Shares of auto parts maker Magna International Inc. fell $1.18 — or 2.5 per cent — to $45.20 on the Toronto Stock Exchange in early afternoon trading Wednesday on a report that Fiat won't renew a Magna contract to build Chrysler vehicles in Europe.
The Wall Street Journal report quoted Fiat CEO Sergio Marchionne as saying he will move production to a former Carrozzeria Bertone plant in which Fiat plans to invest $218.3 million US over the next three years. Fiat and Chrysler have an operating partnership and Marchionne is Chrysler's new CEO.
Chrysler's assembly plant in Brampton, Ont.: An unconfirmed report says Fiat will not renew Magna's contract to build Chrysler vehicles in Europe. (Frank Gunn/Canadian Press)Magna assembles the Chrysler 300C sedan and Jeep Grand Cherokee for European markets.
The Journal said it was unclear whether Fiat's decision was influenced by Magna's agreement earlier this month to acquire a majority stake in General Motors' European operations, which produce the Opel and Vauxhall brands. Some car makers that are Magna customers see that deal as a conflict.
Chris Piper, associate professor at the University of Western Ontario's Richard Ivey School of Business, told CBC News that Magna's relationships have become more complicated. While much media attention has focused on BMW and Ford's concerns about the risks of Magna accidentally disclosing technology secrets to rivals, he said that's not really the issue — Magna has always had to maintain confidentiality in that way.
"What's different now," he said, from the point of view of a Magna customer, is "the additional problem [of] potentially competing with your supplier. Because Magna, in addition to making parts for you, they're making cars that may compete with you."
The loss of the contract, if true, Piper said, is also an issue of Fiat having to deal with excess capacity. "They have real issues, in fact, with the Italian government and with their Italian workforce. It looked like they were going to have to close a plant, so this an easy balance for Fiat."
With files from The Canadian Press