Magna Loses Co-CEO But Gains A Friend In Russia

Date : 09/13/2010 @ 1:52PM
Source : Dow Jones News
Stock : Magna International, Inc. (MGA)
Quote : 52.14  0.0 (0.00%) @ 7:00AM

Magna Loses Co-CEO But Gains A Friend In Russia

Magna (NYSE:MGA)
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Magna International Inc. (MGA) is expected to continue having a European ally in outbound co-chief executive Siegfried Wolf.

Earlier Monday, the Canadian auto-parts giant announced the resignation of Wolf, who is leaving to join Basic Element's Russian Machines division, which is part of Russian automaker OAO GAZ Group (GAZA.RS). Basic Element is the holding company of Russian billionaire Oleg Deripaska, who was forced to sell his stake of 20 million shares in Magna during the financial crisis.

Wolf's departure, scheduled for Nov. 15, will leave Don Walker as Magna's sole chief executive.

The management shuffle has slightly positive implications for Magna, BMO Capital analyst Peter Sklar said in a note. "We believe that Magna has the structure and depth to manage the company's European operations, even in the absence of Mr. Wolf," he wrote. "However, we understand that Mr. Wolf had strong relationships with Magna's European OEM customers."

Sklar said he believes that Wolf played a "leading role" in Magna's contract with BMW AG (BMW.XE) for its X3 - the largest assembly contract ever for Magna although it's since expired.

Another analyst said Magna has clearly signalled its aspirations for the Russian and eastern European car markets, and that having a "friend" at GAZ won't hurt down the road. "I imagine there will be opportunities," the analyst said.

The analyst believes Wolf facilitated Deripaska's previous investment in Magna, and that Wolf's connections in Europe should continue to benefit Magna in the future.

Magna itself is looking on the bright side. In a statement, Magna founder Frank Stronach said the company "stands to further strengthen its relationship with Basic Element and continue to grow in the recovering Russian car market."

In Wolf's own statement, he said he looks forward to potential future opportunities to work with Magna in its ongoing Russian expansion strategy.

Magna recently won court approval to collapse its dual-class share structure, ending Stronach's longtime voting control of the company in return for nearly $1 billion in cash, stock, and consulting fees.

David Taylor, who was a big supporter of the share reclassification, said co-CEO structures are too complex and it's good that Magna was one person running the show. "This is the first of many moves I suspect to turn this into a normal public company," said Taylor, a portfolio manager at Goodman & Co. who holds Magna shares.

-By Andy Georgiades; Dow Jones Newswires; 416-306-2031;

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