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Stronach humble in victory
VINCE TALOTTA/TORONTO STAR
Frank Stronach is all smiles after landing a 55 per cent stake in GM's Opel unit, split evenly with Russian partnaer OAO Sberbank.
He celebrated his 77th birthday only a few days ago, got off a 10-hour flight from Europe at noon, caught a quick lunch and dabbled in a little extra business at the office.
But it wasn't just another day for Frank Stronach, the hard-driving founder, chairman and controlling shareholder of auto-parts powerhouse Magna International Inc.
His Aurora-based company, one of the biggest success stories in Canadian business history, had overcome its toughest obstacle to become the first parts company to own a major chunk of an international automaker. Magna and its Russian partner, state bank OAO Sberbank, won a bidding battle for majority control of General Motors' European subsidiary, Adam Opel GmbH.
It came after an Opel trust approved a recommendation from GM's board to accept an offer from Magna and Sberbank as the best solution to assure the future of the venerable European automaker. They expect the deal to close at the end of November.
"It means more work for me to do," Stronach joked yesterday as he casually bit into an apple after lunch at the Magna Golf Club in Aurora. "I will have to work harder."
Magna and Sberbank will spend about $787 million "over time" to evenly split 55 per cent of Opel. GM will retain 35 per cent and workers' unions will hold the remainder.
The German government is making the deal work by guaranteeing more than $7 billion in state bank loans for the restructuring of Opel, which started making cars in 1899.
The government favoured the Magna-Sberbank offer because it protected more plants and jobs than a competing proposal from RHJ International of Belgium.
It marks a huge step for Magna into the major leagues after more than a decade of assembling vehicles for automakers under contract at a plant in Austria.
The company is already the world's third-largest independent auto-parts maker with annual sales of more than $23.7 billion (U.S.) last year. It employs more than 16,000 in Canada.
Industry leaders lauded the move, adding that it keeps Canada on the map in the global auto industry.
It could inject new life in the domestic industry since Stronach noted again that he wants to build Opel models in Canada and sell them through GM dealerships here and abroad in about three years.
He suggested it might be better to build a new assembly plant rather than take over an existing facility so the company can install the latest technology, processes and talent to maximize efficiencies.
However, there are also risks overseas as Magna plans to use Opel for a major foray into Russia where a middle class is emerging. Questions abound about the country's business practices and stability.
Although the purchase is the biggest coup of Stronach's career, he downplayed its significance in an interview.
"I think the biggest thing for me was when I made my first million," said the white-haired Stronach, who remains tanned and fit. "This (Opel deal) is just business."
On the subject of realizing a dream of elevating Magna from parts maker to a sizeable stake in a full-fledged automaker, Stronach sounded unusually bashful about the milestone.
"My dream was always to get my own bike so I wouldn't have to share it with my sister," he said, chuckling.
Stronach also emphasized Magna is a minority shareholder with 27.5 per cent of Opel and has no intention of gaining full control.
Furthermore, he stressed Magna will install "firewalls" to separate the company and Opel and therefore protect other automakers from losing proprietary information to rivals.
Stronach acknowleged he has come a long way from the young, hustling Austrian tool-and-die maker who started a shop in the Dufferin-Dupont streets area of Toronto during the 1950s.
Using the slogan "a better product at a better price, Stronach built Magna into an industry giant during the next four decades by implementing a unique corporate culture that emphasizes entrepreneurship and innovation.
After a brush with bankruptcy because of overexpansion at the onset of a recession in the early 1990s, Magna raced through a decade of phenomenal growth and annual double-digit revenue increases.
Magna's parts-making prowess reached a point where it could manufacture almost everything from precision engine components to bumpers, seats and doors.
Stronach said he started thinking about assembling models for his main customers – GM, Ford and Chrysler – about 15 years ago when their market shares showed signs of continuing erosion.
"We were quite happy to supply components but we were worried about them losing share," he said. "We wanted to be of service to our customers."
In recent months, Magna's stature has taken him along with co-chief executives Don Walker and Siegfried (Ziggy) Wolf and chief financial officer Vince Galifi to the capitals of Europe to negotiate for an industry-shaking stake in Opel.
In May, Magna reached a memorandum of understanding with GM to purchase a significant interest in money-losing Opel, which prompted the German government to provide more than $2 billion in bridge financing.
But GM then reconsidered the idea and looked at other offers and options, including keeping the company.
As a decision neared, Stronach revealed that Magna was close to signing a joint venture with General Motors and Russian automaker GAZ about 1 1/2 years ago but the plan fizzled when GM ran into serious financial trouble.
"What this agreement is really about is we have to change," he said in the interview.
"We live in a global economic environment where there is a lot of competition. The old things are gone. You got to manage it a little different."
Stronach said he didn't plan on celebrating too much last night after his grueling travel and negotiating schedule.
"I'll go to bed," he said. "I've been travelling a lot. But maybe I'll have a cold glass of Canadian water."
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