Magna working through issues on Opel deal: co-CEO

A Magna Steyr logo is pictured in Graz June 3, 2009.

DETROIT (Reuters) - Magna International Inc MGa.TO must address several issues in completing the acquisition of General Motors Corp's GMGMQ.PK Opel brand including a clear barrier between the parts and car companies, Magna co-Chief Executive Donald Walker said on Tuesday.

Walker declined to discuss details of the potential acquisition of Opel that would give one of the world's largest auto parts makers a stake in a carmaker. Magna has a nonbinding agreement for the deal.

"We do understand Magna is an auto parts company and Opel is a car company so if we complete this than we have to have a complete firewall between the two business units and that is under discussion right now," Walker said.

Dealing with the German pensions of the Opel workers is also among the many complex issues that must be resolved, Walker said in an interview with Reuters Television.

"There are all sorts of issues that have to be dealt with and that is one that has to be understood," Walker said.

Magna has been working to finalize a deal to take over GM's struggling European unit after reaching a preliminary agreement last month with GM and the German government.

While trying to cement an agreement with Magna, GM has also said it was open to discussions with other interested parties, including Beijing Automotive Industry Holding Corp (BAIC).

Analysts have said some 4 billion euros (in pension obligations for about 70,000 Opel employees could be a stumbling block in the transaction.

Magna and other auto parts suppliers have been pressured by production declines at automaker customers as auto sales have been pressured across the board, especially in North America and Western Europe.

As a large diversified auto parts supplier, Magna is looking at potential acquisitions that would add to its business and is fielding inquiries from automaker customers that need support to deal with failing suppliers, Walker said.

"We are seeing a lot of more reasonably priced opportunities for acquisitions," Walker said.

Walker said he expected a number of auto parts suppliers to fail under the economic downturn, which would force automakers to look for replacements to maintain production schedules.

"There is a lot of discussion about taking on extra work to support ongoing production," Walker said.

Production has slowed markedly in North America with GM cutting back significantly as it goes through its bankruptcy restructuring and Chrysler (FIA.MI) CBS.UL choosing to halt production from early May for its reorganization and sale.

"It's been painful, but in the next couple of months I would expect to see production levels start rising again and hopefully we can get back to profitability," Walker said.

(Reporting by Soyoung Kim and David Bailey; Editing by Brian Moss)