An engineer by training and temperament, Magna International CEO Don Walker is calm and analytical as he discusses the car business and Magna’s powerhouse position as a global parts supplier.
But emotion slips in the 59-year-old’s voice when he talks about government support for the auto sector in Canada.
“We need to do what we need to do – what we have to do – to make sure it’s competitive, so we don’t lose manufacturing to other countries,” Walker emphasizes from Magna’s headquarters in Aurora, Ont., north of Toronto.
Through efforts of industry groups such as the Canadian Automotive Partnership Council, which Walker chairs, governments may be heeding this message. One sign is the as-yet-unspecified funding from Ontario and the federal government that helped secure a commitment from General Motors for new products in Canada as part of a labour agreement with workers in Oshawa and St. Catharines.
A bigger challenge is winning over taxpayers who balk at subsidizing auto plants despite the quick payback – as little as three years, says Walker – in company and employee taxes and general economic boost.
“The difficulty is, if you’re doing the same thing as other jurisdictions to attract them, then some people say, well, you’re wasting money. They don’t really understand the economic benefits.”
Magna isn’t seeking handouts.
The CDN$22-billion company founded by Frank Stronach in the 1950s has money in the bank and an ever-growing portfolio of acquisitions, the latest German components supplier BOCO Group. The world’s third-largest parts maker, it also assembles vehicles for other companies under contract at a plant in Austria.
Should the Trans-Pacific Partnership trade pact go through, Magna and other large suppliers are expected to make further market gains, even if smaller Canadian parts companies suffer.
Yet with 50 plants and 23,000 employees in Canada – 15 per cent of its global workforce – Magna has a big interest in seeing the OEM plants at the top of the Canadian automotive food chain preserved.
“If they go then the supply base basically will eventually move with them – certainly the big heavy manufacturing,” Walker said in a wide-ranging interview with Automotive News Canada.
There’s also some home-side patriotism in play for the Canadian-born chief executive, who stresses that manufacturing and its well-paid, increasingly high-tech jobs are key to maintaining Canada’s standard of living.
Mixed feelings on TPP
He admits, then, to mixed feelings on the TPP, noting the concerns over currency manipulation and non-tariff barriers that could give some countries an unfair advantage, and the potential of the complex deal to reduce Canadian competitiveness.
Yet it’s hard not to be involved, he says, when the United States has accepted (though not yet ratified) the pact. And Canada has benefited from the North American Free Trade Agreement, even if the auto sector here has lost ground to its U.S. and Mexican counterparts since the 2008 recession.
If trade is one consuming topic in the auto world, technology is another. But while autonomous vehicles and other would-be game-changers dominate the discussion, Walker says the revolution has already arrived.
“Vehicles already today are in my opinion the most technologically advanced product and industry in the world,” he says. “Nobody else has as much electronics in a product that is built in such high volumes, with such complex supply chains.”
That said, he believes fully electric vehicles won’t become mainstream as soon as some suggest, though hybridization will continue to grow. Likewise, while driver-assist features are being introduced at a fast pace, “I think fully autonomous-driving vehicles that would not require a steering wheel, as an example, are a long way out in any sort of volume.”
Anything but basic
Magna is routinely identified as an undervalued stock, perhaps because technology-obsessed investors view it as a “basic” producer. To counter that perception, Walker expounds on the supplier’s research and development efforts. It has more than 10,000 product engineers and 2,000 software engineers worldwide. Through its Magna Steyr subsidiary in Austria, it has the ability to design and build complete vehicles.
“Our groups have been working together, as well as working with Magna Steyr, to look at what future vehicles will look like, and come up with technology solutions that would have electronics, lightweight materials, different manufacturing methodologies ... ways to lighter, safer, cheaper, smarter solutions for our customers,” he explains.
With contracts to build BMW’s X5 crossover plus models for Jaguar Land Rover and Mercedes-Benz, the Magna Steyr plant will soon be at its 200,000-vehicles-per-year capacity. That prompted Walker to recently suggest the company could need to add capacity in Europe or North America if it gets more assembly orders.
Industry watchers have speculated that a high-tech car from Apple, Google or Uber could be a candidate for such a plant. Walker doesn’t rule out working with automotive newcomers, but also reports ongoing discussions “with our key customers” on advanced products and technologies.
Nurturing such relationships extends right to Walker’s driveway.
“I believe we should support our customers, so I just bought a new Cadillac CT6. I’ve got a Ford Explorer, my wife has a BMW – we’re one of BMW’s largest suppliers, and I also have a North American-built truck.
“I will support who supports us.”