The war in Ukraine continues to have ripple effects.
A new report from industry bible Automotive News suggests Vladimir Putin is considering seizing the assets of automakers who left Russia in the wake of its invasion of Ukraine.
Ford, Mercedes-Benz, Renault, Stellantis, and Volkswagen are among the companies that left Russia behind in the wake of the fighting. Putin is apparently proposing nationalizing these and other companies, using the euphemism “external management.” Isn’t it grand how corporations and governments can use neutral-sounding buzzwords to soften the blow of misdeeds?
This is all in response to sanctions that are causing Russia pain.
“If foreign owners close the company unreasonably, then in such cases the government proposes to introduce external administration,” Russian Prime Minister Mikhail Mishustin reportedly said this month, according to CNN. “Depending on the decision of the owner, it will determine the future fate of the enterprise.”
At least one analyst thinks there’s a risk Putin and company will make good on their threats.
“I think it’s a high risk,” Joe McCabe, CEO of AutoForecast Solutions, told Automotive News. “Putin’s not shy about walking away from an industry that supports employment in his country, that builds product for local consumers. There are high odds that companies that have left, or ones that are leaving, are nationalized for the sake of his country’s economy.”
There’s a lot of money at stake — Mercedes-Benz, for example, has about $2.2 billion dollars of assets at risk of seizure, including a plant that opened near Moscow in 2019.
Analysts point out that even if Russia seizes plants, it won’t be a simple matter to restart assembly lines. That’s because Russia is cut off from global trade and wouldn’t be able to source components.
Unless, of course, it got help from a friendly nation like China. But analysts also point out the Chinese might not help the Russians, since aiding a country with inferior technology that’s waging an unpopular war might not be in China’s best interest.
The report says automakers always knew nationalization was a possibility, which is why they’ve limited their production investments in Russia. Automakers also won’t be likely to feel too much of a financial pinch.
That said, a couple of OEMs might take it on the chin more than others. Russia accounts for 2.1 percent of global car sales, but it’s 5.7 percent for Hyundai and 7.8 for the Renault/Mitsubishi/Nissan alliance. There’s also this: Analysts say that even if the plants do restart production, it will be at a lower volume than normal because of — say it with me — Russia’s economic troubles.
[Image: Ford. Note: The plant shown is in Kansas, not Russia, and the photo is for illustrative purposes.]
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