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Magna will build paint shop in Slovenia, but will not build new European production facility: CEO

Workers at Magna’s plant in Graz, Austria.

© Herwig Prammer / Reuters/REUTERS

Magna International Inc. will build a paint shop in Slovenia as part of its vehicle assembly business, but will stop short of building a new production facility in Europe as revenue from the assembly business more than doubles by 2019.

Construction on the paint shop, which will employ 400 people, is scheduled to begin in the second quarter of this year as Magna's Steyr assembly plant in Graz, Austria, starts assembling the 5-Series sedan for BMW AG and a vehicle for Jaguar Land Rover.

It's located about 30 minutes away from Magna's sprawling assembly complex and engineering centre in Graz, which is in southern Austria, just north of the border with Slovenia.

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Steyr already builds vehicles for the Mercedes-Benz division of Daimler AG and had built other vehicles for BMW and other auto makers.

In its annual outlook released Wednesday, Magna said its vehicle assembly business will generate revenue of $2.7-billion (U.S.) to $3-billion this year. By 2019, that will grow to between $6.6-billion and $7.1-billion.

Steyr will begin producing a Jaguar battery-electric vehicle next year and Magna revealed that it has won contracts to build two other models as well. It would not identify the auto maker involved.

"Most of the business we have won is in Europe," Magna's chief executive officer Don Walker told an investor conference Wednesday.

There is not enough demand yet, however, for another full assembly plant.

"It's a chicken and egg thing," Mr. Walker said. "I think if we had a flexible assembly plant here we'd be getting business, but we don't want to spend the capital until we have enough critical mass."

The Canadian auto parts giant talks to all auto makers about full vehicle assembly as well as potential new entrants to the automotive business.

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It's not clear those potential new entrants "want to design and source and build a car," which is work Magna is capable of doing, he added.

The assembly business is expected to generate the highest compound annual growth rate of all the company's units between 2016 and 2019.

Total company revenue is forecast to range between $36-billion and $37.7-billion this year.

By 2019, revenue is forecast to grow to between $43.5-billion and $46.2-billion.

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