Magna Chairman Frank Stronach today announced a billion-dollar-plus partnership with a Russian auto magnate but said the deal would have no bearing on his bid for DaimlerChrysler AG's Chrysler Group.
Stronach said he expects DaimlerChrysler to choose a prospective buyer for Chrysler before the deal with Oleg Deripaska's firm Russian Machines is approved by Magna shareholders and finalized.
"We hope one way or the other that the Chrysler issue will be solved by then," Stronach told reporters at a news briefing after Magna's annual meeting here.
The Canadian parts supplier has teamed up with Toronto equity firm Onex Corp. to bid for Chrysler, "and the indications are, Mercedes would like to stay with a small stake," Stronach said. He said he is open to having other firms join the bid but declined to disclose further details about the status of the Chrysler negotiations.
"We can't say, 'This is what we'd be prepared to pay.' We can't talk about the process itself. J.P. Morgan is handling the process. We do hope that we'd be partners and that we could participate," Stronach said. "That's all we can say at this time."
The Toronto Star reported today that Stronach said job cuts at Chrysler would be unavoidable. The Star quoted Stronach as saying Wednesday: "Sometimes, when you're sick, you've got to take some drastic measures. And that's unfortunate."
Today, Stronach said unions had an important role, and he did not oppose them in principle, although his company's workers are not organized. But he said the North American auto industry needs to adapt to cope with tough competition from Asian automakers. "We in business have to change," he said. "Unions have to change. We all have to change."
Speaking briefly with reporters after the annual meeting, Magna President Mark Hogan said Chrysler's difficulties weren't insurmountable. "We know their problems and they are fixable," he said.
Magna's shareholders, eager to hear about the Chrysler bid, were surprised by the deal between Magna, the family-owned Stronach Trust which controls the supplier, and Russian Machines.
Under the terms, Russian Machines would invest $1.54 billion to acquire 20 million Class A Magna shares. Those shares, as well as the shares held by the Stronach Trust, would be put into a new entity called Newco which would have voting control of Magna. Magna finance officials said Stronach retains control of the supplier.
Also on Thursday, Magna reported a small rise in first-quarter income, to $218 million from $212 million a year earlier, on sales of $6.4 billion.
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