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Parts Maker Forms Niche Car Manufacturing Unit

October 27, 1988

DETROIT (AP) _ Canadian auto parts maker Magna International Inc. said Thursday it has formed a new unit to build small-volume specialty vehicles, or niche cars, for its large automaker customers.

The new Vehma International Inc. will prove its capabilities by unveiling a high-performance concept car at the Society of Automotive Engineers’ International Congress and Exposition in February in Detroit, Manfred Gingl, Magna president, said at a news conference.

″It will measure up to anything which is running on four wheels today,″ Gingl said.

He said the car won’t compete with the big manufacturers.

The aim is to show them that the design, styling, engineering, tooling, manufacturing and testing capabilities Magna already uses to supply parts can be combined to produce entire cars, Gingl said.

Vehma is negotiating with ″one or more″ auto companies for such contracts, he said.

He said depending on the outcome, Vehma may build one or more assembly plants in Canada or the United States.

Magna currently employs 13,000 people at 120 plants in Canada, the United States and Europe and makes more than 6,000 products for the global automotive market. It had sales of $1.2 billion in its 1988 fiscal year, which ended July 31.

Magna is made up of four subsidiaries: Cosma International, making body parts; Atoma International, making interior assemblies; Decoma International, making exterior trim, and Tesma International, making drivetrain systems.

Gingl said Vehma would carry out assembly operations involving 8,000 to 15,000 cars a year. A moderately sized plant operated by a major automaker produces volumes in the 250,000-a-year range.

Vehma could build one of its specialized plants for $40 million to $70 million, he said.

Auto analyst Mary Anne Sudol of Fitch Investors in New York said an automaker could save by contracting with Vehma to assemble a vehicle aimed at a small marketing niche rather than interrupting a high-volume assembly line for such a project.

Profits would have to be high to justify contracting out the work, Sudol said.

″It could make sense to farm them out if they were upmarket vehicles with large profit margins and limited runs. I don’t think you could build econoboxes that way,″ she said.

Gingl said the operation would not resemble companies that take manufacturers’ finished vehicles and modify them - to make convertibles or custom vans, for example. ″I’m not talking about a conversion factory here,″ he said.

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