Canada's auto industry has hardly made good news in the past year, but on Saturday an Ontario-based auto-parts maker made headlines for breathing life into General Motors' flailing European division.
Magna International Inc., a company based out of Aurora, Ont., is the new part owner of GM's Opel division, stepping in with Russia's Sberbank to bring some financial stability to the automaker days before it files for bankruptcy.
Euro auto giant Fiat was also in the running to acquire Opel but in a surprise turn, lost the bid to Magna.
Magna is part of a small handful of businesses that are not buckling under the pressures of the recession. Instead, these companies are taking full advantage of opportunities that have been born out of companies that are on death's doorstep.
The Opel acquisition is Magna's biggest deal in the company's 52-year history.
"(Magna) puts in $300 million and he becomes a partner in Opel, with GM, the U.S. government and autoworkers. That's not a bad deal," said Wayne Lilley, author of "Magna Cum Laude," the unauthorized biography of Magna founder Frank Stronach.
"Magna's forte is bringing companies back from bankruptcy and selling new ideas, so hopefully Frank will be able to turn this company around too and sell it as a new and improved GM to the rest of the world," he said in an interview with The Associated Press.
Magna rebounds
It's hard to believe Magna was once in the same boat as GM, drowning in losses in 1989.
The company was hit hard by a faltering economy that caused customers to scale back their orders. The company never filed for bankruptcy though at one point, industry experts didn't rule out the possibility.
However, Magna founder Frank Stronach saved his company by reorganizing his business and implementing a cost-cutting program. He decided to reshift his focus and investments into the auto industry and scaled back aspects of his business that dabbled in the entertainment industry.
Today, the company has rebounded and is Canada's largest manufacturer of auto parts, supplying GM, Ford, Chrysler, Volkswagen, BMW and Toyota operations.
In recent years, the company has moved towards auto manufacturing, putting together vehicles like the BMW X3 SUV at its facilities in Austria. Magna will also assemble the Porsche Cayenne in 2012.
In 2007, Stronach made a play for North American automaker Chrysler in hopes to build vehicles here at home but his bid was unsuccessful.
Stronach's quest for Russia
Stronach, who has been at the helm of Magna's operations since the company was founded in 1957, suffered another minor setback in October 2008 after a deal with a Russian automaker fell through.
Russian billionaire Oleg Deripaska backed out of the deal because of the current global financial crisis. Deripaska has holdings in the GAZ Group -- Russia's major auto maker. It was expected that the partnership would give Magna a chance to tackle the Russian market -- a market Stronach predicted would yield significant influence in the future.
When Stronach announced his plans with Deripaska in 2007, he said that the Russian market will yield Magna double or triple its revenue, which in 2006 was noted as $24 billion.
When the deal fell through, Magna's shares took a nosedive.
But the Opel deal reopens the door to Russia's auto industry.
Carlos Gomes, an economist and auto industry specialist with Scotiabank, told The Associated Press the Opel acquisition is a good move for Magna.
"The potential in Russia is definitely there for Magna," he said. "If you look at sales through the first half of 2008 before you had the collapse in oil prices and the global recession, sales in Russia were actually increasing at such a pace that it was likely to surpass Germany as the largest market in Europe."
"When oil prices collapsed sales just tanked. But the reality is that the potential is there going forward," he added.
Under the partnership agreement, Magna has a 20 per cent stake in Opel while Sberbank and GM each have 35 per cent. The remaining 10 per cent will be controlled by Opel workers.
One of Magna's primary roles will be to provide the new company with expertise in auto manufacturing.
Magna currently operates 326 manufacturing plants, engineering centers and sales offices across North America, South America, Asia and Europe. Magna reported a 2008 profit of $71 million on sales of $23.7 million.
The company employs about 82,000 people.
With files from The Associated Press
