Michael Hlinka: Magna is cuddling up to some very strange bedfellows
Tuesday, June 2, 2009 | 07:11 AM ET
Money Talks is a business column from CBC radio.
By Michael Hlinka, CBC business columnist:
There’s a saying: "Politics makes strange bedfellows." But when you look at the pairings that come out of the buyout of GM’s European Division, Opel, you have to think that the world of business looks like a swinger’s club by comparison.
There will be four new partners in this strangest of unions: GM and Sberbank of Russia, each with 35 per cent, Magna with 20 per cent of the new company, and Opel’s mostly German workforce owning the remaining 10 per cent through its union.
What’s the big deal?
Let’s start with Magna and Opel. When I googled "Frank Stronach and unions," one of the top searchs that came up read – and I quote – "A cornerstone of that culture is Frank Stronach’s anti-union ideology." End of quote. It doesn’t get much more in-your-face than that. Now, it’s true that a few of Magna’s Canadian operations are unionized. But this is under the condition that the workers can’t go on strike. This is Stronach’s M.O. I’m not sure that Opel’s workforce will be happy with it.
Yet, I’m not even sure that this is the most significant potential flash-point.
You may not be familiar with Sberbank. I wasn’t. It’s the oldest bank in Russia and its majority shareholder is … are you ready for this … the Central Bank of Russia.
In other words, Sberbank is really owned by the Russian government. Meanwhile, who controls General Motors? The company entered into bankruptcy protection yesterday. When it emerges the United States government will take a 60 per cent stake – which coincidentally, is exactly how much the Bank of Russia owns in Sberbank.
Okay, so the Russian and United States governments are in the car business together!
This is what I was referring to when I talked about possible conflict down the road. Governments are getting involved to secure high-paying jobs. But here's the paradox. Everyone agrees that there is immense over-capacity in world automotive production. Which means that there are going to be huge consolidations ahead. And that means fewer jobs - in both Europe and North America.
So what we've got is two zero-sum games at play. Either Frank Stronach will have his way and push around the German unions or organized labour will win out. Either automotive production will shift to Russia, which is clearly desired by the Russian government, or it will expand into the United States.
So for the time being, the four partners are sharing the same bed ... amicably … but sooner or later, someone’s going to be demanding all the covers, leaving everyone else out in the cold!
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Comments
conrad b
Frank Stronach should be nominated for the Entrepreneur of the Century award. If government would just back off and let this mans singular business genius run the company there will be no problems. Just keep all governments out of the mix. However I do trust the Russian government more than the US government because at least the Russian government has a track record of kicking out the communists from control, whereas Obama is one of those socialists that will only spell harm to innovation and any chance of economic recovery.
Posted June 2, 2009 09:06 AM
James
Victoria
Sooooo.....Cheap labour mean more affordible cars right? Ya, I thought so.
Posted June 2, 2009 02:24 PM
JCIS
BC
Magna = high auto insurance! Millions of people have hit hardship because of too high auto insurance due to fancy expensive bumpers and autobodies indebting our nation to these car manufacturers' whims. Look at Henry Ford's plastic hemp car - THATS WHAT OUR CARS SHOULD BE MADE OF! The average person shouldn't have to pay more than $10/month for insurance. GM and the rest of the big automobile makers killed the electric car decades ago and more recently killed the great EVs in the 1990s, just to save their money sucking businesses. They deserve NO bailout! Collect their bailouts from their own executives' gross salaries, the billions they should've saved from their past profits and the OIL companies who are making record $Billions in profits!!! Its their damned dirty industry - let themselves bail them out. KEEP TAXPAYERS OUT OF FUNDING THEM - we have done it waay too long already, being enslaved to their insurance scams, with no way out.
People never had to pay insurance to get from point A to point B 70 years ago. It's not fair for these slimy corporations to enslave the entire population because of their greed to suck as much money as they can/could from the general population for decades, while controlling government. Their greed way of business is obviously untenable. Taxpayers should never pay for their follies, just because these car makers paid for the totally undemocratic elections!
Posted June 2, 2009 04:05 PM
Paul Morris
Cambridge
Nice catch, Michael! Strange bedfellows, indeed.
Posted June 2, 2009 04:39 PM
Flex Neck
Vancouver
Magna is a parts manufacturer, providing parts to GM worldwide, among others. It makes absolute business sense for them to actively secure the future existence of one their biggest customers, GM. Stronach also always wanted to be a car-manufacturer as well, so maybe he sees this as his big chance, but it is just as likely that Magna sells its stakes again once the markets are favorable and GM existence as customer #1 for Magna has been secured. No rocket-science here, just good plain common sense for somebody who finds himself in a buyers market and has the cash on hand.
Posted June 2, 2009 05:22 PM
Red
Toronto
re conrad b
more neo-con pap.
hmmmm just who were those geniuses who assured government and the people that all would be fine if only they were allowed to take care of business (while lining their own pockets, and let's be clear about this, WITHOUT CREATING ANY ECONOMIC WEALTH)?
Oh I'm sorry, it was the regulatory agencies that listened to and then FAILED to monitor the geniuses and, therefore, caused all the foreclosures and job losses, my mistake ...
And about Frank (business genius and highest paid CEO in Canada for the past several years) Stronach. Magna is busy laying off workers too.
One last point. The largest investor in innovation in the USA for, hmmm let's see, say the last HALF CENTURY is the US fed gov. Check it out.
You can't have it both ways, there has to be a balance.
No problem
Posted June 3, 2009 08:26 AM