As Magna, the largest auto parts maker in North America, distances from the strategy envisioned by its debt-weary founder Frank Stronach, the company now mulls acquisitions worth almost $4 billion.
According to Chief Executive Officer Don Walker, the company is now more interested in financing from outside sources its needed purchases (thus taking on debt) than it was when Stronach still had a say in the company plans. During the last decade Magna did not complete an acquisition larger than $500 million.
“We have complete flexibility,” CEO Walker said. “We have good discussions at the board.”
According to Colin Langan, a New York-based analyst at UBS AG’s UBS Securities unit, Magna now mulls the purchase of the seating division of Milwaukee-based Johnson Controls or even a complete buyout of Southfield, Michigan-based Lear Corp.
“They’re number four in seating and acquiring either one would make them number one,” he said. “If you look at both Lear and JCI, they both have pretty good positions in China with their joint ventures,” he added. “It would in some ways help them broaden their footprint and give them more on-the-ground experience there.”
Chief Executive Don Walker also predicts the number of global players in the auto parts industry is on a downward trend, partly because of multi-billion acquisitions and also because automakers ask them to supply parts for a reduced number of car platforms.