Another quarter of losses for Magna as it bids for Opel (Roundup)

Aug 7, 2009, 14:04 GMT

Aurora, Canada/Vienna - Canadian-Austrian car parts supplier Magna International reported a second-quarter loss on Friday amid continuing talks to take over German car maker Opel.

With the global car industry under pressure and US vehicle production halved in the April to June period, the company reported a net loss of 205 million dollars, compared with a profit of 227 million dollars in the same quarter last year.

It was the fourth straight quarter of loss for the company.

Although Magna said it was sitting on cash reserves of 1.7 billion dollars, the car supplier also warned of potential risks of taking over 55 per cent of Opel from US automotive group General Motors.

If successful, the deal could scare away other customers concerned about possible transfer of know-how to their competitor Opel, but Magna said it would take measures to prevent this.

'We recognize it could become an issue with some customers more than with others, and we recognize we need to have firewalls in place,' Donald Walker, one of Magna's chief executives, said in a conference call.

Also, the acquisition of Opel could force Magna to renegotiate credit terms with lenders.

Magna's consortium bidding for the German carmaker includes Sberbank in Russia.

While GM has expressed preference for rival bidder, Belgian financial investor RHJI, the German government favours Magna's consortium.

GM chief executive Frederick Henderson was due to meet Magna's co- chief executive Siegfried Wolf at GM's Detroit headquarters Friday evening to discuss outstanding issues.

One of the open questions concerns rights to Opel patents.

The company's operating loss in the second quarter amounted to 237 million dollars.

Owing to declining car production, Magna's sales in car assembly, auto parts, engineering and other sectors fell by 45 per cent to 3.7 billion dollars.

However, Walker expressed optimism: 'There appear to be signs of improvement in certain key automotive markets,' he said.

Walker noted that US car sales hit a 2009 peak in July, driven partly by the government's incentive programme.