February 20, 2008 -- Canadian auto supplier Magna International Inc. will spend US$203-million to try to turn around its mammoth New Process Gear factory in Syracuse, N.Y., and says it has won federal and state government money to help fund its investment.

Greg Deveson, president of Magna Powertrain Americas, disclosed the information in an unusual open letter to the factory's employees on Feb. 14 in which he apologized for "some of the missteps and mistakes" Magna made in managing the plant.

He called on the factory's roughly 2,500 unionized workers to "embrace Magna" and back a new labour contract the company negotiated with union leaders. Workers were scheduled to begin voting on the deal today.

"I can certainly understand your frustration and lack of trust for how we have run the Syracuse site," Mr. Deveson wrote. "I would like to put our past mistakes behind us as I offer management's total commitment to our employees."

The NPG facility, stretching nearly two million square feet, is massive by Magna standards and the company has struggled to figure out how to make it operationally efficient and profitable since buying it from DaimlerChrysler AG in 2004.

Union leaders have said they believed Magna was steering toward closing the facility on at least two recent occasions. The factory, which makes mostly transfer cases for the Detroit-based auto-makers, is currently operating at a loss of US$80-million a year, UBS Investment Research estimates.

Magna has agreed to guarantee an investment of US$40-million in new machinery at the plant in the first year of the labour deal and another US$55-million in the two following years "based on delivering an acceptable return to our shareholders," Mr. Deveson wrote in his letter. He said Magna is also spending US$108-million of its own money on so-called "buy-downs," which are typically one-time payments for workers who choose to stay on with a company in exchange for taking a cut in wages or benefits.

The governments of New York and the United States will be granting money to NPG to help the factory succeed, Mr. Deveson wrote. A Magna excutive and officials with the United Auto Workers union together lobbied legislators for financial aid last week.

Source: National Post