Magna International - healthy growth driven by innovation

Don Walker, CEO OF Magna International tells Simon Duval Smith how the Canadian-based giant is continuing to grow and prosper in spite of some turmoil in its global markets

Don Walker

Don Walker

Magna International Inc. was founded in Toronto in 1957 and has grown to be the third-largest and most diversified automotive parts supplier in the world today. What started as a one-man tool-and-die shop in a garage now designs, develops and manufactures automotive systems, assemblies, modules and components, and engineers and assembles complete vehicles, for automakers around the globe.

Magna's capabilities include the design, engineering, testing and manufacture of automotive interior systems; seating systems; closure systems; body and chassis systems; vision systems; electronic systems; exterior systems; powertrain systems; roof systems; hybrid and electric vehicles/systems; as well as complete vehicle engineering and assembly.

The supplier now talks of becoming a mobility technology company, looking to the future with innovative products and processes. Size-wise, it has more than 174,000 entrepreneurial-minded employees and 348 manufacturing operations and 91 product development, engineering and sales centres in 28 countries.

Embracing EV and connected vehicle technology

With the rapid progress of electric, autonomous and connected vehicles, Magna, as with many suppliers, has sought to prepare itself for the age of new mobility through acquisitions and its own research and development. Like many executives at the helm of suppliers whose core competencies are more traditional hardware manufacturing, and in the case of Magna, production and assembly of vehicles for its customers at its Magna Steyr facilities, Don Walker says he trusts that Magna’s own capabilities will come to the fore. “Our deep systems knowledge across product areas allows us to grow faster and develop systems quickly,” he says, adding: “This enables us to develop new technologies to address changing consumer demands. Additionally, as the industry continues to transform, Magna’s culture of innovation and expanded interaction in the start-up ecosystem is gaining momentum. Such activities ultimately help Magna be at the forefront of innovation in the emerging new mobility landscape.”

Magna CEO Don Walker accepts a World Excellence Award from Ford’s Hau Thai-Tang, chief product development and purchasing officer, and Linda Cash, vice president of quality and new model programs.
Building close to the customer

With the pace of OEMs’ global expansion continuing apace, it is a tough job for a supplier to stay close enough to its customers to benefit from the low labour cost in each new region and keep logistics costs down. I ask Walker about Magna’s global expansion plans; is he thinking about a new low cost labour region for component and systems manufacture, and also for Magna Steyr’s contract manufacturing. Understandably, he is guarded in his response but does highlight the acquisition of one supplier. “Our geographic strategy is mainly driven by the needs of our customers. When we do look at potential M&A activity, consider several criteria including does it expand our geographic footprint, does it give us entry into a new customer, or can it enhance our already strong product portfolio. A great example is with the acquisition of OLSA where we expanded our lighting capabilities to enable it to design, engineer and manufacture headlamps, tail lamps and other lighting products. We added five facilities around the world and 2500 employees.”

This leads me on to ask about North Africa; several OEMs are ramping up their activities in the region and he says that Morocco is already in Magna’s sights. “Morocco is emerging as a competitive export focused production base for global automakers. As such, we have recently extended our activities there. Later last year, we announced our joint venture with Altran in Morocco to offer end-to-end development capabilities for the automotive industry, including design, manufacturing and system development on site for them.”

Canada and logistics challenges

Canada is having some 'hiccups' in vehicle production sites and OEMs' commitment and I wondered how Walker intends to align Magna's supply locations, investments and supply chain to cope with these? He says that the region, Magna’s ‘heartland’ is in a steady ‘holding pattern’.

“We have 50 manufacturing facilities in Canada that continue to give us a good footprint in the region. Although we are not adding capacity, we do continue to maintain our presence and invest in the facilities that we do have there. As a global company Magna is prepared to adapt to economic and political changes.

This takes us on to discuss the changing nature of global supply chains, and I ask Walker what he is looking for in logistics partners and does he choose to leave a lot of the choices of logistics providers up to Magna’s OEM partners? He says that there is a homogeneity of demands from OEMs and Magana. “We are all looking for the same things when it comes to partners. That goes for the supply chain as well. Financially strong companies who can deliver efficiencies, cost savings, innovative ideas.” I ask him whether, with plants and customers all over the world and Magna’s complex and obviously highly-efficient logistics chains, does he look for global expertise from logistics providers or is Magna open to more local transport solutions? He says that the supplier is open-minded, “Could be both, it really depends on the commodity, region, customer, etc. Regardless, they must be cost-effective and meet all the specific conditions and needs that are required in respective regions in terms of logistics, infra-structure or for example state regulations.”

US legislation changes and tariffs

Perhaps no-one can predict the future US business environment in the light (or dark) of the Trump administration's threats of tariffs and other restrictive legislation, and I really did not expect any politically-challenging statements from Walker but he says that while Magana is flexible, he wants a more stable political environment. “As mentioned before Magna is a global company and we adapt to all economic and political changes. The key for us is to have stability and predictability so that we can continue to make sound investment decisions,” he says.

When interviewed by me in 2018, Walker spoke of a possible $60 million 'hit' from tariffs for suppliers like Magna, I wondered how the landscape looks now? He intimates that a large company like Magana does have some influence: “The steel and aluminum tariffs have caused disruption across the industry. We believe that these tariffs will have an adverse impact on automakers, suppliers and consumers. As North America’s largest automotive supplier, we continue to make sure our position is known within the US government administration.” 

(L to R) Magna’s Joe Mueller, Larry Cheney and Don Walker accepting the General Motors 2018 Supplier of the Year Award.
The China effect

The sudden drop in sales in China in 2018 took a lot of carmakers by surprise, they had not realised the immediate nature of consumer decision-making in the region, much faster than in any other territory in the world. Magana seemed to be bucking the trend, with its 2018 announcement of a joint venture for building EVs, with Beijing Automotive. I ask Walker how this has panned out in the light of falling sales in China. He says that his plans have not been changed by this ‘hiccup’, “Although we do expect a decrease in vehicle production volumes in China, our plans are unchanged. We continued to expand our geographic footprint in 2018. Three new joint ventures in China will help to increase our presence in China. They include an engineering joint venture with BJEV, a subsidiary of the BAIC Group, to design a battery electric vehicle architecture for the Chinese market. Additionally, we expect to complete a second joint venture with BJEV to assemble electric vehicles (EVs) in China, our first vehicle production facility outside of Europe.”

I press him on how Magna must have met some headwinds in its joint venture in China; what is the situation there now, especially considering the downturn in sales we have seen in the last few months? He says that everything is on track: “Our joint venture with BJEV is operational and running, the development of the purely electrical platform is almost finished. After just under a year, we are heading for the start of serial production in 2020.” 

A Magna platform for generic EVs?

With the rapidly accelerating rise of EVs, I ask Walker if he can envisage Magna ever making a 'skateboard' or platform chassis complete with drivetrain to offer to smaller OEMs and even non-automotive businesses to put their own bodies and thus brand on - a kind of generic platform? He uses the key words scalable and modular, which might point to my guess being closer to the mark than I anticipated. “At Magna, we are unique because we have complete vehicle system knowledge,” he says, adding: “Additionally, our powertrain systems from our transmission and driveline leadership position as well as experiences in full EVs and PHEVs systems form the basis for key scalable building blocks for powertrain variants needed going forward. A modular, scalable product enabling the flexibility of base ICE, mild hybrid and full hybrid functionality to meet the specific needs of our customers, no matter if they are traditional OEMs or a new entrance.” 

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