TORONTO - Magna International Inc. is regrouping its vehicle assembly and powertrain operations in Europe to offer automakers complete chassis modules.
Magna is merging its Steyr-Daimler-Puch AG vehicle assembly company in Graz, Austria, with its Steyr powertrain operations to create Magna Steyr.
The new entity will be headed by Magna Europe President Siegfried Wolf, who will spearhead the chassis module project. Magna Steyr will work with Magna's Cosma metal-forming division on the chassis project.
The move puts Magna, of Aurora, Ontario, into direct competition with Dana Corp. of Toledo, Ohio, and other parts makers working on joint ventures to do the same thing. Magna ranks No. 6 on Automotive News' list of top 150 suppliers to North America; Dana ranks No. 3.
Magna Steyr is a logical extension of Steyr's complete vehicle assembly capabilities and Cosma's expertise in hydroformed space frames and underbody metal components, said Jim Nicol, Magna's vice chairman.
Magna Steyr's advantage is that it has all of the capabilities in-house, he said, unlike the joint ventures that are trying to develop a complete chassis module.
'We believe that Magna Steyr will be the market leader in providing complete hydroformed chassis on wheels,' Nicol said.
PITCH THE CONCEPT
Nicol cautioned that Magna has no contracts for either a complete chassis or space frame module. The time frame to win such contracts is probably the next three to five years, Nicol said.
'We come up with a concept, and then we pitch that concept to customers,' he said.
That's how Magna won a contract in the early 1990s to provide a complete body-in-white for the BMW Z3 sports car and hydroformed frames to General Motors for it full-sized pickups and sport-utilities.
'The key is to go in with a team and say we can do all of this (for you),' Nicol said. These are the kinds of solutions the automakers want to see from their suppliers, he said.
Company officials think such contracts could provide $2,000 or more of Magna content on a single vehicle.
PRELUDE TO SPINOFF?
Magna Chairman Frank Stronach said the European reorganization is the logical step before spinning off Magna Steyr as a separate publicly held company similar to Decoma International Inc., Magna's exterior plastics unit, and Tesma International Inc., an engine and transmission parts maker. Those two companies have been partially spun off, with Magna remaining the controlling shareholder in both.
'Over the next few months we will assess whether we should take it public,' Stronach said. 'We have to see the market conditions.'
But he hopes to spin off Magna Steyr early in 2001. Magna purchased Steyr in 1998 for $248 million. It now assembles the Jeep Grand Cherokee, Chrysler Voyager minivan and Mercedes-Benz M class for European markets. But it will lose the M-class business when the contract expires in 2004. Mercedes is expanding its assembly plant in Vance, Ala., to consolidate all M-class production at one site.
Magna has won a contract to make vehicles for GM's Saab division and is close to landing a deal to assemble the X3 sport-utility for BMW.
Dana, which competes with Magna for hydroforming and stamping contracts, manufactures a complete chassis module for Dodge Dakota pickups assembled in Brazil.
The announcement of Magna's European reorganization came as the company reported profit of $89 million, or 93 cents a share after extraordinary items, for the three months ended Sept. 30. That compares with $80 million, or 89 cents a share, a year earlier. Sales jumped to $2.34 billion from $2.18 billion.