Updated: June 2, 2009 12:00 AM | By Julian Beltrame, THE CANADIAN PRESS, cp.org

Canada could become big player in electric cars industry, says Magna

Canada could become big player in electric cars industry, says Magna

Magna International Chairman Frank Stronach speaks to the media in front of a battery powered car on display in Ottawa Tuesday June 2, 2009. THE CANADIAN PRESS/Adrian Wyld

OTTAWA - Magna International Inc. chairman Frank Stronach says he wants to start mass-producing electric cars in Canada within three years.

The head of Canada's largest auto parts maker was in Ottawa on Tuesday seeking government support for his new electric vehicle venture after Magna cemented a deal with General Motors Corp. to acquire the U.S. automaker's money-losing Opel car brand in Europe.

Unveiling the fully electric compact that Magna developed in partnership with Ford Motor Co. (NYSE:F), Stronach said he is being courted by the U.S. and Europe but he wants his first electric cars to come off a Canadian assembly line.

"We are very serious, we have a serious commitment," he told reporters.

"I would like to see that the first electric car facilities are in Canada. If we would get a loan at a reasonable rate, we know we could speed it up, we would make sure it will be in Canada."

If successful, an electric car assembly operation in Canada would provide badly needed jobs in a troubled industry and help the global parts giant cash in on the growing demand for low-pollution vehicles in the marketplace over the next few years.

Toyota, with its Prius, and Honda, with its new Insight, already have hybrid electric-gasoline cars, and General Motors plans to mass produce its new Volt fully electric vehicle at a U.S. plant and get them into dealer showrooms by the end of 2010.

The world's former No. 1 auto maker filed for bankruptcy protection on Monday - the largest ever for an industrial company - and said it hopes to move forward with just four core brands - Chevrolet, Cadillac, Buick and GMC.

It also plans a spate of new fuel-efficient and low-polluting models, including the Volt, a critical piece of GM's vehicle lineup for the future.

GM experimented but failed with electric cars in the past. However, the Volt is seen as a sure-fire winner by the Detroit company, especially in a future market of younger buyers worried about soaring gasoline prices and greenhouse gas emissions.

The Volt is an extended-range all electric vehicle with a powerful battery pack that uses cutting-edge lithium-ion technology. The vehicle also has a small gasoline engine to replenish the battery power when it gets low, not to drive the car.

Stronach said he believes within six years about 15 per cent of cars sold will be electric or the hybrid variety, with the percentage doubling by 2021.

An official with the Aurora, Ont. parts maker, which employs 74,000 people in 25 countries, said the model being developed with Ford is aiming for a 160-kilometre range without recharging.

Magna (TSX:MG.A) is putting in about $300 million into the project and is seeking low-interest loans from the federal government for about half the total cost.

But Stronach came to Ottawa without any guarantee he would be seeing Prime Minister Stephen Harper, although he said he hoped to arrange a meeting.

The electric vehicle is a major step by Magna to diversify its business away from auto parts, a sector hit hard by the slump in GM, Ford and Chrysler, Magna's main customers.

Besides electric vehicles, Austrian-born Stronach wants to expand Magna's vehicle assembly operations and use the Opel deal to boost sales to Russia, which could soon become Europe's largest car market and help Magna decrease its dependence on North America.

Magna has also been looking to other customers like Volkswagen, BMW and Toyota.

Saturday's Opel deal calls for Magna to take a 20 per cent stake in the German company and for state-controlled Russian lender Sberbank to take a 35 per cent stake, giving their consortium a majority.

GM will keep 35 per cent, while the remaining 10 per cent will go to Opel employees.

The Magna chairman appeared less certain about whether any of Opel's European-based manufacturing plants would be transferred to Canada, suggesting a sticking point is an agreement with GM not to sell Opels in the U.S. market.

Last week, Stronach said he wants to build Opels in Canada, but although he repeated that wish Tuesday, he suggested availability to the larger U.S. market is essential before the company could make that commitment to manufacture in Canada.

"I'm very optimistic we can sit down and work out concepts and structures which would be beneficial to GM and to Magna and also to Canada," he added.

Stronach described the global auto market as extremely competitive, but said he believes the Opel unit will break even in three years and turn a profit in four years.

In another matter, he called the massive bailouts of GM and Chrysler as necessary, given the jobs at stake and that the car companies were adversely impacted by the global recession.

"If it were only the car industry and the rest of the world economy was functioning, then it wouldn't have been right to bail out the car companies," he said.

"But if they had gone bankrupt and were sold in bits and pieces, the spinoff effects would have been a few million jobs (lost) between Canada and the United States."

Stronach, whose company runs mostly non-union plants, said he has one major concern over what he called the "confrontational culture" that exists between management and unions in the North American auto sector. He said that culture has greatly handicapped the industry.


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