As Magna holds strong, it sizes up the future

Don Walker offered a few words of advice last week as he announced he would retire as CEO of North America's biggest auto supplier, Magna International Inc.

"I think we're well positioned to take advantage of the future trends," Walker said in a phone call with Automotive News and the man who will succeed him, Magna President Swamy Kotagiri.

"But whenever there are things changing, you've got to get it right," he urged, "because you're going to have some people make big missteps and make bad investments."

When he exits at the end of this year, Walker will leave Magna as a fine-tuned company that, despite the upheaval of a pandemic and disruptive industry change at every turn, seems to be holding strong. In early August, even as the supplier stabilized from the financial shock of North America and Europe's second-quarter halt in vehicle production, resulting in what Walker told analysts was "the worst decline that I have experienced in my 40 years in the auto industry," Magna was still confident enough about its liquidity to declare a quarterly dividend of 40 cents, an outlay of $216 million to shareholders.

The Canadian company's sales have almost doubled in the last 15 years that Walker has been in charge. With sales to automakers of $39.43 billion last year, Magna trails only Germany's Robert Bosch and Japan's Denso Corp. among the largest suppliers in the world.

"The automotive industry is going to continue to be global," Walker said. "I think there's going to be some new entrants, which we're very well aligned to support. I think our traditional customers are going to be having to move very quickly with new technologies, and we have a lot of those new technologies to offer them."

But the traditional automakers, he added, "have to cut back on their spending, cut back on their fixed costs, if they want to survive and they want to be agile going forward."

"And with COVID and the movement of people and goods, I think, permanently changing, there is a lot going on right now and a lot of things to be addressed and opportunities and things we should be doing," he said of Magna's future.

Walker, 64, has spent 33 years at the diversified global company, more than half of them as its chief executive.

Magna founder Frank Stronach recruited Walker from General Motors after the young engineer professed a desire to run his own company. He has served two stints as CEO — first from 1994 to 2001 and then again starting in 2005. He left the job for just over three years to be CEO of Intier Automotive, the vehicle interiors business that Magna took private but still controlled as a wholly owned subsidiary. Grupo Antolin of Spain later acquired most of Magna's interiors operations.

Kotagiri, 51, brings his know-how as former chief technology officer, as well as from leadership roles in other areas of the company, and "will continue to advance Magna's position in the changing mobility landscape," Chairman William Young said in a press call last week.

Kotagiri's experience nearly rivals Walker's. He has more than 25 years in the industry, 21 of which have been spent at Magna.

As he prepares to become one of only a handful of people who have held the title of Magna CEO since its founding in 1957, Kotagiri said the future will require focus and prioritization. It will require "reading the tea leaves," he said.

"The question is, how many initiatives do we pick that we can successfully follow through? I think it's going to be the most important thing for us to retain our focus."

Just a week before Walker's retirement news, Magna announced plans to supply the electric vehicle platform for Fisker's Ocean SUV, a significant foray into the future of electrification. Magna is in talks to do similarly with Canoo Holdings.

Will developing such vehicles worry customers that Magna aspires to become their competitor?

"The short and clear answer is no," Kotagiri said. "We don't want to be an OEM. We'll continue to communicate that and clarify that. We bring a different value proposition to the table, like in the case of Fisker, and we continue to do it with our existing customers, too.

"We look at the gaps and look at the trends and see where we need to be looking and what's strategic for us, whether it's cities and research institutions or Silicon Valley and Tel Aviv," he added.

Kotagiri said changes in other industries and among consumer habits have started to make an impact on the automotive and mobility worlds.

Those changes "will bring a new set of players possibly. That's something we have to be aware of and be able to react, either through our own capability or through partnerships and alliances and so on," he said.

"The mobility market is changing. We can't turn the ocean. We've got to pick our battles and opportunities."