GRAZ, Austria - As part of its campaign to launch a North American assembly plant, Magna Steyr has offered to build vehicles for the Big 3 and for European automakers that don't sell vehicles in the United States.
The European coachbuilder's plants in Graz already produce 230,000 vehicles a year. Now Magna Steyr is seeking a location for a plant in North America, Eastern Europe or Asia to produce an additional 160,000 vehicles a year.
Wolf-Dietrich Schulz, vice president for manufacturing, did not identify with which automakers Magna Steyr is talking. But the company already has a sizable portfolio of customers.
Magna's plants in Graz produce the BMW X-3, Saab 9-3 convertible, Mercedes-Benz E-class 4matic, Chrysler 300C and Jeep Grand Cherokee.
But the paint shops at Graz are at full capacity.
"Graz is full. We cannot expand here," Schulz said. "The plant gets too complicated. We want to go out into the world. That's the current idea."
Magna Steyr is wholly owned by Magna International of Aurora, Ontario.
The location of a new plant depends on the identity of Magna Steyr's new customers. North America is a prime target because its automakers use contract builders for less than 1 percent of their total production, according to Magna Steyr. There are long traditions of using independent coachbuilders in Europe and Asia, Schulz said. (See box, below.)
"In North America there is virtually nothing," he said. "They all build their own cars. They are not using the opportunity."
Magna argues that it can reduce risk by what it calls "peak shaving" - letting an automaker tool up for 70 percent of peak capacity on a program. Magna can handle the higher initial demand, then take over declining production at the end of a vehicle's life cycle. It can also produce niche vehicles such as hybrids and convertibles, reducing complexity on an automaker's main assembly plant.
Schulz, a former General Motors manufacturing executive, acknowledges that the UAW likely would object to subcontracting U.S. work. But he says GM and Ford Motor Co. could benefit from such a move.
"When you look at the UAW model, I don't know how they would react to this," he said. "But when you look at the situation of Ford and GM, they are in a desperate situation. They need a paradigm shift. The question is whether they bite the bullet. I would."
Schulz says several European automakers are thinking about entering the United States, and others already selling in that market are thinking of building vehicles there, too. The weak dollar could make North American assembly a better option than shipping European-built vehicles to the United States, he said. Contract assembly would allow a European maker to assemble low initial volumes. Magna Steyr also would like to get work from Asian automakers, which use contract builders frequently. But Japanese companies tend to keep such work within a tight keiretsu network.
Said Schulz: "They are pulling their partners with them into the world."