Q3 2020 Magna International Inc Earnings Call
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Please standby the conference will begin momentarily we thank you for your patience and ask that you. Please remain on the line.
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Greetings and welcome to the third quarter 2020, <unk> results conference call.
During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone if at any time during the conference you need to reach an operator, Please press star zero.
As a reminder, this conference is being recorded Friday November six 2020 I.
I would now like to turn the conference over to Louis Tonelli VP Investor Relations. Please go ahead.
Thanks, Jason Hello, everyone and welcome to our third quarter 2020 conference call.
Joining me today are Don Walker, Swami coding, Gary and Vince Galifi.
We'll have formal comments today from dawn and Vince.
Yesterday, our board of directors met and approved our financial results for the third quarter ended September Thirtyth 2020.
You should a press release this morning for the quarter.
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 Dotcom.
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.
Such statements involve certain risks assumptions and uncertainties, which may cause the companys 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.
As we review financial information today. Please note that all figures discussed are U.S. dollars unless otherwise noted.
We've included in the appendix reconciliations of certain key financial statement lines for Q3, 20, and Q3 19 between reported results and results excluding unusual items.
Our quarterly earnings discussion today excludes the impact of unusual items.
In Q3 2019 dawn.
Tom will comment on the noncash impairment charge, we recorded in the quarter.
Please note that when we use the term organic in the context of sales movements, we mean, excluding the impact of foreign exchange acquisitions and divestitures.
Lastly, please note that we will be providing our 2021 outlook at the same time as we report our fourth quarter and year end results in February 2021.
And now I'll pass the call over to Dawn.
Thanks, Louis Good morning, everybody I hope everybody safe and healthy wherever you are today before I start I would like to acknowledge all magnum employees around the world for their tremendous efforts in meeting and exceeding the challenges of the past nine months.
I'd also like to once again reiterate that the.
The health and safety of all of our employees remains our top priority at Magnum.
Today ill review, our recent highlights, including our announcement of Salamis appointment as Magnus next CEO, our strong third quarter financial results like a noncash impairment charge related to our investment in one of our equity accounted transmission joint ventures.
Our agreement to acquire Hong Lee.
The start of production in our vehicle manufacturing joint venture with BJ youd be in China.
Announced cooperation with desk or in a key program award in camera monitoring.
I'll switch up the order a little bit here in or start with our strong Q3 results. Following the significant production declines driven by the COVID-19 pandemic in the first half of the year, we were experiencing a recovery in production which started.
At the end of the second quarter, particularly in our key markets of North America, and Europe as well as China.
We were pleased with our operating performance in our quarter wealth sales were down 2% year over year, our adjusted EPS increased 38% to $1.95 in the quarter.
And we generated $1.3 billion in free cash flow.
Strong results reflect our operational focus on world class manufacturing and the actions, we have taken to reduce discretionary and structural costs in response to the lower levels of production.
While production is recovering in auto sales has been fairly robust in the past few months the resurgence of COVID-19 remains a risk to future sales and production.
I believe the government's realize the importance of keeping our industry going.
We have shown is been done safely. So I hope, we wouldn't have to shut down manufacturing.
We believe the actions we have taken to reduce our cost structure and adjust discretionary spending are once again evident of our operating philosophy and agility in adapting to changes in our operating environment.
I would now like to address a noncash impairment charge. We took this past quarter in the past few years, we have highlighted some of the changes we have faced in or get dragged joint ventures similar to last year. During the third quarter of this year, we began to develop our business plans, including volume projections and cash flows for future.
Two years based on this we concluded that the carrying value of our investment in get dragged jangling transmission or GJ tea joint venture. It's further impaired, resulting in 200 million noncash asset impairment charge after taxes and minority interest.
We are disappointed in our.
Future projections in joint venture in to detect a good trade joint venture in particularly growth in the Chinese business restructuring actions, we announced last quarter included further charges to rightsize GJ tea, we continue to review ways to optimize our joint venture transmission businesses on that.
Positive side, our wholly owned transmission business, which is primarily dual clutch transmissions or DC teas continues to be strong our package neutral hybrid DCT.
On which a motor is embedded directly into the transmission is an important element of our powertrain electrification strategy. You will recall that we have an award from BMW front transmission technologies for front wheel drive platforms.
This award is for our scalable DCT, including hybrid transmission variance covering 170 different vehicle applications.
We also noted at our Investor day earlier this year that we have been awarded 48 volt hybrid DCT business with an additional customer.
We began to launch our hybrid DCT product next year continues to be strong interest from other Oems for DCT products and we are confident that this will remain a key product supporting their customers vehicle electrification strategy going forward.
Overall contract has been a good acquisition Unfortunately.
Since we allocated a higher proportion of the value to the jvs at the outset resulted in some impairments and our investments in those jvs.
Next let me discuss some recent developments at Magna, including a couple that highlight our continued focus on expanding in China and a couple that demonstrate the unique position we hold in the industry.
We currently have a noncontrolling interest in a joint venture with Hong leave a leading seed supplier to Chinese automakers back in September we signed an agreement to acquire 65% ownership of Hong lease entire seating business.
China is an important market for Magna and this transaction strengthens our competitiveness and seeding through additional manufacturing sites full engineering and testing and increased vertical integration.
The majority upon lease plants are vertically integrated with G.I.T. ceding assembly structures foam and trim capabilities that enable an optimum sourcing solution for automakers. The transaction is expected to close in early 2021.
This past quarter in our complete vehicle manufacturing joint venture facility in China. We began the launch we began to launch the Ark Fox Alpha T. The first vehicle to be produced with the arc Fox brand for BJ, EDI and our first vehicle assembled outside of Europe.
While volumes not.
Going to be significant through 2020, they are expected to grow over the next couple of years as we ramp up production and additional art Fox vehicles are introduced.
As part of our strategic direction to support traditional automakers as well as new entrants, we signed agreements with Fisker that provide the framework for a platform sharing and manufacturing cooperation for the Fisker Ocean SCB initial production is planned for the fourth quarter of 2022.
This is a great example of our strategy to leverage our strong portfolio to scale for future mobility needs and utilize our full vehicle engineering and manufacturing capability.
This is a unique competitive position for us, particularly with the new mobility players.
And OEM seeking to expand their electrified offerings as part of the cooperation Fisker issued magna warrants to purchase shares currently representing approximately 6% of its equity.
In addition, we have recently been awarded business for a new camera monitoring system across multiple vehicle models for a global automakers.
Our new Clearview technology will enter the market in 2022, using a unique combination of our camera mirror.
Electronic and software capabilities that clear view system creates a complete vision system that enhances driver safety by giving the driver and more information about their side and rear surroundings.
The system demonstrates magna's ability to combine our capabilities to provide optimized solutions for our customers.
Lastly, and importantly, I'm happy to do that we recently announced that the board has appointed Swami coda, Gary as CEO effective January 2021, following my retirement ended the year.
Leading magna over these years has been a tremendous honor and I'm extremely proud of everything we've accomplished I've truly enjoyed the ongoing dialogue. They have had with the investment community and we'll miss a regular contact.
Fortunately most if not all of you are familiar with Swami through his interactions over the past few years through quarterly Investor calls investor days, and other presentations as well as through business toward CROI offices.
In addition, just wanted me strong technical and operational strengths he.
He has played an integral role in developing Magnus strategy and advancing our position in the changing mobility landscape.
I am very confident and swung his leadership and ability to move magnet forward into the next decade and beyond and.
And I'm also very confident in the extremely strong and experienced management team we have.
Senior leadership positions across Magna.
And with that and speaking of that experienced senior management I'll pass the call over to Vince.
Well, thank you Don and.
Good morning, everyone.
As Don mentioned following the worst year over year decline in vehicle production during the second quarter of 2020 that we can recall, we experienced a significant recovery in our key markets in the third quarter.
And we quickly bounced back to profitability stronger margins and solid free cash flow generation, even on relatively low vehicle production.
Our third quarter results include sales of 9.1 billion.
Adjusted EBITDA of $778 million, which is up 39%.
Adjusted EBIT margin of 8.5% compare to 6% last year.
Adjusted net income attributable to magna of $585 million up 34%.
Adjusted diluted EPS of $1.95 up 38% over the third quarter up 2019, and free cash flow of 1.3 billion.
We also returned $115 million to shareholders through dividends.
Lastly, we increased our outlook for 2020.
EBITDA cover these in my financial review.
Our third quarter total sales were 9.1 billion, a decline of $190 million or 2% from the third quarter of 2019.
Our sales were negatively impacted by lower assembly volumes back the stier lower vehicle production, particularly in Europe. The end of production on certain programs and net customer price concessions.
These were partially offset by the launch of new programs the negative impact of the labor strike at GM that was reflected in our results in the third quarter of 2019 and currency translation, which was about a 117 million tailwind.
On an organic basis in the third quarter, our sales were roughly in line with global production largely as anticipated coming into this quarter.
Year to date, our sales have outgrown production on a magnet weighted basis by 4%.
We also expect solid sales outperformance of the market in the fourth quarter as you will see in our outlook.
Despite the lower sales adjusted EBITDA increased $220 million.
Or 39% to 778 million, our adjusted EBIT margin also increased compared to last year.
We reported 8.5% in the third quarter of 2020 up from 6% in the third quarter of 2019.
The increase reflects a higher margin percent earned on sales as a result of discretionary and structural cost savings and efficiencies realized across the company the labor strike at GM, which negatively impacted results in the third quarter of last year, lower launch costs productivity and efficiency improvements at certain underperforming facilities.
Some of these lower.
Lower spending for autonomy as a result of exiting our list partnership at the end of last year and favorable mix in our complete vehicle segment.
Also benefiting our margin in the third quarter by about 70 basis points less COVID-19 related government employees support programs, which have substantially come to an end in the third quarter.
These were partially offset by higher foreign exchange losses, and net warranty costs.
Each of our segments generated better adjusted EBIT, both percent of sales and dollars compared to last year.
Our effective income tax rate increased to 22.6% this year compared to 19.6% in Q3 of 2019.
Increase was primarily due to lower favorable changes to our reserves for uncertain tax positions, partially offset by a change in the mix of earnings.
Net income attributable to Magna was 585 million compared to 438 million in Q3, 2019, reflecting the higher EBIT, partially offset by higher interest expense and the impact of the higher effective tax rate.
Diluted EPS was $1.95 for the second quarter compared to a $1.41 last year.
The increase reflects the higher net income and 4% fewer shares outstanding.
I'm going to take a moment to discuss accounting for the noncash impairment charge against the carrying value of our investment in our GJ tea joint venture.
The legal ownership of the good track joint ventures is quite complex. We've included a summary in our appendix our.
Our net impairment this quarter is $200 million. However, a number of incomes that statement lines are impacted the pre tax charge of $337 million, a tax recovery of $62 million and minority interest recovery of $75 million.
Lastly, the U.S. GAAP EPS impact on Magna of the impairment charge of 67 cents.
I will now review, our cash flows and investment activities. During the third quarter of 2020, we generated 1.6 billion cash from operations compared to $750 million in the third quarter of 2019.
This included 518 million in cash generated from working capital, reflecting among other things the collection of customer receivables that had been delayed from the second quarter as well as a return to normal payment patterns with our supply base.
Investment activities amounted to $293 million, including 213 million in fixed assets 68 million investments other assets and intangible assets at a 12 million dollar increase in private equity investments free.
Free cash flow was $1.3 billion in the third quarter.
In addition, we returned 115 million to shareholders in the quarter through the payment of dividends.
Our balance sheet remains very strong.
At the end of the third quarter, our liquidity stood at $5.3 billion, including $1.6 billion in cash or.
Our adjusted debt to adjusted.
EBITDA at the end of the third quarter stands at 2.1 times lower than the 2.35 times in Q2.
As anticipated this is above our target range given the severe decline in EBITDA in the first half of the year, we will likely stay above the target range in the short term, but expect the ratio to normalize back into the range in 2021.
Yesterday, our board approved our third quarter dividend of 40 cents, reflecting our collective confidence in our liquidity and our future.
We announced today that our board approved subject to approval by the Toronto, and New York Stock Exchange as a new normal course issuer bid to purchase up to $29.6 million of our common shares.
The stupid will expire in November of 2021.
Next let me turn to our updated outlook as always our outlook is predicated on a set of vehicle production assumptions.
Compared to other years that remains a higher degree of uncertainty surrounding future production given risk associated with consumer demand, increasing COVID-19 infection rates supply chain or other production challenges in other factors if actual production very significantly from our assumptions. Our results may also vary significantly.
Our 2020 margin and cash flow the outlook has improved from our August outlook, primarily reflecting strong operating performance and higher sales expectations. The improved sales expectations relate mainly to higher expected 2020 light vehicle production in key markets and currency Tailwinds some of which we expect.
Once in the third quarter as well as increased anticipated assembly sales.
The improvement in free cash flow outlook, mainly reflects better than previously expected cash from operations and a slight decline in our expected capital spending for 2020.
We also reinstated other elements of our outlook, including sales by segment equity income and net income attributable to Magna and.
In the appendix to our conference call Slide deck. We have also included expected segment margins segment margins for full year 2020.
A few observations regarding our implied fourth quarter outlook compared to the fourth quarter of 2019.
Vehicle production is expected to be down approximately 4% and 6% in our key markets of North America and Europe, respectively. Overall, we also expect global vehicle production down approximately 10%.
We anticipate another solid quarter in Q4, despite production volumes being down year over year.
Our total sales range implies sales at worst level with Q4, 2019, and at best up 11% with organic growth over market expected to be strong.
Our either percent range implies an EBIT dollars range of about $675 million to $815 million compared to $590 million in the fourth quarter of 2019.
Our range for net income attributable to Magna is 515 to 604 $640 million compared to $433 million in the fourth quarter of 2019, and our free cash flow range for 2020 is now between $801 billion, implying a range of $550 million to sell.
150 million for the fourth quarter of 2020 compared to a very strong 1.1 billion in Q4 up 19.
This would bring our second half free cash flow to between about 1.85, and 2.05 billion compared to the $1.3 billion to $1.5 billion range, we expected back in August.
The solid outlook reflects the combined actions, we've been taking across our business to address the current industry environment.
Thanks for your attention. This morning, we would all be pleased to answer your questions at this time.
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One moment please for the first question.
And our first question comes from the line of John Murphy with Bank of America. Please proceed with your question.
Good good morning, guys and thanks for all the detail on a lot of developments here at so it's very helpful.
Wanted to ask a first question on the outlook Vince that you just went through.
Particularly around the fourth quarter, which is very strong.
Top line and even EBIT level. It are there programs rolling on in the fourth quarter, that's giving you this level of confidence because I mean, if you look at the outgrowth words versus the market as you just simply without sales were.
Up 10% to 21% above the market. So it seems like your.
Really outperforming the market in the fourth quarter and it seems like something must be rolling in.
Well I think what you're seeing in the the fourth quarter is a benefit to some new program launches.
We're also seeing.
Yes, so expecting to see some continued better mix just within our product segments, which have certainly to grow overall sales or VR old old way of defining things content per vehicle average content per vehicle. So that's certainly helping on the on the sales line.
On the margin side.
You look at kind of implied margins in Q4, and and there you have to work the math that will be a little lower than where we were in Q3, but remember Q3 benefited from those government support programs about 70 basis points. So if you kind of neutralize Q3 for that and look at kind of the range of potential.
Q4 margins.
It's in the ballpark of the Q3 net of the government support programs.
Again.
I look at that and.
So I think thats, good margins strong margins as reflecting obviously.
Some of the activities, we undertook through this year, starting in Q1, and Q2 and actually continuing wherever.
Right sizing.
Our company looking at a whole bunch of structural costs that we've taken out you know we took a pretty big impairment.
Severance costs due to the $150 million and we're expecting some savings and we are seeing the benefit of that in Q3, we will continue to see the benefit of that in Q4 and continue to see benefits growing and as we get into 2021 on the margin side.
John the other thing is that for the most part we've had we've been struggling with some losing divisions in the past few years and some.
Some difficult launches in right now knock on wood everything seems to be going pretty well and we've made some really good improvement in a number of those areas. So thats, helping as well on the sales side for sure a big programs. There are some launches, including the Gms Cvs, but just generally the GM programs are very strong year over year Morse stronger, let's say in the fourth.
Quarter relative term in relative terms compared to where they were in the third quarter. So that's definitely helping us and we're launching the bronco. We've got some content on that and of course, the escalate and Weve got content on there Theres a few programs that are launching.
Okay. That's very helpful. And then just a second question maybe sort of two pronged on strategy here I'm. Just curious if you can you remind us of your currency position in China, and what the timely acquisition means to sort of the total portfolio in China, and then sort of the the second strategic question is we look at ARCC.
Alex and Fisker I'm, just curious how the platform development costs and the platform development.
Whether you call it a skateboarder what the how you want to define that platform.
Is getting paid for it in shared these partners and is there any crossover between what you're doing with arc box and what might be the platform for fiscal <unk>.
Okay.
[laughter].
Yeah, Let me, let me start with the seating Magna has been as you know if you look at historically, we've been relatively small going back 20 years, we Brits grew in North America and in Europe. So we were relatively small player still in China, but we have made some acquisitions, we've done some greenfield operations and this just strengthens our position in.
China, We believe we can continue to penetrate organically with this winning new business over there and we've got some very big competitors in China and some of that.
Onto at some some difficult times. So this was a move for us to really give us full capability just to continue on a greenfield growth over in China.
Maybe I'll turn it over to do so on me for fiscal <unk> Fisker, We would just Christ Duvet Fisker and what we're doing for art Pocs because were tied up with customers were pretty limited what we can say well.
Well that will even up to them what they want to say, but didn't know if you want to add anything Thats why me on Fisker and our thoughts.
Yeah, Don I think generally make you said, we want to be talking specifics, John but most importantly, I think there is a lot of.
Platform and core technologies across Magna and we've always talked about how there is an advantage in being able to bring.
All of these platforms together at the system level loaded from a regional perspective.
We have done back at different levels. So if there is one another example.
Being able to provide that Greece platform, obviously, the details and because my vision and some of that stuff is different from different Oems and customers.
You're not able to discuss those details.
Okay, maybe just one follow up to that I mean, I mean, obviously, you're capable of designing engineering and manufacturing and you'd be right. It's.
I don't think it's a secret you guys are very good at this stuff.
The business question is given the business and so that is always a big the big question Mark somebody else is taking the risk you're being archrocks in Fisker for you, but I mean, it's just.
What we will we ever utilities here your hobby development costs and these platforms.
Costs are shared overtime, but I think there is a lot of interest in obviously, what you're doing here, but then what you can do in the future based on what you might develop here or what you might do with other other partners I mean or is there going to be a point in time, where we can have more disclosure I understand what's going on right now, but I think there's a lot of curiosity about what you're doing here.
Yeah like I said, John one of the key things that we've always talked about looking at platform.
Platform being modular and scalable.
He took the product line.
When I say that with its powertrain within certain power levels are you that you know that the.
The loan to plant.
As we go through each of this even in cosmetic studio slick water has been under body work through April structure.
We have always done it with the outlook on what the rate cuts could be in different segments and what is the sweet spot.
With her magna's tire engineering capability and kind of oversight from what they go through from a manufacturing perspective.
We are bringing these things together so it's very difficult to say here is a platform. Overall. This is what we consider to be core platform technologies have looked mandan it happens across the portfolio.
So you are definitely going forward they will be synergies on things that have been developed and use off the shelf.
You know going forward, just like any other products and we hope to see that but difficult to quantify exactly.
Well just as quick restaurants.
Okay, and then just lastly, real quick on the.
Yeah, GDT write down gone you kind of commented.
The way that you had been allocated at the point of acquisition May have been made less than perfect based on what you know now right. Maybe you know was good when you when you were doing it.
But it sounds like there's a lot of value that developing on the HVP side, its sort of packet neutral port for hybrids and and just curious in total if you think about that acquisition. There are some really some parts that may be a little bit negative, but then it sounds it sounds like there's some parts that are really positive things on the H.D.T. side. So.
Is that GDP right that really an accounting.
Rule that you're kind of forced to follow and there actually is still a lot of value when it could drag acquisition and its not something its all sudden in coal being really impaired in a significant way.
John I think differently or the.
The product.
Jason see compared to what we had in our driveline systems.
It is definitely a great decision and it continues to show.
In our DPP portfolio and as you talked about we continue to win business in the hybrid let's transmissions and a lot more inquiries from various customers.
Going way beyond the 2026 timeframe, even so we see a strong roadmap there and as a next step based on the DCT platform. We are also looking at the D. H D.
And that is that is every cable to the hybrid as well as the ERP platform. So we see that as the right decision and it continues to be a foundational step forward electrification process. So it's only a matter of regional product application in China, where I think we.
You talked about it maybe you can add some color.
The reason why we are seeing the impairments, but for all of the product portfolio and the decision on good track refill believed was the right thing and he is the right thing.
John its its fast just like I.
Unfortunately accounting rules.
Force me to look at our wholly owned operations in our equity accounted investments a separate pieces because we're doing some.
The required testing.
I got to compare that to how we originally allocated purchase price on on this acquisition and that's forcing a pretty significant you know impairment. This year. We also took an impairment on.
On this business.
You know if these entities were consolidated and I looked at this through one lens as opposed to.
Hi, Jason substantially all that impairment wouldn't be required I think there'd be some still some fixed asset impairments and the entities because of different tests that applies whether your equity a counter consolidated but substantially all that impairment wouldn't be required. It's just unfortunate because as as Don talked about Islam, we talked to you or is this acquisition.
And there's always uncertainty and anything you do even when you look at the program and you had in China, we underperform than in Europe.
[noise] outperformed expectations and that's why we talked about his position extremely well when you think about our electric.
Electrification strategy.
That's just the end result, and we're following the rules.
Yes. Thank you very much that's incredibly helpful. Thank you.
And our next question comes from the line of you taking the Kelley with Citigroup. Please proceed with your question.
Great. Thank you good morning, and Don Swami can congrats to you both.
<unk> first question going back to the margin discussion maybe for Vince since it looks like you're exiting kind of in the high 70% range prepare your guidance I think you mentioned earlier there are still some additional opportunities there. So it at a high level, how should we think about kind of the the original 2022 guided range I think of 7.6.
8%, Okay. Thanks, a lot of uncertainty out there but.
Should we think about that as having potential upside over the next couple of years, a any puts and takes there would be helpful.
But we're in right now in the middle of business plans.
So I I don't have that information handy right now that I can look at it and rely on.
So we'll give a full sort of color in February but yeah, I think kind of sit back the way I would think about it.
This fall.
If our volume and mix assumptions and 2022, where exactly you know we put we did pull our guidance right given the uncertainty.
You know that that gives you a benchmark and when I look back at the business and what's happening in the business and some of the things that we've done this year to improve our cost structure would be additive I believe to where we would have been 2022, that's a plus but I got to remind you too that yeah. I don't think the volumes are going to be where they are.
I think they're probably going to be a little bit lower so that's kind of in a negative I don't know when you kind of add one plus two and the changes in new business awards for that all sort of.
Ads too.
But we have become I'd say more efficient on the cost structure and that's just not a Q3 or Q4 item is something that's going to continue.
You know for the foreseeable future out into 21, 22 and 23, that's my visibility at this point in time.
No. That's very helpful. Then so thank you for that and then just secondly, I'm, hoping you can give us an update broadly on just the new business and quoting pipeline and then maybe particularly on on the Das business. I know previously you were thinking about the.
The outlook was it picked up business to the over a billion of revenue by 2025 day any updates there in terms of the level of quoting and just new business when activity.
So.
All right go ahead go ahead, sorry go ahead.
Well I think I just was going to make your comment from a the program that we were talking about and which have actually helped us get.
I guess some of the development process that we've undergone in advanced technologies tend to put us in a great.
Great position to win some additional business or.
So I think that quote platform technology will help significantly and as we look at the growth ranges out through 22 and 23.
Earlier, we talked the boat to be in the 7% to 9% Cagar from 19 to 22 are looking at 19 through 23 relating to the 13% to 15%, but did do some good traction in terms of programs you're talking based on the core development that we've gone through.
Yes, if I look at our program, our wars, and and Oh, Hey, Ana it's hard to just take it a quarter and make a conclusion on that but if I look at the first nine months of the year and whats in the pipeline I'd say on the specifically on Ada Es.
We certainly had a plan in terms of what we were targeting and you know where our results are today I'm confident that we're going to.
Meet or exceed that plan.
And we'll quantify that as we get some guidance in February of next year, you know with respect to some of the other businesses I think in some some areas weve seen some slippage into 21 as some of the programs have been delayed but.
Not that we've lost the business just set the program awards have been flushed out over what we thought they were you know that they were going to be awarded so I'd say overall you know we're on track in terms of where we thought we were going to be at the beginning of a 2020.
And Vince I think just maybe a couple of points on Dom mentioned that the program award for camera monitoring.
I I think is a good example of how.
We are basing their existing technology and bringing different systems together.
This is a complete intelligent vision system, you're talking about includes the outside mirrors with camera monitoring inside radio meter and the remote you and our software of course.
So we see this as a trend where it's unique to us to be able to bring systems together and that's that's a good win and we see a lot more traction and discussions with other Oems.
Interesting that's very helpful. I guess just to sneak in on that somebody else on the camera monitoring award any sense of how we should think about the CPV for that.
All right it's difficult because it's based on the number of creatures then what type of integration is needed, but if you look at the meters are worse than the cameras individually whats the steel world system.
I would say at an average that could be an increase content for us.
Got it perfect. Thanks for all the detail. Thank you.
And our next question comes from the line of Chris Mcnally with Evercore ISI. Please proceed with your question.
Hi, Thanks, so much and congratulations again to Don in Colombia, hopefully so on that you can get the 23 times with turning in Magnus docket that thought it would take to accomplish over here its career, so we'll keep that optimism.
One one model question and one street strategic.
I'm on the modeling of the power Division margins.
<unk>.
Particularly impressive and that's one where you've already discussed that you've had a lot of turnaround in a couple of execution issues over the last one to two years. This is a business that used to have a 10% plus margin I'm I'm coal you're just curious can we think about that this 8% sort of second half.
War as something to work off I'm going forward I know you're working on that for three year plan, but just trying to see if there's anything extraordinary in the mix that gave you such a.
A nice pickup and that in and what looks like the implied second half.
Hey, Chris Let me, let me try to answer that and you look at the the the margins in Q3 for Parkervision. They came in at 88.3% compared to about 6.2 or the year before.
I think you've got an.
Look at the point free and and think about first of all the employee support programs and that was probably around a you know point points or 60 basis points 60 to 65 basis points for power and vision.
And the other is a benefit of not having a GM strike in Q3 last year.
But besides that we did see some some some margin expansion in our power vision segment.
Part of that came through some efficiencies and restructuring savings you know part of that came through you know.
Reduce spending on on lift, which we've talked about but.
Hi, Chris think about it this business on this basis, it's still a relatively small business I know, it's growing quite rapidly.
And we've been investing and I take couple of areas one as.
I call I call. It core platform technology, and you've heard just want to talk a little bit about that in other areas of the business.
And we're also spending a lot of money on programs are going to ramp up and launch over the next couple of years.
That core technology spending once weve got it it's an asset we have is like a fixed asset. Unfortunately, we don't put on the balance sheet, because we expense it but we're going to be a little leverage that for for future programs. So [noise].
Yeah that should lead to higher margins on its own.
I'm like a fixed assets, where you depreciate over time and it continues to hit margins. This money is spent we've got the asset and we're going to leverage that.
So how the margins grow over time, there's going to be a function of how quickly the business ramps up how much new business. We've got and water continues spending is on on platform technology.
And I would expect the the level of spending that we're doing now on on sort of gaining and maintaining our capabilities, there's going to be roughly the same and the variable is gonna be application engineering, which is completely related to that tied to new business.
Okay. That's that's.
That's really helpful. In terms of the of the launch sequence and then maybe my second question a little bit more on strategic you know think about aspire and and John I think alluded to to sort of the spirit of the question in and in his question I guess my high level.
You have Austria, you have assumed that facility.
In Serbia, which you can grow what would it take from an economics perspective, you know a new customer to launch sort of a U.S. facility because I think clearly the what we're all seeing is a huge startup demand from new easy players, who really don't have any history and in manufacturing, but but essentially of all that.
Free capital in the World and it seems like it would be this once in a you know a a kind of cycle opportunity for magnet to to do something with styrene in North American and sort of get out ahead of that could you just talk about maybe the third hurdle requirements capex requirements anything about what does the opposite.
To me that it looks like we can grow stier, you know significantly come here.
So oh, it's increased.
Great question in terms of looking at the possibility of a footprint in North America, We've always said.
If the business case makes sense in terms of a longer term perspective, we would remain open and you know they the position is still the same.
To your point, where they can comment Oems looking for different variants, whether it be or otherwise.
In combination with the new entrants I think we have the flexibility and the manufacturing proxies, we still have to look at a volume criteria of how much. He was required to attentively halfway facility you can always talk be something unhappy.
Flexibility to grow or add on I think that still remain the same or whether the.
You bet it has to be multiple Oems are not really dependent upon the volume. If there is a smaller volume criteria with a deep and outlook and then it's two or three mix or maybe just one which has a certain number oh graphically bureaucrats, who would typically be a two.
They can produce up to 200000 units a year kind of gets you a ballpark you know in terms of the Caylin site plus or minus.
Lastly, we can like I said have there could attribute to start smaller and grow.
We continue to have discussions and we are seeing a lot of inquiries.
You know beyond 2023, we said, we would be contemplating and looking at the possibility with fiscal <unk> again. It if it makes sense. So I think there's a few variables that we need to manage through.
That's great and those typical programs I think you said on previous calls I mean, youve done programs that are 50000, but typically there there's 75000.
And and above okay that makes sense and thanks, so much and congrats again.
And our next question comes from the line of Ryan Brinkman with J.P. Morgan. Please proceed with your question Hi, Thanks for taking my question, which is another one on the clear view opportunity on.
I think with slide 17, or how do you estimate or how do you estimate this product stacks up in terms of its cost weight packaging et cetera relative to what competitive offerings are out there and and given those characteristics of the market do you have a targeted amount of sales or market share that you think you are probably could garner overtime could this be.
Eventually material for the power Invision segment, and if so over what timeframe.
And good morning, I think a one there is a key point there is bringing systems together, which we have always talked about was the uniqueness of magna. So this is a good example.
As we look forward, we always talked also about emitters being augmented with other systems to provide information.
To the drivers than the passengers this is that.
In terms of looking at the value you cannot just look at the value from the component to complement comparison.
As we have these discussions with the OEM both in terms of the feature.
The availability to the consumer class you know the one plus one is greater than two is a good example, here so order electric system level. The Oems would look at it only if it makes sense to [laughter] or do you still.
Yeah, the cost base for them right Porosities and increased content and we are able to bring things together in terms of synergies of software EPS used in packaging for sure.
And it's giving more value to the consumer in this case it gives us a larger field of view and that is customized both through user preference.
It has improved driver visibility with three cameras, creating emerged view.
So there's a lot of value to the consumer itself. So its a combination of the two that's it able to bring and we think there is a large market for this and especially with the expertise we have on board meters cameras and software.
Okay, great. Thanks, and then I'm just curious finally, a after the announcement of the transaction with Fisker. If youve received any sort of additional inbound interest along these lines I know you have more capacity, particularly in China coming online how should we think about that complete vehicle assembly business ramping in terms of potential new.
Awards or transactions with a startup automakers that don't have their own manufacturing capacity or how do you think that could trend over the next couple or several years.
I I think it's it's not specifically related to the announcement actually even before.
It did magna's tire capabilities are well known and we have continued to have a radius discussions with with the sign up new entrants as well as actually being come into Oems better experience or regular platforms.
So we see definitely unique capability and like Don talk about we're just starting to launch in a in China, we see a lot of discussion state as well as in North America and in Europe, We believe we could be the enabler too.
To the Oems to widen their portfolio and look at us as an extension and differently from a new entrant perspective to bring reliability robustness experience Oh, a scale manufacturing to them. So we see a good future there.
Okay, great. Thank you.
Just want to add one one thing to your previous question you talk about the market size for clear view, it's always the most difficult to develop something get it proven out and get it can get a.
Hi, make or to say it wouldn't but then in platform.
Once you get one it's the barrier to entry for others is much lower and as an example leads I would look at the electronic watch it took us almost a decade from the concept to land. Our first contract. Once you get the first contract and it was tested out and there was a lot of interest from others and it starts to penetrate so can't give you a.
<unk> dollar range, but.
I would expect once you get it the first one then you can get others and you know as we're looking at the very first program.
So a pretty sizable program, we're estimating well sales are about $100 million a year. So it's a first step into a you know I think additional awards in this in the future and we are speaking with a number of.
Additional customers about our Clearview technology. So I think there is an area of growth for us.
That's that's great. Thanks, a lot for the color.
And our next question comes from the line of Mark Neville with Scotia Capital. Please proceed with your question.
Hi, Good morning, first off dawns wrong again sungard both congratulations.
I just want to help me a little more color on some of the structural cost savings it sounds like head count the big part of it but just curious if there was anything else in.
Vince I know, maybe it's a challenge to quantify but.
How do we think about that in terms or maybe if it's a structurally higher incremental margin or no or putting a number on those those cost savings. Thanks.
[noise].
You know Mark is thought all.
Headcount related right. Some of it is parcels related some of it is just sort of which I think we talked about this and in the end of Q1 is where you know the team took an opportunity to look at what we've been doing and just say what do you know.
What what what's real value added and what can we do differently.
And what what cost can we eliminate so we've done some of that and even when you look at the headcount when I think about the improvement it's not because labor is up or down because volumes are up or down weve actually taken headcount because we we reduce our structural cost and I would expect that to come back.
In terms of trying to quantify it.
I get it I don't have a number mark all I can tell you at this point as you know, we just spent about a $150 million or incurred about $150 million provision in Q2, there continue to be a unfortunately, some some severance and restructuring costs, even in Q3 and expect some more in Q4.
We didn't call them as specifically as scattered here and there and everywhere.
And when we did the analysis and we spent a lot of time in Q2, and just looked at what savings are kinda permit versus just volume related you know at that point and our view was that our savings will be about $200 million on an annual basis now we don't get to that whole number of Paul 2022.
Well, obviously, we're getting some of that today and then the balance of this year the via a bigger part of that's going to fall into 21, and again 22, we should see the full 200 impacting our profitability on a positive basis.
Thanks, and I guess I don't want to pick too much and then another Q4, guys and they say it's very strong.
Or just sort of look at the implied sort of growth rate sequentially sales were up about 700 million.
I haven't quite done the math with the subsidies, but again it looks like the incremental margin is a bit lower than I might have might have thought so and they get some of those excuse me as the cost savings or you're taking some time to come in or maybe it's mix I'm just curious what you thought.
Oh.
So you're looking at a kind of you know these sales were eight.
Right.
Look at ours or sales range implied for Q4 were kind of.
No nine forward it to Ken for and over just over 9 billion.
In the quarter up I.
I think mix has got something to do with it.
You still have to think about seasonality in our business if that.
Christmas shutdown still impacting us in Q4, right I think it's going to be a little different I hope, it's a little different than probably stronger production generally over the holidays, but there is that impact typically in Q4 that does hurt our margins on a on a seasonal basis, they got to factor that into account as well Mark.
Okay I'm sorry, just maybe just one last one just to be counting on the.
The impairment to the JV, what's the the remaining carrying value for that JV and just sort of curious wants to hear sort of what percentage of the <unk>.
No.
Yeah, you know what you look at the <unk>.
And we've got a number of jvs in there.
I think when you look at all of that I'm, just trying to find it over here, yeah, certainly a lot less and kind of where we thought.
We're we're probably in the three to 400 million dollar range, yeah at the end of the quarter in terms of their carrying value.
But remember our carrying value on our on our original acquisition price to be a lot of movement scenario, because you're you know you're <unk>, we've taken money out in the in the form of dividends Oh, we generate some income so.
It is not an easy tie back to kind of our original purchase price you got to run through all the various pieces that impacts our carrying value on our books.
Right got it alright.
Thanks to all pass line. Thank you.
And our next question.
Comes from the line of Dan Levy with Credit Suisse. Please proceed with your question.
Hi, good morning, and echoing ER to others comments Ah Tony since told me congratulations.
Wanted to go back to the margin question specific to the body exterior structures are you at a 10% margin won't every quarter fourth.
Fourth quarter, it yeah, basically implies something like 20% and that's well above what you've done.
In the past for at least for the period that cheap reported segment margins. So can you just give us a sense of the underlying dynamics in the business I mean, I know and treat you obviously had some governance for a day, but for Q still pretty strong is it just.
The GM truck mix in third quarter fourth quarter that you're getting you know really nice contribution margin on that or I know you mentioned a few things in the release about cost saves or large cost efficiency improvement.
Are those unique.
You know, what we shouldn't extrapolate that forward or is there any sustainability.
Kit to those results into those drivers.
And then I think when you look at last year's margins for B S start with posture.
Yeah. There's a couple of things are really stick out in my mind, one is certainly the G.M. strike.
Which we called out last year, which is it was under 50 basis points, but 45 basis points. So that's reversed in the quarter.
But we were impacted by a couple of underperforming operations in the Oscars posture.
We've been talking about some of the actions that we've taken.
Improve those operations.
Kinda board in the first half of the year given produce volumes of coal, but 19, but if you. If you look at the this performance as those operations in Q3 and expected performance in Q4 and so on the.
The actions, we're taking to improve operations as adding to overall margin. So that's going to continue and should continue to expand as we move into 2021.
You know we've been benefiting a bad through the summer launch cost is just really the level of activity.
But do you know throughout that the entire organization at B.S.
Actually throughout the whole company, we're seeing the benefits of some of the Rightsizing actions that we tested some of these efficiencies and restructuring items that we've done and again I think thats going to carry on.
What won't carry on into Q4, because again the impact of siems government employees for programs and as you know a b S.
We estimate that that's about 90 basis points on their margins. So you take the 10, one yeah, there really running at kind of without that.
999, Twoish, let's call that yeah, I think that's a good sort of benchmark.
And with continued.
Realization that some of the benefits from the cost savings from the restructuring just roll over time.
As well as continued improvement in some of those Underperformers you know I don't see any reason why margins can continue to inch up overtime.
Overtime.
Great. So there is some sustainability to that run rate that we see in the fourth quarter.
And just just to be clear you know how much of that is driven by mix because GM is particularly strong and they are running a lot and I know you guys.
Hi couple of Tesla.
Yeah, I, Yeah, Dan and Matt you know that I think when you look at overall, our RV EPS businesses are number customers a number of programs I don't really look at it and kind of highlight what what one program may or may not due to overall margins.
Got it Okay, and then I want to circle back Hum. The Pfister question, there just really a more broadly I'm, calling the complete type vehicles.
So you know I think we all know about.
You know it you do the vehicle assembly piece quite a whole new world older that but I think.
What you know maybe a unique talents or what we're seeing more now with this engineering services piece. So first could you just give us a sense of you know you know how new is this or how you're approaching areas like battery powered trains a day.
Electrical architecture that I mean, we maybe don't see as much on the.
We side and obviously I think we know the appeal of a the start up that come to you because they take the asset light approach, but what's the appeal of a legacy automaker to join you on this platform and take on these engineering services. When they obviously have some of that in house is it just that are really in a school.
Taylor resource allocation.
Yeah Yeah.
I think the important part of it is that the engineering political intimating services is not new we have done that with many of our.
Oems both in North America, and Europe at a subsystem level and also at their full wafer level engineering and integration.
So it's not specific or unique only to the new entrants we have done that in the past.
And that is the experience, that's pure and leveraging and working through so they they reach hesitates there.
I I think a little bit goes to our knowledge and depth in different product system. So it is not just bringing things together.
We can leverage each of the product groups that we have the get the knowledge, we know how the systems interface and bring it together and top of that is the experience like I talked about is the pooled vehicles in the past. So I wouldn't say there is a specific too.
Especially pick two startups only.
As the Oems are looking at is there no we have the capability and experience so they're looking at a radiant or you know.
Oh, the existing platform are looking at you undertaking an existing platform and customizing to something different to meet their needs I think almost there, but now we are able to bring to the table right.
And it's great centric to new entrants I think we can actually look at the entire value chain and say here. The platforms that we have core technology that Vince talked about and if we are involved with them ready ahead. There is a lot of synergies in terms of time and you know the deadline.
Friend process that could be helpful to come to the market faster. So it's a combination of all of those.
And just to clarify any any comments on sort of how youve approached the battery well in areas, which are a bit more unique.
In terms of the integration of the battery if you remember we have the knowledge in terms so far how their practice work and you know like we also talk about how do we bring power to the view.
So in terms of the battery chemistry, and so on honestly, there's a bit of a lot going on so thats something for us to understand but not the expertise, but in terms of the integration of the battery packs and you know the rest of the system.
You know, we have a lot of expertise and knowledge in that I should say.
Great. Thank you.
And our next question comes from Kevin Chiang with CIA PC World markets. Please proceed with your question.
Hi, Thanks for taking my question and <unk> debt.
Congrats dawn and its one day it maybe just a couple of clarification questions. Vince you called out the government, which support.
Impact on margins I think if my math is right. Its about $64 million you know mid 60 million of a of contribution that's that's greater than the decline you saw in your labor cost line, just wondering where else would this these cost savings show up in your piano.
Yeah, they would be in the.
Overhead line overhead.
Okay Yeah.
Yep <unk> tosses hasn't asked you named big as part of its going to probably being pass this test Kevin Okay.
That's helpful.
<unk> It was a lot of conversation on your complete vehicle manufacturing capabilities. If memory serves me correct.
When when EBIT margins were closer to one to two per Se you with your quarterly highlight that the return on invested capital within this division was was it was a little.
At a corporate average or in line with the other divisions.
Just just give it a step function improvement you've seen in margins and then complete vehicle manufacturing wonder how that ROI see looks like today would that suggest that you're seeing returns better than the corporate average now you know with margin closer to 5%.
Yeah, you know <unk> was with this business here, we've been seeing you know returns. It's historically that had been better than our corporate average and that continues to be the case, Kevin Yeah, I'd say on the.
The negative let's impacting return on invested capital or doesn't offset sort of some of the gains as a result of margin expansion, but it's the the capital that we've invested in facility and are in Europe.
And just to support some of the Democrats activities, you know certainly that that's a pretty significant investment that you know when you do the math impacts return on invested capital, but all in all today, you know our star businesses.
Operating at returns that are better than the corporate average.
Okay. That's helpful. Thank you congrats on a good quarter.
Thank you.
And our next question comes from the line of James pick a relevant with Keybanc. Please proceed with your question.
Hey, good morning, guys.
Okay, what are the restructuring savings you're expecting to achieve too cheap by year end. It within the 200 million fully targeted what should be realized this year and has that changed at all relative to your previous guidance.
I'd I'd given to our previous guidance I I don't have any information at this point that would.
Making change my views on that well, we'll do a deep dive as we get through People's a anchors business class I felt that deal that you had a million dollar numbers thought I'd say, it's relatively in the ballpark yeah.
In terms of how much of that is going to be realized this year versus next year and point to a I'd say that the bigger bought I did pick up off of it is going to be in 21, when we have a full your advantage and and we've been operating in this type of environment for for six months plus or.
On the <unk>, we should see continued everything else being equal incremental improvements to margins as a result of the activities that were taking place or have taken place and we'll continue to take place and 2020.
Okay got it so no major change to the witness cheap.
No this year okay.
All right and then just at a high level as we try to bridge to 2021 on the positive side of the ledger will have structural cost savings from the from the program, we just talked about.
It sounds as though you know.
Your top up payments were fully reimbursed by the government support programs. This past quarter. So nothing really call out on that front just as we think about next year is there a quantifiable bucket of net temporary cost savings. This year that won't repeat in 2021, I mean could this be an equal offset to your permanent savings next year, just how should we be thinking about that.
It would be helpful. Thanks.
I think that's going to depend on a little bit on what happens with restrictions Oh, yeah, I can see right.
For example, you know travel costs or catch up somewhat and that capital is now.
I'm afraid.
You know we have been working virtually across its organization.
It works fine I still think the face to face meetings in certain situations or pardon and necessary I don't think we're going to get to the same level. We were in the past, but you know that that can certainly you know edge up somewhat.
But I you know I I people going to be a little bit you know if if if volumes start to move up probably start to move that people are going to be a little but a little easier to just spend some money on discretionary items, possibly but I don't think that's got any way out way the benefits.
We expect from a rightsizing our business.
Got it and then just a last one the timing of the you know the almost 30 million share buyback program would you expect to complete that authorization within the one year term just what's what's been the company's historical track record on fully executing the ports share authorization.
You know James.
I think this is the 10th your and the role that we've now C.N.C.I.V. and I think there's a couple of periods, where it comes to mind, we haven't how so what we were doing and Oh, we were authorized to do and the reason for that is Oh, yeah. We were allocating capital to the business that I think of the period.
When we acquired the track for example.
You know, we stop the buy back to <unk> or <unk>.
Bring some more cash into the Kitty to pay for the acquisition, but once we got through that we started buying back again so.
So you look at it into this and see Ivy and Ah you know I've talked about when do we consider resuming the answer would be and I said, we're not going to be doing anything at 2021 and get through the end of this year a lot of this updated business plan for the next three years can come up with a revised strategy in or.
Capital allocation strategy hasn't changed.
So he is going to be a function of.
You know, how we use our cash and how much of that is used to invest in the business either organically or inorganically.
And then the balance of the buybacks. So would you can get to the situation, where we buy back the complete number of shares could be that some of that cash is being used to invest and grow the business. So you know that the well just cut back a little bit on the buyback, but unknown at this point in time, but in terms of our strategy and how we look at.
But james hasn't changed or with this announcement here.
Got it congrats you done in a its use while swimming. Thanks. Thank you. Thank you.
And our next question comes from the line of Rod Lache with Wolfe Research. Please proceed with your question.
Okay, great good morning, everybody.
You talked a little bit about the opportunity that you see in a hybrid drive line I was hoping you might just a touch on the feedback that you've been getting on the competitiveness of your your battery electric vehicle Driveline technologies, what's the interest in.
In the motors gears in parallel Tronics, you've been developing specifically freebies and is there some aspect of that that did you think is is it.
In particular, gaining traction with with Oems.
And then secondly, you know G M yesterday talked about the decision to transform Marshall had a pick up truck manufacturing starting in 2022, I think you have over 2000 hours of content per vehicle on pick ups.
From from them.
Do you have similar levels of content or do you have by the potential for similar levels of content on some of the electric pickups that are coming out over the next few years.
Oh, good morning Rod.
Yeah. The answer is yes, and what I mean by that is as we look at that you drive systems, we have talked about Oh, we looked at the building blocks that go into the world system.
And you know I'm all not just on the integration, but actually the rally to know the system is very we have been looking at and in the two programs that we haven't really talked about you know obviously, the meaning of the business shows the competition that's roxanne.
In getting back as we go through the launch we are going through a long time and getting through that process. So we actually have a very comprehensive strategy on addressing the power Rangers and the parks and so on and so forth.
So we believe we have a very I strongly believe we have a good position a in the overall system, which means we have to look at the power electronics the gearbox the software and they can voters that and how they all come together or we are looking at it from a world system perspective and also.
A component perspective, so I think it's a very good position there are with the two that we have that you're launching regained experience and we continue to have a lot of discussions with other programs.
Across Oems.
From a pickup perspective, I think the content if anything could be better like we talk.
In the past with electrification with our powertrain or bringing power to the real.
Our market actually opens up to address even their front friedreichs not just before we broke all regarding market. So we actually see that as a.
Potential upright.
You know going forward.
Oh, yes.
Sorry, we could have battery frames, as well, which is a pretty high content product.
Okay.
Right, so you're saying that in.
Because you have front wheel drive.
That that's a.
Did that that would be incremental because you you most of your content on the the pickup trucks is just transfer cases in all wheel drive systems.
So the way I'm looking at when you say they always <unk>. It's a feature growth rate today, we happened right away that feature with the transfer case, but we are doing eat rice. So that you drive a functionality can also provide and talk to the real red and when needed. So we are able to provide that function.
Maliki right going forward, what that mix is going to be the consumers are going to look back on their customers. The Oems are going to look at.
But as we moved into the eat right and we are making them today, we should be able to address not just only be.
Alright, well regarded feature you can also look at the two really great feature with eat right right. So if anything it could be an expansion of the market is what I mean.
Okay, Great and you've mentioned that refrains, a few times and just to put this into context for us.
You know what is the yeah.
The content opportunity for you guys is it you know sort of rivaling the kind of content you would have on pickup truck frames or Rob you know in any way to put any context around that.
So if you look at the back of your frames today.
Yeah definitely actually more than.
You can look at content up at full sized a cream or it's more than that Ron and I think as the the scale comes in if you're both a it could change a little bit, but I think you're going to be substantial and easily comparable to a full raiko frame.
Okay interesting great. Thank you.
And our next question comes from the line, Peter Sklar with BMO capital markets.
Please proceed with your question.
Right. Thanks, then just going back to the.
Guidance that you provided in January for 2022, when when you provided that guidance what's the.
The restructuring.
Part of that.
The restructuring where you plan on getting the 200 million of savings or should we think of that as that 200 million you know above and beyond the guidance that you provided back in January.
Yeah, Peter I think there was some of that was baked into a R 22 guidance, but that the bulk of it.
ER is gonna be should be incremental to what we had built into 2022.
Okay.
The other thing I wanted to ask about.
Did the risk I don't think there's been any discussion today about the three eight you know you got the three significant Ada es programs, where you're moving from engineering into production and when you're talking about.
Some of the moving parts that improved your your margins.
You didn't talk about those programs. So can you give us an update on those programs and.
Where they are in terms of moving from engineering to launch and if they are contributing to the margin.
Yeah, So I figure.
Oh, sorry, Tom go ahead, if you want how I can fill in afterwards.
No no problem and I think the the programs are continuing and are hitting the milestones and so they're progressing well you.
You know, we still have to get to the finish line, but you know in a much better position like at that and we also anticipate that some of the development that we have undergone during this process.
Really become what I consider to be the core technology, then we will see how I put us in a good position to win additional business, but from a three programs that you're talking about Peter.
You're moving according to plan.
Yeah, Peter just to add a little bit more color. There I think if you look you know remember we talked about those additional social cost in the second quarter you back those as I say the first half of this year.
ER compared to the first half of last year, we're probably running a little higher but you guys get into Q3 and Q4 on a year over year basis, we expect those costs to be a little lower.
Got it I I didn't talk about that in my role discussion because it really is not meaningful I think that the more meaningful impact is going to be in 21 and 22 as these programs near and start to launch.
Yep.
And can you just give me a little bit more specific when when do these three programs get into launch does it start next year and then unfold over the next two years.
I I don't know, whether we're able to give specific customer timelines, Peter but I'm sure that the launches would be next year, but a substantial part of the.
Engineering activity will be you know coming.
Our really be order from let's say already a and you know it's it's in the next three to four months three to six months I would say is a continuing towards production.
But the launch.
The plants are in the 2021 didn't want to get too specific because their customer their timelines.
Okay I understand Swami Thanks, and just one last question Vince I noticed that.
You did buy back some shares during the quarter.
Is that more you're buying for anti dilutive purposes or or.
You know do you feel comfortable now given.
Oh things have unfolded with Covidien the recovery in the industry that you could be back to buying stock.
So Peter there specifically related to employee Commandments <unk>, because we have these heavy were buying them under the M.C.I.D., but suffer like amendments and it shows that the a disservice to employees is not part of kind of realigning our balance sheet structure.
Right. Okay. That's all I have thank you.
And then I said, just because we're almost out of time I'm just going to just want to say a few closing remarks may be swimming does as well for lose everybody I just that.
Peter I'm glad you asked the question because after all of the must be over 100.
Quarterly Investor calls a day you had asked a question at the end it would have been a little disappointing. So just want to thank everybody for participating participated in Q3 was a really strong bounce back quarter for Magna.
Also varying courage from what I see going forward in the fourth quarter and beyond.
As I said earlier I think it really is a testament to the fact that magna is pretty agile and adapting due to issues that come up.
Just in general like to thank personally like to thank all the investors for all their support over the years I took over operations a magnet back in 1991 so.
So I've been CEO for 26 years. If I include the four years a was it the CEO of the interior Spinco.
And specifically I look at my career here, specifically since 2010, when we did the transaction to go to a single class share, we really really been focused on our three pirates of World class manufacturing innovation people development.
And you know we were a global organization and takes time due to really get things ingrained in into a company.
A week Corporately been focused heavily for the past number of years and our long term product strategy in a consistent capital strategy. So I think a lot of people have asked us about and some other things like free cash flow that we thought were important for for the investors in our share price.
And then recently I had been focused with the team on our sustainability efforts, which I think are really important and then we got a good plan and our diversity inclusion program I.
I think we're really well positioned to take advantage of future mobility trends and have great reputation when their customers as a global supplier of powerhouse and that's the feedback I've been getting when I talked in the letter to Ceos and head of purchasing of our customers on a as I explained them with the changes with Swami.
I think we've got the strongest management team in the industry, we've been working really hard and succession planning across the company for the past five years I think Swami starting out in the rule in a really strong position and a really strong team think somebody had mentioned earlier. So I mean, if you can.
Increase in share price 23 times when I took over a one when Frank asked from take over operations that stock price imagine was at $2.10 Canadian so, including the the two shares but weve gone from about just over $2 do about $290. If we hadn't had the shares but so so I mean I am man.
Well as I've said publicly and so I mean I worked very close together I mean, it's still support the Sun was ever he needs I got a significant amount of equity going forward, which I have accumulated and held over.
Over time, so I've got a real interest and what happens with the company and bleeding that would not be stepping down if I didn't think the company. It was a really strong hands.
So I'll just turn it was swami, but Swann infusion continue do a.
So we've been we've increased by 100 times since 2000 1991, if you can increase the share price by 10 times over the next 10 years I'll be happy I'm not sure, but everybody else on the call. So thanks very much everybody for all his support over the years, it's been really a great career and continue to work on a number of a number of passion projects at mine and maybe I'll just turn it over Swami Devon anything.
Do you want to close off was funny.
Got it thanks, Tom I appreciate your comments and ER as always done has set the bar and in a nice way a good target for all of US all kidding aside or there since the announcement or as we have been working together Dawn I sure does time period with a few comments, but it.
Lets get to head down and get back to work because the even after the announcement that transition. The next day felt like normal day at work and all that credit goes to you for making it so seamless and for the rest of my peer group would have been phenomenal and helping through this process. So.
And and to all of you who are on the call since the announcement that gotten a lot of calls many.
Many text messages and emails and so on so I very much appreciate all the good wishes and they look forward to working even closer with you going forward.
And on a I will try my best to meet the target that you set out there. Thank you very much.
Okay. Thanks, Rami and I guess, the last and like to say is that with that I must say the over the years, the investor calls and the questions, we get any getting increasingly more complicated and difficult and I.
There's no way, we would've been able to give as good a.
An update to the investment community, but wasn't for Lewis and Vince who had done a phenomenal job in my opinion and really understand the questions and the needs of the investment community. So hats go out to both of them because it made my job how about Egypt. So thanks, very much everybody and I appreciate everybody dialing into the call today.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your line.
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