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UPDATE: Magna Swings To 3Q Profit; Revenue Down 16%

(Updates with co-CEO comments on future acquisitions, business wins and cost cutting.)

By Jeff Bennett

Of DOW JONES NEWSWIRES

DETROIT -(Dow Jones)- Canadian auto parts maker Magna International Inc. (MGA) swung to a third-quarter profit although its revenue fell 16% as its auto maker customers cut production.

Co-Chief Executive Don Walker said the company has no plans to pursue other auto maker acquisitions after General Motors Co. pulled out of a plan to sell its German Adam Opel GmbH unit to a Russian-backed consortium led by Magna. GM announced Tuesday that its board of directors decided to keep the unit amid improving operations.

The announcement may be a blessing since some auto makers were threatening to pull their parts business from Magna if it bought Opel, thereby becoming a direct competitor.

"I would hope that we are just back to business as usual with those auto makers," Walker said during a conference call Thursday.

Magna, which is in better financial shape than most of its competitors, continues to wrestle business away from other suppliers, especially in North America.

The company secured about $50 million in new business during the quarter and about $700 million year-to-date. The new business wins have slowed but Walker said he expects that to change as auto makers continue consolidating their supplier base.

For the quarter, the company earned $51 million, or 45 cents per share, compared with a loss of $215 million, or $1.93 a share, a year earlier.

"Considering industry challenges that we faced, we're very pleased with our financial result in the third quarter of 2009, particularly in North America," Walker said. He added that some worker benefits may be reinstated since the company is recovering.

Walker said there was a third-quarter industry-wide automotive production increase of 32% in North America compared with the second quarter. He attributed the increase to Chrysler Group LLC and General Motors resuming production after exiting bankruptcy protection. Car buying was also helped by the U.S. government's "Cash for Clunkers" incentive.

Europe, meanwhile reported a 9% drop in production compared with the second quarter as government sponsored car-buying incentives ended in different regions.

Despite the increase, production is still at historic low levels, pressuring Magna's sales growth. The company said sales fell 16% to $4.7 billion compared with the same period a year earlier.

Magna took the biggest hit in its car assembly unit, where sales fell 38% to $ 428 million. Magna is the only auto parts supplier that also builds complete vehicles for other auto makers, at its plant in Austria. The company's assembly volume dropped 42% over the same period a year earlier. Output in the unit is expected to begin recovering in the first quarter.

Walker said cost-cutting helped stabilize its North American unit although there is concern about Europe's future product output. The company expects to incur cost-cutting expenses in the fourth quarter and perhaps into 2010.

"A lot of it will depend on what we see happen in Europe," Walker said.

-By Jeff Bennett, Dow Jones Newswires; 248-204-5542; jeff.bennett@dowjones.com

(Judy McKinnon contributed to this article.)

  (END) Dow Jones Newswires
  11-05-091914ET
  Copyright (c) 2009 Dow Jones & Company, Inc.