By on June 4, 2009

It has been commented widely (and it doesn’t take a tall IQ to do so) that Magna might get problems with its parts customers (a.k.a. OEMs) when Magna starts competing with them through Opel. Didn’t take long: “Volkswagen AG said Wednesday Canadian auto parts supplier Magna International Inc. will face conflicts of interest following the planned takeover of General Motors Corp.’s (GM) Adam Opel GmbH unit,” Dow Jones Newswire reports from Germany. The threats are carefully worded:

According to VeeDub’s spokesperson Michael Brendel, “Volkswagen will monitor this development very closely.” Translation: Volkswagen Purchasing is talking to other bidders.

Volkswagen is a direct rival of Opel. Volkswagen is also a major customer of Magna. Magna also supplies components to Porsche, Volkswagen’s largest shareholder. Conflict of interest? Looks like it.

Large parts suppliers enjoy a tight relationship with auto makers. They often are embedded in the development process of a new car. If you want to know in detail what a auto maker plans for five years down the road, become one of their components suppliers. You will work with them, and they will work with you. Unless you also own a direct competitor like Opel. If you do that, your mugshot will be posted at Wache Sandkamp, the main entrance to Volkswagen’s HQ in Wolfsburg.

Volkswagen has another beef: “Tax money has been used to a large extent for Opel’s rescue.” Volkswagen would have rather seen Opel dead. Being propped up with tax money, AND run by one of their suppliers is a bit much for them to swallow. Other makers most likely see it the same way as Volkswagen.

Magna will have to decide: Auto maker or parts maker. I’d choose the latter.

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21 Comments on “VW To Magna: “Us Or Opel”...”

  • avatar

    Magna was down this road before, back in 1989, with their Torrero SUV prototype that they considered putting into production.

  • avatar
    John Horner

    If I were a car maker I would be doing everything possible to move away from doing business with Magna after the Opel deal. As this article says, tier 1 suppliers are privy to a host of proprietary information one would never put into the hands of a direct competitor.

    Just as Magna’s ego-driven push into the horse racing business has come to a bad end, so might the Opel deal.

  • avatar
    Rod Panhard

    Does Delphi only supply to GM?

  • avatar
    Ken Elias

    No, Delphi supplies worldwide to a variety of manufacturers. GM does remain Delphi’s largest customer however – around 30% of its revenues IIRC.

  • avatar

    Hey at least they arent Ford. Ford has to try to compete against the bottomless pit of funds coming from the US Government into GM and Chrysler.

  • avatar

    Was waiting for this to come up. VW has a valid beef on both fronts. But, looks like Porsche is begging for some cash today so point #2 might be invalidated. Also, as noted in another post, the bidding is not final, so this will be an interesting few months on this front.

  • avatar

    This has been an ego stroking exercise for Frank Stronach from the gitgo…..

    It does not make all that much economic sense, unless viewed from the perspective that Frank has always wanted to do this.

    It’s not the first time that Frank Stronach has treated Magna as his own company, not a public one.

  • avatar

    Not very different from Delphi, Visteon, or even Denso (toyota). VW can talk tough with Magna but they should be very careful. A supplier like Magna can inflict major pain on an OEM if required. And if VW somehow moved all the parts/systems from Magna, it would take a long time and cost alot of money.

    I’m sure Magna’s competitors would love to see VW take that position with Magna, because they would see an increase in sales and be able to charge VW more for parts/systems thanks to the elimination of a major competitor.

  • avatar

    VW management is totally justified, having Magna compete directly with them would be a great big no-no. It would be extremely difficult for them to closely together on developing products. Also, why would VW support the parent company of an automaker that’s taking market share from them? It doesn’t make sense. However, Opel is probably the best of GM’s cast aways, and it seems like the suppliers are more vulnerable to total failure than the automakers are. I don’t think it’s a completely dumb idea for Magna to buy Opel, but they would definitely have to examine the possible effects on their parts business.

  • avatar

    Does Delphi only supply to GM?

    No, and Visteon doesn’t sell only to Ford. Nor does Denso or Aisin sell only to Toyota.

    VW management is totally justified, having Magna compete directly with them would be a great big no-no.

    Not, they’re not. The interlock among suppliers and automakers is already pretty heavy. VW itself likely buys parts from Denso or Delphi now. This is just posturing at best, and poisoning the well for Opel at worst.

  • avatar
    John Horner

    “VW itself likely buys parts from Denso or Delphi now.”

    Denso and Delphi are not directly in the car business themselves. Yes, they have historical ties to Toyota and GM, but one of the reasons they are independent of those customers is to make it palatable for other car makers to buy parts from them.

  • avatar

    Denso and Delphi are not directly in the car business themselves.

    Denso and Delphi are as attached to the car business as Magna is. Magna will have a 20% stake in Opel**; Toyota has a larger stake in Denso and Aisin. I honestly don’t know how much of a stake GM or Ford have in Delphi or Visteon, mostly because the answer changes daily.

    The point is that VW wants to cast doubt on Opel by weakening or scaring off Magna. A weak Opel is good for VW. The “Us or them” posturing on the grounds of conflict of interest is just that: posturing. If they cared, they’d have severed ties with other suppliers, including Magna, who has built whole cars (eg, the BMW X3) for VW’s competitors.

    ** Ok, maybe more if you add Serbank’s share to Magna’s. I’ll give on that.

  • avatar

    If the Magna deal doesn’t go through, who is next in line….


    Let’s just hypothesize for a second and say that the Chrysler turnaround will be successful. And that Fiat gets Opel/Vauxhall and manages to keep that ship afloat as well. The result would be another auto empire, a company big enough to compete on all fronts with the other giants (VW itself, Toyota, Ford, presumably GM, and Renault-Nissan if you want to generous)

    Or, Magna gets Opel and it remains a small, continental operation.

    I really don’t know if VW has thought this one through.

  • avatar
    Rod Panhard

    Looks to me like there’s really nothing to see here, folks. Just a memo. Move along please ….

  • avatar

    I think Serbank without Magna would be next in line. Than the Chinese and only then FIAT

  • avatar

    This is VW posturing. Looking good for the banks? Media? Germans? Shareholders?
    Given that Magna-Steyr has been building whole platforms for forever and the vast empire that Stronach has built basically builds something for *everybody* I doubt that this will be of much use except as a talking point in the media. Nobody else will care.

  • avatar

    Just don’t piss off Piech, whatever you do.

    Next thing you know, he will Bench Press the entire Deutscher Sprachraum, short Opel using the nation of Argentina as collateral, and buy Credit Default Swaps from AIG on its demise, tricking Pierre Trudeau into footing the bill.

    -and then settle down for a nice Chianti and some Fava Beans.

  • avatar

    Pierre Trudeau??? He left office 25 years ago, and died eight years ago.

  • avatar

    Being dead does not stop Piech from getting hold of you.

  • avatar

    Agree with psarhjinian, All the automakers are tied up with each other anyway. The parts suppliers sell to multiple makers. The makers buy from each other (Routan ring a bell?).

    This is just political posturing.

  • avatar

    psarhjinian and charly,

    it’s not Serbank, it’s Sberbank. And why would you add shares of Magna (with Canadian owner) to Sberbank (Russian government owned)? I don’t see any logic in it.

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