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Magna focusing on core business after Opel defeat, CEO says

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Magna focusing on core business after Opel defeat, CEO says

AUTOMOTIVE NEWS EUROPE

NOVEMBER 6, 2009 06:01 CET

TORONTO (Reuters) -- Magna International Inc. is not looking at taking over any other automakers following the collapse of its deal to buy a stake in General Motors Co.'s European operations, the auto parts maker's co-CEO, Don Walker, said.

GM's board of directors had approved the sale of a 55 percent stake in Germany-based Opel to the Canadian company and its Russian backer Sberbank for 500 million euros after months of negotiations.

But the board reversed its decision late on Tuesday, prompted by improved business conditions and the strategic importance of Opel as for GM going forward.

"We're not looking at any other transactions in that space," Walker said in a conference call on Thursday. He was responding to a query as to whether Magna might be looking at Ford Motor Co.'s Volvo unit or GM's Saab.

"Right now we're focusing back on the core business, which is automotive parts, and we have no discussions going on right now on any other vehicle-type acquisitions."

Deal dies, shares rise

The shares of Magna, which reported a surprise third quarter profit on Thursday, rose over 10 percent on Wednesday after the GM/Opel deal fell through.

"Most of the analysts are happy to see the end of it (the deal) and it appears in the share price movement, that was the same conclusion in the investment community," said David Tyerman, an analyst at Genuity Capital Markets.

There was concern among some in the industry that Magna was buying into a cash-burning, market-share losing operation, Tyerman said.

Other risks associated with the deal included Magna's lack of experience in running an automaker, especially on the sales and marketing side, and the possibility of its parts business suffering as the company began competing with automakers it supplies with parts.

Cost cuts drive profit, but sales sag

Cost reductions and restructuring initiated late last year in response to the chaos in the auto market led Magna to a surprise quarterly profit even as reduced production by North American and European automakers pushed its revenue down 16 percent.

The company reported on Thursday net income of $51 million, or 45 cents a share, for the third quarter. That compares with a net loss of $215 million, or $1.93, a year earlier, when it booked $234 million of unusual items.

Sales in the quarter fell 16 percent to $4.67 billion.

Analysts on average had expected a loss of 19 cents a share, on revenue of $4.53 billion, according to Thomson Reuters I/B/E/S.

Aurora, Ontario-based Magna said its average dollar content per vehicle rose 8 percent in North America and was roughly flat in Europe from the third quarter of 2008.

Complete vehicle assembly sales were down 38 percent at $428 million, while complete vehicle assembly volumes fell 42 percent to about 14,700 units, Magna said.

Its operating profit in the quarter was $81 million, compared with an operating loss of $112 million a year earlier.

Magna ranks No. 4 on the Automotive News Europe list of the top 100 global suppliers, with sales to automakers of about $23.3 billion in 2008.

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GM did you a huge favor. You just do not see it yet. You now do not risk alienating your customer base or putting the rest of the industry in an uproar.

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Can the anal-ysts explain why is it a defeat for Magna in a war that never really took place? Defeated for preparation of war? Nice analysis.

It would have been a defeat if there was RHJ in the equation and RHJ won the bidding war.

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