Magna posts $205 Million second quarter loss
Magna International Inc., the parts supplier bidding for General Motors Europe, posted a second-quarter net loss of $205 million as automakers slashed purchases.
The deficit of $1.83 a share compares with year-earlier net income of $227 million, or $1.98, the Aurora, Ontario-based company said in a statement today. The results missed analysts’ estimates, and sales tumbled 45 percent to $3.71 billion.
Buying a majority of GM’s European division would give Magna control of its own auto operations, expanding on the building of vehicles under contract for other companies at a plant in Austria. Magna said its assembly sales fell 60 percent to $423 million.
“It was a disappointing quarter,” said Rich Kwas, a Wells Fargo Securities LLC analyst in Baltimore. “North America was going to be under pressure because of the company’s sizable Chrysler and GM exposure in North America, but the results were worse than expected.” He said
GM, the biggest U.S. automaker, and No. 3 Chrysler Group LLC both shut down almost all production for more than a month after their predecessor companies sought bankruptcy protection during the second quarter.
Industrywide vehicle production plunged 49 percent in North America and 28 percent in Europe, Magna said. Magna’s cash balance slid to $1.73 billion as of June 30 from $1.75 billion at the start of the quarter.
Magna is vying for Opel with Brussels-based investment firm RHJ International SA. Buying Opel would create risks for parts sales, because automakers might opt not to use a supplier that builds its own vehicles,
Magna said. The company said it also probably would fall out of compliance with some credit facilities.
A “complete firewall” would be set up between Opel and Magna’s auto-parts operations to ensure there would be no exchange of technology with a potential competitor, Co-Chief Executive Officer Don Walker said.
Source: Bloomberg
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