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Martinrea factory. (Charla Jones/Charla Jones/THE GLOBE AND MAIL)
Martinrea factory. (Charla Jones/Charla Jones/THE GLOBE AND MAIL)

Martinrea gears up for big drive into Europe Add to ...

Auto parts maker Martinrea International Inc. plans to become a big player in Europe as part of a strategy to diversify from its North American base.

"We want to be a global company," Martinrea chief executive officer Fred Jaekel told shareholders at the company's annual meeting Tuesday. "It won't be long before we have a Martinrea this size in Europe."

A shakeout in the European auto parts business arising from an expected slump in production this year coupled with the potential additional damage caused by the European sovereign debt crisis should open up opportunities for acquisition, Mr. Jaekel said in an interview after the meeting.

He would not outline a goal for European revenue or when he expects it to begin representing a major chunk of the company's business, but he noted that the company is quoting on new business with Europe-based auto makers and has been awarded contracts with some of those companies in North America.

About 99 per cent of Martinrea's annual revenue of $1.1-billion is generated in North America. Almost 90 per cent of that came from the Detroit Three auto makers and Nissan Motor Co. Ltd.

But Mr. Jaekel and other senior executives trumpeted new business awarded by Fiat SpA and Volkswagen AG in North America as examples of how Martinrea is diversifying its customer base and now is seen as a consolidator in the metal stamping business after having survived the auto crisis that drove some key competitors into bankruptcy protection.

Their comments came as Moody's Investor Service revised its outlook for U.S. auto parts suppliers to "positive" from "stable".

The ratings agency's outlook for European suppliers, however, remains negative.

"Although we've raised our light-vehicle unit sales forecasts modestly, we still believe European auto sales will be down 12 per cent year-over-year in 2010 before rebounding 5 per cent in 2011," Moody's said Tuesday.

Moody's is forecasting an increase in U.S. vehicle sales next year and hence an increased demand for parts.

While Martinrea targets Europe from a geographic perspective, it is also focusing on smaller vehicles as the North American market shifts to cars and crossover utility vehicles from pickup trucks and sport utility vehicles. The assembly of frames for SUVs was once a mainstay of Martinrea's business, but it has now closed a Kitchener, Ont., facility that was its largest operation after General Motors Corp. ceased production of its mid-sized Chevrolet TrailBlazer and GMC Envoy SUVs.

Two of Martinrea's top 10 vehicle programs by 2012 will be the Focus compact and Escape crossover made by Ford Motor Co. and GM's Chevrolet Cruze compact, president Nick Orlando said.

"We think it's a strategic area to be in," Mr. Orlando said. Martinrea will make front and rear cradles for the Cruze, as well as rear suspension corners.

In addition, the business it has won with Fiat is to produce rear axles for the Fiat 500. That is a subcompact car scheduled to go on sale in North America later this year. It will be assembled in Mexico and is the first Fiat product to go on sale through Chrysler Group LLC, which Fiat now controls.

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