Russian Investment May Help Magna Buy Chrysler
By Michelle Krebs May 10, 2007Magna International, believed to be the leading contender to buy Chrysler, said Russian billionaire Oleg Deripaska is buying a $1.54-billion stake in the Canadian auto supplier to help it expand in Eastern Europe. The investment also may help Magna buy Chrysler.
Magna held its annual meeting in Toronto this morning. On the eve that meeting, Magna chairman Frank Stronach told Canada's Globe and Mail newspaper that he expects drastic measures at the Chrysler Group if Magna International succeeds in buying the automaker. "Sometimes when you're sick, you've got to take some drastic measures and that's unfortunate," he said in the interview.
Magna has a bid for Chrysler with Canadian conglomerate Onex Corp. The two announced earlier this week that they have financing lined up for the deal. The offer has DaimlerChrysler retaining a stake in the new entity.
Deripaska controls Russian automaker GAZ, the country's second-largest auto company. It is part of Deipaska's Russian Machines business. His company, Basic Element, which owns Russian Machines, is a holding company with energy and machinery stakes. Its annual revenues are about $18 billion.
Late last year, GAZ said it would start three ventures with Magna, including a new factory in Nizhny Novgorod, where GAZ's Gorky Auto Plant is based. Russian Machines also plans to set up a new division, RM Systems, that will focus on the production of components for carmakers in Russia, according to Bloomberg.
Meantime, Magna posted first-quarter profits of $218 million, up from $212 million in the first three months of 2006. Revenue was $6.4 billion, up from $6.0 billion a year ago. The company said first-quarter sales were at record levels. Some experts wonder how Magnaâs purchase of Chrysler will impact its parts sales to other auto manufacturers since they compete with Chrysler.
LEAVE A COMMENT