Magna Offers Overcapacity Solution

For more than a year, Magna International Inc. has talked about building a new plant in North America to assemble niche vehicles for automaker customers, much like its Steyr Fahrzeugtechnik plant in Graz, Austria (see WAW — March '00, p.105).

At a recent media briefing, Magna discusses a new strategy: using existing auto assembly plants rather than building a greenfield site. With the current overcapacity of automaker plants, the strategy makes sense, says Siegfried Wolf, president and chief executive officer of the newly created Magna Steyr.

With the auto industry in a downturn, auto plants may soon be available for just such a project. DaimlerChrysler Corp., for instance, already plans to close two plants in North America. And automakers in general are always looking for ways to improve efficiency.

Magna Steyr is one of five operating units within Canada's No. 1 supplier. The bulk of the operation came from Magna's 1998 acquisition of Steyr-Daimler-Puch, which owned the Graz plant.

In late February, Magna announces it will spin off Steyr as well as Magna's interiors business as new, separate companies.

Magna Steyr will have annual sales of about $2.6 billion and will include Steyr powertrain (all-wheel-drive systems). The operation also wants to supply complete hydroformed “chassis-on-wheels” and space frames.

Magna Interiors reports annual sales of about $3 billion (seats, closure systems and instrument and trim panels). Early this month, the company was expected to announce details of its Interiors spinoff. The two public offerings will be conducted in Canada and Europe when market conditions are right, company officials say.

As a niche assembler, Mr. Wolf says Magna Steyr could work in partnership with an automaker to better utilize its vehicle assembly plants. Magna could, for instance, oversee body-in-white assembly or the paint shop.

At the Steyr plant in Graz, the company assembled 88,000 vehicles for the European market in 2000. This year, Graz output will reach 100,000 units (Jeep Grand Cherokee and Mercedes-Benz M-, E- and G-class vehicles). In 2003, Steyr will begin assembling a Saab convertible.

Sources also say Magna Steyr is in advanced discussions with BMW AG to assemble a small sport/utility vehicle in Graz, likely for 2004.

Steyr is having “serious discussions” with potential automaker customers to do the same type of assembly work in North America. Mr. Wolf says a “niche vehicle” in North America could entail production of between 5,000 and 50,000 vehicles. He says Steyr wants to be a niche assembler for automakers, rather than competing with them by developing new vehicles.