Magna's North American plant unlikely amid heightened uncertainty

DETROIT — Magna International is pumping the brakes on a potential North American vehicle assembly plant as the supplier signals a more cautious approach to its contract manufacturing business.

"Given uncertainty right now and the excess capacity that is there in the market, I would say that the probability of us looking at that would be very low right now," Magna CEO Swamy Kotagiri said during a Sept. 9 roundtable with journalists at the company's U.S. headquarters in suburban Detroit.

For years, the supplier signaled interest in expanding its contract assembly business beyond its Magna Steyr plant in Graz, Austria, and a joint venture in China with BAIC. Speculation swirled that Apple would choose Magna for assembly of its now-canceled electric vehicle, and Magna signaled hope that U.S. EV manufacturing incentives would spur demand for such a plant in North America.

But market conditions now make such a move unlikely, Kotagiri said. The company was seeking long-term business with a customer or customers for multiple product cycles, conditions that companies are less likely to meet given slowdowns in EV sales growth and uncertainty surrounding automaker product plans.

Magna is dialing back hopes for North American contract assembly as it grapples with the end of Fisker Ocean production in Austria following the EV startup's bankruptcy. Magna expects a $400 million revenue loss this year because of the end of Fisker assembly, and it eliminated about 500 jobs at the Graz plant in April.

The supplier plans to be "much more cautious" on terms with contract assembly customers moving forward, Kotagiri said. The terms it had with Fisker were different than normal and included Magna going beyond assembly and providing "significant content" for the Ocean, he said.

"Would we do that again? Maybe we would take a different viewpoint," Kotagiri said.

The plant's post-Ocean future is the biggest source of uncertainty for Magna Steyr, but it is not the only one. Startup Ineos did not proceed with planned Fusilier EV production at the Graz plant. Moreover, production of the Jaguar E-Pace and I-Pace, BMW Z4 and Toyota Supra is not expected to continue there.

The company made about 18,600 vehicles for automakers in the second quarter, nearly a third less than it did during the same period a year earlier. Contract vehicle assembly for the quarter fell 19 percent to $1.24 billion from the same period a year earlier.

Regardless of which companies it chooses to do business with moving forward, Magna's top priority will be ensuring long-term production stability, Kotagiri said, adding that it will continue to produce both EVs and combustion engine vehicles.

"I wouldn't say it's about EV or ICE," he said. "It's the stability of the platform and the guarantees that we can get."

While expansion of its contract assembly business appears unlikely for now, Magna remains open to projects such as those it has with Waymo. Magna is installing equipment in a 230,000-square-foot facility in Mesa, Arizona, to outfit vehicles with Waymo's self-driving systems. It also works with Waymo to outfit vehicles at a plant in Detroit.

The projects with Waymo are not capital intensive for Magna, making an arrangement such as that appealing, Kotagiri said.

"There are very few fixed assets or dedicated capital there," he said. "From a risk perspective, it's minimal. And it's been a long-term relationship. If there's something like that, we would look at it — but very cautiously."

Magna ranks No. 3 on Automotive News' list of the world's largest suppliers, with global sales to automakers of $42.8 billion in 2023.