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Hydro to sell car-parts business to bolster profit

Norsk Hydro ASA, the world's fourth- largest aluminum producer, plans to sell its car-parts business to increase profit and focus on production of primary aluminum.

The unit, which makes metal parts for automobiles, has been losing money as increased competition from Japanese carmakers curbs earnings at General Motors Corp. and other Norsk Hydro clients, the Oslo-based company said in a statement. It has two main operations, known as structures and casting. “There will be different parties interested in buying the two different parts,” Thomas Knutzen, a spokesman at Norsk Hydro, said in an interview today. “We've come furthest in the process of finding a buyer for casting.” Hydro said in December it might get out of the car-parts business to help reduce its exposure to metal components markets. Decreasing margins for car makers have prompted companies such as Ford Motor Co. to buy products made from cheaper metals and materials, hurting profit at Hydro's automotive structures business, the Norwegian company said. “Hydro has not been able to ensure satisfactory profitability” for the structures operations, it said. “The castings business unit is healthy but should be further developed by an owner that is better positioned to succeed in the competitive auto industry.

” The structures unit employs about 1,650 people in countries including Norway, Denmark, France, the UK the US and Sweden, Knutzen said. It makes products such as aluminum bumper beams and crash management systems for cars. The casting business has about 2,000 employees in places including Germany, Austria, Hungary and Mexico. The unit makes cast aluminum engine blocks and cylinder heads. Hydro hasn't set a deadline for selling the automotive business, Knutzen said. The company may close down its automotive plants if it fails to sell them, he said. Knutzen declined to give a value for the business. Hydro's automotive unit had an operating loss of 136 million krone ($21.4 million) in the 3Q, compared with a loss of 60 million krone a year earlier. Operating profit at Hydro's entire aluminum business almost doubled to 1.66 billion krone in the quarter from 842 million krone, mainly because of increases in the price of the metal. Shares of Norsk Hydro, which is also Norway's second-largest oil company, rose 0.2% to 158.25 kroner at 10:37 a.m. today in Oslo. (Bloomberg)