Can Magna keep its model juggling act with Opel?

September 11, 2009

OPEL/Cries from Volkswagen about pulling its business from Magna if the Canadian car parts maker ended up owning a stake in GM’s former European unit Opel ring somewhat hollow given the success Magna has had in juggling its customers’ different needs so far.

Even so, Magna is trying hard to keep its customers — which also include Toyota, Ford and BMW — happy by vowing to ringfence Opel from the rest of its business now it has won the long battle to buy GM’s former European unit.

Sure, these carmakers will want watertight assurances over the supplier’s tie-up with one of their competitors. But they can’t have it all ways if they want to continue to outsource their parts — and even the construction of whole cars — to keep their costs down.

Given the tortuous journey to agreeing a buyer for Opel, Magna’s customers have had plenty of time to work out what guarantees they will want, although it is only now that a deal has been done that they will get to hear the full details of the arrangements between GM, Opel, Magna and its co-investor, Russia’s Sberbank. Magna will have to show them it can treat its own car manufacturer like any other client.

Magna’s Steyr unit already produces the BMW X3, the Mercedes-Benz G-Class, the Chrysler 300C and both the Jeep Commander and Grand Cherokee for three different customers. So it is in a fairly strong position in any discussions — after all the major carmakers are heavily reliant on their parts manufacturers and switching supplier is not an easy option by any means.

But it remains to be seen for how long Magna retains a clear separation between its traditional parts business and its new car making operation Opel. It may find the move up the value chain to its liking.

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[...] seems little doubt that Magna can manage potential conflicts, after all it already builds cars for BMW, Chrysler and Mercedes as well as making parts for [...]