Magna, VW in Talks Over Underutilized Germany Plant

VIENNA – Magna and Volkswagen are negotiating a cooperative agreement over use of the automaker’s Osnabrück car plant in Northwest Germany.

Both companies are in serious talks, including a visit by a Magna delegation to Osnabrück, the Neue Osnabrücker Zeitung reports.

According to the daily local newspaper the negotiations have included scenarios ranging from Magna obtaining a minority stake in the plant to the acquisition of individual departments up to a complete sale to the Canada-based contract assembler and automotive supplier.

Sources close to the plant tell the newspaper a complete takeover by Magna no longer is an issue, but talks continue regarding a cooperative arrangement that could lead to better utilization of the factory.

A VW spokesman tells Neue Osnabrücker Zeitung the automaker is most interested in utilization of production capacity. “That includes the close cooperation within the group as well as an analysis of possible partnerships,” he says.

The talks appear to address whether Magna might use some of Osnabrück’s capacity for a future contract manufacturing project.

“Under proper conditions and under the umbrella of VW Osnabrück we would be happy to build cars for third parties,” the newspaper quotes Stephan Soldanski, a representative of the local IG Metall unions, as saying.

VW employees were informed about the talks with Magna before the holidays in December.

The cooperation may start in one year or 18 months, two unnamed sources familiar with the negotiations tell the German news agency DPA. “Currently the question is whether Magna will receive the order at all and under what conditions,” one source says.

Volkswagen took over the Osnabrück facility from bankrupt contract assembler Wilhelm Karmann in 2009 and launched production of the VW Golf Cabrio there in 2011.

In addition to Golf Cabrio output, Volkswagen uses the factory to handle overflow and phase-out production. As a part of this strategy, Porsche Cayman and Cayenne models are assembled at the site.

While volume production of the new-generation Tiguan compact SUV is under way at Volkswagen’s main plant in Wolfsburg, the Osnabrück site will take over phase-out assembly of the old Tiguan including paint and assembly operations in the spring. Welded bodies will be sourced from Wolfsburg. Plans call for building about 2,500 units per month.

Total capacity of the plant is about 100,000 cars annually, but Volkswagen has not been able to operate it at capacity since the takeover.

Some 2,300 people are employed at Osnabrück, which also includes the development department and the production of tools, production equipment and pressed parts for other Volkswagen Group plants.

Magna’s only car plant is the Magna Steyr facility in Graz, Austria. Mercedes-Benz G-Class and Mini Countryman and Paceman are assembled at the factory. While production of both Mini models will be phased out later this year, Magna Steyr will launch new vehicles for BMW and Jaguar Land Rover in 2017.

In recent years, Magna Steyr has considered establishing a second car-production site, including the takeover of the mothballed FSO plant in Warsaw, Poland, or constructing a greenfield facility in Hungary.

Magna Steyr President Günther Apfalter confirmed last fall that a second site is still an option. “We have now done our homework for Graz,” Apfalter told the Austrian industry publication Auto-Information. “If additional potentials in the market arise, then a second plant is still an option.”

The Osnabrück deal could be an alternative solution in case a production order is not large enough to utilize a second plant.