Ex-Magna CEO might take management of Volkswagen’s belongings in Russia 

The Russian media reported that Volkswagen AG might promote its Russian enterprise – together with an meeting plant and an inside combustion engine producer – to Austrian enterprise conglomerate Steyr Automotive owned by ex-Magna CEO Siegfried Wolf.  

According to these conversant in the matter, the corporate hopes to renew the manufacturing of VW vehicles in Russia below a special model, as the corporate’s whole manufacturing actions have been suspended in March in response to Russia’s unprovoked invasion of Ukraine.

If VW have been to place this initiative into movement, the corporate would proceed to provide elements and spare components to Russia, in addition to present engineering providers, all of which might be a boon for the Russian auto market. VW’s manufacturing websites would then be managed by Russia’s automaker, GAZ Group, which is owned by Wolf’s long-time enterprise companion, Oleg Deripaska, one among Russia’s most well-known Kremlin-linked oligarchs and who’s presently below EU, US and UK sanctions for his shut ties to Vladimir Putin.

Reports have indicated that Wolf, himself, chaired GAZ Group’s board from 2010-2019 and should have held a minority stake within the firm.      

Volkswagen has been manufacturing vehicles in Russia since 2007 at its meeting plant in Kaluga, 170 km southwest of Moscow, the place the mannequin vary contains the Volkswagen Tiguan, the VW Polo and the Škoda Rapid. The firm’s complete investments in Russia, simply previous to the start of the conflict in Ukraine, exceeded €2 billion.

In 2011, Volkswagen and GAZ Group signed an settlement for the contract meeting of Volkswagen and Škoda vehicles on the GAZ plant in Nizhny Novgorod, a metropolis of greater than 1.2 million folks on the Volga River. In 2015, the corporate began manufacturing of its most trendy engines on the Kaluga facility. VW bought round 199,000 automobiles in Russia over the course of 2021, over 80% of which have been made on the firm’s manufacturing websites within the nation. Among them have been the VW Polo and VW Tiguan, in addition to the Škoda Rapid, Škoda Kodiaq and Škoda Octavia. The firm estimated that its share within the Russian auto market stood at over 11% on the finish of final 12 months.  

Those upward trending fortunes modified immediately in March after Putin ordered his army to invade Ukraine. Volkswagen Group’s board determined to halt the manufacturing of automobiles in and finish its exports to Russia. Over 4,000 of VW’s staff on the plant in Kaluga stay employed and proceed to be paid a portion of their wages in compliance with Russian statutory necessities, although manufacturing has been totally suspended.  

Since Russia launched its unprovoked conflict in opposition to Ukraine, all European, Japanese and Korean automakers have halted manufacturing in Russia citing EU and US sanctions, logistical challenges and an absence of severely restricted components from suppliers. As a consequence, automobile gross sales in Russia plunged greater than 80% in May, hitting the bottom degree since 2006.   

Rumors have swirled for months that Putin, in gentle of rising financial stress and battlefield failures in Ukraine, has thought of nationalizing the manufacturing crops and different belongings of world automakers corporations. Other than Volkswagen, Stellantis, Ford and Mercedes-Benz can be these most affected by strikes that Russian authorities officers wish to dub “external administration”. 

“If foreign owners unreasonably close their companies, then in such cases the government will propose the introduction of ‘external administration’,” Russian Prime Minister Mikhail Mishustin has instructed the media. “Depending on the decision of the owner, this will determine the fate of the enterprise.” 

In May, France’s Renault bought its Russian belongings to the Kremlin for a symbolic one ruble sum, with a call-back possibility for a 68% stake in Russia’s largest native automaker, Avtovaz. 

Volkswagen was earlier believed to be in talks with Kazakh-based automaker Asia Auto concerning the sale of its belongings, however up to now no concrete developments have emerged.   

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New vehicles parked on the Volkswagen Group plant in Kaluga, Russia.

 While the scale and particulars of the doable Volkswagen – Steyr deal are nonetheless unknown, it might be extremely profitable for Volkswagen, significantly within the present geopolitical setting. On the one hand, it permits the corporate to partially cowl its multi-billion euro investments in Russia, whereas on the opposite – VW will formally give up Russia – an ethical pledge for a significant European firm as a response to the Russian Federation’s brutal invasion of Ukraine. VW will, nonetheless, proceed to profit from the Russian market by supplying its elements and spare components and offering engineering providers.  

There can also be the apparent moral query that entails Deripaska, as soon as the richest particular person in Russia. He is a well known, sanctioned member of Putin’s internal circle. If Volkswagen have been to have its approach, Deripaska will clearly profit from the deal, as VW’s former manufacturing websites can be managed by his personal GAZ Group.

Simply put, making a sanctioned Russian oligarch even richer is completely opposite to what the sanctions have been designed for.