The deep slide in North American vehicle production sent profit at Magna International skidding 13% lower in the second quarter and the Canadian parts giant warned there is worse to come.

"Given our expectations for continued weak vehicle production in North America in the second half of the year, we expect our sales and earnings to continue to be negatively impacted for the remainder of 2008," Magna said in Toronto last night (6 August) as it reported profit of US$227m for the three months ended 30 June on revenue of $6.71bn. That compared with a profit of $262m on revenue of $6.73bn in the second quarter of 2007.

The surge in petrol prices and the collapse of the US housing market have pummelled sales of pickups and sport utility vehicles for Magna's three largest North American customers, Chrysler, Ford and General Motors.

As a result, the auto parts company reduced its sales forecast to between $24.3bn and $25.6bn for 2008, down from $26.1bn in 2007 and lower than other forecasts made earlier this year.

"In North America, we're faced with the most challenging times we have experienced in the last 20 years," Magna's co-chief executive officer Don Walker said in a conference call with analysts.

For the first time in the company's history, sales and operating income in Europe surpassed levels in North America during the second quarter.

While profit fell, Magna is sitting on $2.5bn in cash, which makes it one of the healthiest companies in the industry and in a good position to take advantage of opportunities to take over business from weak suppliers or make acquisitions during the downturn, company executives said.

But asked if Magna is interested in acquiring Chrysler as it was last year when then-parent DaimlerChrysler put the US auto maker up for sale, Walker said no.

"We can do something in conjunction with the customer if there's a product area we're interested in like an engine area or something like that," he said. "We would look at it, but we're not out running after car companies."

The North American slump has slowed down global expansion at Magna, which is now among the top three parts suppliers globally as measured by annual sales.

Last year, Magna added 25 new factories globally and closed, sold or consolidated 13. This year, it has added seven plants around the world and closed seven, chief financial officer Vince Galifi said.

One big Magna operation that could be in danger is the New Process Gear facility in Syracuse, New York state, that makes four-wheel-drive components for the Detroit auto makers. Magna purchased the plant from Chrysler earlier this decade but needs help from customers and the workforce to reduce costs, Galifi said.

"If we can't fix this, one solution might be that we have to shut the facility down," he said.