Battered Magna expects rebound

Auto-parts maker says markets should improve with ‘cash for clunkers'

Car-parts maker Magna International Inc (MG.A-T53.301.923.74%) ., hit by the suffering North American auto market, sees “signs of improvement” for the balance of the year, co-chief executive officer Don Walker said Friday.

On a conference call with analyst, Mr. Walker said the United States' new vehicle incentive program – known as “cash for clunkers” – is helping stabilize sales there, and European sales are on the rise.

But a 49-per-cent decline in vehicle production in North America in the second quarter pushed Magna's revenue down by 45 per cent to $3.71-billion (U.S.) from $6.71-billion in the year-earlier quarter, and the company declared a loss of $205-million.

Among the bright spots, Magna is winning business from other companies, and is expecting to gain significant growth in the coming years by expanding its production of electronic parts, and components for electric cars and hybrids.

The company was tight-lipped about its bid for a stake in Adam Opel GmbH, the European operations of General Motors Corp. Discussions are under way between GM and the two bidders – Magna and its Russian partner, and Belgium-based investment firm RHJ International.

If the consortium is successful in completing the acquisition, Magna will put in place appropriate “firewalls” to ensure its current business will operate independently from Opel, Mr. Walker said, so its other European customers are comfortable with the arrangement.

“We've have various initial feedback” from existing customers, Mr. Walker said. “People are waiting to see, number one, [if] this deal happens, and number two, how do we put the firewalls in place?”

The key is to make sure that there is no risk of technology transferring “from other customers to Opel or from Opel to other customers,” he said.

Mr. Walker's only other comment on the deal was that, if it takes place, there could be “growth into Russia” to drive new sales, and a focus on cost reductions.