VW seeks to cut ties with Magna

October 04, 2009 10:09:37 AM

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German car maker Volkswagen is seeking to end or sharply reduce its ties with car parts maker Magna after the Canadian group's takeover of VW rival Opel, according to a report to be published Monday.

VW purchasing chief Francisco Garcia Sanz will be meeting Magna boss Siegfried Wolf in the next few days, Der Spiegel says.

Volkswagen, which buys two billion euros (2.8 billion dollars) worth of parts from Magna every year, does not want its rival deducing from VW's orders what might feature in future models, it adds.

The threat to halt orders from Magna would also apply to luxury sports car maker Porsche, which now belongs to the Volkswagen group.

The development follows Chrysler's decision reported on Wednesday not to renew its contracts with Magna for the production of vehicles for the European market.

A spokesman for Fiat, which recently bought Chrysler, said that in future the cars would be built at the Fiat-owned Bertone plant in Italy.

The Opel takeover has raised concern among competitors who do not want to see a key supplier transformed into a direct rival.

"Until now, we have had a good cooperation with Magna," Friedrich Eichiner, finance director at German luxury car maker BMW, told reporters last month at the press opening of the 63rd Frankfurt motor show.

"But the strategy has changed," he added. "We must consider which technologies are going to fall into the hands of a competitor."

Ferdinand Piech, head of the supervisory board at Volkswagen, Europe's biggest car maker, also said: "From a business point of view, we don't like it when a supplier becomes a competitor."

Volkswagen threatened to review its supplier contract, with VW chairman Martin Winterkorn saying: "We will examine our model of activity with Magna."

US automaker General Motors announced in September it would sell a 55 percent stake in Opel and its sister brand Vauxhall to Magna and its Russian partner, the state-owned bank Sberbank.

GM plans to hold on to a 35-percent share in Opel, with workers owning the rest of its shares.

For the Canadian group the deal represents a strategic shift away from being just a parts supplier to many auto makers and an assembler of vehicles for brands like BMW.

Wolf has stressed that his group would establish "a strict separation between the supplier Magna and activities tied to Opel."

He pledged to respect the "protection of confidentiality" expected by Magna's partners.

The head of German luxury brand Daimler, Dieter Zetsche, has said he has "no problem" with it as "Magna has confirmed again and again" the principle of two separate groups operating side by side.

Ford Europe chairman John Fleming also told AFP: "Magna is a good supplier to us, we'll continue to work with them to make sure we have separation."

But threats by some important clients could nonetheless destabilize Magna, said Frank Schwope, an auto analyst at German bank NordLB.

"Opel has become a real competitor" for other brands and a separation of activities could be hard to put in place in practice, he told AFP.