By Robert Sherefkin, Automotive News
Detroit, Michigan -- Magna International Inc.'s successful bid for control of General Motors Co.'s Opel/Vauxhall operations comes with some risk. But it fulfills a longstanding dream of Magna Chairman Frank Stronach to run an automaker.
Some Magna customers will be wary of dealing with a company that is both a supplier and a competitor, says auto analyst Efraim Levy of Standard & Poor's equity research.
Stronach recognises the risk.
"Upon the successful completion of the acquisition, Magna will put in place appropriate firewalls in order to ensure a complete separation between its current auto parts business and Opel so that the confidential and proprietary information of its customers is fully protected," Stronach said in a statement Thursday.
In August, Volkswagen AG CEO Martin Winterkorn said VW viewed Magna's Opel bid with suspicion and would reconsider doing business on complex components with the supplier if Magna won control of Opel.
Opel labour leader Klaus Franz promptly fired back at Winterkorn. "The threat not to award Magna with contracts is tantamount to blackmail," Franz said.
In contrast, Ford Motor Co. Chief Financial Officer Lewis Booth said in August that Ford believes it could continue working with Magna even if the supplier giant also owns a stake in a rival automaker.
"We've had discussions with Magna about ensuring the appropriate safeguards for our intellectual property," Booth said. "We'll work with Magna to make sure we mitigate any ramifications.
"Magna's a good supplier," he said. "We like working with them, and we'll manage the issues as they come up."
Magna co-ceos Siegfried Wolf and Don Walker have both said the suburban Toronto supplier would separate its auto parts business and Opel.
Magna's largest global automotive customers, in order of size, are GM, BMW AG, Ford Motor Co., Chrysler Group and Daimler AG, according to Magna.
Magna ranks No. 4 on the Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $23.30 billion in 2008. It ranks No. 1 on the Automotive News list of the top 150 suppliers to North America with parts sales to automakers in North America of $11.42 billion in 2008.
Magna's share price jumped more than 4 percent Thursday after news that Magna finally had won control of Opel, beating out a private-equity group and a Chinese automaker.
In 2007, Stronach pursued Chrysler when DaimlerChrysler AG was selling off its US unit, but came up empty-handed. Under the terms disclosed Thursday, Magna and Russian bank Sberbank will each take a 27.5-percent stake in Opel. GM would retain a 35-percent stake and Opel employees a 10-percent stake.
The deal is not yet final. GM said in a statement that definitive agreements should be ready to sign within a few weeks, with closing to follow within the next few months.
Magna has 10 product groups, including electronics, exteriors, interiors, powertrain and, importantly, vehicle engineering and assembly. For years, its Magna Steyr subsidiary in Graz, Austria, has assembled vehicles for Chrysler and other automakers.