Magna International Q1 2025 Earnings Report

Magna International EPS Results

• Actual EPS: $0.78
• Consensus EPS: $0.90
• Beat/Miss: Missed by -$0.12
• One Year Ago EPS: $1.08

Magna International Revenue Results

• Actual Revenue: $9.68 billion
• Expected Revenue: $9.66 billion
• Beat/Miss: Beat by +$20.04 million
• YoY Revenue Growth: -8.20%

Magna International Announcement Details

• Quarter: Q1 2025
• Date: 5/2/2025
• Time: Before Market Opens
• Conference Call Date: Friday, May 2, 2025
• Conference Call Time: 8:00AM ET

Magna International (NYSE:MGA) designs, engineers, and manufactures components, assemblies, systems, subsystems, and modules for original equipment manufacturers of vehicles and light trucks worldwide. It operates through four segments: Body Exteriors & Structures, Power & Vision, Seating Systems, and Complete Vehicles. The Body Exteriors & Structures segment provides body and chassis system, battery enclosures, and engineering and testing; and exteriors, including fascia and trims, front end modules, integration panels, liftgate modules, active aerodynamics, engineered glass, running boards, truck bed access products, breakthrough lightings, side doors, and greenhouse products. The Power & Vision segment offers electric drive systems and components, such as emotors, inverters, onboard chargers, gearboxes, and e-clutch; dedicated hybrid drives, dual and hybrid dual clutch, and manual transmissions; AWD/4WD products and rear drive modules; transmission, driveline components, and ICE; far camera module, remote camera heads, interior sensing camera, radars, thermal sensing, and domain controllers; interior and exterior mirrors, camera monitoring system driver/occupant monitoring systems, and smart actuators; forward and rear lighting, and lit grilles/panels/displays; latching system, door modules, charge port doors, power system, hinges, and door handles; and modular and textile folding roofs, and hard and soft tops. The Seating Systems segment provides seat structures, mechanism and hardware solutions, and foam and trim products. The Complete Vehicles segment offers vehicle engineering and manufacturing services. Magna International Inc. was founded in 1957 and is headquartered in Aurora, Canada.

Magna International Q1 2025 Earnings Call Transcript

Key Takeaways

• Magna’s Q1 2025 results beat internal targets, with consolidated sales of CAD 10.1 billion, adjusted EBIT margin of 3.5% and adjusted EPS of CAD 0.78, while returning CAD 187 million to shareholders via dividends and buybacks.
• Updated full-year outlook reflects higher sales driven by foreign‐exchange translation (notably a stronger euro), partially offset by a 100,000-unit reduction in North American production; EBIT margin guidance is lowered for currency headwinds and North American decremental margins.
• Magna estimates gross tariff exposure of roughly CAD 500 million on imports from Canada, Mexico, China and Europe, with 75–80% of parts now USMCA compliant and an annualized net direct impact of about CAD 250 million after government remissions—management intends to recover 100% of unmitigated costs from customers.
• The company continues to win new business and accolades, including collaborations with NVIDIA on next-gen ADAS and autonomous systems, a complete ADAS award from a global OEM, a dual-motor e-drive for Mercedes-Benz and GM Supplier of the Year honors.
• Magna maintains a disciplined capital strategy—capping 2025 capex at CAD 1.7–1.8 billion, targeting positive free cash flow, sustaining an investment-grade balance sheet and prioritizing cost containment, portfolio management and long-term shareholder returns.

Presentation

[Operator]

Thank you. And as a reminder, this call is being recorded. Would now like to hand the call over to Luis Donnelli, VP of Investor Relations.

[Operator]

Luis, please go ahead.

[Louis Tonelli, Vice President - IR at Magna International]

Thanks, operator. Hello, everyone, and welcome to our conference call covering our first quarter twenty twenty five results. Joining me today are Swamy Kotagiri and Pat McCann. Yesterday, our Board of Directors met and approved our financial results for the first quarter of twenty twenty five and our updated outlook. We issued a press release this morning outlining our results.

[Louis Tonelli, Vice President - IR at Magna International]

You'll find the press release, today's conference call webcast, the slide presentation to go along with the call and our updated quarterly financial review, all in the Investor Relations section of our website at magna.com. Before we get started, just as a reminder, discussion today may contain forward looking information or forward looking statements within the meaning of applicable securities legislation. Such statements involve certain risks, assumptions and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our safe harbor disclaimer. Please also refer to the reminder slide included in our presentation that relates to our commentary today.

[Louis Tonelli, Vice President - IR at Magna International]

With that, I'll pass it over to Swamy.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Thank you, Louis. Good morning, everyone. I appreciate you joining our call today. Before we start, I wanna express our deep sadness here at Magna with the passing of our former CFO, Vince Galifi. Vince was not only a remarkable leader, but also a cherished colleague, mentor, and a friend to me and many of us.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Vince's contributions to Magna over his thirty plus year career were invaluable, including playing a crucial role in shaping our financial strategies, providing stability, and ensuring our disciplined profitable growth. Many of you listening in today benefited from his knowledge, wisdom, and insight. As we mourn his loss, we also celebrate his life and the profound influence he had on Magna. There are some notable takeaways from the quarter that I would like to highlight before getting into some of the details. We are pleased that our Q1 results came in ahead of our quarterly planning cadence, mainly reflecting strong incremental margin on higher sales.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

You may recall that in our February call, I mentioned that the first half of twenty twenty five would be weaker than the second half and of the first two quarters, Q1 would be weaker. We returned $187,000,000 to shareholders in the first quarter in the form of dividends and share repurchases. Despite increased uncertainty due to the current tariff environment, we have updated our outlook which includes higher sales largely due to foreign currency translation partially offset by slightly lower vehicle production in North America and a modest reduction in margin mainly due to the higher euro and decremental margins related to the North American volume reduction. We continue to work closely with our customers to mitigate the tariff impacts and adjust in this rapidly evolving environment focusing on what is under our control including cost containment efforts. And we have clearly communicated to our customers our intention to pass on any unmitigated incremental tariff costs.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

We continue to win new business and advanced automotive technologies. We are collaborating with NVIDIA for next generation scalable active safety and autonomous driving systems as well as other applications. We have been awarded a new complete ADAS system with a North American based global OEM. And we are supplying a two speed dual motor e drive with advanced off road technology for Mercedes Benz. Our customers and the industry continue to recognize Magna for excellence in launch and innovation.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

We recently won GM Supplier of the Year and Overdrive Awards, and Automotive News recently selected our AI based thermal sensing technology as a twenty twenty five PACE pilot innovation to watch. As I said earlier, the industry is facing a high degree of uncertainty as a result of the tariff and trade environment. Let me frame tariffs in the context of Magna. Last year, our North American business was about $20,000,000,000 or less than half of our global sales. In 2024, we imported roughly $2,000,000,000 of goods from countries including Canada and Mexico that are subject to tariffs which would result in roughly $500,000,000 in gross tariff costs.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Based on our analysis to date, 75% to 80% of our parts crossing the border are already USMCA compliant, which puts our 2025 annualized direct tariff impact estimate at about $250,000,000 We continue to evaluate options that will further increase USMCA compliance to mitigate tariff impacts. In some instances, it will require design modifications, validation, and or customer approvals. We will continue to evaluate the full scope of these opportunities. As a result, we are highly focused on working with customers to consider further mitigation opportunities, utilizing government remission programs where appropriate, continuing cost reduction programs already in place and remaining disciplined with capital spend. As I said at the outset, we expect 100% of unmitigated incremental direct tariff costs to be recovered from customers.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Next, I will cover our updated outlook. Uncertainty in the current business environment caused by tariffs and other trade measures has made forecasting more challenging than normal. Our outlook reflects our strong first quarter performance and near term OEM production release information including announced production downtime at certain OEM assembly facilities. Our production assumptions do not contemplate the potential impacts of tariffs and other trade measures on vehicle costs, vehicle affordability or consumer demand nor the impact of these on vehicle production. Relative to our previous outlook, we have reduced North American production by about 100,000 units to 15,000,000, held Europe production unchanged and have raised our China production assumptions by roughly our Q1 outperformance to 30,200,000 units.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

We also assume exchange rates in our outlook will approximate recent rates. We now expect a higher euro and Canadian dollar for 2025 relative to our previous outlook. The increase in our sales range is predominantly associated with foreign exchange translation due to the higher euro relative to the U. S. Dollar, partially offset by lower vehicle production in North America, particularly with respect to certain programs with high Magna content.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

The lowering our EBIT margin range reflects the margin dilutive impact of euro U. S. Dollar translation as well as decremental margin on the lower sales associated with the volume reductions in North America. We increased our tax rate to approximately 26% from approximately 25% mainly due to mix of earnings. We expect capital spending to be in the 1,700,000,000.0 to $1,800,000,000 range down slightly from $1,800,000,000 previously reflecting our continuing efforts to defer or reduce capital wherever possible.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

And our interest expense, net income and free cash flow ranges are all unchanged from our last outlook. In addition, we are providing some helpful financial modeling guidance with respect to Magna. Our average content per vehicle in North America is approximately $1,300 and we would estimate incremental and decremental margins in North America to be in the 15% to 20% range at the Magna level under normal conditions. We have also seen relatively volatile foreign exchange rate swings over the past few months. As you model sales, keep in mind that a $01 change in the euro USD rate has about a $110,000,000 impact on annual sales with a margin below our corporate average.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

And a $01 change in the Canadian to U. S. Dollar is about $50,000,000 in annual sales with a margin at about our corporate average. Lastly, we are proactively evaluating costs and capital. I would like to reiterate that our guiding principles remain the cornerstone of Magna, a long term ownership mentality that starts with our culture of accountability and alignment of interests at all levels of the company.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Managing our portfolio under a consistent set of criteria and dispassionately assess our product lines in terms of their markets, market positions and returns maintaining a strong balance sheet to have the financial flexibility to manage through the cyclicality of our industry and a capital allocation strategy that entails the long term balance of investing for profitable growth together with returning capital to shareholders. Regardless of where we are in the cycle or challenges we are facing, these overarching principles govern the way we manage Magna for long term success. With that, I'll pass the call over to Pat.

[Patrick McCann, Executive VP & CFO at Magna International]

Thanks, Swamy, and good morning, everyone. As Swamy indicated, we delivered solid first quarter earnings ahead of our expectations. Recall that we indicated on our February call that we expected our 2025 earnings to be lowest in the first quarter of the year. Now comparing the first quarter of twenty twenty five to the first quarter of twenty twenty four. Consolidated sales were $10,100,000,000 down 8% compared to a 3% decline in global light vehicle production.

[Patrick McCann, Executive VP & CFO at Magna International]

Adjusted EBIT was $354,000,000 and adjusted EBIT margin was 3.5%. Adjusted EPS came in at $0.78 down 28% year over year, primarily due to decremental margins on lower sales, but ahead of our expectations. And free cash flow used in the quarter was $313,000,000 ahead of our expectations and compared to $270,000,000 in the first quarter of twenty twenty four. Let me take you through some of the details. North American and European light vehicle production decreased 58%, respectively.

[Patrick McCann, Executive VP & CFO at Magna International]

And production in China increased 2%, netting to a 3% decrease in global production. On a sales weighted basis, light vehicle production declined 5% from the prior year. Our consolidated sales were CAD10.1 billion compared to CAD11 billion in the first quarter of twenty twenty four. On an organic basis, our sales decreased 6% year over year for a negative 1% growth over market in the quarter, in part reflecting negative production mix from lower D3 production in North America, lower light vehicle production a decline in complete vehicle assembly volumes, including the end of production of the Jaguar E and I PACE in Graz, Austria the end of production of certain other programs the divestiture of a controlling interest in our metal forming operations in India, the impact of changes in foreign exchange rates and normal course customer price givebacks. These were partially offset by the launch of new programs, higher commercial recoveries and customer price increases to recover certain higher production input costs.

[Patrick McCann, Executive VP & CFO at Magna International]

Adjusted EBIT was $354,000,000 and adjusted EBIT margin was 3.5%, down 80 basis points from Q1 twenty twenty four. The lower EBIT percent in the quarter reflects positive 60 basis points from operational items, reflecting operational excellence activities, lower engineering spend and lower net input costs, partially offset by higher new facility costs negative 15 basis points related to lower equity income as a result of lower net favorable commercial items, higher net transactional FX losses and reduced earnings on lower sales, partially offset by lower launch costs, all with respect to certain equity accounted investments. Negative 10 basis points for tariff costs paid out but not yet recovered from customers and volume and other items, impacted us by negative 150 basis points reflecting reduced earnings on lower sales and lower net transactional FX gains. In net discrete items, higher net favorable commercial items was completely offset by higher net warranty costs and higher restructuring costs not called out as unusual. Interest was essentially in line with last year.

[Patrick McCann, Executive VP & CFO at Magna International]

Our adjusted effective income tax rate came in at 25.7%, higher than Q1 of last year, primarily due to higher losses not benefited in Europe, unfavorable foreign exchange adjustments for U. S. GAAP purposes and a change in the mix of earnings, partially offset by favorable changes in our reserves for uncertain tax positions. Net income was $219,000,000 compared to $311,000,000 in Q1 twenty twenty four, mainly reflecting lower EBIT, partially offset by lower income tax and lower minority interest. And adjusted EPS was $0.78 compared to $1.8 last year, reflecting lower net income, partially offset by fewer diluted shares outstanding.

[Patrick McCann, Executive VP & CFO at Magna International]

The fewer shares outstanding largely reflects share repurchases in the fourth quarter of twenty twenty four and the first quarter of twenty twenty five. Turning to a review of our cash flows and investment activities. In the first quarter of twenty twenty five, we generated $547,000,000 in cash from operations before changes in working capital and used $470,000,000 in working capital. Investment activities in the quarter included $268,000,000 for fixed assets and $148,000,000 increase in investments, other assets and intangibles. Overall, we used free cash flow of $313,000,000 in Q1, better than we were forecasting and compared to $270,000,000 in the first quarter of twenty twenty four.

[Patrick McCann, Executive VP & CFO at Magna International]

And we continue to return capital to shareholders, paying $136,000,000 in dividends along with $51,000,000 in share repurchases during the first quarter of twenty twenty five. Our balance sheet continues to be strong with investment grade ratings from the major credit agencies. At the end of Q1, we had just under 4,600,000,000 in liquidity, including about $1,100,000,000 in cash. Currently, our adjusted debt to adjusted EBITDA ratio is at 1.92, better than we had anticipated coming into the quarter. In summary, we had solid financial performance in the quarter, ahead of what we had expected.

[Patrick McCann, Executive VP & CFO at Magna International]

We returned $187,000,000 to shareholders in the quarter in the form of dividends and share repurchases. We updated our outlook, excluding the impacts of tariffs, which includes higher sales, largely due to foreign currency translation, partially offset by lower volumes in North America and a modest reduction in margin, mainly due to the higher euro and decremental margins related to North American volume reduction. And we are working closely with our customers to mitigate tariff impacts and adjust in the rapidly evolving environment. Thanks for your attention this morning. We would be happy to take your questions.

[Operator]

We will now begin the question and answer session. And your first question comes from the line of John Murphy with Bank of America. John, please go ahead.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

Good morning, guys. I'm very sorry to hear about Vince. It's tough news for all of us. I think we all learned a lot from him. He was a great friend.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

That's rough way to start the call. Thoughts are out to all you guys.

[Patrick McCann, Executive VP & CFO at Magna International]

Thank you.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

I guess first here, maybe kind of thinking sort of mid to long term Swamy. On the Seating business, it just seems like even adjusting for tariffs, the business remains kind of tough. I'm just curious as you think about that business mid to long term, if there's something you need to do on a micro basis organically or do you need to get larger scale? Because there are a lot of other folks out there that are kind of tripping over that business as well. And it seems like it should be an okay business, but it seems like you just can't get it to turn the corner.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

What are your thoughts there on Seating?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Good morning, John, and thanks for your comments. On the seeding, I don't know if you caught it. The the big topic, the one time which is behind us was a 30,000,000 magnitude warranty topic that's included in the quarter right now, and that's behind us. Operationally, continuing to look at what we had last year and what we had in the past, it continues to track. Given the volatility and, you know, the program that we talked about in South Carolina and it comes on board for next year, the macro variables that we talked about in seating as a business hasn't changed.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

From an operations perspective, the execution plans that we have been talking about stay on track. But, you know, on the bigger context, not just to seeding, John, we we as I mentioned before, we continue to look at all product lines. So that's that's always a part of the process.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

Okay. And then just a second question, as you think about tariffs and I hate to harp on this. Yesterday, the Customs Border Patrol, they put out a sort of a notice that seems to be an indication that USMCA compliant parts are going to remain on tariff beyond sort of the ninety day review, which certainly beyond May 3, and it seems like that may be in perpetuity. I'm just curious what you're hearing there and if that's correct interpretation because that would create some pretty extreme relief for you guys here at least in North America.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

John, that's I read that report and you're absolutely right. I think I mentioned in the call, we are about that's where the focus has been. We have had work streams looking at, you know, in intricate detail of every part that, you know, crosses the border. We are about between 75 to 80% USMCA compliant. A lot of discussions on how to take that percentage up.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Yes. Definitely, that gives a lot more certainty and relief in our planning process, And that is the assumption that we are going with and hope to get some more clarity and certainty on that decision.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

And maybe just to follow on that. I mean, as far as schedule changes and program launch changes, what have you heard from automakers so far? It seems like everybody's kind of trying to plow ahead without making significant changes yet. Have you seen big changes in short term schedules or potential program launches for the second half of this year or maybe even into next year?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

John, we have not. Not just looking at releases. So first, to address the releases, right, April seemed pretty aligned with our planning. May, from a visibility perspective, also looks normal, but we always have been thinking about depending on any announcements that might change pretty quickly. But as we see today, it looks pretty aligned.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

And, obviously, we don't stop just by looking at the data here. We have been in conversations with OEMs at least two or three times a week at my level even to get a understanding and not depend only on the releases. Overall, we have not seen any changes in terms of planning or in terms of production schedules, at least from the programs that we are involved with. But even at a macro level, we are not seeing it. Lot of discussions on how to get more USMCA compliance for sure, but that's where the chips fall today.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

And then just lastly, China seems like it's showing some relative strength and absolute strength relative to expectations. You just remind us of footprints or your mix of customers there, domestic, Chinese OEMs versus international?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Yes. It happens to be we were in China about just three weeks ago. About 5 and a half billion dollars of our revenue is from China. Of that, just about over $60.65 percent of the business is with Chinese OEMs. And they're, I would say, largely, John, with five to six customers, the major Chinese OEMs there.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

If you remember, we started in China predominantly with call the Western OEMs, and we've been able to move that mix from 10% to 65 plus percent or in that range today. So we continue to gain traction. Even last year, we grew at 15%, you know, in China compared to the roughly 5% that China market is going. So we feel pretty good about it. We're deliberate which product, which customer, but we continue to gain or improve our mix there.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

So, I mean, I thought just about a year ago that was fifty fifty. I mean, did it move that quickly? Or was my number kind of Yes. It did move that quickly.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Okay. John, your numbers are correct. We continue to make good progress and have traction.

[John Murphy, Managing Director at Bank of America Merrill Lynch]

Great. Thank you very much, guys.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Thanks And

[Operator]

your next question comes from the line of Tamy Chen with BMO Capital Markets. Tamy, please go ahead.

[Tamy Chen, Director & Equity Research Analyst at BMO Capital Markets]

Hi, good morning. Thanks for the question. First, I just wanted to clarify. So Swamy and Pat, the annualized tariff exposure this year, you said $250,000,000 So, I might interpret that as essentially the COGS exposure from you importing into your US plants, parts from Canada and Mexico? And are you saying this this number, you believe, you would get a % recovery from your customers?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

So, Tammy, good morning. First, yes, what you said, the 250,000,000 we are talking about where we are the importer of record for tax. Beyond Canada and Mexico.

[Patrick McCann, Executive VP & CFO at Magna International]

Beyond Canada and Mexico. China and whatnot.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

China and Europe. Although those numbers are smaller, but it's a very comprehensive list. Second, obviously, our first initiative is to mitigate that as much as possible with all our internal actions, resourcing, rebalancing, continuing to work with our customers to increase The US compliance. Some of it might need design modifications or validations or, you know, the production part approval process. And we're working with them, and we'll continue to.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

So now anything that is remaining past all those efforts, yes, our intent is to pass it on to the customer study.

[Tamy Chen, Director & Equity Research Analyst at BMO Capital Markets]

Okay. Understood. And, yeah, on that, with respect to, yeah, increasing USMCA compliance. And also, I'm curious if at this point, well, I think first of all, said a lot of discussions around that, increasing USMCA compliance with your customers. I'm also wondering, most recently after we've got a little bit of relief and clarity earlier this week, do you also believe your customers may be thinking more about increasing U.

[Tamy Chen, Director & Equity Research Analyst at BMO Capital Markets]

S. Content, not just USMCA compliance? And can you talk a little bit more about between the two of them, what that means for you, incremental capital investments? What what do you, you know, what do you need to do? How does that impact you if both of those things continue from here?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Yeah. I think, Tammy, it's only fair to say that all scenarios have are being considered. But from what we are hearing, given in my discussions, I think it is not a major reaction given the capital allocation and the magnitude, of what's being discussed. They're looking at very carefully. If there is a rebalancing possible, I think that is the first option.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

If there is a resourcing, that is also an option. I haven't heard in all the discussions that I'm having with all the customers that anybody is looking at a knee jerk reaction. They're looking at it, and they've been very collaborative and sharing data with us. So that's that's on one side of things. Magna has a footprint in Canada, in Mexico, and in United States.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

As you can imagine, there is not capacity available at any point of time, but is there a possibility of rebalancing some of the things? Yes. That we continue to look at. But, again, we cannot do it unilaterally. We have to work with our customers to make those changes.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

So that's that's how we are proceeding to mitigate any impacts that are there.

[Tamy Chen, Director & Equity Research Analyst at BMO Capital Markets]

Okay. Got it. And my last question is on your share buyback. Could you confirm at this point, I think you'd said earlier that a month or so ago you've paused it. I just want to understand at this point, how are you thinking about the buyback?

[Tamy Chen, Director & Equity Research Analyst at BMO Capital Markets]

Is that still on pause given the macro uncertainty? Is it also related to the where your leverage currently is at or where you expect that going forward? Thanks.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

So, Tammy, yes, you're right. We talked about pausing, and we've always talked about it as a strategy, right, in managing our balance sheet. To answer your question very directly, yes, it is past given the uncertainty that we have in the market. But as you know, we had the NCIB about to purchase 28,500,000.0 shares approximately. If uncertainty goes away and there is a lot of clarity, there is always the possibility to look at it later in the year.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

For now, given where the market is and given where uncertainty is, yes, we have paused.

[Tamy Chen, Director & Equity Research Analyst at BMO Capital Markets]

Thank you.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

But also to add, I mean, the leverage ratio, as Pat mentioned, is on track and, you know, we continue to make good progress as discussed. And I think we're just a little bit ahead compared to where we are planning, as Pat mentioned in the comments.

[Tamy Chen, Director & Equity Research Analyst at BMO Capital Markets]

Great. Thank you.

[Operator]

And your next question comes from the line of Dan Levy with Barclays. Dan, please go ahead.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Hi. Good morning. Thanks for taking the question. I wanted to first just ask on advanced program launch activity. What have you seen there?

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Has there been any change in, the activity or behavior of automakers on this front? Maybe you can just include in that. And what's the tone and tenor of commercial discussions with the automakers right now?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Good morning, Dan. From a overall planning launch perspective, we have not seen any change. Right? But in terms of sourcing, there is a lot of scenarios being discussed and talked through. And I think we are fortunate in a way to say that most of our major customers have had discussions with us because of the footprint and capacity and our ability.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

So we we are getting a viewpoint on that. So I wouldn't say it has slowed, but I think there is deliberation on the footprint and the cadence of the decision making. But we are not really seeing a change in what we are going after in terms of business and how it's being sourced.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Okay. And then as far as the Complete Vehicles segment, if you could just give any color on the outperformance in the quarter. But also, how should we assess the risk for Complete Vehicles given G Wagon is a central program and there's some questions on the demand in the tariff environment as those are all exported.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Yes. Dan, I think part of the outperformance has been based on how our complete vehicle assembly segment has the terms. Right? So there is commercial recoveries as volumes go, you know, change because of how the terms are there. So that's one.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

And over the last year, we've been talking about restructuring and getting the cost structure of that facility to the current volume scenarios and the programs that we have had. We talked about some of the programs ending and some coming to an end in the 2026, towards the end of '26. So we have proactively taken steps to restructure the cost base, and we we continue to see that flow through. On the Mercedes g Wagon, I won't comment for our customers, obviously, but you've seen the public statement of holding the price. But if there is a demand reduction for that vehicle in North America.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

I'm sure there will be an impact, but you got to keep in mind the margin profile of that business is substantially lower than the normal Magna average.

[Patrick McCann, Executive VP & CFO at Magna International]

The only other thing I'd add, Dan, is it comes back to the contracts while he's talking about there are fixed recoveries in it. So even if the volumes fall, we do have that fixed recovery regardless.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

And we continue to have discussions, as mentioned, with different OEMs for getting on additional programs. And they seem, I would say, pretty encouraging then.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Okay. Thanks. If I could just squeeze one in just to clarify the pieces of the business that are not USMCA compliant. Those are which products or in which segment?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Dan, I I I think it's across. We haven't seen any significant point to make on one specific segment. Right? I I would say it's all across. But there's not a marked difference from one to the other.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

So it's kind of a cross magnet.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Great. Thank you.

[Operator]

And your next question comes from the line of Doug Dutton with Evercore ISI. Doug, please go ahead.

[Douglas Dutton, Vice President at Evercore ISI]

Hey, Swamy. Hey, team. Just looking at the Body and Exterior segment here, margins were particularly weak. They were down from most of last year from all of last year actually. I understand there's some FX volume effect there, but in terms of timing is this likely to be a first half or first quarter phenomenon or is this something that could persist with the uncertainty that we're seeing?

[Douglas Dutton, Vice President at Evercore ISI]

How do you see those margins progressing throughout the course of 2025?

[Patrick McCann, Executive VP & CFO at Magna International]

Doug, it's Pat. I just grabbed my numbers here. But I think your thesis, broadly speaking, is correct. We're operating where we expected to operate in the BES group. So we came in at EBIT number of 5.8%.

[Patrick McCann, Executive VP & CFO at Magna International]

We're seeing that increase as we progress through the year, and it would be consistent with what we had seen last year. Remember, we're still in a situation where a lot of our commercial upgrades tend to be recovered in the back half of the year. That's probably going to be amplified this year given all the volume uncertainty. So

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

I think we're still expecting a strong margin performance in Q4 compared to the first three quarters of the year. So it might be a cadence, but operationally and foundationally, this segment BES is really doing well and continues to perform at the level that we, NSA. No difference in the operations from where we had last year versus now except volume and other things I just talked about.

[Douglas Dutton, Vice President at Evercore ISI]

Okay. That's helpful. And then that's a good segue into my next question here. On slide 17, you mentioned those tariff costs that have been paid and not recovered from customers as a headwind. Is this going be the norm going forward where those tariff costs are treated similarly to your cost recoveries from your customers?

[Douglas Dutton, Vice President at Evercore ISI]

Basically, it's Magna fronting any incremental cost and then you will be reimbursed in the future. Is that the correct way to think about this incremental tariff cost?

[Patrick McCann, Executive VP & CFO at Magna International]

Yeah. I think, Doug, this is an accounting issue. It's not really the commercial side of it. Under the accounting rules, until you have a legal agreement with your customer to recover it, you have to expense those costs. The costs in the quarter were about $10,000,000 gross, for perspective.

[Patrick McCann, Executive VP & CFO at Magna International]

Obviously, we're pushing it close as quickly as we can, but that is expect that same cadence as other commercial.

[Douglas Dutton, Vice President at Evercore ISI]

Awesome. Thanks, team.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Thanks, Doug.

[Patrick McCann, Executive VP & CFO at Magna International]

Thanks, Doug.

[Operator]

And your next question comes from the line of Joe Spak with UBS. Joe, please go ahead.

[Joseph Spak, Managing Director at UBS Group]

Thank you, everyone, and thanks for the tariff impact color. Sorry to go back to this. I just want to understand some of the math here. The $2,000,000,000 of goods that cross the border, I get, you know, 25% of that's the 500,000,000. Then you're saying 25% of the parts are non USMCA compliant.

[Joseph Spak, Managing Director at UBS Group]

So how do you get to a $250,000,000 impact? Is that because the compliance, that that percentage you gave is parts based, not dollar weighted? So you really mean only half the dollars are exempt? And then just to be very clear, I I know you're not assuming the any volume impact, but in the guidance, are you assuming in the revenue guidance that you recover that 250 I'm sorry. The the half of that on an annualized basis?

[Joseph Spak, Managing Director at UBS Group]

So I I think

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

to clarify, right, in the math, there is also remission programs from governments, right, for example, on the Canada. So that would offset some of the things that are there. And net of that remission is how you get to the 250 approximate number that you're seeing, Joe. And we are not including the volume impact. Right?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Is that your question?

[Joseph Spak, Managing Director at UBS Group]

Well, yes. So sorry. The remissions would sorry. Go further. Right?

[Joseph Spak, Managing Director at UBS Group]

I guess what I'm saying is just very simple math. If you're saying No. You know, 500

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

The remissions are included is what I'm saying. After remissions, we are having the two fifty.

[Joseph Spak, Managing Director at UBS Group]

Or maybe we could take it offline. I I but, because, again, if if if 25% is not compliant, I I I would have thought the impact would have been one twenty five before remissions and the remissions would bring it down further.

[Patrick McCann, Executive VP & CFO at Magna International]

I I think, Joe, we can take it offline, but forget don't don't forget that it's not all 25% across the board. We are importing parts from China and other parts of the world that have a higher tariff than '25

[Joseph Spak, Managing Director at UBS Group]

Fair enough. Okay. Alright. And then I know the volume Okay.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

I know the volume Oh, sorry. Go ahead.

[Patrick McCann, Executive VP & CFO at Magna International]

Sorry. No. You also asked about Oh, sorry. I know

[Joseph Spak, Managing Director at UBS Group]

the volume impact from tariffs not included, but is the recovery of that, let's say, three quarters of that two fifty included in the revenue outlook?

[Patrick McCann, Executive VP & CFO at Magna International]

We've assumed in our outlook that at the EBIT level, we have zero impact from tariffs because any residual is gonna be recovered from the customer. It's not included in revenues. It's just as a cost recovery.

[Joseph Spak, Managing Director at UBS Group]

Okay.

[Joseph Spak, Managing Director at UBS Group]

So it's not in the revenue, but then you assume but in reality, it would be, but then it's zero impact to EBIT?

[Patrick McCann, Executive VP & CFO at Magna International]

I I can't it's gonna depend, Joe, on how we structure those agreements with the customer. It's gonna be more complicated than we can answer just yet.

[Joseph Spak, Managing Director at UBS Group]

Okay. And then, I guess, just on the, you know, when you look at some of this, the margin revisions by by segment, you know, was mostly in in BS and Seating. And I know, Swamy, just said the the tariff impact is, you know, mostly, or or across sort of all all all segments. So is that really just a result of, some of the the softer 1Q results?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

So I am just broadly speaking, Joel, when you look at

[Patrick McCann, Executive VP & CFO at Magna International]

the revenue changes from our outlook in February to our current outlook, midpoint to midpoint, we're seeing roughly about a $1,500,000,000 increase that's related to foreign exchange. And that's spread out quite evenly across our four segments. When you look at the pure volume declines as just manufacturing activity, the bulk of that decline is in PES, and we're seeing weakness in seeding. And the seeding is primarily related to announced shutdowns in April and May already.

[Joseph Spak, Managing Director at UBS Group]

Okay. I appreciate it. Thank you.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

You're welcome.

[Operator]

And your next question comes from the line of Adam Jones with Morgan Stanley. Adam, please go ahead.

[Adam Jones, Transfer of Assets Associate at Morgan Stanley]

Thanks, Swamy and Pat and everybody. I wanted to offer my condolences for the loss of Vince. He was a really talented, kind, humorous, and gentle soul who left the world a better place than he found it. And if I was lucky enough to know him, his memory is a real blessing. And I don't think he were he if he was if he was listening to this call well above, he'd be saying, you know, just alright.

[Adam Jones, Transfer of Assets Associate at Morgan Stanley]

Back to work. Keep your head down and get through the challenges and the opportunities of the day. And I think you would have great confidence in the team. And I I just wanted to offer my condolences to the Magnus family and his own family and children as well. And that's all I want to say.

[Adam Jones, Transfer of Assets Associate at Morgan Stanley]

I don't have any questions. Get back to the call. Thank you.

[Patrick McCann, Executive VP & CFO at Magna International]

Thanks, Adam.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Thank you, Adam. I appreciate it.

[Patrick McCann, Executive VP & CFO at Magna International]

I'll pass it on to Jo Anne and the family.

[Operator]

And your next question comes from the line of James Picariello with BNP Paribas. James, please go ahead.

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

Hi, good morning, everybody. My question is on, Swamy, you mentioned in your prepared remarks that the 1Q exceeded internal expectations and the 2025 EBIT range is unchanged. Just curious, do you still expect the first half to represent about 40% of the full year, right? This would imply something modestly above $500,000,000 for the second quarter. I know tariffs and the timing of recoveries could swing the answer, but if you were to get full recovery in the second quarter, which I don't think is I don't I imagine it's pretty reasonable given that the parts rebate mechanism is now in place for OEMs and given Magna's critical role as a supplier to your customers?

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

Just, you know, how are you thinking about that forty sixty split? I

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

I think, James, the simple answer is yes. Based on all the visibility that we have, it will be behind us. And, you know, unless something drastically changes, and then nowadays that seems to be happening, I would say the 40% in the first half, 16% in the second half is still a good assumption. Yes.

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

Got it. Thank you. And then, my follow-up is just on buybacks. I think it was mentioned at a you know, Magna mentioned at a at a recent conference that, you know, typically for the you know, when you get the authorization for a buyback, you know, you wanna a company would typically wanna, you know, buy back at least half of the authorization. That was something, you know, again, mentioned at at a conference, you know, not necessarily my words.

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

Just wondering, you know, if if volumes overall for the industry, you know, hang in, you get, you know, you get full recovery or most recoveries for for the tariff exposure that you have. Is that kind of the target, at least half of this authorization gets done this year?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

I don't know about the comment about the half. I don't think, James, it's from us. But like I said, when we look at share repurchases, we always looked at it as a tool to give excess liquidity back to our investors and shareholders. But the most important thing is, you know, operationally, how do you maintain liquidity and have the balance sheet and look at possible programs, you know, and opportunities even that come up in a normal course site, like additional volume and and, you know, programs from other places that customers might reach out to us, especially in terms of uncertainty like this. Beyond that and that's the reason why we said we are paused.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

We have to see if everything returns back to normalcy. We would still go back to the NCIB authorization that we have, and we have to assess, you know, our surplus at that point of time given we are still tracking the way we wanted to for our leverage ratio. I wouldn't say it's half or our intent when we start is to say we wanna get as close as to the NCIB as possible. Right? Our intent is always that.

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

Understood. Thank you.

[Operator]

And your next question comes from the line of Shreyas Patil with Wolfe Research. Shreyas, please go ahead.

[Shreyas Patil, Vice President - Equity Research at Wolfe Research, LLC]

Hey, thanks so much for taking my questions and my condolences to Vince and his family. Wanted to maybe just come back to the guidance for this year. I understand it does not reflect tariffs, but just to confirm you have revised it for the latest FX assumptions. I guess just looking at the euro for example, that alone would be maybe a $650,000,000 benefit to revenue for this year, 35,000,000 or so to EBIT, Canadian dollars another benefit. And so is that correct?

[Shreyas Patil, Vice President - Equity Research at Wolfe Research, LLC]

And if so, can you maybe just expand on the offset that you mentioned? I think there were some headwinds on key programs that you noted.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Good morning, Shreyas. I think the FX, what we have taken is as dollar stands with respect to euro and Canadian dollar today, right, which is how we do every time. I don't know the exact number for how much of that is in Europe. Some of it is Inspire. Some of it is in Europe for sure.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

And perhaps maybe

[Patrick McCann, Executive VP & CFO at Magna International]

I think we'd have to break it down, Shrias. But just broadly speaking, the FX impact, including Q1, is about $1,500,000,000 That's the role. Then the offsets are primarily where we're seeing some volume. Remember, just broadly speaking, our volumes in North America are down just over 100,000 units, and that's primarily impacting our BES segment and our Seating segment.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

And we have taken what we have seen in terms of closures to date, right? Okay.

[Shreyas Patil, Vice President - Equity Research at Wolfe Research, LLC]

Yes. So just so basically, revenue is up $1,000,000,000 on FX, and then it's offset lower volume. That's the primary headwind.

[Patrick McCann, Executive VP & CFO at Magna International]

That's 95% of the answer, correct?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Yes.

[Shreyas Patil, Vice President - Equity Research at Wolfe Research, LLC]

Okay.

[Shreyas Patil, Vice President - Equity Research at Wolfe Research, LLC]

Understood. And then just maybe if you could help us just understand mechanically the process by which you would get recovery from the OEM because I understand your expectation is to get 100%. I guess what we've seen in the past, I think about the semiconductor shortage from 2021 and 2022 is there is a bit of a lag in recovery. Would you expect this time around if you're looking at tariff costs to incur a lag through negotiation? Or do you feel like because this is an industry wide problem that the pace at which you could get recoveries is much quicker?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

So, Shes, even during the semiconductor crisis, yes, there is a little bit of time, and it depends. We had three way conversations. Some of it will directly with the customers. And keep in mind that we recovered pretty much 95 plus percent, if not % of the, semiconductor at that point in time. So we have a process, is what I'm trying to say, and we'll set up a process again similar to what we have.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

So would there be a little bit of back and forth in terms of timing? Depends on customer and program and the magnitude of it, but we feel pretty confident. And I have to say that customers have been open to discussion and collaborative as we are discussing. But all I have to say is stay tuned.

[Shreyas Patil, Vice President - Equity Research at Wolfe Research, LLC]

Okay. Thanks.

[Operator]

And your next question comes from the line of Mark Delaney with Goldman Sachs. Mark, please go ahead.

[Mark Delaney, Stock Analyst at Goldman Sachs]

Yes. Good morning. Thank you very much for taking my questions. And please allow me to pass my sympathies on to Magna and Vince's family on his passing. He's very detail oriented and always quite generous with his time.

[Mark Delaney, Stock Analyst at Goldman Sachs]

So he will be the best for sure.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Yes. Thank you.

[Mark Delaney, Stock Analyst at Goldman Sachs]

I did want to speak a bit on schedules and understand your comments that customer production schedules have been stable. When you speak to your broader set of customers on their plans, can you help us better understand what they're indicating they'll do with vehicles being exported and now seeing tariffs? And I was wondering why there wouldn't be a change to those exported vehicles given the tariff dynamic? And then just overall, as you think about the second half, what's the confidence you have in production schedules tracking in line with your prior view for 2H?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Mark, it's a little bit of a crystal ball. Right? When we made the comments, we are talking about releases that are in the system, and it also depends on what programs and platforms we are on. Right? So our comments are, you know, very much dependent on that.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

And we haven't seen, I would say, any significant change compared to the normal course of going up and down a little bit. You know, what you're talking about is a little bit macro. If it is, what, 800,000 units that are imported from Europe into North America because of tariffs, would that have an impact on those 800,000 units? I think so. But difficult to quantify what that would be depending on, you know, would the customers look at keeping the market share, managing pricing for the short term.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

There's so many variables here. I would not know how to quantify that yet, but our answers are purely based on the data that we are seeing and based on the conversations we are having with our customers on the programs that we are active.

[Mark Delaney, Stock Analyst at Goldman Sachs]

Thanks for that color, Swamy. My second question was about EBIT margins. The company had been expecting to achieve 75 bps of EBIT margin tailwind over the next two years in total. I'm hoping to better understand if there's been any change in either the magnitude of savings or the timing of which it may flow through given the current industry backdrop? Thanks.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

No, I would say we are on track, Right? We talked about roughly 35 basis points, in 2025, and similar in 2026. We had visibility for the continuous improvement and other activities. I can tell you the entire organization is focused on all those actions plus anything else that we have to mitigate. Fundamentally, the organization is looking at the cost structure to be viable and good at the current levels.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

And as the volume comes back, we are talking flex up to be able to take advantage and get our incrementals to be better. That's the philosophy. That's the mindset in the entire organization. So we feel pretty good into the given set of volumes, obviously, you know that has a significant impact. If the volumes continue as they are and slowly come back over time and the uncertainty, calms down, we feel pretty good about what we're doing now in terms of corrections as well as through 2026, which we are keeping a very close eye on.

[Mark Delaney, Stock Analyst at Goldman Sachs]

Thank you.

[Operator]

And your next question comes from the line of Jonathan Goldman with Scotiabank. Jonathan, please go ahead.

[Jonathan Goldman, Equity Research Analyst at Scotiabank]

Hi, good morning guys and thanks for taking my questions. Most of them have been asked already, but just one for me then. We've seen the light vehicle inventories come down in the past two months in North America, and maybe that's related to the pull forward in demand. But in your production outlook for North America, does that assume any rebuild of inventories at all this year?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

We kinda keep an eye on the inventory, Jonathan. What I would say is where we ended up in December, there was a spike in January, February. What we see today kinda goes back to what December was, But our planning or our production is based on releases, not on where the inventory is or the assumption whether it's gonna pull up or not. Right? That's for the customers to make, not us.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

So I would say what we are telling you is based on releases in the system.

[Jonathan Goldman, Equity Research Analyst at Scotiabank]

No. That's fair. I appreciate the color. Thanks, Swamy.

[Patrick McCann, Executive VP & CFO at Magna International]

Thanks, Sean.

[Operator]

And your final question comes from the line of Michael Glenn with Raymond James. Michael, please go ahead.

[Michael Glen, Managing Director - Consumer & Diversified Industrials at Raymond James Financial]

Hey, good morning. Swamy, thank you for the answer with regard to the European export for assembled vehicles. But could you provide some context to Magna's exposure to Mexico Mexican and Canadian assembled vehicles? What the outlook is there? And maybe what customers are communicating to you in terms of what might happen with those production schedules and any movement we might see?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Good morning, Michael. Maybe two part. I'll try to get it, and Pat can add color. We when we talk about phases, obviously, looking across the North America ecosystem, we are not seeing a change in the platform or the mix at this point of time. And when we talked about tariffs, again, we are taking Canada and Mexico and our content in all these platforms, you know, crossing borders, whether it's we supply in from Canada into Canada vehicles, but those vehicles might be coming over.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

We are looking at it broadly. I don't know if I can give more color than that at this point of time, or I have more than that to give you.

[Patrick McCann, Executive VP & CFO at Magna International]

I think, Michael, we have that data point. I just don't have it handy of OEM production in Canada and Mexico that shipped into The US for sale. We have that data. We can follow-up with you. I just don't have it handy.

[Patrick McCann, Executive VP & CFO at Magna International]

But from our point of view, we know our sales piece. We have sales of just over $4,000,000,000 in Canada. About 70% of that is sold into The U. S, where the OEM's been quarter of record. And in Mexico, we're about $5,500,000,000 of sales, and about 25% of that is sold into The U.

[Patrick McCann, Executive VP & CFO at Magna International]

S. Your question of what the OEMs are building in those two countries and shipped it, we'd have to get back to you.

[Michael Glen, Managing Director - Consumer & Diversified Industrials at Raymond James Financial]

And not to put you on the spot with this question or anything like that, but like when you do you believe that the 25% on assembled vehicles from Canada or Mexico into The U. S. Will remain in place?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

You are putting us on the spot, and I don't have the answer for you. I know what I wish, but that doesn't matter.

[Michael Glen, Managing Director - Consumer & Diversified Industrials at Raymond James Financial]

Okay. And just some of the reshoring efforts that you might look for to pursue to increase USMCA compliant. How do you think about the Tier two, Tier three or Tier four supplier base? Do you see this as feasible? Like I'm just trying to assess your opportunity to reshor some of those components.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Yeah. I mean, if you go back to the COVID in the semiconductor crisis, there was a little bit of reshoring or I would say rebalancing, you know, and looking at the possibilities, Michael, this is no different from that perspective, I would say. All those work streams are in place today. Does it mean you can take everything in the shore in the short period of time? I don't think so.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

But I'm just one voice in the industry. As you know, semiconductors you saw. Right? So we'll look at it part by part. It depends on that.

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

And, you know, obviously, as I said, our goal is to figure how to increase the USMCA compliant cost. And then we have to follow how the OEMs are thinking and how they are going to optimize or manage their footprint because, you know, based on logistics and other things, we have to kind of work collaboratively and cannot make that decision unilaterally.

[Michael Glen, Managing Director - Consumer & Diversified Industrials at Raymond James Financial]

Okay.

[Patrick McCann, Executive VP & CFO at Magna International]

I think Mike and Armen think it's Swamy's point Swamy's point's very, very important because there's a business case that the customer has to agree to behind each of these nationwide opportunities. Right? So that it's a granular bottoms up case by case analysis that the customer has to sign up on with commercial terms.

[Operator]

That concludes our question and answer session. I will now hand it back over to Swamy Kothakiri for closing remarks. Swamy?

[Seetarama Swamy Kotagiri, CEO, President & Director at Magna International]

Thanks, everyone, for listening in today. We all talked about the high degree of uncertainty in the industry that we're all facing, but I want to assure you we remain focused on execution, all things that we control, including cost and capital discipline. Free cash flow is primary focus and getting back within our target leverage ratio. So we remain highly confident in Magna's future, and thanks for listening in, and have a great day.

[Operator]

That concludes today's call. You may now disconnect.

Participants

Executives

• Louis Tonelli, Vice President - IR
• Seetarama Swamy Kotagiri, CEO, President & Director
• Patrick McCann, Executive VP & CFO

Analysts

• John Murphy, Managing Director at Bank of America Merrill Lynch
• Tamy Chen, Director & Equity Research Analyst at BMO Capital Markets
• Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank
• Douglas Dutton, Vice President at Evercore ISI
• Joseph Spak, Managing Director at UBS Group
• Adam Jones, Transfer of Assets Associate at Morgan Stanley
• James Picariello, Director & Sr. Automotive Analyst at BNP Paribas
• Shreyas Patil, Vice President - Equity Research at Wolfe Research, LLC
• Mark Delaney, Stock Analyst at Goldman Sachs
• Jonathan Goldman, Equity Research Analyst at Scotiabank
• Michael Glen, Managing Director - Consumer & Diversified Industrials at Raymond James Financial