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UPDATE 1-Magna may lose BMW's Mini car contract for Austria

Monday, 1 Oct 2012 | 3:15 PM ET

* BMW looking to concentrate Mini production in two plants

* BMW to build Mini cars at VDL NedCar in Born, Netherlands

* Mini's logistics better if cars built near UK supply base

(Adds BMW and Magna Steyr comments, company and industry background)

By Christiaan Hetzner

FRANKFURT, Oct 1 (Reuters) - Canadian automotive group Magna International Inc may lose the contract with BMW

to build the next generation of Mini cars at its Austrian plant as BMW looks to concentrate Mini production in Britain and the Netherlands.

Graz-based contract car manufacturing subsidiary Magna Steyr currently makes the Mini Countryman sports utility vehicle (SUV) and later this year will also begin producing the Paceman, a sportier coupe version of the SUV, the seventh derivative of the Mini.

"We let Magna Steyr produce the Countryman and the Paceman ... but in the mid-term we are looking at concentrating Mini production in two locations, namely Oxford and NedCar (in Born, Netherlands)," a spokesman for BMW said on Monday.

He added that the Dutch plant in Born would offer improved logistics versus Graz, since it was closer to the supplier base which is largely situated in the UK.

Mini operates the Oxford vehicle plant as well as an engine plant in Hams Hall and a steel pressing facility in Swindon, where it employs roughly 5,500 people.

BMW emphasized that the company has been happy with Magna Steyr's performance and production quality, and continues to see it as "an important, strategic production partner, with whom we would like to continue working together in the future."

A spokeswoman for Magna Steyr said the company has manufactured cars for BMW since 2003, and looks forward to further business beyond the Mini since it would be a "key contribution to the production and development site in Graz."

Mini sales have increased by 8.3 percent to 192,652 vehicles in the first eight months of 2012 thanks primarily to the success of the Countryman SUV. BMW sold 63,817 vehicles of the brand's second-most popular body style since the beginning of the year, an increase of 23 percent.

Earlier, Dutch group VDL said it had signed a deal with Mitsubishi Motors Corp to buy the latter's NedCar plant in Born, which can produce 200,000 cars per year on a two-shift basis, in a deal that the Japanese carmaker said would be valued at a notional 1 euro.

VDL aims to turn the plant into an independent car manufacturer for third parties, just like Magna Steyr, under the name VDL NedCar.

Until the start of Mini production in the second half of 2014, VDL will top up the unemployment benefits for the 1,500 NedCar employees so they continue to receive 100 percent of their old wages.

"The order is big enough to cover our costs and make a slight profit. Contracts run for five to seven years, so we have plenty of time to get more business," said Theo Toussaint, executive vice president at VDL, which owns NedCar.

(Additional reporting by Thomas Escritt in Amsterdam; editing by Peter Dinkloh and Matthew Lewis)

((christiaan.hetzner@thomsonreuters.com)(+49 - 69 - 7565 1249)(Reuters Messaging: christiaan.hetzner.thomsonreuters.com@reuters.net))

Keywords: MAGNA BMW/MINI

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