An analyst at Global Insight has said that Magna's profit forecasts look 'highly aggressive' and that elements underlying the deal appear precarious - in particular the state of the Russian car market and arrangements for future Chevrolet sales.

Magna expects Opel and its affiliate Vauxhall to report positive EBIT (earnings before interest and tax) by 2011, according to a Dow Jones International report. The projection was part of an internal document that has been seen by the news agency.

This, says analyst Tim Urquhart, would appear to be a highly aggressive profitability target considering the current state of Opel and Vauxhall's finances and previous comments by the Chairman and President of GM Europe Carl-Peter Forster, who said his target was for Opel to be profitable by 2013.

The document also reiterates that a large component of Magna's business plan for Opel and Vauxhall includes a sizeable commitment to the Russian passenger car market.

A component of Magna's plan is to win exclusive rights to sell Chevrolet cars in Russia, which will be a massive boost to Magna's business plan as Chevrolet is currently the third biggest selling overall vehicle brand in Russia. However, Dow Jones quoted Opel's German works council leader Klaus Franz as saying that this point had still to be negotiated.

Magna is looking to enter the Russian market with Opel and Chevrolet in partnership with the GAZ Group, using the Russian firm's network of 126 dealers and its manufacturing facilities.

According to Magna's plan, the partners should sell 550,000 new cars annually in Russia by 2014. This would include 200,000 Opel and 350,000 Chevrolet cars, with potential production capacity of 700,000 vehicles a year. Magna aims for a Russian market share of 22%. However, with Magna describing GAZ as a "potential" partner in the document seen by Dow Jones, it appears that there is much work to be done before a deal is signed off.

The fact that Magna is hoping to win the right to exclusively manufacture and sell Chevrolet vehicles in Russia, according to the internal document quoted by Dow Jones, shows how potentially precarious any agreement is between Magna and GM, according to the analysts at GI.

If the document is correct and Magna's business plan relies on this strategy being a component of Magna's takeover of Opel it just adds to the uncertainty surrounding the deal, GI says.

It appears extremely unlikely that GM would be willing to give up its successful operations in Russia, where it has acquired a substantial share of the market selling Chevrolet-badged versions of GMDAT developed products such as the C-segment Lacetti and Aveo.

The collapse in the Russian passenger car market in itself partially highlights one of the main issues with Magna's strategy for Opel, the research note adds.

While there is no doubt the Russian market will recover significantly from its current slump nearly all major foreign OEMs now have significant production operations in the country and are well established in the market making for a highly competitive market environment.

GI says that Magna's projection of 200,000 Opel sales and 350,000 Chevrolet sales in Russia by 2014 would 'appear ambitious'.

IHS Global Insight forecast Chevrolet sales in Russia of 248,000 and Opel sales of 133,000, significantly short of Magna's target.

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