Magna Europe, a division of Magna International Inc. of Aurora, Ontario, has more than quadrupled its revenue since 1994. A major acquisition program has seen the company restructure itself into 61 units, employing 18,500 staff members. Only two of those units currently are failing to make a profit. Earlier this year, Magna International acquired Steyr-Daimler-Puch, the Austrian vehicle engineering and manufacturing specialist. Magna Europe AG, which is registered in Austria and based in Vienna, is headed by President Siegfried Wolf. He was interviewed by Automotive News Europe correspondent Georg Auer. What follows is an edited transcript.
How do you cope with rapid expansion?
We have grown on a sound financial base. We only work with our own capital. We do not invest loans from banks. Magna has no debts. We form our plants into competence groups. For example, we have a group for interiors, a chassis group, another for all exterior fittings and a group for the whole body. So we can always provide complete modules of any size up to the biggest possible module - the whole car. This makes us able to react quickly and efficiently to customer needs. The acquisition of Steyr, in particular, has improved our competence in these areas.
Naturally you are riding full speed on the waves of the boom?
Yes, but we have to prepare for a time when the market may drop by 10 or 15 percent. We have to be profitable even then. One can already see signs of weaker economies in Europe and North America - although high technology products will suffer less than other sectors of the market. We are confident of maintaining an annual growth rate of 30 percent.
How will the future consolidation of motor manufacturers from the current 16 to maybe just eight or six influence the supplier market?
Recent studies on this subject show a concentration process within the ranks of the suppliers. Currently Delphi and Visteon lead the supplier chart, with Bosch and Denso forming the following group. Then there is a group of three - Magna, Lear and Johnson Controls - each with between $12 (billion) and $15 billion annual sales.
Maybe suppliers will concentrate increasingly on one product as auto manufacturers consolidate - as Lear and Johnson have done with seats, for example.
On the contrary: No car manufacturer really likes having only one source for his parts supplies. So there will not be supplier monopolies for particular products. Competition is the mother and father of innovation.
And how does the trend for increasing variation in model ranges change the way suppliers work?
Completely new relationships between manufacturer and supplier, and supplier and supplier, are being created. Customers increasingly want a custom-built car. This means that the first-tier supplier has to work together with the second-tier supplier more intensively than before.
For example, Magna Europe has just finished the development and engineering of a complete car interior, from ceiling to floor, including acoustics and safety fixtures. We took total responsibility for the module. But nowadays manufacturers have to design so many variations of a car that they do not have enough test beds. So, for example, the jointly owned dynamic acoustics test bed of Steyr and AVL List in Graz was a big help with this project.
1999 will see a change in the international supplier scene: GM will spin off Delphi, and there has been speculation about Ford and Visteon. What will happen if these leading suppliers enter the free market?
Why do those big companies go for the free market? Because suppliers need a structured net of customers for continuous growth. That means you have to have more customers in your portfolio. You get a safer ride if you have greater diversification.
However, those spin-off companies will have to get their cost structures right first - just as we had to do some years ago when (former General Motors and Volkswagen purchasing chief J. Ignacio) Lopez tore through supplier structures.
What are Magna's plans for Central and Eastern Europe?
Magna is active in Poland, Russia, the Czech Republic and Slovakia. We are close to the Hungarian plants of Opel and VW/Audi with our center in Styria, and we source components in Hungary. Local content is a main theme today and logistics costs are damaging over great distances. We seek viable ventures - not adventures.
Just now the main concentration point of Magna International is Mexico. If we establish ourselves in a region, it has to make economic sense.