Magna International Inc. didn’t get the blockbuster autonomous-driving technology deal it wanted this summer. But CEO Swamy Kotagiri indicated the Canadian megasupplier remains unfazed.
Kotagiri, 52, in his first year leading Magna, said North America’s biggest auto supplier and the world’s fourth largest will soldier on with its strategy on advanced driver-assistance systems, even after its bid for Swedish tech supplier Veoneer got snatched out from under him by a rival offer from Qualcomm.
Expect Magna to continue investing significantly in its existing portfolio to win new business from automakers while continuing to keep an eye out for acquisitions and partnerships that make sense for the company, he said.
“We have a really good business in terms of having the sensor suite, whether it’s the cameras, the radar, the lidar, the domain controllers and the software capability,” he said. “And we always have said that if there’s an opportunity to augment scale, our geographic footprint or the customer base, we’ll do what is necessary within the realm of the financial hurdles that make sense for us.”
Magna had agreed to buy Veoneer for about $3.8 billion. That deal fell apart after Qualcomm and New York investment fund SSW Partners agreed to buy the company for about $4.5 billion. Qualcomm will hold onto Veoneer’s Arriver software business while the rest of the company — including its restraint control systems and active safety units — will go to SSW, which aims to find a long-term owner for them.
Kotagiri spoke with Reporter John Irwin. Here are edited excerpts.
Q: When Qualcomm came in with a higher offer for Veoneer, did Magna consider increasing its bid?
A: The Veoneer acquisition gave us scale. It complemented the geographic footprint, and we put a value on what made sense to us. Obviously, the value is different for us than it might be for others. But if you look at the history of Magna, we have always talked about financial discipline and what fits our strategy. So when we looked at it from our viewpoint, what we put on the table made sense, and we did not feel it was prudent for us to chase just based on price.
Does Magna have interest in acquiring the portion of Veoneer’s business that will be controlled by SSW Partners after the deal closes?
It wouldn’t be prudent to comment before it closes, but I remain open to all options, whether it’s organic or inorganic, that cater to our strategy. So I won’t close doors on anything.
The microchip shortage put a dent in Magna’s third-quarter revenue, which fell to $7.9 billion, compared with $9.1 billion a year earlier. How long does Magna anticipate the shortage lasting, and what is the supplier doing to stay on top of it?
It’s fundamentally a question of the supply chain complexity that we deal with and the different tiers that we have, especially in the chip industry. The whole industry has learned from this. How do we provide visibility to the semiconductor industry, not just for the next six weeks or six months, but for the next 12 months, 18 months or maybe even more, so there could be better planning?
I think that’s the long-term learning. Given what we’ve gone through, and in terms of the capacity that’s been added and a change in thinking process — both in the automotive industry as well as the semiconductor industry — for it to really take effect, I think we’re looking at the next eight, 10 or 12 months.
The expectation as we stand here today, with the facts that we know, it looks like there will be some sense of normalcy by the middle to third quarter of next year. In some cases, to get back to a full cadence of production and how it needs to work, it might even be a little longer.
How might the industry’s supply chain woes impact how Magna sources components and builds parts in the future?
Definitely, there are lessons learned. But I wouldn’t say it’ll be drastically different. We continue to work with our OEM customers, and we also continue to work with supplier partners.
I think if there is one thing that comes out very prominently, it’s to have that strategic relationship and sharing of road maps. How do we make sure we have the flexibility in the design itself so that you’re not basing everything on one product or one chip? I think that’s going to be paramount across the industry to see how we can reduce the bottlenecks.
Beyond that, I think it’s not substantially different from what we were doing in our management of the supply chain or logistics or design philosophy.
Magna Steyr will build Fisker’s electric Ocean SUV, in addition to the models it builds for established manufacturers, such as BMW and Jaguar. With more EV startups coming to market, where does Magna’s complete vehicle assembly business go in the coming years?
Full-vehicle assembly is the tip of the spear for us.
It’s not just vehicle assembly — it’s the integration knowledge and full-vehicle engineering capability that is the first differentiator that Magna has. It’s not just assembling to a direction or assembling to a print that somebody already has. That’s important, but that’s only one thing.
To be able to work with a partner with decades of experience and millions of vehicles that have been put together in our facilities, we bring something to the table. What are the normal pitfalls? How could we look at, whether it’s manufacturing or different systems, differently? That’s the second aspect.
How does assembling complete vehicles help Magna in its larger strategy?
As the team that deals with full vehicle design and integration brings all of this together, it can also leverage the deep systems experience that we have in other groups at Magna. If you want to get into the nuts and bolts and the details of ADAS or powertrain systems, or in seating or body and exterior structures, mirrors, closure mechanisms — they would have a whole army of experts they could leverage.
So if somebody comes to us with a vision, a specification of what they want to achieve, we cannot only tell them how to manufacture the vehicle and engineer it, but we can give them different options. We can provide synergies and economies of scale with existing platforms that we might already have.
If you’re in an EV as a customer, I don’t think you really care what motor is in it. You’re looking at the features and functionalities that surprise and delight from your perspective. Being able to customize that to your needs and your brand by leveraging a platform that has been validated to a large extent at the baseline, I think it brings a lot of capital efficiency to the market. It’s good for all of the parties involved.