Q4 2020 Magna International Inc Earnings Call
Greetings and welcome.
Welcome to the Q4, 'twenty and 'twenty results and 'twenty 'twenty, one outlook conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct the question and answer session at that time and do you have a question. Please press. The one followed by the foreign your telephone if at any time during the conference and the two each and operator, Please press star zero and.
As a reminder of this conference.
He reported Friday February 19, and 'twenty 'twenty, one and now let's turn the conference over to Mr. Louis Tonelli VP Investor Relations. Please go ahead Sir.
Thanks, Maria Hello, everyone and welcome to our conference call covering our 'twenty and 'twenty results as well as sort of 21 outlook joining.
Joining me today are swamy quota, Gary and Vince Galicia.
As of yesterday, our board of directors met and approved our financial results for 'twenty and 'twenty as well as our financial outlook, we issued a press release this morning, hopefully and each of these.
To 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 of the Investor Relations section of our website.
Web site at Magna Dot com.
Before we get started and just as the 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.
<unk> to be materially different from those expressed or implied and these statements.
Refer to todays press release sort of complete description of our safe Harbor disclaimer.
Please also refer to todays reminder, slide included in the deck related to our commentary today.
This morning, we will cover our 'twenty and 'twenty highlights and our Q4 results.
<unk> will then provide our 'twenty, one and outlook and lastly run through our <unk>. Our go forward financial strategy and with that I'll pass it over the Swamy.
Thank you Louis and good morning, everyone.
I am excited to be speaking with all of you again, especially in my new role as CEO.
Before I start.
I would like to thank Don.
Has been of Great leader and mentor to me.
<unk> and prepare for the succession for a number of years.
And the result has been a smooth transition.
Today, I'll recap 2020.
Comment on our results and briefly cover our positioning and the industry.
When we think about 2020, the first few things that naturally come to mind are COVID-19 difficult year and life changing gear.
Each of which I know, we can all relate to.
Having said that I am extremely proud of the way, we have navigated through the pandemic and the.
And any rebound power operations had and the second half of the year.
Youre going to the theater a lot of information today, but bottom line we have.
And to recover quickly.
No one has been immune to the impacts of Covid, Inc.
<unk>, the CVR decline and industrial production.
Outstanding debt and the first half of the year.
However, production volumes started to recover at the end of the second quarter and the recovery accelerated in Q4 across our key markets.
Leading to very strong operating performance for the quarter.
Relative to Q4 2019.
<unk> sales increased by 12% and adjusted EBIT margin expanded by 410 basis points.
Our adjusted EPS more than doubled to a record $2.83 and we generated $1 7 billion of free cash flow.
And also.
<unk> grew our dividend for the 11th straight year.
Vince will share more details around our performance, but I wanted to highlight that these positive results and a testament to our employees, who have executed and the myths of challenging circumstances throughout the year.
Looking.
Also of some of our accomplishments for the year I have to start with the focus on our employees keeping.
Keeping our employees safe through all of the pandemic has been and will continue to be our top priority the.
The stories of our employees resilience this past year half of amazed me.
Not only have the executed near flawlessly and the midst of unprecedented challenges, but they also volunteered to help deliver of PPE and other supplies to frontline workers and rent above and beyond to support our communities and.
And Magna has been recognized for consecutive.
It appears with Fortune's, most admired companies and Forbes Best employers Awards.
We never lose sight of the importance of our operational excellence.
And 2020, we took the necessary restructuring actions that will lead to two.
<unk> hundred millions of dollars of recurring cost savings annually.
And our team also managed the shutdown and ramp up of over 300 facilities due to the COVID-19 pandemic our.
Our focus and operational excellence and innovation leads to customer recognition.
Just last year.
We received 97 customer recognition awards, including a record six awards from GM and the most ever given to any one supplier and a single year.
Now, let me turn my attention to growth.
And all of those sales for the full year fell as a result of the large.
The declines in vehicle production, we had a strong recovery and the second half of the year with sales growing 5% year over year.
We also managed to outgrow the market and 2020 by 4% and in fact achieved the outgrowth and each of our major regions North America Europe.
And in Asia.
Finally, I would like to touch on our innovation.
We continued to expand our collaboration with the growing ecosystem of companies working with some of the best mines and technological advancements to help accelerate time to market for our innovative products.
We also have successes and new innovation areas.
I'll point to three examples from across our business.
New battery trade program and body and exteriors, our new clear view digital vision system, and power and vision and our proprietary <unk> technology in seating.
Magna's composite space frame liftgate reinforcement solution, which debuted on the period of Supra earned a 2020 automotive News Pace Award The award marks Magnus for the Pace Award and the last six years. These.
These customer wins and industry awards reflect.
How many of our solutions that are aligned with the secular industry trends and.
And our commitment to innovation continued despite the challenges posed by Covid and 2020.
We maintained our R&D spend.
With that rents and test off to you.
Thank you Swamy and good.
Morning, I hope, everyone is staying safe and healthy.
Going to the shorter version of our quarterly reviews, including on our segments to allow more time for our outlook more detail is included in our appendix.
2020 of course was significantly impacted by COVID-19.
Sales declined 17% per the year, however, on a magna weighted basis, our sales performed 4% better than production for the year.
This continues the trend that we've seen at Magna for many years and considering the dramatic decline in sales for the year, we posted an impressive five 1% adjusted.
With margin.
2020 was in many ways of tale of two half the first half was severely impacted by the pandemic sales.
Sales were down, 37% and and the second quarter, we posted our first operating loss since the great recession of 2009.
However across the company we took steps.
And to reduce discretionary and structural costs as well as capital, which helped US set which helped set us up for a return to strong performance when the industry began to recover in the second half of the year let.
Let me briefly cover off the fourth quarter.
Total sales were $10 6 billion and increase of one.
And $2 billion over the fourth quarter of 2019 this represents.
6% weighted growth over market for the quarter, our sales were positively impacted by new program launches and the negative impact of the labor strike at GM and 2019 currency translation, which was about a 200.
5 million tailwind higher vehicle production and increase the assembly sales.
Adjusted EBIT increased 86% to $1 1 billion, our adjusted EBIT margin also increased by over 400 basis points to 10, 4% and Q4.
The increase in March.
And mainly reflects pull through on higher sales and improved operational performance the labor strike at GM, and 2019, and lower Adas costs, including as a result of our exiting our lyft partnership at the end of 2019.
Each of our segments generated better adjusted EBIT of percentage of sales and.
Compared to last year.
Net income materials of Magna increased by over 400 million to 851 million, mainly reflecting the higher EBIT, partially offset by higher interest expense and higher income tax expense.
And diluted EPS more than doubled to a record.
Record of $2 83 for the quarter compared to $1 41 last year.
The increase reflects the higher net income and 2% fewer shares outstanding.
During the fourth quarter of 2020 free cash flow amounted to $1 $7 billion compared to $1 1 billion last year.
The.
This increase reflected our higher earnings as well as of 100 and east $186 million and increased cash from working capital.
Working capital came in lower than expected at the end of 2020, largely as a result of earlier than anticipated collections from customers and higher restructuring and other accruals compared to last year.
Here, we expect to see working capital returned to more normal levels in 2021.
Drawing the dividend remains a priority at Magna, we maintained our dividend during last year's Covid crisis, and a number of our peers cut the dividend and yesterday our board approved.
At 8%.
The recent quarterly dividend to <unk> 43 sets of share, reflecting our strong results and the second half of 2020 and our solid outlook.
We have increased dividends per share at a CAGR of 13% going back to 2010.
And now I will pass it over of Swamy for few.
<unk>, Inc. Vector of comments prior to getting into the specifics of our outlook.
Before we look ahead to 2021 and beyond I wanted to take a step back and share some thoughts on what makes magna and unique and why we are well positioned for the industry changes.
And I keep this brief foot per day.
Because we will go further into this at our April Investor event.
And our story really starts with our business model.
While our business plans individual product areas all of the way through complete vehicles.
And one company that is the top three player and most of the areas where we compete.
<unk> takes the system level approach that allows us to think like an automaker and optimized solutions and our building block technologies strategy meets the different customer needs with scalable modular and easy to integrate configurations.
Additionally, we of deliberate and disciplined.
And all the actions, we enhanced cash generations and generations through our world class manufacturing initiatives.
We continue to invest and drive innovation in particular and high growth areas and.
And you have heard and our past calls.
<unk> performance is made possible by the DNA.
<unk> company, which comprises our people the entrepreneurial culture and the deep expertise and manufacturing debt allows us to consistently exceed customer expectations.
And our capabilities and disciplined execution together enable a unique competitive position and.
And mobility for Magna.
Yes.
Linking our unique approach with the alignment to the secular trends is what gives me confidence and magna's future.
We continue to advanced mobility with the sharp eye on the needs of people, while also doing the right things for the planet.
On.
Of the expectation, we continue to enhance our portfolio of E powertrain products, our joint venture with LG and important building blocks to further strengthen our position while also allowing us to participate in the fast growing global market for electrified powertrain components.
Beyond.
The electric JV, our core business has the product range to support customers along the transition towards full evs and.
In addition, our portfolio of continues to win content on upcoming Ev's across all of our capabilities, including complete vehicles reached by 2000.
'twenty three is expected to have 50% of its production units on EV models.
On autonomy, we offer a full range of ddos capabilities, including complete systems. We were recently awarded the full Adas stack on the fifth corrosion debt.
<unk> the depth and.
And breadth of our capabilities and we expect <unk> sales to grow at about 20% on average per year over 2023 period.
We continue to invest to develop cutting edge it solutions.
And lastly, we are actively pursuing opportunities.
And to leverage new business models and create value across new mobility ecosystem.
Our JV with BJ EV is launching a full electric vehicles the first of four radiant.
Our ongoing collaboration with fiscal demonstrates our unique ability to support the new entrants with systems.
The <unk> engineering and manufacturing capabilities.
This adjusted snapshot of how we are well positioned to take advantage of the secular trends and the industry.
Now, let's shift gears to talk about our business outlook for 2021.
Before Wednesday.
To you through the details the Oh.
Overall message I want to emphasize is that I'm really excited about our outlook.
Believe we have a plan in place that will allow us to continue our leadership position and the sector are.
And our business continues to grow and you should have confidence and our outlook as.
State and 90% of our 2023 sales are already booked.
Margins are expected to expand and each of our outlook, we continue to invest for the future, including about $600 million annually and engineering spend before customer recoveries in the Mega.
The word yes.
Our power envisions segment engineering spend in 2020 represented about five 5% of sales.
Lastly forecast free cash flow generation from our business remained strong this should allow us to both invest for growth and return capital to shareholders.
And with that let me hand, it over to Wayne and.
And thanks again Swamy.
Our outlook reflects increase the other production and each of our key regions from the lows of 2020.
And North America, and Europe, our two largest markets volumes and 2023 remain at or below levels experienced in 2019.
With respect of the semiconductor shortage, we see near term disruptions to OEM production. However at this point any shortage is expected to be made up by the end of 2021.
We assume exchange rates and our outlook will approximate recent rates. This reflects the weaker average U S dollar of relative to 2000.
Yes.
Which positively impacts our reported sales going forward.
As a review of our outlook I will provide insight into some of the drivers of sales growth going forward.
For margins given the unusual nature of 2020 of our overall from 2019, which we believe is of more comparable.
20th year of starting points.
I am going to start with our consolidated outlook.
Before I do let me briefly comment on our actions to simplify the legal structure of our three contracts joint ventures, and China before the end of 2020, we dispose of our interest and the Dongfeng contract joint venture.
Both of which had unconsolidated sales of less than $100 million last year.
And we obtained the financial controlling interest and our joint venture with <unk>, which we call of <unk>.
We also entered into an agreement with Ford to dissolve our good track for transmissions joint venture based in Europe as.
<unk> of this transaction, we will assume one division of the joint venture located and per adult Fran.
As a result in 2021.
We'll begin to consolidate the results of the <unk> business and the <unk> facility. This.
And this impacts both of our sales and margin.
As we gain sales at a lower than.
As part of <unk> margin and we lose equity income.
We expect consolidated sales to grow by 10% to 12% on average per year out to 2023, reaching 43 billion and potentially as high as <unk>.
<unk> 45 5 billion.
The growth is driven by the higher vehicle.
And then and content growth, including as a result of many new technologies across our portfolio. The consolidation of the former of contract joint venture entities and foreign exchange and the acquisition of <unk> seating.
In addition.
And we are expecting significant sales growth from unconsolidated joint ventures over the next few.
Few years, including from our complete vehicle manufacturing JV and integrated E drive the JV both based in China.
And as well as our LG E powertrain joint venture expected to close and the second quarter of this year.
We expect our consolidated margin to expand in 2021.
Production and then again to 2023 wells.
The relative to 2019, our 'twenty, one margin benefits from world class manufacturing initiatives and restructuring benefits.
Lending to more normalized level of Veda engineering cost the labor strike at GM, and 2019 and license income.
These are.
One has to be partially offset by higher engineering costs for electrification and new mobility.
Lower equity income and the consolidation of the <unk> entities.
We expect additional margin expansion to 2023, driven by contribution on higher sales for the world class manufacturing initiatives and restructuring benefits.
The first and higher equity income.
These are expected to be offset by lower license income relative to 2021.
Early last year, we provided of consolidated margin outlook for 2022, and the range of seven 6% to 8%.
While we are not providing of 2022 well of today.
I expect that to say that we still expect to be in that range. Despite lower vehicle production in both Europe and China.
Many of the same factors that are driving higher consolidated sales and margins out to 2023 are also impacting our segment.
And the interest of time, we will not run through the.
Hmm detail. However, they are included in the appendix and we are happy to discuss any questions on them.
Big picture, we expect continued solid sales growth and margins across all of our segments.
Next I'd like to cover some of the highlights of our financial strategy.
And we've been consistent.
The segment, indicating our capital allocation principles over the years.
Want to maintain a strong balance sheet ample liquidity and high investment grade ratings.
We want to invest for growth through organic and inorganic opportunities along with innovation spending and returned capital to shareholders.
Yes.
And after exercising discipline and reducing spending and response to the significant volume decline and 2020 for 2021, we expect capital spending to be approximately $1 6 billion and relatively at the same level out to 2023.
We anticipate ongoing strong.
Free cash flow generation, including between five five and $6 billion over the next three years working.
Working capital swings have had a considerable impact on free cash flows and as you can see excluding working capital, we expect higher free cash flow over each of the next three years relative to 2020.
Strong driven by increased earnings.
And here's our projected uses of operating cash flow over the 'twenty one to 'twenty three time frame net internal investment spending is expected to represent 50% to 55%. This includes capital and other asset spending less proceeds from dispositions.
Dividends should account for 10% to 15% of operating cash flow consistent with the past several years.
We expect 35% to 40% to be available for incremental investments and share repurchases without adding any additional leverage to the balance sheet and of course debt capacity increases EBITDA.
Together this provides significant capacity to invest for the future.
So in summary, we plan to further grow our business.
Executed and our plans to expand margins and generate strong free cash flow and continue to invest for the car of the future.
Growth, we hope to see many of you and April at our Investor event, where we will go into more detail around how unique our how our unique positioning and strategy is aligned to the secular trends and the ability.
Thanks for your attention we would now be happy to answer your question.
Yes.
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The first question comes from the line of John Murphy from Bank of America.
Please go ahead.
Good morning, guys.
And congrats Swamy I am doing the goal all along and it's a great call.
As we look at slide 28.
And so theres a lot of moving parts and <unk>.
And of alluded with the shifts and the good try JV, but it looks like the 10% to 12% CAGR would indicate sort of into the.
The midpoint of about seven 5%.
Above market, just doing some simple math, but with the sort of the other moving parts of on the JV that might not be quite correctly and just trying to understand if that is correct and what we should be thinking about about growth above market rents.
And while we've been talking a bit.
Continued growth over market.
And just kind of flying and a one page debt kind of stripped out the org.
Ganic, sorry, the acquisitions and FX and can deal with organic growth and if you've got the I can give you that yes and yes.
And I do yes, if you look at our expectations and the 'twenty to 'twenty three time frame it would imply 1% to 3%.
Outgrowth.
Weighted outgrowth over that period.
And I would say that some of that some of what's being impacted there as the complete vehicles, which is impacting us by about 1%.
Okay. That's helpful. Yeah, just must be some moving parts of that maintenance.
The different and can follow up on that Bob.
The second.
Second question.
On slide 33, and when you when you are talking about cap allocation and of this.
35% and 40% debt is for incremental investments and share repurchases.
I'm just curious Vincent.
Think about.
A lot of the auto tech.
Smaller companies have become very expensive.
And so obviously the stack boom there is a tremendous amount of interest here I'm just curious as you go out there and you're.
During the due diligence and trying to find.
Good.
That means are you running into much higher valuations and does this kind of preclude you maybe for making external investments and it really more focusing on organic and share buybacks.
With Genesis kind of.
Interesting question certainly over the last little while we've seen some valuation, especially for some of the.
Startups are increasing and a pretty significant way.
And our strategy and it hasnt changed at all obviously invest organically and we got a really good business.
And I say invest organically, that's more than just brick and mortar is investing in engineering and building net core capability developing swamy would always talk about the building blocks and we can.
<unk>, a complete system solution to a customer and given our unique positioning across the company like we've shown the best care I think of that a real advantage.
And when the having said all of that John we still look at.
Some of the newer technologies out there that could complement and add to our capabilities.
And when Youre looking at technology. Some of these are always weighing out.
I wanted to try to do this EMI and what's the cost.
By the time to time to get this completed whats the risk associated with that and there may be something out there that's already 30% of 40%.
<unk> completed and you can look at that and say all of that makes so much sense financially. So we're we continue to look to.
And to continue to focus on the Swamy talked.
And with the comments.
And some of the megatrend areas, which are the big focus for our organization.
And I expect John as time goes on we're going to continue to look at.
The transactions M&A transactions that helped to build our capabilities.
Good morning, John Deters for me and just to add to Vince's comments.
The bonus as we have talked about.
As a part of our technology mining process, we identify what we believe are the important going forward for the kind of of the future.
And through our scanning process, we of being able to work through universities research institutions and startups at a very early phase.
In the power, it's kind of a symbiotic gross book base, we are able to bring.
Call it the discipline and design for manufacturing and scale as the work through specs with some of the start ups.
And in the process, we have a very early viewpoint.
The tech.
So that is all sort of helped us too.
You kind of address.
Call it the necessities of the future for the current.
And that's one way of how we're looking at tech not wait for it to become.
Already proliferate right.
Okay. That's helpful. And then just lastly on the complete vehicle segue.
Segment disk.
You said, you mentioned higher earnings on engineering and sales.
Curious.
Over time, Inc.
And by our complete vehicle, however, you want to classify it.
It seems like there is a growing opportunity as youre getting more of the startups.
A lot of Pittsburg debt.
Youre going to have engineering and sales that might carry much higher margin.
And I'm, just curious how big of a part of the power that can become and Youre.
Complete vehicles segment and what.
And of opportunities you see there.
So from a total vehicle.
Capability perspective, John I think.
The kind of located of going together because the new.
And so anybody even the current customers when they come to us.
And they look at the overall capability that we bring which is understanding the system interfaces, bringing all of the systems together.
Looking at design for manufacturing.
So that part of engineering is call it the.
The initial step towards the conversations most of the time.
And then it leads to.
The systems of Magna being supplied power.
The.
The assembly of the full vehicles or sometimes both us and the case of fiscal <unk>.
We think of our engineering capabilities and.
And the enabler and.
And some cases, it adjusted engineering and some cases.
And so.
We received going hand in hand.
Thank you very much.
Our next question comes from the line of Mickey.
Mcnally.
<unk> from Citigroup. Please go ahead.
Great. Thanks, good morning, everyone and congrats.
Just a question and the.
The strong 10, 4% margin and the fourth quarter, it looks like and just over $42 billion of of annualized revenue. Yes. We think it had just wanted to maybe go through a bridge of of what.
And would prevent you from repeating that type of margin performance.
And that comparable level of revenue and in the future maybe just talk about the the puts and takes of all of the bridge going forward, maybe investments youre, making and so forth.
And I'd say.
And I talked about in my comments of 2020 is really not a good.
Basis of comparison for the out of the outer years.
I'll tell you what I kind of looked at and said the organization and I looked at there.
Kind of margin run rate in the second half of.
And 2020 and kind of trying to wrap my head around and how does how does that relate to.
Line.
And it's kind of you look.
And the second half of our margins for EBIT margin.
And.
Just two things you got of just knock off the 95% and kind of.
Normalized debt to what the run rate was and <unk>.
And two the second half of 2020.
As of about 30 basis points.
Government support programs debt.
Impacted positively our margins and the second half.
Look at the full year.
The impact of and that's significant because we had sort of of.
A bunch of cost and the first half and guest recovery and the second half of second half the positive impact of about 30 basis points.
And talk to you about what we're doing.
The joint ventures, and the consolidation of the GTA and.
And the poor dold facility and that's adding.
Sales of that.
And margins at less and the Magna average and reducing our equity income kind of when you run through the math and you were.
And look at that.
And that's about 30 basis points so.
We're below 9% of kind of run rate for 2021.
And you look at our guidance of 1% to 75.
The big gap and <unk>.
My perspective, but just a couple of things to keep in the back of your mind.
And I can.
And you look at kind of there's a bunch of year end.
Small items.
There's a favorable settlement here something over there.
And adjustments or non accrual the small amounts add up to quite a bit and kind of the second half. So that's kind of I would say non reoccurring.
And you think about it and you know it could be of when next year that could confidence and money, but that was the wind this year.
We're going to have lower equity income in 2021 versus the second.
The second half of 2020, even if we exclude.
The contract entities and there is a couple of reasons for that one is.
We're excited about the LNG joint venture.
It's an investment and it's growing as the business. So we're going to have some losses, there which impacts of equity income and we got one of our equity accounted joint ventures is and the investment.
And the near term so that's going to be a drag on equity income even if you look at the cadence.
Volumes of second half and you compare that for 'twenty one.
Europe, and China of were considerably higher.
Hi.
2020 versus where we think they're gonna be 'twenty one.
Tooling income was relatively higher and second half.
<unk> some program mix, which was part.
As of it and kind of all of 2020 will be kind of negatively impacted margins.
And then.
One thing that Swamy and I have been talking to the organization of that as we've done a good job on.
Clamping down on costs, but.
Yes, I don't think it's realistic to assume debt, we're going to be able to.
Run 21, like we did the second half 2020.
We expect travel to.
The start to help them and expect some of the discretionary items debt.
Didn't happen of goodness start to happen and so that's going to help and that's going to help move some.
The sum cost of them and reduce overall margins. So that's how we.
Kind of roll from about an $8 nine adjusted second half to kind of seven 1% to 75% for 2021.
That's very helpful. I appreciate all that color and maybe a quick follow up on the on slide 54 on the Adas CAGR of 19% to 23% is that book consistent with the.
$100 million of revenue you were expecting for 'twenty and 'twenty three I think I could I think last year at the Investor day or is that and improvements and maybe if you could just talk of about what youre seeing on the Ada of sourcing and and booking side.
Yes.
So our U K.
We ended the year of getting the references to 2019, and we've talked about 2019.
Roughly 50 odd million dollars and the kind of right and whatever 20% carry of 19 bogie of range there.
And that takes us to.
Just under a $1 billion and 23. So it is and it is ahead of where we thought we were going to be.
And I look at our bookings this year.
And we had kind of your of restaurant business. Finding here you kind of look at opportunities of here's what I think of going again.
All of that plus some.
So we've been pretty pleased with the progress that we've been making and that one area of the business. Yeah. I think just as I said and the comments before.
And believe.
And the building blocks of strategy that <unk> been working on and helped our leadership.
Positioning and camera of the leapfrog technology, and greater and bringing the first solid state lidar system to production.
We booked a lot of business in 2020, and as I said in my comments we.
We expect to grow at about a 20% CAGR over the outlook period.
And it's good to also see that almost 80% of our 2023 expected sales is booked here.
And the focus of us paying debt youre going to stay for some of the LTM two plus programs.
No.
It also and advantage to keep the organization focused.
That's great to hear and thanks again everybody.
The next question comes from the line of Chris Mcnally from Evercore ISI. Your line is open.
One of the team and I'm sure there'll be.
Some questions on the strength and margin until we could pass over those and maybe just two questions and Swamy an auto tech. The first is on light weighting and and body it doesn't get a lot of attention but.
The typical body content per vehicle maybe of $1000 per car.
Thanks for the kind of curious.
Nextgen body solutions for electric vehicles for light weighting to save money with battery cost could you go through maybe some of the the potential content per vehicle.
And if someone was really the take all the the options that debt.
Magna body with a book to provide.
Yes, good morning, Chris Great question.
When we talk about the light weighting it was primarily driven in the past by some.
The key reasons right. One like you said the increase the battery range and that's obviously going to be a balancing act as the the true.
Trajectory of the battery and cost continues to go down right.
So the start putting value on how much premium.
Wanted to spend on light weighting and the second part of it was.
The front of arrear.
The rates split of the vehicle and we have the IC engine and the front.
Do.
Half of the $50 50 of close to 50 to 50 range split and you would focus on light weighting some components and the front like the.
Truck drivers and rails, and so on and so forth with different materials and also to reduce the CTO of the vehicles from top to bottom, but if you start looking at the battery and put.
On the other side of this vehicle.
All of those variables change a little bit right.
But looking at the process that we have ability to look at any of the variance of steel or aluminum or other materials and including different processes, whether it is.
You know stamping growth, forming the hydro forming or hot stamping and casting and so on and so forth.
Have the tools and the toolbox for sure the design impacts that I would see of the floor will look different the.
Sales structures, you know definitely integrate the.
The safety.
And the battery trays that are coming which is actually of new addressable market for us from the viewpoint.
And we were able to do the battery trays, we already have two significant awards from customers.
Debt.
And that is.
The important for us.
So that would be a content growth opportunity for us in total.
If you look at our exteriors and we're looking at and lot of college sensor integration piece. So there is a lot of process and material.
Advantages there coming through.
So these are I would say some of the.
Aspects that I think food and govern light weighting and the amount of light weighting and where it happens, but the important thing is to have the flexibility of different processes.
So we can address we don't constrain whatever the vehicle architecture and started from different Oems.
Finally, if I.
The push for.
And so maybe some the numbers I mean is it sort of of 20% to 30% uptick opportunity or is there almost and order of magnitude way of spending that extra thousand dollars, an on body and light weight and composites, you can get the payback and and longer range or lower battery cost this quarter of magnitude because I know what the cost.
Various products, but I'm, just trying to think of the.
The next Gen eds.
If you look at the.
The way I, usually look at it Chris is what is the trend and some of the processes and the next vehicle structures, whether it's hot stamping and casting and we have a good visibility on what's happening in 2003 to 25 timeframe.
I could just body.
If I look at that I would say and the.
15% range.
We'll continue going forward.
But if the battery cost come down to 100 are sub 100, and then that equation will change.
Perfect.
Framework one question on spire, I mean, we've seen the big uptick and.
And margins and just the follow on sort of.
First of logic.
As you start the press forward lots of discussion around new companies that youre working with and in the press.
New level of margin call it the four 5%.
And plus.
Is that sort of the way.
And the negotiations are happening.
The mid teens ROIC.
Or.
Are you willing to work with new customers at lower margins for a much larger book of business.
Yes, Chris.
Yes.
And then the other thing.
And we're all margins.
Hi.
You got to figure out how how you calculate margins.
Value added and contract or is it.
<unk>.
The cause of that we're selling back of the customer.
And in the case of Heska or assumption at this point, it's going to get value ladder.
As interest rates.
And that all has to be taken into account and the net.
And from my perspective.
I would focus on return on capital and return on investment that kind of.
Putting of weather.
At the capital, whether it's engineering dollars.
And of look at the the risk profile.
And kind of update.
Revenue stream coming in.
We're looking for it and appropriately currently back into the margins, but we're not kind of using margin of set the price and we're actually looking and making sure we're getting the appropriate return.
And on our Investor day.
And the value of bring to the customer I think where you look at margins you know Magna Sarah and they had been moving.
And if you go back a few years, it's a really of the Lora I think the margin number the right now are more representative.
And subject to mix changes of the day.
Business going forward and rather than what we were a couple of years ago.
One thing that.
And I've got to emphasize we talked a bit.
The World class manufacturing and the tough.
A lot of value.
Okay.
The restructuring and we took in 2020 and some of the benefits going forward, but the Magna Sarah.
The <unk>.
We'll focus on what the diesel.
The process standpoint, and whether it's engineering and manufacturing.
And we've seen the benefits of.
Of that.
And our margin numbers and we expect that to continue going forward.
Okay, and then just one more if I could any update and I apologize I know the assets quite often but any update on what it would take the pull the trigger sort of proactively.
To build the North American facility.
It clearly seems like some of the demands of the customers that is is there I imagine it takes a couple of contracts of size of just curious if there's any updated thoughts.
Yeah, Chris and Nothing's really.
No update there are we are certainly and.
And our mine ready to make the.
Precisely the right investment and North America likely get and China for example, and we've got some capacity there before our capacity in Europe, not that long ago.
But it's got to be kind of the rate and business mix for us and.
I know there will be risks coming into North America as with any new plant start up.
Do you have to be able to measure the risk quantify it and be comfortable with the rest were taking and the the returns we're going to generate.
And I think just right.
We have roughly about 180000 units per year.
And you know capacity and our JV in China.
Depending on the type.
But we have simple or kind of maybe two to 200 pounds and and our.
<unk> first of all.
The there.
Yeah.
If you look at it.
Kind of a pipeline of business and the road map, we could start with the lower number of units given the <unk>.
Flexibility, we have and manufacturing and one of our team has.
The media so as long as it is the path to get to get to an appropriate level of business, Chris I think.
We would be open to that obviously there is a bunch of variables, whether it's painted of not non painted and and so on and so forth that will.
And to the decision process.
That's really encouraging.
The next question comes from the line of Ryan Brinkman from Jpmorgan. Your line is open.
Great. Thanks could you discuss and a bit more detail your joint venture with LG electronics, how would you compare your integrated E drive system capabilities. Following closing of the JV relative to the competition would you say that your planned suite.
<unk> done the electrification of offerings is now pretty much complete.
Does it also makes sense to I don't know offer batteries or have some sort of more formal tie up with the battery manufacturers and we've seen with one of your E drive competitors at least on the commercial side.
Or would you consider that to be more non core.
Yeah.
Good morning, Brian.
Sweet of book.
And as we've talked about.
And you mentioned the building blocks of strategy was the key top process, which we started a few years ago.
Of addressing the overall system.
Half of the two awarded E Drive systems, one just being launched and the other one following.
I think.
And in China and out of high School JV.
As we looked at the overall value stream the figure that it was important to look at the.
E Motors and the in borders part of it and we are really excited to have LG as a partner there.
With that in place of.
The two important blocks and the technology.
With our software and.
And the overall integration capability that we have we believe it's going to.
Oh.
The increase the pace we're on.
Already having some.
Very good conversations with the customers.
Customers.
As you know some of the customers.
As the <unk>.
<unk> is evolving are looking at doing some of the systems in house, but.
But with the energy we have the opportunity to address the component side of motors and Inverters with them.
And the overall.
Tam actually as it progresses towards the lease increases for US right, because we are and the all wheel drive four wheel drive.
The systems today as it is moving forward.
Overall addressable market increases so we believe there and a really good position, we'll always continue to look for.
Specific technologies.
<unk> settlement of debt.
Might leapfrog going forward as this.
Clearly the past changing.
From a seller perspective, I think it's a pretty significant area. That's been there for a long time.
At this point, we believe mom.
Monitor, but our focus is on the E drive systems and how do we.
Stopped getting our fair share.
With the customers. So I just wanted to ask is when I think about the joint venture as well, we're not starting from zero of the joint venture does have and established revenue base.
<unk> of $150 million of revenue and.
And as expected.
And to grow and over 50% CAGR over the next number of Europe. So.
As we look at combining our forces with the book of business the.
Joint venture already has and we should be able to drive opportunities for the for the joint venture ourselves and it's all of the LG exactly.
Very helpful.
And just lastly, there might've been some illusion earlier, if the speculation regarding the need potential Apple car I just wanted to check in with you with regard to your ability to manufacturer of battery electric vehicles for newer startup manufacturers of course, you've discussed <unk> on this call and others are there any other startups that have shown interest, including any non b J E E.
Thanks, and China can you remind us of your capacity and your spare capacity in China I think the original press release from 2018 mentioned of 180000 vehicles I just wanted to check when the automakers oftentimes the first announced the plant, though also sometimes buy up some of the land around that plant and give them optionality to expand and the future just curious if that might be the case here too.
The company.
Yes.
We have said in the past.
And you to have conversations with various new entrants and even with the.
The established customers and.
Various platforms.
And I believe that has a unique position for magna.
In terms of.
To be as I said, we are and the.
150000.
The capacity range.
JV in China.
Obviously, we cannot talk specifics about the volume, but we have the flexibility with the agreement that we can look at non be JV.
And related opportunities that can come and China.
And Vincent I just spoke about her.
Openness to do a footprint in North America of theaters, the right business case so.
Really exciting discussions, but nothing specific that we can talk about.
Great. Thank you.
Our next question comes from the line of Mark Neville from Scotia Capital. Your line is open.
Hey, good morning, guys.
In the quarter.
And maybe just first and just to square away of the conversation on the margin So I understand your.
Playing off the <unk>.
Turning point is call it eight 9% the guide for next year of seven three.
And sort of a bunch of sort of discrete items and sort of explain the way the difference Davies mix stuff like that that sort of what are you doing it.
Yes, sorry.
The eight nine and getting it sorry, Mark good morning, Mark and I was just getting out.
Sort of top line I would say to two items that I think you should take into account one of the of governance in place of our programs and just the consolidation of the track entities and the both each of the three or eight nine.
And when I kind of look through the pluses and minuses.
The way some some.
And in the east escalation as we move into 'twenty, one compared to 2020, I think part of it Big picture of when you look at the run rate of volume in the second half and you kind of think of the 2021 and certain regions and they were running.
Really really high volumes, which are not expected of 'twenty, so that have an impact on.
Incremental and decremental margin.
Tooling was.
And had some more tooling revenue in the second half.
Yes.
There's a bunch of other kind of small things.
One of the causes I would say sorry is just kind of continued restructuring benefits.
Of course.
That's going to continue to benefit us and.
21, little more than it did in 2020 and it will be incremental again and in 'twenty, two and by coming kind of get to the end of 'twenty, two we pretty well got the benefits, we're expecting from our restructuring program debt.
And we started in 2020.
Yes.
And when you have seen much benefit and the second half of that restructuring.
And we saw some benefits of it we.
And we did.
And we talked about.
Kind of event it at $200 million.
The benefit from the restructuring the cost per but at the number of about 150 or $60 million and that we.
And Q2.
We probably got about.
Okay.
The quarter of that and.
Throughout 2020.
And what have been some of that in Q2.
And probably about 25% of it and 'twenty, two and kind of.
But part of it is in 'twenty one.
And kind of order of magnitude.
Okay.
Some of the Capex discussion and I guess, the complete vehicle discussion just to be clear the and.
The the guidance for the next few years of one 6 billion net of Capex roughly.
Does that sort of the contemplated any.
The capacity build for the <unk>.
The big deal.
And I'm not going to specifically talk of it.
Out of our business I can tell you that.
Capital being invested.
And all of our business units.
And it really depends on program launches and so.
Sure.
Mark I, just want to remind you to the two.
And when we talk about capital and historically, we've always talked about capital.
Just a couple of other big chunks of investment spending debt.
And we kind of interest.
Mentioning the odd time, but one of the investment in other assets and <unk>.
And Thats all types of production you can see debt that has been growing over time.
And net engineering right and we've been talking about engineering and Swamy talked of Ed.
$600 million roughly.
Roughly and the megatrend areas, but those are.
Pretty significant investments were.
And our business to position ourselves for the future.
Okay.
And the first one just one last question just on buyback.
And just curious when and.
And it might come back and the market.
Yes.
The really good question Mark.
So you kind of look at the.
The balance sheet at the end.
We're making we did it and that's with a lot of cash.
If you are right.
The presentation, there and kind of run the math and you look at.
Rest of debt to adjusted EBITDA at the end of Q4.
One six.
And from my perspective.
And we've got more cash.
And of the year, what I would have liked to have a lot of shouldnt I'd like to pay down some debt and I cant because its all fixed I think if you.
Back of surplus cash and my my mind, not all of the cash the surplus cash and we're probably running.
All of one two times churn at the end of the year.
That's kind of our sweet spot one to one and a half.
And so we're kind of.
And the physician at this point too.
And look at.
And the.
And starting to buy back some stock.
In 2021 subject to obviously.
What we see from an opportunity standpoint.
And on an inorganic basis.
Alright.
And I appreciate it.
Our next question comes from the line of Dan Levy from Credit Suisse. Please go ahead.
Hey.
Good morning, and and thank you for taking the questions.
I wanted to start the.
Question.
Thanks.
On the outlook.
Physically revenue for complete vehicle then you are effectively forecasting revenue flat over the next few years and.
And actually down slightly at the midpoint versus two.
And 19.
We've heard about this curve and presumably you are having discussions with other so can you help us.
And and.
To what extent upside may materialize in complete vehicles and it just it seems like this business is really hitting its stride or the appeal to.
Customers as the.
As a way to get.
And I think if they are asset light exposure and to address EBIT manufacturing. So why aren't we seeing more of that.
And the Sunday and the revenue outlook per complete vehicles.
Well, Dan and I think you've got to take into kind of a couple of things.
No.
As we've talked to the Fisher coming onboard and the.
The plans are to launch that business at the.
The end of the 2000.
And in 'twenty two.
So the.
I think you'll start to see more of a normal impact as you get into 2023 on the revenue line and our assumption that we built in to our outlook is that thats going to be of value added contract.
Our fully price contracts.
And the.
Our assumption of debt.
And the materials that are a big chunk of the materials are going to be and a pass through basis. So that has.
And no impact at all of our EBIT the bottom line, but certainly on the on the revenue line.
And you also look at the programs that we have a day and Magna Stier and.
So.
And the program.
Mr to end of life volume tends to drop off.
And until that will have a negative impact on overall sales.
And.
And when we look at our kind of 'twenty three revenue across the organization and 90%.
The businesses booked and we have contracts in place of the.
<unk>.
And new business question weather.
And we're going to be starting net in 'twenty, two 'twenty three or some time thereafter.
And what kind of.
Think about our complete vehicles business, that's what's kind of impacting the number of CME.
So that our range of 21, and 23 of kind of roughly the same type of about I think the lower end and 'twenty threes couple of hundred million dollars lower than our low end of 'twenty, one, but for all intents and purposes. The range of about the same but there are a bunch of moving pieces in there.
Keep it up and down we're also ramping up in China, but youre not going to see that and are consulting.
Consolidated sales of the volume is going to rise sales going arises as the soft consolidated.
Okay. So yes it does.
And the extent that you are having other.
The discussions, yes, we'd see that beyond 2023.
Yes.
Okay.
And then.
That's correct.
And you look to find out and go ahead.
Yes.
And then.
The second question you obviously the theme of the market is really to the.
And to understand how much each company's exposure benefits from <unk> I think we've heard about complete vehicles and that has a play on the we've heard about your battery tray exposure tried units light weighting.
Can you help us understand as we add everything up by 2023 of 2025 whats the net mix of the portfolio that ultimately.
The positive.
Good morning, Dan.
If you just look at it but I think the way you explained it we can look at.
The specter of the full vehicles, that's one piece the.
<unk> I would say is the.
And one that would be most impacted not just purely by heavy but.
EV along with the.
The EV architecture of that goes along with it.
Goodness.
The real kind of an impact on the product and how the products of design and via the computer systems of sitting and so on and so forth.
But some of the interesting things that you mentioned are also an ibs.
We see.
The new product as I would like to call it the battery tray.
Lightweight and <unk>.
Scott.
Again, as I mentioned before it would be.
And dependent on the drop and the battery prices and so on.
If you step back and look at it I think it will have an impact on how some of the components and the body and the.
Chassis systems will change overtime.
If you take just the powertrain and piece of.
Magnum business.
And look at the other stages of about 80% of the business right.
One interesting fact for example, a lot of the UBS has become for our world will have most of this.
<unk> going forward.
And we kind of looked at as one data point the boat.
And where we had I think $3400 worth of.
Content has increased to 3700.
So as most Oems migrate from the current to the.
And the Evs.
78% of our business, we will continue.
And to be sort of strike and on the powertrain and makes you said we are moving towards the debt.
And the E drive, we're looking at the electrical architecture, which I think is and.
And the enabler for the new entrants and possibly.
For some variance and the established customer base.
And that's how we have to look at it can put a specific number on it but hopefully give some color.
Maybe I can just that.
Swamy you look at kind of just the.
And the electrified and part of our business.
So we're.
And quite a bit of growth. If you just look at pure Evs.
And some of the joint venture so we've talked about the LG.
<unk> talked about <unk>, and we've launched and the dry system and as the second line is coming along.
And the.
With the completion of the the joint venture with LG is going to help too.
To tolerate.
Our capabilities and.
And our presence with the customers and we're seeing it today I guess, Eric Wold sitting across from me here.
And I know he has been and a lot more discussions about our capabilities of complete capabilities right now with the visa their customers. So I think youre going to see a lot.
And more of that growth.
And the 'twenty three time frame.
But we're starting to see the impact of that also in our business plan period from here until the end of 'twenty three.
So I think we can say the greatest exposure is powertrain, but we added LG.
So the rest of continues and the content opportunity we believe.
<unk> will go from April of 1900, and ice vehicles to about $2300 and EBITDA.
Great. Thank you very much.
The next question comes from the line of Peter Sklar from BMO.
Capital markets. Your line is open.
Hi, Thanks, good morning.
Vince I just wanted to go back on your comment on the the chip shortage and how you incorporated that and into the forecast.
I think what you're saying and and correct me if I'm wrong is that any loss of volume that.
Okay and globally as the result of the chip shortage do you anticipate that there'll be made up and the in the latter part of the year. So net net the chip shortage has had no impact on your guidance for full year 2021, although it does move the quarterly timing around that is that the right way to think about it.
Yes, Peter that the.
What's the right way to think of it.
<unk> already seen.
We haven't disrupted our customers and we've been able to even with the month of January meet our production, but we've had to shift things around and within our plan and some inefficiencies as a result of that so far so good but.
Our customers have shut has taken down some of their plants.
Both of the units are going to we're expecting that they're going to come out.
In the first quarter second quarter.
And our assumption in our outlook is sales units will be made out by the end of the year, So net neutral, but youre right.
So you've kind of Europe, you are stealing from the first half to bring to the second half. So that's the assumption of our outlook.
What we haven't kind of model of that.
The cost of some of those inefficiencies the start and stop.
My view is Peter that.
And Peter is really not going to be significant significant can move kind of the guidance. We've given you, but I do anticipate that there will be some.
Inefficiencies as the result of kind of start and stopping things, but we'll work through that and I don't think again, it's going to be any significant amount for us for the year.
I'd also.
Also pointed out if there is.
A little bit of volume loss and if you look at where IHS is and their most recent expectations. There of 16, two and North America where of 59.
19, and Europe, we're at 18 five of 20.
24, eight and China. We're at 24, so we're running right now below the IHS, they're the most current look.
And so it gives us a little bit of protection and case volumes are off a little bit.
Okay. Thanks Louis.
My second question is like when you look at the segmented reporting the bodies and the exteriors group was particularly strong boats and revenue and haven't had had the like a very unusually high margin.
I'm just wondering is there anything in particular.
You can point to and that segment.
G M light truck volumes were strong so I would think that would be some of it but is there anything else that you would want to call out and that segment.
Yeah, there's a couple of things and I'm happy to call it Peter.
And in the segment.
Yeah, Youre looking Q4, and Q4 of them assuming rate and you referenced yes.
I know, there's the GM strike last year, and but the GM strike and we've talked about the last year. It was.
One 2% on that segment.
So yes.
Take the seventh.
We were <unk> 74 last year, you had one to sort.
And we're at 86 versus 12 four is still a lot in there.
And we've been <unk>.
Talking some time about focusing on some of the Underperformers that we had and this group and we've been chipping away and making progress and we continue to make progress and we don't expect that to go away that.
Progress has been made and we're just kind of continue to move forward from there.
Pretty big contributor year over year.
We had commodity costs were.
A little bit of a benefit for us.
This quarter versus last quarter.
The little bit less launch costs.
And.
They've got some.
Odds and ends is positive adjustments I talked about that and my comments overall at Magna and I think the other thing too is Peter with the higher volume.
I just had.
And the pull through and just the do you think of it and the incremental margin of higher volumes and net debt.
And certainly helps the overall margin.
Kind of at the start adding it all up and all the pieces, it's a pretty significant improvement.
Year over year.
Yes, Tal the programs on the Bill.
And the sale of five of the top of Rems and can be yes were really strong some of them are related to launch.
Including like the Suvs as you mentioned that.
A few others, including some diamond business.
But volume just strong volumes and on top programs, there and the impact of launch.
Okay. Thanks.
And then I just had one last question if I may per swamy.
Swamy as you know with these.
Ford and GM announcements.
And that we've had over the course of the law.
And so you know the movement to vehicle electrification you know appears to gone two of sprint now with everybody trying to outdo themselves you know for a shorter time frame for the termination of the you know, making you know ice powertrain vehicles. So I'm just wondering you know if you.
The thought there is any substance to those announcements or is it you know just more noise.
Noise and perception on their part and if if this more.
You know accelerated movement to battery electric vehicles, and if that has caused you to pause and reassess your strategy at all and the investments.
You need to make.
Good morning, Peter Great question.
I think if you've seen us over the last three to five years as we've always said how do we develop the strategy of bringing power to the wheels, which is a portfolio of today.
Being agnostic to the take rates to the extent of hospital, obviously right.
We always said, let's look at what are the key building blocks and how can we scale.
As the market accelerates.
I think the push towards electrification and like you said.
I don't know to characterize it whether it is the strength of our non definitely has accelerated compared to what you've seen.
<unk>.
Based on the.
The.
Where Europe is where China is and now.
Lots of conversation and U S.
But I think overall with the.
<unk> expertise and capabilities that we had at Magna.
The addition of LNG.
And <unk>.
And just looking at the product portfolio overall, we actually see this as an opportunity going forward.
And not even talking about the new entrants and others that are.
Able to contemplate entry into the market, we think it's of great great.
Great opportunity for Magna.
Okay.
Thanks for your comments.
The next question comes from the line of James Picariello from Keybanc. Your line is open.
Hey, good morning, guys.
Can.
You want and James share the margin can you share the margin profile of the $650 million consolidated and get dragged piece and how much equity income was taken out from that.
And.
And any of that and handy and chat.
And.
No I can think of that I could ask Mike, Yes, I could just ask my next question, if you find it and tie.
Great, but otherwise.
Right.
And the power and vision segment.
Can you provide any color on what's baked into the LG JV of financials over the next few years, specifically I mean, you have the marker of the 50%.
Revenue CAGR and more so interested and you know in the equity income impact and kind of tying it to the your total and consolidated revenue growing more than 2 billion right from 'twenty one to 'twenty three curious what's.
What's the breakout there.
And I think when you look at the.
The margin side.
And the.
Power and vision side that is going to be diluted and.
21 and 22.
We've got some losses.
Some of investments and there is the business starts to ramp up.
As we get into the 23 I think it's a book to early start to tell us the number of opportunities debt.
And that could be working on and so it depends on many of the cadence of that and let the associated engineering spend kind of Asia.
And as well as the revenue starts to ramp up obeisance and incremental profit on all of that and that's really the mix of that.
And it's still a little towards the talent.
I look at kind of of our consolidated numbers.
And it's not going to move the needle that much one way or the other I think as you get.
Cost of 23.
And the joint ventures is going to have the more significant impact.
The equity income line.
And certainly.
And they will provide some opportunities for us on the Magna side as well if you look at complete E drive systems.
So within the $2 billion in and growth for your total and consolidated revenue right yourself over two year period.
I mean this is the majority of that driven by by Hesco and and P. J a V or just kind of the breakout of the three J vs that are that are growing.
Yes.
Yes.
Just off the top my head of the VIX contributors are gonna be Haskell.
And it's going to be the JV and I've talked about LGD and about $150 million of sales in 2019. So the sales are going to be more in 'twenty, one and I've been talking about the 50% CAGR. So there is just some of that built into the unconsolidated joint venture.
<unk> sales as well.
Got it okay and just.
And at the high level, if we just bridge. This year's guide the 2023 and you take the midpoint to get a sense for what 2022 looks like and even after adjusting forget track.
The entire implied 2022 framework is almost identical to the 2022 targets.
They got last year. So just curious you out of the high level what are the the major driving forces you'd attribute to that story line in terms of the earnings resilience.
Okay.
Oh.
And this really.
Three things that stand out in my mind, one is I think the first kind of look back.
Where our volume and where we thought we were going to be last year, where we think we're going to be this year and 2002 volumes are less so.
That's the negative.
We've talked about the consolidation of the track.
That's the negative what we would have anticipated last year.
I think the.
And I can say biggest driver.
Going the other way is really our focus on the overall cost structure.
Yeah.
Not only of was that accounting for some of the the right sizing and and bringing down our structural cost.
At the end of 2020, but I just think of see overall, the small and textile and <unk> started.
And lot of them World class manufacturing.
The World Class manufacturing hunkering down and looking at what we're doing to take cost out of the systems.
And.
As of a lot of kind of moving pieces, but.
And I say that.
Probably the biggest part of it and you know I look at 20% of two.
<unk> 22 from a year ago to now.
Thanks, Jess and.
In terms of of the equity income its about $50 million for the for the two joint ventures in 2020.
Our next question comes from the line of Kevin Chiang from CIBC World markets.
Your line is open.
Thanks, and thanks for squeezing me in here and it's been a long call I. Appreciate all the color maybe just just one for me just circling back on the chip shortage I appreciate the color you provided.
And the uncertainty and you say so just wondering.
The other plays out and if you think of the downside risk and Myra.
To think of the segments that might be the most impacted might be of complete vehicle manufacturing segment or or would you.
Would you think of another segment might be more.
Theres more downside risk and in the event the chip shortage.
Last longer than through 'twenty and 'twenty one.
Good morning, Kevin I think many of the faithful vehicle manufacturing and Pcs.
And how the Oems are available.
Manage their mix I think right and rich models sort of reset was going to be.
Fair value versus the other but that is something that we have the kind of followed the lead.
Vincent.
We've been fortunate not to disrupt from our side of things on any of the part of clients, but we've been.
Monitoring and extremely closely over the last two to three months and I think and continue.
Going forward.
But other than that there is a lot of it is a very dynamic situation right now I don't know how we can.
Can put a finger on it other than say based on the facts today. We believe the first half is where we have to watch closely and we might see those type of stops and.
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Managing different variants, but.
And we still see with the capacities that are added and so.
So on and so forth.
It looks like there is a good possibility of making up and the second half, but like I said, it's sort of dynamic behalf, the still wait and watch.
Well I appreciate the situation that's it for me. Thank you very much.
Are there any other any.
The of the calls the health and a pretty long.
Meeting.
It's just one of the call, we'll take that bad debt.
And some other things and we're committed to this morning that we need to get into as well.
No problem.
So this will be the last question coming from the line of Adam Jonas from Morgan Stanley.
Please go ahead.
Guys I'm going to give me your time back I just wanted to say I continue to underestimate you don't bet against the Canadians.
Great presentation really value added disclosure.
I don't have to really sink my teeth into the transcript here. So let's let Louis Louis Let's talk later Louis Okay, you guys be well and stay safe.
Thanks, and thanks Adam.
Take care.
And just to conclude the call and I appreciate everybody, taking the time I know it for the long haul and we went through a lot of.
Detail like I said, our objective today was true.
And focus on the outlook and the fourth quarter results, but.
And I'm really hoping to and looking forward to meeting all of you and our April <unk>.
Investor event, where we want to provide color a little bit more on the product portfolio and the strategy going forward.
So until then thank you very much and stay safe and stay healthy. Thank you.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.
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