UPDATE 2-Magna says can't sell Opel cars in U.S., China

Tue Jun 2, 2009 2:48pm EDT

* GM protects U.S. market, protects China for now

* Magna says little appetite for buying Saturn, Saab

* Sees Opel breaking even in three years, profit in four

* Seeks government help for electric vehicle production (Adds remarks on electric vehicle production)

By Randall Palmer

OTTAWA, June 2 (Reuters) - Magna International Inc MGa.TO is prevented by an agreement with General Motors Corp GMGMQ.PK from selling Opel cars in the United States and, for now, in China, the chairman of the Canadian auto parts company said on Tuesday.

"The agreement with General Motors does prevent us from selling Opel in the United States," Frank Stronach told reporters at a news conference in Ottawa. A Magna-led consortium has agreed to buy European automaker Opel from GM.

Asked if the agreement applies to China too, he said, "Yes, for the moment, but keep in mind that General Motors -- we've been working together for 50 years, we've been great partners, and they still own 35 percent (of Opel)."

He suggested the prohibition on Opel sales in China might be flexible. "If it makes economic sense you might persuade people to change something."

Stronach also said he expects Opel to break even in three years, and to turn a profit in four.

Now that Magna has agreed to take on Opel, Stronach displayed little appetite for buying Saturn and Saab from GM, which is trying to unload those brands.

"We have to digest Opel now, and we have got a mouthful, so we'll see how quickly that will take place," he said.

Stronach was in the Canadian capital to seek government funding for a project to produce electrical systems for electric cars and, eventually, electric cars themselves.

"I'm very confident that Magna will be amongst the leaders in selling and building electric cars," he said, after demonstrating a Ford (F.N) prototype with a Magna electrical system.

He said it would cost about C$300 million ($280 million) to build a plant, and he would like to build it in Canada, but he is being courted by U.S. states and European countries.

Magna is seeking a federal loan for half that amount under Canada's Automotive Innovation Fund, designed to support research and development projects to build greener vehicles

"If we get a loan we know we could speed it up. We could make sure it's going to be in Canada," he said, adding that mass production could begin within three years.

Stronach said that if the company did produce electric cars, it would make sure it set up walls between the car manufacturing and parts manufacturing divisions, so as to assure fair treatment for major automakers that buy Magna parts. (Additional reporting by Louise Egan; editing by Rob Wilson)

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