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Auto Giants Reposition Globally

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Here come the Big 12
The world's auto industry is transforming rapidly into a dozen geopolitical coalitions with political as well as business agendas.

Put another way, the globalization of free trade in autos, plus the economic meltdown, is accelerating the globalization of ownership. This opens up opportunities to smaller players, which is why it is not surprising that two Canadians are among the new auto business superstars, Magna International's Frank Stronach and Fiat's Sergio Marchionne.

Both men have mastered the Great Canadian Art of creating alliances with bigger players and of mixing public with private enterprise. The two also share similar biographies. Both are hyphenated Canadians or Europeans who left home to immigrate to Canada, then returned back home later in their careers.

The battle in Germany
Stronach sits atop Magna, the world's third largest parts manufacturer, which appears to lead the bidding sweepstakes to buy the profitable Opel and Vauxhall divisions of General Motors. The German government favors the bid because of Magna's pledge to keep auto jobs in Germany. So do the American and Canadian governments, which are now part owners of GM.

The Germans also support Magna because Russian business interests are also involved as part of its consortium. Russia represents a potential auto market as big as Germany's, Russia is an important country to join forces with as the principle energy supplier to the Germans and Russia's Prime Minister Vladimir Putin is a close personal friend of former Chancellor Gerhard Schroder, among other German socialists.

The skirmish in North America
The battle for Opel was initially also joined by Fiat's Marchionne but he dropped out in its early stages. He had already scored a major coup by capturing a chunk of Chrysler, where Fiat is now in the driver's seat and shares the company with the American and Canadian governments (plus workers). This catapulted Fiat, with its fuel efficient entries and large Latin American positioning, into the North American market in a big way overnight.

Unlike Chrysler, the battle for Opel and Vauxhall is hotly contested. Magna faces two contestants and reports this week maintain that its early lead is diminishing after a revised bid by a Belgian group with American and Japanese backing out of New York.

However, other reports indicate that the third bid by a Chinese group appears to be sidelined amid fears in Germany that technology and jobs will be transferred to China.

The other German players have taken a pass: Daimler Benz and Volkswagen/Porsche, which just merged (thanks to a big investment by Qatar).

The fight for public support
Germany has a large say in this bidding because, like GM and Chrysler, the Opel/Vauxhall deal includes government bailout funds. About EUR 1.5 billion in financing is being put up by two levels of government in order to facilitate the purchase. This is because the German banks will not, or cannot, lend money to keep Opel afloat, since its parent GM went into bankruptcy.

Also staying out of the fray are the world's other giants, such as Ford Motor; Japan's Toyota, Honda; Korea's Hyundai and Kia; India's Tata and Renault/Nissan.

This comprises the Big 12, but there will be more consolidation and possibly new entrants as more governments, such as Brazil, may decide to get into the game by creating or financing a National Auto Champion.

Cars are not longer just big business. Winners will have to build desirable vehicles, but will also have to be able to create, then manage, multilateral partnerships which include workers, politicians, civil servants and investors.