The Russians are coming!
Sometimes, you really have to empathize with Rick Wagoner, GM’s boss.
This would be one of those times. As if having to deal with the United Auto Workers wasn’t a big enough problem,
It gets worse:
According to a report in a Russian newspaper, a Russian billionaire acquired five percent of the outstanding General Motors stock in the past year. The report also says that Oleg Deripaska does not intend to increase his holdings in GM. Neither Deripaska nor the holding company through which he operates would confirm the report.
But it is very believable.
Deripaska owns the biggest aluminum company in Russia and bought a substantial interest in Canadian auto parts maker Magna International, also last year.
He’s got lots of money, because he’s a henchman of the boss, in a country in which crooks run the country.
It’s like having the Mafia own an interest in your company.
Deripaska is one of those Russians who has parlayed his connections with Vladimir Putin into a fortune. Putin, the former KGB agent who has become President of Russia and appears to be doing his level best to emulate Joseph Stalin, has systematically stripped those of the rich who were not his lackeys of their assets, going so far as to imprison them. The most publicized was Mikhail Kordorokovsky, the billionaire owner at the time of Yukos, a gigantic and wealthy Russian oil company. Cooking up false tax evasion charges, Putin’s government took away Yukos and destroyed Kordorokovsky, who had been critical of Putin. He’s still in prison in Russia.
Functionally, Putin has confiscated the Russian oil industry for himself and his friends. One large oil foreign company was forced to sell its interests in the Russian oil business for a fraction of what they were worth. They took the offer because they knew they’d get nothing if they didn’t.
More recently, Putin has been implicated in the murder of KGB defector Alexander Litvinenko in London, a killing done in such a unique way – by feeding Litvenenko polonium 210 – that it could not have been accomplished without Russian government involvement at the highest level. Polonium 210 is a substance so uncommon that it could only have come from Russia’s nuclear program.
At least Litvenienko, who’d been part of the KGB when Putin ran it, was killed in an unusually sophisticated manner for Putin’s thugs. Another Putin critic, journalist Anna Politkovskaya, who last year joined the scores of Putin critics who have been assassinated in Russia itself, was just shot. Three years ago, the reporter for Forbes– an American business magazine - was assassinated in Moscow.
Great Britain expelled Russian diplomats two weeks ago, after Russia refused Great Britain’s request to extradite one of Putin’s buddies whom it has charged with the Litvinenko murder.
And now, one of Putin’s buddies owns a five percent stake in General Motors.
(Five percent keeps you below federal disclosure regulations. Above it, you have to disclose. So, there’s no really rational reason to disclose your interest if you don’t plan to add enough to it to take you over the 5% level.)
Having someone own 5% of your company is like getting a ransom note.
Kirk Kerkorian, the billionaire who never bought into a company without intending to strip it of its assets for his personal profit (MGM being the most famous example), year bought five percent of GM’s stock over time in 2005 and announced that he would not buy more.
A few months later, he tried to take over the company.
Kerkorian lost, selling his interest in GM in late 2006, but he cost GM both management time and corporate money that could better have been expended on building better cars.
As rapacious as Kerkorian is, he’s not in the league of the Putin thugs. Kerlorian was dependent on getting money from Western sources with which to tender for GM shares. He’s 89, so people wondered what would happen to the company after he was no longer on the proverbial mortal coil. Moreover, his reputation ain’t the best. Because other institutional owners of GM stock didn’t trust him, he couldn’t pull it off.
But the Russians have plenty of money from oil revenues and they don’t need to resort to Western financial markets for financing. One Russian company was reportedly nibbling at the idea of buying Jaguar and Land Rover from Ford, but backed away over concern that Ford might not be a reliable engine supplier.
The announcement in a Russian newspaper suggests that Deripaska is taking the same approach toward GM as Kerkorian – but probably with a lot more money. If he’s willing to bid enough, the institutional investors that own much of GM’s stock will do what they’re supposed to do: sell high. If that happens, other investors will follow. Indeed, the prospect of a take-over by Deripaska might be sufficiently damaging to GM’s stock price to let him pick up much of the stock at bargain prices.
This, too, is a technique reminiscent of the Mafia.
Though the prospect of one of the largest automobile companies in the world being controlled by one of Vladimir Putin’s henchmen should give pause to anyone, it probably won’t make a dent in the collective consciousness of the Bush administration. The President has consistently taken the position that dialog with Putin is better than confrontation, pursuing that policy only last month when Putin visited at Camp David.
Last time a President pursued that policy, Franklin Roosevelt helped Stalin partition Germany.
Rick Waggoner is probably longing for the days when he was he was merely supposed to be in charge of building cars and trying to make a profit. He’s probably thinking that negotiations with the UAW might just be a pleasant diversion.
He’s probably right.