To compete in the tough market for engineering services, Austrian supplier Magna Steyr is heading in new directions.

Karl-Friedrich Stracke, who is president of vehicle technology and engineering at the Magna International unit, is betting on targeted acquisitions and growth in China. The former Opel CEO spoke with Johannes Winterhagen, correspondent at Automobilwoche.

Magna Steyr was one of the world’s largest engineering service providers, but the company has slipped in the ranking because of many mergers in the sector. Do you have to make some acquisitions?

We are watching the M&A market very closely and are already looking at ways that we can become stronger. But it must be a true enhancement that brings us additional expertise. Just buying additional capacity makes no sense. A purchase has to fit strategically and contribute to our ability to offer our customers better service. That is the goal.

What are you looking for?

We are looking at companies involved with electronics and on-board networks or with alternative powertrains as their focus. We have already mastered the integration of such technologies into the entire vehicle. Overall vehicle expertise has been a traditional Magna Steyr strength. However, this requirement is now coming from our Chinese customers, and that means we have to build up more overall vehicle know-how there. In China, however, the focus is on organic growth.

Are your European customers concerned about all the business you are doing with Chinese automakers?

In some cases, it is our European customers’ explicit desire that we supply Chinese automakers with engineering services. For example, one of our premium customers explicitly wants us to be the link between its development departments in Europe and its joint venture in China.

What has changed in the engineering unit?

The main thing is that we have completely repositioned our proposal process and restructured engineering, that is, we made our structures leaner and consolidated departments. We have created flatter hierarchies and shorter reporting lines. And we have sharply reduced costs per engineering hour. We are targeting each individual type of cost and, as a result, we are improving our productivity. In all, we are on the right track to achieve the cost reductions of 15 percent targeted for this year.