Linamar Exposed, Magna Not So Much, to U.S. Nafta Auto Threat

(Bloomberg) -- Of the U.S. demands expected to complicate round five of Nafta negotiations this week in Mexico City, here’s one of the more contentious: an American proposal that half of all parts and vehicles that cross borders under the pact be made in the U.S.

While that might sound onerous for auto-parts manufacturers in Canada, some companies aren’t far off from that threshold, according to data compiled by Bloomberg.

Canada’s largest auto-parts maker Magna International Inc., is among the most protected with about 48 percent of the Aurora, Ontario-based company’s North American plant and equipment located in the U.S. already, the data show.

Magna is the top supplier to General Motors Co., Ford Motor Co., and Fiat Chrysler Automobiles NV. On the company’s quarterly earnings call last week, Chief Executive Officer Don Walker acknowledged that Nafta uncertainty means a company contemplating big investments over the long term is probably on hold or going to be “biased to invest more in the U.S.” until there’s an outcome. He added Magna hasn’t made any such adjustments itself.

Martinrea International Inc. surged almost 10 percent on Wednesday, the biggest jump in a year, after the Vaughan, Ontario-based manufacturer beat earnings estimates and commented extensively on Nafta. About 41 percent of Martinrea’s North American fixed assets are in the U.S., according to Bloomberg data.

Executive Chairman and co-founder Robert Wildeboer said in a conference call on Wednesday that “our relative footprint is very well positioned even if the rules of origin rules were tightened or even if there was no Nafta.”

Canada’s second-biggest parts maker, Linamar Corp., has more to worry about in the event that a 50 percent U.S.-content requirement becomes reality. Only about 27 percent of its North American fixed assets are concentrated in the U.S., the data show.

CEO Linda Hasenfratz came out swinging against such a proposal in the opening statement of her earnings call last week. “There is no chance that country-specific content will be agreed to by Canada or Mexico. So there is no sense in evaluating that scenario.”

Hasenfratz sits on the Canadian government’s Nafta advisory council. Shares in the Guelph, Ontario-based company tumbled more than 15 percent after it missed earnings estimates.

To contact the reporter on this story: Lily Jamali in Toronto at ljamali1@bloomberg.net.

To contact the editors responsible for this story: Jacqueline Thorpe at jthorpe23@bloomberg.net, Stephen Wicary

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