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Tuesday, July 10, 2007

Stronach Has Big Plans...For Cars

- There was a profile of Frank Stronach in the business section of Tuesday's Times that you can read here, I believe with no registration required. As we've noted many times, Stronach is an interesting and complex guy. We saw his efforts to help house people left homeless by Katrina, which at one time included a plan to build an entire community. I'm not sure if that plan was followed through on. He once ran (unsuccessfully) for Parliament, and offered a different take on democracy.

In 1993, Mr. Stronach, who once ran unsuccessfully for Parliament, suggested that Canada should be governed by juries of citizens selected by computers to serve one-year terms and vote in secret on legislation. Magna helped finance the promotion of the concept with some of the 2 percent of its pretax profit that is reserved for charity, social causes, education and politics.“
He’s sort of a genius and a bit of buffoon wrapped together,” said Wayne Lilley, author of “Magna Cum Laude,” a biography of Mr. Stronach published last fall [NY Times]
The genius part helped him build his small auto parts shop into the empire that is Magna International. But we've seen the buffoon part at Gulfstream; and in fact, I suppose that many may feel the same way about the entire Magna Entertainment venture, which lost $87 million last year.

Stronach has huge plans for Magna, the car company. Magna currently manufacturers whole vehicles in Austria for companies including BMW, and the Saab division of GM. (And I've been thinking of leasing a Saab, hmmm...) This picture is of a "concept car" that Magna showed last year. What the concept is I'm not sure, though that could be a Horse Wizard machine on the dashboard.**

Stronach is apparently enjoying making cars so much that he tried to buy Chrysler. He has also proposed a controversial plan, subject to shareholder approval, to venture into the Russian automobile market, which he sees as a huge untapped source. He would sell 20 million shares and partial control of the company to Oleg Deripaska, a wealthy Russian businessman who has an interest in Russian automobile maker GAZ Group. Mr. Stronach predicted that entering the Russian market might double or triple Magna’s revenue, which was $24 billion last year. He would also enrich himself; he'd put up no money, but collect an $8 million annual dividend as opposed to its current yield of around $700,000.

Mr. Deripaska caught the attention of New York's rather thorough Inspector General Kristine Hamann. Late breaking news earned him a footnote in her Report to the Governor on the Integrity of Those Seeking to Operate the Racetracks at Aqueduct, Belmont Park and Saratoga even though he's merely a prospective partner to a partner in Empire, and despite the fact that any deal is far from being done. The fastidious Ms. Hamann did not approve.
United States law enforcement officials suspect Mr. Deripaska of having ties to Russian organized crime. Deripaska's visa to travel to the United States was canceled last year because of Washington's legal concerns. The sale would give Deripaska significant control of Magna, giving him the right to nominate six of Magna's fourteen Board members, the same number as are nominated by the Stronach family that currently controls Magna.
Thus, not surprisingly, approval by Magna shareholders is not assured.
“Whatever it is, the only sure thing is that Mr. Stronach and management are getting a slick deal here,” wrote Derek DeCloet, a business columnist for The Globe and Mail who urged shareholders to use their votes to “deliver a message: Give us a better deal, Mr. Stronach, or we’ll kill this one.” [NYT]
** Cheap shot for the easy laugh...I actually like the Horse Wizard concept.

- The website for the International Herald Tribune, kinda like the international version of the Times, ran this picture below with the story instead of the car.
The caption reads: Horse racing is an expensive sideline for Frank Stronach, head of Magna International. But actually, Magna Entertainment is spun off from Magna, and I imagine that Frank probably is doing just fine with his Adena breeding and racing operation. A look at a list of his stallions shows that he has three in six figure territory - El Prado ($125,000), Awesome Again ($150,000), and Ghostzapper ($150,000).

$150,000 - live foal - for Ghostzapper? Is anyone going for that? 111 mare owners did in 2006. That's a pretty nice piece of change.

- Giacomo also stands at Adena, for $12,500 (foal stands and nurses). That may seem a bit low for a Derby winner, even one with a record of three wins in 16 starts. But he has nary a drop of fashionable blood; not Northern Dancer, Mr. Prospector, or even Seattle Slew; so it will be interesting to see how he fares in popularity and success.