Less than four months after buying publicly traded Donnelly Corp., Magna International Inc. is preparing to spin off the new Magna Donnelly division, putting it back out on its own.
This time, however, the company will be the largest global automotive mirror maker and will have Magna's backing.
In a Jan. 21 speech, Magna International founder and Chairman Frank Stronach said the company plans to spin off its Magna Steyr specialty assembly company within six months and follow up with the launch of an independent Magna Donnelly within a year.
Spokesman Jim Warren said the firm had no further comment beyond Stronach's statements.
Magna, based in Aurora, Ontario, completed its purchase of Holland, Mich.-based Donnelly on Oct. 1 in a stock-exchange deal worth $415 million.
On its own, Donnelly was a steady - if not exciting - player in the auto industry, with $850 million in sales, most of it in mirrors. The company does its own injection molding for mirror housings, along with rear window systems and door handles.
Magna joined Donnelly's operations with its own mirror sales, making a $1.2 billion, wholly owned subsidiary. It brought in new management, with Carlos Mazzorin taking over Jan. 6 as chairman and chief executive officer.
Mazzorin, 61, retired from Ford Motor Co. after 30 years with the automaker, most recently serving as group vice president of Asia-Pacific operations, South America operations and global purchasing. He works alongside former Donnelly CEO Dwane Baumgardner, who now is vice chairman, and Peter Schmied, executive vice president and chief operating officer.
The spinoff will follow Magna's corporate strategy. The firm has a controlling ownership in three publicly traded companies: exterior plastics supplier Decoma International Inc., auto interior specialist Intier Automotive Inc. and Tesma International Inc., an engine and transmissions supplier.
Both Magna Steyr and Magna Donnelly are to follow the same route, moving from wholly owned subsidiaries to independent companies operating within the Magna family. But while the move may follow the Magna group's traditional route, the firm will have to make some real changes within Magna Donnelly to make the company interesting to stock buyers, said Dennis Virag, president of Automotive Consulting Group Inc. of Ann Arbor, Mich.
Donnelly never was glamorous. It was profitable, but never drew the attention or stock growth of competitor Gentex Corp., Virag said. Magna must show real ways the mirror group can leverage its strengths into future growth.
Its association with Magna - among the biggest global auto suppliers, with more than $10 billion in sales through its companies - will provide some sheen, but: ``It's going to take more than a name,'' he said. ``The real proof will be in performance. The question is, will this be a logical move on the investment side.''
Mazzorin has great recognition in the industry, Virag added, but his specialty has been in purchasing, not manufacturing, and Magna Donnelly must prove it can compete in an increasingly cutthroat supply industry.
``They're bringing in the big guns, but the big guns don't necessarily turn these companies around,'' he said.