Magna International Inc., MG-T the Canadian auto-parts giant, says it is idling its Russian operations in response to the country’s invasion of Ukraine.
The assault that began a week ago triggered a wave of international sanctions and corporate boycotts by government and business leaders who called the attack unprovoked.
Magna, which once boasted of ties to the country’s leadership, had said earlier this week that it was focused on the “business continuity” of its Russian operations, but changed tack on Thursday night.
Now, the company says it is pausing its six plants in Russia, which employ about 2,500 workers and which generated $345-million in sales in 2020.
“Like most in the international community, we remain deeply concerned with the very unfortunate situation in Ukraine,” Tracy Fuerst, Magna’s vice-president of corporate communications, said in a statement. “Given current conditions, Magna is idling its Russian operations.”
The company also said it would make a “significant donation” to the United Nations Refugee Agency, but declined to specify the amount.
Ms. Fuerst said the company’s paramount concern was the safety of the people of Ukraine. “Although we don’t have facilities in Ukraine, we have the privilege of working with thousands of Ukrainian colleagues in our Magna operations around the world, as well as those from Russia who share the same values of human rights, diversity and inclusion,” she said in the statement.
Magna’s Russian plants make parts primarily for Hyundai and Volkswagen cars, according to U.S. corporate documents filed by Magna on Thursday. That same day, VW and Hyundai both said they would suspend car production in Russia. The three companies cited a mix of concerns about the violence in Ukraine and logistical concerns, such as shortages of semiconductor chips.
Louis Hébert, a professor of corporate strategy at Montreal’s HEC business school, said logistics likely factored heavily into Magna’s decision to suspend operations. Dozens of countries have closed their air space to Russian planes in the past week and international sanctions are constraining the ability of Russian companies to buy and sell supplies.
“If we think of an assembly plant in the car industry, you are in a just-in-time [setting,] and you need parts, you need subcomponents, and once they are assembled, you need to ship the product elsewhere,” Prof. Hébert said, a process that would be very difficult given current constraints.
“They don’t have much choice to stop the operations,” he said.
Joseph McCabe, an auto-industry analyst and president of AutoForecast Solutions LLC, said manufacturers in Russia have been hit hard by the current restrictions, though he thought Magna had strong resources to get through.
“My thought is that it is the right thing to do in the current climate,” Mr. McCabe said.
The company’s share price has tumbled 10 per cent over the past week.
At one time, Russia was seen as a breakthrough market for Magna. Russian oligarch Oleg Deripaska bought US$1.54-billion in shares of the company in 2007 and planned to run it with founder Frank Stronach. Mr. Stronach told shareholders at the time that before the investment, he sought and received a meeting with Russian President Vladimir Putin to get his endorsement of the deal. Mr. Deripaska later sold his shares during the financial crisis in 2008.
Earlier this week, Russia’s central bank introduced new capital controls that required companies operating in the country to exchange 80 per cent of their foreign earnings into rubles, to help prop up the Russian currency. Magna has not responded to questions about whether they were affected by the orders.
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