Magna skeptical about Tesla-driven move to megacasting

Magna International is a world leader in metal body parts, but it has been very cautious when it comes to moving into so-called megacasting, which combines multiple underbody parts in one. Pioneered by Tesla and its suppliers, the process is being investigated by several automakers, with Volvo planning to start using the technique in 2025. But the move to megacasting carries risks. "I think we have got to be careful. It's not as easy as it seems," Magna's new head of Europe, Uwe Geissinger, told Automotive News Europe Correspondent Nick Gibbs on the sidelines of the IAA Mobility show in Munich. It was Geissinger's first interview since his June promotion. Magna, the world's fourth-largest automotive parts supplier, according to an Automotive News ranking, has multiple areas of expertise, including metal parts, fascias, electronics and seating. In June, the Canadian company completed the purchase of Sweden's Veoneer, an active safety specialist that Magna hopes will boost its revenue in a key area of concern for European automakers. Europe accounted for 40 percent of Magna's revenue in the second quarter of the year, putting the region a second behind North America.

Metal body parts and structures are Magna's biggest business globally. Raw material prices have been hitting automakers hard. What trends are you seeing?

Actually, steel came down a bit, which is good. Obviously, we have got to see where the entire market is going right now. There is a lot of uncertainty still, more on semiconductors, but steel prices coming down definitely helps the industry.

Are you able to pass changes in metals prices straight through to your customers?  

Not always but in some cases we can. It's very customer specific. The industry is moving to index pricing and that is what we are shooting for as well because that way nobody really wins or loses. So, we need to have the indexing.

What are the growth areas at your metals division, Magna Cosma?

We are growing the battery enclosures business quite significantly. There are really great opportunities in this area.

Are you moving into megacastings?

We are going a little bit into it. Obviously, we all know that there is one automaker very active on this [Tesla]. I know a lot of people are reviewing [Tesla] products. I think we have got to be careful. It's not as easy as it seems, for quality reasons. It's also very capital intensive. But we are moving higher in tonnages for pressing. Casting is really a big business for us, especially with aluminum casting, and it's growing for us too. We are looking into megacasting, but we are not actively pursuing it.

Are customers asking for it?

I think everybody is learning right now from what is out there. Our customers are ripping these cars apart and really taking a look at them. Obviously, if the automakers want to go that way, we will look into it. But you have got to be careful. We will not jump blindly into this.

But are you combining more pieces now?

We have the entire side rails. We are going up in tonnage and we have already expertise in it. But not in the fully, super big presses.

Procurement is one of your specialist areas. What have the supply chain problems that hit the industry post-COVID taught you?

We all learned a lot, particularly when it comes to semiconductors. We have just signed a deal with [U.S. semiconductor company] Onsemi, which is a major supplier to us. We are constantly in contact with our semiconductor suppliers because chips are key right now. The automakers are very much involved with the semiconductor suppliers as well. It's a shared responsibility.

In general, how are chip supplies now?

I'm not as pessimistic as I was about the future. We don't have excess capacity -- definitely not -- and you never know what the impact will be if there is a major fire at a plant or something else happens. But right now, it's stable.

Has anything fundamentally changed in the way that you source parts now?

We look deep into the entire supply chain -- right down into lowest tiers -- because we have to. We have we implemented a very thorough risk management and installed a tool that looks deeply into the entire structural supply chain. We are obviously very well connected with our automakers and talk to them about call-offs [changes in production forecasts] to properly manage this.

What did the recent crises teach you that you didn't know before when it comes to the supply chain?

That surprises can still happen. I think the whole industry was pretty shocked to learn that we weren't as important [to the major chipmakers as other industries] at the beginning of the semiconductor shortage. Volumes from the automotive industry compared with mobile phone companies were significantly lower.

Do you see any growing danger to the supply chain from natural disasters caused by climate change, political instability or other unexpected factors?

The impact we felt from the fire at Japanese chipmaker Renesas in 2021 shows how tight supply remains. While we are in a better position going forward, if something happens like a flood, or a political issue with China and Taiwan, there will be uncertainty. To address this, we are looking closely at our suppliers' risks, checking their financial situations and who they are buying from. Sustainability is another big subject. We are looking into all of our suppliers in regard to those things. That being said, there are always risks.

Do you oversee Magna Steyr's contract manufacturing in Europe?

No.

What are Magna core advantages over its rivals?

We think like an automaker without being one. Our product portfolio is so wide that we can integrate so much more [than our rivals]. Look at the tailgate. We can make that and put lights and sensors on it. We can bring together separate business units and offer a whole range of solutions that no other supplier can match.

As automakers make the costly move toward electrification, what are they asking from you?

It's all about collaboration. They look at new ideas, too. For example, we have made a significant investment in the area of ADAS [advance driver assistance systems], when we took over active safety company Veoneer [in a deal that was finalized in June]. We are also strong on e-drives [combining the electric motor, inverter and transmission].

Several automakers are starting e-drive production in-house. Is that business shrinking for suppliers or will it come back to you?

It's a technology we are very far ahead with. It helps the automakers if they have good suppliers. Sometimes when an automaker does a product in-house they only see their own product and not what is available on the market.

Supplier GKN has said the e-drive business is very difficult right now for suppliers. What's your view?

It is definitely a challenging market, but one with great opportunities. Sales of battery-electric vehicles are increasing, so this a great opportunity for us to grow with our customers.

Why is it challenging?  

A lot of people are trying to enter that market. Everybody thinks it's the future, but I think it's easier said than done. You need a lot of experience.

How is your business developing entire platforms?

We did that for Arcfox in China. Magna Steyr developed the architecture.

Are you working with Jaguar Land Rover on their new Jaguar platform?

Let's just say we are still working with JLR in general. JLR is an important customer.

With your Veoneer active safety division, how do you fit into the ADAS-focused sector that include companies such as Mobileye?

We have a very long relationship with Mobileye, but we want to go in more of a systems approach in this market. That is why we bought Veoneer because now we have one of the biggest players in the ADAS sector. We also want to offer more of the compute modules.

What are the key concerns you are hearing about from your customers in Europe?

ADAS is a huge subject in Europe. I think time to market is also an important topic. My worry is also the Chinese entering the European market

What are your customers asking you to do in response to the influx of Chinese competitors entering Europe?

For them, quality is still very important.

Are they looking for faster development?

Time to market will be a thing. That is something we are working on. For example, we recently opened a large engineering center in Bengaluru, India, that supports global projects including software engineering.

Will this help Magna work faster and with less cost?

I wouldn't say faster, it's about pricing and availability. And, technologically wise, they are very good.