January 3, 2008 -- Canadian auto supplier Magna International Inc. plans to expand its presence in Turkey, part of a growing push by manufacturers into car-hungry Eastern Europe as auto sales stall further west.

Company spokeswoman Tracy Fuerst confirmed yesterday the Aurora, Ont.-based auto-parts giant intends to buy land in Turkey. She declined to say how much Magna would spend on the expansion. Press reports in Turkey have given figures in the range of $400-million to $500-million.

"This move is a result of our strategy to expand our manufacturing presence in southeastern Europe," Ms. Fuerst said. "Turkey was selected primarily due to the existence of a supplier infrastructure and functioning logistics, as well as strong market potential for the region's automotive sector."

Such automakers as General Motors Corp. are shifting their production focus from Western Europe, where sales are stagnating, further east toward Russia and surrounding countries. A growing middle class in Eastern Europe has spurred automakers to build almost one million additional vehicles this year.

Through the first 10 months of 2007, passenger-vehicle output in greater Europe, which includes Russia and Turkey, rose 6.3% to 16.4 million units. Automakers in Turkey alone will have the capacity to build 1.44 million light vehicles by 2010, a 26% increase from the 1.14-million unit capacity in 2007, according to PwC Automotive Institute. Manufacturers are also boosting capacity in Kazakhstan, Uzbekistan and Ukraine.

"Central and Eastern Europe have become incredibly important to European automakers because sales have exceeded their wildest expectations," AID Ltd. analyst Peter Schmidt told Automotive News in November. "The trend is likely to accelerate further."

Turkey is a good production base for the European market because its labour costs are much lower than in the European Union and Turkish workers are highly qualified, Markus Gran, a Magna Steyr executive, told the publication.

Magna has one existing manufacturing facility in Turkey. The company has already started to look for a new site in Izmit, an industrial zone in the country's northwest Marmara region, the Turkish daily newspaper Zaman reported.

It is also planning a big push into neighbouring Russia, following a deal last May that saw Russian metals magnate Oleg Deripaska buy into Magna and share control with its founder, Frank Stronach. Magna is expected to detail the scope and details of specific plans in coming weeks.

Negotiations aiming to make Turkey a member of the European Union have slowed under pressure from France, which opposes its membership.

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Source: National Post