×

Magna Open to Daimler as Chrysler Partner, Secures Russian Investment

Magna International is open to DaimlerChrysler keeping a stake in struggling automaker Chrysler Group even if a bid by Canada's biggest autoparts supplier for a minority stake is approved.

Speaking to reporters after the company's annual meeting in Toronto, Magna Chairman Frank Stronach said he would work with any partner that would help ensure a successful Chrysler bid. Magna currently has a partnership with Canadian buyout firm Onex that is aimed at purchasing a stake in DaimlerChrysler's Chrysler division.

"Right now our proposal is we do have another partner with Onex and indications are that perhaps Mercedes would like to stay in with a small percentage," Stronach said. "But if Mercedes chooses to stay in with a percentage then it's a three-way partnership.

Magna has a lot riding on the outcome of a potential sale of Chrysler since it generates some 25% of its $24 billion in annual revenue from DaimlerChrysler, and about half of that comes from Chrysler Group.

Stronach also said that it had secured a $1.54 billion investment from Russian billionaire and automotive entrepreneur Oleg Deripaska could make its play for Chrysler more attractive to DaimlerChrysler.

"If I would be Mercedes ... I would say 'gee if Magna would have a Russian partner we would like that because Russia is a great market for Mercedes cars.' But I am speaking out loud, I am not speaking on behalf of Mercedes," said Stronach.

The deal with Deripaska, which still needs to be approved by shareholders and regulators, would give Deripaska and Stronach joint control of the diversified autoparts supplier through a new holding company. Russian Machines, which holds an interest in the Gaz Group – Russia’s second-largest automotive company – will own 18% of Magna’s subordinate voting stock.

The announcement, coupled with news of higher first-quarter profit, sent Magna's class A shares to their highest level since early 2005 on the Toronto Stock Exchange.

The stock rose 11% to C$96.95 in Toronto before easing slightly to close at C$93.65 for a gain of 7%. In New York the shares rose $5.38, or 6.8%, to $84.31.

Stronach, who said Magna will be well positioned to play a role in the Russian car market, told shareholders he met with Russian President Vladimir Putin to get his endorsement before agreeing to have Deripaska as a business partner.

"I am very optimistic that this will be great for Magna, will be great for the shareholders, will be great for the employees," Stronach said.

Profit Edges Higher

Earlier, Magna said it had a net profit of $218 million, or $1.96 a share, in the quarter ended March 31. That was up from a profit of $212 million, or $1.91 a share, a year earlier.

Revenue at Magna, which generates much of its sales from the Big Three U.S. automakers, rose 7% to $6.4 billion from $6.0 billion.

During the quarter, Magna said the value of its parts in cars rose 10% in North America. Content per vehicle in Europe rose 14%.

The company said it now expects consolidated sales of between $23.5 billion and $24.8 billion in 2007, based on light vehicle production volumes of about 15.3 million units in North America and about 15.5 million in Europe.

That compares with its previous outlook for consolidated sales of between $22.9 billion and $24.2 billion, on production volumes of 15.4 million units in North America and 15.5 million in Europe.