Magna's Frank Stronach gets in the passenger seat of a Ford battery electric vehicle.CHRIS WATTIE/Reuters
Frank Stronach has a vision for the next big thing at Magna International and as always, it's bold and sweeping.
The Canadian auto parts giant is designing and developing a platform packed with electronic components and technology to auto makers to serve as the base for their electric vehicles. And Mr. Stronach, the 77-year-old founder, regards it as so crucial to Magna's future that he has taken charge of the project personally.
"It takes a very strong hand," the Magna chairman said. "I made it quite clear: I call the shots. I made it absolutely clear."
In an exclusive interview, Mr. Stronach said his plan is to "provide our customers with a rolling chassis, with all the electrical components in there. The customers can put their interiors in, their exteriors."
The initiative is Magna's ambitious gambit to participate in what is already emerging as the key industry trend of the second decade of the 2000s - the electrification of the vehicle. Auto makers are rushing to meet stringent new fuel economy regulations and building new propulsion systems to begin replacing the internal combustion engine, which has been the only system under the hood for more than a century.
The strategy involves the creation of a new Magna group called Magna E-car Systems, typically a move the company makes when it expects one of its auto parts divisions to reach a critical mass.
Peter Reif, president of E-car Systems and head of its European division, reports directly to Mr. Stronach. So does Ted Robertson, North American president of E-car Systems and executive vice-president of new product creation for Magna.
The European and North American teams compete with each other to develop best practices and allow the brightest ideas to rise to the top, Mr. Stronach said. Magna E-cars is working on such key components as battery packs, the computers that control electric vehicles, and the gears that drive electric motors.
He made his comments as prepared for Magna's annual meeting to be held Thursday at a suburban Toronto hotel.
Magna is coming off a year in which it lost $493-million (U.S.) but weathered the worst crisis in the automotive industry since the Great Depression of the 1930s, which drove two of its largest customers into Chapter 11 bankruptcy protection.
Magna's own trip to the edge of the financial abyss in the late 1980s and early 1990s led to a virtual ban on debt at the company and a cash pile that helped it survive the 2009 crisis and emerge as one of the strongest global auto suppliers.
Becoming a key player in electric vehicles will take an investment of $500-million, Mr. Stronach estimated. But in 10 years, when he sees electric vehicles making up between 20 per cent and 30 per cent of North American vehicle sales, the annual revenue from electric vehicle components for Magna could amount to $20-billion.
He has made such grandiose projections before, notably when he declared that Magna Entertainment Corp., his racetrack empire, would one day be as large as the auto parts business, which in a normal year generates annual revenue of more than $20-billion. Magna Entertainment went into Chapter 11 protection last year.
But in auto parts, he and Magna have a successful record of identifying winning technologies and taking advantage of them.
Among those were a new method in the early 1980s to install the foam in automotive seats, which led to the company winning a contract with then Chrysler Corp. to supply for that auto maker's minivans, arguably the most successful vehicle in Chrysler history. The purchase by Magna of a company that developed hydroforming - the use of high-pressure water power to shape metal tubing - led to a groundbreaking contract with General Motors Corp. to manufacture frames for GM pickup trucks.
Mr. Stronach sees electric cars capturing 10 per cent of the market within five years. Pure electric vehicles such as the battery-powered Focus compact that Magna developed for Ford Motor Co., are expected to be just a tiny slice of the market by 2015.
But if the definition is broadened to include hybrids, which combine a traditional gas engine with an electric motor, and plug-in hybrids that rely mainly on an electric motor with a small gas engine as back-up, the figures grow.
Consulting firm J.D. Power and Associates forecasts sales of 55,000 battery-electric vehicles by 2015, but 1.45 million combined hybrid, battery-electric and plug-in hybrid sales. Some analysts expect sales to return to the 15 million level annual by that year.
Magna would like to invest its money in Canada, Mr. Stronach said, adding his voice to those calling for the federal and Ontario governments to devise a policy to make sure Canada obtains a slice of the tens of billions of dollars auto makers and suppliers will spend developing electric cars and systems.
"If somebody says 'Look, we pay half of the thing, we match your investment if you put such and such a factory in our state, in our country' then I cannot be totally ignorant. What strategy [does Canada]have?"