Canadian Plastics

Stronach says he wants to help Chrysler while retaining customers

Canadian Plastics   

Canadian Plastics

Frank Stronach, the chairman of Aurora, Ont.-based automotive parts manufacturer Magna International Inc., is talki...

Frank Stronach, the chairman of Aurora, Ont.-based automotive parts manufacturer Magna International Inc., is talking more openly about the recent talks between Magna and Chrysler.

Magna has received a tremendous amount of media attention over the last month because of its alleged interest in Chrysler. The North American unit of the automotive manufacturer is on sale, and news of meetings between Magna senior executives and Chrysler sparked speculation about a potential bid.

Earlier this week, analyst website Bloomberg News cited Magna as one of the three “frontrunners” in the bid for the automaker. Citing two sources close to the talks, the equity firm named Cerberus Capital Management LLC and a team led by Blackstone Group and Centerbridge Capital Partners LP as the other major contenders for Chrysler.

But in an interview with the Toronto Star last week, Stronach said he wants to help Chrysler without putting his assets directly in competition with his customers.


“The message I want to get across is we do not want to compete with any customer,” he reportedly said.

Company officials have insisted that his company is only trying to ascertain Chrysler’s position, and Stronach noted that any investment would not place Magna in a position against clients who are Chrysler’s competitors.

The initial Feb. 26 notice by KeyBanc Capital Markets analyst Brett Hoselton also made note of the factors that would impede a successful takeover. Hoselton said a complete merger between the two entities was a “low-probability outcome” because of the impact it could have on Magna.

“As [Magna] becomes a direct competitor of its automaker customers, it risks losing future business to other suppliers,” the report said. “GM and Ford account for nearly 40 per cent of sales alone. We also believe direct competition would make it more difficult for [Magna] to grow its business with other automakers.”

Magna has ventured into the arena of automotive manufacturing over the last few years, and the company has produced cars out of a European facility. Analysts have also noted that Magna counts Chrysler as one of its largest clients.

Stronach told the newspaper that the transfer of ownership could have a serious impact on Magnas operations.

“It’s a concern,” he said. “All those things go through our minds.”

Magna is one of the world’s largest manufacturers of auto part systems, including plastic body, lighting exterior and trim systems. As of September 2006, Magna had 228 production centres and 62 engineering and R&D centres in 23 different countries.


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