Magna International will establish a firewall between its parts business and car business if it succeeds in its bid for General Motors’ Opel division, co-CEO Donald Walker told Reuters Television in an interview.
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“We do understand Magna is an auto parts company and Opel is a car company so if we complete this than we have to have a complete firewall between the two business units and that is under discussion right now,” Walker said.
Another issue is the pensions of up to 70,000 Opel employees. Analysts estimate that pension obligations amount to some EUR4bn (US$5.5bn). Dealing with that is one of “many complex issues that must be resolved,” Walker said.
Magna has a non-binding agreement with GM to buy up to 55% of Opel and Vauxhall with partner Sberbank of Russia. Under the agreement, GM would keep a 35% stake and Opel workers would have a 10% stake in the new company.
Away from Opel, Walker said that now could be a good time to do deals and said that Magna is looking at potential acquisitions that would add to its business and is fielding inquiries from automaker customers that need support to deal with failing suppliers.
“We are seeing a lot of more reasonably priced opportunities for acquisitions,” Walker said.
He said he expected a number of auto parts suppliers to fail under the economic downturn, which would force automakers to look for replacements to maintain production schedules.
“There is a lot of discussion about taking on extra work to support ongoing production,” Walker said.
Production has slowed sharply in North America with GM cutting back significantly as it goes through its bankruptcy restructuring and Chrysler choosing to halt production from early May for its reorganisation and sale.
“It’s been painful, but in the next couple of months I would expect to see production levels start rising again and hopefully we can get back to profitability,” Walker said.
