Magna sees China growth driving sales

By Fang Yan | SHANGHAI (Reuters) - Canadian auto parts maker Magna International Inc. (MGa.TO: Quote), a possible bidder for DaimlerChrysler's (DCXGn.DE: Quote) Chrysler arm, expects Asia to make up 15 percent of its global sales over the next three years, three times the current level, helped by robust demand in China.

While mature markets in North America and Europe are stagnating, Asia, and particularly China, have been a magnet for global automakers such as General Motors Corp. (GM.N: Quote) and Volkswagen AG (VOWG.DE: Quote) and international parts suppliers such as Magna and Robert Bosch GmbH (ROBG.UL: Quote).

In 2005, Asia accounted for less than 2 percent of Magna's global sales.

"We are looking to grow our Asia business to 15 percent by 2010," Scott Paradise, Magna's vice-president for global marketing and business development, told Reuters on the eve of the Shanghai Auto Show.

Magna said in January it expected its 2007 sales to be in a range of US$22.9 billion to US$24.2 billion, well below analysts' average forecast for US$24.8 billion, as the autos industry faces tough challenges.

Aurora, Ontario-based Magna vies with Visteon Corp. (VC.N: Quote), Valeo (VLOF.PA: Quote) and others in the global auto parts sector, and entered China in 1996. It now has 16 manufacturing facilities there.

Fred Kao, vice president of Magna International China, said the company would consider expanding its capacity in response to local market demand.

Rival Delphi (DPHIQ.PK: Quote), a General Motors (GM.N: Quote) spin-off that hopes to emerge from bankruptcy this year, runs 11 manufacturing firms in China, while Visteon has 21 plants.

Although it grew its China sales by double digits in the past years, Magna has felt the pinch from high raw material costs and as global automakers cut costs in the world's second-largest autos market.

Executives declined to detail China revenues.

GM, Volkswagen and others have chopped car prices to help drive sales, and auto industry executives reckon car prices in China could fall another 10 percent by 2010.

"That pressure does cascade down into the supply base," said Paradise, adding his company is having to work more efficiently to cope.

Paradise said Magna was ready to do anything that could make Chrysler, the world's largest truck maker, remain a viable customer. DaimlerChrysler accounts for around a quarter of Magna's annual group sales, with around half of that coming from the Chrysler group.

Media reports have said Magna may bid for Chrysler in a joint offer with buyout firm Onex Corp. (OCX.TO: Quote).

MGa.TO	Magna International Inc	88.9	+0.05	+0.06
DCXGn.DE	Daimlerchrysler	€59.82	+0.42	+0.71