Q4 2021 Magna International Inc Earnings Call

Okay.

Yeah.

Speaker 1: Greetings and welcome to the Q4 and year-end 2021 results and 2022 outlook.

Greetings and welcome to the Q4 and year end 2021 result in 2022 outlook.

Speaker 1: During the presentation, participants will be in a listen-only mode. Afterwards, we'll conduct a question and answer session. At that time, if you have a question, just press the 1, followed by the 4 on your telephone. If any time of the conference you need to reach an operator, you may press the start, followed by the 0. As a reminder, today's call is being recorded Friday, February 11, 2022.

In the presentation, all participants will be in a listen only mode.

Afterwards conduct a question and answer session at the time, if you have a question just crossed the one so by the four on your telephone if anytime the conference here to reach the operator, you May press the star.

Followed by zero.

As a reminder, today's call is being recorded Friday February 11th 2022.

Speaker 1: Now, I would like to turn the conference over to Louis Twinelli, VP of Investor Relations. Please go right ahead.

Now I would like to turn the conference over to Louis Tonelli VP of Investor Relations. Please go right ahead.

Speaker 2: Thank you. Hello, everyone, and welcome to our conference call covering our 21 results and our 2022 outlook. Joining me today are Swami Kodagiri, Vince Galissi, and Pat McCann.

Thank you Hello, everyone and welcome to our conference call covering our 'twenty, one results and our 2022 outlook joining.

Joining me today are Tony quarter, Gary <unk>, and Pat Mccann, Yes.

Speaker 2: Yesterday, our board of directors met and approved our financial results for 2021, as well as our financial outlook. We issued a press release this morning outlining each of these.

Yesterday, our board of directors met and approved our financial results for 2021 as well as our financial outlook, we issued a press release. This morning outlining each of these.

Speaker 2: You'll find the press release, today's conference call webcast, the slide presentation to go along with the call, and our updated quarterly financial review, all in the investor relations section of our website at magna.com.

You'll find the press release today's conference call webcast.

Slide presentation to go along with the call and our updated quarterly financial review all in the Investor Relations section of our web site at Magna Dot com.

Speaker 2: Just before we get started, just as a reminder, the discussion today may contain forward-looking information or a forward-looking statement within the meaning of applicable securities legislation.

Just 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.

Speaker 2: Such statements involve certain risks, assumptions, and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements.

Such statements involve certain risks assumptions and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements.

Speaker 2: Please refer to today's press release for a complete description of our safe harbor.

Please refer to today's press release for a complete description of our safe Harbor disclaimer.

Speaker 2: Please also refer to the reminder slide included in our deck today related to our comments.

Please also refer to the reminder, slides, including included in our deck today related to our commentary.

Speaker 2: This morning we will cover our 21 highlights as well as our two core results.

This morning, we will cover our 'twenty, one highlights as well as our Q4 results we.

Speaker 2: We'll then provide our 22 outlook and lastly run through our financial strategy.

We will then provide our 'twenty two outlook and lastly run through our financial strategy and with that I'll pass it over to Swamy.

Speaker 3: Thank you, Lewis. Good morning, everyone. We've been busy over the last few days, taking our board through our annual results and our business plans. Today, I'll recap 2021, comment on our results, and address our outlook.

Thank you Louis good morning, everyone.

We've been busy over the last few days, taking our board through our annual results and our business plans today I'll recap 2021 comment on our results and address our outlook.

Speaker 3: 2020 was a very challenging year that was dominated by the global turmoil caused by COVID.

2020 was a very challenging year that was dominated by the global turmoil caused by Covid.

Speaker 3: In 2021, the auto industry was severely impacted by supply chain disruptions, most notably the lack of availability of semiconductor chips.

In 2021, the auto industry with CBA really impacted by supply chain disruptions, most notably the lack of availability of semiconductor chips.

Speaker 3: Once again, we found ourselves working closely with our customers to manage through the challenges to mitigate the impact on production.

Once again, we found ourselves working closely with our customers to manage through the challenges to mitigate the impact on production.

Speaker 3: While I'm not happy with our financial results in 2021, when I sit back and think about the efforts and performance of our team, whether it be winning new businesses, launches, or other operational excellence activities, I was extremely pleased with the results we achieved.

While im not happy with our financial results in 2021, when I sit back and think about the efforts and performance of our team whether it be winning new business launches or other operational excellence activities I was extremely pleased with the results we achieved.

Speaker 3: It is a testament to our people that we managed through yet another difficult operating environment.

It is a testament to our people that we managed through yet another difficult operating environment.

Speaker 3: our culture of collaboration and execution comes through once again in 21.

Our culture of collaboration and execution comes through once again in 'twenty one.

Speaker 3: In 2020, the first half of the year was severely impacted by COVID-related production shutdowns globally, while the second half saw a strong vehicle production rebound.

In 2020, the first half of the year with Cvs really impacted by Covid related production shutdowns globally.

While the second half saw a strong vehicle production rebound.

Speaker 3: In each of the first three quarters of 2021, we experienced sequential weakening of vehicle production as the semi-chip availability became progressively worse.

In each of the first three quarters of 2021.

We experienced sequential weakening of vehicle production as the semi chip availability became progressively worse.

Speaker 3: In addition to the lower production, inefficiencies driven by the unpredictable production schedules of our customers drove higher-than-typical decremental margins.

In addition to the lower production inefficiencies driven by the unpredictable production schedules of our customers drove higher than typical decremental margins.

Speaker 3: The fourth quarter saw some sequential recovery in production, but global volumes were still down 17% from the fourth quarter of 2020.

The fourth quarter saw some sequential recovery in production, but global volumes were still down 17% from the fourth quarter of 2020.

Speaker 3: As a result of this cadence, our sales of $9.1 billion in the fourth quarter of 2021 were down 14% year over year.

As a result of this cadence our sales of $9 1 billion in the fourth quarter of 2021 were down 14% year over year.

Speaker 3: However, organic sales outperformed our underlying markets by 6% in the quarter.

However, organic sales outperformed our underlying markets by 6% in the quarter.

Speaker 3: EBIT margin declined year over year to 5.6% while increasing from 2.9% in Q3.

EBIT margin declined year over year to five 6%, while increasing from two 9% in Q3.

Speaker 3: Our adjusted EPS was $1.30 for the quarter.

Our adjusted EPS was $1 30 for the quarter.

Speaker 3: and free cash flow in Q4 was $729 million, ending the year at $1.3 billion.

And free cash flow in Q4 was $729 million ending.

Ending the year at one 3 billion.

Speaker 3: Now let us look at some highlights for 2021.

Now, let us look at some highlights for 2021.

Speaker 3: Keeping our employees safe throughout the pandemic has been and will continue to be our top priority.

Keeping our employees safe throughout the pandemic has been and will continue to be our top priority.

Speaker 3: We have been evolving and updating our protocols and facilitating testing and vaccination programs globally to help protect the health and safety of our employees.

Have been evolving and updating our protocols and facilitating testing and vaccination programs globally to help protect the health and safety of our employees.

Speaker 3: We remain focused on three key priorities, building awareness, creating an inclusive workforce, including through training and leveraging tools and recruiting to help remove any bias during screening.

We remain focused on three key priorities building awareness.

Creating an inclusive workforce, including through training.

And leveraging tools and recruiting to help remove any bias during screening.

Speaker 3: To continue to cultivate a culture of learning, we have launched several new education programs for employees facilitating further development.

To continue to cultivate a culture of learning.

Have launched several new education programs for employees facilitating further development.

Speaker 3: And among the many awards we received, MAGNA has been recognized for the fifth consecutive year, being named Forbes World's Best Employer for 2021.

And among the many awards we received Magna has been recognized for the fifth consecutive year being named Forbes world's best employer for 2021.

Speaker 3: We never lost sight of the importance of operational excellence.

We never lost sight of the importance of operational excellence.

Speaker 3: Last year, we committed to being carbon neutral in our European operations by 2025 and globally by 2030.

Last year, we committed to being carbon neutral in our European operations by 2025 and globally by 2030.

Speaker 3: This should place us among industry leaders in Europe and North America.

This should place us among industry leaders in Europe , and North America.

Speaker 3: We managed through the year-long supply chain challenges while working diligently with our customers to minimize production disruption.

We managed through the ear long supply chain challenges, while working diligently with our customers to minimize production disruptions.

Speaker 3: and our focus on operational excellence and innovation led to customer recognition.

And our focus on operational excellence and innovation led to customer recognition.

Speaker 3: Last year, we received our highest ever customer recognition awards, 122 in total.

Last year, we saw.

<unk>, our highest ever customer recognition awards 122 in total.

Now, let me comment on growth.

Speaker 3: We outgrew our market in 2021 by 4%.

We outgrew our market in 2021 by 4%.

Speaker 3: This exceeded the outgrowth we anticipated in our initial outlook last year.

This exceeded the outgrowth, we anticipated in our initial outlook last year.

Speaker 3: In fact, we achieved that outgrowth in each of our major regions, North America, Europe , and Asia.

In fact, we achieved that outgrowth in each of our major regions North America, Europe and Asia.

Speaker 3: And we launched new technologies that have significant growing addressable markets, namely e-drives, advanced driver assist systems, and EV battery inclusion.

And we launched new technologies that have significant growing addressable markets, namely E drive advanced driver assist systems and EV battery enclosures.

Speaker 3: We expect these product areas to keep driving our growth for many years to come. Finally.

We expect these product areas to keep driving our growth for many years to come.

Finally, I would like to touch on our innovation we.

Speaker 3: We demonstrated the successful commercialization of our innovation activities over the past few years.

We have demonstrated the successful commercialization of our innovation activities over the past few years.

Speaker 3: We were awarded new business in a number of core areas. This includes a recently announced driver monitoring system for a German-based OEM.

We were awarded new business in a number of core areas. This.

This includes our recently announced driver monitoring system for a German based OEM.

Speaker 3: We won the CES Best Innovation Award for our ICON digital radar, which is going into production this year.

We won the CES Best Innovation award for our icon digital radar, which is going into production this year.

Speaker 3: We also continued to expand our collaboration with a growing ecosystem of entities to help accelerate time to market for our innovative products.

We also continued to expand our collaboration with a growing ecosystem of entities to help accelerate time to market for our innovative products.

Speaker 3: And lastly, our commitment to innovation continues.

And lastly, our commitment to innovation continues.

Speaker 3: Over the past year, we increased investments in megatrend areas to position us for the future.

Over the past year, we increased investments in megatrend areas to position us for the future.

Speaker 3: Normally, I would be passing off to Vince, and I've heard this statement over many years. Don did it, and I did it for the last quarter. He's here with us. Instead, I'll pass the call to Pat McCann, our new CFO , who will first take us through the financials. But before I do, I would like to thank Vince for continuing to be a mentor to both Pat and I. Pat?

Normally I would be passing off to wins and I've heard this statement over many years Don did it and I did it for the last Carter is here with US and said I'll pass the call to Pat Mccann, our new CFO , we will first take us through the financials, but before I do I would like to thank Vince.

We're continuing to be a mentor to both Pat and I pack.

Speaker 4: Thanks Swami and good morning everyone. I hope everyone is staying safe and healthy.

Thanks, Swamy and good morning, everyone.

I hope everyone is staying safe and healthy.

Speaker 4: I'm happy to be speaking with all of you as CFO . I would like to start by thanking Vince, who has helped me immensely over the years and has supported me while I have prepared for my new role.

I'm happy to be speaking with all of US CFO I would like to start by thanking Vince who has helped me immensely over the years and have supported me while I have prepared my new role.

Speaker 4: It will be evident that Swami Vint and I are fully aligned on Magnus' disciplined, returns-based approach to capital allocation.

It will be evident that swamy, Vince and I are fully aligned on Magnus disciplined returns based approach to capital allocation.

Speaker 4: Today I will cover our financial results for the fourth quarter and full year 2021.

Today, I will cover our financial results for the fourth quarter and full year 2021.

Speaker 4: I'll do a shorter than usual version of our quarterly review to allow more time to cover our outlook and financial strategy. More detail on our financials is on our website.

I'll do a shorter than usual version of our quarterly review to allow more time to cover our outlook and financial strategy.

More detail on our financials is included in the appendix.

Speaker 4: As Swami said, both 2020 and 2021 were impacted by significant global events.

As Swamy said, both 2020 and 2021 were impacted by significant global events.

Speaker 4: 20 was affected by COVID-related production shutdowns, particularly in the first half of the year. 2021 was impacted by semi.

'twenty was affected by Covid related production shutdowns, particularly in the first half of the year.

2021 was impacted by semi chip shortages.

Speaker 4: Overall, global light vehicle production only increased 4% in 2021.

Overall global light vehicle production only increased 4% and 21.

Speaker 4: Our consolidated sales rose 11% year over year. On an organic basis, our sales increased 5% compared to a weighted global production increase of 1%.

Our consolidated sales rose, 11% year over year.

On an organic basis, our sales increased 5% compared to a weighted global production increase of 1%.

Speaker 4: driving a 4% weighted growth over market for the year.

Driving a 4% weighted growth over market for the year.

Speaker 4: mainly as a result of the higher year-over-year sales, our adjusted EBIT margin and EPS also rose.

Mainly as a result of the higher year over year sales, our adjusted EBIT margin and EPS also rose.

Speaker 4: For the fourth quarter, global light vehicle production declined 17%.

For the fourth quarter Global light vehicle production declined 17%.

Speaker 4: as a result of year-over-year reductions of 20%, 28% and 10% in North America, Europe and China, respectively.

As a result of year over year reductions of 20% 28, and 10% in North America, Europe , and China, respectively.

Speaker 4: On a magna weighted basis, production declined 20% in the fourth quarter compared to Q4 2020.

On a magnet weighted basis production declined 20% in the fourth quarter compared to Q4 2020.

Speaker 4: Consolidated sales were $9.1 billion compared to $10.6 billion in Q4 2020.

Consolidated sales were $9 1 billion compared to $10 6 billion in Q4 2020.

We had strong relative sales performance in the quarter with organic sales outperforming weighted production by 6%.

Speaker 4: We had strong relative sales performance in the quarter with organic sales outperforming weighted production by 6%.

Speaker 4: Largely as a result of the lower year-over-year sales, adjusted EBIT and EPS declined from the fourth quarter of 2020.

Largely as a result of the lower year over year sales adjusted EBIT and EPS declined from the fourth quarter of 2020.

Speaker 4: As with the past couple of quarters, a more informative comparison is reviewing sequential results.

As with the past couple of quarters, a more informative comparison is reviewing sequential results.

Speaker 4: Comparing Q4 to Q3 of 2021, global light vehicle production was up 21%, driven principally by China and Europe as chip related production shutdown subsided to some degree.

Comparing Q4 to Q3 of 2021 global light vehicle production was up 21% driven principally by China and Europe as chip related production shutdowns subsided to some degree.

Speaker 4: Our sales were up 15% due to higher production and the launch of new programs.

Our sales were up 15% due to higher production and the launch of new programs.

Speaker 4: partially offset by negative program mix and foreign currency translation.

Partially offset by negative program mix and foreign currency translation.

Speaker 4: All of our segments experience sequential increases in sales.

All of our segments experienced sequential increases in sales.

Speaker 4: Comparing the third quarter to the fourth quarter of 2021, our adjusted EBIT increased from $229 million to $508 million, and EBIT margin rose from 2.9% in Q3 to 5.6% in Q4. The adjusted EBIT increase reflected a number of factors.

Comparing the third quarter to the fourth quarter of 2021, our adjusted EBIT increased from 229 million to $508 million and EBIT margin rose from two 9% in Q3 to five 6% in Q4.

The adjusted EBIT increase reflected a number of factors.

Higher earnings on increased sales.

Speaker 4: The $45 million provision on engineering contracts with Evergrande recorded last quarter.

The 45 million provision on engineering contracts with Evergrande recorded last quarter.

Speaker 4: government R&D incentives received this past quarter and higher commercial settlement.

Government R&D incentives received this past quarter and higher commercial settlements.

Speaker 4: These were partially offset by higher input costs and increased transactional foreign exchange losses.

These were partially offset by higher input costs and increased transactional foreign exchange losses.

I will now review, our cash flows and investment activities.

Speaker 4: During the fourth quarter of 2021, we generated $849 million in cash from operations before changes in working capital, and an additional $502 million in working capital.

During the fourth quarter of 2021, we generated $849 million in cash from operations before changes in working capital and an additional $502 million in working capital.

Investment activities in the quarter included $540 million in fixed assets a.

Speaker 4: Investment activities in the quarter included $549 million in fixed assets, a $105 million increase in investments, other assets and intangibles.

A $105 million increase in investments other assets and intangibles.

Speaker 4: $63 million to finalize the LG MagnaJoint Venture, $31 million for a small acquisition, and $45 million in public and private equity investment.

$63 million to finalize the LG magnet joint venture $31 million for a small acquisition and $45 million in public and private equity investments.

Speaker 4: Free cash flow with $729 million in Q4.

Free cash flow was $729 million in Q4.

Speaker 4: We also repurchased $251 million of our common shares and paid $127 million in dividends.

We also repurchased $251 million of our common shares and paid $127 million in dividends.

Growing our dividend as part of our stated financial strategy and.

Speaker 4: And yesterday, our board approved a 5% increase in our quarterly dividends to $0.45 per share, reflecting the board and management's collective confidence in the outlook for our business.

And yesterday, our board approved a 5% increase in our quarterly dividend to <unk> 45 per share, reflecting the board and managements collective confidence in the outlook for our business.

Speaker 4: We have increased our dividend per share at an average growth rate of 12% going back to 2020.

We have increased our dividend per share at an average growth rate of 12% going back to 2020.

Speaker 4: And now I will pass it to Swami for a few introductory comments before getting into the specifics of our outlook.

Okay.

And now I will pass it to swamy for a few introductory comments before getting into the specifics of our outlook.

Speaker 3: At our investor event last April , I articulated our go-forward strategy for growth.

At our Investor event last April .

Two created our go forward strategy for growth.

Speaker 3: We are on track with our strategy to further strengthen our position in megatrend areas, drive operational excellence, and look to leverage our unique position in the industry to unlock new opportunities.

We are on track with our strategy to further strengthen our position and megatrend areas drive operational excellence and look to leverage our unique position in the industry to unlock new opportunities.

Speaker 3: I look forward to giving you the details of our progress at our investor event in May.

I look forward to giving you the details of our progress.

Investor event in May.

Speaker 3: But today, I'm going to focus on our three-year outlook, which I'm really excited about.

But today I'm going to focus on our three year outlook, which I'm really excited about.

Speaker 3: It reflects our Go Forward strategy to remain a leader in mobility.

It reflects our go forward strategy to remain a leader in mobility.

Speaker 3: you're going to see that we continue to increase our investments in megatrend areas and that much of the growth associated with these investments will be realized beyond our outlook period.

Youre going to see that we continue to increase our investments and megatrend areas and that much of the growth associated with this investment will be realized beyond our outlook period.

Speaker 3: Specifically in the outlook, we see both tailwinds and headwinds.

Specifically in the outlook.

C both tailwind and headwinds.

Speaker 3: In terms of tailwinds, we are launching content on a number of new programs, which is contributing to sales growth. I will come back to that.

In terms of tailwind we are launching content on a number of new programs, which is contributing to sales group growth.

I will come back to that shortly.

Speaker 3: Relative to last year's outlook, we have an increase in business awards and are seeing opportunities in megatrend areas, particularly electrification and autonomy.

<unk> to last year's outlook, we have an increase in business awards and are seeing opportunities and megatrend areas, particularly electrification and autonomy.

Speaker 3: With the current robust auto demand and low dealer inventory levels, we expect a favorable production environment extending into 2024.

With the current robust auto demand and low dealer inventory levels, we expect a favorable production environment extending into 2024.

Speaker 3: and our operational excellence initiatives are expected to contribute to margin improvement through our outlook period.

And our operational excellence initiatives are expected to contribute to margin improvement through our outlook period.

Speaker 3: In terms of headwinds in our outlook, we expect continued semiconductor supply constraints to impact production in 22.

In terms of headwinds in our outlook, we expect continued semiconductor supply constraints to impact production in 'twenty two.

Speaker 3: The supply chain in general remains relatively vulnerable, which could also impact vehicle production.

The supply chain in general remains relatively vulnerable, which could also impact vehicle production.

Speaker 3: And our business is facing inflationary input cost impacts in areas such as commodities, labor, energy, logistics, and other areas, some of which are expected to be short-term in nature and others being more enduring.

And our business is facing inflationary input cost impacts in areas, such as commodities labor energy logistics and other areas some of which are expected to be short term in nature and others being more enduring.

Speaker 3: We expect weaker operating results in the first half of the year relative to the second, primarily as a result of semiconductor availability, which should negatively impact production more significantly in the first half.

We expect weaker operating results in the first half of the year relative to the second primarily as a result of semiconductor availability, which should negatively impact production more significantly in the first half.

Speaker 3: So how does all of this translate in our key financial metrics?

So how does all of this translate in our key financial metrics.

Speaker 3: We expect to continue strong sales growth through our outlook period, and we have confidence in our outlook.

We expect to continue strong sales growth through our outlook period, and we have confidence in our outlook.

Speaker 3: About 90% of our 2024 sales are already booked.

About 90% of our 2024 sales are already booked.

Speaker 3: In spite of inflationary input cost pressures and increased engineering activities in mega-trend areas, margins are expected to expand in each year of our outlook.

In spite of inflationary inputs input cost pressures and increased engineering activities and megatrend areas margins are expected to expand in each year of our outlook.

Speaker 3: Our engineering investments in megatrend areas should increase to an average of about 900 million annually before customer recovery.

Our engineering investments and megatrend areas should increase to an average of about $900 million annually before customer recoveries.

Speaker 3: Capital spending is also expected to increase largely as a result of investments to support the growth in our outlook.

Capital spending is also expected to increase largely as a result of investments to support the growth in our outlook.

Speaker 3: Lastly, free cash flow generation from our business is expected to remain strong, reflecting our operating performance and our disciplined approach to investment.

Lastly, free cash flow generation from our business is expected to remain strong, reflecting our operating performance and our disciplined approach to investment.

Speaker 3: This should allow us to further invest for growth and return capital to shareholders.

This should allow us to further invest for growth and return capital to shareholders.

Speaker 3: The industry is undergoing a significant shift towards electrified powertrains.

The industry is undergoing a significant shift towards electrified powertrains.

Speaker 3: In particular, OEMs are bringing an increased number of Babs to market.

Particular Oems are bringing an increased number of <unk> to market.

Speaker 3: We have been communicating for some time now that the vast majority of our product portfolio is powertrain agnostic. And electrification is, in fact, an opportunity for us.

We have been communicating for some time now that the vast majority of our product portfolio is powertrain agnostic.

Electrification is in fact, an opportunity for us.

Speaker 3: And MAGNA has significant content on electric vehicles that are launching this year across the globe.

And Magna has significant content on electric vehicles that are launching this year across the globe.

Speaker 3: Just to name a few, we have over $3,500 in content on the Cadillac Lyric, about $2,000 on the F-150 Lightning, about $1,000 on BMW iX.

Just to name a few we have over $3500 in content on the Cadillac lyric.

<unk> 2000 on the F 150 lightning.

<unk> thousand on BMW IX.

Speaker 3: About $500 each on Xpeng and Smart SUVs and around $900 on the Neo ES7.

About 500, each on X Bang and smart Suvs and around $900 under Neil <unk> seven.

Speaker 3: These vehicles shown are well above our average content in the respective market.

These vehicles shown are well above our average.

Content in their respective markets.

Speaker 3: These are just some of the many vehicle launches around the world that are contributing to the sales growth in our outlook. With that, I'll pass it back to Pat. Thanks, Swami.

These are just some of the many vehicle launches around the world that are contributing to the sales growth in our outlook.

With that I will pass it back to Pat.

Thanks Swamy.

Let me start with the key assumptions in our outlook.

Speaker 5: Our outlook reflects increased vehicle production in each of our key regions relative to 2021.

Our outlook reflects increased vehicle production in each of our key regions relative to 2021.

Speaker 4: In North America and Europe , our two largest markets, volumes in 2022 remained well below levels experienced in 2019, pre-COVID, and China production is also slightly lower.

In North America, and Europe , our two largest markets volumes in 2020 to remain well below levels experienced in 2019 pre COVID-19 .

In China production is also slightly lower.

Speaker 4: However, we expect increased production through 2024.

However, we expect increased production through 2024.

Speaker 4: We assume exchange rates in our outlook will approximate recent rates. This reflects a weaker Euro relative to 21, which negatively impacts our reported sales going forward.

We assume exchange rates and our outlook will approximate recent rates. This reflects a weaker euro relative to 'twenty, one which negatively impacts our reported sales going forward.

I will start with our consolidated outlook.

Speaker 4: We expect consolidated sales to grow by 7% to 9% on average per year out to 2024, reaching $44.6 billion and potentially as high as $47.1 billion.

We expect consolidated sales to grow by 7% to 9% on average per year up to 2020 for reaching.

Reaching $44 6 billion and potentially as high as $47 1 billion.

Speaker 4: The growth is driven by higher vehicle production and content growth, including as a result of many new technologies across our portfolio.

The growth is driven by higher vehicle production and content growth, including as a result of many new technologies across our portfolio.

Speaker 4: These are partially offset by foreign exchange, the end of production on certain programs, and net disposition.

These are partially offset by foreign exchange the end of production on certain programs and net dispositions.

Speaker 4: On an organic basis, we expect consolidated sales to grow between 8 and 10% on average per year out to 2024.

On an organic basis, we expect consolidated sales to grow between 8% and 10% on average per year out to 2024.

Speaker 4: Excluding complete vehicles, we expect our organic sales to grow between 10 and 12% on average.

Excluding complete vehicles, we expect organic sales to grow between 10 and 12% on average.

Yeah.

Speaker 4: In addition, we are expecting significant sales growth from unconsolidated joint ventures over the next few years, including from our LG E-Powertrain joint venture, our integrated E-Drive JV in China, and a new seeding joint venture in North America.

In addition, we are expecting significant sales growth from unconsolidated joint ventures over the next few years.

Including from our LG E powertrain joint venture our integrated E drive GB in China, and a new seating joint venture in North America.

Speaker 4: We expect our consolidated margin to expand in 2022 and then again out to 2024.

We expect our consolidated margin to expand in 2022, and then again up to 24.

Speaker 4: Relative to 21, our 2022 margin benefits from contribution on higher sales, lower production inefficiencies from unpredictable OEM production schedules, and operational excellence initiatives.

Relative to 'twenty, one or 2022 margin benefits from contribution on higher sales.

Production inefficiencies from unpredictable OEM production schedules and operational excellence initiatives.

Speaker 4: These are expected to be partially offset by higher input costs and engineering investments to support new program awards and to capitalize on growing opportunities in megatrend areas.

These are expected to be partially offset by higher input costs and engineering investments to support New program awards and to capitalize on growing opportunities and megatrend areas.

Speaker 4: We also expect a meaningful step up in margins in 2023. This is largely driven by contribution on higher anticipated sales, operational excellence initiatives, and lower application engineering in megatrend areas.

We also expect a meaningful step up in margins in 'twenty three this.

This was largely driven by contribution on higher anticipated sales operational excellence initiatives and lower application engineering and megatrend areas.

Speaker 4: And, we expect additional margin expansion in 2024, primarily driven by higher sales and operational excellence initiatives.

And we expect additional margin expansion in 'twenty, four primarily driven by higher sales and operational excellence initiatives.

Speaker 4: Many of the same factors that are impacting consolidated sales and margins out to 2024 are also impacting our segments.

Many of the same factors that are impacting consolidated sales and margins up to 2024 are also impacting our segments.

Speaker 4: In the interest of time, we will not run through the segment detail. However, they are included in the appendix, and we are happy to discuss any questions on them.

In the interest of time, we will not run through the segment detail. However, they are included in the appendix and we're happy to discuss any questions on them.

Speaker 4: Next, I would like to cover some of the highlights of our financial strategy.

Next I would like to cover some of the highlights of our financial strategy.

Speaker 4: We have been consistent in communicating our capital allocation principles over the years, and I would like to reiterate these now.

We have been consistent in communicating our capital allocation principles over the years and I would like to reiterate these now.

Speaker 4: We want to maintain a strong balance sheet, ample liquidity, and high investment grade ratings.

We want to maintain a strong balance sheet ample liquidity and high investment grade ratings.

Speaker 4: Invest for growth through organic and inorganic opportunities along with innovation spending and return capital to shareholders.

Invest for growth through organic and inorganic opportunities along with innovation spending.

<unk> returned capital to shareholders.

Speaker 4: Over the last couple of years, our capital spending has been below normal levels as a result of the environment.

Over the last couple of years, our capital spending has been below normal levels as a result of the environment.

Speaker 4: As we get into our outlook period, spending reflects the capital required to support the growth and sales.

As we get into our outlook period spending reflects the capital required to support the growth in sales.

Speaker 4: We expect capital spending to be approximately $1.8 billion for 2022 and remain relatively level out to 2024.

We expect capital spending to be approximately $1 8 billion for 2022 and remained relatively level up to 24.

Speaker 4: We expect further strong pre-cash flow totaling about $6 billion over the next three years.

We expect further strong free cash flow totaling about $6 billion over the next three years.

Speaker 4: In summary, we're executing our go forward strategy.

In summary, we are executing our go forward strategy.

Speaker 4: We plan to further grow our business with particular sales acceleration and megatrend areas.

We plan to further grow our business with particular sales acceleration and megatrend areas.

Speaker 4: execute on our plans to expand margins, including through operational excellence.

<unk> on our plans to expand margin, including through operational excellence.

Speaker 4: generate solid free cash flow to further fuel growth and return capital to shareholders and accelerate investments to support growth on the car of the future.

Generate solid free cash flow to further fuel growth and return capital to shareholders and accelerate investments.

To support growth on the car of the future.

Speaker 4: We hope to see many of you in May at our investor event where we will elaborate on our go-forward strategy. Thanks for your attention. We would be happy to answer your questions.

We hope to see many of you had made at our Investor event.

Where we will elaborate on our go forward strategy. Thanks for your attention we would be happy to answer your questions.

Speaker 1: Thank you very much, and if you'd like to register a question, please press the 1 by the 4 on your telephone. You have a free phone prompt, but now it's your request.

Okay.

Thank you very much and if you'd like to register for a question. Please press the one or by the four on your telephone.

We have three strong prompt.

And I assure you question.

Speaker 1: If your question hasn't been asked or you'd like to withdraw your registration, it is the 1-4-by-3. If you're using a speakerphone, please select your handset before entering your request. Once again, it is the 1-4 to register your question.

If your question has been asked I would like to draw your registration for one or by the three train using a speaker phone lift your handset before entering your question Wes.

Again this is the one forward towards the start of your question.

One moment, please our first question in queue.

Speaker 1: And we'll proceed with our first question on the lines with Mr. John Murphy of Bank of America Merrill Lynch. Go right ahead.

And we'll proceed with our first question on the lines with Mr. John Murphy of Bank of America Merrill Lynch go right ahead.

Speaker 4: Good morning, guys, and Pat, welcome to the call. Just a first question. If I look at slide 23, which is your live production,

Good morning, guys and welcome to the call.

Just a first.

First question is.

If I look at.

<unk> 2023, which is your production assumptions and slide 25, Youre 20 up to 2024 shells.

Speaker 4: assumptions and slide 25, out of 2024 sales, it looks like your sales from 21 to 24 are growing largely or essentially right in line midpoint with production. So I'm just curious, it seems like the growth above market that you've had kind of fades away in your outlook and it looks like it's complete vehicle assembly largely, but what's the key driver? Is it literally just the mix or what's going on there?

It looks like your sales.

As from 'twenty, one to 'twenty four growing largely are essentially right in line with the midpoint with production I'm just curious.

Seems like the growth above market that you've had kind of fades away.

Your outlook and it looks like its complete vehicle assembly largely but.

What's the key drivers of the mix or what's going on there.

Speaker 2: Yeah, I, you know, if you go back, John , to where we were, what we were expecting in 2021, we are sort of flat relative to production.

Yes, if you go back John too.

Where are we what we were expecting in 2021 were sort of flat relative to production.

Speaker 2: organic growth and we ended the year at plus four. So starting point higher for one thing. We also said that our expectation for the 21 to 24 time frame was like one to three percent on average per year.

Our organic growth and we ended the year at plus four so the starting point is higher for one thing. We also said that our expectation for the 'twenty one 'twenty four timeframe was like 1% to 3% on average per year.

Speaker 2: If you look at excluding the impact of complete vehicles, which has had an impact on our overall growth, we're back at 1-3% per year in the 2021-2024 timeframe. Certainly, complete vehicles is negatively impacting our overall growth rate. What we're not talking about here is unconsolidated sales, which is growing significantly.

If you look at excluding the impact of complete vehicles, which has had an impact on our overall growth. We're back at the kind of 1% to 3% per year in the 'twenty, one 'twenty four timeframe. So certainly.

These vehicles is negatively impacting our overall growth rate.

And what we're talking about here is unconsolidated sales, which is growing significantly over our Blackberry.

Speaker 4: Yeah, yep, that helps quite a bit. And a second question, I mean, as the automakers are focusing more and more on AV and EV investments, there's this idea, and I think this makes a lot of sense, that they are going to outsource more and more parts of the vehicle, even outside those systems, which really lays in the sweet spot of Magna and your business. I'm just curious if you're seeing any.

Yes, yes.

That helps us quite a bit.

Second question, the automakers are focusing more and more on <unk> and EV investments. There's this idea and I think this makes a lot of sense, but they are going to outsource more and more parts of the vehicle even outside those systems, which really lays into the sweet spot of Magna in your business.

Just curious if youre seeing any.

Speaker 4: incremental quoting on plastic stampings, if you will, or other parts where there might be greater opportunity for you to take on more and more of the vehicle as they focus their investment dollar and human capital on AVs and EVs.

Incremental quoting on class a stampings, if you will or other parts, where there might be greater opportunity for you to take on more and more of the vehicle as they focus.

Their investment dollar.

K human capital.

Avs and Evs.

Speaker 3: Good morning, John . This is Swami. As we see today, definitely from a perspective of capabilities and capacity, we are well-positioned if that comes through. But as we sit here today and look at the cadence of the sourcing activity, we don't see a significant shift as of yet, but that is to be seen. But like you said, if you look at what we have in terms of footprint and capabilities, we should be well-positioned to address that piece.

Good morning, John This is Tommy.

As we see today definitely.

From a perspective of capabilities and capacity, we are well positioned.

That comes through but as we sit here today and look at the cadence of the sourcing activity.

We don't see a significant shift as of yet but that has to be seen but like you said if you look at what we have in terms of footprint and capabilities, we should be well positioned to address that piece.

Speaker 4: Got it. And then just lastly, I apologize on the on the outlet, one more question on the 8.1, 8.6 range. It's the same as what you're expecting in 23. We're looking at a little bit higher a revenue base. I mean, is this the, I mean, is this the ultimate margin is sort of this, you know, 8.1, 8.6 range that you think that Magna tops out at? Or is there potential over time as you grow in the business mix, maybe shifts to potentially even get higher on margin?

Got it and then just lastly, I apologize on the outlet one more question on the 8186 range. It's the same as what you were expecting in 'twenty three we're looking at a little bit higher our revenue base.

Base I mean, you just needed to the ultimate margin is sort of this 886 range that you think that.

<unk> topped out at or is there potential over time.

As you grow in the business mix, maybe shifts to potentially even get higher on margins.

Speaker 1: John , when we think about the margin here, I think there's so many components we have to consider mix. I think the one thing that's changed year over year is some of the input costs have increased. When we do go out, we see significant input cost increases in 2022. Some of those costs will stabilize, I would say, as we go through the outlook period. Some of them won't. When you think about labor, I think there's been a reset to some degree on the labor cost, whereas others will come up.

John when we think about the margin here I think there's so many components we have to consider mix I think the one thing thats changed year over year as some of the input costs have increased.

When we do go out we see significant put cost increases in 'twenty two.

Some of those costs will.

Stabilized I would say as we go through the two the outlook period some of them. When we think about labor I think there has been a reset to some degree on the labor cost, whereas others will come off.

Speaker 2: We're also going to step up in our investments for megatrend areas, which is going to impact our margins in the short term, but it's going to drive growth in the long term.

We've also seen a step up in our investments for megatrend areas, which is going to impact our margins in the short term, but drive growth in the longer term.

Speaker 4: Got it. And I'm sorry, if I could dig in one more, just on the Ambassador Bridge, and it's not because you guys are Canadians, although you probably have a better perspective than I do as a New Yorker on what's going on up there, but I mean, are you running into any issues with, you know, I mean, with, I mean, it's not shipping, it's the trucking, you know, and any kind of disruption around that? Or is that just a hiccup that you guys will be able to work through in the industry you think will work through?

Got it and I'm, sorry, if I can sneak in one more just on the ambassador bridge. It looks like as you guys are Canadians, although you probably have a better perspective than I do with that.

The New Yorker on whats going on up there, but I mean are you running into any issues with.

I mean, it's not shipping as it shows the trucking.

And any kind of disruption around that or is that just a hiccup that you guys will be able to walk through where the industry. You think will work through.

Speaker 6: I think in the long term, I'm sure we'll work through, but as of right now, we're constantly monitoring it, John , and some of the OEM customers have had to idle or cut production requirements. They're adjusting, I should say, the production schedules, and we're kind of starting to see some initial impact in some areas versus the other, for example, JIT facilities and so on. So, we're watching it closely. I definitely hope that it will get resolved quickly. Okay. Thank you very much.

I think in the long term.

I'm sure we'll work through but as of right. Now there is we are constantly monitoring it John .

Some of the OEM customers have had to idle or cut production dequadros that adjusting I should say that production schedules and we are kind of starting to see some initial impact in some areas versus the other for example, <unk> facilities and so on so we are watching it closely definitely hope that will get resolved quickly.

Okay. Thank you very much guys.

Thanks, John Thank you.

Speaker 1: Thank you. We'll get to our next question on the line from the line of Adam Jonas with Morgan Stanley . Go right ahead.

Thank you.

We'll go to our next question on the line from the line of Adam Jonas with Morgan Stanley Go right ahead.

Speaker 7: It's so interesting, your outlook is so balanced compared to many of your OEM customers that are guiding for, you know, really significant increases in margin over the next few years, so it's a nice dose of reality. Swami, where are you most concerned? You highlighted commodities.

It's so interesting.

Your outlook is so balanced.

Care to.

Many of your OEM customers that are guiding for.

Really significant increases in margin over the next few years.

This dose of reality and Swamy.

Where are you most concerned you highlighted commodities.

Speaker 7: Amongst the commodities, and particularly metals, what's giving you the most concern right now?

EMEA amongst the commodities and particularly metals, what's giving you the most concern right now.

Speaker 3: I think it makes a little bit, Adam, as you look at the stuff, some of the commodities like steel, we are on resale, a significant portion of it, some of it, you know, we have in the free market.

I think it's a makes a little bit item as you look at the top of some of the commodities like steel we are on <unk> sell a significant portion of it some of it we have in the free market.

Speaker 3: A large part of resin also on recels, some of it is not, especially the polyethylene-based, you know, speciality resins and so on and so forth.

Large part of resin also on resell some of it is not especially the polyethylene based.

Especially if it isn't and so on and so forth.

Speaker 3: A little bit on aluminum and copper, but most of the times we are indexed or on resale program, and the rest we have to manage through, you know, as the market is fluctuating. But I wouldn't say one is significantly different.

A little bit on aluminum and copper.

But most of the times we are in.

<unk> are under resale program.

And the rest we have to manage through.

As the market has fluctuated, but I wouldn't say one is significantly different.

Speaker 3: than the other. There's a bunch of commodities that we are closely monitoring, and the supply is going to be one of the key things that we have to look at, and how our tiered suppliers are managing that is going to be also an important thing to closely monitor.

Then the other there is a bunch of commodity fit here.

Closely monitoring.

And the supply is going to be one of the key things that we have to look at in our tiered suppliers are managing that is going to be also an important thing to closely monitor.

Speaker 7: Thanks, Swami. And then just a follow up on Steyr, you have

Thanks, a lot and then just a follow up on Shire you have.

Speaker 7: and Gratz, a very highly anticipated launch for this November . I was curious if there was, if that looked on track from your perspective or anything you wanted to call out there. And what are, any update on plans or timing or milestones regarding your decision of a North American contract manufacturing location? Thanks, Swami.

And in Graz.

Very highly anticipated launch for this November I was curious if there was if that was on track from your perspective or anything you wanted to call out there.

And.

What are any update on plans or timing or milestones regarding your decision of at North American contract manufacturing location. Thanks Rami.

Speaker 3: For the anticipated launch, both the teams are working together well and progressing well, I should say, Adam, right? But more specifics I would leave for the OEM to comment. In terms of looking just at various opportunities and graphs, they continue. In the North American footprint, like I've said before, very open to the idea of having the footprint here.

For the anticipated launch.

We are.

The teams are working together, well and progressing well I should say, Adam but more specifics I'll leave for the OEM to comment.

In terms of looking just at our greatest opportunities and grasp they continue.

In the North American footprint.

We have said before very open.

To the idea of having the footprint here.

Speaker 3: As I've always said, I think it's important to have a little bit of visibility on the product plan, even though it starts off at a lower volume, if there is enough visibility in the long term. I think we'll be looking forward to have that footprint in North America.

As I've always said I think it's important to have a little bit of visibility on the product plan, even though it starts off at a lower volume if there is enough visibility in the long term I think.

We will be looking forward to have that footprint in North America.

Thanks Rami.

Speaker 1: Thank you very much. We'll get to our next question on the line from E.T. McKellie from Citigroup. Please go right ahead.

Thank you very much we'll get to our next question on the line.

Kelly from Citigroup. Please go right ahead.

Speaker 8: Great, thanks. Good morning, everybody. First question, just wanted to go into some of the incremental investments you're making this year on the megatrend. I was hoping you could quantify kind of the year-over-year impact there. It sounds like that's mostly in power and vision.

Great. Thanks, good morning, everybody.

First question just wanted to go into the some of the incremental investments you are making this year on the Mega trends I was hoping you could quantify kind of the year over year impact it sounds like thats, mostly in power solutions.

Division.

Speaker 8: And maybe, Swami, talk about some of the opportunities for revenue for these investments coming beyond, I think, 2024. Maybe quantify or talk about where specifically you are investing on the EV and autonomy side.

Maybe swamy talked about some of the opportunities.

Revenue for these investments coming beyond I think 2024, but hoping you can maybe quantify or talk about kind of where specifically you are.

Investing on the EV and autonomy side.

Speaker 3: Yes, I think, as you said, a lot of the investment that we're talking about is in that region. From an engineering investment perspective, if you look at the electrification side of things, I think if you look at the overall managed sales, by 2024, we are going to be in the $2 billion range.

Yes, I think as you said a lot of the investment that we're talking about is in that region.

From an engineering investment perspective.

If you look at the electrification side of things.

Between the I think if you look at the overall managed sale by 2024.

We're going to be in the $2 billion range.

Speaker 3: And in our LG joint venture that we talked about, we continue to see a 50% KGAR over the next or during the planned period, I should say.

And in our LG <unk>.

<unk> debenture that we talked about.

We continue to see a 50% CAGR over the next or during the plan period I should say.

Speaker 3: In the ADAS area, last we talked about 20-plus percent KGAR, and as we look at the plan period now from 2021 to 2024, we are even seeing a 30 percent KGAR. So, I would say the investments that we have made and the platform technologies are starting to yield results, and we continue to see that going forward.

In the Adas area last week talked about 20 plus percent CAGR and as we look at the plan period now from 'twenty one to 'twenty four we are even seeing a 30% CAGR. So I would say the investments that we have made in the platform technologies are.

Starting to yield results and we continue to see that going forward specific areas.

Speaker 3: Specific areas, e-drives, you know, larger addressable market for us, like we said before, not just the all-wheel drive, four-wheel drive. Now we are looking at, you know, all drives. So that is a expanded addressable market.

<unk>.

Larger addressable market for us like we said before.

Not just the all wheel drive four wheel drive now we are looking at all drives so that is a expanded.

The expanded addressable market on.

Speaker 3: On the ADAS side, we have, as we said, the building blocks in terms of the sensor suite, the compute, and the software infusion capabilities. I briefly mentioned about our radar going into production and also a program with the German OEM on the driver monitoring system, and we also continue to see further traction in that product line.

On the Adas side.

We have as we said the building blocks in terms of the sensor suite, the compute and the soft greater infusion capabilities.

I briefly mentioned about our radar going into production.

And also.

A program with a German OEM on the driver monitoring system and we also continue to see further traction in that product line.

Speaker 1: And Atay, I think the other thing we should consider when we talk about investments in mega-trend areas is the portion that throws through P&L as gross engineering expense.

And I think the other thing we should consider when we talk about investments and megatrend areas. There's the portion that throws through P&L gross engineering expense. The other part that's in there.

Speaker 1: The other part that's primarily in our P&B segment, as you pointed out, the other large investment we're making is in our BES segment, and that's primarily in the form of capital as we launch battery enclosures, so we're investing now for battery enclosures that are going to be launching throughout the outlook period. We recently started the launch of the Hummer.

That's primarily in our <unk> segment as you pointed out the other large investment we're making is in our EES segment and Thats, primarily in the form of capital as we launch battery and closures. So we're investing now for battery and closures that are going to be launching throughout the outlook period.

Recently started the launch of.

The hummer.

Here in Michigan.

Yes.

Speaker 8: That's all very helpful, just a quick follow-up, and I apologize if I did miss it before, but I was hoping we could go through the bridge and complete vehicle assembly between kind of the prior outlook for 2023 that you had versus the updated outlook today for kind of the top line and margins as well.

That's all very helpful. And then just a quick follow up I apologize if I did miss it before but I was hoping we can go through the bridge in complete vehicle assembly between kind of the prior outlook for off of 'twenty. Three that you had versus the updated outlook today for kind of the top line and margins as well.

Speaker 2: If you look at the 2023, we had.

I think if you look at 2023.

Had.

Speaker 2: We would have had the BMW 5 Series in there for most of the year, and that continues to be the case, but 2024 now we've brought another year, so that program ends in 2023, it's not into 2024. Now, we do have the Cisco program that launches, but...

We would've had the BMW five series and there for most of the year and that continues to be the case by 2024 and that will drive another year.

Program because it ends in 'twenty three if not into 24 now we do have the fiscal program that launches but.

Speaker 2: There's different accounting, so if you recall, we've had full-cost accounting and value-added accounting with the five series on a full-cost basis, so a much higher unit price per unit. And the fiscal program is on a value-added basis, so a much lower unit price. So even though the volumes in the plant are not that significantly different, the revenues are quite different.

And there's different accounting. So if you recall, we had a full cost accounting and value added accounting. The five series is a forecast.

Much higher unit.

Price per unit.

And the physical organized on a value added basis somewhat lower unit price, so even though the volumes in the plant.

I'm not that significantly different the revenues are quite different.

That's very helpful. Thank you.

Speaker 9: Thank you very much. We'll get to our next question on the line from Peter Scalar with BMO Capital Markets. Go right ahead.

Thank you very much. Okay. So next question on the line from Peter Sklar with BMO capital markets go right ahead.

Speaker 7: Good morning. Just looking at your initial 2024 guidance.

Hi, good morning.

Just looking at your initial 2024 guidance.

Speaker 7: You're showing a lot of equity income growth, you know, over the over the plan period.

Youre showing a lot of equity income growth over the over the planned period I take it thats coming from.

Speaker 7: I take it that's coming from some of these joint ventures, the partnership with LG, the partnership with Hasco. So I'm not surprised that the revenue is ramping up. But I was surprised at the growth of equity income, given that there would be initial ramp periods as those joint ventures begin to build. So I just wanted to add a little flavor on what's driving the equity income growth.

Some of these joint ventures, the partnership with LG, the partnership with <unk>, So I'm not I'm not surprised that the revenues ramping up but I was surprised at the growth of equity income given that there would be.

Initial ramp period since those joint ventures to begin to to build so I'm. Just wondering if you could add a little flavor on whats driving the equity income growth.

Speaker 1: Hi Peter, it's Pat. I think when you look at the equity income, what I would consider, you're right, a lot of the growth is coming from those joint ventures and what you have to consider is in the early, where we are today as we're investing heavily.

Hi, Peter its Pat.

I think when we look at the equity income what I would consider youre right a lot of the growth is coming from those joint ventures, and what you have to consider is in the early where we are today is we are investing heavily be engineering spend to launch a lot of these programs in the EV markets, we get out to 2020 for a large portion of these programs will.

Speaker 1: via engineering spent to launch a lot of these programs in the EV markets. When we get out to 2024, a large portion of these programs will be launched, generating revenue. So it's a combination of lower application engineering.

Be launched generating revenue so that the combination of.

Lower application engineering.

Speaker 1: in the future, combined with margin on sales that are going to be generated. The LG joint venture already has sales and it's ramping up pretty significantly, so there's investment there. Asco launched the Volkswagen program last year, continues to ramp up and there's another

In the future combined with margin on sales that are going to be generated.

The LNG joint venture already has sales and it's ramping up pretty significantly so.

There is investment there <unk> launch.

The the Volkswagen program last year continues to ramp up and there is another program that launches next year. So it's going to start having more higher sales and and so there is a change in the results as a result of that drives the sale would be much higher.

Speaker 2: Next year so it's going to start having more higher sales And and so there's a change in in the results as a result of the drive the sales being much higher

Okay.

Speaker 7: Another question I had is, I'm a little lost on how many eDrive awards.

Another question I had is I'm a little lost on how many E Drive award.

Speaker 7: you've received and have announced, like, I forget when it was, I think it was last week or recently, you issued the press release on the Volkswagen platform where you're providing the secondary drive. So, as I recall, last time you spoke, you had three major eDrive awards and it's the Volkswagen program you talked about last week, is that part of that or is that a fourth program? Maybe you could just review where you are on eDrive awards.

You have received and have announced like just I forget when it was I think it was last week or recently you issued the press release on the Bulks wagon platform, where you're providing the secondary drive so.

So as I recall last time, you spoke at three major E Drive Award.

The Volkswagen program you talked about last week is that part of that or is that a fourth program. Maybe you could just review where you are on E Drive Award.

Speaker 2: Yeah, Peter have to do that. We you're right. The Volkswagen program is the 1st program and we have talked about that before. We have another program as I just said.

Yes, Peter happy to do that.

Right. The Volkswagen program as the first E drive program and we have talked about that before we have another program as I. Just said that's launching in hospital next year that will be a second and then last year. We were awarded two additional.

Speaker 2: that's launching in Haskell next year, that'll be a second, and then last year we were awarded two additional eDrive programs that include both the primary and secondary drives, so we have four currently booked. Lots of conversations, in fact there's an acceleration in conversations with customers over the last 12 months, and that's mainly due to all the focus on EVs, and certainly the LG partnership is a driver there, and we're looking at a bunch of...

These are programs that include both the primary and secondary drive. So we have four currently booked lots of conversations in fact is an acceleration in conversations with customers over the last 12 months and Thats, mainly due to all the focus on Evs.

And certainly the LG partnership as a driver there.

We're looking at a bunch of additional quotes for this business.

Speaker 7: And the LG partnership, is that for components for the eDrive system or will the joint venture do the entire eDrive system or a bit of both? It's both Peter, if you recall, it's for components but also with any Japanese or Korean customers, LG joint venture is responsible as the tier one on the eDrive.

Okay and the LG partnership is that four components for the E drive system or will.

The joint venture due the entire E drive system or a bit of both.

As both Peter you recall that.

For components, but also with.

And the Japanese or Korean customers, they're responsible LG joint ventures are possible as the tier one on the dry side.

Speaker 7: Okay, and then just lastly, on the complete vehicle assembly, where your results were, you know, pretty strong in terms of operating income.

Okay, and then just lastly.

The complete vehicle Assembly, where your results were pretty strong in terms of operating income.

Speaker 7: You attributed that partially to government research and development incentives. I'm just wondering what they related to and, you know, what was the magnitude? You know, those incentives must have been pretty significant if you called them out.

You attributed that parcel partially to government research and development incentive so I'm just wondering what they related to and what what was the magnitude and although its incentives must have been pretty significant if you called them out.

Speaker 1: Yeah, Peter, they're basically R&D credits similar to what you would see here in Canada. The way this program is structured in Austria, they do run through EBIT. The number is in the range of about $20 million and it's a little bit more significant than we're used to because it covers out-of-period amounts as well. Okay, thanks Pat.

Yes, Peter.

Theyre basically R&D credits similar to what you would see here in Canada.

The way this program structure and Austria, they do run through EBIT.

The number is.

And the range of about $20 million and it's a little bit more significant than we're used to because it covers a period.

Amounts as well.

Okay.

Thanks Pat.

And we'll get to our next question on the line.

Speaker 10: from the line of Chris McNally with Evercore ISI. Please go right ahead.

From the line of Chris Mcnally with Evercore ISI. Please go right ahead.

Speaker 11: Thanks so much, team. Just a follow-up on the margin questions for power and vision and body. On power and vision, you talked about the engineering upspend in 2022, is that the majority of the margin hit year over year, or is it equally shared with things like component costs?

Thanks, so much team.

Just a follow up on the margin question.

Power and vision and body on power and vision, you talked about the engineering up spend in 'twenty. Two could you can you just talk about is that the majority of the.

The margin hit.

Year over year or.

And equally shared with things like component costs.

So can you repeat the question Peter sorry, Chris.

Speaker 12: The down margin year-over-year in power and vision, you talked about the increased spending for R&D, ADAS programs, is that the majority of the hit, or is, you know, if we were to rank order components, you know, higher chip prices and things like that, are also ahead

Yes.

The down margin year over year empower envisioned you talked about the increased spending for R&D Adas programs.

Is that the majority of the hit more is if we were to rank order components higher chip prices and things like that are also.

A headwind.

Speaker 3: Just trying to find the right page, Chris, you know, to get to what you're referring to.

Just trying to find the right page Chris.

To get to what you're offering.

Okay.

Speaker 10: To look at power and vision, I think what you're seeing in terms of the big impact to the margin are going to be the inflationary input costs, and a big chunk of the engineering spend is coming through in 2022.

If you look at power and vision I think what you have.

Seeing in terms of the base.

The big impact to the margin are going to be the inflationary input costs.

And a big chunk of the engineering spend as it comes due in 2022.

The two biggest drivers.

Of the decrease.

Speaker 11: Perfect. And then body wear, obviously, things normalize pretty quickly next year. Could you just talk about how raw materials are flowing through? Obviously, you have steel recovery and you also have steel scrap. You know, just talk about some of the tailwinds there that get back your margin, you know, to sort of this 8 percent plus typical range.

In 2002, Okay, perfect and then and then Bodywear, obviously think normalized pretty.

Pretty quickly.

Next year could you just talk about.

How raw materials are flowing through obviously you have steel recovery and you also have steel scrap.

Just talk about some of the the tailwind there that get back to your margin.

This 8% plus.

<unk> range.

Speaker 1: Hi Chris, it's Pat. When I think about the BES segment, you're right, it's primarily a steel story with some resin on the exterior side.

Hi, Chris It's Pat.

When I think about the BFS segment, you're right, it's primarily a <unk> story with some resin on the exterior side specifically on the steel we are.

Speaker 1: Specifically on the steel, we are primarily covered via resale or indexing programs, and we do have a benefit of being able to resell scrap steel on the market. Those markets tend to go together, so as we see steel coming off in the future, scrap recoveries will probably move in tandem, maybe a little bit quarterly delay or whatnot.

Primarily covered via resale or indexing programs and we do have a benefit of <unk>.

Being able to resell scrap steel in the market those markets tend to go together, so as we see steel coming off in the future scrap recoveries will probably move in tandem maybe a little bit quarterly delay or whatnot I think the biggest driver when you look at the margin increasing from the $5 721, it's it's really driven by higher sales.

Speaker 1: I think the biggest driver, when you look at the margin increasing from the 5.7 to 21, it's really driven by higher sales. The other factor is we're expecting some stability to come back into the production schedules from our OEM customers. If you recall, in 21, we did have some fairly high decrementals. We have these big capital-intensive plants, and when we return back, I think that's driving the majority of that improvement. I think that's driving the majority of that improvement.

And the other factor is we're expecting some stability to come back into the production schedules from our OEM customers. So if you recall in 'twenty. One we did have some fairly high decrementals.

Big capital intensive plants and will be returned back I think that's driving the majority of that improvement.

Speaker 11: Okay, that's great. So lower risk on raw. And then my final question just on on styrene, I think it's been asked a couple of times, but just wanted to clarify, you know, on in your slides.

Okay, that's great so lower risk on raws and then my final question just on on style and I think it's been asked a couple of times, but just wanted to clarify on <unk>.

Slide I think on slide 53, you have the volumes basically like a $1 30 to 140000 unit range for 2024 as far as I know I think the capacity is around 200000.

Speaker 11: I think on 553, you have the volumes, you know, basically in like a 130 to 140,000 unit range for 2024. As far as I know, I think the capacity is around 200,000.

Speaker 11: Is the Fisker number in there because we're I guess what I'm trying to wonder is with the BMW rolling off

Is the fiscal number in there because I guess, what im trying to wonder is with the BMW rolling off and all of the opportunities you have.

Speaker 11: and all the opportunities you have, could you fill that capacity the next couple of years or are we getting close to the point where you'd make a go-no-go decision on a new North American facility?

Could you fill that capacity over the next couple of years or are we getting close to the point, where you would make a go no go decision on a new North American facility.

Speaker 3: So, Chris, I think I would say again, depending upon the mix and what the requirements are in the assembly and the paint and so on, I will take the capacity roughly to be around 170 to 180 and graphs and, you know, similar number in.

Chris I think I would say again, depending upon the mix and what the requirements are in the assembly and the paint and so on.

The capacity roughly to be around 170 to $1 80 in Graz.

A similar number in.

Speaker 3: a joint venture in China. So I think as the BMW rolls off, we talked about the fiscal just starting at the end of this year and slowly ramping into 23 and 24.

Joint venture in China.

So I think as the BMW rule, so we talked about the physical just.

Starting at the end of this year and slowly ramping into 'twenty, three and 'twenty four.

Speaker 3: So there is a little bit of a transitionary time as BMW comes off, right, and fiscal ramps up. And we continue to have many discussions on different variants and OEMs.

So there is a little bit of transition at a time as BMW comes off right in fiscal <unk>.

So and we continue to have many discussions on the different variants and Oems.

Speaker 3: So, it's a lumpy business, it goes through the cycle, and we're having a whole bunch of conversations to utilize the capacity appropriately.

So.

It's a lumpy business.

Goes through the cycle.

And we're having a whole bunch of conversations too.

Utilize the capacity appropriately.

Cisco is in okay.

Right.

Speaker 11: So, you don't have, you know, there's only maybe 30,000 capacity there. If another big program came, you would need significantly more capacity. Okay. Thank you so much, guys.

This guidance in there. So I guess, so you don't have there's only maybe 30000 capacity there.

Big program came you you would need.

More capacity okay. Thanks, so much guys.

Speaker 10: Thank you. We'll get your next question on the line from Dan Levy from Credit Suisse. Go right ahead.

Thank you.

Next question on the line from Dan Levy from Credit Suisse go right ahead.

Speaker 11: Hi. Good morning. Thank you for taking the questions. First, I wanted to go back on one of the earlier questions of, you know, the fact that the margin guide for 24 is flat versus 23 despite the higher revenue. I think you mentioned increased commodities. And I assume that, you know, that's just a broader catch-all for input costs. So maybe you can just elaborate a bit more on that. So if we're just thinking about input costs or cost inflation, you know, what's in that

Hi, Good morning, Thank you for taking the question first.

Wanted to go back on one of the earlier questions.

The fact that the margin guide for 'twenty four is flat versus 23, despite the higher revenue I think you mentioned.

Increased commodities and I assume that that's just a broader catch all for input costs. So maybe you can just elaborate a bit more on that so if we're just thinking about input costs or cost inflation.

Tom.

What's in that bucket, how much cost inflation did you see in 2021, what are you assuming for 2022, what are you assuming beyond.

And then whats the mitigation what are you assuming on mitigation of those costs or are those costs all sticky.

So.

Sure. It's Pat again, so we think about the.

I think your statement is correct I would view it primarily is just higher input costs and when we think about those higher input costs. It is going to cover items, such as commodities, whether it's steel or resin and when I talk about steel obviously, that's on a net basis, we have resin we would have copper aluminum.

But we also have areas such as freight energy costs, we're seeing an uptick primarily in Europe .

Speaker 1: And outside of third-party costs, we're also seeing an uptick in labour costs. And the labour costs in 2021 were primarily more in the form of retentions or whatnot. What we're seeing as we go into 2022 is we are experiencing higher than historical wage increases in various parts of the world. So, coming back to the numbers, if you think about 2021...

And.

Outside of third party costs, we're also seeing an uptick in labor costs and the labor costs in 'twenty. One we're primarily more in the four months retentions are or what not what we're seeing as we go into 'twenty two as we are experiencing higher than historical wage increases.

As parts of the world So coming back to the numbers. If you think about 2021.

From expect if we go back compared to 2020.

Our uptick of input cost is probably in the range of about $80 million.

Speaker 1: Of that 80, 50 related primarily to commodities and third-party costs and 30 would be primarily labour. We roll forward into 2022, the additional uptick is in the range of about $275 million and that split would be $190 on commodities and a balance on labour primarily.

I hope that 80 50 related primarily to.

Commodities and third party party cost and 30 would be primarily labor we roll forward into 2022. The additional uptick is in the range of about $275 million and that split would be 190 on commodities and the balance on labor primarily.

Speaker 11: The first part of your question, when you're looking at the margin being flat from 2023-2024, when you start thinking about commodities, we're expecting them to come off. Labour is stickier and when you look at 2023-2024, I think we do have an uptick on our labour costs that is going to stick.

And then going into spring.

Sorry, Dan just don't want to cut you off but sort of the first part of your question. When you when Youre looking at the margin being flat from 'twenty three to 'twenty four.

When you start thinking about commodities may 10.

We're expecting them to come off labor stickier and when you look at 23% 24, I think we do have an uptick on our on our labor costs that is going to stick.

But we do have hirings and uptick in engineering to that period.

That's impacting the business initiatives.

Speaker 11: Okay, so you're assuming full mitigation of the commodities or some of the commodities to come off correct?

Okay. So youre, assuming full mitigation of the commodities or some of the commodities to come off the correct.

Yes.

Speaker 1: Yeah, we have, we have, we've assumed in our plan that we have some recoveries, but the number

Yes, we have we have we've assumed in our plan that we have.

Some recoveries.

But the numbers I pointed out.

The Atlas.

Speaker 11: Okay. Thank you. And then the next question is just on the LGJB, and I see the power and vision equity in common. It's coming up.

Okay.

Okay. Thank you.

And then.

Next question is.

Just on the on the LG J D and I see the power <unk> vision equity income and it's coming up.

Speaker 11: Maybe you could just provide some comments on the underlying profit, because I think, Swami, you mentioned earlier that it's 50% CAGR, but if I just compare the equity income from 21 to 24, it appears like it's a...

Maybe you could just provide some comments on the underlying property because I think so on that you mentioned earlier that.

50% CAGR, but if I just compare the equity income from 'twenty, one to 'twenty four it appears like it's a slight uptick so.

Speaker 11: uptick. So, you know, is that just a reflection that you're getting the revenue but it's still not a steady state margin by 2024?

Is that just a reflection that you are getting the revenue, but it's still not a steady state margin by 2024.

Speaker 2: I think it's fair to say that we're still investing in it when we get to 2024. Unfortunately, we don't control the joint venture and we're not able to get into you know, what the profitability is. I mean, clearly we're heavy, we're in heavy investment mode and over time the sales growth will get contribution, but we can't comment.

I think it's fair to say that we're still investing and we get to 2024. Unfortunately, we don't control the joint venture in.

We're not able to get into what the profitability is clearly where we're in heavy investment mode and over time that sales growth will get contribution, but we can't comment on me.

Speaker 2: impact. We also have in our equity income one of our joint ventures which is planning pretty conservatively, it's conservative on the amount of recoveries that they intend to get or expect to get from customers so that's impacting equity income in the short term.

On the on the impact we also have in our equity income one of our joint ventures, which is planning pretty conservatively.

On the amount of recoveries that they intend to get or expect to get some customers. So that's impacting equity income in the short term.

Speaker 11: Okay, thanks. And then just lastly, maybe you could just provide a quick comment on the free cash. You're guiding to something flat to slightly below $21. I realize a big part of that is, you know, a higher capa.

Okay. Thanks, and then just lastly, maybe you could just provide a quick comment on the free cash.

You're guiding to something flat to slightly below 21.

I realize a big part of that.

Yes.

Higher capex.

Speaker 11: But, you know, it seems like the EBIT increase should more than offset that. So maybe you could just provide some comments on the free cash dynamics. Thank you.

But.

It seems like the EBIT increase should more than offset that so maybe you could just provide some comments on that.

On the free cash dynamics. Thank you.

Okay.

So yes, just on the free cash flow.

Speaker 1: Again, I think when you put in perspective of the range we're talking for CapEx, I think that investment is pretty significant compared to the Delta in profitability.

Again, I think when you put in perspective the range, we're talking for Capex.

I think that that investment is pretty significant compared to the delta in profitability.

Yeah.

Speaker 1: When you think about our capital spending, the other piece we have to consider is the

Yes.

Notes passed over to be here. So when you think about our capital spending the other piece we have to consider.

Speaker 1: We talk about capital and this would be capital where if you go to a plant in the tank, say Magna on it, there's another significant increase and it's primarily when we get into the mega trend areas and you talk about battery enclosures, there's a significant amount of investment of customer-owned tooling. And when we're guiding that number out, we're seeing a $50 to $75 million increase in that number as well. You'll see that in other assets.

<unk>.

We talk about capital and this would be capital, where if you go through a plant and that takes a magnolia does another significant increase and it's primarily we get into the megatrend areas. When you talk about battery enclosures.

Inefficient amount of investment of customer owned tooling and when we're guiding that number we're seeing.

$50 million to $75 million increase in that number as well.

You'll see that in other assets.

Yeah.

Got it okay. Thank you.

Speaker 10: Thank you very much. We'll go to our next question on the line from Mark Neville with Scotia Capital. Go right ahead.

Thank you very much.

Our next question on the line from Mark Neville with Scotia Capital go right ahead.

Speaker 11: I just want to make sure I understand and sort of go back on this, what's happening in complete vehicles? So volume will be flat, sales are down, but that's Fisker accounting, but you also have the BMW rolling off in 2024, is that correct? BMW rolls off late in 2023, or second half of 2023.

Hey, good morning, guys.

So I just want to make sure I understand I'm sorry to go back on this what's happening in complete vehicles.

So volume will be flat sales are down, but thats fisker accounting.

But you also have the BMW rolling off in 2024 is that correct.

BMW rolls off late in 2003 for.

The second half of 2023.

Okay.

A different accounting for customers that way too.

Speaker 2: Yeah, we talked about even last year, we're counting forward on our value added.

Yes, we've talked about even last year.

Going forward on a value added basis.

Speaker 2: Okay, yeah, that's a lot lower unit price per unit than we are with the rest of our programs

Okay.

Lower unit price per unit than we are with that.

East of our programs, including <unk> Engineering is also download.

Speaker 2: Engineering is also down a little bit. We've been spending, we've been generating a lot of engineering revenues and we're expecting that to come off.

Lending, we've been generating a lot of engineering revenues.

And we're expecting that to come awful, but from the high levels, we've seen over the last couple of years.

Speaker 11: Given the fiscal accounting, if it's this value-add, shouldn't we assume or wouldn't normally the margin be higher?

Okay.

Yes.

Given the fiscal accounting.

If it is value added.

Should we assume or wouldn't normally the margin.

Higher.

Yes.

Speaker 2: Yeah, the margin is higher. There are still some elements in there of goods that are included in the unit price, which keeps the margin down a little bit, but it is higher. It's just there's a lot of factors that are going through that line, and we highlighted a few of them in the attendance.

Yes.

There are some elements in there.

Of goods that are included in the unit price, which.

It keeps the margin down a little bit but it is higher its just theres a lot of factors that are going through that line.

We highlight a few of them in the appendix there, but it's more than just that fisker thats going in there.

Speaker 2: There's some input costs that are impacting the margin, et cetera.

Mix is going to get into some input costs that are impacting the margin et cetera.

Speaker 11: You mentioned some numbers in terms of inflationary pressures, I think you said $275 million for 2022. I missed the split.

Okay.

Pat you mentioned some.

He threw some numbers.

Just in terms of inflationary pressures I think you said $275 million for 2022.

Mr split.

Speaker 1: Oh, sorry. Yeah, so just to be clear, so it's $275 incremental versus $21 on a net basis and the split is $190 on commodity.

Yes, so just.

Just to be clear, so it's $2 75 incremental versus 'twenty, one on a net basis.

The split is 190 on commodities.

Speaker 1: or third party costs, and then 85 would be primary.

Our third party costs, and then 85 would be primarily labor.

Okay.

Speaker 11: I'm just curious what sort of what steps you can take if any, just around the labor and energy. Again, I appreciate commodities move around, but I guess labor feels a little more structural. So what are some of the things you can do to sort of push that through?

And I'm, just curious what sort of what steps you can take if any.

Surround the labor and energy again, I appreciate commodities move around but I guess labor feels a little more structural.

So what are some of the things you can do to sort of.

Push that through or deal with that.

Speaker 3: It's a mix, I would say, right? You know, some of it is continuing discussions with the customers, looking at productivity improvements within our operations. Not one answer, you know, we look at continuous improvements and VAVs, and that's an ongoing exercise going forward to it. And some of it will be recovered in the new codes as we go forward.

It's a mix I would say some of it is continuing discussions.

Big customers.

Looking at productivity improvements within the within our operations.

Not one answer.

We look at continuous improvements in via <unk>, and that's an ongoing exercise.

Going forward to it and some of it will be recovered in the new quotes as we go forward.

Right.

Speaker 11: One last question. Just in the 2024 outlook, I understand there's no comments around M&A, but I'm just curious to get your updated thoughts there.

One last question just.

In the 2020 for outlook.

Understanding theres no comments around M&A, but just curious to get your sort of your updated thoughts.

Thanks.

Speaker 3: Yeah, I think, you know, like I always said, we look at the, you know, the geography, the customer and the product strategy overall, and try to look at what is the right way to go at either organic or inorganic and, you know, if the answer happens to be inorganic, then we look at what's the right approach to do that.

Yes, I think.

Like I always said, we look at the geography, the customer and the product strategy overall and try to look at what is the right way to go.

At either organic or inorganic.

The answer happens to be inorganic then we look at what's the right approach to do that.

Speaker 13: Hey Mark, it's Vince. First time I'm going to say something on this call, kind of more my area looking at overall strategic initiatives with SWAMI. On the M&A front, we typically do not build anything into our outlook, right? We only build in M&A that has happened or we've got a contract in place. So certainly with the strength of our cash flow, our balance sheet strength and

Okay.

Markets.

5% I'm going to say something on this call kind of kind of more Mike area looking at overall strategic initiatives with Swami on the M&A front.

We typically do not built anything into our outlook right, we only built in <unk>.

M&A that.

Has happened or we've got a contract in place so certainly with the strength of our cash flow our balance sheet strength and.

Speaker 2: what's happening in the industry and the evolution and how well we're positioned. You know, we obviously, as you can imagine, look at a whole bunch of things and we have an overall strategic approach to our business.

What's happening in the industry and the evolution, how well we're positioned.

Obviously as you can imagine look at a whole bunch of things and we have an overall strategic approach to our business.

Speaker 2: With the right opportunities, you know, you shouldn't be surprised if we do use our balance sheet. We've used it in the past. I expect we're going to continue to use it in the future to strengthen our overall product portfolio to support our customers.

With the right opportunities.

You shouldn't be surprised if we do use our balance sheet, we would use it in the past I expect we're going to continue to use it in the future to strengthen our overall product portfolio to support our customers.

Got it thanks happening around us.

Thank you.

Speaker 10: We'll get to our next question on the line from Mark Delaney with Goldman Sachs. Go right ahead.

We'll go to our next question on the line from Mark Delaney with Goldman Sachs go right ahead.

Speaker 14: Yes, good morning, and thanks very much for taking my questions. The company's outlook for global auto production looks pretty consistent with IHS. It is above some of the other auto Tier 1 supplier guidance, and so I'm hoping you can elaborate a bit more on how you're deriving your outlook for production. How closely does it align with the OEM forecast that you're being given, and are you trying to factor in any conservatism, given all of the supply chains?

Yes, good morning, and thanks very much for taking my questions. The company's outlook for global auto production looks pretty consistent with IHS.

It is above some of the other auto tier ones of our guidance and so im hoping you can elaborate a bit more on how you're driving your outlook for production how closely does it align with the OEM forecast that you are being given and are you trying to factor in any conservatism given all of the supply chain issues. I think if you look at 'twenty, two or our outlook on a global basis is about six.

Speaker 2: I think if you look at 22, our outlook on a global basis is about 6% growth versus 21. In North American Europe , I think we're a little bit more aligned. If you look at the 24, my reflection is that we're still a little bit conservative relative to IHS.

<unk>.

Growth versus 'twenty one.

In North America, Europe , I think we're a little bit more aligned.

Look at the 24 my recollection is that we're still a little bit conservative relative to IHS.

Speaker 2: at least in North America and Europe . So, I mean, we look at external forecasters. We definitely have our ear to the ground about, at least in the short term, what we're hearing from our

At least in North America, and Europe . So I mean, we looked at external forecasters.

We're definitely.

At our ear to the ground at least in the short term what we're hearing from R. R.

Speaker 2: our groups and what to hear from their customers. So, I mean, it's a combination.

Our groups.

What they hear from their customers.

I mean, it's a combination we have to put a stake in the ground.

Speaker 2: at a point in time, and we don't know, of course, what others are doing. We look at the analysts as well, and where you guys are at, where you guys are expecting, and we come up with a collective view on Outlook, and then we finish our plan. That's kind of how we do it.

At a point in time, and we don't know of course with what others are doing and look at the analysts Delaware, where you guys are at where you guys are expecting when we come up with a collective view on outlook and then we will.

Finish our plant that's kind of how we do it.

Speaker 14: Got it, that's helpful. And then my second question was on Optimus Ride, an acquisition the company did relatively recently. Maybe you can talk a bit more on the assets and IP that that acquisition is bringing into Magna and how you plan to incorporate it into the development of the company overall.

Got it that's helpful. And then my second question was on Optimus ride and acquisition. The company did relatively recently, maybe you can talk a bit more on the assets and IP that that acquisition is bringing into magna and how you plan to incorporate it into the development of the company overall thank you.

Speaker 3: Hi Mark, we've talked about continuing to look at different areas based on product strategy and we have done a few things to continue to strengthen our foundation in ADAS and software in general. And with this acquisition, we...

Hi, Mark.

We are comfortable continuing to look at different areas based on product strategy.

We have.

<unk> done a few things to continue to strengthen our foundation and Adas and software in general and with this acquisition, we welcomed over 130 employees there.

Speaker 3: welcomed about 130 employees there. We felt the capabilities and the knowledge they had would add to what we're doing in the feature function development and so on. Not commenting specifically on the IP, but it really adds to the depth of the software in general and the ADAS piece in specific.

Had we felt the capabilities and an honest they had would add to what we're doing.

The feature function development and so on.

Not.

Not commenting specifically on the IP, but it really adds to the depth of the software in general and the Adas piece in specific.

And we can do we will.

Speaker 3: Maintain the office in Boston. It's a rich area in terms of the ecosystem of academic institutions and just the software talent. So we continue to grow that as a region.

<unk> maintained the office in Boston.

The area in terms of ecosystem of academic institutions.

Just as software talent. So we continue to grow that as a region.

Thank you.

Yes.

Speaker 10: Thank you. We'll get to our next question on the line from Colin Langan from Wells Fargo. Go right ahead. Oh, great. Thanks.

Thank you. Our next question on the line from Colin Langan from Wells Fargo, Great ahead.

Oh, great. Thanks for taking my question.

Speaker 7: I'm a little surprised by the commodity cost increase going from $50 million to $190 million, particularly as steel is heading in a downward direction, or has been. What are the big...

Most surprised by the commodity cost increase going from 50 million to 190, particularly in steel is heading in a downward direction Aspen.

What are the big components of that 119 increase.

It's not steel.

Okay.

Speaker 1: Hi Colin, it's Pat again. So when you think about the commodity increase, I think it covered off a few of the major items. Obviously resins, we have much less resin on a resale program or indexing program, just given the nature of the product, it's a harder...

Hi, Collin, it's Pat again, so when you think about the the commodity increase I think I've covered off a few of the major items, obviously resins.

We have much less compression on a resale program are indexing program, just given the nature of the product it's a harder around.

Speaker 1: you know, it's a harder product to hedge against. So resin's obviously a big part of it. The other big part is energy that's flowing through. We're seeing that in Europe . A lot of the.

It's a harder product to hedge against the.

Resins, and obviously, a big part of it.

The big part is energy that's flowing through we are seeing that in Europe .

One of the.

On the.

Speaker 1: like a lot of the input costs. What we're seeing as well is when you look at energy and some of these input costs, they're coming through the supply base as well in the form of surcharges, which are a little bit harder to control. Specifically regarding steel, if you think about steel, and I understand steel prices have been coming off pretty steadily since, towards the end of Q3 of last year, really the timing of your contract and when you lock in, it's gonna drive a lot of that value. So it's a bit of a...

Like level all of the input costs, what we're seeing as well as when you look at energy and some of these input costs are coming through the supply base as well as a form of surcharges, which are a little bit harder to control.

Specifically regarding <unk>, if you think about steel and I understand the steel prices have been coming off pretty steadily since.

We ended Q3 of last year.

Really the timing of your contracts and when you lock in is going to drive a lot of that.

That value so.

It's a bit of a.

Speaker 1: a three-party negotiation when you're dealing with your customers and the mills and we're in the middle. And when you lock in those contracts really drives your steel pricing on a year-over-year basis.

Three party negotiation when you're dealing with your customers in the mills and we're in the middle and when you lock in those contracts really drives your steel pricing on a year over year basis.

The prices coming down in the scrap sales are lower as well.

Baked into there as well.

Okay.

Speaker 7: And when I look at growth over market, if you look at 21 to 22, and I take out assembly, I'm coming up with something like an 11% growth with your outlook for North America and Europe up there.

And when I look at growth over market.

If you look at 'twenty, one to 'twenty, two and I take out Assembly I'm coming out with something like an 11% growth with your outlook for North America, and Europe up 16.

Speaker 7: It seems like you're underperforming this year. Is that right? And is that just assuming some sort of platform mixed drag relative to geographic benefit? What are you actually underperforming in the market this year?

It seems like you're underperforming this year.

Is that right and is that just assuming some sort of platform mix drag.

Relative to geographic benefit.

All right.

What are you actually underperforming the market this year too.

Speaker 7: Is that in any color on what platforms maybe you're dragging that?

Is that and any color on what platforms that you're tracking that crossover market.

Speaker 2: Oh, I don't think there's any particular plan. I think, you know, we give a range for

Im wondering if any particular I think we gave a range for.

Speaker 2: for our growth rates. Last year, we were kind of picking the same thing. We started the year kind of close to flat and we ended up at plus four, so the base is higher.

For our growth rates last year, we were kind of thinking the same thing so we.

We started the year kind of close to flat and ended up at plus four so the base is higher.

Speaker 2: But, you know, it's just it's just a mix of programs that we have, you know, in the business of driving the position. We still think, excuse me, sir, we have growth in the in the entire.

But it's just the mix of programs that we have.

And the business I'll start on that.

The physician, we still think excuse me Sarah we have growth.

In the entire period.

Speaker 2: Um, you know, we've also got crystal. Let's go. We've also got a disposition that we did in

Sure.

We've also got Crystal.

We've also got a disposition that we did in.

Speaker 2: in 2021, which is impacting overall sales.

In 2021, which is impacting overall sales.

Okay and anything in particular in power and vision that wouldn't seem to have the lowest.

Growth year over year.

Speaker 2: Power Envision in particular has a really strong global market over the last couple of years. We were 9% over the market in 2020 and 4% last year, so the base is certainly high there. We have businesses in Power Envision that are pretty established, and so it isn't always going to grow fast in the market, and it just depends on the year, just a mix of programs and business.

Our vision in particular really strong cohort market over the last couple of years, we are at 9%.

Over the market in 2020, and 4% last year. So the basin certainly high there and we have businesses in <unk>.

Our revision that are pretty established and so it isn't always going to grow faster than the market and it just depends on year, just the mix of programs.

Okay, alright, thanks for taking my questions.

Speaker 10: Thank you. We'll get to our next question on the line. This is from Rod Lash from Wolf Research. Please go right ahead.

Thank you.

Our next question on the line from Rod Lache from Wolfe Research. Please go right ahead.

Speaker 10: Hey, this is Trey for Rod. Just following up on that power and vision question. So, you know, I know it obviously houses a lot of the secular growth elements of the business and like ADAS and E-Drive. And, you know, you talked about consolidated revenues up 9% to 10%. Through 2024, you know, the market is up 9%. So, a little bit of outgrowth. And I realize, you know, the JV part of the business is growing rapidly.

Hey, this is Sharon.

Rod.

Just following up on that power and vision question. So.

Yes, I know it obviously, how does a lot of the secular growth elements of the business.

Like any of that's in the drive and you talked about consolidated revenues up 9% to 10% through 2020 for the market is up nine.

So little bit of outgrowth and I realized the JV part of the business is growing rapidly.

Speaker 10: But are there parts of the power and vision business that you expect will grow a lot slower over these next few years and maybe even shrink that you can talk about?

But are there parts of the power ambition business that you expect will grow slower over these next few years and maybe even shrink.

That you can talk about.

Speaker 3: The Power and Vision has, you know, we have the mechatronics, mirrors, lighting, ADAS, and in the powertrain, it's a combination of our transmission business and all-wheel drive, four-wheel drive, and the e-drives. So there's kind of some of the areas which are growing fast as we talk about with the rest of the market. Some of them are stable and have a very long runway for the next 10 years, which gives the stability, but those things are not growing as much as the other areas. The Power and Vision has, you know, we have the mechatronics, mirrors, lighting, ADAS, and in the powertrain, it's a combination of our transmission business and all-wheel drive, four-wheel drive, four-wheel drive, four-wheel drive, and the e-drives. Some of the things that we're talking about with the powertrain, you know, is the powertrain, the lights, and the powertrain, which is the powertrain that the powertrain has, which is the powertrain that is the powertrain that the powertrain has.

The Palm Bay, a powder envision has we have the mechatronics mirrors lighting Adas powertrain, it's a combination of our transmission business and all wheel drive four wheel drive and the E drives so there's kind of some of the areas, which are growing fast as we've talked.

About with the rest of the market some of them are stable and have a very long.

Run rate for the next 10 years, which gets the stability, but those things are not growing as much as the other areas.

Speaker 3: We cannot look specifically at each of the product lines, for example, the mirrors that continue to grow with the market, every vehicle has that.

We cannot look specifically at each of the product line for example.

The mirrors that continue to grow with the market every vehicle as that but we are looking at the combination of the mirrors and.

Speaker 3: But we are looking at the combination of the mirrors and, you know, electronics in the driver monitoring system. So that.

Electronics and the driver monitoring system. So that's turning out to be a new product line. So you can't really put a specific number on each one of these things it's a mix and I think as time goes on it evolves right some product lines evolved faster than the other and the segments are seeing the fastest growth in unconsolidated sales.

Speaker 3: you know, turning out to be a new product line. So you can't really put a specific number on each one of these things. It's a mix.

Speaker 3: And I think as time goes on, it evolves, right? Some product lines will evolve faster than the other. And the second, they're seeing the fastest growth in unconsolidated sales is not a problem in the group, right? Due to the LG joint venture and that.

Is that a part of our vision, but due to the LG joint venture and ask which I've mentioned in particular.

Speaker 10: Okay. And then, you know, you mentioned engineering spending is growing to $900 million. Megatron engineering spending is growing to $900 million in 2022. What was that spending in 2021, and what are you assuming for 2024?

Okay.

And then.

You mentioned in engineering spending is growing to $900 million.

Megatron and engineering spend in 2990 2022.

What was that spending in 'twenty, one and what are you assuming for 2024.

Speaker 3: We're talking about average annual numbers throughout the plan period, so if you look at just the average annual numbers, I would say it's about a $300 million increase as an average from the last plan period to now.

We were talking about average annual numbers through the planned period. So if you look at just the average annual number so I would say, it's about a 300 million.

Increase in average from the last plan period to now.

Speaker 2: All right, and that's gross spend. That's before recovery from our customer. Yeah.

And that's gross spend thats.

Before before recovery from our customers.

Okay. So basically.

Speaker 10: You're saying that it would be up to $1.2 billion by 2024 versus the $900 billion in 2022? I just want to make sure I know what you're saying. We're just saying that we're expecting about $600 billion on average in our last outlook over the three-year period, and now there's an uptick to about $900 billion on average.

Youre, saying that it would be up to $1 2 billion by 2024 versus the 900.

2002, I just want to make sure nobody a note, saying that that you are expecting about 600 on average overall in the last in our last outlook over the three year period and now there is an uptick to about 900 on average.

Right.

Okay.

Understood. Thank you.

On the growth side gross spend.

Speaker 15: Thank you. We'll get to our next question on the line, from the line of Brian Johnson with Barclays. Go right ahead.

Thank you, we'll get to our next questioner on the line.

I know, Brian Johnson with Barclays go right ahead.

Speaker 10: Thank you. A lot of my questions have been drained already, so I want to ask kind of a bigger picture one. One of your large competitors that is considered a role model of the industry, Aptiv, recently made a large and frankly expensive

Thank you have a lot of my questions have been drained already so wanted to ask kind of a bigger picture one.

One of your large competitors that is considered a real model of industry <unk> recently made a large and frankly expensive software acquisition. So.

Speaker 10: software acquisitions. So, and maybe this is a chance for Vince to talk a bit, you know, how are you thinking about the role of software overall at Magna and potentially the need for acquisitions, which of course have been very common in multi-industry space, to help...

Maybe this is a chance for Vince to talk a bit how are you thinking about the role of software overall at Magna and potentially the need for acquisitions, which of course have been very common in multi industry space to help you get there.

Speaker 3: Yeah. I think Brian , good morning. Software is such a wide topic and it is put under a broad umbrella. And if you look at the software capabilities and application, it's different in different product areas. But for sure, what you said is true that software will define a large

Yeah, I think Brian good morning, sorry.

Our software is such a wide topic and it is put under the broad umbrella and if you look at the software capabilities and application it's different in different productivity, but for sure. What you said is true that software will define in large part of the vehicle going forward.

Speaker 16: part of the vehicle going forward. Given that overall statement, we continue to look at what software and what role does it play, whether it's ADAS or whether it's mechatronics, whether it's powertrain and so on.

Given that overall statement, we continue to look at what software.

And what role does it play whether it's Adas, so whether it's mechatronics, whether its powertrain and so on.

Speaker 3: So we continue to look at each of the specific areas of what the application software capabilities are, and therefore, you know, the investments, whether organic or inorganic, to complement that. At a base level, there are some of the electrical architecture, like we did with Fisker, or with our entire business. We continue to look at the holistic view of what the vehicle is going to be, and we continue to add to that capability.

So we continue to look at each of the specific areas of what the application software capabilities are.

And therefore, the investments whether organic or inorganic to complement that at a base level that are some of the electrical architecture like we did with <unk>.

Our with our tire business, we continue to look at the holistic view of what the rate is going to be and we continue to add to that capability right. So I think one of the unique things in Magna, which I think should be it should be considered a role model is how we can actually integrate.

Speaker 3: Right, so I think one of the unique things in Magna, which I think should be considered a role model is how we can actually integrate and think holistically of a whole vehicle and what each system means, right? So that's how we look at it.

And think holistically, okay hold vehicle and what each system means right. So that's how we look at it.

Speaker 10: And does that mean you'd want to be active across the software stack or are you thinking about specific domains or applications where you really want to focus your software expertise?

And does that mean, you would want to be active across the software stack or are you thinking about specific domains are applications, where you really want to focus your software expertise.

Speaker 3: We believe that we have to have a system viewpoint, given our engineering, full vehicle engineering and full vehicle manufacturing, and given the domains that we have, we look at domain specificity also, right? So given our portfolio, we continue to look at all of them. And you know, how the stack develops and what OEMs will take on versus what the suppliers will take on is evolving, and we continue to track that. Okay, thanks.

We believe that we have to have a system viewpoint, given our engineering full vehicle engineering and full vehicle manufacturing and given the domains that we haven't looked at domain specificity also right. So given our portfolio. We continue to look at all of them and how the stack develops.

What Oems will take on versus what the suppliers will take on is evolving and we continue to track that.

Okay. Thanks.

Tommy final questions certainly.

Certainly.

Speaker 15: We'll proceed with our final questions from the line of Michael Glenn from Raymond James. Go right ahead.

Our final question is from the line of Michael Glen from Raymond James Go right ahead.

Speaker 17: Well, thanks for getting me in. You made the comment on the 2022 guidance regarding the 1H, 2H dynamic. Can you just provide a little bit more clarity on how different will the two periods be as we're modeling this out?

Well thanks for thanks for getting me in you made the comment on the 2022 guidance regarding the one H two H dynamic can you just provide a little bit more clarity on how different will the two periods be sort of modeling this out.

Speaker 2: Well, I mean, we don't provide, Pat's just having a look at the overall numbers, we don't provide quality guidance, but definitely the impact that the chips is going to have is going to skew what you'd normally see as a stronger first half.

Well I mean, we don't we don't provide.

That's how to look at the overall numbers, we don't provide quarterly guidance, but definitely the impact of chips is going to have.

Is it going to is going to skew what you would normally see as a stronger first half versus the second half.

Speaker 18: Okay. Because coming at like Q4 at the end of the day was you came in at $1.30 in EPS and that was kind of well ahead of what consensus was forecasting. So, you know, are you expecting something different in Q1 versus what you saw in Q4? Does it get...

Okay, because coming in at like Q4 at the end of the day was documented a box 30 in EPS notes kind of well ahead of what consensus was forecasting so.

Okay.

Are you expecting something different in Q1 versus what you saw in Q4 doesn't get.

Speaker 18: Is there a little more pressure in Q1 that starts to take place?

You get a little.

Is there a little more pressure in Q1 that starts to take place.

Speaker 2: Yeah, we're not going to get into the details of, you know, that's kind of walk from, let's say, the earnings or the margins in Game 2, 4 versus Q1. We don't provide that outlook. So, like I said, the direction was more related to the volumes, volumes in the first half versus the second half. We can't get into the details of what we expect in the first quarter.

Yes, we're not going to get into the details of.

Let's kind of walk from let's say the earnings so the margins in Q4 versus Q1, we don't provide that outlook. So.

Like I said its more the direction was more related to the volumes volumes in the first half versus the second half we can't get into the details of what we expect in the first quarter or the first half margins.

Speaker 18: Okay. And just some thoughts on, given where the free cash flow outlook is, some thoughts on how you would proceed with the buyback in 2020.

Okay, and just some thoughts on given where the free cash flow.

How you would proceed with the buyback in 2022.

Speaker 1: Mike, we do have an open NTIB where we're able to buy up to 10% of our shares.

We do have an open and CIB, where we're able to buy up to 10% of our shares at any point in time.

Speaker 1: at any point in time. We have been active in the market. In the quarter just passed, we did purchase $250 million.

We have been active in the market in the quarter just passed we did purchase $250 million.

Speaker 19: I think it's going to be consistent with our liquidity or our financial strategy, which is our number one priority is to grow the business organically and organically. And if opportunities are not there, we're going to continue with the share buyback.

I think it's going to be consistent with our R. R.

Liquidity, our financial strategy, which is our number one priority is good.

To grow the business organically Inorganically and.

Opportunities are not there we're going to continue with the share buyback.

Speaker 1: When I think about the shared buyback, what's nice about the buyback is we can turn it off, so if we do have an opportunity that comes up that is significant, we can turn it off, and we have turned it off in the past.

When I think about the share buyback whats nice about the buyback because we could turn it off so if we do have an opportunity that comes up that is significant we can turn it off and we have turned it off in the past.

Speaker 1: when we have looked at acquisitions and I think we're not going to change that strategy going forward.

When we have looked at acquisitions and I think we're not going to change that strategy going forward.

Speaker 11: Yeah, Michael, just to add to that, I mean, I've been part of this capital strategy, kind of, and how we evolved it over the years, it's been pretty consistent, kind of, you know, we look at a leverage ratio, we look at the macroeconomic environment, we look at the opportunities that we see, and we've got to make sure we have enough liquidity. And to the extent that there's excess liquidity,

And Michael just to add to that I mean, I've been part of this capital strategy kind of and how we evolve that over the years, it's been pretty consistent kind of.

We look at our leverage ratio, we look at the macroeconomic environment will look at the opportunities that we see and.

We've got to make sure we have enough liquidity.

Said that there is excess liquidity.

Speaker 11: you know, we've demonstrated over time that we'll return that to shareholders by way of buybacks. But as Pat talked about, nice thing about the buyback is you got flexibility turned on and off, depending on the situation. And, you know, our strategy in that area hasn't changed.

We have demonstrated over time that will return that to shareholders by way of buybacks, but as Pat talked about I think but the buyback is you've got flexibility turned on and off depending on the situation.

And.

Our strategy in that area Hasnt changed.

Great. Thanks for taking the questions.

Speaker 15: Thank you. There are no further questions. I'll turn it back.

Thank you Gary there are no further questions I'll turn it back to you.

Speaker 3: Thank you. Thanks everyone for listening in. I know we have had two straight years with a difficult production environment and industry challenges still continue to persist. However we remain confident in the strength of our business model and our ability to grow and generate earnings and free cash flow to create significant long term value for shareholders.

Thank you thanks, everyone for listening in.

I had two straight years with a difficult production environment and industry challenges still continue to persist.

However, we remain confident in the strength of our business model and our ability to.

Grow and generate earnings and free cash flow to create significant long term value for shareholders.

Speaker 3: We stay focused on executing our go-forward strategy and look forward to seeing many or all of you in Detroit at our investor event in May. Stay safe, stay healthy, and enjoy the rest of your day.

We stay focused on executing our go forward strategy and look forward.

To seeing many or all of you in Detroit at our Investor event in May.

Stay safe stay healthy and just like the rest of your day.

Speaker 20: Thank you very much. Thank you, everyone. That concludes the public conference today. We thank you for your participation. As we disconnect your lines, have a good day.

Thank you very much and thank you everyone that does conclude our call for today. We thank you for your participation. Please disconnect your lines have a good day everyone.

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Speaker 15: Greetings and welcome to the Q4 and year-end 2021 results and 2022 outlook.

Greetings and welcome to the Q4 and year end 2021 result in 2022 outlook.

Speaker 15: During the presentation, participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. At that time, if you have a question, just press the one followed by the four on your telephone. If any time in the conference you need to reach an operator, you may press the star followed by the zero. As a reminder, today's call is being recorded Friday, February 11th, 2022.

The presentation, all participants will be in a listen only mode.

<unk> conduct a question and answer session at the time, if you have a question just passed the one so by the four on your telephone.

If anytime to conference where it could reach operators in my press the star, but probably does here.

As a reminder, today's call is being recorded on Friday February 11th 2022.

Speaker 15: Now, I would like to turn the conference over to Louis Twinelli, VP of Investor Relations. Please go right ahead.

Now I would like to turn the conference over to Louis Tonelli VP of Investor Relations. Please go right ahead.

Speaker 2: Thank you. Hello everyone and welcome to our conference call covering our 21 results and our 2022 outlook. Joining me today are Swami Kodagiri, Vince Galiffi and Pat McCann.

Thank you Hello, everyone and welcome to our conference call covering our 'twenty, one results and our 2022 outlook join.

Joining me today are solid quarter, Gary Metzger lithium at Mccann you.

Speaker 2: Yesterday, our board of directors met and approved our financial results for 2021, as well as our financial outlook. We issued a press release this morning outlining each of these.

Yesterday, our board of directors met and approved our financial results for 2021 as well as our financial outlook, we issued a press release. This morning outlining each of these.

Speaker 2: You'll find the press release, today's conference call webcast, the slide presentation to go along with the call, and our updated quarterly financial review, all in the investor relations section of our website at magna.com.

You'll find the press release today's conference call webcast.

Slide presentation to go along with the call and our updated quarterly financial review all in the Investor Relations section of our web site at Magna Dot com.

Speaker 2: Just before we get started, this is a reminder, the discussion today may contain forward-looking information or a forward-looking statement within the meaning of applicable securities legislation.

Just before we get started just as a reminder.

<unk> today may contain forward looking information or forward looking statements within the meaning of the applicable securities legislation.

Speaker 2: Such statements involve certain risks, assumptions, and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements.

Such statements involve certain risks assumptions and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements.

Speaker 2: Please refer to today's press release for a complete description of our safe harbor.

Please refer to today's press release for a complete description of our safe Harbor disclaimer.

Speaker 2: Please also refer to the reminder slide included in our deck today related to our common...

Please also refer to the reminder, slide including included in our deck today related to our commentary.

Speaker 2: This morning we will cover our 21 highlights as well as our Q4 results.

This morning, we will cover our 'twenty, one highlights as well as our Q4 results we.

Speaker 2: We'll then provide our 22 outlook and lastly run through our financial strategy.

We will then provide our 'twenty two outlook and lastly run through our financial strategy and with that I'll pass it over to Swamy.

Speaker 3: Thank you, Luis. Good morning, everyone. We've been busy over the last few days taking our board through our annual results and our business plans. Today, I'll recap 2021, comment on our results, and address our outlook.

Thank you Louis good morning, everyone.

We've been busy over the last few days, taking our board through our annual results and our business plans today I'll recap 2021 comment on our results and address our outlook.

Speaker 3: 2020 was a very challenging year that was dominated by the global turmoil caused by COVID.

2020 was a very challenging year that was dominated by the global turmoil caused by Covid.

Speaker 3: In 2021, the auto industry was severely impacted by supply chain disruptions, most notably the lack of availability of semiconductor chips.

In 2021, the auto industry, where CBOE impacted by supply chain disruptions.

Notably the lack of availability of semiconductor chips.

Speaker 3: Once again, we found ourselves working closely with our customers to manage through the challenges to mitigate the impact on production.

Once again, we found ourselves working closely with our customers to manage through the challenges to mitigate the impact on production.

Speaker 3: While I'm not happy with our financial results in 2021, when I sit back and think about the efforts and performance of our team, whether it be winning new businesses, launches, or other operational excellence activities, I was extremely pleased with the results we achieved.

While I'm not happy with our financial results in 2021, when I sit back and think about the efforts and performance of our team.

Be winning new businesses.

Launches are other operational excellence activities I was extremely pleased with the results we achieved.

Speaker 3: It is a testament to our people that we managed through yet another difficult operating environment.

It is a testament to our people that we managed through yet another difficult operating environment.

Speaker 3: our culture of collaboration and execution comes through once again in 21.

Our culture of collaboration and execution comes through once again in 'twenty one.

Speaker 3: In 2020, the first half of the year was severely impacted by COVID-related production shutdowns globally, while the second half saw a strong vehicle production rebound.

In 2020, the first half of the year with Cvs really impacted by Covid related production shutdowns globally.

While the second half sorry, its strong vehicle production rebound.

Speaker 3: In each of the first three quarters of 2021, we experienced sequential weakening of vehicle production as the semi-chip availability became progressively worse.

In each of the first three quarters of 2021.

We experienced sequential weakening of vehicle production as the semi chip availability became progressively worse.

Speaker 3: In addition to the lower production, inefficiencies driven by the unpredictable production schedules of our customers drove higher-than-typical decremental margins.

In addition to the lower production inefficiencies driven by the unpredictable production schedules to help our customers drove higher than typical decremental margins.

Speaker 3: The fourth quarter saw some sequential recovery in production, but global volumes were still down 17% from the fourth quarter of 2020.

The fourth quarter saw some sequential recovery in production, but global volumes were still down 17% from the fourth quarter of 2020.

Speaker 3: As a result of this cadence, our sales of $9.1 billion in the fourth quarter of 2021 were down 14% year-over-year.

As a result of this cadence our sales of $9 1 billion in the fourth quarter of 2021 were down 14% year over year.

Speaker 3: However, organic sales outperformed our underlying markets by 6% in the quarter.

However, organic sales outperformed our underlying markets by 6% in the quarter.

Speaker 3: EBIT margin declined year over year to 5.6% while increasing from 2.9% in Q3.

EBIT margin declined year over year to five 6%, while increasing dropped two 9% in Q3.

Speaker 3: Our adjusted EPS was $1.30 for the quarter.

Our adjusted EPS was <unk> 30 for the quarter.

Speaker 3: and free cash flow in Q4 was $729 million, ending the year at $1.3 billion.

And free cash flow in Q4 was $729 million ending.

Ending the year at one 3 billion.

Speaker 3: Now let us look at some highlights for 2021.

Now, let us look at some highlights for 2021.

Speaker 3: Keeping our employees safe throughout the pandemic has been and will continue to be our top priority.

Keeping our employees safe throughout the pandemic has been and will continue to be our top priority.

Speaker 3: We have been evolving and updating our protocols and facilitating testing and vaccination programs globally to help protect the health and safety of our employees.

We have been evolving and updating our protocols and facilitating testing and vaccination programs globally to help protect the health and safety of our employees.

Speaker 3: We remain focused on three key priorities, building awareness, creating an inclusive workforce, including through training and leveraging tools and recruiting to help remove any bias during screening.

We remain focused on three key priorities building awareness.

Creating an inclusive workforce, including through training.

And leveraging tools and recruiting to help remove any bias during screening.

Speaker 3: To continue to cultivate a culture of learning, we have launched several new education programs for employees facilitating further development.

To continue to cultivate a culture of learning.

Have launched several new education programs for employees facilitating further development.

Speaker 3: And among the many awards we received, MAGNA has been recognized for the fifth consecutive year, being named Forbes World's Best Employer for 2021.

And among the many awards we received Magna has been recognized for the fifth consecutive year being named Forbes world's best employer for 2021.

Speaker 3: We never lost sight of the importance of operational excellence.

We never lost sight of the importance of operational excellence last.

Speaker 3: Last year, we committed to being carbon neutral in our European operations by 2025 and globally by 2030.

Last year, we committed to being carbon neutral in our European operations by 2025 and globally by 2030.

Speaker 3: This should place us among industry leaders in Europe and North America.

This should place us among industry leaders in Europe , and North America.

Speaker 3: We managed through the year-long supply chain challenges while working diligently with our customers to minimize production disruption.

We managed through the year long supply chain challenges, while working diligently with our customers to minimize production disruptions.

Speaker 3: and our focus on operational excellence and innovation led to customer recognition.

And our focus on operational excellence and innovation led to customer recognition.

Speaker 3: Last year, we received our highest ever customer recognition awards, 122 in total.

Last year, we saw.

We used our highest ever customer recognition awards 122 in total.

Now, let me comment on growth.

Speaker 3: We outgrew our market in 2021 by 4%.

We outgrew our market in 2021 by 4%.

Speaker 3: This exceeded the outgrowth we anticipated in our initial outlook last year.

This exceeded the outgrowth, we anticipated in our initial outlook last year.

Speaker 3: In fact, we achieved that outgrowth in each of our major regions, North America, Europe , and Asia.

In fact, we achieved that outgrowth in each of our major regions North America, Europe and Asia.

Speaker 3: and we launched new technologies that have significant growing addressable markets, namely e-drives, advanced driver assist systems, and EV battery inclusion.

And we launched new technologies that have significant growing addressable markets, namely E drive advanced driver assist systems and EV battery enclosures.

Speaker 3: We expect these product areas to keep driving our growth for many years to come. Finally.

We expect these product areas to keep driving our growth for many years to come.

Finally, I would like to touch on our innovation.

Speaker 3: We demonstrated the successful commercialization of our innovation activities over the past few years.

We have demonstrated the successful commercialization of our innovation activities over the past few years.

Speaker 3: We were awarded new business in a number of core areas.

We were awarded new business in a number of core areas.

Speaker 3: This includes a recently announced driver monitoring system for a German-based OEM.

This includes our recently announced driver monitoring system for a German based OEM.

Speaker 3: We won the CES Best Innovation Award for our Icon Digital Radar, which is going into production this year.

We won the CES Best Innovation award for our icon digital radar, which is going into production this year.

Speaker 3: We also continued to expand our collaboration with a growing ecosystem of entities to help accelerate time to market for our innovative products.

We also continued to expand our collaboration with a growing ecosystem of entities to help accelerate time to market for our innovative products.

Speaker 3: And lastly, our commitment to innovation continues.

And lastly, our commitment to innovation continues.

Speaker 3: Over the past year, we increased investments in megatrend areas to position us for the future.

Over the past year, we increased investments in megatrend areas to position us for the future.

Speaker 3: Normally, I would be passing off to Vince, and I've heard this statement over many years. Don did it, and I did it for the last quarter. He's here with us. Instead, I'll pass the call to Pat McCann, our new CFO , who will first take us through the financials. But before I do, I would like to thank Vince for continuing to be a mentor to both Pat and I. Pat?

Normally I would be passing off to wins and I've heard this statement over many years, Don did it and I did it.

For the last quarter. He is here with us and said I'll pass the call to Pat Mccann, our new CFO , we will first take us through the financials, but before I do I would like to thank Vince for continuing to be a mentor to both pack ni.

Speaker 1: Thanks Swami and good morning everyone. I hope everyone is staying safe and healthy.

Thanks, Swamy and good morning, everyone I hope, everyone is staying safe and healthy.

Speaker 1: I'm happy to be speaking with all of you as CFO . I would like to start by thanking Vince, who has helped me immensely over the years and has supported me while I have prepared for my new role.

I'm happy to be speaking with all of you as CFO I would like to start by thanking Vince who has helped me immensely over the years and have supported me while I have prepared my new role.

Speaker 1: It will be evident that Swami Vint and I are fully aligned on Magnus' disciplined, returns-based approach to capital allocation.

It will be evident that swamy, Vince and I are fully aligned on Magnus disciplined returns based approach to capital allocation.

Speaker 1: Today, I will cover our financial results for the fourth quarter and full year 2021.

Today, I will cover our financial results for the fourth quarter and full year 2021.

Speaker 1: I'll do a shorter than usual version of our quarterly review to allow more time to cover our outlook and financial strategy. More detail on our financials as well.

I'll do a shorter than usual version of our quarterly review to allow more time to cover our outlook and financial strategy.

More detail on our financials is included in the appendix.

Speaker 1: As Swami said, both 2020 and 2021 were impacted by significant global events.

As Swamy said, both 2020 and 2021 were impacted by significant global events.

Speaker 1: 20 was affected by COVID-related production shutdowns, particularly in the first half of the year. 2021 was impacted by semi.

<unk> was affected by Covid related production shutdowns, particularly in the first half of the year.

2021 was impacted by semi chip shortages.

Speaker 1: Overall, global light vehicle production only increased 4% in 2021.

Overall global light vehicle production only increased 4% and 21.

Speaker 1: Our consolidated sales rose 11% year over year. On an organic basis, our sales increased 5% compared to a weighted global production increase of 1%.

Our consolidated sales rose, 11% year over year on.

On an organic basis, our sales increased 5% compared to a weighted global production increase of 1%.

Speaker 1: driving a 4% weighted growth over market for the year.

Driving up 4% weighted growth over market for the year.

Speaker 1: mainly as a result of the higher year-over-year sales, our adjusted EBIT margin and EPS also rose.

Mainly as a result of the higher year over year sales, our adjusted EBIT margin and EPS also rose.

Okay.

Speaker 1: For the fourth quarter, global light vehicle production declined 17%.

Okay.

For the fourth quarter Global light vehicle production declined 17%.

Speaker 1: as a result of year-over-year reductions of 20%, 28% and 10% in North America, Europe and China respectively.

As a result of year over year reductions of 20% 28, and 10% in North America, Europe , and China, respectively.

Speaker 1: On a magna weighted basis, production declined 20% in the fourth quarter compared to Q4 2020.

On a magna weighted basis production declined 20% in the fourth quarter compared to Q4 2020.

Speaker 1: Consolidated sales were $9.1 billion compared to $10.6 billion in Q4 2020.

Consolidated sales were $9 1 billion compared to $10 6 billion in Q4 2020.

Speaker 1: We had strong relative sales performance in the quarter with organic sales both performing weighted production by 6%.

We had strong relative sales performance in the quarter with organic sales outperforming weighted production by 6%.

Speaker 1: Largely as a result of the lower year-over-year sales, adjusted EBIT and EPS declined from the fourth quarter of 2020.

Largely as a result of the lower year over year with the sales adjusted EBIT and EPS declined from the fourth quarter of 2020.

Speaker 1: As with the past couple of quarters, a more informative comparison is reviewing sequential results.

As with the past couple of quarters, a more informative comparison is reviewing sequential results.

Speaker 1: Comparing Q4 to Q3 of 2021, global light vehicle production was up 21%, driven principally by China and Europe , as chip related production shutdown subsided to some degree.

Comparing Q4 to Q3 of 2021 global light vehicle production was up 21% driven principally by China and Europe as chip related production shutdowns subsided to some degree.

Speaker 1: Our sales were up 15% due to higher production and the launch of new programs.

Our sales were up 15% due to higher production and the launch of new programs.

Speaker 1: partially offset by negative program mix and foreign currency translation.

Partially offset by negative program mix and foreign currency translation.

Speaker 1: All of our segments experience sequential increases in sales.

All of our segments experienced sequential increases in sales.

Speaker 1: Comparing the third quarter to the fourth quarter of 2021, our adjusted EBIT increased from $229 million to $508 million, and EBIT margin rose from 2.9% in Q3 to 5.6% in Q4. The adjusted EBIT increase reflected a number of factors.

Comparing the third quarter to the fourth quarter of 2021, our adjusted EBIT increased from 229 million to $508 million and EBIT margin rose from two 9% in Q3 to five 6% in Q4.

The adjusted EBIT increase reflected a number of factors.

Higher earnings on increased sales.

Speaker 1: The $45 million provision on engineering contracts with Evergrande recorded last quarter.

A $45 million provision on engineering contracts with Evergrande recorded last quarter.

Speaker 1: government R&D incentives received this past quarter and higher commercial settlement.

Government R&D incentives received this past quarter and higher commercial settlements.

Speaker 1: These were partially offset by higher input costs and increased transactional foreign exchange losses.

These were partially offset by higher input costs and increased transactional foreign exchange losses.

Okay.

Okay.

I will now review, our cash flows and investment activities.

Speaker 1: During the fourth quarter of 2021, we generated $849 million in cash from operations before changes in working capital, and an additional $502 million in working capital.

During the fourth quarter of 2021, we generated $849 million in cash from operations before changes in working capital and an additional $502 million in working capital.

Speaker 1: Investment activities in the quarter included $549 million in fixed assets, $105 million increase in investments, other assets, and intangibles.

Investment activities in the quarter included $540 million in fixed assets a.

A $105 million increase in investments other assets and intangibles.

Speaker 1: $63 million to finalize the LG Magnet Joint Venture, $31 million for a small acquisition, and $45 million in public and private equity investment.

$63 million to finalize the LG magnet joint venture $31 million for a small acquisition and $45 million in public and private equity investments.

Speaker 1: Free cash flow with $729 million in Q4.

Free cash flow was $729 million in Q4.

Speaker 1: We also repurchased $251 million of our common shares and paid $127 million in dividends.

We also repurchased $251 million of our common shares and paid $127 million in dividends.

Growing our dividend as part of our stated financial strategy.

Speaker 1: And yesterday, our board approved a 5% increase in our quarterly dividends to $0.45 per share, reflecting the board and management's collective confidence in the outlook for our business.

And yesterday, our board approved a 5% increase in our quarterly dividend to <unk> 45 per share, reflecting the board and managements collective confidence in the outlook for our business.

Speaker 1: We have increased our dividends per share at an average growth rate of 12% going back to 2020.

We have increased our dividend per share at an average growth rate of 12% going back to 2020.

Okay.

Speaker 1: And now I will pass it to Swami for a few introductory comments before getting into the specifics of our outlook.

And now I will pass it to swamy for a few introductory comments before getting into the specifics of our outlook.

Speaker 3: At our investor event last April , I articulated our go-forward strategy for growth.

At our Investor event last April .

Particularly at our go forward strategy for growth.

Speaker 3: We are on track with our strategy to further strengthen our position in megatrend areas, drive operational excellence, and look to leverage our unique position in the industry to unlock new opportunities.

We are on track with our strategy to further strengthen our position and megatrend areas drive operational excellence and look to leverage our unique position in the industry to unlock new opportunities.

Speaker 3: I look forward to giving you the details of her progress at her investor event in May.

I look forward to giving you the details of our progress at our Investor event in May.

Speaker 3: But today, I'm going to focus on our three-year outlook, which I'm really excited about.

But today I'm going to focus on our three year outlook with Tim We're really excited about.

Speaker 3: It reflects our Go Forward strategy to remain a leader in mobility.

It reflects our go forward strategy to remain a leader in mobility.

Speaker 3: you're going to see that we continue to increase our investments in megatrend areas and that much of the growth associated with these investments will be realized beyond our outlook period.

Youre going to see that we continue to increase our investments and megatrend areas and that much of the growth associated with this investment will be realized beyond our outlook period.

Speaker 3: Specifically in the outlook, we see both tailwinds and headwinds.

Specifically in the outlook, we see both tailwind and headwinds in.

Speaker 3: In terms of Tailwinds, we are launching content on a number of new programs, which is contributing to sales growth. I will come back to that.

In terms of tailwind we are launching content on a number of new programs, which is contributing to sales growth.

I will come back to that shortly.

Speaker 3: Relative to last year's outlook, we have an increase in business awards and are seeing opportunities in megatrend areas, particularly electrification and autonomy.

Relative to last year's outlook, we have an increase in business awards and are seeing opportunities in megatrend areas, particularly electrification and autonomy.

Speaker 3: With the current robust auto demand and low dealer inventory levels, we expect a favorable production environment extending into 2024.

With the current robust auto demand and low dealer inventory levels, we expect a favorable production environment extending into 2024.

Speaker 3: And our operational excellence initiatives are expected to contribute to margin improvement through our outlook period.

And our operational excellence initiatives are expected to contribute to margin improvement through our outlook period.

Speaker 3: In terms of headwinds in our outlook, we expect continued semiconductor supply constraints to impact production in 2022.

In terms of headwinds in our outlook, we expect continued semiconductor supply constraints to impact production in 'twenty two.

Speaker 3: The supply chain in general remains relatively vulnerable, which could also impact vehicle production.

The supply chain in general remains relatively vulnerable, which could also impact vehicle production.

Speaker 3: And our business is facing inflationary input cost impacts in areas such as commodities, labor, energy, logistics, and other areas, some of which are expected to be short-term in nature and others being more enduring.

And our business is facing inflationary input cost impacts in areas, such as commodities labor energy logistics and other areas some of which are expected to be short term in nature and others being more enduring.

Speaker 3: We expect weaker operating results in the first half of the year relative to the second, primarily as a result of semiconductor availability, which should negatively impact production more significantly in the first half.

We expect weaker operating results in the first half of the year relative to the second primarily as a result of semiconductor availability, which should negatively impact production more significantly in the first half.

Speaker 3: So how does all of this translate in our key financial metrics?

So how does all of this translate in our key financial metrics.

Speaker 3: We expect to continue strong sales growth through our outlook period, and we have confidence in our outlook.

We expect to continue strong sales growth through our outlook period, and we have confidence in our outlook.

Speaker 3: about 90% of our 2024 sales are already booked.

About 90% of our 2024 sales are already booked.

Speaker 3: In spite of inflationary input cost pressures and increased engineering activities in mega-trend areas, margins are expected to expand in each year of our outlook.

In spite of inflationary inputs input cost pressures and increased engineering activities and megatrend areas margins are expected to expand in each year of our outlook.

Speaker 3: Our engineering investments in megatrend areas should increase to an average of about $900 million annually before customer recovery.

Our engineering investments and megatrend areas should increase to an average.

<unk> $900 million annually before customer recoveries.

Speaker 3: Capital spending is also expected to increase largely as a result of investments to support the growth in our outlook.

Capital spending is also expected to increase largely as a result of investments to support the growth in our outlook.

Speaker 3: Lastly, free cash flow generation from our business is expected to remain strong, reflecting our operating performance and our disciplined approach to investment.

Lastly, free cash flow generation from our business is expected to remain strong, reflecting our operating performance and our disciplined approach to investment.

Speaker 3: This should allow us to further invest for growth and return capital to shareholders.

This should allow us to further invest for growth and return capital to shareholders.

Speaker 3: The industry is undergoing a significant shift towards electrified powertrains.

The industry is undergoing a significant shift towards electrified powertrains.

Speaker 3: In particular, OEMs are bringing an increased number of Babs to market.

Particular Oems are bringing an increased number of <unk> to market.

Speaker 3: We have been communicating for some time now that the vast majority of our product portfolio is powertrain agnostic, and electrification is, in fact, an opportunity for us.

We have been communicating for some time now that the vast majority of our product portfolio is powertrain agnostic.

Electrification is in fact, an opportunity for us.

Speaker 3: And Magna has significant content on electric vehicles that are launching this year across the globe.

And Magna has significant content on electric vehicles that are launching this year across the globe.

Speaker 3: Just to name a few, we have over $3,500 in content on the Cadillac Lyric, about $2,000 on the F-150 Lightning, about $1,000 on BMW iX.

Just to name a few we have over $3500 in content on the Cadillac lyric.

<unk> 2000 on the F 150 lightning.

<unk> thousand on BMW IX.

Speaker 3: About $500 each on Xpeng and Smart SUVs and around $900 on the Neo ES7.

500, each on X bank, and smart Suvs and around $900 under Neil <unk> seven.

Speaker 3: These vehicles shown are well above our average content in the respective market.

These vehicles shown are well above our average content in their respective markets.

Speaker 3: These are just some of the many vehicle launches around the world that are contributing to the sales growth in our outlook. With that, I'll pass it back to Pat. Thanks, Swami.

These are just some of the many vehicle launches around the world that are contributing to the sales growth in our outlook.

With that I'll pass it back to Pat.

Thanks Swamy.

Let me start with the key assumptions in our outlook.

Speaker 1: Our outlook reflects increased vehicle production in each of our key regions relative to 2021.

Our outlook reflects increased vehicle production in each of our key regions relative to 2021.

Speaker 1: In North America and Europe , our two largest markets, volumes in 2022 remained well below levels experienced in 2019, pre-COVID, and China production is also slightly lower.

In North America, and Europe , our two largest markets volumes in 2020 to remain well below levels experienced in 2019 pre COVID-19 .

In China production is also slightly lower.

Speaker 1: However, we expect increased production through 2024.

However, we expect increased production through 2024.

Speaker 1: We assume exchange rates in our outlook will approximate recent rates. This reflects a weaker Euro relative to 21, which negatively impacts our reported sales going forward.

We assume exchange rates and our outlook will approximate recent rates. This reflects a weaker euro relative to 'twenty, one which negatively impacts our reported sales going forward.

I will start with our consolidated outlook.

Speaker 1: We expect consolidated sales to grow by 7% to 9% on average per year out to 2024, reaching $44.6 billion and potentially as high as $47.1 billion.

We expect consolidated sales to grow by 7% to 9% on average per year out to 2020 for reaching.

Reaching $44 6 billion and potentially as high as $47 1 billion.

Speaker 1: The growth is driven by higher vehicle production and content growth, including as a result of many new technologies across our portfolio.

The growth is driven by higher vehicle production and content growth, including as a result of many new technologies across our portfolio.

Speaker 1: These are partially offset by foreign exchange, the end of production on certain programs, and net disposition.

These are partially offset by foreign exchange at the end of production on certain programs and net dispositions.

Speaker 1: On an organic basis, we expect consolidated sales to grow between 8 and 10% on average per year out to 2024.

On an organic basis, we expect consolidated sales to grow between 8% and 10% on average per year out to 2024.

Speaker 1: Excluding complete vehicles, we expect our organic sales to grow between 10% and 12% on average.

Excluding complete vehicles, we expect our organic sales to grow between 10 and 12% on average.

Speaker 1: In addition, we are expecting significant sales growth from unconsolidated joint ventures over the next few years, including from our LG ePowerTrain joint venture, our integrated eDrive JB in China, and a new seeding joint venture in North America.

In addition, we are expecting significant sales growth from unconsolidated joint ventures over the next few years.

Including from our LG E powertrain joint venture our integrated E drive GB in China, and a new seating joint venture in North America.

Speaker 1: We expect our consolidated margin to expand in 2022 and then again out to 2024.

We expect our consolidated margin to expand in 2022, and then again out to 'twenty four.

Speaker 1: Relative to 21, our 2022 margin benefits from contribution on higher sales, lower production inefficiencies from unpredictable OEM production schedules, and operational excellence initiatives.

Relative to 'twenty, one or 2022 margin benefits from contribution on higher sales lower production inefficiencies from unpredictable OEM production schedules and operational excellence initiatives.

Speaker 1: These are expected to be partially offset by higher input costs and engineering investments to support new program awards and to capitalize on growing opportunities in megatrend areas.

These are expected to be partially offset by higher input costs and engineering investments to support New program awards and to capitalize on growing opportunities and megatrend areas.

Speaker 1: We also expect a meaningful step up in margins in 2023. This is largely driven by contribution on higher anticipated sales, operational excellence initiatives, and lower application engineering in megatrend areas.

We also expect a meaningful step up in margins in 'twenty three.

This was largely driven by contribution on higher anticipated sales operational excellence initiatives and lower application engineering and megatrend areas.

Speaker 1: And, we expect additional margin expansion in 2024, primarily driven by higher sales and operational excellence initiatives.

And we expect additional margin expansion in 'twenty, four primarily driven by higher sales and operational excellence initiatives.

Speaker 1: Many of the same factors that are impacting consolidated sales and margins out to 2024 are also impacting our segments.

Many of the same factors that are impacting consolidated sales and margins out to 2024 are also impacting our segments.

Speaker 1: In the interest of time, we will not run through the segment details, however, they are included in the appendix and we are happy to discuss any questions on them.

In the interest of time, we will not run through the segment detail. However, they are included in the appendix and we're happy to discuss any questions on them.

Yes.

Speaker 1: Next, I would like to cover some of the highlights of our financial strategy.

Next I would like to cover some of the highlights of our financial strategy.

Speaker 1: We have been consistent in communicating our capital allocation principles over the years and I would like to reiterate these now.

We have been consistent in communicating our capital allocation principles over the years and I would like to reiterate these now.

Speaker 1: We want to maintain a strong balance sheet, ample liquidity, and high investment grade ratings.

We want to maintain a strong balance sheet ample liquidity and high investment grade ratings.

Speaker 1: invest for growth through organic and inorganic opportunities, along with innovation spending, and return capital to shareholders.

Invest for growth through organic and inorganic opportunities along with innovation spending.

<unk> returned capital to shareholders.

Speaker 1: Over the last couple of years, our capital spending has been below normal levels as a result of the environment.

Over the last couple of years, our capital spending has been below normal levels as a result of the environment.

Speaker 1: As we get into our outlook period, spending reflects the capital required to support the growth and sales.

As we get into our outlook period spending reflects the capital required to support the growth in sales.

Speaker 1: We expect capital spending to be approximately $1.8 billion for 2022 and remain relatively level out to 2024.

We expect capital spending to be approximately $1 8 billion for 2022 and remained relatively level up to 24.

Speaker 1: we expect further strong pre-cash flow totaling about $6 billion over the next three years.

We expect further strong free cash flow totaling about $6 billion over the next three years.

Speaker 1: In summary, we're executing our go forward strategy.

In summary, we are executing our go forward strategy.

Speaker 1: We plan to further grow our business with particular sales acceleration in megatrend areas.

We plan to further grow our business with particular sales acceleration and megatrend areas.

Speaker 1: execute on our plans to expand margins, including through operational excellence.

Execute on our plans to expand margin, including through operational excellence.

Speaker 1: generate solid free cash flow to further fuel growth and return capital to shareholders and accelerate investments to support growth on the car of the future.

Generate solid free cash flow to further fuel growth and return capital to shareholders and accelerate investments.

To support growth on the car of the future.

Speaker 1: We hope to see many of you in May at our investor event where we will elaborate on our go-forward strategy. Thanks for your attention. We would be happy to answer your questions.

We hope to see many you in may at our Investor event.

Where we will elaborate on our go forward strategy. Thanks for your attention we would be happy to answer your questions.

Speaker 15: Thank you very much, and if you'd like to register a question, please press the 1 or by the 4 on your telephone. You have a free phone prompt, but now it's your request.

Okay.

Thank you very much and if you'd like to register a question. Please press the one oh by the four on your telephone.

We have three strong prompt.

Sure your question.

Speaker 15: If your question hasn't been answered, I'd like to draw your attention, it is the 1-4-by-3. If you're using a speakerphone, please select your handset before entering your request. Once again, it is the 1-4 to register your question.

If your question has been asked I would like to draw your restoration is to one provider.

If you're using a speaker phone lift your handset before entering request.

Again this is the one forward towards the start of your question.

One moment, please our first question in queue.

Speaker 15: And we'll proceed with our first question on the lines with Mr. John Murphy of Bank of America Merrill Lynch. Go right ahead.

Okay.

And we'll proceed with our first question on the lines with Mr. John Murphy of Bank of America Merrill Lynch go right ahead.

Speaker 4: Good morning, guys. And Pat, welcome to the call. Just a first question. If I look at slide 2023, which is your your life of production

Good morning, guys and Pat welcome to the call.

Just.

My first question.

If I look at.

Slide 2023, which is youre likely production assumptions and slide 25, your 20-F, 'twenty 'twenty four shells.

Speaker 4: assumptions and slide 25, out of 2024 sales. It looks like your sales from 21 to 24 are growing largely or essentially right in line at midpoint with production. So I'm just curious, it seems like the growth of market that you had kind of fades away in your outlook and it looks like it's complete vehicle assembly largely, but I just, what's the key driver? Is it literally just that the mix or what's going on there?

It looks like your sales from.

As from 'twenty, one to 'twenty four growing largely are essentially right in line with the midpoint with production I'm just curious it.

It seems like the growth above market that you had kind of fades away in your outlook and it looks like its complete vehicle assembly largely but.

What's the key drivers of the <unk>.

Mix or what's going on there.

Speaker 2: Yeah, you know, if you go back, John , to where we were, what we were expecting in 2021, we are sort of flat relative to production.

Yes, if you go back John to.

Where are we what we're expecting in 2021 were sort of flat relative to production.

Speaker 2: organic growth and we ended the year at plus four. So the starting point is higher for one thing. We also said that our expectation for the 21 to 24 time frame was like one to three percent on average per year.

Our organic growth and we ended the year plus four so the starting point is higher for one thing. We also said that our expectation for the 'twenty one 'twenty four timeframe was like 1% to 3% on average per year.

Speaker 2: If you look at excluding the impact of complete vehicles, which has had an impact on our overall growth, we're back at 1-3% per year in the 2021-2024 timeframe. Certainly, complete vehicles is negatively impacting our overall growth rate. What we're not talking about here is unconsolidated sales, which is growing significantly.

If you look at excluding the impact of complete vehicles, which has had an impact on our overall growth we're back at kind of 1% to 3% per year in the 'twenty, one 'twenty four timeframe. So certainly.

These vehicles is negatively impacting our overall growth rate.

And what we're talking about here is unconsolidated sales, which is growing significantly over our planning period.

Speaker 4: Yeah, yep. That helps quite a bit. And a second question, I mean, as the automakers are focusing more and more on AV and EV investments, there's this idea, and I think this makes a lot of sense, that they are going to outsource more and more parts of the vehicle, even outside those systems, which really lays into the sweet spot of Magna in your business. I'm just curious if you're seeing any

Yes, yes.

Helps us quite a bit.

Second question I mean at the automakers are focusing more and more on an EV investments. There's this idea and I think this makes a lot of sense, but they are going to outsource more and more parts of the vehicle even outside those systems, which really lays into the sweet spot of Magna in your business.

Just curious if youre seeing any.

Speaker 4: incremental quoting on plastic stampings, if you will, or other parts where there might be greater opportunity for you to take on more and more of the vehicle as they focus their investment dollar and human capital on AVs and EVs.

Incremental quoting on class a stampings, if you will or other parts, where there might be greater opportunity for you to take on more and more of the vehicle as they focus their investment dollar.

K human capital.

<unk> in Evs.

Speaker 3: Good morning, John . This is Swami. As we see today, definitely from a perspective of capabilities and capacity, we are well-positioned if that comes through. But as we sit here today and look at the cadence of the sourcing activity, we don't see a significant shift as of yet, but that is to be seen. But like you said, if you look at what we have in terms of footprint and capabilities, we should be well-positioned to address that piece.

Good morning, John This is Tommy.

As we see today definitely.

A prospective capabilities and capacity, we are well positioned if that comes through but as we sit here today and look at the cadence of the sourcing activity.

We don't see a significant shift as of yet but that has to be seen but like you said if you look at what we have in terms of footprint and capability, we should be well positioned to address that piece.

Yeah.

Speaker 4: Got it. And then just lastly, I apologize on the on the outlook. One more question on the 8.1, 8.6 range. It's the same as what you were expecting in 23. We're looking at a little bit higher a revenue base. I mean, is this the ultimate margin is sort of this, you know, 8.1, 8.6 range that you think that Magna tops out at or is there potential over time as you grow in the business mix, maybe shifts to potentially even get higher on margin?

Got it and then just lastly, I apologize on the on the outlook one more question on the 8186 range. It's the same as what you were expecting in 'twenty three we're looking at a little bit higher our revenue base.

Base.

You mean, the ultimate margin is sort of this $818 six range that you think that.

<unk> topped out at or is there potential over time.

As you grow in the business mix, maybe shifts to potentially even get higher on margins.

Speaker 1: John , when we think about the margin here, I think there's so many components we have to consider mix. I think the one thing that's changed year over year is some of the input costs have increased. When we do go out, we see significant input cost increases in 2022. Some of those costs will stabilize, I would say, as we go through the outlook period. Some of them won't. When you think about labor, I think there's been a reset to some degree on the labor cost, whereas others will come on.

John when we think about the margin here I think there's so many components we have to consider mix I think the one thing thats changed year over year as some of the input costs have increased.

When we do go out we see significant put cost increases in 'twenty two some.

Some of those costs will.

Stabilized I would say as we go through the two the outlook period some of that when we think about labor I think theres been a reset to some degree on the labor cost, whereas others will come off.

Speaker 2: It's also going to step up in our investments for megatrend areas, which is going to impact our margins in the short term, but it's going to drive growth in the long term.

<unk> also seen a step up in our investments for megatrend areas, which is going to impact our margins in the short term, but drive growth in the longer term.

Speaker 4: But, and I'm sorry, if I could speak in one more, just on the Ambassador Bridge, that's not because you guys are Canadians, although you probably have a better perspective than I do as a New Yorker on what's going on up there. But I mean, are you running into any issues with, you know, I mean, with, I mean, it's not shipping, it's the trucking, you know, and any kind of disruption around that? Or is that just a hiccup that you guys will be able to work through in the industry you think we'll work through?

Got it and I'm, sorry, if I can sneak in one more just on the ambassador bridge.

As you guys are Canadians, although you probably have a better perspective than I do it.

The New Yorker on what's going on up there, but I mean are you running into any issues with.

I mean, it's not shipping as it shows the trucking.

And any kind of disruption around that or is that just a hiccup that you guys will be able to walk through where the industry. You think will work through.

Speaker 3: I think in the long term, I'm sure we'll work through, but as of right now, we're constantly monitoring it, John , and some of the OEM customers have had to idle or cut production requirements. They're adjusting, I should say, the production schedules, and we're kind of starting to see some initial impact in some areas versus the other, for example, JIT facilities and so on. We're watching it closely. I definitely hope that it will get resolved quickly. Okay. Thank you very much.

I think in the long term.

I'm sure we'll work through but as of right. Now there is that we are constantly monitoring it John .

Some of the OEM customers have had to idle or cut production dequadros that adjusting I should say that production schedules and we are kind of starting to see some initial impact in some areas versus the other for example, <unk> facilities and so on so we are watching it closely definitely hope that we could get resolved quickly.

Okay. Thank you very much guys.

Thanks, John Thank you.

Speaker 15: Thank you. We'll get to our next question on the line from the line of Adam Jonas with Morgan Stanley . Go right ahead.

Thank you.

We'll go to our next question on the line from the line of Adam Jonas with Morgan Stanley Go right ahead.

Speaker 7: It's so interesting, your outlook is so balanced compared to many of your OEM customers that are guiding for, you know, really significant increases in margin over the next few years, so it's a nice dose of reality. Swami, where are you most concerned? You highlighted commodities.

It's so interesting.

Your outlook is so balanced.

Care to many of your OEM customers that are guiding for.

Really significant increases in margin over the next few years sets, a nice dose of reality and swamy.

Where are you most concerned you highlighted commodities.

Speaker 7: Amongst the commodities, and particularly metals, what's giving you the most concern right now?

EMEA amongst the commodities and particularly metals, what's giving you the most concern right now.

Speaker 3: I think it makes a little bit, Adam, as you look at the stuff, some of the commodities like steel, we are on resale, a significant portion of it, some of it, you know, we have in the free market.

I think it's a.

It makes it a little bit Adam as you look at the top some of the commodities like steel we are on <unk> sell a significant portion of it some of it we have in the free market.

Speaker 3: A large part of resin also on recels, some of it is not, especially the polyethylene-based, you know, speciality resins and so on and so forth.

Part of resin also on resell some of it is not especially the polyethylene based.

<unk> and Samsung and so forth.

Speaker 3: A little bit on aluminum and copper, but most of the times we are indexed or on resale program, and the rest we have to manage through, you know, as the market is fluctuating. But I wouldn't say one is significantly different.

A little bit on aluminum and copper.

Most of the times, we are indexed or Andre sale program.

And the rest we have to manage through.

As the market has fluctuated, but I wouldn't say one is significantly different.

Speaker 3: than the other. There's a bunch of commodities that we are closely monitoring, and the supply is going to be one of the key things that we have to look at, and how our tiered suppliers are managing that is going to be also an important thing to closely monitor.

Then the other there's a bunch of commodity a fit for <unk>.

Closely monitoring it.

And the supply is going to be one of the key things that we have to look at and how our tiered suppliers are managing that is going to be also an important thing to closely monitor.

Speaker 7: Thanks, Swami. And then just a follow-up on Steyr, you have...

Thanks, a lot and then just a follow up on Shire you have.

Speaker 7: and Gratz, a very highly anticipated launch for this November . I was curious if there was, if that looked on track from your perspective or anything you wanted to call out there. And what are, any update on plans or timing or milestones regarding your decision of a North American contract manufacturing location? Thanks, Rami.

And in Graz.

Very highly anticipated launch for this November I was curious if there was.

That looked on track from a from your perspective or anything you wanted to call out there.

And what are any update on plans or timing or milestones regarding your decision of and North American contract manufacturing locations. Thanks Rami.

Speaker 3: For the anticipated launch, both the teams are working together well and progressing well, I should say, Adam, right? But more specifics I would leave for the OEM to comment. In terms of looking just at various opportunities and graphs, they continue. In the North American footprint, like I said before, very open to the idea of having the footprint here.

For the anticipated launch.

We are.

But the teams are working together, well and progressing well I should say, Adam but more specifics I would leave for the OEM to comment.

In terms of looking just set our greatest opportunities and grasp they continue.

In the North American footprint.

Like we've said before very open.

To the idea of having the footprint here.

Yeah.

Speaker 3: As I've always said, I think it's important to have a little bit of visibility on the product plan, even though it starts off at a lower volume, if there is enough visibility in the long term. I think we'll be looking forward to have that footprint in North America.

As I've always said I think it's important to have a better visibility on the product plan, even though it starts off at a lower volume if there is enough visibility in the long term.

I think.

We will be looking forward to have that footprint in North America.

Thanks Rami.

Speaker 15: Thank you very much. We'll get to our next question on the line from Itay McKellie from Citigroup. Please go right ahead.

Thank you very much we'll get to our <unk>.

Question on the line.

Kelly from Citigroup. Please go right ahead.

Speaker 8: uh... great thanks for the good morning everybody uh... first question just wanted to go into the uh... to meet incremental investment you're making this year on on the megatrend is hoping to quantify kind of the year-over-year impact there it's not a good mostly in power solution about our end and vision

Great. Thanks, Todd and good morning, everybody.

First question just wanted to go into the some of the incremental investments you are making this year on the Mega trend just hoping you could quantify kind of the year over year impact there it sounds like thats, mostly in power solutions.

Division.

Speaker 8: And maybe, Swami, talk about some of the opportunities for revenue from these investments coming beyond, I think, 2024. Maybe quantify or talk about where specifically you are investing on the EV and autonomy side.

Maybe swamy talked about some of the opportunities.

Revenue for these investments coming beyond two.

<unk> 'twenty 'twenty four but hoping you can maybe quantify or talk about kind of where specifically you are investing on the EV and autonomy side.

Speaker 3: Yes, Siddharth, I think, as you said, a lot of the investment that we're talking about is in that region from an engineering investment perspective. If you look at the electrification side of things, I think if you look at the overall managed sales by 2024, we are going to be in the $2 billion range.

Yes, I think.

As you said a lot of the investment that we're talking about is in that.

Region.

And engineering investment perspective.

If you look at the electrification side of things.

Between the I think if we look at the overall managed sales by 2024, we are going to be in that $2 billion range.

Speaker 3: And in our LG joint venture that we talked about, we continue to see a 50% KGAR over the next or during the planned period, I should say.

And in our LG giant.

<unk> debenture that we talked about we continue to see a 50% CAGR over the next or during the plan period I should say.

Speaker 3: In the ADAS area, last we talked about 20-plus percent KGAR, and as we look at the plan period now from 2021 to 2024, we are even seeing a 30 percent KGAR. So, I would say the investments that we have made and the platform technologies are starting to yield results, and we continue to see that going forward.

In the Adas area last week talked about 20 plus percent CAGR and as we look at the plan period now from 21% to 24, we're even seeing a 30% CAGR. So I would say the investments that we have made and the platform technologies are.

Starting to erode result, and we continue to see that going forward specific areas either.

Speaker 3: Specific areas, e-drives, you know, larger addressable market for us, like we said before, not just the all-wheel drive, four-wheel drive. Now we are looking at, you know, all drives. So that is a expanded addressable market.

<unk>.

Larger addressable market for us like we've said before.

Not just the all wheel drive four wheel drive now we are looking at all drives so that is a expanded.

The expanded addressable market on.

Speaker 3: On the ADA side, we have, as we said, the building blocks in terms of the sensor suite, the compute, and the software infusion capabilities. I briefly mentioned about our radar going into production and also a program with a German OEM on the driver monitoring system, and we also continue to see further traction in that product line.

On the Adas side.

We have as we've said the building blocks in terms of the sensor suite, the compute and the soft greater infusion capabilities.

I briefly mentioned about our freight are going into production.

And also.

A program with a German OEM on the driver monitoring system and we also continue to see further traction in that product line.

Speaker 1: And Atay, I think the other thing we should consider when we talk about investments in mega trend areas is the portion that throws through P&L as gross engineering expense.

And <unk> I think the other thing we should consider when we talk about investments and megatrend areas. Since the portion of that throws through P&L as gross engineering expense. The other part that's in there.

Speaker 1: The other part that's primarily in our P&B segment, as you pointed out, the other large investment we're making is in our BES segment, and that's primarily in the form of capital as we launch battery enclosures, so we're investing now for battery enclosures that are going to be launching throughout the outlook period. We recently started the launch of the Hummer.

That's primarily in our <unk> segment as you pointed out the other large investment we're making is in our CES segment and that's primarily in the form of capital as we launch battery and closures. So we're investing now for battery and closures that are going to be launching throughout the outlook period.

Recently started the launch.

The hummer here.

Here in Michigan.

Speaker 8: That's all very helpful. Just a quick follow-up, and I apologize if I did miss it before, but I was hoping we could go through the bridge and complete vehicle assembly between kind of the prior outlook for 2023 that you had versus the updated outlook today for kind of the top line and margins as well.

That's all very helpful. And then just a quick follow up I apologize if I did miss it before but I was hoping we can go through the bridge in complete vehicle assembly between kind of the prior outlook for 2023 that you had versus the updated outlook today for kind of the top line and margins as well.

Speaker 2: If you look at the 2023, we had.

And if you look at the 2023.

Speaker 2: We would have had the BMW 5 Series in there for most of the year, and that continues to be the case, but 2024 now we've brought another year, so that program ends in 2023, it's not into 2024. Now, we do have the Cisco program that launches, but...

Had.

We would've had deck the BMW five series and there for most of the year and that continues to be the case by 2024 and that will drive another year.

That program because at the end of 'twenty three is not into 'twenty. Four now we do have the fiscal program that launches but.

Speaker 2: There's different accounting, so if you recall, we've had full-cost accounting and value-added accounting with the five series on a full-cost basis, so a much higher unit price per unit. And the fiscal program is on a value-added basis, so a much lower unit price. So even though the volumes in the plant are not that significantly different, the revenues are quite different.

And there's different accounting. So if you recall, we had a full cost accounting and value added accounting the five series a forecast basis.

Much higher unit.

Price per unit.

And the physical organized on a value added basis, a much lower unit price, so even though the volumes in the plant.

Im not that significantly different but the revenues are quite different.

That's very helpful. Thank you.

Okay.

Speaker 15: Thank you very much. We'll get to our next question on the line from Peter Scalar with BMO Capital Markets. Go right ahead.

Thank you very much our next question on the line from Peter Sklar with BMO capital markets go right ahead.

Speaker 7: Good morning. Just looking at your initial 2024 guidance.

Hi, good morning.

Just looking at your initial 2024 guidance.

Speaker 7: You're showing a lot of equity income growth, you know, over the over the plan period.

Youre showing a lot of equity income growth over the over the planned period I take it that's coming from.

Speaker 7: I take it that's coming from some of these joint ventures, the partnership with LG, the partnership with Hasco. So I'm not surprised that the revenue is ramping up, but I was surprised at the growth of equity income, given that there would be initial ramp periods as those joint ventures begin to build. So I just wanted to add a little flavor on what's driving the equity income growth.

Some of these joint ventures, the partnership with LG, the partnership with <unk>, So I'm not I'm not surprised that the revenues ramping up but I was surprised at the growth of equity income given that there would be <unk>.

Initial ramp periods as those joint ventures begin to to build so I'm. Just wondering if you could add a little flavor on whats driving the equity income growth.

Speaker 1: Hi Peter, it's Pat. I think when you look at the equity income, what I would consider, you're right, a lot of the growth is coming from those joint ventures. And what you have to consider is in the early, where we are today as we're investing heavily.

Hi, Peter its Pat.

I think when we look at the equity income what I would consider youre right a lot of the growth is coming from those joint ventures, and what you have to consider is in the early where we are today is we're investing heavily.

Speaker 1: via engineering spent to launch a lot of these programs in the EV markets. When we get out to 2024, a large portion of these programs will be launched, generating revenue. So it's a combination of lower application engineering.

Engineering spend to launch a lot of these programs in the EV markets, we get out to 2020 for a large portion of these programs will be launched generating revenue. So it's a combination of.

Lower application engineering.

Speaker 1: in the future, combined with margin on sales that are going to be generated. The LG joint venture already has sales and it's ramping up pretty significantly, so there's investment there. Asco launched the Volkswagen program last year, continues to ramp up, and there's another

In the future combined with margin on sales that are going to be generated.

The LNG joint venture already has sales and it's ramping up pretty significantly so.

Theres investment there <unk> launch.

The the Volkswagen program last year continues to ramp up and Thats. Another program that launches next year. So it's going to start having more higher sales and and so there is a change in the results as a result of the drive the sale of the much higher.

Speaker 2: Next year so it's going to start having more higher sales And and so there's a change in in the results as a result of the drive the sales being much higher

Okay.

Speaker 7: Another question I had is, I'm a little lost on how many eDrive awards.

Another question I had is I'm a little lost on how many E Drive awards you have received and have announced like just I forget when it was I think it was last week or recently you issued the press release on the Volkswagen platform, where you're providing the secondary drive so.

Speaker 7: you've received and have announced like, just I forget when it was, I think it was last week or recently, you issued the press release on the Volkswagen platform where you're providing the secondary drive. So as I recall last time you spoke, you had three major eDrive awards and it's the Volkswagen program you talked about last week. Is that part of that or is that a fourth program? Maybe you could just review where you are on eDrive awards.

So as I recall last time, you spoke at three major you Drive awards.

The Volkswagen program you talked about last week is that part of that or is that a fourth program. Maybe you could just review where you are on E Drive Award.

Speaker 2: Yeah, Peter. Happy to do that. You're right. The Volkswagen program is the first eDrive program, and we have talked about that before. We have another program, as I just said.

Yes, Peter happy to do that.

You are right the Volkswagen program as the first Epi program and we have talked about that before we have another program as I just said.

Speaker 2: that's launching in Haskell next year, that'll be a second, and then last year we were awarded two additional eDrive programs that include both the primary and secondary drives, so we have four currently booked. Lots of conversations, in fact there's an acceleration in conversations with customers over the last 12 months, and that's mainly due to all the focus on EVs, and certainly the LG partnership is a driver there, and we're looking at a bunch of...

Launching <unk> next year that will be a second and then last year, we were awarded two additional.

These are programs that includes both the primary and secondary drive. So we have four currently booked lots of conversations in fact is an acceleration in conversations with customers over the last 12 months.

Due to all the focus on Evs.

And certainly the LG partnership as a driver there.

Looking at a bunch of additional quotes for this business.

Speaker 7: And the LG partnership, is that for components for the eDrive system or will the joint venture do the entire eDrive system or a bit of both? It's both Peter, if you recall, it's for components but also with any Japanese or Korean customers, LG joint venture is responsible as the tier one on the eDrive.

Okay, and the LG partnership is that.

Components for the E drive system our world.

Joint venture due the entire E drive system or a bit of both.

Both Peter you recall that its four components, but also with.

And the Japanese or Korean customers, they're responsible LG joint venture its a thoughtful as the tier one on the dry side.

Speaker 7: Okay and then just lastly on the complete vehicle assembly where your results were you know pretty strong in terms of operating income.

Okay and then just lastly on the complete vehicle Assembly, where your results were pretty strong in terms of operating income.

Speaker 7: You attributed that partially to government research and development incentives. I'm just wondering what they related to and, you know, what was the magnitude? You know, those incentives must have been pretty significant if you called them out.

You attributed that parser, partially to government research and development incentives I'm, just wondering what they related to and what what was the magnitude and although its incentives must have been pretty significant if you called them out.

Speaker 1: Yes, Peter. They're basically R&D credits, similar to what you would see here in Canada. The way this program is structured in Austria, they do run through EBIT. The number is in the range of about $20 million, and it's a little bit more significant than we're used to because it covers out-of-period amounts as well. Okay. Thanks, Pat.

Yes, Peter.

They are basically R&D credits similar to what you would see here in Canada.

The way the program structure in Austria, they do run through EBIT.

The number is.

And the range of about $20 million and it's a little bit more significant than we're used to because it covers out of period.

Amounts as well.

Okay.

Thanks Pat.

Sure.

And we will get to our next question on the line.

Speaker 15: From the line of Chris McNally with Evercore ISI, please go right ahead.

From the line of Chris Mcnally with Evercore ISI. Please go right ahead.

Speaker 7: Thanks so much, team. Just a follow-up on the margin questions for power and vision and body. On power and vision, you talked about the engineering upspend in 2022. Can you just talk about, is that the majority of the margin hit year over year, or is it equally shared with things like component costs? Yeah. I think it's a pretty broad question. I think it's a pretty broad question.

Hi, Thanks, so much team.

Just a follow up on the margin questions for power and vision and <unk>.

Body on power and vision, you talked about the engineering up spend in 'twenty. Two could you can you just talk about is that the majority of the of the margin hit year over year or.

Is it equally shared with things like component cost.

So if you repeat the question Peter sorry, Chris.

Speaker 7: The down margin year-over-year in power and vision, you talked about the increased spending for R&D, ADAS programs, is that the majority of the hit, or is, you know, if we were to rank order components, you know, higher-trim prices and things like that are also ahead

Yes.

The down margin year over year in power envisioned you talked about the increased spending for R&D Adas programs.

Is that the majority of the hit more if we were to rank order components higher chip prices and things like that are also.

Headwind.

Speaker 3: Just trying to find the right page, Chris, you know, to get to what you're referring to.

Just trying to find the right page Chris.

To get to work here at upfront this year, let's say.

Speaker 21: If you look at power and vision, I think what you're seeing in terms of the big impact to the margin are going to be the inflationary input costs, and a big chunk of the engineering spend is coming through in 2022.

If you look at power envision I think what you have.

In terms of the business.

The big impact to the margin are going to be the inflationary input costs.

And a big chunk of the engineering spend is coming through in 2022.

The two biggest drivers simple thesis of the decreases.

Speaker 7: Perfect. And then body, where obviously, you know, things normalize pretty quickly next year. Could you just talk about how raw materials are flowing through? Obviously, you know, you have steel recovery and you also have steel scrap. You know, just talk about some of the tailwinds there that get back to your margin, you know, to sort of this 8 percent plus typical range.

In 2002, Okay, perfect and then and then Bodywear, obviously think normalized pretty.

Pretty quickly.

Next year can you just talk about how.

Raw materials are flowing through obviously you have steel recovery and you also have steel scrap.

Just talk about some of the the tailwind there that get back to your margin.

So this 8% plus.

Typical range.

Speaker 1: Hi Chris, it's Pat. When I think about the BES segment, you're right, it's primarily a steel story with some resin on the exterior side.

Hi, Chris its part when I think about the BFS segment, you're right. It's primarily a steel story with some resin on the exterior side.

Speaker 1: Specifically on the steel, we are primarily covered via resale or indexing programs and we do have a benefit of being able to resell scrap steel on the market. Those markets tend to go together, so as we see steel coming off in the future, scrap recoveries will probably move in tandem, maybe a little bit quarterly delay or whatnot.

Pacifically on the steel we are <unk>.

<unk> covered via resale or indexing programs and we do have the benefit of being able to resell scrap steel in the market those markets tend to go together, so as we see steel coming off in the future scrap recoveries will probably move in tandem, maybe a little bit quarterly delay or whatnot.

Speaker 1: I think the biggest driver when you look at the margin increasing from the 5.7 and 21, it's really driven by higher sales. And the other factor is we're expecting some stability to come back into the production schedules from our OEM customers. So if you recall in 21, we did have some fairly high decrementals. We have these big capital intensive plans. And when we return back, I think that's driving the majority of that improvement.

I think the biggest driver when you look at the margin increasing from the $5 721, it's it's really driven by higher sales and the other factor is we're expecting some stability to come back into the production schedules from our OEM customers. So if you recall in 'twenty. One we did have some fairly high decremental.

And you have these big capital intensive plan and will be returned back I think that's driving the majority of that improvement.

Speaker 2: Okay, that's great. So lower risk on raw. And then my final question just on on styrene, I think it's been asked a couple of times. I just wanted to clarify, you know, on in your slides.

Okay, that's great so lower risk on raws and then my final question just on on style and I think it's been asked a couple of times, but just wanted to clarify in your slides I think on slide 53, you have the volumes basically in like a $1 30 to 140 <unk>.

Speaker 2: I think on slide 53, you have the volumes, you know, basically in like a 130 to 140,000 unit range for 2024. As far as I know, I think the capacity is around 200,000.

And unit range for 2024 as far as I know I think the capacity is around 200000.

Speaker 2: Is the Fisker number in there because we're I guess what I'm trying to wonder is with the BMW rolling off

Is the fiscal number in there because I guess, what im trying to wonder is with the BMW rolling off and all of the opportunities you have.

Speaker 2: and all the opportunities you have, could you fill that capacity the next couple of years or are we getting close to the point where you'd make a go, no-go decision on a new North American facility?

Could you fill that capacity over the next couple of years or are we getting close to the point, where you would make a go no go decision on a new North American facility.

Speaker 3: So Chris, I think I would say, again, depending upon the mix and what the requirements are in the assembly and the paint and so on, I would pick the capacity roughly to be around 170 to 180 in grafts. And, you know, similar number in.

So Chris I think I would say again, depending upon the mix and what the requirements are in the assembly and the paint and so on.

I will take the capacity roughly to be around 170 to 180, congrats and similar number.

Speaker 3: joint venture in China. So I think as the BMW rolls off, we talked about the Fisker just starting at the end of this year and slowly ramping into 23 and 24.

In.

The joint venture in China.

So I think as the BMW rule, so we talked about the physical just.

Starting at the end of this year and slowly ramping into 2003 and 'twenty four.

Speaker 3: So there is a little bit of a transitionary time as BMW comes off, right, and Fisker ramps up, and we continue to have many discussions on different variants and OEMs.

So there is a little bit of transition at a time as BMW comes off in fiscal <unk>.

Ramps up and we continue to have many discussions on the different variants and Oems.

Speaker 3: So, it's a lumpy business, it goes through the cycle, and we're having a whole bunch of conversations to utilize the capacity appropriately.

So it's a lumpy business.

<unk> through the cycle.

And we're having a whole bunch of conversations too.

Utilize the capacity appropriately.

<unk> is an okay.

Speaker 2: So, you don't have, you know, there's only maybe 30,000 capacity there. Another big program came, you would need significantly more capacity. Okay. Thank you so much, guys.

Right.

This guidance in there. So I guess so you don't have there's only maybe 30000 capacity there. Another big program came in you would need a significantly more capacity. Okay. Thanks, so much guys.

Speaker 15: Thank you. We'll get your next question on the line from Dan Levy from Credit Suisse. Go right ahead.

Thank you.

Our next question on the line from Dan Levy from Credit Suisse go right ahead.

Yeah.

Speaker 1: Hi. Good morning. Thank you for taking questions. First, I wanted to go back on one of the earlier questions of, you know, the fact that the margin guide for 24 is flat versus 23 despite the higher revenue. I think you mentioned increased commodities. And I assume that, you know, that's just a broader cash flow for input cost. So maybe you can just elaborate a bit more on that. So if we're just thinking about input costs or cost inflation, you know, what's in that box?

Hi, Good morning. Thank you for taking the questions first I wanted to go back on one of the earlier questions.

Uh huh.

The fact that the margin guide for 'twenty four is flat versus 23, despite the higher revenue I think you mentioned.

Increased commodities and I assume that that's just a broader capsule for input cost. So maybe you can just elaborate a bit more on that so if we're just thinking about input costs or cost inflation.

Whats in that bucket, how much cost inflation did you see in 2021, what are you assuming for 2022, what are you assuming beyond and then whats the mitigation what are you assuming on mitigation of those costs or are those costs all sticky.

Speaker 1: What cost inflation did you see in 2021? What are you assuming for 2022? What are you assuming beyond? And then, you know, what's the mitigation? What are you assuming on mitigation of those costs, or are those costs all sticky?

So.

Speaker 22: Sorry, Dan, it's Pat again. So we think about the, I think your statement is correct. I would view it primarily as just higher input costs.

Our extensive it's Pat again, so we think about the.

I think your statement is correct I would view it primarily is just higher input costs and when we think about those higher input costs, it's going to cover items, such as commodities, whether it's steel or resin and when I talk about steel obviously, that's on a net basis, we have resin we would have copper aluminum.

Speaker 22: And when we think about those higher input costs, it's going to cover items such as commodities, whether it's steel or

Speaker 22: resins, and when I talk about steel obviously that's on a net basis. We have resin, we would have copper, aluminum, but we also have areas such as freight, energy costs we're seeing an uptick primarily in Europe .

But we also have areas such as freight energy costs, we're seeing an uptick primarily in Europe .

Speaker 22: And outside of third-party costs, we're also seeing an uptick in labour costs. And the labour costs in 2021 were primarily more in the form of retentions or whatnot. What we're seeing as we go into 2022 is we are experiencing higher than historical wage increases in various parts of the world. So, coming back to the numbers, if you think about 2021...

And.

Outside of third party costs, we're also seeing an uptick in labor costs and the labor costs in 'twenty. One we're primarily more in the form of Retentions or whatnot, what we're seeing as we go into 'twenty two as we are experiencing higher than historical wage increases.

<unk> parts of the world So coming back to the numbers. If you think about 2021.

Speaker 22: From that perspective, if we go back compared to 2020, our uptake of input costs was probably in the range of about $80 million.

From that perspective, if we go back compared to 2020.

Our uptick of input cost is probably in the range of about $80 million.

Speaker 22: Of that $80 million, $50 million related primarily to commodities and third-party costs and $30 million would be primarily labor. We roll forward into 2022, the additional uptick is in the range of $275 million and that split would be $190 million on commodities and the balance on labor primarily.

Of that 80, 50 related primarily to come.

Commodities and third party party cost and 30 would be primarily labor we roll forward into 2022. The additional uptick is in the range of about $275 million and that split would be 190 on commodities and the balance on labor primarily.

Speaker 1: The first part of your question, when you're looking at the margin being flat from 2023-2024, when you start thinking about commodities, we're expecting them to come off, labour is stickier. When you look at 2023-2024, I think we do have an uptick on our labour cost that is going to stick.

And then going forward.

Sorry, Dan just don't want to cut you off but sort of the first part of your question. When you when Youre looking at the margin being flat from 'twenty three to 'twenty four.

When you start thinking about commodities they tend to they were expecting them to come off labor stickier and when you look at 23% 24, I think we do have an uptick on our on our labor costs that is going to stick.

But we do have higher and an uptick in engineering to that period.

That's impacting the business infrastructure.

Speaker 1: Okay, so you're assuming full mitigation of the commodities or some of the commodities to come off, correct?

Okay. So youre, assuming full mitigation of the commodities or some of the commodities to come off the correct.

Yes.

Speaker 22: Yeah, we have, we have, we've assumed in our plan that we have some recoveries, but the number

Yes, we have.

We've assumed in our plan that we have.

Some recoveries.

But the numbers I pointed out on our on a net basis.

Speaker 23: Okay. Thank you. And then the next question is just on the LGJB. And I see the power and vision equity in common. It's coming up.

Okay. Thank you.

And then <unk>.

Next question is.

Just on the on the LG JV and I can see the power <unk> vision equity income and it's coming up.

Speaker 1: Maybe you could just provide some comments on the underlying profit, because I think, Swami, you mentioned earlier that it's 50% CAGR, but if I just compare the equity income from 21 to 24, it appears like it's a...

Maybe you could just provide some comments on the underlying property because I think so on that you mentioned earlier that.

50% CAGR, but if I just compare the equity income from 'twenty to 'twenty four it appears like it's a slight uptick so.

Speaker 1: uptick. So, you know, is that just a reflection that you're getting the revenue but it's still not a steady state margin by 2024?

Is that just a reflection that you are getting the revenue, but it's still not a steady state margin by 2024.

Speaker 21: I think it's fair to say that we're still investing in it when we get to 2024. Unfortunately, we don't control the joint venture and we're not able to get into you know, what the profitability is. I mean, clearly we're heavy, we're in heavy investment load and over time in sales growth, we'll get contributions, but we can't comment on the.

I think it's fair to say that we're still investing and we'll get to 2024. Unfortunately, we don't control the joint venture in.

We're not able to get into what the profitability. It can be clearly where we're in heavy investment mode and over time that sales growth will get contribution, but we can't comment on me.

On the on the impact we also have in our equity income one of our joint ventures, which is planning pretty conservatively.

Speaker 21: We also have in our equity income, one of our joint ventures, which is planning pretty conservatively, is conservative on the amount of recovery that they intend to get or expect to get from customers. So that's impacting equity income in the short term.

Sort of on the amount of recoveries that they intend to get or expect to get some customers. So that's impacting equity income in the short term.

Speaker 1: Okay, thanks. And then just lastly, maybe you could just provide a quick comment on the three caches. You're guiding to something flat to slightly below 21. I realize a big part of that is, you know, a higher CAPA.

Okay. Thanks, and then just lastly, maybe you could just provide a quick comment on the free cash.

You're guiding to something flat to slightly below 21.

I realize a big part of that.

Yes.

Higher capex.

Speaker 1: But, you know, it seems like the EBIT increase should more than offset that, so maybe you could just provide some comments on the free cash dynamics. Thank you.

But.

It seems like the EBIT increase should more than offset that so maybe you could just provide some comments on.

On the free cash dynamics. Thank you.

Okay.

Yes, just on the free cash flow.

Speaker 22: Again, I think when you put in perspective of the range we're talking for CapEx, I think that investment is pretty significant compared to the Delta in profitability.

Again, I think when you put in perspective the range, we're talking for Capex.

I think that that investment is pretty significant compared to the delta in profitability.

Yeah.

Speaker 22: When you think about our capital spending, the other piece we have to consider is,

Yes.

Notes passed over to be here. So when you think about our capital spending the other piece we have to consider.

<unk>.

Speaker 22: We talk about capital and this would be capital where if you go through a plant in the tank, say Magna on it, there's another significant increase and it's primarily when we get into the mega trend areas and you talk about battery enclosures, there's a significant amount of investment of customer-owned tooling. And when we're guiding that number out, we're seeing a $50 to $75 million increase in that number as well. That's the other, you see that in other assets.

We talk about capital and this would be capital, where if you go through a plant and that takes a magna on it does another significant increase and it's primarily we get into the megatrend areas. When you talk about battery enclosures.

Inefficient amount of investment of customer owned tooling and when we're guiding that number out we're seeing.

$50 million to $75 million increase in that number as well.

You'll see that in other assets.

Got it okay. Thank you.

Speaker 15: Thank you very much. We'll get your next question on the line from Mark Neville with Scotia Capital. Go right ahead.

Thank you very much.

Our next question on the line from Mark Neville with Scotia Capital go right ahead.

Speaker 1: I just want to make sure I understand and sort of go back on this, what's happening in complete vehicles? So volume will be flat, sales are down, but that's Fisker accounting. But you also have the BMW rolling off in 2024, is that correct? BMW rolls off late in 2023, the second half of 2023.

Hey, good morning, guys.

So I just want to make sure I understand I'm sorry to go back on this what's happening in complete vehicles.

So volume will be flat sales are down, but thats fisker accounting.

And you also have the BMW rolling off in 2024 is that correct.

BMW rolls off late in 2003 for.

The second half of 2023.

Okay.

A different accounting for customers that way too.

Speaker 21: Yeah, we talked about it even last year, we're counting forward on a value add.

Yes, we've talked about even last year, where we're accounting for it on a value added basis.

Speaker 21: Okay, yeah, that's a lot lower unit price per unit than we are with the rest of our programs

Okay.

Lower unit price per unit than we are with that with the rest of our programs, including the BMW five series Engineers also download zinc spending we've been generating a lot of engineering revenues.

Speaker 21: Engineering is also down, we've been spending, we've been generating a lot of engineering revenue.

Speaker 21: And we're expecting that to come off a little bit from the high levels we see.

We're expecting that to come awful, but from the high levels, we've seen over last couple of years.

Speaker 1: Given the fiscal accounting, if it's this value-add, shouldn't we assume or wouldn't normally the margin be higher?

Okay.

Given the fiscal accounting.

I'm not sure if it is value add.

Shouldnt, we assume or wouldn't normally the margin.

Sure.

Speaker 21: Yeah, the margin is higher. There are still some elements in there of goods that are included in the unit price, which keeps the margin down a little bit, but it is higher. It's just a lot of factors that are going through that line, and we highlighted a few of them in the appendix.

Yes.

There are still some elements in there.

The goods that are included in the unit price, which.

It keeps the margin down a little bit but it is higher its just theres a lot of factors that are going through that line.

We highlight a few of them in the appendix there, but it's more than just that fisker thats going in there.

Speaker 21: There's some input costs that are impacting the margin, et cetera.

Mix is going to get into some input costs that are impacting the margin et cetera.

Speaker 1: Okay. Pat, you mentioned some, you threw out some numbers in terms of inflationary pressures. I think you said $275 million for 2022. I missed the split.

Okay.

Pat you mentioned some.

Historical numbers.

Just in terms of inflationary pressures I think you said $275 million for 2022.

I missed the split.

Speaker 22: Oh, sorry. Yeah, so just to be clear, so it's $275 incremental versus $21 on a net basis and the split is $190 on commodity.

Yes, so just to be clear so it's $2 75 incremental versus 'twenty, one on a net basis.

And the split is 190 on commodities or.

Speaker 22: or third party costs, and then 85 would be primary.

Or third party costs, and then 85 would be primarily labor.

Sure.

Speaker 1: I'm just curious what sort of what steps you can take, if any, just around the labor and energy. Again, I appreciate commodities move around, but I guess labor feels a little more structural. So what are some of the things you can do to sort of push that through?

And I'm, just curious what sort of what steps you can take if any.

Surround the labor and energy again, I appreciate commodities move around but I guess, I guess labor feels a little more structural.

So what are some of the things you can do to sort of.

Push that through or deal with that.

Speaker 3: It's a mix, I would say, right? You know, some of it is continuing discussions with the customers, looking at productivity improvements within our operations. Not one answer, you know, we look at continuous improvements and VAVs, and that's an ongoing exercise going forward to it. And some of it will be recovered in the new codes as we go forward.

It's a mix I would say right some of it is considering discussions.

We are big customers.

Looking at productivity improvements within the.

In our operations.

Not one answer.

We look at continuous improvements in <unk> and that's an ongoing exercise.

Going forward to it and some of it will be recovered in the new quotes as we go forward.

Speaker 1: One last question. Just in the 2024 outlook, I understand there's no comments around M&A, but I'm just curious to get your updated thoughts there.

Alright.

One last question just.

In the 2020 for outlook.

Theres no comments around M&A, but just curious to get your sort of your updated thoughts.

Speaker 3: Yeah, I think, you know, like I always said, we look at the, you know, the geography, the customer and the product strategy overall, and try to look at what is the right way to go at either organic or inorganic and, you know, if the answer happens to be inorganic, then we look at what's the right approach to do that.

Thanks.

Yes, I think.

Like I always said, we look at the the geography, the customer and the product strategy overall and tried to look at what is the right way to go.

At either organic or inorganic.

The answer happens to be inorganic then we look at what's the right approach to do that.

Speaker 11: Hey Mark, it's Vince. First time I'm going to say something on this call, kind of more of my area looking at overall strategic initiatives with SWAMI. You know, on the M&A front, we typically do not build anything into our outlook, right? We only build in M&A that has happened or we've got a contract in place. So certainly with the strength of our cash flow, our balance

Okay.

A market sense.

I'm going to say something on this call kind of kind of more Mike area looking at overall strategic initiatives with Swami on the M&A front.

We typically do not built anything into our outlook right, we only built in.

M&A that.

Has happened there we've got a contract in place so certainly with the strength of our cash flow our balance sheet strength and.

Speaker 11: what's happening in the industry and the evolution, how well we're positioned. You know, we obviously, as you can imagine, look at a whole bunch of things and we have an overall strategic approach to our business.

What's happening in the industry and the evolution, how well we're positioned.

We obviously as you can imagine look at a whole bunch of things and we have an overall strategic approach to our business.

Speaker 11: With the right opportunities, you shouldn't be surprised if we do use our balance sheet. We've used it in the past. I expect we're going to continue to use it in the future to strengthen our overall product portfolio to support our customers.

With the right opportunities.

You shouldn't be surprised if we do use our balance sheet with views of the pass expect we're going to continue to use it in the future to strengthen our overall product portfolio to support our customers.

Got it thanks happening around us.

Thank you.

Speaker 15: We'll get to our next question on the line from Mark Delaney with Goldman Sachs. Go right ahead.

We will go to our next question on the line from Mark Delaney with Goldman Sachs go right ahead.

Speaker 14: Yes, good morning, and thanks very much for taking my questions. The company's outlook for global auto production looks pretty consistent with IHS. It is above some of the other auto Tier 1 supplier guidance, and so I'm hoping you can elaborate a bit more on how you're deriving your outlook for production. How closely does it align with the OEM forecast that you're being given, and are you trying to factor in any conservatism, given all of the supply chains?

Yes, good morning, and thanks very much for taking my questions. The company's outlook for global auto production looks pretty consistent with IHS.

It is above some of the other auto tier one supplier guidance I'm, hoping you can elaborate a bit more on how you're driving your outlook for production how closely does it align with the OEM forecast that you are being given and are you trying to factor in any conservatism given all of the supply chain issues.

Speaker 21: I think if you look at 22, our outlook on a global basis is about 6% growth versus 21. In North American Europe , I think we're a little bit more aligned. If you look at the 24, my reflection is that we're still a little bit conservative relative to IHS.

Look at 'twenty, two or our outlook on a global basis is about 6%.

Growth versus 'twenty one.

In North America, Europe , I think we're a little bit more aligned.

We look at the 24 my recollection is that we're still a little bit conservative relative to IHS.

Speaker 21: at least in North America and Europe . So, I mean, we look at external forecasters. We definitely have our ear to the ground about, at least in the short term, what we're hearing from our

At least in North America, and Europe . So I mean, we looked at external forecasters.

We're definitely.

At our ear to the ground about at least in the short term what we're hearing from R. R.

Speaker 21: our groups and what to hear from their customers. So, I mean, it's a combination.

Our groups.

What they hear from their customers. So I mean, it's a combination we have to put a stake in the ground.

Speaker 21: at a point in time, and we don't know, of course, what others are doing. We look at the analysts as well, and where you guys are at, where you guys are expecting. And we come up with a collective view on Outlook, and then we finish our plan. That's kind of how we do it.

At a point in time, and we don't know of course with what others are doing and look at the analysts Delaware, where you guys are at where you guys are expecting when we come up with a collective view on outlook and then we finish our plan and I would do it.

Speaker 14: Got it, that's helpful. And then my second question was on Optimus Ride, an acquisition the company did relatively recently. Maybe you can talk a bit more on the assets and IP that that acquisition is bringing into Magna and how you plan to incorporate it into the development of the company overall.

Got it that's helpful. And then my second question was on Optimus ride and acquisition. The company did relatively recently, maybe you can talk a bit more on the assets and IP that that acquisition is bringing into magna and how you plan to incorporate it into the development of the company overall thank you.

Speaker 3: Hi Mark, we talked about continuing to look at different areas based on product strategy and we have done a few things to continue to strengthen our foundation in ADAS and software in general and with this acquisition we

Hi, Mark.

We've talked about continuing to look at different areas based on product strategy and we have.

<unk> done a few things to continue to strengthen our foundation and Acas and software in general and with this acquisition, we welcomed about 130 employees there.

Speaker 3: welcomed about 130 employees there. We felt the capabilities and the knowledge they had would add to what we're doing in, you know, the feature function development and so on. You know, not commenting specifically on the IP, but it really adds to the depth of the software in general, and the ADAS piece in specific. And we can,

Had we felt the capabilities and the knowledge that they had would add to what we're doing.

The feature function development and so on.

Not.

Not commenting specifically on the IP, but it really adds to the depth of the software in general and the Adas piece in specific.

And we can do we will.

Speaker 3: maintain the office in Boston. It's a rich area in terms of the ecosystem of academic institutions and just the software talent, so we will continue to grow that as a region.

<unk> maintained the office in Boston.

In terms of ecosystem of academic institutions.

Just the software talent. So we continue to grow that as a region.

Thank you.

Speaker 15: Thank you. We'll get to our next question on the line from Colin Langan from Wells Fargo, right ahead. Oh, great. Thanks.

Yes.

Thank you. Our next question on the line from Colin Langan from Wells Fargo go right ahead.

Oh, great. Thanks for taking my question.

Speaker 14: I'm a little surprised by the commodity cost increase going from $50 million to $190 million, particularly if steel is heading in a downward direction or has been. What are the big competitors?

Most surprised by the commodity cost increase going from 50 million to 190, particularly in steel is heading in a downward direction.

What are the big components of that 190 <unk> increase.

It's not steel.

Speaker 22: Hi Colin, it's Pat again. So when you think about the commodity increase, I think it covered off a few of the major items. Obviously resins, we have much less resin on a resale program or indexing program, just given the nature of the product, it's a harder...

Okay.

Hi, Collin, it's Pat again, so when you think about the the commodity increase I think I've covered off a few of the major items obsolete resins.

We have much less resin on a resale program are indexing programs just given the nature of the product it's a harder.

Speaker 22: you know, it's a harder product to hedge against. So resin's obviously a big part of it. The other big part is energy that's flowing through. We're seeing that in Europe .

It's a harder product to hedge against the.

Resins, and obviously, a big part of it.

Other big part is energy that's flowing through we are seeing that in Europe .

One of the.

On the.

Speaker 22: like a lot of the input costs, what we're seeing as well is when you look at energy and some of these input costs, they're coming through the supply base as well in the form of surcharges, which are a little bit harder to control. Specifically regarding steel, if you think about steel, and I understand steel prices have been coming off pretty steadily since towards the end of Q3 of last year, really the timing of your contract and when you lock in is going to drive a lot of that value. So it's a bit of a...

Like level all of the input costs, what we're seeing as well as when you look at energy and some of these input costs are coming through the supply base as well as a form of surcharges, which are a little bit harder to control.

Specifically regarding <unk>, if you think about steel and I understand steel prices have been coming off pretty steadily since.

We ended Q3 of last year.

Really the timing of your contracts and when you lock in is going to drive a lot of that.

That value so it's a bit of a okay.

Speaker 22: a three-party negotiation when you're dealing with your customers and the mills and we're in the middle. And when you lock in those contracts really drives your steel pricing on a year-over-year basis.

Three party negotiation when you're dealing with your customers in the mills and we're in the middle and when you lock in those contracts really drives.

Steel pricing on a year over year basis.

The prices coming down in the scrap sales are lower as well.

Baked into there as well.

Okay.

Speaker 14: And when I look at growth over market, if you look at 21 to 22, and I take out assembly, I'm coming up with something like an 11% growth with your outlook for North America and Europe up there.

And when I look at growth over market.

If you look at 'twenty, one to 'twenty, two and I take out Assembly I'm coming out with something like an 11% growth with your outlook for North America, and Europe up 16.

Speaker 14: It seems like you're underperforming this year. Is that right? And is that just assuming some sort of platform mixed drag relative to geographic benefit? What are you actually underperforming the market this year?

It seems like you're underperforming this year.

Is that right and is that just assuming some sort of platform mix drag.

Relative to geographic benefit.

Alright.

What are you actually underperforming the market this year too.

Speaker 14: Is that in any color on what platforms maybe you're dragging that?

Is that and any color on what platforms that we are tracking that crossover market.

Speaker 21: I don't think there's any particular plan. I think, you know, we give a range for...

I Wonder if any particular callout I think we gave a range for.

Speaker 11: for our growth rates. Last year, we were kind of picking the same thing. We started the year kind of close to flat and ended up at plus four, so the base is higher.

For our growth rates last year, we were kind of thinking the same thing. So we started the year kind of close to flat and ended up at plus four so the base is higher.

Speaker 21: But, you know, it's just it's just a mix of programs that we have that, you know, in the business, it's driving the position. We still think, excluding Star, we have growth in the in the entire.

But.

It's just the mix of programs that we have.

And the business, let's start on the <unk>.

We still think excuse me Sarah we have growth in the us.

In the entire period.

Speaker 21: We've also got a disposition that we did in...

We've also got Crystal.

We've also got a disposition that we did in the.

Speaker 21: in 2021, which is impacting overall sales.

In 2021, which is impacting overall sales.

Okay and anything in particular in power and vision that one seem to have the lowest.

Growth year over year.

Speaker 21: Power Envision in particular had a really strong growth over the market over the last couple of years. We were 9% over the market in 2020 and 4% last year, so the base is certainly high there. We have businesses in Power Envision that are pretty established, and so it isn't always going to grow fast in the market, and it just depends on the year, it's just a mix of programs and business.

Our envision in particular at really strong cohort market over the last couple of years, we are 9% over the market in 2020, and 4% last year. So the basin certainly high there and we have businesses in our revision that are pretty established and so it isn't always going to grow faster than the market and it just depends on the year just the mix of programs.

Our business.

Okay, alright, thanks for taking my questions.

Speaker 15: Thank you. We'll get to our next question on the line. This is from Rod Lash from Wolf Research. Please go right ahead.

Thank you.

Our next question on the line from Rod Lache from Wolfe Research. Please go right ahead.

Speaker 10: Just following up on that power and vision question, I know it obviously houses a lot of the sectoral growth elements of the business, like ADAS and E-Drive, and you talked about consolidated revenues up 9 to 10 percent through 2024, the market is up 9, so a little bit of outgrowth. And I realize the JV part of the business is growing rapidly.

Hi, This is Chad.

For Rod.

Just following up on that power and vision question. So.

Yes, I know it obviously, how does a lot of the secular growth elements of the business.

And like any of that's in the drive and you talked about consolidated revenues up 9% to 10% between 24 the market up nine.

So little bit of outgrowth and I realized the JV part of the business is growing rapidly but are there parts of the power and vision business that you expect will grow a lot slower over these next few years and maybe even shrink.

Speaker 10: but are there parts of the power and vision business that you expect will grow a lot slower over these next few years and maybe even shrink that you can talk about?

That you can talk about.

Speaker 3: The power and vision has, we have the mechatronics, mirrors, lighting, ADAS, and in the powertrain, it's a combination of our transmission business and all-wheel drive, four-wheel drive, and the e-drives. So there's kind of some of the areas which are growing fast as we talk about with the rest of the market. Some of them are stable and have a very long runway for the next 10 years, which gives the stability, but those things are not growing as much as the other areas.

<unk> powder and envision has we have the mechatronics mirrors lighting Adas in the powertrain, it's a combination of our transmission business and all wheel drive four wheel drive and that drives so there's kind of some of the areas, which are growing fast as we.

About with the rest of the market some of them are stable and have a very long runway for the next 10 years, which gets the stability, but those things are not growing as much as the other areas.

Speaker 3: In, you know, we cannot look specifically at each other product line, for example, the mirrors that continue to, you know, grow with the market, every vehicle has that.

We cannot look specifically at each of the product line. For example, the mirrors that continue to grow with the market every vehicle has that but we are looking at the combination of the mirrors and.

Speaker 3: But we are looking at the combination of the mirrors and electronics in the driver monitoring system. So that.

Electronics and the driver monitoring system. So that's.

Speaker 3: you know, turning out to be a new product line. So you can't really put a specific number on each one of these things. It's a mix.

Turning out to be a new product line. So you can't really put a specific number on each one of these things it's a mix and I think as time goes on it evolves right some product lines evolved faster than the other and the segment. They are seeing the fastest growth in unconsolidated sales.

Speaker 3: And I think as time goes on, it evolves, right? Some product lines will evolve faster than the other. And the second, they're seeing the fastest growth in unconsolidated sales is not a part of the group, right? Due to the LG joint venture and the.

Is that partly due to the LG joint venture an Astro joint venture in particular.

Speaker 10: Okay. And then, you know, you mentioned engineering spending is growing to $900 million. Megatron engineering spending is growing to $900 million in 2022. What was that spending in 2021, and what are you assuming for 2024?

Okay.

And then you.

You mentioned, the engineering spending is growing to $900 million.

Megatrend engineering space.

2022.

What was that spending in 'twenty, one and what are you assuming for 2024.

Speaker 3: We're talking about average annual numbers throughout the plan period, so if you look at just the average annual numbers, I would say it's about a $300 million increase as an average from the last plan period to now.

Okay.

We were talking about average annual numbers through the plan period. So if you look at just the average annual number so I would say, it's about a 300 million.

Increase in average from the last plan period to now.

Speaker 21: All right, and that's gross spend. That's before recovery from our customers. Yeah.

And thats growth spend that's.

Before before recovery from our customers yet.

Okay. So basically.

Speaker 10: You're saying that it would be up to $1.2 billion by 2024 versus the $900 billion in 2022? I just want to make sure I understand that. No, we're just saying that we're expecting about $600 billion on average overall in our last outlook over the three-year period, and now there's an uptick to about $900 billion on average.

Youre, saying that it would be up to $1 2 billion by 2024 versus the 900.

2002, I just want to make sure nobody knows.

Saying that we are expecting about 600 on average overall in the last in our last outlook over the three year period and now there is an uptick to about 900 on average.

Sure.

Okay.

Thank you.

On the growth side gross spend.

Speaker 15: Thank you. We'll get to our next question on the line from the line of Brian Johnson with Barclays. Go right ahead.

Thank you.

Our next question on the line.

Line of Brian Johnson with Barclays go right ahead.

Speaker 1: Thank you. A lot of my questions have been drained already, so I want to ask kind of a bigger picture one. One of your large competitors that is considered a role model of the industry, Aptiv, recently made a large and frankly expensive

Thank you have a lot of my questions have been drained already so I wanted to ask kind of a bigger picture one.

One of your large competitors that is considered a role model of industry <unk> recently made a large and frankly expensive software acquisition. So.

Speaker 1: software acquisitions. So, and maybe this is a chance for Vince to talk a bit, you know, how are you thinking about the role of software overall at Magna, and potentially the need for acquisitions, which of course have been very common in multi-industry space, to help

And maybe this is a chance for Vince to talk a bit how are you thinking about the role of software overall at Magna and potentially the need for acquisitions, which of course has been very common in multi industry space to help you get there.

Speaker 3: Yeah, I think Brian , good morning. Software is such a wide topic and it is put under a broad umbrella. And if you look at the software capabilities and application, it's different in different product areas. But for sure, what you said is true that software will define a large.

Yeah, I think Brian good morning.

Software is such a wide topic and it is put under the broad umbrella and if you look at the software capabilities and application it's different in different productivity, yes, but for sure. What you said is true that software will define a large part of the vehicle going forward.

Speaker 3: part of the vehicle going forward. Given that overall statement, we continue to look at what software and what role does it play, whether it's ADAS or whether it's mechatronics, whether it's Powertrain and so on.

Given that overall statement, we continue to look at broad software.

And what role does it play, whether it's adas or whether it's mechatronics, whether its powertrain and so on.

Speaker 3: So we continue to look at each of the specific areas of what the application software capabilities are, and therefore, the investments, whether organic or inorganic, to complement that. At a base level, there are some of the electrical architecture, like we did with Fisker, or with our entire business, we continue to look at the holistic view of what the vehicle is going to be, and we continue to add to that capability.

So we continue to look at each of the specific areas of what the application software capabilities are.

And therefore, the investments whether organic or inorganic to complement that at a base level that are some of the electrical architecture like we did with fisker or with US tire business. We continue to look at the holistic view of what the rate is going to be and we continue to add to that capability.

Speaker 3: Right, so I think one of the unique things in Magna, which I think should be considered a role model is how we can actually integrate and think holistically of a whole vehicle and what each system means, right? So that's how we look at it.

Right. So I think one of the unique things in Magna.

Which I think should be it should be considered a role model is how we can actually integrate and.

I think holistically whole vehicle and what each system means right. So that's how we look at it.

Speaker 1: And does that mean you'd want to be active across the software stack or are you thinking about specific domains or applications where you really want to focus your software expertise?

And does that mean you'd want to be active across the software stack or are you thinking about specific domains are applications, where you really want to focus your software expertise.

Speaker 3: We believe that we have to have a system viewpoint, given our engineering, full vehicle engineering and full vehicle manufacturing, and given the domains that we have, look at domain specificity also. Right? So given our portfolio, we continue to look at all of them. And you know, how the stack develops and what OEMs will take on versus what the suppliers will take on is evolving, and we continue to track that. Okay. Thanks.

We believe that we have to have a system viewpoint, given our engineering full vehicle intimating and full vehicle manufacturing and given the domains that we haven't looked at domain specificity also right. So given our portfolio. We continue to look at all of them and how the stack develops.

What Oems will take on versus what the suppliers will take on is evolving and we continue to track that.

Okay. Thanks.

Tommy a final question Sir.

Speaker 15: We'll proceed with our final questions from the line of Michael Glenn from Raymond James. Go right ahead.

Certainly.

Our final question is from the line of Michael Glen from Raymond James Go right ahead.

Speaker 17: Thanks for getting me in. You made the comment on the 2022 guidance regarding the 1H, 2H dynamic. Can you just provide a little bit more clarity on how different will the two periods be as we're modeling this out?

Well, thanks, Alright, Thanks for getting me in you made the comment on the 2022 guidance regarding the one H two H dynamic can you just provide a little bit more clarity on how different will the two periods.

We're modeling this out.

Speaker 21: Well, I mean, we don't, we don't provide, I mean, Pat's just having a look at the overall numbers. We don't provide quality guidance, but definitely the impact that the CHIPS is going to have is going to skew what you'd normally see as a stronger first half.

Well I mean, we don't we don't provide.

That's how to look at the overall number that we don't provide quarterly guidance, but definitely the impact of the <unk>.

This is going to have.

Is it going to is going to skew what you would normally see as a stronger first half versus the second half.

Speaker 18: Okay. Because coming at like Q4 at the end of the day was you came at it at $1.30 in EPS and that was kind of well ahead of what consensus was forecasting. So, you know, are you expecting something different in Q1 versus what you saw in Q4? Does it get...

Okay, because coming out like Q4 at the end of the day. What you came in at a box 30 in EPS and that was kind of well ahead of what consensus was forecasting so.

Are you expecting something different in Q1 versus what you saw in Q4 and doesn't get.

Speaker 18: get a little, is there a little more pressure in Q1 that starts to take place?

Get a little.

Is there a little more pressure in Q1 that starts to take place.

Speaker 21: Yeah, we're not going to get into the details of you know, let's kind of walk from let's say the earnings or the margins and in Q4 versus Q1, we don't provide that outlook. So like I said, it's more, the direction was more related to the volumes, volumes in the first half versus the second half, we can't get into the details of what we expect in the first quarter.

Yes.

Get into the details of.

Let's kind of walk from let's say the earnings so the margins in Q4 versus Q1, we don't provide that outlook. So.

Like I said thats more the direction was more related to the volumes.

Billings in the first half versus the second half we can't get into the details of what we expect in the first quarter or the first half on margins.

Speaker 18: Okay. And just some thoughts on, given where the free cash flow outlook is, some thoughts on how you would proceed with the buyback in 2020.

Okay, and just some thoughts on given where the free cash flow outlook at some thoughts on how you would proceed with the buyback in 2022.

Speaker 22: Mike, we do have an open NTIB where we're able to buy up to 10% of our shares.

Mike We do have an open and CIB, where we're able to buy up to 10% of our shares at any point in time, we have been active in the market in the quarter just passed we did purchase $250 million.

Speaker 22: at any point in time. We have been active in the market. In the quarter just passed, we did purchase $250 million.

Speaker 22: I think it's going to be consistent with our liquidity or our financial strategy, which is our number one priority is to grow the business organically and organically. And if opportunities are not there, we're going to continue with the share buyback.

I think it is going to be consistent with our.

Liquidity, our financial strategy, which is our number one priority.

To grow the business organically inorganically and if opportunities are not there we're going to continue with the share buyback.

Speaker 22: When I think about the share buyback, what's nice about the buyback is we can turn it off, so if we do have an opportunity that comes up that is significant, we can turn it off, and we have turned it off in the past.

When I think about the share buyback whats nice about the buyback because we can turn it off so if we do have an opportunity that comes up that is significant we can turn it off and we have turned it off in the past.

Speaker 22: when we have looked at acquisitions and I think we're not going to change that strategy going forward.

When we have looked at acquisitions and I think we're not going to change that strategy going forward.

Speaker 11: Yeah, Michael, it's been just to add to that, I mean, I've been part of this capital strategy kind of and how we evolved it over the years, it's been pretty consistent, kind of, you know, we look at a leverage ratio, we look at the macroeconomic environment, we look at the opportunities that we see, and we've got to make sure we have enough liquidity and to the extent that there's excess liquidity.

And just to add to that I mean, I've been part of this capital strategy kind of in how we evolved that over the years, it's been pretty consistent kind of.

We look at our leverage ratio, we look at the macroeconomic environment will look at the opportunities that we see in <unk>.

We've got to make sure we have enough liquidity and to the extent that there is excess liquidity.

Speaker 11: We've demonstrated over time that we'll return that to shareholders by way of buybacks. But as Pat talked about, the nice thing about the buyback is you've got flexibility turned on and off depending on the situation. And our strategy in that area hasn't changed.

We have demonstrated over time that will return that to shareholders by way of buybacks, but as Pat talked about I think about the buyback that you've got flexibility turned on and off depending on the situation.

And.

Our strategy in that area Hasnt changed.

Great. Thanks for taking the questions.

Thank you Kerry there are no further questions I'll turn it back to you.

Speaker 3: Thank you. Thanks everyone for listening in. I know we have had two straight years with a difficult production environment and industry challenges still continue to persist. However we remain confident in the strength of our business model and our ability to grow and generate earnings and free cash flow to create significant long term value for shareholders.

Thank you thanks, everyone for listening in.

<unk> had two straight years with a difficult production environment and industry challenges still continue to persist.

However, we remain confident in the strength of our business model and our ability to.

Grow and generate earnings and free cash flow to create significant long term value for our shareholders.

Speaker 3: We stay focused on executing our go-forward strategy and look forward to seeing many or all of you in Detroit at our investor event in May. Stay safe, stay healthy, and enjoy the rest of your day.

We stay focused on executing our go forward strategy and we look forward.

To seeing many or all of you in Detroit at our Investor event in May.

Stay safe stay healthy and enjoy the rest of your day.

Yes.

Speaker 15: Thank you very much. Thank you, everyone. That does conclude the call for today. We thank you for your participation. As we disconnect your lines, have a good day.

Thank you very much. Thank you everyone that does conclude our call for today. We thank you for your participation. Please disconnect your lines.

Good day everyone.