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Rescuing Opel

May 30, 2009

Magna International may not be a household name, but the Russian-backed Canadian company, which clinched a deal to take over battered German carmaker Opel, is anything but an industry newcomer.

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Magna Steyr factory in Austria
Magna International employs 75,000 people in 25 countriesImage: AP

It's a classic rags-to-riches story. Austrian Frank Strohsack arrived in Canada in 1954 with nothing but a few dollars in his pockets. He changed his name to Stronach, rented a small garage and began building tools.

Today, Stronach's company, Magna International, is the world's third biggest car parts manufacturer with around 75,000 employees in 25 countries across the globe.

Before Magna popped up in the headlines as a potential buyer of the German car maker and GM subsidy Opel, few in Europe would have heard of the company. But Magna has in fact been a big player for quite some time - it's just that the logo and the name rarely appear on the products they make.

Magna International supplies parts for the interiors, engines and designs for a wide range of car makers. And, at its Austrian production sites, Magna assembles specific vehicles under contract for BMW, Mercedes and Aston Martin.

Innovative technologies

Magna chief Frank Stronach
The German media has called Stronach "the Schwarzenegger of the auto industry"Image: AP

When it comes to innovative technologies, Magna also seems well prepared for the future. The company developed a prototype of an electric car that raised eyebrows at the Geneva Motor Show earlier this year.

Magna's cutting-edge technology may help it succeed in running Opel, according to German auto expert Ferdinand Dudenhoefer.

"They are highly competent when it comes to manufacturing cars -- much more than Fiat who are mostly producing at old sites in Italy," Dudenhoefer said.

"The electric model of the Ford Focus is developed and built by Magna. That's where the difference is between Magna and Fiat. Fiat has neither the hybrid technology nor any concepts for electric cars," he said.

But Magna has not been spared by the global recession. A production site in the US has already been closed and thousands of employees in Austria are working reduced hour weeks and have seen their salaries cut.

Russian backing

Building with Sberbank logo
Russia's Sberbank will foot the bill for Magna's plansImage: DW/Petrenko

Taking Opel off the hands of the troubled US giant is likely to push Magna to its limits, but German politicians seem confident that in the end Magna will be able to shoulder the task.

Crucial to the deal is backing from Russia's state-controlled Sberbank. The ownership structure of the new company could, according to Magna officials, look like this: the Canadian company could get 20 percent, Sberbank 35 percent, 35 percent would go to GM and 10 percent could stay in the hands of Opel staff or Opel car dealers.

Russian carmaker GAZ will serve as an industrial partner for Opel. Its assembly lines in Nizhny Novgorod will soon produce Opel cars that are "made in Russia."

Although the Russian economy has also been hard hit by the global recession, many see the market as potentially lucrative once the crisis is over. Magna has already said Russia will be a prime target for Opel in the future.

ai/dpa/AP
Editor: Toma Tasovac