Pininfarina takeover would boost Magna expertise in key areas

Magna International Inc. would become a stronger competitor for design and development jobs if it takes over struggling car styling and engineering firm Pininfarina S.p.A., executives say.

“Magna badly needs design competence, and Pininfarina has top staff,” said Paolo Tumminelli, CEO of Goodbrands GmbH, a brand and marketing consultancy based in Cologne, Germany.

An ownership change at Pininfarina could happen as soon as Dec. 31, according documents released Nov. 12 as part of the the Italian company's third-quarter financial results.

Dieter Althaus, a vice president at Magna's European unit, told Bloomberg News last week that taking over the Pininfarina also would give the Canadian-Austrian auto supplier “additional competence on development matters.”

“We're also very considerably engaged in the field of engineering and that's where design and technology also play a role,” Althaus added.

Sources with direct knowledge of the matter told Automotive News Europe last week that Magna is interested in Pininfarina.

Magna and Pininfarina officials declined comment.

VW a rival?

Consultant Tumminelli sees another reason why Magna would want control of Pininfarina:

“The move is necessary for Magna to get a key piece of the design and engineering market after Italdesign was bought by VW,” he said.

In May, Volkswagen AG took a 90-percent stake in Italdesign Giugiaro S.p.A., Italy's most powerful design and engineering firm. With Italdesign primarily focused on VW, an estimated 70 million euros ($95 million) in annual design and engineering business has become available.

Pininfarina, which is celebrating its 80th anniversary this year, is one of the companies interested in getting some of that business.

As Italy's second most powerful design and engineering company firm, Pininfarina is known for its work on legendary sport cars such as the 1966 Alfa Romeo Spider and the 1984 Ferrari Testarossa.

It's also known for having state-of-the-art technology such as its wind tunnel, which three years ago underwent a 4 million euro upgrade to improve its ground-effect simulation system.

Magna doesn't have a wind tunnel, which can cost more than 30 million euros ($40 million) to construct from scratch.

“The wind tunnel is a good asset and certainly worthwhile owning,” Tumminelli said.

A takeover of Pininfarina would give Magna a tool that is crucial to helping designers and engineers improve a vehicle's aerodynamics, which in turn helps decrease fuel consumption and reduce emissions.

Automakers are under pressure to cut their fleet emissions or face fines in Europe, where tougher pollution rules start to take effect in 2012.

Financial troubles

Pininfarina has struggled financially for years, losing a combined 358 million euros from 2007 to 2009. The company reduced its net debt from 157 million euros in 2007 to 58 million euros (about $79 million) as of Sept. 30, but it is still losing money.

Italian media have reported that as many as 10 carmakers and private equity firms are interested in the company. The reports named Beijing Automotive Industry Holding Corp. and India's Mahindra & Mahindra Ltd. as possible suitors.

Following the Nov. 17 publication of the Automotive News Europe story about Magna's interest in the company, Pininfarina issued a release to say it is “collecting expressions of interest from potential buyers. Whenever any negotiations have reached a stage where it needs to be communicated, the company will do with the usual transparency.”

In 2009, Pininfarina hired Banca Leonardo, a Milan-based merchant bank, to sell a 50.7 percent stake held by Pincar, the Pininfarina family holding company. The sale is part of a 180 million euro loan write-off agreement made with creditor banks at the end of 2008. The banks will get the proceeds from the sale of the stake, which grew to 76.1 percent last year after the banks canceled another 70 million euros in loans.

The Pininfarina family owns 1.2 percent of Pininfarina S.p.A, down from a 55 percent stake before the financial crisis hit. The company was founded by Battista Pininfarina, the grandfather of current chairman Paolo Pininfarina.

By Luca Ciferri- Automotive News