Posted 4/5/05 GlobeandMail.com
Magna steers into vehicle designer lane
Seeks partner from among Big Three to assemble four-seater 'lifestyle' entry
GREG KEENAN
AUTO INDUSTRY REPORTER
TORONTO -- Magna International Inc. wants to make one of the biggest leaps
in its history by hooking up with one of the Big Three North American auto
makers to assemble a vehicle that the Canadian auto parts giant has designed.
Magna is trying to convince one of the car companies to join it in building
a small vehicle that would combine the attributes of a sports car, a sedan
and a sport utility vehicle, and would be able to tow a trailer carrying
snowmobiles, surfboards or other gear, Magna's executive vice-chairman Fred
Gingl said yesterday.
"It's a lifestyle vehicle," said Mr. Gingl, who designed the four-seater. "The
whole purpose was to create a brand new niche for young and not-so-young
people."
Magna has already built a prototype of the vehicle, which would have to be
priced in the $15,000 range and would be built in North America for this
market, he said.
Working together on this kind of project would be a way for Ford Motor Co.,
General Motors Corp. or the Chrysler division of DaimlerChrysler AG to become
more competitive on this continent and reverse their market share losses,
Magna chairman Frank Stronach told shareholders at the company's annual meeting
in Toronto yesterday.
"Let's build a car that we could get back market share," Mr. Stronach
said.
Those three auto makers need a low-cost, high-quality vehicle without all
the electronics that are driving car prices higher, he said. "We have
to create products where we can keep the pricing down."
Mr. Gingl showed a slide of the concept vehicle during his presentation at
the annual meeting.
Magna already assembles vehicles on a contract basis for Chrysler, GM and
other auto makers at its MagnaSteyr operation in Europe and is capable of
designing and manufacturing virtually every component and system in a vehicle.
Mr. Gingl said yesterday that people in the industry laughed at him in 1989
when he designed the first Magna concept vehicle, the Torrero SUV, but now
North Americans are buying millions of sport utility vehicles annually.
Mr. Stronach said North American-based auto makers have made mistakes, mainly
because they're being managed on a short-term basis.
"You cannot ignore the immediate term, but I think you also have to
look 10, 20, 30 years down the road," he told reporters after the meeting.
That long-term view should also apply to institutional shareholders, he noted.
More than 50 per cent of Magna's class A shareholders withheld their votes
this year for the company's board of directors, which prompted Mr. Stronach
to issue what is becoming an annual invitation to institutional shareholders
to visit him at the company's head office in Aurora, Ont., to discuss their
concerns.
"Is it bothering you that I make too much money?" he asked.
He described the opposition to the board as having little impact, in part
because his control of the multiple-vote class B shares meant the directors
nominated by management were elected. Magna doesn't need institutional shareholders,
he insisted. "We've got money in the bank. We are healthy."
Nor is Magna required to operate in North America, he said.
"We want to be here. We want to be a good corporate citizen in Canada,
the United States and Europe. But we can't do it alone. There's got to be
a mindset."
First-quarter woes at Ford and GM contributed to a decline in profit at Magna
for the period.
Profit fell to $172-million (U.S.) or $1.68 a share from $179-million or
$1.84 a year earlier. Revenue rose 12 per cent to $5.72-billion from $5.1-billion.
Vince Galifi, Magna's chief financial officer, said sales for all of 2005
are expected to be in the $21.8-billion to $23.1-billion range, compared
with $20.7-billion in 2004, and, while operating profit is expected to fall,
share profit is expected to be higher than last year's $7.13.
Magna shares rose $2.38 (Canadian) to close at $78.38 on the Toronto Stock
Exchange yesterday.
