Canada will have a national auto maker now that Magna International Inc. has won the bidding to take over Adam Opel AG.
“We want to build Opel cars in Canada,” Magna chairman Frank Stronach said late Friday from Vienna as he awaited confirmation that the Canadian auto-parts giant had indeed won the backing of the German government for a deal that would give it and its partners a controlling stake.
“Canada should have its own Canadian company … a truly Canadian automobile industry,” he said, although he did not indicate where in Canada the cars would be built.
His comments came as the Magna-led bid for the key European operations of General Motors Corp. was being debated by German politicians, who later approved the deal and a bridge loan of 1.5-billion euros. Germany is home to several Opel assembly plants and about 25,000 of the company’s employees.
The victory for the 76-year-old native of Austria is the culmination of an automotive career that began in 1957, when Mr. Stronach founded a company in a Toronto garage whose first contract was with GM to stamp out metal brackets to hold sun visors in place.
Since then, with just one major setback in the early 1990s, Magna has become one of the three largest auto-parts makers in the world and, with a cash balance of $1.5-billion (U.S.), one of the healthiest companies in the auto industry.
Under the arrangement, Magna will hold 20 per cent of Opel, while its partner in the deal, Sberbank of Russia, will have 35 per cent. GM will retain 35 per cent and 10 per cent will be distributed to Opel’s employees.
Mr. Stronach said auto makers can be competitive if management and employees work together and end what he called the confrontational and adversarial structure that has dominated the industry.
“I know we can be competitive, I know we can create jobs in Canada and the United States. If we don’t change the culture, North America’s got no chance to be in the automobile industry, absolutely no chance.”
If Mr. Stronach is able to follow through with his plans for Canada, it will be the first substantial Canadian-owned vehicle manufacturer since the sons of Sam McLaughlin sold the carriage and auto-making business their father started to GM in 1918.
Magna is a vehicle manufacturer now, but does it on contract for GM, BMW AG and other auto makers in Austria.
While Mr. Stronach has a vision of building cars in Canada, he also has an eye east – on Russia, which he believes will recover from the economic crisis and again become one of the fastest-growing markets in the world.
He has been building relationships there for years, including advising Prime Minister Vladimir Putin on the industry.
Sberbank, which is controlled by the government, is Magna’s main partner in the Opel deal. Another potential partner is Oleg Deripaska, the oligarch who owns the Basic Element group and whose companies include struggling auto and truck maker OAO Gaz.
Two years ago, Mr. Deripaska invested $1.5-billion (U.S.) in Magna. Last autumn, during the height of the financial crisis, a margin call forced him to surrender that stake to lenders. Basic Element and Magna nonetheless vowed to work together to build a Russian auto-components business. Now that Magna has won control of Opel, Mr. Deripaska’s dream of selling quality cars to the masses could come true.
Sources said Basic Element might attempt to buy some or all of Sberbank’s stake in Opel. Basic Element is in no position to invest in Opel now because Mr. Deripaska’s heavily indebted empire is struggling to stay alive amid the financial crisis. Gaz is losing money and recently announced an “anti-crisis” restructuring effort.
Gaz has, however, offered to build Opel cars at its underutilized Russian factories. “The Gaz facilities would be put at the disposal of the new Opel company,” said an executive familiar with Mr. Deripaska’s plans. “Opel models are ideal for lower- and middle-class consumption in Russia.”
Gaz is Russia’s largest producer of buses, trucks and road-construction equipment and wants to ramp up its passenger-car business. It makes the low-tech Volga car, which was popular during the Soviet era, and recently struck a deal to produce a Chrysler knock-off called the Siber.
The question is whether the German government will tolerate production of Opels in Russia, when it is almost certain that thousands of Opel workers in Germany would lose their jobs. Exporting Opels to Russia, instead of building them there, would keep more of Germany’s Opel workers employed.
In winning his bid, Mr. Stronach defeated Italian auto-maker Fiat SpA and its chief executive officer Sergio Marchionne.
The complex negotiations to save Opel took on “the air of a Brazilian soap opera, in the midst of an election year both in Europe and Germany,” Mr. Marchionne said in Montreal yesterday.
He forecast a global automotive consolidation during the next two years that will leave just six players standing.
“This industry is in dire need of consolidation,” he said.
Mr. Marchionne bid for Opel in an attempt to vault into the global leadership ranks from its status as a regional player in Europe and South America. But losing out on the deal didn’t seem to bother him.
“If the Opel transaction is not available to Fiat, life will move on, you know.”
