‘I think we can leverage Getrag’s growth there and we can also leverage the capabilities Getrag has and we’ve got as we grow in China,’ Magna CEO Don Walker said.AARON HARRIS/Reuters
Magna International Inc.'s acquisition of transmission maker Getrag will help Magna expand more rapidly in China, which is the key growth market the parts giant is targeting, chief executive officer Don Walker says.
Short-term economic gyrations have not caused Magna to change its view that China represents the best growth opportunity among all global vehicle markets, Mr. Walker said.
"I think we can leverage Getrag's growth there and we can also leverage the capabilities Getrag has and we've got as we grow in China," he told a news conference at Getrag's head office in Germany on Thursday. Magna's purchase of Getrag closed earlier this month.
The €1.75-billion ($2.7 billion) purchase of Getrag is the biggest acquisition yet for Magna and means that it is now a maker of complete transmissions in addition to the components for transmissions that its Magna Powertrain division already manufactures.
"We're the biggest supplier in the auto-parts industry in North America, we're one of the bigger ones in Europe," Mr. Walker said. "China is our biggest growth priority from a geographic standpoint outside our core markets."
Getrag has three plants of its own in China, a joint venture and a regional office.
Magna expects to have 38 plants and joint-venture facilities operating in China by 2018, compared with 15 in 2010.
Sales are forecast to be between $1.5-billion and $1.6-billion (U.S.) in China in 2015, but more than double that to a range of $3-billion to $3.3-billion by 2018, Magna said in its annual outlook presentation in Detroit last week. The 2018 figure includes sales of about $400-million by Getrag.
The deal positions Magna to further cement its relationships with auto makers.
Engines and transmissions are complex, expensive parts of a vehicle that auto makers are gradually beginning to outsource to suppliers as they try to cut costs.
Transmissions have been built by auto makers for generations, but began to be outsourced to suppliers about a decade ago, Getrag CEO Mihir Kotecha said.
"It is our conviction that the amount of 90 per cent of transmissions are made in-house – maybe 10 years ago it was 95 per cent and tomorrow it will be 85 per cent – there are not so many suppliers that are in a position to take advantage of that momentum," Mr. Kotecha told the news conference.
"This is the first time in our 80-year history where in our chosen specialist technology we know more and have greater depth and greater resources and a wider product range than our customers do," he said.
Magna will not put acquisitions on pause while it integrates Getrag and other recent purchases, Mr. Walker said.
It would have taken a decade for Magna to build up the capability that Getrag has, he said. "I would prefer to build the company organically rather than make a lot of acquisitions, but in the case of Getrag, it was a perfect fit," he said.