VIENNA - The Canadian supplier Magna International expects to increase sales in Europe by 20-30 percent annually in the coming years.
Magna will keep buying companies in Europe and will go after more business for its existing plants, said Frank Stronach, founder, chairman and main shareholder of Magna.
Magna plans to invest $340 million in Europe in the next two years. It will invest $565 million worldwide in 1997.
In the past six years, Magna has acquired several small and medium sized European companies, and it has built plants of its own.
In May, Magna paid $52 million for UK-based seat specialist Tricom Group Holdings Ltd. Tricom supplies Ford and GM and has annual sales of around $100 million.
Earlier this year, Magna bought Georg Naher, the German interior trim supplier, and Caradon Rolinx, a UK maker of plastic bumpers. Magna was a bidder for Keiper Car Seating GmbH, which was acquired last month by Lear Corp.
'We will go on doing this,' said Stronach. 'Although the European auto industry does not show any signs of strong growth, our business is bound to grow substantially. Carmakers in Europe will have to face facts. As they outsource more, their profits rise. Those who don't will lose competitiveness.'
Western Europe's high wages do not frighten Stronach.
'Wages are not the biggest obstacle in western Europe,' he said. 'It is the cost of government officials that is too high.'
Stronach said European bureaucracy is slow to make decisions that affect business investments.
'But it is absolutely necessary that we build plants in western Europe,' he added.
Magna is a key supplier to Micro Compact Car AG's Smart car. Magna will weld the body structure and space frame in its own assembly area inside Micro Compact Car's plant in Hambach, France.
'Working on the assembly line of the car manufacturer is something new for a Tier 1 supplier' said Stronach.
'If the customer wants us to do that, it's OK with us. We don't think it will interfere with our wage structure, because wages of manual workers in the car manufacturers are not much higher than the wages we pay our manual workers.'
Stronach said the supplier's advantage is 'flexibility, not lower wages.'
He said that competitive suppliers can satisfy carmakers' demands for continual price cuts. But Stronach said that '5 percent is a bit much. If you keep that up, you will soon arrive at zero price. With good engineering, good quality and new technologies you can squeeze the price.'
Magna is building a stamping plant in Weiz, Austria, to make body panels for the Chrysler Voyager and the Jeep Grand Cherokee built in Graz, Austria.
Production will start in autumn 1998. The panels now come from Detroit.
'To make the investment more viable we hope to get Audi, Opel and Suzuki as customers,' said Stronach. 'They all assemble cars nearby in Hungary.'
Magna does not plan large investments in eastern Europe, but Stronach said 'now that customers like Opel are moving into Poland we might go there if they need us.'
Magna has two stamping plants in the Czech Republic, one in Prague and another in the Czech-Austrian border town of Czeske Velenice.
Magna wants to do more business with Japanese transplants in Europe.
'We do good business with the Japanese manufacturers in the US. We hope to get them as customers all over the world,' he said.
Magna has a new European headquarters in Ober-Waltersdorf, 30km south of Vienna.