News

Magna International Inc. MG.A-T will turn its attention to new technologies including electric vehicles after a plan to acquire General Motors Co.'s European division was scuttled earlier this week.

Magna co-chief executive officer Don Walker said the auto parts giant made its pitch to acquire a majority stake in Adam Opel GmbH at the request of the German government and now that the deal has fallen through it will turn its attention back to other priorities.

“We remain focused on running a world-class parts business,” Mr. Walker said Thursday in a conference call with analysts.

“This includes an ongoing assessment of our product portfolio, investing in new technologies and growing vehicle areas such as electronics and electric vehicles.”

Ford Motor Co. F-N has already announced that it will make an electric vehicle in conjunction with Magna that will be introduced in 2011.

On Tuesday, GM scuttled a plan to sell a 55 per cent stake in its Opel division to a consortium involving Magna and Russian lender Sberbank. The two sides had reached a tentative agreement in September, but GM backed out after it decided it could restructure Opel on its own for less money than it would have to spend under the Magna deal.

Mr. Walker said Magna intends to continue to support Opel as a supplier, and has no plans to acquire any other auto makers.

“We got involved in the Opel discussion from a fairly unique set of circumstances,” he said.

Despite the slump in vehicle sales, Magna is emerging as a winner among global suppliers.

Chief financial officer Vince Galifi said the company has won approximately $700-million in takeover business so far in 2009, the bulk of which will impact revenues in the fourth quarter and into 2010.

In the third quarter, Magna reported a small profit, reversing a year-earlier loss despite a 14.5 per cent decline in revenue.

The company said Thursday it earned $51-million (U.S.), or 45 cents per share, in the third quarter, reversing a year-earlier loss of $215-million, or $1.93 per share. This was Magna's first quarterly profit since the third quarter of 2008.

Sales for the company, headquartered in Aurora, Ont., were $4.7-billion, down from $5.5-billion a year ago as a result of “significant declines” in vehicle production in both North America and Europe.

“The improvement in our financial results... largely reflects the benefits of our actions to right-size through the restructuring of our operations and the implementation of various cost-saving initiatives,” Mr. Walker said.

“While it's difficult across Magna to quantify the benefits of these actions, we have been successful in reducing our fixed cost structure such that we can generate increased profits despite year-over-year production declines.”

He added that Magna is also increasingly focusing its efforts on regions outside its traditional markets of North America and Europe. The company's sales outside these two regions increased 35 per cent year-over-year.

Magna said vehicle production in North American fell 20 per cent year-over-year to 2.3 million units, while production in Europe dropped nine per cent to 2.9 million units. However, quarter-over-quarter North American vehicle production showed signs of improvement, growing by 32 per cent.

“The positive industry signs combined with our restructuring actions to date and planned actions give a certain degree of confidence that our North American operations are stable and we should be able to continue to generate profits going forward,” Mr. Walker said.

Magna said its North American average dollar content per vehicle increased 8 per cent in the quarter, while European content per vehicle was unchanged.

Complete vehicle assembly sales fell 38 per cent to $428-million compared with a year earlier, while complete vehicle assembly volume dropped 42 per cent to 14,700 units.

Magna also said its board of directors has approved the redemption of all its outstanding 6.5 per cent convertible subordinated debentures for cash on Dec. 7. The aggregate principal amount of debentures outstanding is approximately $100-million (Canadian).