To compete in the hotly contested market for engineering services, Austrian supplier Magna Steyr is heading in new directions. Karl-Friedrich Stracke, 58, who is head of contract manufacturing and engineering at the unit of Magna International Inc., is betting on targeted acquisitions and growth in China.
The former Opel CEO recently spoke with Automobilwoche, a German-language sister of Automotive News.
Q: Magna Steyr was previously one of the world's largest engineering service providers, but the company has slipped in the ranking because of many mergers in the sector. Do you have to make acquisitions?
A: We are watching the M&A market very closely and are already looking at ways that we can become stronger. But it must be a true enhancement that brings us additional expertise. Just buying additional capacity makes no sense. A purchase has to fit strategically and contribute to our ability to offer our customers better service. That is the goal.
What are you looking for?
We are looking at companies involved with electronics and on-board networks or with alternative powertrains as their focus. We have already mastered the integration of such technologies into the entire vehicle.
Overall vehicle expertise has been a traditional Magna Steyr strength. However, this requirement is now coming from our Chinese customers, and that means we have to build up more overall vehicle know-how there.
In China, however, the focus is on organic growth.
Are Magna Steyr's European customers concerned about all the business the company is doing with Chinese automakers?
In some cases, it is our European customers' explicit desire that we supply Chinese automakers with engineering services. For example, one of our premium customers explicitly wants us to be the link between its development departments in Europe and its joint venture in China.
What has changed in the engineering unit?
The main thing is that we have completely repositioned our proposal process and restructured engineering. That is, we made our structures leaner and consolidated departments.
We have created flatter hierarchies and shorter reporting paths. And we have sharply reduced costs per engineering hour. We are targeting each individual type of cost and, as a result, we are improving our productivity. In all, we are on the right track to achieve the cost reductions of 15 percent targeted for this year.
What was the problem with the previous proposal process?
We want to impress the customer the first time and not after X number of loops. To do that, you need a standard cost model for engineering services.
Magna Steyr's contract manufacturing unit increased production 20 percent last year to 146,566 vehicles. Is the plant in Graz, Austria, running at full capacity?
Thanks to a new contract with BMW, production has been secured after the phaseout of the Mini models.
Do you have available capacity?
Sure. We still intend to link three customers long-term to the Graz facility to offset fluctuations and generate cost advantages for these customers. The goal is 150,000 to 200,000 vehicles a year. The paint shop can handle that, and that is the sole limiting factor.