Magna International (MGA) 11 Feb 222021 Q4 Earnings call transcript

Company Profile

Participants

Louis Tonelli	VP of Investor Relations
Seetarama Kotagiri	CEO
Patrick McCann	EVP and CFO
Vincent Galifi	President
John Murphy	BofA Securities
Adam Jonas	Morgan Stanley
Itay Michaeli	Citigroup
Peter Sklar	BMO Capital Markets
Christopher McNally	Evercore ISI
Dan Levy	Credit Suisse
Mark Neville	Scotiabank
Mark Delaney	Goldman Sachs
Colin Langan	Wells Fargo
Shreyas Patil	Wolfe Research
Brian Johnson	Barclays
Michael Glen	Raymond James

Call transcript

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Operator

Greetings, and welcome to the Q4 and Year-End 2021 Results and 2022 Outlook.

During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. [Operator Instructions].

As a reminder, today's call is being recorded Friday, February 11, 2022.

to Investor conference Relations. like Tonelli, to would of VP I turn over the Louis Now Please ahead. go

Louis Tonelli

Thank you. outlook. Hello, call covering everyone, and welcome 'XX and to results our XXXX our our conference

Galifi of Joining are this a Board Directors our XXXX and me met press financial these. morning for McCann. our results well Swamy Vince release of financial today approved as Yesterday, and Kotagiri, outlook. our each Pat outlining as issued We

along section go the You'll all the website press slides our find quarterly call at release, webcast, updated that the and conference in today's presentation the of magna.com. with financial review Investor Relations our

press to our as Swamy. a Such we get over assumptions to and involve which results. before forward-looking included different the information performance certain our may we a highlights reminder, Please cover slide uncertainties disclaimer. our or the expressed actual materially I'll company's as statements. be cause and outlook; to reminder our our discussion also from it in of release today's legislation. pass will safe strategy. Please We'll today through complete And today implied statements results within Just commentary. those of or or This then statements this contain refer these to to financial meaning future refer related forward-looking 'XX started, our morning, lastly, for risks, may QX the provide and well deck harbor description the run is securities with in applicable that,

Seetarama Kotagiri

recap closely comment very by production. we notably, XXXX outlook. caused annual by with the plans. taking auto address turmoil and working We've XXXX, Once found few results on our our dominated of lack COVID. that chain again, our most of to been through challenging . the Thank busy XXXX, was you, results I'll to mitigate the was over manage days, everyone. disruptions severely business a Louis. semiconductor on through by and chips. impact Today, ourselves our was year impacted In last Good Board challenges supply morning, our global our customers availability industry the the the

not I'm about manage and excellence pleased our performance we businesses, be operational back winning with efforts I extremely financial sit through environment. team, happy yet is another testament a difficult results our While with launches we think or in the results whether when was people of and activities, XXXX, it our that operating the achieved. It new to I other

in collaboration we as production half each In through worse. second In strong severely of XXXX, again and globally, shutdowns half vehicle production availability the the XXXX, X a of vehicle weakening sequential experienced saw progressively the comes COVID-related of quarters execution 'XX. once of of chip impacted the first semi Our while was culture by production first rebound. the year became

fourth to production, but inefficiencies still the quarter the addition some in saw of decremental lower margins. higher-than-typical fourth schedules recovery global sequential quarter the of unpredictable XX% down our In drove production production were customers volumes The XXXX. driven from by

result cadence, of the $X.X sales a were As XXXX in of XX% of our billion this year-over-year. fourth down quarter

from quarter. our while the QX. by X.X%, However, in markets X.X% declined year-over-year sales EBIT margin to underlying organic X% increasing outperformed in

the for QX year in Our $XXX free cash at adjusted was $X.XX flow And $X.X EPS quarter. billion. was the ending million,

safe pandemic some employees and at Now, Keeping look highlights be top has priority. XXXX. continue to for throughout us been our will let the

named an on including and leveraging launched testing Building protocols our and our We inclusive globally tools awareness; and priorities: three We through and help workforce, the facilitating evolving and vaccination updating protect creating to employees. programs of focused health and been have safety remain several training key programs for cultivate the to recruiting development. recognized received, screening. we for have been facilitating during And has being among fifth bias employees a year many we of any new Magna sight the neutral to importance continue the awards Forbes education recognition. To year, our consecutive remove learning, operational help further culture to managed minimize in to recognition focus awards, excellence for innovation chain Last we committed should XXX on XXXX. Europe being working year-long to operational Last excellence. our ever North total. supply We This leaders while operations us America. carbon among our the We received XXXX highest World's disruptions. led customers And place of through globally we challenges XXXX. production diligently of never customer our and customer Employer by lose in Best European by industry and and in year, with

This me our let X%. comment market in by outlook in we outgrowth exceeded XXXX our anticipated on Now growth. initial last the outgrew year. We

and we that each Asia. driver major fact, significant outgrowth of achieved and we In new technologies have North regions: EV that enclosures. addressable launched battery systems Europe our in And markets, namely advanced America, assist eDrives, growing

our keep these driving come. years to We expect for areas growth product many to

ICON a the monitoring going into I year. This past Digital We core this We Radar, over includes the a years. would innovation number were announced touch innovation. OEM. demonstrated the few recently of system driver activities to for won CES Best new areas. Finally, awarded Award on for our our of commercialization like We production which in Innovation German-based a successful our business is

products. collaboration with time to our commitment continues. accelerate our We innovation market innovative a our to to continued growing also entities ecosystem And of help lastly, for expand to

over heard in it, did quarter. and CFO, the financials. the the do, year, I. He is the this we Pat? who pass both thank to to Pat McCann, to to did take through I'll will I new like continuing Instead, areas our us. last call be would increased with to investments statement I Vince a for future. before Over be here to I it Pat the for first us us for Don and will position mentor But years, Normally, Vince, and I past off many megatrend I've passing

Patrick McCann

safe Vince, who I happy has that staying be and is everyone. evident to as with I I'm supported immensely to thanking will good by CFO. like hope and years for of Swamy, would my everyone me helped and all me have I start It allow financials I version the included speaking new role. prepared full strategy. over on cover Vince returns-based Magna's the are aligned for be disciplined have time to and while a our healthy. you quarterly appendix. the do Swamy, Today, in shorter-than-usual Thanks, XXXX. of outlook our review approach results fully and financial and I'll is cover on our More to capital will fourth allocation. quarter detail our financial to more I morning, year

year. was both impacted 'XX in 'XX. significant impacted shutdowns, were particularly semi said, XXXX chip first and global light of global XXXX production by Swamy Overall, As COVID-related XXXX half the increased events by was the shortages. by vehicle affected production X% in only

rose X% Mainly an for sales over of production higher our increased organic X%, a as X% the to of adjusted consolidated weighted increase year-over-year. sales our year-over-year On the growth weighted rose. basis, a EPS and Our also margin compared global year. result market XX% driving a EBIT sales,

basis, had XX% declined sales in sales Europe quarter fourth in billion fourth billion XXXX. a declined to as XX%, result XX% North global quarter, were For sales, the QX of of and vehicle strong organic We XX% XXXX. Largely with compared adjusted X%. America, production fourth production of weighted in quarter relative sales Magna-weighted performance the a year-over-year declined and lower XXXX. $X.X compared EBIT the and outperforming result EPS Consolidated in year-over-year $XX.X the quarter production of XX% a respectively. by to reductions as China, light On QX from

past was principally informative reviewing as China the subsided up some QX XX%, degree. light driven of comparison by with and As Comparing a Europe production quarters, to couple production more QX sequential vehicle global XXXX, chip-related of shutdown is to results.

new to sales the up translation. partially mix by production higher program currency Our negative of and XX% were foreign offset programs, and due launch

All Higher QX Evergrande margin of sales. on past and to now higher These input to government XXXX, QX. fourth losses. to a of experienced in EBIT and EBIT sequential quarter The our quarter, I increased contracts factors: in number adjusted costs the by cash million, segments quarter earnings offset adjusted EBIT and on foreign quarter and $XXX increased increase of rose last will partially the sales, from from review provision $XXX X.X% with settlements. were increased flows incentives this $XX our received engineering commercial the exchange reflected million higher X.X% R&D in million Comparing our third activities. recorded transactional investment increases

capital. in million changes a of quarter XXXX, and operations from in $XXX fourth flow acquisition; an $XXX million assets; $XX to million private for $XXX the before million quarter in assets joint Investment public working the included in investments, increase we $XX small cash $XXX the activities intangibles; in was in fixed million $XX venture; a million million in other additional investments. equity and During capital in Free cash working finalize QX. $XXX LG-Magna and generated million and

to million confidence Board We in quarterly for financial also business. share, strategy. our dividend stated increase the per paid the dividends. and million $XXX our of our dividend reflecting in shares common our part and our $XXX our $X.XX collective yesterday, Growing repurchased X% is in of approved management's Board And outlook a

before to And our increased Swamy rate to pass a of will XX% an introductory average now, specifics comments going share growth outlook. our getting into have of the XXXX. at dividend We it back few for per I

Seetarama Kotagiri

At our our event investor growth. strategy for last articulated I go-forward April,

our May. It the our a opportunities. strengthen our going forward to at on operational excellence, I our go-forward leverage to megatrend on which in our the unlock I'm really you areas, unique our to mobility. leader to and details focus to of I'm event excited outlook, giving X-year We new remain track in progress with strategy about. today, investor industry look position in are to our reflects drive further But in strategy position look

our in areas, You're to be continue increase beyond outlook will period. and going we that investments to realized our investments megatrend see

in tailwinds and outlook, Specifically the see headwinds. we both

number content terms year's seeing are to of increase autonomy. contributing shortly. In a we opportunities sales in programs, are have and in business is awards outlook, growth. back an electrification tailwinds, launching last to new I to areas, and come that which of particularly we Related on megatrend will

contribute our auto expect environment initiatives margin we are our expected robust favorable dealer extending outlook low With to inventory and levels, the demand to period. through And excellence a current into improvement XXXX. operational production

business labor, In logistics inflationary nature cost in and of are as The energy, other and we to in supply term impacts vulnerable, relatively semiconductor short more expected to general, terms outlook, production. continued in areas vehicle impact input areas, also enduring. And could which in our facing be some remains being commodities, expect supply which chain such impact is constraints of others headwinds in 'XX. production our

the of which more primarily relative half We first result should of impact to negatively the a year first semiconductor second half. expect the results in availability, weaker operating in the as production significantly

how through and outlook. spite translate pressures of areas, continue key in already to confidence expect in does our sales We outlook in XX% period this financial inflationary and So XXXX to increased are our year booked. are our cost outlook. engineering of all in strong expected expand our we metrics? activities growth sales have each of input of In margins our megatrend About

increase engineering of in the expected million a our is of to growth in result an $XXX areas support Our customer to investments should investments recoveries. largely before Capital to annually megatrend increase spending about outlook. average also as

approach operating In performance and significant BEVs towards business to industry is our cash market. expected us strong, return investment. increased and particular, The from This bringing number invest to capital are an of to generation is powertrains. should for shift electrified further our free growth flow to Lastly, disciplined allow shareholders. OEMs a reflecting our to undergoing remain

And product have electrification been content that the some globe. launching significant an this on year vehicles majority time our in and Magna of fact, now for that for opportunity us. the are is, powertrain electric communicating across agnostic We has vast the

and the our back respective Pat. on around over the F-XXX in are to each in Just few, and that, about will to a NIO the LYRIQ, many Xpeng BMW well above content growth the pass of some $XXX With world sales around average about Lightning, have These name $XXX on I $X,XXX above contributing These it outlook. vehicles just smart that the on in vehicle content ESX. to Cadillac the our $X,XXX are launches on iX, we shown $X,XXX markets. are SUVs on the

Patrick McCann

Swamy. Thanks,

our outlook. Let me start with on the assumptions key

slightly pre-COVID. Our outlook is lower. XXXX. well each America And in of reflects key XXXX, increased relative two production also vehicle China largest production levels Europe, our North and to In below markets, in in our XXXX regions experienced volumes remain

expect reflects increased to through with reported our I weaker exchange euro outlook we impacts This 'XX, which outlook. going consolidated sales However, forward. will production recent a XXXX. in rates negatively relative our approximate start assume We our will rates.

grow X% our across by organic exchange, year certain to the content billion as higher production potentially and and sales by foreign consolidated $XX.X These is driven X% of to as average of expect basis, On partially by including net XX% and technologies of out offset $XX.X an to XXXX, to we a consolidated on new programs between as We high result vehicle expect sales grow growth growth, per on reaching to and production X% average billion. XXXX. portfolio. many out are per year dispositions. The end

organic to we expect XX% our average. Vehicles, sales XX% grow between Excluding and Complete on

next years significant from joint our a eDrive integrated new from expecting are in JV including ventures North in venture, the few seating venture joint e-powertrain over sales America. growth China In addition, joint and unconsolidated LG our we

consolidated are We be XXXX program in to Relative new offset engineering on from inefficiencies to on 'XX, XXXX margin then input awards higher and lower again to partially expect production to to and expected our by operational costs from capitalize unpredictable in margin excellence contribution production expand initiatives. OEM support 'XX. to and opportunities and schedules sales, our out higher benefits growing areas. megatrend investments These

by in driven expansion This higher not contribution application areas. through the additional to primarily segment operational will consolidated are the meaningful margin 'XX We driven a excellence also anticipated are in sales expect initiatives on we sales and same up that excellence margins we detail. impacting expect margins And In is step higher the our in in 'XX. and impacting XXXX initiatives. engineering sales, and lower largely of of Many factors time, run by out operational also megatrend segments. interest

in to included the questions appendix any are them. discuss happy we're they However, and on

I Next, strategy. financial cover to would of our of some like the highlights

strong capital years, been growth inorganic have capital organic with communicating to want the a would like allocation return consistent sheet, liquidity our ample balance and We now. innovation for to through these along in over spending We and opportunities I invest shareholders. maintain principles and reiterate to

couple normal last environment. years, Over spending of below of capital a the as our the been levels result has

As sales. we spending outlook the the required growth get in reflects our capital into period, to support

low billion 'XX. capital and expect remain spending for to $X.X be We XXXX to approximately relatively out

questions. $X summary, answer and many megatrend we free business to cash we strong generate happy fuel to strategy. car our return hope further investments through expect your the We go-forward We'll expand on about our with of particular growth to our go be growth including the May executing accelerate execute over attention. in capital your to next flow you to see cash Thanks forward elaborate future. to to In on in shareholders further acceleration and of solid We where X flow We invest for excellence, the support investor at years. will are totaling on our billion strategy. operational plan plans areas, our further free sales margins, grow

Operator

[Operator question we'll our it’s of on with Instructions]. America first John Merrill And line, the Murphy Mr. of with proceed Lynch. Bank

John Murphy

at 'XX And guys. growing 'XX sales. the like Pat, at morning, I welcome through question, A production. Good Slide essentially assumptions your from first your line which and production to XX is looks the XXXX in to with -- if your or Slide call. sales light right It XX, vehicle look largely midpoint

market what's driver? just the curious, going assembly it it's on outlook. Is you what's the But like growth there it just And So complete had away looks the like there? vehicle kind it largely. mix? -- key of fades in I I'm just Or seems above that your

Patrick McCann

Yes.

in of go -- to where back what are we expecting we were relative we you John, If XXXX, production. were sort flat to

growth of the Our is end at organic year the X. plus

is higher, point starting So thing. one

also for We to was expectation that like to year. average the time X% on our per frame X% said 'XX 'XX

has the our kind had of on impact in X% back Vehicles, the frame. time at 'XX overall Complete 'XX to impact at to per of growth, X% If the excluding you which we're look an year

growth impacting which our And period. no, significantly overall negatively here unconsolidated growing Complete not we're talking prime rate. over our about sales, certainly, Vehicles is of So is

John Murphy

the And investments. vehicle, Yes. AV EV Yes. really more this are think more mean, Magna spot even there those on you're and greater take lays on to and I your other question. are opportunity investment in on sweet where outsource a or more makes idea, just That you more even might as helps will, I capital the quoting of focusing EVs? their AVs of quite the incremental they systems, There's Class a as parts second the on any if business. I'm of parts and and for a which lot that dollar of seeing stampings, focus and if curious you bit. outside automakers A and vehicle going they and be to and more just this sense more

Seetarama Kotagiri

Good This Swamy. John. is morning,

capacity, perspective see capabilities significant at said, that that a cadence in the at through. address seen. here today, look of but sit you and well we well should don't are today terms to definitely, we positioned comes we from positioned But be yet, a like footprint is see we as and and activity, what the sourcing As of of you we that of capabilities, if we as look if piece. have be to shift But

John Murphy

as Or shifts is to at? get business sort question little that ultimate Got you're grow there tops same just even range? potential X.X%, mean, the X.X%, this margins? margin I on potentially 'XX, base. X.X% the of think the revenue I range. maybe what And as a the bit the higher lastly, higher time is It's then on over and on out apologize this you one more it. outlook, Magna X.X% as in mix You expecting

Patrick McCann

components John, think when so have about consider here, we margin the there's think I mix. we many to

year-over-year the one increases of out, 'XX. input costs do have increased. we in significant see we some the think go is cost changed input that's I thing When

period. the those I say, will stabilize, we through would outlook of go costs Some as

off. Some for drive but to in short will term. won't. which longer of reset labor whereas term, going seen is about them our a our When the the I been think to in cost, also labor, on investments a come areas, going some others degree we megatrend margins there's step-up think impact growth in to the We've

John Murphy

could industry just there. on sorry, although in better Bridge. Ambassador guys perspective Got up on do mean, what's any it's issues hiccup going disruption kind if you and shipping, Canadians, around you a because the I one it. more, I But any into able -- running you guys I And think be not mean, sneak just is that? you I'm are are work probably It's than will and on as New to trucking, a Yorker I have the with through? that a will through Or not work you that it's of

Seetarama Kotagiri

long areas think for is there it, I'm initial production constantly is had [Jeep] should say, work I term, adjusting, other, John. idle sure of of They're and But some example, see And to some the versus some schedules. now, kind production And through. monitoring the or impact -- we're we'll starting I on. facilities cut so in customers requirements. to have right as there we're -- the in OEM of the

it it that watching hope I So closely. we're resolved get will definitely quickly.

Operator

line Jonas Adam from We'll with Stanley. the next on Morgan the line question of our get

Adam Jonas

few customers in so compared significant your the to your are next guiding increases OEM many It's outlook over for really years. interesting is margin of balanced that

metals, Swamy, mean, you So I you concerned the and what's now? it's are most commodities, of right reality. a amongst -- concern the giving you commodities. where most highlighted dose particularly nice

Seetarama Kotagiri

the it's as bit, at mix think stuff. I little a you Adam, a look

commodities the a steel, resell, of are like of significant on Some portion we it.

in Some the have of of part resell. large market. it A we free also on resin

say that the on bit so especially through not, most aluminum market There's monitoring. going we at resins have of monitor. tiered also But commodities different one to to A how we and the indexed bunch is the closely of things suppliers fluctuating. significantly our we the as closely that But a is and would I to specialty are so than have key are is the And other. supply resale copper. on be look it rest, is of on we is going of managing little Some to the And manage polyethylene-based forth. be that the an are to program. important one and times, and thing

Adam Jonas

And then just a follow-up on Steyr.

anticipated out timing if regarding highly location? -- call very there? November. track Graz, launch is on And of decision wanted and or on or anything from a was perspective are there -- looked your you Was what contract have your that or American or to milestones this for You any manufacturing update plans curious North

Seetarama Kotagiri

both are the to For teams the comment. we would well, more anticipated progressing say, for launch, together working should specifics, right? OEM But I are well -- leave Adam, and I the

looking very at continue. like of the before, terms here. Graz, said In just In they various of I've footprint, American having footprint opportunities the North idea open the in to

America. I said, that enough visibility on the long a North though in to always looking I've of off there be volume. plan, have As have little even starts footprint product think forward at it the If we'll term, is lower a important bit in I visibility it's to think

Operator

Michaeli to our Itay from the Citigroup. go on line next We'll from question

Itay Michaeli

autonomy quantify vision. are beyond, on talk revenue could side? about mostly First maybe talk from XXXX. I the of power It kind on of kind this specifically you the the these solution Swamy megatrends. could about you're and in coming -- incremental of think, the I some you EV question, the hope -- quantify Maybe just sounds or into wanted I opportunities the like hoping of making investments for impact investing that's and to power year some where investments was you there. go year-over-year

Seetarama Kotagiri

Itay. Yes,

of said, perspective. about as an in investment the engineering talking you region investment that I from lot that is think, we're a

about, during sales, period, I say. to our 'XX talked $X the see And as think we a ADAS 'XX, to I we from at If XX% LG planned are or seeing a the XX-plus by And the we should joint area, percent about, the you CAGR range. talked even be plan look at XXXX in between look billion last look going electrification venture in period XX% the if to -- at are -- that managed we you we overall over things, we continue the side next the the CAGR. CAGR. now In of

So that we say we that and we not are all-wheel yield the platform going results, see starting drive. Specific drive, us, before, continue areas, I for would the have investments just forward. to like the made and technologies to eDrives, larger market addressable X-wheel said

at we Now, are looking all drives.

is that expanded market. addressable a So

software On on the line. capabilities. suite, continue blocks traction ADAS the the as Monitoring briefly our System, a further a program said, the in building OEM side, to we of that the have, also we and mentioned and product in going terms about I Driver compute production radar see we with and into sensor the German infusion also

Patrick McCann

the that we the think when thing should through investments in areas, gross expense. P&L portion talk engineering I you there's about And Itay, flows megatrend consider other as

The that's primarily you and -- other part pointed as segment, in out. P&V our that's

The segment, as we is investment form in of that's large battery enclosures. our making launch we're other BES capital and the in primarily

here of throughout investing the for that battery now We Michigan. to launch outlook in launching are the we're started So the Hummer period. be going recently enclosures

Itay Michaeli

outlook top vehicle hoping the versus between for all and we of the can I miss go apologize bridge just helpful. I That's line of a prior if kind was for it XXXX and and updated And I complete but assembly the as kind quick today the outlook margins through well? very that had you follow-up, before, did

Louis Tonelli

the in X had BMW be have XXXX, the If and would we year. that you case continues at to that would and look another -- the for of for there XXXX, most had Series we year, drive

So if in that 'XX. not into 'XX, program it's if it ends

Fisker that different Now the but accounting. program launches, there's we do have

you always and full cost is value-added kind The So basis. of accounting accounting. had have cost a full X Series a

so value-added price. is per program on much basis, and -- So unit the a a Fisker unit much higher lower unit price

So plant quite the even the significantly not though the in different, are that are volumes revenues but different.

Operator

next on our from Capital Peter with Markets. Sklar question BMO get line We'll the

Peter Sklar

showing with initial over the ventures, looking the I partnership from some coming guidance, HASCO. income plan a you're LG, equity the Just your joint of period. with of XXXX growth at take partnership lot these that's

So I'm there given be joint growth the is not I as of those but ramp income, build. would ventures surprised ramping periods revenue begin up, initial was that the equity to surprised at that

could a wondering flavor income if driving you just add on So little growth? what's the equity

Patrick McCann

Peter, it's Pat.

I revenues. out we are portion EV in get XXXX, programs lot lot When think launch consider is the joint spend those right, generating I heavily, look income, markets. a to growth you're have to programs in we're today early what you you what And equity coming ventures. at a a is the investing the when launched the of we from -- is to would consider, engineering where of these the large these of be will

lower with the it's in of sales to be So that margin generated. engineering combined a combination on going future, are application

Louis Tonelli

pretty ramping I has and sales up mean, joint the LG significantly. is already venture

program another Volkswagen next So and there's up there's investment ramp that year. continues there. HASCO last launched to program launches the year,

start to going sales. having it's higher So more

the higher. the a And -- a results in be much drive of as so would the change result there's sale

Peter Sklar

Okay.

recently, eDrive is, on I I'm was, drive. had press I it just question have how or a lost little Another you when week last platform it received awards on secondary the I where the think forget Volkswagen many providing issued the announced. was you've and you're Like release

just you Volkswagen you last are about eDrive that awards, could So review you is on as is is that? major time last where spoke, week, you eDrive of program part program? the recall and we that talked Maybe Or awards? I a fourth

Louis Tonelli

that. to Yes. do Peter, happy

the have first is The right. program Volkswagen talked You're program, before. about we that eDrive and

two the primary programs program, just year, and HASCO And eDrive I additional then as secondary next launching that be we second. another both were will have year, awarded that's include that drives. said, in We last

we four of currently. Lots have So conversations.

we're In looking a partnership this conversations And EVs. that's the all at additional on fact, in XX the bunch quotes and a last there's an do of acceleration over business. they for is And driver certainly, with focus LG there. the customers months,

Peter Sklar

eDrive that will And LG do Or partnership, for system? eDrive the the Okay. a joint is the components for of both? venture bit the Or system? entire

Louis Tonelli

It's Peter. both,

also it's you Japanese venture as but eDrive on components, responsible recall, joint side. the is X with or If any Tier they're responsible the for Korean -- customers, LG

Peter Sklar

just complete strong then in vehicle of assembly operating And pretty lastly, where the income. results terms on Okay. were

government you been have to those was development the if must what wondering You pretty called incentives. just related I'm to attributed they that them significant magnitude and partially research and what out? incentives

Patrick McCann

would similar here program you we're to $XX more to The it's Yes, way through that in because do and R&D Canada. what is little Peter, Austria, is used they're in about it than in amounts a covers range as well. the bit The see out-of-period EBIT. run million, significant credits, of basically number they structured

Operator

to our on of line get from Chris line next We'll the the with ISI. question McNally Evercore

Christopher McNally

talked costs? for shared talk majority margin on the Just -- Or the Vision in just things & with the follow-up a body. is and it that margin & Power of spend the Can you hit equally like engineering you about is On year-over-year? Vision, about question Power up 'XX. component

Louis Tonelli

Peter repeat you could Chris? question -- the sorry, So,

Christopher McNally

the to prices R&D, & that Power that Or are the in were spending increased to like we components, margin a is ADAS you hit? talked Yes. Is majority The order also for of about down the if Vision, things year-over-year headwind? higher rank and programs.

Seetarama Kotagiri

page, Chris, find what to to you're right the to get referring. trying Just

a... us give Just

Louis Tonelli

a I inflationary is what Vision, are big in margin the be input think of impacts engineering you spend And see XXXX. the to chunk of the at the through If you Power to coming going terms look big & in costs.

biggest that the drivers -- two the in 'XX. margin So of in those decrease are

Christopher McNally

next Obviously, normalize Okay. recovery steel body also through? quickly things raw talk Could pretty and scrap. ware, you about year. how materials you then steel flowing are have have obviously, just you And Perfect.

talk of Just tailwinds get the about range. some your that sort this typical X% margin plus back of there

Patrick McCann

segment, right, it's a steel side. story exterior Chris, about some think the When on primarily Hi, Pat. it's I the BES with resin you're

markets able covered tend Specifically resell being indexing steel have the we on via and resale steel, go to in primarily do benefit a are of or the market. we to programs, scrap together. Those

off coming bit recoveries delay steel the see or move a in whatnot. probably in So scrap quarterly tandem, future, maybe little will as we

margin driver biggest into the driven X.X% at our factor by other come stability 'XX, in when increasing think customers. it's higher the sales. is look production from expecting to schedules the And from we're the OEM you I back the really some

where recall, think So we driving capital-intensive have 'XX, that's big high that back, improvement. decrementals we return you if I of majority these some fairly did in you plants. And have the when

Christopher McNally

great. That's Okay.

Steyr. risk lower final then raws. question, on just my So on And

on to of but think clarify. I I been just Slide in I your XXX,XXX In you asked slides, have wanted for volumes unit it's a like think XX, a couple times, XXXX. the XXX,XXX basically to range

the American in As wonder because North far is have, with a on are is the you to capacity the over Or as to I and close make new -- years? we're know, no-go the go, trying I Is capacity where decision around number next I that opportunities you the of could there BMW getting off what Fisker rolling XXX,XXX. we think a guess I'm fill facility? you'd all point the couple

Seetarama Kotagiri

mix be what So on, depending take I would in around joint and and the Graz in capacity the XXX,XXX to number to requirements are venture similar Chris, roughly upon assembly and the paint the say, China. so would XXX,XXX in in and think I the I our again,

off, the at 'XX this starting the the we talked So I end fiscal BMW just into think of ramping 'XX. and rolls about and slowly year as

up have little continue comes So different as bit variants ramps many of a on OEMs. out, and and there fiscal to transitionary BMW is time and a we right, discussions

lumpy whole to bunch utilize the it's a the of It business. and through appropriately. conversations capacity we're having goes cycle, So a

Louis Tonelli

in. Fisker there. in And is is Fisker

capacity don't XX,XXX say maybe there's -- would I there. only you have So

program significantly came, more it big capacity. need would Another

Operator

Levy Your question Dan Credit line the on next from from Suisse.

Dan Levy

First, I margin revenue. guide for despite versus questions back the the 'XX wanted on to go is one of that the flat of 'XX the higher fact earlier

I think cost. mentioned you assume that's a capture just increased broader commodities I and for that input

you a just that. more on maybe can So elaborate bit

assuming are on or Or cost in all cost inflation XXXX? input And seeing What those costs? are What you are what's bucket? the How see mitigation? you about thinking are inflation, beyond? mitigation you then What those costs assuming did that sticky? for of cost much just we're if you what's XXXX? So in

Patrick McCann

Dan, it's Pat again.

in about cover have it commodities, as basis, deal, on the form primarily And about the I or going costs, I labor about higher as uptick various an we is of 'XX third-party -- copper, are such to go primarily parts input outside seeing And of seeing as energy a higher steel What think we're also as talk it's in items I that's aluminum. view we cost or the uptick, would have whatnot. if of think we're we into input costs. resins. than just whether think were increases And Europe. it's historical your net world. would seeing when obviously, resin, we 'XX have we primarily labor But correct. we're the more freight, costs, in those statement wage an So is we when in retentions costs, higher areas And costs. in we such also experiencing

to go if back that be XXXX, to $XX party to of commodities costs -- probably back million, about $XX range third is numbers, $XX about of and our the cost the if and uptick million $XX coming we primarily related would XXXX, primarily compared So about in labor. million you of from million, think input

the forward of roll we and million, the primarily. split uptick the that million into additional labor be As is about on balance in $XXX $XXX and commodities XXXX, would on range

Dan Levy

to... going then And

Patrick McCann

Labor the the when to sort catch start at Sorry, tend labor Dan, 'XX do is when 'XX them of come is on our look we're 'XX, -- that about being stick. first question, to flat looking And of to off. But uptick to you're you 'XX, at they going cost when margin from to expecting I off. commodities, just they part have think stickier. your want we you -- an to thinking

Louis Tonelli

But and period, in that's the a the uptick business we impacting short term. through in higher do engineering that

Dan Levy

Okay.

commodities or So the mitigation some you're the off, full commodities on correct? assuming to come of

Patrick McCann

-- numbers recoveries. the we But net some a we've have have assumed that in plan our we Yes, basis. Yes. on I pointed are out

Dan Levy

But some JV, the & then equity you question it's I XX% just Swamy, a it's on to compare comments it's you income CAGR. 'XX on because just LG see And it if up. I from profit the think, provide equity the the slight that like coming earlier underlying and Okay. appears just income Vision Power next and could mentioned uptick. Maybe is I 'XX,

So by is that just margin a getting a still not revenue, XXXX? it's you're reflection but the that steady-state

Louis Tonelli

get can't I venture, able think the control contribution, profitability the clearly, but we're say we'll not and heavy we the on XXXX. fair investing over we impact. like we're comment get don't Unfortunately, get to what the investment is. joint still and into in we're -- it's in to time, growth, we to that We mode sales

income, which We recoveries get one conservatively, ventures, in the also our pretty intend to of planning or from on that amount equity joint expect is have, of to customers. they conservative our get

So term. the that in impacting equity short income

Dan Levy

Okay. And a then could the maybe free just provide quick lastly, cash. just on comment you

than EBIT that. guiding to I should more But something increase higher flat that CapEx. a like is part to 'XX. the realize You're offset it slightly big below a of seems

some provide comments just could cash you maybe So free dynamics? the on

Patrick McCann

the I to you cash over I delta that significant range investment the CapEx, on it free put Yes, we're me pretty -- again, pass for in talking think perspective and just yes, profitability. So here. is and compared the when think to flow,

primarily enclosures, in well. to out, tools. battery you as think a number to about we're $XX if significant million a the and have you significant consider amount and be tag talk megatrend areas a would our the the on investment we there's this you seeing we're talked spending, capital capital when piece another to say of Magna go where other million increase $XX And we when capital, to it, is, and when it's number of guiding that about beginning customer-owned that plant So increase there's about

Louis Tonelli

so -- the that’s assets. in other That's

Operator

question next the with Scotia Mark Neville from on Our line Capital.

Mark Neville

to happening I the of correct? in So Fisker will but also down, BMW this, what's understand XXXX. Sales are I sort off sure make just to volumes back Vehicles? be that and Complete rolling you go Is accounting that's on want have in flat.

Louis Tonelli

rolls late off in the half BMW of 'XX, XXXX. second

Mark Neville

accounting different a is right there's Fisker, for And that Okay. too?

Louis Tonelli

lot basis. lower about last even Yes, the for of a -- we're a BMW we than the price rest That said, we programs, Series. with value-added our per unit Engineering levels what generating years. seen revenues, a accounting talked of also expecting down unit including over come X bit been lot from it year, on We've we've spending. high couple with that to a engineering little off were the and we're we is last of the are

Mark Neville

Okay.

or -- assume if accounting, we Fisker shouldn't sort of higher? value-add, the the wouldn't just be normally margin Given it's wouldn't

Louis Tonelli

a in through impacting in them cetera. few but than appendix in addition, goods that some lot still there margin the a a keeps higher. actually going are but Yes, of higher. we the just more are it are costs there. which factors that's included margin, are that line. And that the bit, It's some et highlighted the is is input in down in going There price, elements there's margin Fisker just of of unit that little that it's the there, Mix,

Mark Neville

Okay. terms pressures. Pat, in -- numbers of you mentioned you inflationary some -- showed some just

split. I you XXXX. missed for think million I the $XXX said

Patrick McCann

so a costs to labor. is third-party $XXX versus on would then commodities incremental net million or 'XX be $XX million be the just Yes, on it's primarily -- and split so $XXX million clear, basis and

Mark Neville

I'm Again, of structural. around, can what feels little I if just take, guess the what move sort appreciate steps curious more I labor energy? but commodities around Okay. a you any, and labor

do things what or So you the that? that of with push are sort deal of some can to through

Seetarama Kotagiri

that's and not EVs answer. We a continuous say, going within within it improvements with It's would -- and mix, ongoing an the continuing customers, operations. It's the our right? productivity one forward at I exercise is it. at VA, improvements look of Some to discussions looking

recovered new quotes it as of be some And we go the will in forward.

Mark Neville

Right. question. One last

curious around just Just to but in understand get no M&A, the I thoughts there's updated there? XXXX your comments outlook,

Seetarama Kotagiri

Yes.

said, right inorganic. look at right we try and at to be either geography, always the strategy and way And overall the approach we at the to look to I the organic is customer look like what go think I or inorganic. the that. at answer to do Then, happens what's product the

Vincent Galifi

Vince. Mark, it's

my initiatives of area of say more going this Swamy. kind on something to at call, looking overall, with time First I'm strategic

M&A On got do typically place. a has the only we've anything into that or right? contract build we We front, in outlook, our M&A not happened built in

do what's support in we're and to future right our the imagine, strength our strengthen and We've obviously, and product balance in of we customers. of opportunities, with So our as past. to a to the strength use cash And certainly, used bunch sheet. well going our expect use we to the you the shouldn't surprised how with I happening portfolio positioned, our strategic can continue things, look the overall approach if be overall them it flow, business. of balance in the we're you we our whole industry sheet at an have evolution to

Operator

on next our to go question Sachs. with We'll line from the Mark Goldman Delaney

Mark Delaney

auto trying looks given? consistent auto factor being it you align on conservatism OEM you The the above other with supply all driving pretty for chain your production? in guidance. how does outlook I'm are for the closely It any production outlook you're some the that How forecast issues? you're of to And more given with global IHS. hoping supplier a Tier of company's Xs bit can is elaborate

Louis Tonelli

our on a America global X% if Europe, 'XX, In think basis we're little North you at about growth versus look a I and is more think bit 'XX. outlook I aligned.

bit little look a conservative at to in If Europe. still at the you least America North 'XX, and reflection we're my IHS, relative

if they're we look at and at term, to our definitely mean, from what So ear short the what you from customers. our least the in I ground, hearing have their hearing forecasters, external we're groups

mean, I combination. So it's a

how collective know, a a guys then at the where are we guys look are That's we come in the it. are what you we of do expecting time, on We outlook we'll where ground and when right course, in and kind at We here with up to have doing. a our put analyst view you roll others finish stake plans. point of

Mark Delaney

development And is the bringing recently. question second helpful. company the you of incorporate into more my and into how IP you to That's and company an a then Ride, that, it. that did plan relatively the was Magna assets on talk Got the on bit acquisition Maybe acquisition Optimus it can overall?

Seetarama Kotagiri

we we'll our on ecosystem so a to terms to this general. to we acquisition, few will it we've about to areas welcome capabilities continuing piece And the on function, in had XXX and with product the and of have Not -- the continue and area and there, It's the as the look based adds maintain things general we to talent, commenting in we're to the what knowledge specific. at a in on. of add strategy, had specifically in development And ADAS really IP, doing the foundation in the different continue rich employees of Mark, in so talked but and software in the the software they strengthen software economic ADAS institutions Boston. that done grow would about depth region. just office a and feature,

Operator

Langan from our Colin on get from line we'll Fargo. the next Wells And question

Colin Langan

to I'm increase are a heading the little been. $XXX steel? million, a or is going of components the direction has not if from million in big if by What $XX steel $XXX cost particularly million downward it's increase surprised that commodity

Patrick McCann

Colin, Pat Hi, again. it's

few the Obviously, items. resin a have less we when off the indexing increase, I on major So resale of program. resins, I've commodity about much covered think you think a program or

Just product -- given of it's to harder product, harder against. a the hedge that's the nature a

So resin is obviously a big part of it.

look well well lot in a form input What that to seeing some bit input which that's surcharges, of are is of is part costs, supply We're Europe we're as flowing like harder lot little -- big when base as seeing in the of energy other control. through The the of at the a energy they're we and through. a costs. on the coming

year. if in QX steel, going contract of regarding to your think I lock towards you the value. Really that understand when of since coming been steadily off and and a pretty drive have lot timing steel, prices last of is end about Specifically steel of you the

the when a steel mills really dealing contracts, of in with basis. and on negotiation when middle. you're So and lock a in we're it's pricing you a those the customers year-over-year bit And your three-party drives the

Louis Tonelli

there kind a well. as Yes, that's little sales down the scrap of baked into are prices and coming in as well,

Colin Langan

look growth market And seems underperforming color out are your And just at -- I'm right? look XX% up outlook to and of And market when geographic 'XX and 'XX the market two, is that XX%. mix assembly, the if year. going dragging growth this relative is an you're Europe, down? at America underperforming growth; and you platforms year? -- then with take for Is what with Okay. be sort of What any It I to you I over this drag like assuming platform up like benefit? North that that something when sort over coming some on to that actually

Louis Tonelli

rates. there's of think the -- any were a I thing. kind year, And last we for don't growth particular give same our I Well, we think range thinking

we But growth the go]. kind higher. had let flat in business the that's and [Crystal plus entire So still end We started the position. year that got up the driving period. have excluding it's to close X%, mix so of base the is we just think We've the of programs we Steyr, in also

sales. So that impacting did we've which overall also got is we XXXX, in a disposition

Colin Langan

Power Okay. seems That the in growth in And year-over-year. & one Vision? to anything particular lowest have

Louis Tonelli

strong had particular, really Power last over growth in the & years. couple Vision, market of

are X% We the and over year. X% market last XXXX in

the going isn't And mix of programs established high it the in grow certainly And & businesses depends Power is Vision market. than base year, always have just that pretty the are so a So to in there. it and on faster business. just we

Operator

We'll on Wolfe is Rod the Lache from get question Research. our line from next

Shreyas Patil

on is Rod. for This Shreyas

that & up Just question. Vision Power on following

of it to So elements X%. XX% market eDrive. obviously through you revenues lot consolidated And The X% of talked and ADAS and secular the has the business up growth about up a is like XXXX.

part next bit and will So you are lot growing But years of realize outgrowth. talk grow slower there that few business And a the I expect of shrink rapidly. you that the Vision a over parts & of is about? business JV Power little maybe the these even can

Seetarama Kotagiri

business in X-wheel -- drive of and transmission and mechatronics combination it's a Power powertrain, all-wheel, the And we the the our mirrors, The & eDrives. lighting, Vision have has ADAS.

the of about So fast, market. growing as with there's of rest are some which we areas of talked the kind the

stability, at of each look are areas. gives We lines. stable the cannot have very things as for years, which specifically runway those Some other them are a the and as next long product growing not XX but the of the much

grow the For at example, the that. the the system. and combination market. has mirrors that the But mirrors, looking to electronics vehicle with monitoring are in we driver continue of Every

a out turning line. new product be to that's So

Some really product goes can't lines each evolves, put specific than you evolve And So things. think will a a one the faster on, number as other. on of these It's it mix. I time right?

Louis Tonelli

they're in growth the particular. due is and unconsolidated group joint second, sales LG venture the not HASCO venture fastest & the joint to And Power right, seeing Vision in

Shreyas Patil

you then spending growing mentioned running $XXX million megatrend is XXXX. that engineering is engineering And are what Okay. million for XXXX? spending you $XXX was spending to 'XX? What -- in in assuming And

Seetarama Kotagiri

average about numbers talking period. annual the planned We're for

it's numbers, would $XXX about say annual I average increase just now. to the as period So the from million average a if you last at look an planned

Louis Tonelli

And recoveries That's gross Right. before spend. ups. and mark that's

Seetarama Kotagiri

Yes.

Shreyas Patil

Okay.

just you're up XXXX be basically, it So want in saying to make sure... I million $XXX versus would 'XX? the that billion $X.X by to

Seetarama Kotagiri

over $XXX on on we're about on that side that an period $XXX over the uptick to growth now million in expecting average -- on there's the spend. last average growth million No, we're -- saying period. X-year our outlook And about

Operator

We'll the line Johnson from get Barclays. next to with on the of Brian our question line

Brian Johnson

a picture bigger kind ask of to want one. I

a large expensive Aptiv, software and competitors is fickly considered large industry, One role-model your of that made recently acquisitions.

Vince chance to to which, role help acquisitions, common at multi-industry about So software How bit. a in thinking been have get need -- you for the there? and potentially a for maybe talk the there's of you Magna very and course, of are space overall

Seetarama Kotagiri

Yes.

vehicle such a going at is application, true the and And define forward. capabilities I think different that in will different areas. software large a product sure, software under and is put look part Brian, broad it's what But of topic, umbrella. wide if a for Software you it you said is the

what continue whether it's it's does towards to statement, play, overall and role whether mechatronics, software look ADAS or powertrain so that it's it on. and Given we at whether

to the or what the continue did architecture base Fisker each like specific So whether some with software application business. therefore, investments, of that. our At areas we organic level, we tire at the of capabilities complement inorganic with look to there are. or of And are the a electrical

add to of vehicle right? we to Magna, to continue one what the I continue the vehicle think the in look unique capability, is We view at that holistic going be, to can which and and it. things I think of So model and of system think role at integrate we is whole right? actually considered that's should be each So how means, how we holistically what look a

Brian Johnson

you focus that thinking Or expertise? or to does the stack? applications where you your software domains across wanted mean And give about software really want to you are specific

Seetarama Kotagiri

vehicle the what one take We’ll also, -- is We And And on develops question. at continue of and on them. versus suppliers vehicle that. a evolving, what that portfolio, track will viewpoint continue system all will domain-specificity OEMs we have at So domains take more given full look have, we to to we have and full given believe engineering to our we that the stack we how right? the have given engineering look and manufacturing. our

Operator

of proceed from And final from Michael with our we'll the line Certainly. Raymond question James. Glen

Michael Glen

on You how different will you the comment just bit XH, on guidance a made more be we're provide XH clarity periods regarding Can this two little like XXXX the modeling dynamic. as the the out?

Louis Tonelli

has first the as overall to provide a half. have chips stronger the going at don't going to guidance, see look provide skew -- quarterly don't second mean, I -- the the definitely to versus to we normally numbers, is impact what is half We but have of you

Michael Glen

was coming kind at of what like was at was in of well you end Because ahead the at Okay. and day QX, the out forecasting. $X.XX EPS, that came of consensus

a QX? you you expecting are pressure more it Does place? -- different what little get starts QX to little take in in is a versus So saw QX something there that in

Louis Tonelli

earnings say, not to sort get of margins just QX. trying Yes. provide the don't going to let's versus of We're that details from, We outlook. walk the into QX in

the the volumes the the So the first details margins. expect We like first direction get to the or quarter second -- into half. versus more I on in what said, in it's more of the half related we can't half is first

Michael Glen

some And where thoughts Okay. you in would some with on given is, cash thoughts the on proceed the flow just outlook -- buyback free how XXXX?

Patrick McCann

time. we point Mike, do at an XX% we're our where up the have of in open able shares to buy any NCIB

did In the active million. $XXX the market. quarter We purchase just have in past, been we

I inorganically. about is, strategy, financial going liquidity think are #X I organically, buyback, is turn with grow it continue could opportunities going off. business consistent to share the When share be with to what's we the if buyback. it's the not the about nice our or And we're our our is which priority think buyback there, to

change significant, and going strategy we we do an acquisitions going turn think When forward. that it the off opportunity have if can up off So we're I to and is it turned comes looked we that not past. have that in at we have

Vincent Galifi

Yes, Michael, Vince. it's

strategy part it talked the excess got have kind of of off look about, enough over pretty there's We the -- opportunities flexibility that we've by on of liquidity. that to make that in and that. kind that over look the and how I our changed. we But area that you've strategy to we as leverage mean ratio. with been the buyback macroeconomic we think return on and hasn't turned we add years, Pat sure situation demonstrated liquidity, And at the time shareholders way buybacks. of capital depending to extent evolve at look we've at environment. I Just consistent I've the to this been to the and We see, it's got we'll

Operator

it turn you. I'll questions. to further no are There back

Seetarama Kotagiri

in. challenges years industry Thank still you. had continue production X know I and persist. Thanks, environment have we to with everyone, straight difficult for listening

confident Stay to and investor However, in business the value the you our our executing rest day. flow generate look or cash and in we create on and at stay for May. our We seeing safe, of to focused of and all significant free event ability strength remain in model your grow go-forward many shareholders. of earnings our our healthy and to enjoy stay Detroit forward strategy long-term

Operator

much, you, you and participation. conference for very does today. thank Thanks That the conclude everyone. your We thank

day your everyone. lines. You may good a Have disconnect

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