MAGNA Int. and NAFTA Presented by: Mariana Garcia V Leanne Hoffart Chris McEwen Faisal Niazi

Who we are? Founded by Frank Stronach (1954) Now: 68 plants 15,000 employees Sales of C$ 2.4 billion

1992

Fast growth of the Automotive Industry Penetration of North American Market by Japanese producers (+300 plants) NAFTA is signed (Canada-USA-Mexico) MAGNA is looking for a long-term growth opportunity 1992

MAGNA’s Competitive Strategy Full line supplier Target OEMs Employee empowerment Decentralized Structure Innovation=Competitive differentiation Knowledge of the business

COSMA’s Automotive Group Metal stamping, rust proofing and sunroofs Ability to design and construct its own die- making tools Capital intensive- complex+expensive tool Require automotive grade steel Opened MAGNA’s first Mexican division servicing VW

? The big ? MAGNA is looking for a long-term growth. MAGNA is already expanded all over Canada and USA. MAGNA wants to expand to new markets… Is MEXICO the best option?

Mexican Economy, Culture and Workforce (1992) Solid Economy Expected growth in automotive industry Predicted rise in standard of living OEMs in Mexico Large market Low wages Large labor force (26.2 M) Personal Relationships important Government promoting foreign investment Lax enforcement of labor + environmental standard

Problems Entering Mexican Market High cost of entering High training costs Necessity to find steel supplier in Mexico Relocation of engineers to Mexico Increased Transportation costs

Porter Analysis

Effects of NAFTA Tariffs Trade Balancing Local Content Equity Restriction

Projected Porter Analysis

Alternatives Remain in Canada and US markets Expand into Mexico Expand into a different country Merge of partnership with another company

Recommendation Expand COSMA Upgrade the “Puebla” facility

Investment Strategy Capital intensive industry Must be aggressive Can’t go incrementally in need to make it full Market penetration to capitalize

QUESTIONS ?