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Magna announces second quarter and year to date results
Posted by: gurufocus (IP Logged)
Date: August 7, 2009 04:15AM

Press Release: Magna announces second quarter and year to date results

AURORA, ON, Aug. 7 /PRNewswire-FirstCall/ - Magna International Inc. (TSX: MG.A; NYSE: MGA) today reported financial results for the second quarter and six months ended June 30, 2009.

-------------------------------------------------------------------------
                                     THREE MONTHS ENDED     SIX MONTHS ENDED
                                           JUNE 30,              JUNE 30,
                                  ---------------------- --------------------
                                       2009       2008       2009       2008
                                       ----       ----       ----       ----

    Sales                         $ 3,705(2) $   6,713  $   7,279  $  13,335

    Operating (loss) income       $    (237) $     319  $    (467) $     605

    Net (loss) income             $    (205) $     227  $    (405) $     434

    Diluted (loss) earnings per
     share                        $   (1.83) $    1.98  $   (3.62) $    3.75
    -------------------------------------------------------------------------
    All results are reported in millions of U.S. dollars, except per share
    figures, which are in U.S. dollars.
    -------------------------------------------------------------------------

    THREE MONTHS ENDED JUNE 30, 2009
    --------------------------------

During the second quarter of 2009, vehicle production declined 49% to 1.8 million units in North America and 28% to 3.1 million units in Europe, each compared to the second quarter of 2008.

Also during the second quarter of 2009, our North American and European average dollar content per vehicle decreased 10% and 7% respectively, each compared to the second quarter of 2008.

Complete vehicle assembly sales decreased 60% to $423 million for the second quarter of 2009 compared to $1.1 billion for the second quarter of 2008, while complete vehicle assembly volumes declined 65% to approximately 14,100 units.

Substantially as a result of the significant declines in vehicle production in North America and Europe, lower average dollar content per vehicle in these two markets, and decreases in assembly sales and tooling, engineering and other sales, our total sales decreased 45% to $3.7 billion for the second quarter of 2009 as compared to $6.7 billion for the second quarter of 2008.

During the second quarter of 2009, operating loss was $237 million, net loss was $205 million and diluted loss per share was $1.83, decreases of $556 million, $432 million and $3.81, respectively, each compared to the second quarter of 2008.

During the second quarter ended June 30, 2009, we generated cash from operations before changes in non-cash operating assets and liabilities of $87 million, and invested $55 million in non-cash operating assets and liabilities. Total investment activities for the second quarter of 2009 were $273 million, including $150 million in fixed asset additions, $39 million to purchase subsidiaries and an $84 million increase in investments and other assets.

SIX MONTHS ENDED JUNE 30, 2009
    ------------------------------

During the six months ended June 30, 2009, vehicle production declined 50% to 3.5 million units in North America and 34% to 5.6 million units in Europe, each compared to the first six months of 2008.

Also during the first six months of 2009, our North American and European average dollar content per vehicle decreased 3% and 5% respectively, each compared to the first six months of 2008.

Complete vehicle assembly sales decreased 61% to $824 million for the six months ended June 30, 2009 compared to $2.1 billion for the six months ended June 30, 2008, while complete vehicle assembly volumes declined 69% to approximately 26,100.

As a result of the significant declines in vehicle production in North America and Europe, lower average dollar content per vehicle in these two markets, and decreases in Rest of World sales, assembly sales and tooling, engineering and other sales, our total sales decreased 45% to $7.3 billion for the six months ended June 30, 2009 as compared to $13.3 billion for the six months ended June 30, 2008.

During the six months ended June 30, 2009, operating loss was $467 million, net loss was $405 million and diluted loss per share was $3.62, decreases of $1.1 billion, $839 million and $7.37, respectively, each compared to the first six months of 2008.

During the six months ended June 30, 2009, we generated cash from operations before changes in non-cash operating assets and liabilities of $96 million, and invested $107 million in non-cash operating assets and liabilities. Total investment activities for the first six months of 2009 were $391 million, including $246 million in fixed asset additions, $39 million to purchase subsidiaries, and a $106 million increase in investments and other assets.

A more detailed discussion of our consolidated financial results for the second quarter and six months ended June 30, 2009 is contained in the Management\'s Discussion and Analysis of Results of Operations and Financial Position, and the unaudited interim consolidated financial statements and notes thereto, which are attached to this Press Release.

We are the most diversified global automotive supplier. We design, develop and manufacture technologically advanced automotive systems, assemblies, modules and components, and engineer and assemble complete vehicles, primarily for sale to original equipment manufacturers ("OEMs") of cars and light trucks. Our capabilities include the design, engineering, testing and manufacture of automotive interior systems; seating systems; closure systems; body and chassis systems; vision systems; electronic systems; exterior systems; powertrain systems; roof systems; as well as complete vehicle engineering and assembly.

We have approximately 71,000 employees in 247 manufacturing operations and 86 product development and engineering centres in 25 countries.

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    We will hold a conference call for interested analysts and shareholders
    to discuss our second quarter results on Friday, August 7, 2009 at
    8:30 a.m. EDT. The conference call will be chaired by Vincent J. Galifi,
    Executive Vice-President and Chief Financial Officer. The number to use
    for this call is 1-800-909-4147. The number for overseas callers is
    1-212-231-2911. Please call in 10 minutes prior to the call. We will also
    webcast the conference call at www.magna.com. The slide presentation
    accompanying the conference call will be available on our website Friday
    morning prior to the call.

    For further information, please contact Louis Tonelli, Vice-President,
    Investor Relations at 905-726-7035.

    For teleconferencing questions, please contact Karin Kaminski at 905-726-
    7103.
    -------------------------------------------------------------------------

    FORWARD-LOOKING STATEMENTS
    --------------------------

The previous discussion may contain statements that, to the extent that they are not recitations of historical fact, constitute "forward-looking statements" within the meaning of applicable securities legislation. Forward-looking statements may include financial and other projections, as well as statements regarding our future plans, objectives or economic performance, or the assumptions underlying any of the foregoing. We use words such as "may", "would", "could", "will", "likely", "expect", "anticipate", "believe", "intend", "plan", "forecast", "project", "estimate" and similar expressions to identify forward-looking statements. Any such forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks, assumptions and uncertainties, including, without limitation: the potential for an extended global recession, including its impact on our liquidity; the persistence of low production volumes and sales levels; restructuring of the global automotive industry and the impact on the financial condition and credit worthiness of some of our OEM customers, including the potential that such customers may not make, or may seek to delay or reduce, payments owed to us; the financial distress of some of our suppliers and the risk of their insolvency, bankruptcy or financial restructuring; restructuring and/or downsizing costs related to the rationalization of some of our operations; impairment charges; shifts in technology; our ability to successfully grow our sales to non-traditional customers; a reduction in the production volumes of certain vehicles, such as certain light trucks; our dependence on outsourcing by our customers; risks of conducting business in foreign countries, including Russia, India and China; our ability to quickly shift our manufacturing footprint to take advantage of lower cost manufacturing opportunities; the termination or non-renewal by our customers of any material contracts; fluctuations in relative currency values; our ability to successfully identify, complete and integrate acquisitions; our proposed purchase of an equity stake in Opel and the potential impact of an ownership stake in an OEM; the continued exertion of pricing pressures by our customers and our ability to offset price concessions demanded by our customers; the impact of government financial intervention in the automotive industry; disruptions in the capital and credit markets; warranty and recall costs; product liability claims in excess of our insurance coverage; changes in our mix of earnings between jurisdictions with lower tax rates and those with higher tax rates, as well as our ability to fully benefit tax losses; other potential tax exposures; legal claims against us; work stoppages and labour relations disputes; changes in laws and governmental regulations; costs associated with compliance with environmental laws and regulations; potential conflicts of interest involving our indirect controlling shareholder, the Stronach Trust; and other factors set out in our Annual Information Form filed with securities commissions in Canada and our annual report on Form 40-F filed with the United States Securities and Exchange Commission, and subsequent filings. In evaluating forward-looking statements, readers should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by such forward-looking statements. Unless otherwise required by applicable securities laws, we do not intend, nor do we undertake any obligation, to update or revise any forward-looking statements to reflect subsequent information, events, results or circumstances or otherwise.

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    For further information about Magna, please see our website at
    www.magna.com. Copies of financial data and other publicly filed
    documents are available through the internet on the Canadian Securities
    Administrators\' System for Electronic Document Analysis and Retrieval
    (SEDAR) which can be accessed at www.sedar.com and on the United States
    Securities and Exchange Commission\'s Electronic Data Gathering, Analysis
    and Retrieval System (EDGAR) which can be accessed at www.sec.gov.
    -------------------------------------------------------------------------

    MAGNA INTERNATIONAL INC.
    Management\'s Discussion and Analysis of Results of Operations and
    Financial Position
    -------------------------------------------------------------------------

All amounts in this Management\'s Discussion and Analysis of Results of Operations and Financial Position ("MD A") are in U.S. dollars and all tabular amounts are in millions of U.S. dollars, except per share figures and average dollar content per vehicle, which are in U.S. dollars, unless otherwise noted. When we use the terms "we", "us", "our" or "Magna", we are referring to Magna International Inc. and its subsidiaries and jointly controlled entities, unless the context otherwise requires.

This MD A should be read in conjunction with the unaudited interim consolidated financial statements for the three months and six months ended June 30, 2009 included in this Press Release, and the audited consolidated financial statements and MD A for the year ended December 31, 2008 included in our 2008 Annual Report to Shareholders. The unaudited interim consolidated financial statements for the three months and six months ended June 30, 2009 have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") with respect to the preparation of interim financial information and the audited consolidated financial statements for the year ended December 31, 2008 have been prepared in accordance with Canadian GAAP.

This MD A has been prepared as at August 6, 2009.

OVERVIEW
    -------------------------------------------------------------------------

We are the most diversified global automotive supplier. We design, develop and manufacture technologically advanced automotive systems, assemblies, modules and components, and engineer and assemble complete vehicles, primarily for sale to original equipment manufacturers ("OEMs") of cars and light trucks. Our capabilities include the design, engineering, testing and manufacture of automotive interior systems; seating systems; closure systems; body and chassis systems; vision systems; electronic systems; exterior systems; powertrain systems; roof systems; as well as complete vehicle engineering and assembly. We follow a corporate policy of functional and operational decentralization, pursuant to which we conduct our operations through divisions, each of which is an autonomous business unit operating within pre-determined guidelines. As at June 30, 2009, we had 247 manufacturing divisions and 86 product development, engineering and sales centres in 25 countries.

Our operations are segmented on a geographic basis between North America, Europe and Rest of World (primarily Asia, South America and Africa). A Co-Chief Executive Officer heads management in each of our two primary markets, North America and Europe. The role of the North American and European management teams is to manage our interests to ensure a coordinated effort across our different capabilities. In addition to maintaining key customer, supplier and government contacts in their respective markets, our regional management teams centrally manage key aspects of our operations while permitting our divisions enough flexibility through our decentralized structure to foster an entrepreneurial environment.

HIGHLIGHTS
    -------------------------------------------------------------------------

The second quarter of 2009 was another challenging period for Magna, particularly in North America. Vehicle production in North America declined 49% compared to the second quarter of 2008, and increased only modestly compared to the depressed production levels in the first quarter of 2009. Continued weak automotive sales and high dealer inventories for many vehicles were largely responsible for the significant year-over-year decline in vehicle production. In addition, during the second quarter of 2009, both General Motors and Chrysler (our largest and fourth largest customers, respectively, based on 2008 sales) filed for bankruptcy protection in the United States. Chrysler substantially ceased its vehicle production for the duration of the period it was under bankruptcy protection and, consequently, Chrysler\'s North American vehicle production in the second quarter of 2009 declined 84% as compared to the second quarter of 2008. Although General Motors did not cease operations at all of its North American vehicle assembly facilities while under bankruptcy protection, a number of its facilities were shut down for extended periods of time, leading to a 53% decline in General Motors vehicle production in the second quarter of 2009 as compared to the second quarter of 2008.

European vehicle production for the second quarter of 2009 declined 28% compared to the second quarter of 2008, although it improved 21% from the first quarter of 2009. Vehicle "scrappage" programs in effect this year in a number of European countries have benefitted European automotive sales and contributed in large part to the quarterly improvement in European vehicle production from the first quarter to the second quarter of 2009. Recently, the United States implemented the Car Allowance Rebate System ("CARS"), an incentive program effective July 24, 2009 (for vehicles purchased on or after July 1, 2009), which appears to be stimulating sales of new vehicles in the United States.

The difficult automotive environment, particularly in North America, adversely impacted our financial results for the second quarter of 2009. Our total sales decreased by 45% for the second quarter of 2009 as compared to the second quarter of 2008 as a result of: the significant declines in vehicle production in our two principal markets; a 60% decrease in complete vehicle assembly sales; and a 16% decrease in tooling and other sales. Operating income for the second quarter of 2009 decreased $556 million to a loss of $237 million, from operating income of $319 million in the second quarter of 2008.

Despite the significant year-over-year declines in sales and operating income we improved our financial results, excluding unusual items, from the first quarter of 2009 to the second quarter of 2009. While total sales in the second quarter of 2009 increased only $131 million from the first quarter of 2009, we reduced our operating loss, excluding unusual items, by $48 million. Second quarter 2009 financial results benefitted from the higher sequential European automotive production, continued restructuring activities, the implementation of additional cost-saving measures, and recent acquisitions, all relative to the first quarter of 2009.

New Chrysler and General Motors companies were formed in June and July of this year, respectively, in connection with the bankruptcies of these OEMs, and the continuing operations of these new companies are no longer subject to bankruptcy protection. As a result of the U.S. Administration\'s efforts to protect the automotive supply base in the bankruptcy process, we were able to avoid a significant adverse impact on our profitability and financial condition.

There appear to be signs of improvement in certain key automotive markets. Recent U.S. monthly sales rates appear to have stabilized, with July\'s U.S. auto sales rate being the highest thus far in 2009, driven in part by the CARS incentive program. North American dealer inventories have declined, and are now below long-term average levels, while Western European auto sales have been improving in recent months. OEM production schedules in North America and Europe, while still low by recent historical standards, point to increases in the second half of 2009, compared to the first half of 2009.

We have taken steps to further improve our competitive position. In the second quarter of 2009, we secured a significant amount of takeover business, in addition to the amount awarded to us in the first quarter of 2009. We continue to make selective acquisitions, such as Cadence Innovation s.r.o, located primarily in the Czech Republic ("Cadence"), and several facilities in Mexico and the U.S. from Meridian Automotive Systems Inc. ("Meridian"). We also continue to restructure our operations in our traditional markets to right-size our capacity. In addition to reduced discretionary spending, we have initiated a number of cost saving actions, including employee reductions, short work week schedules, reduced bonuses, voluntary wage reductions and benefit plan changes. Some of these actions began to benefit our operating results in the second quarter of 2009, while others will impact results in future quarters.

Our strong financial position allows us to continue to invest in innovation. In particular, over the past few years, we have been investing to expand our capabilities and footprint in the electronics area. We see electronics content, particularly in the area of driver assistance systems, as an area of future growth for the automotive industry and for Magna. However, further investments are required in the coming years before we generate appropriate returns from these investments. In the meantime, we expect our electronics investments to continue to negatively impact our earnings, as such investments did in the second quarter of 2009.

More recently, we have been investing to develop our component, system and integration capabilities in the growing hybrid/electric vehicle market. This market is becoming more significant globally each year, and certain long-term industry forecasts indicate considerable future growth. We are developing capabilities across a number of areas/systems that are unique to hybrid/electric vehicles, including motors and controllers, inverters, converters, chargers, transfer cases and electric pumps. However, additional investments are also required in this area, and we expect our continued investments to negatively impact our earnings in the near term, as such investments did in the second quarter of 2009.

Last month we announced that, together with the Savings Bank of the Russian Federation ("Sberbank"), we jointly submitted a revised offer to acquire a 55% interest in Adam Opel GmbH ("Opel") as part of a proposed solution that is intended to assure the long-term viability of Opel. Under the offer, the acquired 55% interest in Opel would be owned by a 50:50 Magna/Sberbank consortium (the "Consortium"), with General Motors Company ("General Motors") retaining a 35% interest and Opel employees acquiring 10% as part of a new labour framework. The offer was made in response to a request by General Motors for final offers regarding Opel. The offer contemplates a total equity investment by the Consortium of (euro)500 million over time.

The Opel Trust, whose Advisory Board includes two representatives of the German government and two representatives of General Motors, owns 65% of Opel and is expected to review the submitted offers and supervise the sale process.

If the offer is successful, any transaction between the Consortium and General Motors would be subject to finalization of definitive agreements and other conditions, including government-backed financing. Therefore, there is no assurance at this time that any transaction will result from the current involvement of Magna and Sberbank.

If the Consortium is successful in completing the acquisition, Magna will put in place appropriate "firewalls" to ensure that its current business will operate independently from Opel.

FINANCIAL RESULTS SUMMARY
    -------------------------------------------------------------------------

During the second quarter of 2009, we posted sales of $3.7 billion, a decrease of 45% from the second quarter of 2008. This lower sales level was a result of decreases in our North American and European production sales, complete vehicle assembly sales and tooling, engineering and other sales offset in part by increases in our Rest of World production sales. Comparing the second quarter of 2009 to the second quarter of 2008:

-   North American average dollar content per vehicle decreased 10%,
        while vehicle production declined 49%;
    -   European average dollar content per vehicle decreased 7%, while
        vehicle production declined 28%; and
    -   Complete vehicle assembly sales decreased 60% to $423 million from
        $1,054 million and complete vehicle assembly volumes declined 65%.

During the second quarter of 2009, we incurred an operating loss of $237 million compared to operating income of $319 million for the second quarter of 2008. Excluding the unusual items recorded in the second quarters of 2009 and 2008, as discussed in the "Unusual Items" section, the $510 million decrease in operating income was substantially due to decreased margin earned on reduced sales as a result of significantly lower vehicle production volumes, in particular at Chrysler and General Motors. In addition, the remaining decrease in operating income was primarily due to:

-   a favourable settlement on research and development incentives during
        the second quarter of 2008;
    -   incremental costs associated with restructuring and downsizing
        activities;
    -   a favourable revaluation of warranty accruals during the second
        quarter of 2008;
    -   electric vehicle development costs;
    -   costs incurred at new facilities in Russia as we continue to pursue
        opportunities in this market;
    -   increased commodity costs;
    -   additional supplier insolvency costs;
    -   costs incurred to develop and grow our electronics capabilities; and
    -   amortization of deferred wage buydown assets at a powertrain systems
        facility in the United States.

    These factors were partially offset by:

    -   no employee profit sharing to for the second quarter of 2009;
    -   productivity and efficiency improvements at certain facilities;
    -   the benefit of restructuring and downsizing activities undertaken
        during or subsequent to the second quarter of 2008;
    -   lower incentive compensation;
    -   cost savings initiatives, including reduced discretionary spending,
        employee reductions, short work week schedules, reduced bonuses,
        voluntary wage reductions and benefit plan changes;
    -   incremental margin earned from acquisitions completed during or
        subsequent to the second quarter of 2008; and
    -   the sale of certain underperforming divisions during or subsequent to
        the second quarter of 2008.

During the second quarter of 2009, we incurred a net loss of $205 million compared to net income of $227 million for the second quarter of 2008. Excluding the unusual items recorded in the second quarters of 2009 and 2008, as discussed in the "Unusual Items" section, net income for the second quarter of 2009 decreased $378 million. The decrease in net income was as a result of the decrease in operating income partially offset by lower income taxes.

During the second quarter of 2009, our diluted loss per share was $1.83 compared to diluted earnings per share of $1.98 for the second quarter of 2008. Excluding the unusual items recorded in the second quarters of 2009 and 2008, as discussed in the "Unusual Items" section, diluted earnings per share for the second quarter of 2009 decreased $3.33. The decrease in diluted earnings per share is as a result of the decrease in net income combined with a decrease in the weighted average number of diluted shares outstanding. The decrease in the weighted average number of diluted shares outstanding was primarily due to the repurchase and cancellation of Class A Subordinate Voting Shares during or subsequent to the second quarter of 2008 under the terms of our ongoing Normal Course Issuer Bid and a reduction in the number of diluted shares associated with debentures and stock options, since such shares were anti-dilutive in the second quarter of 2009.

UNUSUAL ITEMS
    -------------------------------------------------------------------------

    During the three months ended March 31, 2009 and 2008 there were no
unusual items recorded. During the three months and six months ended June 30,
2009 and 2008, we recorded certain unusual items as follows:


                                    2009                       2008
                       --------------------------- --------------------------
                                          Diluted                    Diluted
                        Operat-          Earnings   Operat-         Earnings
                            ing      Net      per      ing      Net      per
                         Income   Income    Share   Income   Income    Share
    -------------------------------------------------------------------------

    Impairment
     charges(1)          $  (75)  $  (75) $ (0.67) $    (9) $    (7) $ (0.06)
    Restructuring
     charges(1)              (6)      (6)   (0.05)       -        -        -
    Curtailment gain(2)      26       20     0.18        -        -        -
    -------------------------------------------------------------------------
    Total second quarter
     and year to date
     unusual items       $  (55)  $  (61) $ (0.54) $    (9) $    (7) $ (0.06)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Restructuring and Impairment Charges

        (a)   For the six months ended June 30, 2009

              Historically, we complete our annual goodwill and long-lived
              impairment analyses in the fourth quarter of each year in
              conjunction with our annual business planning process. However,
              goodwill must be tested for impairment when an event or
              circumstance occurs that more likely than not reduces the fair
              value of a reporting unit below its carrying amount.

              After failing to reach a favourable labour agreement at a
              powertrain systems facility in Syracuse, New York, during the
              second quarter of 2009, we decided to wind down these
              operations. Given the significance of the facility\'s cashflows
              in relation to the reporting unit, we determined that it was
              more likely than not that goodwill at the Powertrain North
              America reporting unit could potentially be impaired.

              Therefore, we made a reasonable estimate of the goodwill
              impairment by determining the implied fair value of goodwill in
              the same manner as if we had acquired the reporting unit as at
              June 30, 2009. As a result, during the second quarter of 2009,
              we recorded a $75 million goodwill impairment at our Powertrain
              North America reporting unit, representing our best estimate of
              the impairment. Due to the judgment involved in determining the
              fair value of the reporting unit\'s assets and liabilities, the
              final amount of the goodwill impairment charge could differ
              from the amount estimated. An adjustment, if any, to the
              estimated impairment charge, based on finalization of the
              impairment analysis, would be recorded during the fourth
              quarter of 2009.

              During the second quarter of 2009, we recorded restructuring
              costs of $6 million related to the planned closure of this
              powertrain systems facility, substantially all of which will be
              paid subsequent to 2009.

        (b)   For the six months ended June 30, 2008

              During the second quarter of 2008, we recorded asset
              impairments of $5 million relating to specific assets at a
              seating systems facility in North America and $4 million
              relating to specific assets at an interior systems facility in
              Europe.

    (2) Curtailment gain

        During the second quarter of 2009, we amended our Retiree Premium
        Reimbursement Plan in Canada and the United States, such that
        employees retiring on or after August 1, 2009 will no longer
        participate in the plan. The amendment will reduce service costs and
        retirement medical benefit expense in 2009 and future years. As a
        result of amending the plan, a curtailment gain of $26 million was
        recorded in cost of goods sold in the second quarter of 2009.

    INDUSTRY TRENDS AND RISKS
    -------------------------------------------------------------------------

Our success is primarily dependent upon the levels of North American and European car and light truck production by our customers and the relative amount of content we have on their various vehicle programs. A number of other economic, industry and risk factors discussed in our Annual Information Form and Annual Report on Form 40-F, each in respect of the year ended December 31, 2008, also affect our success. The economic, industry and risk factors remain substantially unchanged in respect of the second quarter ended June 30, 2009, except that:

-   On June 1, 2009, the U.S. Bankruptcy Court, Southern District of
        New York approved the sale, pursuant to Section 363 of the
        U.S. Bankruptcy Code, of Chrysler LLC\'s principal assets and
        operations to Chrysler Group LLC, a new company formed in alliance
        with Fiat SpA. As a result of the sale, which was completed on
        June 10, 2009, the continuing operations of the new Chrysler are no
        longer subject to bankruptcy protection.

        On July 6, 2009, the U.S. Bankruptcy Court, Southern District of
        New York approved the sale, pursuant to Section 363 of the
        U.S. Bankruptcy Code, of General Motors Corporation\'s principal
        assets and operations to General Motors Company, a new company owned
        primarily by the United States, Canadian and Ontario governments, and
        by a trust for providing medical benefits to United Auto Workers
        retirees. As a result of the sale, which was completed on July 10,
        2009, the continuing operations of the new General Motors are no
        longer subject to bankruptcy protection.

    -   As a result of the successful restructuring of Chrysler\'s and
        General Motors\' operations out of bankruptcy, our credit risk related
        to Chrysler and General Motors has significantly diminished.

    -   As previously disclosed, Magna and Sberbank have jointly submitted a
        revised offer to acquire a 55% equity interest in General Motors\'
        European subsidiary, Opel through the Consortium. The Opel Trust is
        expected to review the submitted offers and supervise the sale
        process. There is no assurance as at the date of this MD&A that any
        transaction will result from the current involvement of Magna and
        Sberbank.

        If we complete the purchase of an equity stake in Opel, we will be
        subject to a number of risks, including:

        -  the possibility that the terms and conditions of the definitive
           agreements we enter into in connection with the acquisition may
           differ from those currently proposed;
        -  the risk that, despite any "firewalls" we implement to separate
           our operations from those of Opel\'s, some of our OEM customers may
           prefer to purchase components and systems from suppliers which do
           not own an equity stake in an OEM;
        -  the likelihood that we will cease to be in compliance with certain
           covenants relating to our credit facility and will, as a result,
           need to renegotiate credit terms with our lending syndicate; and
        -  various risks associated with the operation of an automotive OEM
           business.

    -   On June 24, 2009, the United States Government passed legislation
        establishing the CARS program, effective July 24, 2009 (for vehicles
        purchased on or after July 1, 2009). Under the CARS program, vehicle
        owners meeting specified criteria can receive monetary credit for
        trading in their older, less efficient vehicles and purchasing or
        leasing newer, more efficient vehicles. As at the date of this MD&A,
        the initial funds allocated to the CARS program had been effectively
        exhausted, however, the U.S. Congress appears set to pass legislation
        that will allocate an additional $2 billion in funding to the
        program. Similar programs in certain European countries have had a
        positive short-term effect on vehicle production and sales to date in
        2009, however, it is too early to determine the impact of the CARS
        program on North American vehicle production and sales for the full
        year 2009 and beyond.

    RESULTS OF OPERATIONS
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    Average Foreign Exchange

                                   For the three months   For the six months
                                        ended June 30,       ended June 30,
                                  ---------------------- --------------------
                                     2009   2008 Change   2009   2008 Change
    -------------------------------------------------------------------------

    1 Canadian dollar equals
     U.S. dollars                   0.863  0.991  - 13%  0.832  0.994  - 16%
    1 euro equals U.S. dollars      1.369  1.562  - 12%  1.335  1.530  - 13%
    1 British pound equals
     U.S. dollars                   1.554  1.970  - 21%  1.494  1.974  - 24%
    -------------------------------------------------------------------------

The preceding table reflects the average foreign exchange rates between the most common currencies in which we conduct business and our U.S. dollar reporting currency. The significant changes in these foreign exchange rates for the three months and six months ended June 30, 2009 impacted the reported U.S. dollar amounts of our sales, expenses and income.

The results of operations whose functional currency is not the U.S. dollar are translated into U.S. dollars using the average exchange rates in the table above for the relevant period. Throughout this MD A, reference is made to the impact of translation of foreign operations on reported U.S. dollar amounts where relevant.

Our results can also be affected by the impact of movements in exchange rates on foreign currency transactions (such as raw material purchases or sales denominated in foreign currencies). However, as a result of hedging programs employed by us, primarily in Canada, foreign currency transactions in the current period have not been fully impacted by movements in exchange rates. We record foreign currency transactions at the hedged rate where applicable.

Finally, holding gains and losses on foreign currency denominated monetary items, which are recorded in selling, general and administrative expenses, impact reported results.

RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED JUNE 30, 2009
    -------------------------------------------------------------------------

    Sales
                                             For the three months
                                                   ended June 30,
                                             ---------------------
                                                  2009       2008     Change
    -------------------------------------------------------------------------

    Vehicle Production Volumes (millions of
     units)
      North America                              1.768      3.479      - 49%
      Europe                                     3.075      4.251      - 28%
    -------------------------------------------------------------------------

    Average Dollar Content Per Vehicle
      North America                          $     768  $     858      - 10%
      Europe                                 $     467  $     500      -  7%
    -------------------------------------------------------------------------

    Sales
      External Production
        North America                        $   1,357  $   2,986      - 55%
        Europe                                   1,435      2,126      - 33%
        Rest of World                              154        148      +  4%
      Complete Vehicle Assembly                    423      1,054      - 60%
      Tooling, Engineering and Other               336        399      - 16%
    -------------------------------------------------------------------------
    Total Sales                              $   3,705  $   6,713      - 45%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

External Production Sales - North America

External production sales in North America decreased 55% or $1.6 billion to $1.4 billion for the second quarter of 2009 compared to $3.0 billion for the second quarter of 2008. This decrease in production sales reflects a 49% decrease in North American vehicle production volumes as discussed in the "Highlights" section above combined with a 10% decrease in our North American average dollar content per vehicle. More importantly, during the second quarter of 2009 our largest customers in North America continued to reduce vehicle production volumes compared to the second quarter of 2008. While North American vehicle production volumes declined 49% in the second quarter of 2009 compared to the second quarter of 2008, Chrysler and GM vehicle production declined 84% and 53%, respectively. Due in part to their bankruptcy protection filings, Chrysler and GM stopped or reduced vehicle production at many of their North American assembly operations during the second quarter of 2009.

Our average dollar content per vehicle declined by 10% or $90 to $768 for the second quarter of 2009 compared to $858 for the second quarter of 2008 primarily as a result of:

-   Chrysler and GM programs impacted by the stoppages and reductions in
        vehicle production, as noted above including the:
        -  Dodge Grand Caravan, Chrysler Town & Country and Volkswagen
           Routan;
        -  Chrysler 300 and 300C and Dodge Charger;
        -  Dodge Journey;
        -  Jeep Wrangler;
        -  Jeep Liberty;
        -  Dodge Avenger and Chrysler Sebring; and
        -  Jeep Grand Cherokee;
        -  GM full-sized SUVs and pickups;
        -  Chevrolet Cobalt and Pontiac G5; and
        -  Saturn Vue;
    -   a decrease in reported U.S. dollar sales due to the weakening of the
        Canadian dollar against the U.S. dollar;
    -   programs that ended production during or subsequent to the second
        quarter of 2008, including the:
        -  Chevrolet Trailblazer and GMC Envoy; and
        -  Dodge Durango and Chrysler Aspen; and
    -   customer price concessions subsequent to the second quarter of 2008.

    These factors were partially offset by:

    -   increased production and/or content on certain programs, including
        the:
        -  Ford Escape, Mercury Mariner and Mazda Tribute;
        -  Ford Fusion, Mercury Milan and Lincoln MKZ;
        -  Ford Edge, Lincoln MKX;
        -  Mercedes-Benz R-Class, M-Class and GL-Class; and
        -  Saturn Outlook, Buick Enclave and GMC Acadia;
    -   the launch of new programs during or subsequent to the second quarter
        of 2008, including the:
        -  Chevrolet Traverse;
        -  Ford F-Series and Lincoln Mark LT; and
        -  Chevrolet Camaro; and
    -   acquisitions completed during or subsequent to the second quarter of
        2008, including a substantial portion of Plastech Engineered Products
        Inc.\'s ("Plastech") exteriors business.

External Production Sales - Europe

External production sales in Europe decreased 33% or $0.7 billion to $1.4 billion for the second quarter of 2009 compared to $2.1 billion for the second quarter of 2008. This decrease in production sales reflects a 28% decrease in European vehicle production volumes as discussed in the "Highlights" section above combined with a 7% decrease in our European average dollar content per vehicle.

Our average dollar content per vehicle declined by 7% or $33 to $467 for the second quarter of 2009 compared to $500 for the second quarter of 2008, primarily as a result of:

-   the impact of lower production and/or content on certain programs,
        including the:
        -  Mercedes-Benz C-Class;
        -  Ford Transit;
        -  Porsche Cayenne and Volkswagen Touareg;
        -  Volkswagen Transporter;
        -  Opel/Vauxhall Vivaro, Nissan Primastar and Renault Trafic;
        -  Mercedes-Benz SLK;
        -  BMW X3;
        -  Opel/Vauxhall Astra Twin Top; and
        -  Audi Q7;
    -   a decrease in reported U.S. dollar sales due to the weakening of the
        euro and British pound, each against the U.S. dollar;
    -   the sale of certain facilities during or subsequent to the second
        quarter of 2008; and
    -   customer price concessions subsequent to the second quarter of 2008.

    These factors were partially offset by:

    -   the launch of new programs during or subsequent to the second quarter
        of 2008, including the:
        -  Audi Q5;
        -  Volkswagen Golf;
        -  MINI Cooper Convertible;
        -  Audi A5 Cabrio; and
        -  Peugeot 308 CC;
    -   acquisitions completed during or subsequent to the second quarter of
        2008, including:
        -  Cadence, a manufacturer of exterior and interior systems primarily
           located in the Czech Republic; and
        -  Technoplast ("Technoplast"), a supplier of plastic exterior and
           interior components located in Russia; and
    -   increased production and/or content on certain programs, including
        the:
        -  Opel/Vauxhall Insignia; and
        -  Volkswagen Tiguan.

    External Production Sales - Rest of World

    External production sales in Rest of World increased 4% or $6 million to
$154 million for the second quarter of 2009 compared to $148 million for the
second quarter of 2008 primarily as a result of:

    -   increased production and/or content on certain programs in China and
        Brazil;
    -   the launch of new programs during or subsequent to the second quarter
        of 2008 in China; and
    -   an increase in reported U.S. dollar sales as a result of the
        strengthening of the Chinese Renminbi against the U.S. dollar.

    These factors were partially offset by:

    -   a decrease in reported U.S. dollar sales as a result of the weakening
        of the Brazilian real and Korean Won, each against the U.S. dollar;
        and
    -   decreased production and/or content on certain programs, particularly
        in Korea and South Africa.

Complete Vehicle Assembly Sales

The terms of our various vehicle assembly contracts differ with respect to the ownership of components and supplies related to the assembly process and the method of determining the selling price to the OEM customer. Under certain contracts we are acting as principal, and purchased components and systems in assembled vehicles are included in our inventory and cost of sales. These costs are reflected on a full-cost basis in the selling price of the final assembled vehicle to the OEM customer. Other contracts provide that third-party components and systems are held on consignment by us, and the selling price to the OEM customer reflects a value-added assembly fee only.

Production levels of the various vehicles assembled by us have an impact on the level of our sales and profitability. In addition, the relative proportion of programs accounted for on a full-cost basis and programs accounted for on a value-added basis also impacts our level of sales and operating margin percentage, but may not necessarily affect our overall level of profitability. Assuming no change in total vehicles assembled, a relative increase in the assembly of vehicles accounted for on a full-cost basis has the effect of increasing the level of total sales, however, because purchased components are included in cost of sales, profitability as a percentage of total sales is reduced. Conversely, a relative increase in the assembly of vehicles accounted for on a value-added basis has the effect of reducing the level of total sales and increasing profitability as a percentage of total sales.

For the three months
                                                   ended June 30,
                                             ---------------------
                                                  2009       2008     Change
    -------------------------------------------------------------------------

    Complete Vehicle Assembly Sales          $     423  $   1,054      - 60%
    -------------------------------------------------------------------------
    Complete Vehicle Assembly Volumes (Units)
      Full-Costed:
        BMW X3, Mercedes-Benz G-Class, and Saab
         93 Convertible                         13,268     31,413      - 58%
      Value-Added:
        Jeep Grand Cherokee, Chrysler 300, and
         Jeep Commander                            783      8,313      - 91%
    -------------------------------------------------------------------------
                                                14,051     39,726      - 65%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

Complete vehicle assembly sales decreased 60% or $631 million to $423 million for the second quarter of 2009 compared to $1.05 billion for the second quarter of 2008 and assembly volumes decreased 65% or 25,675 units. In general, the decrease in complete vehicle assembly volumes is due to a combination of general economic conditions as discussed previously; the natural decline in volumes as certain models that we currently assemble approach their scheduled end of production; and a decrease in reported U.S. dollar sales due to the weakening of the euro against the U.S. dollar. Several new complete vehicle assembly programs have been awarded and are scheduled to launch throughout 2009 to 2013.

Tooling, Engineering and Other

Tooling, engineering and other sales decreased 16% or $63 million to $336 million for the second quarter of 2009 compared to $399 million for the second quarter of 2008.

In the second quarter of 2009, the major programs for which we recorded tooling, engineering and other sales were the:

Source: PRNewsWire

MGA is in the portfolios of Prem Watsa of Fairfax Financial Holdings, Inc., Richard Pzena of Pzena Investment Management LLC, Arnold Schneider of Schneider Capital Management, Charles Brandes of Brandes Investment, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc.


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