Supply Side – Magna

While automaker after automaker makes announcements regarding new facilities and growth opportunities in China, one of the industry’s Tier One suppliers is guardedly optimistic about expanding in the booming market. Magna International Inc. said it will take a cautious approach to investing in China even though it sees the market as having tremendous growth potential, say Magna executives in reports.

The company says it will have to follow its customers into the market and while it is developing a strategy it will take a prudent approach in China, which has only 1.5 cars per 1,000 people.

While its Chinese expansion is in the future, Magna currently continues to expand in both North American and Europe. It says it has $3.3 billion in new business for 2003 and into 2004. Projects include supplying a myriad of parts for the new Chrysler Pacifica, Dodge Durango and Ford F-series.

In total, the company has 24 new contracts, which should increase Magna business 12 percent to 16 percent by 2005.

But the contracts seem to do little to help Magna’s first-quarter earnings forecast. The company is forecasting $1.25 to $1.45 a share, down from analyst’s expectations of $1.69 a share.