Deadly Sins of International Business Blog

After months of uncertainty and intensive negotiations, GM has announced this week that it will decide a 55 percent stake in it’s European Opel unit to a consortium of the Austrian-Canadian automotive supply conglomerate Magna and its Russian investment partner, Sberbank. 35 % of the shares will remain with GM, and another 10 % will be held by Opel’s employees. Magna’s majority shareholder, Frank Stronach, is coming full circle with this – he started a garage business in Toronto in 1957 manufacturing sun visor brackets for GM and then turned his company into one of the largest players in the automotive world. Having already experienced some difficulties in the Russian and Canadian markets, it’ll be interesting to see how Magna will be able to integrate so many different cultures under its wing – an Austrian-Canadian mothership, a Russian investor, an American shareholder and all of that in a German setting, competing on world markets. First, however, the parties to the agreement have to sign on the dotted line which is not expected to happen before German elections.

Pervasive corruption and an impenetrable maze of bureaucracies have caused IKEA to freeze new investment projects in Russia. One example of IKEA’s immense frustration with Russia is it’s 130,000 square meter shopping complex in Samara. It’s opening was originally planned for late 2007, but was then delayed by authorities eight times. According to 83 year old IKEA founder Ingvar Kamprad, Russia’s ‘unpredictable characater of administrative procedures in Russia’ has cost IKEA a total of $190 million so far. It’ll be interesting to see if IKEA’s decision will have a ripple effect among other Western companies who are equally frustrated by Russia’s business environment.