09/12/2009 05:12 am ET | Updated May 25, 2011

General Motors Europe and the Cold War

The old saw is that "what's good for General Motors is good for America" and that's why the Magna International bid for GM's European operations is unlikely to succeed.

The problem is that Magna's partners are Russians and selling the European operation of an American icon like GM to Moscow interests is not something that Washington, General Motors' workers and others support. Concern is strategic and commercial as GM technology will be owned by a Russian car manufacturing rival.

This week, Magna's chances of capturing the car making prize in Europe faded even more with postponement of any decision about GM's Adam Opel GmbH sale until after the German election on Sept. 27. Germany's Chancellor Angela Merkel, who backs Magna's bid, must believe she cannot keep her lead in the polls if she choses their proposal to take over Opel.

This procrastination is nothing new. The bidding process, to take over Opel, should have been completed months ago. Instead, Germany plus GM appear to be trying to buy time to avoid losing control. Opel employs 25,000 in Germany, another 25,000 mostly in Britain and is promised up to US$5.6 billion in German government loans. Stronach has said his consortia needs at least another US$1 billion.

Those bailouts -- plus job loss fears -- mean the issue is political in Germany, as it is in the U.S.

Magna's co-partnership arrangement with the Russians is bothersome to many Germans, who already feel there is too much Russian control over Germany's economy through its energy monopoly.

This should have been apparent to Stronach from the beginning and he would have been wise to have invited in another partner -- with expertise, capital and a non-malevolent reputation. If he had done so, notably a European or American partner, he may have already captured the prize.

Instead, Stronach's Russian partnership arrangement has been murky and fluid. Percentages of ownership by the Russians have had to be rolled back, eliminating the possibility of a Magna-Russian control block. Initially, the Russian backer (Oleg Deripaska) was supposed to be Frank's partner, then it was a Russian bank, then that bank's ownership was only supposed to be temporary.

Besides, Stronach's own history with Deripaska is confusing. He sold part of his Magna control block to him, announced grand schemes to create a Russian-based car manufacturing giant, and then found out his partner wasn't as flush as was thought. The Russian had financial problems and his Magna stock became the property of his many lenders. Despite that major hiccup, he's hitched himself to the same leveraged partner.

Putin, and Dmitri Medvedev, are pressuring Germany, always a bad move, which more or less "encourages" Chancellor Merkel to come out publicly as a supporter. Her hand is also forced somewhat because her predecessor, socialist Gerhard Schroder, is pressuring his party and others on behalf of the Russians. He is on the Russian payroll as a director/consultant/lobbyist for Gazprom and others.

Clearly, Merkel sees some political risk in giving Opel to the Magna-Russian consortium then handing over billions to them. Speculation in the press is that the Opel strategy may shift with the company put into bankruptcy shortly, restructured and eventually controlled by German governments so taxpayers, not foreigners, can benefit from the bailout.

Stay tuned. It's Car Wars. The saga.

Diane Francis blogs at Financial Post