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An Opel assembly line in Gliwice, Poland


Magna International Inc.'s ambitious move deeper into auto-making hit another obstacle as BMW, Magna's second-largest customer, warned that the close relationship between the two companies could be in jeopardy.

BMW fears Magna will go from parts supplier to competitor if the Canadian company fulfills its goal of leaping into the ranks of mass producers through an ownership stake in Adam Opel GmbH.

If Magna does so, BMW will need to ensure its technology does not fall into Magna's hands.

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In interviews at the Frankfurt Auto Show on Tuesday, BMW chief financial officer Friedrich Eichiner said Magna's agreement to purchase Opel might change the entire relationship his company has with Magna.

"Magna has always been a strong supplier to us," Mr. Eichiner said.

"However, with Magna acquiring control of Opel, this creates a new situation which we will have to assess. We will not put into question any running contracts with Magna. But where we see conflicts of interest, when it involves innovative technologies, such as new [drive train]technologies, this of course could create a conflict of interest in the future."

The relationship is crucial for Magna. BMW generated 19 per cent of Magna's $23.7-billion (U.S.) in sales last year.

The parts maker assembles vehicles on contract for auto makers through its Magna Steyr division, including the X3 sport utility vehicle for BMW in Austria. Although that is being shifted to a BMW factory, the parts company has won another contract to assemble a vehicle for BMW's Mini division.

The average BMW 3-series car that rolls off the line carries $5,000 worth of Magna parts. The X3 contains $2,500 worth of Magna content.

Other customers are also worried about Magna competing with them through Opel.

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Volkswagen AG, which raised concerns publicly while Magna and Sberbank were negotiating with General Motors Co. and the German government to take a stake in Opel, reiterated its anxiety.

"From a business point of view, we don't like it when a supplier becomes a competitor," Ferdinand Piech, chairman of Volkswagen's supervisory board, was quoted as saying.

Magna and partner Sberbank, Russia's biggest bank, have agreed to share a 55-per-cent stake in Opel, GM's European car division.

Magna is obviously concerned that it could lose some sales to existing customers when the Opel deal is signed. "There has to be a very clear separation between the parts business and the Opel business," Magna co-chief executive officer Siegfried Wolf said at the auto show Tuesday.

His co-CEO, Don Walker, spent much of a Monday news conference saying customers should not worry about their secrets being shared with Opel and used to develop technology for Opel vehicles.

Firewalls are already in place, Mr. Walker noted.

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Development of the X3 was kept separate from Magna Steyr's other assembly contracts when the company purchased an assembly plant next door to Steyr in Graz, Austria, from then DaimlerChrysler AG and segregated production of the BMW vehicle in that factory.

Magna's uneasy dual role helps to explain why it is unlikely to boost its Opel ownership over time.

Magna supplies a broad range of parts to BMW, including exterior mirrors, bumper enclosures, sheet metal panels for car bodies, engine components, and body and chassis parts.

The warning from BMW came a day after the European Union competition authorities made it clear that they would investigate the loan package the German government intends to give to Opel to keep it alive while its turnaround plan is put into place. German Chancellor Angela Merkel has offered €4.5-billion ($7.07-billion Canadian) in loans to Opel, including a €1.5-billion bridge loan that is already in place.

Carl-Peter Foster, chairman of Opel's supervisory board, used a packed press conference at the Frankfurt Auto Show to note that auto companies everywhere get financial assistance and that Opel should be no exception, given its dire financial shape. "I would like to ask the critical voices … to allow us to do our work," he said.

Mr. Wolf said he is confident that the EU competition office will approve the German loans, because they are "based on economics," not politics.

With files from Agence France-Presse

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