Commentaries

Should Volkswagen demand a Magna Carta?

Magna International seems to be taking seriously threats from Volkswagen to pull its business following the Canadian car parts maker’s Opel victory.

Magna’s co-CEO Donald Walker is saying that after talking to them, most of his other customers are happy that the car parts group – which along with Russian backer Sberbank is buying a 55 percent shareholding in GM’s Opel — is able to protect their technologies.

Apparently VW is still unconvinced, so Magna will “finalising the internal procedures” and will have more talks with the German carmaker.

Walker is also stressing that Magna is not looking to compete with its clients but is simply aiming to get a good return on its investment in Opel, reiterating that Magna will remain a parts company.

There 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 Toyota, Ford and VW.

But to say Magna won’t be competing with other carmakers once it starts building Opel cars is stretching the point. Why else would you buy Opel if it wasn’t to take market share from VW and others?

Can Magna keep its model juggling act with 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.

Mandy moves to hide Byers’ blushes over Rover

At the very least, it’s frightfully convenient for the Britishgovernment to call in the Serious Fraud Office to look into MG Rover, a former carmaker. Whether there’s a shocking crime or not, it suits Peter Mandelson, the Business Secretary, to organise a further delay before this gory case is finally closed.

It took BDO Stoy Hayward’s partner Gervase MacGregor 16 million pounds and four years to report on a case which looked open and shut at the time. Whatever exciting new detail he has unearthed, this attempt to smear the so-called Phoenix Four is little more than political treachery.

The Four, as John Towers and his three cronies were immediately dubbed, were a bunch of chancers who saw an opportunity. They might have genuinely believed they could make a go of a business where even BMW had failed, but few others did. BMW gifted them the company, added 427 million pounds and the (uncomfortably large) stock of unsold cars, and gratefully walked away.

The cash allowed Towers & Co to pretend that a sub-scale business, producing unattractive, high-cost models in an industry with chronic overcapacity could be made viable.  When the money ran out, five years later, the plant had to close.

On what we know so far Towers & Co, who helped themselves to over 40 million pounds during their tenture, are guilty of little more than greed. In 2000, the Trade Secretary was Stephen Byers, a man with an impressive record of errors. The Rover unions were obsessed with preserving jobs in the face of the facts, and between them and Towers, Byers was bamboozled into awarding it to the incompetents. Since little public money was involved, it looked like an easy decision.

The only alternative (barring complete closure) was put forward by Jon Moulton, who proposed selling off most of the site and continuing to make MG sports cars, the only niche of MG Rover with any value. He was swiftly tarred by the unions as an asset-stripper, and the Phoenix Four took the wheel.

The real tragedy here is not that Labour made such an obviously stupid decision, but that it blighted the lives of thousands of Rover workers. BMW’s 427 million was there to fund generous redundancy terms for them. By the time the money was needed, it was gone, and the workers were five years older, less able to find a career elsewhere. A study nearly two years on found that almost a quarter of them were not in regular employment, despite a two million pound support package from the government.