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Chrysler's Future in Russia

Posted by: Gail Edmondson on May 11, 2007

Last year when Chrysler reported its third big profit blowout in five years, the question of the automaker’s survival loomed again. And speculation about what it will take to save Chrysler has only intensified since DaimlerChrysler CEO Dieter Zetsche put the company on the block Feb. 14.

Could the Russian market be Chrysler’s salvation? Magna International Chairman Frank Stronach, who is bidding for Chrysler, is betting big on Russia. Yesterday Magna announced Russian industrial tycoon Oleg Deripaska. Russia’s second largest automaker GAZ, plans to take a $1.5 billion stake in Magna. If Stronach wins Chrysler, and Deripaska clinches the deal with Magna, Chrysler’s future is driving east.

Analysts say the three-way Magna-Chrylser-GAZ tie-up is brilliant. GAZ already has licensed the Sebring platform and purchased a Chrysler factory which it is transplanting in Russia. The Russian auto market is forecast to grow by 50 percent to 2.1 million cars by 2010, making it easy for newcomers to grab a slice of the growing pie. And with powerful partner like Deripaska, it’s hard to see how Chrysler could stumble.

It’s still early days — Magna hasn’t won the bid for Chrysler yet. (A decision is expected by late June). But the opportunity for Chrysler, with an assist from the powerful Deripaska, to tap Russia’s vast market and its low-cost manufacturing base is dazzling. Some analysts believe Chrysler could double its existing sales by racing into Russia, and use future models built in Russian to enter other emerging markets. That would help create the vital global business Chrysler needs to survive.

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