WhenSteyr makes its debut as a publicly traded company, it will do so intact, promises the president and CEO of its parent company, Canada-based Magna International Inc.
The IPO is inevitable, Belinda Stronach confirms, and when it happens, don’t expectSteyr’s powertrain capability to be carved out.
|Magna is adopting a “downturn mindset” for 2003, says CEO Stronach.|
“The powertrain assets will remain within Steyr,” Stronach says after Magna announces a fourth-quarter 2002 profit of $110 million, down from $118 million in like-2001.
“The 4x4 is crucial to Magna Steyr,” Stronach adds. “It’s one of the reasons why we do get the niche vehicle assembly contracts. And it will remain within the Steyr group.”
Steyr not only assembles niche vehicles at its recently expanded complex in Graz, Austria, it engineers 4-wheel-drive systems and powertrain modules. This combined capability helped the supplier achieve its status as sole source of Mercedes-Benz E-Class vehicles equipped with the auto maker’s trademark 4Matic all-wheel-drive system (see related story: Magna Steyr Rolls Out Redesigned E-Class).
However, Stronach offers no hint that a spin-off is imminent. Senior executives at Magna “continue to work on preparing the Magna Steyr group for a public offering,” she says. “When we feel it’s ready, we’re going to come out with it.”
Fourth-quarter profits were reduced $34 million because of charges incurred by Magna subsidiariesAutomotive Inc., which manufactures interior systems, and Tesma International Inc., which makes engine, transmission, fueling and cooling components.
The charges – stemming from new Canadian accounting regulations – also affected Magna Entertainment Corp., a non-automotive subsidiary with extensive holdings in horse racing.
Meanwhile, Magna forecasts first-quarter automotive sales of $3.2 billion to $3.4 billion based on “strong OEM production schedules.” Full-year 2003 sales should range from $13.3 billion to $14.1 billion, it says, up slightly over last year’s $13 billion and significantly higher than 2001’s $11 billion.
Despite such optimism, Stronach says, geopolitical uncertainty compels the company to be cautious, if not conservative.
“I am working with our group presidents and Magna’s senior management team to instill a downturn mindset with respect to expenditures,” Stronach says during a teleconference peppered with words such as “discipline” and “prudent.”
In 2002, Magna acquired mirror maker Donnelly Corp. and DaimlerChrysler AG’s Eurostar assembly operation in Graz. But these moves were measured maneuvers and do not signal a spending spree, Stronach says (see related story: Magna Expected to Shine – and Possibly Grow – in 2003).
Donnelly’s holdings, now part of Magna Donnelly, “strengthened Magna’s strategic position in the global mirror market from the perspective of production location, customer profiles, product diversification and innovative technology.”
The Eurostar acquisition “provides us with capacity and access to a highly trained workforce which will facilitate the launch of theX3 complete vehicle program later this year,” she says.
It also “affords Magna Steyr the opportunity to pursue additional assembly business” (see related story: New Production Contract Pending at Magna Steyr?).
In addition to building E-Class and the X3, Magna has stakes in the launches – current and pending – of several other high-profile vehicles, including thePacifica and Touareg.
“We will focus on successful product launches,” Stronach says. “Flawless execution of complex launches has been, and will remain, a trademark of Magna.”
Such was not the case with the Lincoln Blackwood, she admits.Motor Co. canceled that program last year because of production problems traceable to the upscale truck’s trademark cargo box – engineered and built by Magna.
Discussions to pick up the pieces have concluded, Stronach reveals, “in an amicable manner” and the resulting settlement sees Magna sustaining “no material financial impact.” No details are disclosed (see related story: Blackwood Burial Costs Subject of Debate).
Meanwhile, Stronach suggests her company has emerged from the controversy relatively unscathed. “Magna will launch approximately $3.3 billion of new and replacement business over the next 12 months,” she says.
The company also says content-per-vehicle increased last year by 26% in Europe and 20% in North America.
While targeting Asia in 2003, Stronach says Magna also will “focus on increasing our penetration with the French OEMs.”