GM looks toward Russia

With warnings from credit agencies that GM's (NYSE: GM) cash flow may drop as its debt rises, the company needs to expand beyond the US more than ever. It has a large presence in China, but many experts believe that Russia will soon be the largest car market in Europe. The Wall Street Journal says "sales of foreign-brand cars have risen more than 60% this year, thanks to an increasingly affluent middle class and an oil-fueled consumer boom."

GM is trying to buy a large stake in Russian car company Avtovaz. Fiat has also expressed an interest in the company. GM's sales in Russia will double this year to about 250,000, but having a manufacturing partner in the country could cut the costs of importing vehicles. It could also allow the US car maker the chance to make money from a local brand as well as its own cars.

While the rewards for GM are obvious, the risks are simple. GM may get into a bidding war for Avtovaz and the No. 1 US car company already has a less-than-desirable balance sheet. Pushing cash into Russia may weaken it more. The other issue is that Russian economic growth is based on oil and very few other factors. If the price of crude drops significantly, buying power in the country could fall off quickly.

GM may think it needs to be in Russia, but it could easily put too much money in the pot and get burned.

Douglas A. McIntyre is an editor at 247wallst.com.

Get the latest on cars and trucks
from GM and all brands at AOL Autos.

Reader Comments (Page 1 of 1)

Symbol Lookup
IndexesChangePrice
DJIA-89.2312,801.23
NASDAQ-23.352,903.88
S&P 500-9.311,342.64

Last updated: February 12, 2012: 03:59 PM

Hot Stocks

General Electric

18.875-0.255(-1.33)

Alcoa

10.29-0.35(-3.29)

Apple Inc

493.42+0.25(+0.05)

Google Inc 'A'

605.91-5.55(-0.91)

Bank of America

8.07-0.11(-1.34)

Wal-Mart Stores

61.90-0.06(-0.10)

Exxon Mobil Corp

83.80-1.08(-1.27)

Ford

12.44-0.25(-1.97)

Citigroup

32.925-0.735(-2.18)

IBM

192.42-0.71(-0.37)

Yahoo

16.14+0.14(+0.88)

Starbucks

48.82-0.38(-0.77)

Microsoft

30.495-0.275(-0.89)

Home Depot

45.33+0.06(+0.13)

Learn More About GM Cars

General Motors Brands:
Find Your Next Car

AOL Autos New Cars and Used Cars

DailyFinance Headlines

Benzinga Headlines

TheFlyOnTheWall.com Headlines

BioHealth Investor Headlines

WalletPop Headlines

DailyFinance BlackBerry App

My Portfolios

Track your stocks here!

Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

BloggingStocks Partners

More from AOL Money & Finance

BioHealth Investor Headlines

Page Loaded in 1329080348472 ms.