North American Assembly Possible for Expanding Supplier Magna

TROY, MI – Mega-supplier Magna International isn’t exactly saying it will bring its contract-assembly expertise to North America, but a high-ranking executive here admits the business climate certainly appears ripe for such a move.

Rumors and speculation have surfaced in recent months Magna could be interested in expanding its strapped contract-assembly capacity with a new facility, possibly in North America. It currently has two assembly plants in Graz, Austria, which either build or are soon to launch production of vehicles for Mercedes, Jaguar Land Rover and BMW.

But other automakers may be interested in outsourcing some assembly work, as well, particularly in the NAFTA region, where the industry’s Great Recession-inspired downsizing has left OEs capacity-constrained but reluctant to add new brick and mortar.

A case in point is General Motors, which will shift assembly of its rear-drive Chevrolet Express and GMC Savana vans to a Navistar plant in Springfield, OH, beginning next year to free up room for midsize pickups at its Wentzville, MO, plant.

“In NAFTA, (automakers are) at 100% of capacity,” says Jim Tobin, Magna’s chief marketing officer and president of its Asia region. “They’re busting at the seams.”

WardsAuto data shows automakers are running at 101.1% of straight-time capacity in North America, with only Canada (92.6%) running below a 100% rate. Little relief is expected next year even though the market is projected to decline slightly. WardsAuto forecasts capacity-utilization at 97.6% for the U.S., Canada and Mexico in 2017.

Magna’s Graz capacity also is fully allocated, Tobin notes. The operation begins building BMW 5-Series models and undisclosed Land Rover vehicles next year to go alongside Mercedes G-Class production. Total output is expected to reach 200,000 vehicles per year in 2018.

“We are full out to 2022-2023,” Tobin tells media here at a backgrounder on the company’s latest technology. Talks reportedly are under way in Slovenia involving a potential new Magna vehicle assembly plant in that country.

Canada-based Magna, which also produces metal stampings, composite parts, seats, powertrains, high-tech safety systems and other components, is the biggest automotive supplier in North America and No.3 worldwide based on annual revenue of about $36 billion. It operates in 31 countries with 309 manufacturing plants and 152,000 employees.

But the supplier continues to grow its manufacturing footprint, with plans to open 13 new plants this year and another 16 next year worldwide. The 2-year rollout includes facilities in the U.S. (3), Mexico (4), Western Europe (6), Eastern Europe (2), China (9), India (3) and South America (2).

Magna has not said whether one of those new North American plants might be targeted for vehicle assembly, Tobin says, “but we continue to talk to our customers.

“We’re looking at what makes sense…whether it makes sense to expand further,” he adds. “The major investment is in the paint shop, so you have to get critical mass (to draw up a viable business case).”

Tobin says Magna is in constant communication with its customers about both product and manufacturing strategy, “so we’re seeing a lot of what-ifs.”

Of course, Magna wouldn’t be the only game in town if automakers look to outsource some assembly in North America. In addition to Navistar, which is taking on the GM van work, AM General has idle capacity at its Mishawaka, IN, operation, which currently builds the Mercedes R-Class and specialty vehicles for Mobility Ventures. Mitsubishi’s mothballed assembly plant in Normal, IL, also is eager for new work.

[email protected] @DavidZoia