Ed Bentley

General Motors' last-minute pullout from the deal to sell Opel to a Sberbank-backed consortium has left the Kremlin scrambling to rework its plans to save Russia's auto industry from the scrapheap and thousands of workers facing the chop.

A surge back to profitability at GM and a fear of handing over technology to Russian companies are seen as the key reasons behind the US carmaker's reversal of the deal, which was a crucial chance to retool Oleg Deripaska's struggling automaker, GAZ.

The scrapping of the deal prompted tens of thousands of German car workers to take to the streets in protests last week, as they feared GM would now slash jobs across Europe in a bid to squeeze out maximum profits amid shrinking demand.

Lacking modern models after decades of chronic underinvestment, Russia's carmakers have seen their slice of the market slump from 63 per cent in 2004 to 40 per cent last year as they struggled to compete with foreign manufacturers.

Analysts said GM's desire to keep a grip on its Russian business had been a key factor.

"The business plan was sketchy and the involvement of Russian backers Sberbank clearly flagged issues over intellectual property rights and Russian market competition for GM," IHS Global Insight analyst Paul Newton wrote in a note to investors.

Sberbank and its Canadian partner Magna have said they will conduct a "deep legal analysis" of GM's pullout, while Prime Minister Vladimir Putin, who had thrown his weight behind the Sberbank deal, said he was "surprised" but that it would not affect Russia, RIA Novosti reported. "GM's decision not to carry out the deal and drop plans to sell Opel to the Magna-Sberbank consortium will clearly not damage our interests," Putin said.

"[GM] ... presented everyone with a fait accompli," Putin said. "It's a good lesson, and we will have to take into account this style of doing business in the future."

Putin's spokesman, Dmitry Peskov, insisted that the government would continue to drive forward plans to rejuvenate the auto industry, which has seen sales collapse since the economic crisis hit last year.

"We have our own development programme, it's very wide, and the measures [introduced to support the industry] in 2009 will remain in 2010 and will be expanded," Peskov said by telephone.

He declined to say whether GAZ would receive a government bailout.

Oleg Deripaska's GAZ was widely viewed as the likely ultimate beneficiary of the scrapped deal, with Sberbank acting as a holding company to allow the troubled tycoon's automaker a breathing space to reschedule its debts.

GM's pullout "is more a political decision," said Anna Kupriyanova, an auto industry analyst at UralSib. "The company agreed to transfer technology to the Russian market and companies ... but now there is no need to sell assets and Russian participation wasn't very welcome."

Although the deal could have boosted GAZ's long-term future, their reported $1.3 billion debts are a more pressing concern for the firm's immediate future.

"The company's prospects depend on a market recovery and debt settlement issues rather than on Opel," said Kirill Tachennikov, senior analyst at financial company Otkritie.

But while the consortium's deal appears dead in the water, Russia's automakers are still likely to turn to international brands to strike partnerships that could help them develop in the potentially lucrative Russian market.

"For GAZ, it would be a good addition if they could get access to Opel technologies and I believe they could still get them through an agreement or partnership," said Kupriyanova.

Peskov, Putin's spokesman, pointed to existing partnerships as signs that Russia's auto industry was already recovering.

"Russian carmakers have growing partnerships with other international giants, so there are alternative development vectors," said Peskov. "These are Nissan, Renault [and] Fiat."

Renault's partner, Avtovaz, is on the verge of receiving a $1.87 billion bail out from the government to clear debts of about 62 billion roubles ($2.1 billion), though independent trade union officials at the plant are sceptical that it will improve the situation.

"It is not entirely clear where this money is going - to Avtovaz or to Russian Technologies," said Pyotr Zolotaryov, leader of the trade union Yedinstvo, or Unity. "We fear the money will be misappropriated again."

"I see talks about bailout packages but nothing about reforming the company," said Kupriyanova of UralSib.

An Avtovaz spokeswoman said the company could not comment on reports of a bailout until the government came up with its bailout proposals, which are expected to be unveiled this week.