Earnings call transcript: Magna International beats Q2 2025 forecasts

Magna International Inc. reported its second-quarter 2025 earnings, surpassing market expectations with an EPS of $1.99 against a forecast of $1.57, a 26.75% positive surprise. The company’s revenue also exceeded forecasts, reaching $14.7 billion compared to the expected $14.13 billion. Following the announcement, Magna’s stock price saw a modest increase of 0.56%, reflecting positive market sentiment. According to InvestingPro data, analysts maintain a strong buy consensus, and the company appears undervalued based on its Fair Value analysis. For detailed insights into Magna’s valuation, check out the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Key Takeaways

• Magna International’s EPS and revenue both exceeded analyst expectations.
• The company reported a 1% increase in adjusted EBIT and a rise in free cash flow.
• Despite a year-over-year sales decline, operational improvements and cost reduction efforts were highlighted.
• The stock price increased by 0.56% post-announcement.
• The company received several awards for innovation and quality.

Company Performance

Magna International demonstrated resilience in Q2 2025, with significant earnings and revenue beats despite a 3% year-over-year decline in consolidated sales. The company reported a 1% increase in adjusted EBIT and improved EBIT margins, reflecting effective cost management and operational efficiency. The automotive industry faced challenges, but Magna’s diverse product portfolio and global footprint helped mitigate some impacts.

Financial Highlights

• Revenue: $14.7 billion, surpassing forecasts and indicating strong performance.
• Earnings per share: $1.99, beating expectations by 26.75%.
• Adjusted EBIT: $583 million, up 1% year-over-year.
• Free cash flow: $31 million, a significant improvement from the previous year.

Earnings vs. Forecast

Magna International’s actual EPS of $1.99 significantly outperformed the forecast of $1.57, resulting in a 26.75% surprise. Revenue also exceeded expectations, with a 4.03% surprise, reflecting the company’s strong execution and market positioning.

Market Reaction

The stock price increased by 0.56% following the earnings release, indicating a positive market reaction. With a beta of 1.37, InvestingPro data shows the stock exhibits higher volatility than the market. The company has maintained dividend payments for 34 consecutive years, demonstrating strong financial stability despite market fluctuations. Nine analysts have recently revised their earnings estimates upward for the upcoming period, suggesting growing confidence in Magna’s prospects.

Outlook & Guidance

Magna raised the low end of its adjusted EBIT margin range to 5.2-5.6% and anticipates approximately 35% of its 2025 EBIT to occur in Q4. The company is targeting a leverage ratio return to 1.0-1.5x by 2026, supported by ongoing operational excellence initiatives.

Executive Commentary

CEO Swamy Kotagiri expressed confidence in Magna’s future, stating, "We continue to execute despite the high degree of uncertainty in the industry." He also highlighted the company’s strong booking cadence for 2025 and its commitment to innovation and quality.

Risks and Challenges

• Supply chain disruptions could impact production and delivery timelines.
• Fluctuations in global automotive demand, particularly in North America and Europe.
• Potential regulatory changes affecting the automotive industry.
• Currency fluctuations and economic conditions in key markets.

Q&A

During the earnings call, analysts inquired about tariff recoveries and mitigation strategies, potential impacts of EV policy changes, and the North American production outlook. Executives addressed these concerns, emphasizing their strategic focus and operational resilience.

Full transcript - Magna International Inc (MG) Q2 2025:

Conference Operator: and thank you for standing by. My name is Lacey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Magna International Second Quarter twenty twenty five Results Webcast. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

Thank you. I would now like to turn the conference over to Luis Tinelli. You may begin.

Luis Tinelli, Executive, Magna International: Thanks, operator. Hello, everyone, and welcome to our conference call covering our second quarter twenty twenty five results. Joining me today are Swamy Kodagiri and Pat McCann. Yesterday, our Board of Directors met and approved our financial results for the 2025 and our updated outlook. We issued a press release this morning outlining our results.

You’ll ’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, the 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.

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

Swamy Kotagiri, CEO, Magna International: Thank you, Louis. Good morning, everyone. I hope you’re all enjoying the summer so far, and I appreciate you joining our call today. So let’s get started. I’m happy to share a few notable takeaways from the quarter that underscore our strong execution in spite of industry headwinds.

We are pleased with our strong Q2 results driven by consistent execution across our business and progress against our performance initiatives. I am proud of our team’s focus and ongoing efforts. Despite lower production in our two largest markets, North America and Europe, negatively impacting year over year sales, we delivered solid financial results and notable improvements from last year’s. Adjusted EBIT increased 1% and EBIT margin was 20 basis points better despite a 40 basis point negative impact from tariffs not yet recovered from customers. In addition, adjusted diluted EPS was up 7% and free cash flow improved by $178,000,000 Relative to our expectations, our results for the quarter were better reflecting strong incremental margins on higher sales.

We are also raising our outlook for the year. Stronger sales supported largely by foreign currency translation and also better than expected second quarter program mix. Raising the low end of our adjusted EBIT margin range despite lower expected vehicle production in North America as we realized on our cost saving initiatives and an increase in adjusted net income attributable to Magna, mainly reflecting higher expected adjusted EBIT on higher sales and a lower effective income tax rate. We continue to work closely with our customers to mitigate the impact of tariffs. Based on our actions taken and recent updates to tariff rates up to mid July, we have lowered our estimated annualized tariff exposure to $200,000,000 from $250,000,000 when we reported in Q1.

We have settled with multiple OEMs for substantially all of our 2025 net tariff exposure with them And we are working with our other customers and suppliers to mitigate substantially all of our remaining exposure, including through recoveries. Lastly, we returned $137,000,000 to shareholders in dividends in the second quarter, bringing our year to date return of capital to $324,000,000 We continue to assess industry conditions as well as the macroeconomic and trade environment and remain committed to our long stated capital allocation strategy, including share repurchases once conditions become less uncertain. Under our normal course issuer bid initiated last November, we have purchased about 5,700,000 shares to date, representing 2% of our shares outstanding. At Magna, we placed a premium on delivering innovation and high quality to our customers to differentiate ourselves in the industry, and we have enjoyed some success recently. In J.

D. Power’s thirty ninth Annual Initial Quality Study, their Platinum Plant Quality Award was recently given to our complete vehicle assembly operation in Graz, Austria. The award acknowledges quality and precision in producing the BMW Z4. Based solely on defects and malfunctions reported by customers, only one plant in the world receives this platinum distinction each year, making it an exceptionally rare and elite achievement. We also earned the Volkswagen Group Award for 2025 in the product category, recognizing Magna’s technical ingenuity, flexibility and persistence in developing and launching an innovative battery cover for VW’s MEP all electric platform.

Even during this period of uncertainty for our industry, we continue to execute to win new business and advance automotive technologies. We were recently awarded a dedicated hybrid transmission program with a North American based global OEM for PHEV models launching in 2028. We are also quoting a similar hybrid product with an additional global OEM. This award is a testament to the building block and platform strategy that we have been speaking about for some time, demonstrating our ability to support our customers to bring power to the wheels across a wide range of powertrain configurations from ICE through different hybrid variants all the way to pure BEVs. With the increased industry focus on hybrid technologies, we continue to add to our business in this area.

And we are advancing vehicle safety innovation with integrated interior sensing systems, including through our child presence detection technology, which has been recognized recently with business awards from OEMs in Asia and North America. The industry continues to face a high degree of uncertainty as a result of the tariff and trade environment. Despite this uncertainty, we continue to execute against our plan as we have through a variety of challenges in recent years. In terms of recent updates impacting Magna, our estimate of annualized tariff exposure is reduced to approximately $200,000,000 from approximately $250,000,000 when we reported in Q1. We have settled with multiple OEMs for substantially all of our 2025 net tariff exposure with them.

And in our current 2025 outlook, we expect a less than 10 basis point impact to our EBIT margin as well as a modest increase in working capital based on the timing of recoveries or expected tariff costs late in 2025. We remain highly focused on utilizing government permission programs where appropriate, continuing cost reduction programs already in place and being disciplined with capital spend and working with our other customers and suppliers to mitigate substantially all of our remaining exposure, including through recoveries. Next, I’ll cover our updated outlook. While the current environment makes forecasting more challenging than normal, we remain focused on what we can control and continue to adapt to an evolving situation. Relative to our previous outlook, we have adjusted our North American production forecast to 14,700,000 units.

While this reflects a reduction of about 300,000 units, The majority of the adjustment relates to a refinement in backward looking data around first quarter production. These changes help align our outlook with current market dynamics. We are holding Europe production unchanged. We are raising our China production to 30,800,000 units, all of which relate to an adjustment to estimated Q1 production and our Q2 production outperformance. We also assume exchange rates in our outlook with approximate recent rates.

We now expect a higher euro and slightly higher Canadian dollar and RMB for 2025 relative to our previous outlook. We increased our sales range as a result of foreign exchange translation due to the higher euro relative to the U. S. Dollar as well as better than anticipated program mix, particularly this past quarter. We raised the low end of our adjusted EBIT margin range and now expect to be between 5.2% to 5.6, reflecting our strong Q2 results supported by continued execution around our cost saving programs.

Recall that we indicated over the past two reports that we expected approximately 40% of our EBIT to be generated in the 2025, and we are forecast to end up slightly ahead of that. We also said we expected our 2025 earnings to be lowest in the 2025 and to improve meaningfully in the second quarter, which we have also delivered on. Looking forward to H2, based on some timing updates and revised vehicle volumes, we now expect to generate approximately 35% of our full year EBIT in the fourth quarter of this year. The most significant margin drivers sequentially from H1 to H2 are expected to be commercial recoveries, lower engineering spend, net tariff recoveries, lower warranty expense and a step up in the benefits from our operational excellence activities. We are excited about our progress in operational excellence.

And while there is more work ahead, we continue to see additional potential upside to margin from these initiatives over time. We reduced our tax rate to approximately 25% from approximately 26% mainly due to favorable FX adjustments recognized for U. S. GAAP purposes in Q2 and changes in our reserves for uncertain tax positions. We modestly increased our net income attributable to Magna, reflecting higher expected EBIT and the lower effective income tax rate.

We are reducing our capital spending range by $100,000,000 compared to our May outlook, reflecting our continuing efforts to defer or reduce capital wherever possible. Offsetting this CapEx reduction are modest increases in working capital related to tariffs and in other asset spending, resulting in an unchanged free cash flow range. Lastly, our interest expense range is unchanged from our last outlook. To summarize, we are confident in our outlook for the remainder of the year supported by strong Q2 execution and ongoing operational discipline despite ongoing industry challenges. We remain on track to deliver the outlook shared in February, which is a testament to strong execution throughout the organization.

With that, I pass the call over to Pat.

Pat McCann, CFO, Magna International: Thanks, Swamy, and good morning, everyone. As Swamy indicated, we delivered strong second quarter earnings, better year over year and ahead of our expectations. Comparing the 2025 to the 2024, consolidated sales were $10,600,000,000 down 3% compared to a 1% increase in global light vehicle production, which included 62% declines respectively in North America and Europe, our two largest markets. Despite the lower sales, adjusted EBIT was up 1% to $583,000,000 and adjusted EBIT margin was 5.5%, up 20 basis points year over year despite a 40 basis point negative impact from tariffs. Adjusted diluted EPS came in at CAD1.44, up 7%.

And free cash flow generated in the quarter was $3.00 $1,000,000 up $178,000,000 year over year and ahead of our expectations. Let me take you through some of the details. North American and European light vehicle production decreased 62%, respectively, and production in China increased 5%, netting to a 1% increase in global production. On a sales weighted basis, Light Vehicle production declined 3% from Q2 twenty twenty four. Our consolidated sales were £10,600,000,000 compared to £11,000,000,000 in the 2024.

On an organic basis, our sales decreased 4% year over year for a negative 1% growth over market in the quarter. The decline in our total sales largely reflects negative production mix from lower D3 production in North America 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 and normal course customer price givebacks. These were partially offset by the launch of new programs the favorable impact of changes in foreign exchange rates and customer price increases to recover certain higher production input costs. Adjusted EBIT was GBP $583,000,000 and adjusted EBIT margin was 5.5%, up 20 basis points from Q2 twenty twenty four, largely due to our ongoing cost savings and efficiency initiatives. The higher EBIT percent in the quarter reflects positive 50 basis points from operational items, reflecting operational excellence activities and lower launch costs, partially offset by higher new facility costs positive 20 basis points related to higher equity income as a result of higher net favorable commercial items, higher earnings due to favorable product mix and higher sales and lower launch costs, all with respect to certain equity accounted investments and positive 10 basis points in net discrete items, including supply chain premiums incurred in 2024 and lower warranty and restructuring costs, partially offset by lower net favorable commercial items.

These were partially offset by negative 40 basis points for tariff costs incurred but not yet recovered from our customers and volume and other items, which impacted us by negative 20 basis points, largely reflecting reduced earnings on lower sales. Below the EBIT line, interest was modestly lower than last year. Our adjusted effective income tax rate came in at 20.5%, lower than Q2 of last year, primarily due to favorable FX adjustments recognized for U. S. GAAP purposes and favorable changes in our reserves for uncertain tax positions, partially offset by lower nontaxable items, losses not benefited in Europe and a change in the mix of earnings.

Net income was $4.00 $7,000,000 $18,000,000 higher than Q2 twenty twenty four, mainly reflecting higher EBIT and lower income taxes. And adjusted EPS was $1.44 7% better than last year, reflecting higher net income and 2% fewer diluted shares outstanding. The fewer shares outstanding largely reflects share repurchases in the 2024 and 2025. Turning to a review of our cash flows and investment activities. In the 2025, we generated CAD762 million in cash from operations before changes in working capital and used CAD135 million in working capital.

Investment activities in the quarter included two forty six million pounds for fixed assets and a £94,000,000 increase in investments, other assets and intangibles. Overall, we generated free cash flow of $3.00 £1,000,000 in Q2, higher than we were forecasting and £178,000,000 better than the 2024. And we continue to return capital to shareholders, paying £137,000,000 in dividends in Q2. Our balance sheet continues to be strong with investment grade ratings from the major credit agencies. During the second quarter, we successfully raised five seventy five million and $400,000,000 in the form of senior notes, principally to repay $650,000,000 of debt in September.

At the end of Q2, we had over $5,000,000,000 in liquidity, including about $1,500,000,000 in cash. Currently, our adjusted debt to adjusted EBITDA ratio is at 1.87, excluding excess cash held to repay debt coming due, better than we had anticipated coming into the quarter and compared to our target ratio of between one and 1.5x. In summary, we delivered strong financial performance in the second quarter, which exceeded our expectations and showed meaningful improvements to the bottom line on a year over year basis. We have also updated our outlook to reflect this continued momentum, including higher sales supported by favorable foreign currency translation and better than anticipated program mix, particularly in Q2, raising the low end of our adjusted EBIT margin range and increasing adjusted net income largely due to higher expected adjusted EBIT and lower effective income tax rate. In addition, we are proactively working with our customers to mitigate tariff impacts.

Our annualized direct tariff exposure has been reduced since last quarter. We have settled with multiple OEMs for substantively all of our 2025 net tariff exposure with them, and we are working with our other customers and suppliers to mitigate substantively all of our remaining exposure, including through recoveries. Our operational excellence initiatives continue to contribute positively to margins despite a challenging industry backdrop, and we expect further contributions from these activities into 2026. Lastly, we returned $137,000,000 to shareholder in the quarter in the form of dividends and we continue to assess industry conditions as well as the macroeconomic and trade environment and remain committed to our long stated capital allocation strategy, including share repurchases, once conditions become less uncertain. Thanks for your attention this morning.

We’d be happy to take your questions.

Conference Operator: Your first question comes from the line of Tami Chen with BMO Capital Markets. You may go ahead.

Tami Chen, Analyst, BMO Capital Markets: Hi, good morning. Thanks for the question. First, I just want to confirm for the BES segment, were there any one time items or really the strong margin result was largely just on the much better program mix?

Pat McCann, CFO, Magna International: I don’t think there was no real significant one time result of the extraordinary. It really was being driven by operational excellence and, as you said, positive mix on a year over year basis. The only thing we did have last year, we did have a supplier issue at one facility down in Mexico, and that’s behind us. So that’s a little bit of the improvement in margin, but it’s not significant.

Tami Chen, Analyst, BMO Capital Markets: Okay. Thanks for confirming that. And then on tariffs, so thanks for the update on all of that. I just want to confirm, are you expecting to receive the recoveries for your this year tariff impact by Q4 of this year? And given you’re saying already by this point, you’ve settled for a substantial amount of this tariff impact.

I’m wondering, like, have you been able to establish a more formal mechanism with your OEM customers to receive recoveries going forward at a more timely basis? Or will those still be quite lumpy?

Swamy Kotagiri, CEO, Magna International: Good morning, Tammy. A few things. Think mitigation of tariffs, part of it is recoveries, part of it is internal efforts to increase USMCA compliance working through rebalancing and so on and so forth. We have signed agreements with a few customers, and there is framework in place to finish with the other customers. We have been focused on working through a mechanism rather than a lump sum payment.

So in short, to your question, we expect a cadence of recovery. But with that said, I think still in Q4, we will have some tariffs coming in. It’s a timing issue, but we feel comfortable with the outlook that we have given.

Tami Chen, Analyst, BMO Capital Markets: Got it. And last one here, sort of a two part just on, impact to you since the tariffs come in. Look, first, we’ve seen some of your major customers increase production in their US plants and other lower production or idle in their Canadian and Mexican plants. And just wondering, so those ones that have been announced, how have they affected your assets in North America? Like, is it all net negative for your Canadian Mexican plants?

Or is it a bit of a wash and you’re just shipping to those OEMs US plants? And second, I’m wondering if the topic of reshoring now, if it is coming up a bit more in your discussions with OEMs. Thank you.

Swamy Kotagiri, CEO, Magna International: Yeah, Tammy. I think the discussions are definitely there, to look at rebalancing based on the USMCA compliance and upcoming program planning. But the good thing is that we have the footprint in all three regions. So as far as the rebalancing, of the production is concerned, we would be in a good position. But still, it’s a variable to be addressed as the planning goes forward.

The good thing is we have a seat at the table, through the planning process with the OEMs. But with the tariffs on the rest of the world for if that changes or increases local production, it would be an opportunity for Magna.

Pat McCann, CFO, Magna International: And I think the other thing to consider, Tampi, is our sales in Canada are about $4,500,000,000 and 70% of those sales are already coming into The U. S. So increased production in The U. S. Versus Canada really isn’t impacting our Canadian ops at this point.

Swamy Kotagiri, CEO, Magna International: And most of it is USMCA compliant. That is the key thing, right, for us.

Tami Chen, Analyst, BMO Capital Markets: Right. Thank you. Your

Conference Operator: next question comes from the line of Dan Levy with Barclays. You may go ahead. Dan Levy, your line is open.

Dan Levy, Analyst, Barclays: Sorry, was on mute there. Thank you for taking the questions. I wanted to first ask about the step up into the second half. And appreciate the commentary about a number of drivers, the commercial recoveries, lower spend. But maybe you could just unpack of those items where you have clear line of sight versus where it’s going to require a little bit more work.

And then just as a follow-up to that, so you’re going to have a 6% margin in the second half. Is that the right jumping off point as we start to think about what 2026 will be?

Swamy Kotagiri, CEO, Magna International: I’ll give you a good morning, Dan. A few points and Pat can add some. I think if you look at H1 to H2, I think part of it is the launch cadence that we talked about of new programs, into the ’25 going into ’26. I would say a large number of these programs are also coming with new economics. You mentioned the cadence of tariff recoveries, which had a negative impact in the first half.

And as I said, with the framework agreements, the payments are coming in the second half of the year. And usually, on commercial recoveries based on our discussions, they tend to be back ended. Overall, I would say we have pretty good visibility on what we have included in the outlook. There’s always some puts and takes, but we feel the visibility is pretty good. In terms of looking at it, we particularly mentioned, as we did at the beginning of the year, that 40% of, our earnings were coming in the first half.

We were a little bit ahead of that. And for the cadence of the second half, I would say about I think we mentioned roughly 35% of our earnings will come in the fourth quarter. Right? So that should give you that. Now we also talked a little bit of the operational activities taking traction, which we have been working for years.

And with the incremental volumes that is starting to show the incremental flow through into our margins. We talked about a 150 basis points improvement in our margin from ’24, 25. So about 110 basis points of that is behind us, on track to finish the remaining 40 this year. We also see a similar cadence of about 35 basis points going into ’26. So all in all, if the volumes hold and if the assumptions that we talked about in February’s day, we feel pretty good about operationally of what’s in our control.

If nothing changes again, right, on the outside world, we feel pretty good about ’26 outlook that we talked about in February.

Dan Levy, Analyst, Barclays: Great. That’s very helpful. As a follow-up, wanted to ask, about Seating specifically. And first, maybe you could just address, there is a fairly material implied ramp in Seating margins in the back half of the year. I know that first quarter was dragged by warranty, and we saw probably a more appropriate run rate in the second quarter.

But you do have a big step up, I think, in some of those like implied 5% margin second half, which you haven’t done in a while. If you could just talk to that. And then just broadly, do you feel comfortable that within the context of your broader ROIC targets and how you’re managing the portfolio that Seating is still earning in excess of its cost of capital and that this business still fits well within the type of return profile that’s needed at Magna?

Swamy Kotagiri, CEO, Magna International: Again, Dan, I think the more tactical question on Seating, you have to remember that there is a tariff impact in the first half of the year in Seating. But with agreements in place, you will see the recoveries come in the second half. So that’s something to consider. But as we look into the second half, based on what we see in terms of releases and volumes and so on and so forth, it looks pretty good. That’s what we’ve included in the outlook.

Pat, anything to add there?

Pat McCann, CFO, Magna International: No. I think the you mentioned the tariff impact is it’s disproportionately hitting our P and V segment and our Seating segment. So just the tariff impact alone

Dan Levy, Analyst, Barclays: on Seating is in

Pat McCann, CFO, Magna International: the range of about 60 basis points in the first half of the year, and the margin the warranty impact was about 110 basis points. So that’s the bulk of the step up from H1 to H2, Dan.

Swamy Kotagiri, CEO, Magna International: So and then to the second part of your question, look, we’ve always talked about looking at portfolio from the guiding principles. From a returns perspective, Seating has been a good business, you know, in terms of ROIC. It definitely, you know, clears the bar for our financial, metrics for returns. And we have seen the operational improvements that we’ve talked about. We are starting to see that going from year to year except for the warranty issue in the first quarter.

We are seeing the path. But again, like I said, we continue to look at the portfolio every year, and we have to assess.

Dan Levy, Analyst, Barclays: Great. Thank you.

Conference Operator: Your next question comes from the line of Chris McNally with Evercore ISI. You may go ahead.

Chris McNally, Analyst, Evercore ISI: Good morning, team. I apologize for being a little monotonous, I’m going to follow Dan and Tammy’s question, ask about the second half of the P and V segment. Again, looking at the second half implied ramp versus the first half. I think what we’re all trying to think about is volumes are going be lower in second half, but there’s a heavier tint here to international. You talked about, Swamy, some of the launches that you have.

Could you just apply that to P and D? Because margins have been all over the place over the last year or two. So would love to know if there’s a natural progression here that we can take into 2026.

Swamy Kotagiri, CEO, Magna International: I would say the tariff comment applies to the PMV, Chris, definitely going from the first half to the second half. If you exclude that part of it, I think, again, from a performance perspective, PNV is doing well. The cadence of the launches I talked about is not specific to PNV. It’s all across Magna, as you can imagine. So again, going back to the operational initiatives that are in place, we are starting to see the benefits, you know, coming through as we as we talked about it.

Again, if you just go back to what I talked about, the improvements in ’24, ’25, what is to be seen in ’26, I would say we feel pretty good going into what we talked about in ’26. Again, the big, big assumption is the volume staying, and the assumption we have for 26 volumes is roughly in the same level as what we’re talking about in ’25.

Chris McNally, Analyst, Evercore ISI: That’s great. So so, Swamy, maybe the the best way to think about a base of growth for PowerVision is really more think again about the full year rather than a second half versus first half. And then as we grow it in 2026, a lot of the the the actions, the better contracts, but then we need some volume to grow it at your typical incrementals, whatever that be, 20% or greater. Is that a fair way of thinking? Use that full base, the full year base of roughly low fives for PMB.

Swamy Kotagiri, CEO, Magna International: Chris, you sounded better than I could have. Excellent. Thanks so much, team.

Conference Operator: Your next question comes from the line of Joe Spak with UBS. You may go ahead.

Joe Spak, Analyst, UBS: Thanks so much, everyone. I just wanna dig into the 35% of EBIT in the fourth quarter comment again. Like, we’ve seen, obviously, some some lower schedules on some key programs in the third quarter. So is that really what’s sort of driving that, you know, 3Q versus 4Q timing, you’re talking about? Or is it also recoveries?

Or is there anything else you could provide on on that split?

Pat McCann, CFO, Magna International: I think, Joe, it’s a combination of the two. Right? So if we go back in history, the seasonality of our business is that Q3 tends to have lower sales with the shutdowns in North America and in Europe. So we’re seeing some of that, which reflects your comment on the schedules for the next three months. The second part is the commercial recoveries, as we’ve seen over the last couple of years, have been more in the fourth quarter, and that’s still what we’re expecting across the board.

What we’ve added this year to some of that volatility, I would say, is the recovery of tariffs. And I don’t want to I just want to emphasize, like, questions on P and V and Seating, as Swamy said, like, the impacts, just for Magna alone, we’ve expensed $55,000,000 of tariffs in the first half of the year. That impact alone is about 25 basis points. Our expectation is to recover substantially all of that. So we have another swing of close to, say, 20 basis points going the other way in the second half of the year.

That’s another driver of that h one to h two improvement.

Swamy Kotagiri, CEO, Magna International: And, Pat, that’s what we were saying. You know, we have some agreements already signed with the customers and some in place that needs to be just signed, but, you know, that’s the cadence.

Joe Spak, Analyst, UBS: Yeah. I I guess maybe to follow-up on that, I know this gets super confusing because, you know, there’s there’s it’s the, like you said, the timing issue. But, you know, if I if I if I take it, say sort of what you said the margin impact was in the quarter, it sounds like maybe 40,000,000 or so wasn’t recovered. And you’re saying now 200 for the year. You said 10 basis point margin hit for the year.

So that’s, another 40,000,000 you’re saying 40,000,000 hit for the year. So, I mean, it it I understand, like, what you get next quarter might not be for the tariffs in that quarter and everything, but, like, but overall is what you’re saying is, like, on a on a on a net basis, you don’t expect that, you know, whatever the tariff hit is versus sort of the recoveries to be as big an issue in the back half versus this quarter. I I know that’s a a convoluted question, but hopefully hopefully, you followed.

Pat McCann, CFO, Magna International: No, I absolutely get it. And it’s actually tariffs will be a pickup in the second half of the year as opposed to a

Joe Spak, Analyst, UBS: headwind. Remember, we You’ll recover more than you actually incur.

Dan Levy, Analyst, Barclays: Correct.

Luis Tinelli, Executive, Magna International: We’re going

Pat McCann, CFO, Magna International: to have a pickup in EBIT related to tariffs in the second half of the year, as Swamy said, based on the signed agreements to date plus the frameworks that are in place with most of our other customers.

Joe Spak, Analyst, UBS: Okay. May maybe one last quick one. You know, GM sort of had, you know, put out a release about bringing back some production to The US. It looks like you do have some, you know, facilities including in seating that support those, those, those production facilities. Is that is that business you would look to to sort of go after that you don’t have today, or how how are you thinking about that opportunity?

Swamy Kotagiri, CEO, Magna International: Yeah. I think there’s many discussions ongoing, Joe. Right? You know, we have to look at one rebalancing as as the OEMs are thinking about it. The other one is given our footprint of where we are as part of the overall rebalancing.

And like I said, if there is other OEMs that are trying to increase their local production in The US, we got to take all of that into account. I would say if it’s a rebalancing between Mexico and Canada, we are in a good place, but it won’t be an upside to sales. But it helps us think through. But if it’s an increase in local production, we are in a better place to add further to what we have. The key thing for us right now where we are focused is, on capital and investments, really, really focused to understand long term what the plan is before we go do anything in terms of investments.

And and the the customers have been very collaborative in sharing the plans and working with us.

Joe Spak, Analyst, UBS: Thanks, Brad, Swamy.

Conference Operator: Thanks. Next question comes from the line of Tom Narayan with RBC. You may go ahead.

Tom Narayan, Analyst, RBC: Hey, thanks for taking the question. The first one, there’s been some thought that the tariff deals that are struck between The U. S. And other countries, it seems to be the 15% level for Europe, Japan, Korea, but there could be a more favorable one for Mexico, Canada. Given your program mix, just curious, would a situation where volumes benefit in the North American OEMs versus European, Japanese, Korean.

Would that be a net positive for you or a net negative? And then I have a follow-up.

Swamy Kotagiri, CEO, Magna International: Tim, good morning, Tom. If you look at the net import from the Europe, it’s roughly 800,000 units. I would say half a million of that are coming from VW, BMW and Mercedes. But with that said, the total exports for this OEMs into US is about 10% or lesser. So that might have an impact in Europe sales, right, if they’re supplying there.

But on the other hand, as they think of localizing in US, Us being part of the ecosystem would be a uptick hopefully there. And as I said before, if the OEMs in North America are rebalancing between Canada, Mexico, and US, we are at the table. We have the footprint, but that is just a matter of, you know, working through the planning process with them. So that remains to be seen. Since we have the footprint on all three areas or all three regions, I would say we are in a better place to address the planning changes as the OEMs are going through.

Tom Narayan, Analyst, RBC: Got it. And then another question on this H1, H2 dynamic. I know that the tariff dynamic, it’s kind of like a double swing, right? So I get that. It’s a pretty big benefit to Seating and P and V.

But you also called out the commercial recoveries as something you’ve expected based on prior years. But is that just based on kind of what you’d expect based on prior years? Or is this actually stuff that’s already been negotiated? How much confidence, I guess, do you have in that? You’ve already negotiated the tariffs with them, with these OEMs, now that the recoveries, just curious as to how confident you are in getting that?

Thanks.

Swamy Kotagiri, CEO, Magna International: I think, Tom, when we talk about commercial recovery, some of them are based on, you know, normal cadence that we’ve done over years, and it is part of the overall, discussions in terms of LTAs and, you know, new programs and so on and so forth. Difficult to say binary that it’s 100% or zero, but given where we stand with our discussions and looking historically over the last, I don’t know, decades of work, right, I I think I would say we are very comfortable, and that’s what we make a pretty good judgment, and that’s what we include in the outlook.

Dan Levy, Analyst, Barclays: Got it. And just to be

Pat McCann, CFO, Magna International: clear, Tom, these these aren’t placeholders. These are specific program related commercial items that were in discussions with the customers already. So and I just wanna right set everybody as well. Like, our our implied guide our our implied range for h two of 2025 is in line with what we had in 2024 and in 2023. So the cadence is there.

I think we have confidence, whether it’s on the tariffs or the other commercial. So we have traction. So where we are, we haven’t changed our second half of the year from our own expectations. So I think we’re tracking to where we expect to be.

James Picariello, Analyst, BNP Paribas: Actually, if

Tom Narayan, Analyst, RBC: I could, just a quick follow-up to Dan’s question on the portfolio discussion. I think in the past, you’ve said there was some macro uncertainty, right, with everything that’s been happening. It feels like maybe that uncertainty is dissipating a little. As you examine the portfolio of the different businesses you have, is would you say that the macro situation is now less of a hindrance in your evaluation? Or is that still a factor?

Thanks.

Swamy Kotagiri, CEO, Magna International: Yeah. Tom, I I think the keyword that you said is the macro, fluidity, I think, is a little unchanged. To me, it still remains very uncertain. Yes, there is visibility on things that we can control for sure, but, a lot of other macroeconomic, variables are still very fluid, so the uncertainty still prevails. With that said, we continue to look at the entire portfolio all the time, but, you know, volatility and uncertainty adds further complexity now to, you know, make any decisions.

Got it. Thank you.

Conference Operator: Your next question comes from the line of James Picariello with BNP Paribas. You may go ahead.

Dan Levy, Analyst, Barclays: Hey, good morning, everybody. Just wondering on your North America production outlook, right, if you could speak to the visibility into the third quarter, because for North America LVP to be down 5% this year, there’s a rather dramatic falloff likely in the fourth quarter, right, if we just use IHS as a blueprint there. Is there anything you’re seeing cautionary wise in the third quarter? Or is it just embedded conservatism for the fourth quarter?

Swamy Kotagiri, CEO, Magna International: Good morning, James. I I think as we look at it, when we if you go back into the last quarter when IHS was trying to, model the impact of tariffs, I think they decreased the North American volume significantly, and we kinda used what we knew from the releases and customer discussions and so on. And I think at that point, we were, higher than what IHS was looking at, and that is kind of narrowed down or is converging now. If you look at h one to h two, I would say h two is a little bit softer than h one. And our compared to our anticipated numbers, h one came a little bit higher.

I don’t think H2 is significantly off. We have taken a little bit of a pull forward effect. But beyond that, obviously, we are not taking any secondary impacts or tariffs or other where sales of the vehicles might not be there or the OEMs might decide to pass on or increase. So those effects are not in place. But otherwise, I think H2 is a little softer than H1, but we don’t see a precipitous fall

Luis Tinelli, Executive, Magna International0: in And just to put data to

Pat McCann, CFO, Magna International: Swamy’s statements, James, the first half of the year, we had seven just under 7,500,000 units, which leaves, with our guidance about just over 7,200,000 for the back half of the year. And that’s down slightly from what we expected, in May when we gave the guidance. And the 7,200,000 is roughly in line with IHS. It is, Ben.

Luis Tinelli, Executive, Magna International: Understood. Okay. Thank you.

Dan Levy, Analyst, Barclays: And then my follow-up on capital allocation. How are you thinking about buybacks in the second half if the year does progress toward your updated outlook here? And then on the reduction to this year’s CapEx now at 4% of sales, I believe your 2026 targets had captured the idea of lower year over year CapEx. Can this still be the case? Or are certain investments getting pushed from this year to next?

Swamy Kotagiri, CEO, Magna International: Well, James, I think on the CapEx question, we typically talked about getting back to the low fours, I would say, over collective years in terms of CapEx to sales ratio. Given all the discussions that are on, like I said, we are being very deliberate and looking at every dollar of investment that’s going in. So that as a result of that, we’ve been able to reduce the range by $100,000,000 and we continue to look at it going forward. I think overall, going into 2026, the focus on capital investment will stay and we are still focusing, I would say, in the four to low four CapEx to sales ratio. On the capital allocation strategy, no change.

I think our current focus is completely on capital discipline and free cash flow generation so we can return value to the shareholders. As we talked about, we bought about 5,700,000.0 shares. We have an NCIB in place. Last time when we spoke, we talked about uncertainty being the reason for pause. Those conditions haven’t changed yet, but if we see better visibility, we can act on the existing NCIB, and we still have time left.

Thanks.

Conference Operator: Your next question comes from the line of Emmanuel Rosner with Wolfe Research. You may go ahead.

Luis Tinelli, Executive, Magna International1: Great. Thanks so much. Just wanted to come back again to the first half to second half margin improvement. So I guess that’s midpoint of your full year guidance. The revenue is probably not all that different the first half to second half, but obviously the margin would take a fairly meaningful step up.

You mentioned commercial recovery, lower engineering spend, the tariff piece, warranty and then operational excellence. Some of the pieces you quantified on the tariff, example, the $55,000,000 in the first half, can you just give us a sense, specifically for this year or maybe based on history, how should we think about the magnitude of improvement of some of the other stuff maybe based what you’ve historically been able to achieve or anything that you’re able to quantify for this year? Just curious how impactful some of these buckets could actually be because obviously tariffs only gets you a small part of the way.

Luis Tinelli, Executive, Magna International: Yes. We’re not going to quantify. I mean, the items that we talked about are all impactful. Otherwise, we wouldn’t have talked about them. We’re not going to get into dissecting how much is in each, giving you the tariff amount, but the rest are and it’s implied in our guidance, but we’re not going to break down the details.

Luis Tinelli, Executive, Magna International1: Okay. But is it different than the is there something that is more pronounced this year than historically? I understand the tariff is a new dynamic, but is there any are there any drivers this year where commercial recovery should be so much more back end loaded than in the second half than historically or the engineering spend? Or just anything compared to history would be helpful.

Swamy Kotagiri, CEO, Magna International: I think, Emmanuel, short answer, there is no outlier or nothing that stands out in terms of the key buckets that Luis talked about that would stand out this year compared to the previous history other than tariffs. Like the engineering spend, CapEx, and a few of those things are controllable and very visible, right, for us. So that’s the reason why we are saying, you know, the the others are discussions based, you know, on many other variables. So all in all, nothing significantly different than historical trend. And I think

Luis Tinelli, Executive, Magna International: if you look at the segments that we disclosed, what we had last year for our various segments, and you look at the back half and then you look at where we are given the range that we provided for the back half this year, they’re not really that far out. They’re they’re pretty much at the same kind of ranges at the midpoint anyway. So it gives you some comfort that we’ve been there. We’ve been in this we’ve been able to do this recently.

Luis Tinelli, Executive, Magna International1: Got it. Okay. Understood. And then just it’s just a clarification, but I think you you were trying to give a quantification of some of the operational excellence piece of the opportunity. Can you just go back over the math around that, the extra 40 basis point that you mentioned for this year and then into next year?

Swamy Kotagiri, CEO, Magna International: Yes. I mean, there are a mix of many things. As we talk through, it is material savings. It is purchasing initiatives with our own supply base. It is reassuring.

There is some vertical integration activities. And over the past few quarters or actually maybe a year and a half, I’ve talked about specific, initiatives on digitization and automation. We have started seeing, the results yield, you know, with incremental volumes coming. The flow through is much better, which is what we expect. And, Emmanuel, so all of this continues.

So it’s difficult to say specifically each one. That’s what we mean by operational excellence activities. Some of this is normal course. Some of this is, you know, additive. And to sum it up, that was the 40 basis points, and we feel pretty comfortable, hitting that in ’25.

And we also see a road map for a similar magnitude again in 2026. Got it. Thank you. Your

Conference Operator: next question comes from the line of Colin Langan with Wells Fargo. You may go ahead.

Luis Tinelli, Executive, Magna International0: Yeah. Not to keep, thanks for taking my question. Not to keep asking the same point, but you’ve commented that margins first half to second half are seasonally stronger. I I think that might be true in recent history, but is that referring to just post COVID? Because I look at pre COVID, and it looks like margins historically actually fall.

And normally, that’s because production’s weaker. So just making sure I’m understanding the the comments.

Pat McCann, CFO, Magna International: You’re you’re 100% accurate, Colin. So if you go back pre COVID, the the seasonality would be you’d have strong q one, q two would be your strongest quarter, q three would be your weakest quarter, and q four would be right in the middle. What’s changed since COVID and the chip crisis primarily has been the inflation in the system. Now we layer on BEVs, volatility in production volumes and now the tariffs, and that’s driving costs being incurred on January 1 of each year and recovery negotiations happening throughout the year. And our history is showing that most of those are closed in the second half of the year.

That’s the biggest change.

Luis Tinelli, Executive, Magna International0: Okay. Got it. That makes sense. And then the guide does imply sales down about 1%. You said it’s not too different than S and P on your forecast, but Complete Vehicles down.

And then if I look at North America and Europe, which are the largest of your markets, S and P has those down almost 9%. So are you expecting similar half over half declines? And and if that’s the case, how are you only down one if some of your largest markets are down that much? Are there big launches hitting? Is there a mix impact that’s helping in the second half?

Pat McCann, CFO, Magna International: There’s things. And there’s also foreign exchange.

Luis Tinelli, Executive, Magna International0: But I think the other thing

Pat McCann, CFO, Magna International: you have to consider is if you look at our volume projections for the first half of the year and compare those to S and P, there is a difference between what we have. We have seven we’re showing just under 7,500,000 units of production. They’re showing a higher number. So that’s going to factor into the math as well. But there’s foreign exchange positive, there’s mix, there’s launch, and then there’s just some math going on between us and S and P.

Got

Luis Tinelli, Executive, Magna International0: it. And just lastly, any update on the leverage target? I think you’re at 1.87. The target has been to get below 1.5. When is the timeline for that?

Swamy Kotagiri, CEO, Magna International: Yeah. We talked about, getting back into the range that we’ve always talked about in 2026, and we are on track, as we looked at in February and looked at it for the year going into 2026, And we are very much on track to that.

Luis Tinelli, Executive, Magna International0: Got it. All right. Thanks for taking my questions.

Dan Levy, Analyst, Barclays: You. Your

Conference Operator: next question comes from the line of Brian Morrison I

Pat McCann, CFO, Magna International: appreciate the details on the flight plan to 2026 margins and confirming that you can get to the high 6s, maybe low 7%. But if I look back at the 2026 disclosure previously, the progress seems reasonable in each segment, except for Power and Vision. It seems to need the most acceleration to approach higher single digits. I know tariffs are weighing on in the first half this year, but what needs to jumpstart that segment margin performance? And high level, how is Veoneer now performing versus expectations?

Swamy Kotagiri, CEO, Magna International: Yes. I think, from a PNV perspective, you touched on the tariffs. That is the significant piece. And I think from launch cadence in terms of engineering spend, in terms of operational performance, all are on track, going in not just from first half to second half, but looking forward. Again, volumes need to hold and other assumptions need to be there.

From a Veoneer perspective, we are not looking at as much as Veoneer itself. We are looking at the consolidated, you know, entity. And we hit the synergies that we talked about, maybe slightly ahead. We continue to, do the optimization in terms of resources and so on and so forth. So all in all, pretty good.

You know, the take rates and what’s happening in the markets and architecture always will have an impact on it, but I I would say the rationale is holding.

Luis Tinelli, Executive, Magna International0: Thank you.

Conference Operator: Your next question comes from the line of Jonathan Goldman with Scotiabank. You may go ahead.

James Picariello, Analyst, BNP Paribas: Hi, good morning team. Thanks for taking my questions. Swamy, if we sit here today, like what’s the confidence level in getting North American production assumptions of 14.7? Do you think that’s a reasonable level looking out to the rest of the year? I know you don’t have a crystal ball, but just given all the power headlines out there and potential downside risks, how confident are you hitting that 14.7% number?

Swamy Kotagiri, CEO, Magna International: Jonathan, good morning. You talked about the crystal ball. So but that’s what you’re asking me

Luis Tinelli, Executive, Magna International2: to look

Swamy Kotagiri, CEO, Magna International: into. Again, looking at releases, looking at or taking into consideration our discussions with the customers, I I would say we are pretty comfortable unless there is a a complete dynamic change in the pricing of the vehicles and what happens in the market. You look at the inventory levels, look at the data that’s out there and the production today. I I would say I’m pretty confident with the numbers that we’re talking about. Again, this is a little bit of crystal ball, as you said.

Luis Tinelli, Executive, Magna International: We’ve also, last couple of quarters, taken our numbers down in North America. And each last two quarters, the numbers have exceeded what we expected. So we continue to kind of look at it and say, well, this may be some pull forward, but the numbers have been pretty good and sales seem to be pretty resilient even in July. So I think that gives us some confidence.

James Picariello, Analyst, BNP Paribas: No, that’s a fair point. Got it. And I guess another one, maybe looking out a bit longer term. Swamy, has the outlook for EVs changed with all the rhetoric about renewables, energy and the new legislation passed in The U. S.

And some things we’re thinking about in terms of adoption of EVs? And if it’s changed, how do you see that impact on your business, whether it’s on the top line margins or maybe on the capital piece?

Swamy Kotagiri, CEO, Magna International: Jonathan, we talked about EV take rates going back again five years. I just want to remind, we’ve been, I would say, conservative compared to the general outlook. And as we stand and look at the market today, it’s even softer than that. But we still believe that is a long term, you know, trend. But as I talked about in my prepared comments, the product portfolio is flexible to address the hybrid uptick that we are seeing and the continuing guide platforms.

Also, I wanna point out that the investment for our PES in terms of app opportunities is behind us. I talked about platform technologies on our PMV, also significantly behind us. Right? So if the best come forward, even at the current rate or a little bit higher, I would say it would be a tailwind. Right?

Because all the heavy lift is behind us.

James Picariello, Analyst, BNP Paribas: Interesting. That’s good color. I’ll get back in queue. Thanks for taking my questions.

Conference Operator: Your next question comes from the line of Mark Delaney with Goldman Sachs. You may go ahead.

Luis Tinelli, Executive, Magna International2: Good morning. Thank you very much for taking my questions. First is on the industry environment. Hoping to better understand what Magna is seeing in terms of award activity year to date and how you’d characterize your expectation about the bookings environment going into 2H? And I ask in part because some of the Tier 1s have talked about strength in areas like hybrid powertrains, digital cockpit.

You mentioned some hybrid awards this morning, but we’ve also heard other Tier 1s say that the booking environment has been a bit difficult, given some of the policy changes and tariff environment.

Swamy Kotagiri, CEO, Magna International: Good morning, Mark. Short answer, we are seeing good cadence in terms of our overall expected bookings for 2025. Yes, there is program dynamics in terms of push out, cancellations and so on and so forth. But if I step back and look where we stand as of now compared to the past years, we are seeing not a whole lot of change. We are in a good place in terms of hitting our numbers that we had put in our plan.

Luis Tinelli, Executive, Magna International2: Thanks for Swamy. Second question and kind of following up on some of the prior questions around some of the changing policy dynamics, especially for U. S. Emissions policy and just better understanding the net effect to Magna, right? So we think about the potential for more ICE vehicles, increased hybrid mix, but lower bevs.

You just as you think the net of those effects, do you envision those being a net tailwind for Magna in your ability to outgrow the market or more offsetting?

Swamy Kotagiri, CEO, Magna International: I think most of the policy impacts are secondary impacts, right? Like the EV credits going away and therefore the consumers may be not buying as many EVs as an example. I think that might soften the fab. But on the other hand, if it increases hybrid and ICE vehicle sales, then, you know, we we are part of the equation there. Right?

That’s what we are seeing currently. And as that continues, our all our cost initiatives, all the work that we’ve done in terms of footprint consolidation and cost optimization, it will show through in the margins. If the Babs come back, like I said before, a couple of questions before, the investment is behind us and we would see that as a tailwind going forward.

Luis Tinelli, Executive, Magna International2: Okay. Helpful. Just one last one for me. Just trying to understand the bridge of your revenue outlook from the last earnings call until today. I think the midpoint of the revenue outlook is now $400,000,000 higher.

You spoke about North America production being lower, China a bit higher. You also said FX is a tailwind. So if you could just talk a little bit more on the puts and takes, maybe I missed it, but how much of an incremental tailwind is FX and maybe just other key puts and takes around your customer exposure, growth of our market, etcetera?

Joe Spak, Analyst, UBS: I’d say

Luis Tinelli, Executive, Magna International: roughly half of it is currency. Roughly half of it is a net of pretty strong a better mix than we’d anticipated, offset by lower volumes in North America. I think that would be the best way to break down that bridge.

Conference Operator: Your final question comes from the line of Michael Glynn with Raymond James. You may go ahead.

Luis Tinelli, Executive, Magna International3: Hey, good morning. So I just want to visit something we talked about more three plus years ago with this idea of North American reshoring. Has the business case for a Magna Steyr facility in North America evolved? Is this something that could happen at this point in time? Is this something that Magna is considering?

Swamy Kotagiri, CEO, Magna International: Good morning, Michael. We’ve always said in terms of looking at complete vehicle assembly in North America is a decision based on, a customer, programs, multiple life cycles, for it to make sense. I think the those required assumptions remain the same. But given production capacities and how things are going, we we don’t see anything active right now. Right?

So our criteria for looking at that hasn’t changed. It is the same. It has to be multiple customers, multiple life, cycles before we look at it, and there is nothing on the table as I speak today.

James Picariello, Analyst, BNP Paribas: Okay. And then

Luis Tinelli, Executive, Magna International3: when I sit here and look at your production, your North American production outlook at $14,700,000 which for

Pat McCann, CFO, Magna International: me

Luis Tinelli, Executive, Magna International3: very low number considering what we used to see. You have very low inventory levels. In the background, there seems to be this creeping dynamic where the Detroit three are shifting towards or would like to shift towards a made to order type model. Like how do we think about all of this, especially like this dynamic with D3 moving to made to order, how does that impact Magna? And is it something that you’re increasingly seeing?

Swamy Kotagiri, CEO, Magna International: Yeah. I think from a volume perspective, right, we have to look at the data that we have in terms of programs and platforms. We have to base it on customer discussions and releases. So that’s how we come up with a number in terms of the 14.7 as we stand today. If the dynamics change there and if that number increases, I hope you’re right, it’s gonna be a tailwind for all of us.

We are just basing it on the facts and the same method of calculation every time that we look at it. There is some amount of judgment, but it’s again, it’s based on a lot of data. In terms of your, I think the word you used was made to buy. It was made to order.

I haven’t seen a whole lot of that in terms of, there is a complexity and very introduction that the OEMs continue to talk about to simplify, the complexity of manufacturing sequencing and so on. And I think that’s good for everyone. But even if it does go that way, I don’t think from a product portfolio perspective that we have as Magna would mean a lot, a lot of change here.

James Picariello, Analyst, BNP Paribas: Okay. Thank you for taking the questions.

Swamy Kotagiri, CEO, Magna International: I guess that was the last question. Thanks everyone for listening in today.

Conference Operator: At this time, would like to turn it back over to Swamy Kotagiri for closing remarks.

Swamy Kotagiri, CEO, Magna International: Thank you, operator. I jumped the gun. But thanks for listening to everyone today. We continue to execute despite the high degree of uncertainty in the industry. I have to reiterate that we remain focused on the many initiatives that are driving cost, launch and capital discipline and with it, solid free cash flow generation.

We plan to both get back within our target leverage ratio and are committed to our capital allocation strategy, and we remain highly confident in Magna’s future. Thank you, and have a great day.

Conference Operator: This concludes today’s call. You may disconnect.

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