Q1 2025 Magna International Inc Earnings Call

Operator: Hello and welcome to the Magna International First Quarter 2025 results webcast. All lines have been placed on mute to prevent any background noise.

Hello, and welcome to the Magna International first quarter Duane to twenty-five results webcast all lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you.

The speakers remarks, there will be a question and answer session. If you would like to ask a question. During this time she depressed star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again, thank you.

Operator: And as a reminder, this call is being recorded.

Speaker Change: And as a reminder, this call is being recorded I would now like to hand, the call over to Louis Tonelli VP of Investor Relations. Louis. Please go ahead.

Louis Tonelli: I would now like to hand the call over to Louis Tonelli, VP of Investor Relations. Louis, please go out. Thanks, operator.

Louis Tonelli: Thanks, Operator, Hello, everyone and welcome to our conference call covering our first quarter 2025 results.

Louis Tonelli: Hello, everyone, and welcome to our conference call covering our first quarter 2025 results. Joining me today are Swami Kotagiri and Pat McCann. Yesterday, our board of directors met and approved our financial results for the first quarter of twenty five and our updated outlook. We issued a press release this morning outlining our results. 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.

Speaker Change: Joining me today are swamy quite a gerry.

Louis Tonelli: Mccann.

Louis Tonelli: Yesterday, our board of directors met and approved our financial results for the first quarter of 'twenty, five and our updated outlook.

Louis Tonelli: We issued a press release this morning outlining our results.

Louis Tonelli: 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 Dot com.

Louis Tonelli: Before we get started, just as a reminder, discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. Such statements involve certain risks, assumptions, and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our Safe Harbor disclaimer. Please also refer to the reminder slide included in our presentation that relates to our commentary today.

Louis Tonelli: Before we get started just as a reminder discussion.

Louis Tonelli: <unk> discussion today may contain forward looking information.

Louis Tonelli: We're looking statements within the meaning of the applicable securities legislation.

Louis Tonelli: 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.

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

Louis Tonelli: Please also refer to the reminder, slide included in our presentation that relates to our commentary today with that I'll pass it over to Swamy.

Swami Kotagiri: With that, I'll pass it over to Swami. Thank you, Louis. Good morning, everyone. I appreciate you joining our call today.

Swamy: Thank you Louis good morning to everyone. I appreciate you joining our call today.

Swami Kotagiri: Before we start, I want to express our deep sadness here at Magna with the passing of our former CFO, Vince Galiffi. Vince was not only a remarkable leader, but also a cherished colleague, mentor, and a friend to me and many of us. Vince's contributions to Magna over his 30-plus year career were invaluable, including playing a crucial role in shaping our financial strategies, providing stability, and ensuring our disciplined, profitable growth. Many of you listening in today benefited from his knowledge, wisdom and insight.

Speaker Change: Before we start.

Speaker Change: Want to express our deep sadness here at Magna the passing.

Speaker Change: Our former CFO Vince <unk>.

Speaker Change: When this was not only a remarkable leader, but also cherished colleague mentor and a friend to me and many of us.

Speaker Change: Vince its contributions to magna or his 30 plus year career, where invaluable.

Speaker Change: Including claimed a crucial role in shaping our financial strategies, providing stability and ensuring our disciplined profitable growth.

Speaker Change: Many of you listening in today benefited from his knowledge wisdom and insight.

Swami Kotagiri: As we mourn his loss, we also celebrate his life and the profound influence he had on man.

Speaker Change: As we mourn his loss we also celebrate its life.

Speaker Change: And the profound influence you had on that now.

Swami Kotagiri: There are some notable takeaways from the quarter that I would like to highlight before getting into some of the details. We are pleased that our Q1 results came in ahead of our quarterly planning cadence, mainly reflecting strong incremental margin on higher sales. You may recall that in our February call, I mentioned that the first half of 2025 would be weaker than the second half, and of the first two quarters, Q1 would be weaker. We returned $187 million to shareholders in the first quarter in the form of dividends and share repurchase. Despite increased uncertainty due to the current tariff environment, we have updated our outlook, which includes Higher sales largely due to foreign currency translation, partially offset by slightly lower vehicle production in North America.

Speaker Change: There are some notable takeaways from the quarter that I would like to highlight before getting into some of the details.

Speaker Change: We are pleased that our Q1 results came in ahead of our quarterly planning cadence.

Speaker Change: Mainly reflecting strong incremental margin on higher sales.

Speaker Change: You may recall that in our February call I mentioned that the first half of 2025.

Speaker Change: Would be weaker than the second half.

Speaker Change: And after the first two quarters Q1 would be weaker.

Speaker Change: We returned $187 million to shareholders in the first quarter in the form of dividends and share repurchases.

Speaker Change: Despite increased uncertainty due to the current tariff environment, we have updated our outlook, which includes <unk>.

Speaker Change: Higher sales largely due to foreign currency translation, partially offset by slightly lower vehicle production in North America.

Swami Kotagiri: and a modest reduction in margin, mainly due to the higher Euro and decremental margins related to the North American volume reduction. We continue to work closely with our customers to mitigate the tariff impacts and adjust in this rapidly evolving environment, focusing on what is under our control, including cost containment efforts. And we have clearly communicated to our customers our intention to pass on any unmitigated incremental tariff costs. We continue to win new business and advance automotive technology. We are collaborating with NVIDIA for next generation scalable, active safety, and autonomous driving systems, as well as other applications.

Speaker Change: And a modest reduction in margin, mainly due to the higher euro and decremental margins related to the North American volume reduction.

Speaker Change: We continue to work closely with our customers to mitigate the tariff impact and adjust in this rapidly evolving environment.

Speaker Change: <unk> on what is under our control, including cost containment efforts.

Speaker Change: And we have clearly communicated to our customers our intention to pass on any unmitigated incremental tariff costs.

Speaker Change: We continue to win new business and advance automotive technologies.

Speaker Change: We are collaborating with Nvidia for next generation scalable active safety and autonomous driving systems as well as other applications.

Swami Kotagiri: We have been awarded a new complete ADAS system with a North American-based global OEM. And we are supplying a two-speed dual motor E-drive with advanced off-road technology for Mercedes-Benz. Our customers and the industry continue to recognize Magna for excellence in launch and innovation. We recently won GM Supplier of the Year and Overdrive Award. And Automotive News recently selected our AI-based thermal sensing technology as a 2025 pace pilot innovation to watch.

Speaker Change: We have been awarded a new complete Adas system with <unk>.

Speaker Change: North American based global Oems.

Speaker Change: And we are supplying it to speed dual motor drive.

Speaker Change: Advanced offload technology for Mercedes Benz.

Speaker Change: Our customers and the industry continue to recognize magnet for excellence in launch and innovation.

Speaker Change: We recently won GM supplier of the year and Overdrive Awards.

Speaker Change: And automotive news recently selected our AI based thermal sensing technology as a 2025 paid pilot innovation to watch.

Swami Kotagiri: As I said earlier, the industry is facing a high degree of uncertainty as a result of the tariff and trade-in run. Let me frame tariffs in the context of Magna. Last year, our North American business was about $20 billion, or less than half of our global sales. In 2024, we imported roughly $2 billion of goods from countries, including Canada and Mexico, that are subject to tariffs, which would result in roughly $500 million in gross tariff costs. Based on our analysis to date, 75 to 80% of our parts crossing the border are already USMCA compliant. which puts our 2025 annualized direct tariff impact estimate at about $250 million.

Speaker Change: As I said earlier the industry is facing a high degree of uncertainty as a result of the tariff and trade environment.

Speaker Change: Let me frame tariffs in the context of Magna.

Last year.

Speaker Change: North American business was about $20 billion or less than half of our global sales.

Speaker Change: In 2024, we imported roughly $2 billion of goods from countries, including Canada and Mexico.

Speaker Change: Victor tariffs, which would result in roughly $500 million.

Speaker Change: Gross tariff costs.

Speaker Change: Based on our analysis to date, 75% to 80% of our parts crossing the border are already <unk> compliant.

Speaker Change: Which puts our 2025 annualized direct tariff impact estimate.

Speaker Change: <unk> $250 million.

Swami Kotagiri: We continue to evaluate options that will further increase USMCA compliance to mitigate tariff impacts. In some instances, it will require design modifications, validation, and or customer approvals. We will continue to evaluate the full scope of this opportunity. As a result, we are highly focused on working with customers to consider further mitigation opportunities, utilizing government remission programs where appropriate. continuing cost reduction programs already in place and remaining disciplined with capital spend. As I said at the outset, we expect 100% of unmitigated incremental direct tariff costs to be recovered from customers.

Speaker Change: We continue to evaluate options that will further increase U S MCA compliance to mitigate tariff impacts.

Speaker Change: In some instances it will require a design modifications validation and our customer approvals, we will continue to evaluate the full scope of these opportunities.

Speaker Change: As a result, we are highly focused on working with customers to consider further mitigation opportunities Utah.

Speaker Change: Utilizing governmental emission programs where appropriate.

Speaker Change: Continuing cost reduction programs already in place.

Speaker Change: The remaining disciplined with capital spend.

Speaker Change: As I said at the outset, we expect 100% of unmitigated incremental direct tariff costs to be recovered from customers.

Speaker Change: Next.

Swami Kotagiri: I will cover our updated outlook. Uncertainty in the current business environment caused by tariffs and other trade measures has made forecasting more challenging than normal. Our outlook reflects our strong first quarter performance and near-term OEM production release information, including announced production downtime at certain OEM assembly facilities. Our production assumptions do not contemplate the potential impacts of tariffs. and other trade measures on vehicle costs, vehicle affordability or consumer demand, nor the impact of these on vehicle production. Relative to our previous outlook, we have reduced North American production by about 100,000 units to 15 million. held Europe production unchanged and have raised our China production assumptions by roughly our Q1 outperformance to 30.2 million units.

Speaker Change: I will cover our updated outlook.

Speaker Change: Uncertainty in the current business environment caused by Paris, and other trade measures has made forecasting more challenging than normal.

Speaker Change: Our outlook reflects our strong first quarter performance and near term OEM production release information, including announced production downtime at certain OEM SMB facilities.

Our production assumptions do not contemplate the potential impacts of tariffs.

Speaker Change: And other trade measures on wafer cost vehicle affordability, our consumer demand nor the impact of these on vehicle production.

Speaker Change: Relative to our previous outlook, we have reduced north American production by about 100000 units to $15 million.

Speaker Change: Handled Europe production unchanged and have raised our China production assumption spread roughly our Q1 outperformance to $30 2 million units.

Swami Kotagiri: We also assume exchange rates in our outlook will approximate recent rates. We now expect a higher euro and Canadian dollar for 2025 relative to our previous outlook. The increase in our sales range is predominantly associated with foreign exchange translation due to the higher euro relative to the US dollar. partially offset by lower vehicle production in North America, particularly with respect to certain programs with high magna content. The lowering of EBIT margin range reflects the margin dilutive impact of Euro-U.S. dollar translation as well as decremental margin on the lower sales associated with the volume reductions in North America.

Speaker Change: We also assume exchange rates in our outlook will approximate recent rates.

Speaker Change: We now expect a higher euro and Canadian dollar for 2025 relative to our previous outlook.

Speaker Change: The increase in our sales range is predominantly associated with foreign exchange translation due to the higher euro.

Speaker Change: Relative to the U S dollar.

Speaker Change: Partially offset by lower vehicle production in North America, particularly with respect to certain programs with high Magna content.

Speaker Change: The lowering our EBIT margin range reflects the margin dilutive impact of Euro U S. Dollar translation as well as detrimental margin on the lower sales associated with the volume reductions in North America.

Swami Kotagiri: We increased our tax rate to approximately 26% from approximately 25% mainly due to mix of earnings. We expect capital spending to be in the $1.7 to $1.8 billion range, down slightly from $1.8 billion previously, reflecting our continuing efforts to differ or reduce capital wherever possible. And our interest expense, net income, and free cash flow ranges are all unchanged from our last outcome.

Speaker Change: We increased our tax rate to be approximately 26% from approximately 25% mainly due to mix of earnings.

Speaker Change: We expect capital spending to be in the one seven to $1 $8 billion range down slightly from $1 8 billion previously, reflecting our continuing efforts to defer or reduce capital wherever possible.

Speaker Change: And our interest expense net income and free cash flow ranges are all unchanged from our last outlook.

Swami Kotagiri: In addition, we are providing some helpful financial modeling guidance with respect to MAG. Our average content per vehicle in North America is approximately $1,300. and we would estimate incremental and decremental margins in North America to be in the 15 to 20 percent range at the Magna level under normal conditions. We have also seen relatively volatile foreign exchange rate swings over the past few months. As you model sales, keep in mind that a one cent change in the euro USD rate has about a 110 million dollar impact on annual sales, with a margin below our corporate average.

Speaker Change: In addition, we are providing some helpful financial modeling guidance with respect to Magna.

Speaker Change: Our average content per vehicle in North America is approximately <unk> hundred dollars.

Speaker Change: And we would estimate incremental and decremental margins in North America to be in the 15% to 20% range at the magna level under normal conditions.

Speaker Change: We have also seen relatively volatile foreign exchange rates swings over the past few months.

Speaker Change: As you model sales keep in mind that a one cent change in the Euro USD rate has about a $110 million impact on annual sales with a margin below our corporate average.

Swami Kotagiri: And a one cent change in the Canadian to US dollar is about 50 million in annual sales, with a margin at about our corporate average.

Speaker Change: And it <unk> change in the Canadian to U S. Dollar is about $50 million in annual sales with a margin at about our corporate average.

Swami Kotagiri: Lastly, we are proactively evaluating costs and capital. I would like to reiterate that our guiding principles remain the cornerstone of Magna, a long-term ownership mentality that starts with our culture of accountability and alignment of interests at all levels of the company. Managing our portfolio under a consistent set of criteria and dispassionately assess our product lines in terms of their markets, market positions, and returns. Maintaining a strong balance sheet to have the financial flexibility to manage through the cyclicality of our industry and a capital allocation strategy that entails a long-term balance of investing for profitable growth together with returning capital to shareholders.

Speaker Change: Lastly, we are proactively evaluating cost and capital.

Speaker Change: I would like to reiterate that our guiding principles remain the cornerstone of Magna.

Speaker Change: A long term ownership mentality that starts with our culture of accountability and alignment of interests at all levels of the company.

Speaker Change: Managing our portfolio under a consistent set of criteria and dispassionately assess our product lines in terms of their markets market positions and returns.

Speaker Change: Maintaining a strong balance sheet to have the financial flexibility to manage through the cyclicality of our industry and a capital allocation strategy that entails a long term balance of investing for profitable growth together with returning capital to shareholders.

Swami Kotagiri: Regardless of where we are in the cycle or challenges we are facing, these overarching principles govern the way we manage Magna for long-term success.

Speaker Change: Regardless of where we are in the cycle. Our challenges we are facing this overarching principles governing the way we manage magna for long term success with that I'll pass the call over to Pat.

Pat McCann: With that, I'll pass the call over to Pat. Thanks, Swami and good morning, everyone. As Swami indicated, we delivered solid first quarter earnings ahead of our expectations. recall that we indicated on our February call that we expected our 2025 earnings to be lowest in the first quarter of the year. Now comparing the first quarter of 2025 to the first quarter of 2024. Consolidated sales were $10.1 billion, down 8% compared to a 3% decline in global light vehicle production. Adjusted EBIT was $354 million and adjusted EBIT margin was 3.5 percent. Adjusted EPS came in at $0.78, down 28% year-over-year, primarily due to decremental margins on lower sales, but ahead of our expectations.

Speaker Change: Thanks, Swamy and good morning, everyone.

Pat: As <unk> indicated we delivered solid first quarter earnings ahead of our expectations were.

Pat: Recall that we indicated on our February call that we expected our 2025 earnings to be lowest in the first quarter of the year.

Pat: Now comparing the first quarter of $2025 for the first quarter of 2024.

Pat: Consolidated sales were $10 1 billion down 8% compared to a 3% decline in global light vehicle production.

Pat: Adjusted EBIT was $354 million and adjusted EBIT margin was three 5%.

Pat: Adjusted EPS came in at 78.

Pat: Around 28% year over year, primarily due to decremental margins on lower sales, but ahead of our expectations.

Pat McCann: And free cash flow used in the quarter was $313 million, ahead of our expectations and compared to $270 million in the first quarter of 2024. Let me take you through some of the details. North American and European light vehicle production decreased 5% and 8% respectively. and production in China increased 2% netting to a 3% decrease in global production. On a sales weighted basis, light vehicle production declined 5% from the prior year. Our consolidated sales were $10.1 billion compared to $11 billion in the first quarter of 2024. On an organic basis, our sales decreased 6% year over year for a negative 1% growth over market in the quarter, in part reflecting negative production mix from lower D3 production in North America.

Pat: And free cash flow used in the quarter was $313 million ahead of our expectations and compare it to $270 million in the first quarter of 2024.

Pat: Let me take you through some of the details.

Yeah.

Pat: North American and European light vehicle production decreased 5% and 8% respectively.

Pat: And production in China increased 2% netting to a 3% decrease in global production.

Pat: On a sales weighted basis light vehicle production declined 5% from the prior year.

Pat: Our consolidated sales were $10 1 billion compared to <unk> 11 billion in the first quarter of 2024.

Pat: On an organic basis, our sales decreased 6% year over year for a negative 1% growth over market in the quarter in part reflecting negative production mix from lower D. Three production in North America.

Pat McCann: Lower Light Vehicle Production. A decline in complete vehicle assembly volumes, including the end of production of the Jaguar E and I-Pace in Graz, Austria. The end of production of certain other programs. The divestiture of a controlling interest in our metal forming operations in India. The impact of changes in foreign exchange rates and normal course customer price give back. These were partially offset by the launch of new programs, higher commercial recoveries, and customer price increases to recover certain higher production input costs. Adjusted EBIT was $354 million, and adjusted EBIT margin was 3.5%, down 80 basis points from Q1 2024.

Pat: Lower light vehicle production.

Pat: Clyde and complete vehicle assembly volumes, including the end of production of the Jaguar E pace in Graz, Austria.

Pat: At the end of production of certain other programs.

Pat: The divestiture of a controlling interest in our metal forming operations in India.

Pat: The impact of changes in foreign exchange rates and normal course customer price give backs.

Pat: These were partially offset by the launch of new programs higher commercial recoveries and customer price increases to recover certain higher production input costs.

Pat: Adjusted EBIT was $354 million and adjusted EBIT margin was three 5% down 80 basis points from Q1 2024.

Pat McCann: The lower EBIT percent in the quarter reflects positive 60 basis points from operational items reflecting operational excellence activities, lower engineering spend, and lower net input costs, harshly offset by higher new facility costs. Negative 15 basis points related to lower equity income as a result of lower net favorable commercial items, higher net transactional FX losses, and reduced earnings on lower sales, partially offset by lower launch costs, all with respect to certain equity-accounted investments. negative 10 basis points for tariff costs paid out but not yet recovered from customers and volume and other items which impacted us by negative 150 basis points reflecting reduced earnings on lower sales and lower net transactional FX gains.

Pat: The lower EBIT percent in the quarter reflects.

Pat: Positive 60 basis points from operational items, reflecting operational excellence activities.

Pat: Sure engineering spend and lower net input costs, partially offset by higher new facility costs.

Pat: Negative 15 basis points related to lower equity income as a result of lower net favorable commercial items higher net transactional FX losses and reduced earnings on lower sales, partially offset by lower launch costs, all with respect to certain equity accounted investments.

Pat: Negative 10 basis points for tariff costs paid out, but not yet recovered from customers and <unk>.

Pat: Volume and other items, which impacted us by negative 150 basis points, reflecting reduced earnings on lower sales and lower net transactional FX gains.

Pat McCann: In net discrete items, higher net favourable commercial items was completely offset by higher net warranty costs and higher restructuring costs not called out as unusual. Interest was essentially in line with last year. Our adjusted effective income tax rate came in at 25.7%, higher than Q1 of last year, primarily due to higher losses not benefited in Europe, unfavorable foreign exchange adjustments for U.S. GAAP purposes, and a change in the mix of earnings. partially offset by favorable changes in our reserves for uncertain tax positions. Net income was $219 million compared to $311 million in Q1 2024. mainly reflecting lower EBIT, partially offset by lower income tax and lower minority interest.

Pat: And net discrete items higher net favorable commercial items was completely offset by higher net warranty costs and higher restructuring costs not called out as unusual.

Pat: Interest was essentially in line with last year.

Pat: Our adjusted effective income tax rate came in at 25, 7% higher than Q1 of last year, primarily due to higher losses not benefited in Europe unfavorable.

Pat: Unfavorable foreign exchange adjustments for U S GAAP purposes, and a change in the mix of earnings.

Pat: Partially offset by favorable changes in our reserves for uncertain tax positions.

Pat: Net income was $219 million compared to $311 million in Q1 2024.

Pat: Mainly reflecting lower EBIT, partially offset by lower income tax and lower minority interest.

Pat McCann: and Adjusted EPS was $0.78 compared to $1.08 last year reflecting lower net income partially offset by fewer diluted shares outstanding. The fewer shares outstanding largely reflects share repurchases in the fourth quarter of 2024 and the first quarter of 2025.

Pat: And adjusted EPS was <unk> 78.

Pat: Compared to $1 eight last year.

Pat: Afflicting lower net income, partially offset by fewer diluted shares outstanding.

Pat: The fewer shares outstanding largely reflects share repurchases in the fourth quarter of 2024, and the first quarter of 2025.

Pat McCann: Turning to a review of our cash flows and investment activity. In the first quarter of 2025, we generated $547 million in cash from operations before changes in working capital and used $470 million in working capital. Investment activities in the quarter included $268 million for fixed assets and $148 million increase in investments, other assets, and intangibles. Overall, we used free cash flow of $313 million in Q1, better than we were forecasting and compared to $270 million in the first quarter of 2024. And we continue to return capital to shareholders, paying $136 million in dividends along with $51 million in share repurchases during the first quarter of 2025.

Pat: Turning to a review of our cash flows and investment activities in.

Pat: In the first quarter of 2025, we generated $547 million in cash from operations before changes in working capital and used $470 million in working capital.

Pat: Investment activities in the quarter included $268 million for fixed assets and $148 million increase in investments other assets and intangibles.

Pat: Overall, we used free cash flow of $313 million in Q1.

Pat: Better than we were forecasting and compared to $270 million in the first quarter of 2024.

Pat: And we continue to return capital to shareholders paying $136 million in dividends, along with $51 million in share repurchases during the first quarter of 2025.

Pat McCann: Our balance sheet continues to be strong with investment grade ratings from the major credit agencies. At the end of Q1, we had just under $4.6 billion in liquidity, including about $1.1 billion in cash. Currently, our adjusted debt to adjusted EBITDA ratio is at 1.92, better than we had anticipated coming into the quarter.

Pat: Our balance sheet continues to be strong with investment grade ratings from major credit agencies at the end of Q1, we had just under $4 6 billion in liquidity, including about $1 $1 billion in cash.

Pat: Currently our adjusted debt to adjusted EBITDA ratio is at 192, better than we had anticipated coming into the quarter.

Pat McCann: In summary, we had solid financial performance in the quarter, ahead of what we had expected. We returned $187 million to shareholders in the quarter in the form of dividends and share repurchase. We updated our outlook, excluding the impacts of tariffs, which includes higher sales, largely due to foreign currency translation, partially offset by lower volumes in North America, and a modest reduction in margin, mainly due to the higher Euro and decremental margins related to North American volume production. And we are working closely with our customers to mitigate tariff impacts and adjust in a rapidly evolving environment.

Pat: In summary, we had solid financial performance in the quarter ahead of what we had expected.

Pat: We returned $187 million to shareholders in the quarter in the form of dividends and share repurchases.

Pat: We updated our outlook, excluding the impacts of tariffs, which includes higher sales largely due to foreign currency translation, partially offset by lower volumes in North America.

Pat: And a modest reduction in margin, mainly due to the higher euro and decremental margins related to North American volume production.

Pat: And we are working closely with our customers to mitigate tariff impacts and adjust in the rapidly evolving environment.

Pat McCann: Thanks for your attention this morning.

Pat: Thanks for your attention. This morning, we will be happy to take your questions.

Operator: We would be happy to take your questions. We will now begin the question and answer session. If you would like to ask a question, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.

Pat: We will now begin the question and answer session. If you would like to ask a question see depressed star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.

John Murphy: And your first question comes from the line of John Murphy with Bank of America. John, please go ahead. Good morning guys.

Speaker Change: And your first question comes from the line of John Murphy with Bank of America. John. Please go ahead.

Speaker Change: Good morning, guys I'm very sorry to hear about Vince Tuscan was for all of US I think we all learned a law for ammonia was great friend so.

John Murphy: I'm very sorry to hear about Vince. It's tough news for all of us. I think we all learned a lot from him. He was a great friend. So that's a rough way to start the call. Thoughts are out to all you guys. Thank you.

Speaker Change: That's rough rough way to start the call.

Speaker Change: Thoughts are out to all of you guys.

Thank you.

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

Speaker Change: Hi, I guess first here, maybe kind of thinking sort of mid to the long term swamy.

Speaker Change: On the seating business it just seems like even.

Speaker Change: Resting for tariffs.

Speaker Change: The business remains kind of kind of trough I'm just curious as you think about that business mid to long term.

Speaker Change: If there is something you need to do on a micro basis organically or do you need to get.

Speaker Change: Larger scale, because there's a lot of other folks out there that are kind of tripping over that business as well.

Speaker Change: And it seems like it should be an okay business, but it seems like you just can't get it to turn the corner what are your thoughts there on seating.

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

Speaker Change: Good morning, John and thanks for your comments.

Speaker Change: On the seating item non food court at the big topic, the one time, which is behind us.

Speaker Change: <unk> million dollars.

Speaker Change: Magnitude.

Speaker Change: Warranty topics.

Speaker Change: That's included in the cargo that's.

Speaker Change: That's behind Us.

Speaker Change: Operationally continuing to look at what we had last year and more to be had in the <unk>.

Speaker Change: <unk> to track.

Speaker Change: Given the volatility in the program that we've talked about in South Carolina and it comes onboard for next year.

Speaker Change: Macro variables that we've talked about in seeding of the business Hasnt changed.

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

Speaker Change: From an operations perspective, the execution plans that we have been talking about stay on track.

Speaker Change: But on.

Speaker Change: In the bigger context, not just to seating.

Speaker Change: We as I mentioned before we continue to look at all product lines. So that's always a part of the process.

Speaker Change: Okay.

Swami Kotagiri: And then just a second question, as you think about tariffs, and I hate to harp on this. Yesterday, the Customs Border Patrol, they put out a sort of a notice that seems to be an indication that USMCA-compliant parts are going to remain on tariff beyond sort of the 90-day review, would certainly be on May 3rd, and it seems like that may be in perpetuity. I'm just curious what you're hearing there, and if that's a correct interpretation, because that would create some pretty extreme relief for you guys here, at least in North America. Yeah, John, I read that report and you're absolutely right.

Speaker Change: And then just a second question as you think about tariffs and I hate to harp on this yes.

Speaker Change: Yesterday, the customer's border patrol that they put out a sort of a notice.

Speaker Change: It seems to be an indication that U S. MCA compliant parts are going to remain on tariffs beyond sort of the 90 day review, which certainly beyond may 3rd and it seems like that may be in perpetuity I am just curious what your.

Speaker Change: Hearing there and if thats correct interpretation, because that would create some pretty extreme relief for you guys here at least in North America.

Speaker Change: John.

Speaker Change: Report and Youre, absolutely right I think.

Swami Kotagiri: I think I mentioned in the call, we are about, that's where the focus has been. We have had work streams looking at, you know, in intricate detail of every part that, you know, crosses the border. We are about between 75 to 80% USMCA compliant, a lot of discussions on how to take that percentage up. Yes, definitely. That gives a lot more certainty and relief in our planning process and that is the assumption that we're going with and hope to get some more clarity and certainty on that decision.

Speaker Change: I mentioned in the call we had about that.

Speaker Change: Thats, where the focus has been we have had work streams looking at.

Speaker Change: Intricate detail up every part.

Speaker Change: No.

Speaker Change: Crosses the border we had about between 75% to 80% Usmc compliance a lot of discussions on how to take that percentage up.

Speaker Change: Yes, definitely that gives us a lot more certain at the end of the lease.

Speaker Change: Our planning process.

Speaker Change: And that is the assumption that we are growing with and hope to get some more traffic Dms certainly beyond that.

Swami Kotagiri: And maybe just to follow on that, I mean, as far as schedule changes and program launch changes, what have you heard from automakers so far? It seems like everybody's kind of trying to plow, you know, ahead without making significant changes yet. Have you seen big changes in short-term schedules or potential program launches for the second half of this year or maybe even into next year? John, we have not, not just looking at releases. So first, to address the releases, right, April seemed pretty aligned with our planning. May, from a visibility perspective, also looks normal, but we always have been thinking about depending on any announcements that might change pretty quickly.

Speaker Change: And maybe just to follow on that I mean as far as schedule changes.

Speaker Change: And program launch changes.

Speaker Change: Have you heard from automakers. So far it seems like everybody is kind of trying to plough ahead without making significant changes yet have you seen big changes in short term schedules or potential program launches.

Speaker Change: The second half of this year or maybe even into next year.

Speaker Change: John we have not not just looking at resist so cost.

Speaker Change: Thirdly, the strike April seem pretty aligned with our planning.

Speaker Change: From a reasonably perspective also looks normal, but we always have been thinking about depending on.

Speaker Change: Any announcements that might change pretty quickly, but as we see today it looks pretty aligned.

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

Speaker Change: And obviously, we don't stop just by looking at.

Speaker Change: The data here, we have been.

Speaker Change: Conversations with Oems at least two or three times a week at my level, even do get a.

Speaker Change: Understanding and not dependent only on their end users.

Speaker Change: Overall, we have not seen any changes in terms of planning in terms of production schedules.

Speaker Change: At least from the programs that we had in August but even at a macro level. We are not seeing a lot of discussions on how to get more U S. MCA compliance for sure, but that's great.

Speaker Change: That chip spoke today.

Swami Kotagiri: And then just just lastly, China seems like it's showing some relative strength and absolute strength relative to expectations. Can you just remind us of your of your footprints or your mix of customers, their domestic Chinese OEMs versus international? Yeah, it happens to be we were in China about just three weeks ago. About five and a half billion dollars of revenue is from China. Of that, just about over 60-65% of the business is with Chinese OEMs. And they are, I would say, largely, John, with five to six customers, the major Chinese OEMs there. If you remember, we started in China predominantly with all the Western OEMs and we've been able to move that mix from 10% to 65 plus percent or in that range today.

Speaker Change: And then just just lastly, China seems like it's showing some relative strength in absolute strengths relative to expectations can you just remind us of your of your footprint or your mix of customers they're domestic.

Speaker Change: Chinese Oems versus international.

Speaker Change: Yes.

Speaker Change: Happens to be bigger in China, just three weeks ago.

Speaker Change: About <unk> $5 billion of our revenue is from China.

Speaker Change: Then just about over 60% 65% of the business.

Speaker Change: He is with Chinese Oems.

Speaker Change: They are I would say largely John with five to six customers.

The major Chinese Oems there if you remember we started in China predominantly with all the rest and Oems and we have been able to.

Speaker Change: I move that mix from 10% to 65% or in that range. Today. So we continued to gain traction even last year, we grew at 15%.

Swami Kotagiri: So, we continue to gain traction. Even last year, we grew at 15%, you know, in China compared to the roughly 5% that China market was growing. So, we feel pretty good about it. We are deliberate which product, which customer, but we continue to gain or improve our mix there. I thought just about a year ago that was 50-50. It didn't go that quickly. No, John, your numbers are correct. We continue to make good progress and have track. Great.

Speaker Change: In China compared to the roughly 5% of the China market was growing so we feel pretty good about it we are deliberate reached product reach customer, but we continue to gain.

Speaker Change: Improve our mix there.

Speaker Change: So let me ask just about a year ago that was 50 50, I mean did it move that quickly or was my number yes.

Speaker Change: It did with John.

Speaker Change: Your numbers are correct, we continue to make good progress and have traction.

John Murphy: Thank you very much, guys. John. Thanks, John.

Speaker Change: Great. Thank you very much guys.

Speaker Change: Thanks, Sean.

Tamy Chen: And your next question comes from the line of Tamy Chen with BMO Capital Markets.

Speaker Change: And your next question comes from the line of Tami Chen with BMO capital markets. Please go ahead.

Tamy Chen: Tamy, please go ahead. Hi, good morning. Thanks for the question. First, I just wanted to clarify. So, Swami and Pat, the annualized tariff exposure this year, you said $250 million. So, am I to interpret that is essentially the COGS exposure from you importing into your U.S. plants parts from Canada and Mexico? And are you saying this number you believe you would get 100% recovery from your customers?

Speaker Change: Hi, good morning, Thanks for the question.

Speaker Change: First I just wanted to clarify so.

Speaker Change: So on the impact the annualized tariff exposure. This year, you said $250 million. So so much interpret that as essentially.

Speaker Change: Cogs exposure of sudden you inputting into your U S plans.

Speaker Change: Parks from Canada, and Mexico and are you seeing this this number you believe you would get a 100% recovery from your customers.

Swami Kotagiri: So Tamy, good morning. First, yes, what you said, there are 250 million we are talking about where we are the importer of record protects beyond Canada and Mexico, China and Europe, although those numbers are smaller, but it's a very comprehensive. second you Obviously, our first initiative is to mitigate that as much as possible with all our internal actions, resourcing, rebalancing, continuing to work with our customers to increase the U.S. compliance. Some of it might need design modifications or validations or, you know, the production part approval process. And we are working with them and will continue to.

Tommy: So Tommy good morning.

Tommy: Yes, what you said there are $250 million, we are talking about.

Tommy: For growth record cortex.

Tommy: Canada, and Mexico, Canada, and Central China, and whatnot, China and Europe, although those numbers are smaller, but its a very comprehensive.

Tommy: Second.

Tommy: Obviously, our first.

Tommy: The initiative is to mitigate that as much as possible with all of our internal actions.

Resourcing rebalancing continuing to work with our customers to increase the U S.

Tommy: Some of it might need Eric design.

Tommy: Applications are validation.

Tommy: The production part of the approval process and we are working with them and we'll continue to do so now anything that is remaining past all of those efforts, yes, our intent is to pass it onto the customers timing.

Swami Kotagiri: So all those efforts, yes, our intent is to pass it on to the customers.

Tommy: Yes.

Swami Kotagiri: Okay, understood. And yeah, on that, with respect to increasing USMCA compliance, and also I'm curious if at this point, well, I think first of all, you said a lot of discussions around that, you know, increasing USMCA compliance with your customers. I'm also wondering, most recently after we've got a little bit of relief and clarity earlier this week, do you believe your customers may be thinking more about increasing US content, not just USMCA compliance? And can you talk a little bit more about between the two of them? What that means for you, incremental capital investments? What do you, you know, what do you need to do?

Tommy: Okay understood.

Tommy: Yes on that.

Tommy: With respect to increase in the U S. One pay compliance and also I'm curious.

Tommy: At this point well I think first of all you said lot of discussions around that increasing U S. MCA compliance with your customers.

Tommy: I'm also wondering.

Tommy: Most recently after we've got a little bit of relief in clarity earlier. This week do you also believe your customers may be thinking more about encouraging U S contact not just U.

Tommy: U S. MCA compliance can you talk a little bit more about between the two of them.

Tommy: What that means for you incremental capital investment what do you what do you need to do how does that impact you wish both of those things continue from here.

Swami Kotagiri: How does that impact you if both of those things continue from here? Yeah, I think Tamy, it's only fair to say that all scenarios have are being considered. But from what we're hearing, given in my discussions, I think it is not a knee jerk reaction. Given the capital allocation and the magnitude of what's being discussed, they're looking at very carefully. If there is a rebalancing possible, I think that is the first option. If there is a resourcing, that is also an option. I haven't heard in all the discussions that I'm having with all the customers that anybody is looking at a knee-jerk reaction.

Tommy: Yes, I think tammi its only fair too.

Tommy: Say that all scenarios are being considered.

Tommy: From what we are hearing given in my discussions I think it is not a knee jerk reaction.

Tommy: Given the capital allocation and the magnitude.

Tommy: What's being discussed there.

Tommy: King it very carefully.

Tommy: If there is a rebalancing possible I think that is the first option. If there is a resourcing that is also an option.

Tommy: I haven't heard in all the discussions that I'm, having with older customers.

Tommy: If anybody is looking at <unk>, they're looking at it and they've been very collaborative sharing data with us.

Swami Kotagiri: They're looking at it, and they've been very collaborative in sharing data with us. So that's on one side of things.

Tommy: So that's <unk>.

Tommy: One side of things Magna has their footprint.

Swami Kotagiri: Magna has a footprint in Canada, in Mexico, and in the United States. As you can imagine, there is not. capacity available at any point of time. But is there a possibility of rebalancing some of the things? Yes, that we continue to look at. But again, we cannot do it unilaterally. We have to work with our customers to make those changes. So that's that's how we are proceeding to mitigate any impacts that are there.

Tommy: In Canada and Mexico.

Tommy: United States.

Tommy: As you can imagine there is not.

Speaker Change: Capacity available at any point of time, but is there a possibility of rebalancing Solomon. Thanks.

Speaker Change: Yes that we continue to look at but again, we cannot do accumulate seed them to work with our customers.

Speaker Change: To make those changes.

Speaker Change: So that's how we are proceeding to mitigate any impacts that are out there.

Speaker Change: Okay.

Tamy Chen: Okay, got it.

Speaker Change: Okay got it and my last question is on your share buyback.

Tamy Chen: And my last question is on your shared buyback. Could you confirm at this point, I think you'd said earlier that a month or so ago, you've paused it. I just want to understand at this point, how are you thinking about the buyback? Is that still on pause given the macro uncertainty? Is it also related to where your leverage currently is at and where you expect that going forward? Thanks. So, Tamy, yes, you're right. We talked about pausing, and we've always talked about it as a strategy, right, in managing our balance sheet. To answer your question very directly, yes, it is paused given the uncertainty that we have in the market.

Speaker Change: You confirm at this point I think you had said earlier.

A month or so ago, you've paused. It I just wanted to understand at this point how are you thinking about the buyback is that still on pause given the macro uncertainty as it also related to the leverage currently is at and where you expect that going forward. Thanks.

Speaker Change: So Tommy Yes, you are right, we talked about pausing.

Speaker Change: We have always talked about it as a strategy right in <unk>.

Speaker Change: Managing our balance sheet to answer to your question related to equity Etfs. It has passed given the uncertainty that we have in the market, but as you know we had the NCI be about to purchase 28 5 million shares approximately.

Swami Kotagiri: But as you know, we had the NCIB about to purchase 28.5 million shares approximately. If uncertainty goes away and there is a lot of clarity, there is always the possibility to look at it later in the year. For now, given where the market is and given where uncertainty is, yes, we are pausing.

Speaker Change: Uncertainty goes away and there is a lot of clarity there is always the possibility to nook made.

Speaker Change: Later in the year for now given where the market is and given the uncertain. It is yes, we have a pause.

Pat McCann: Thank you. But also, Tamy, the leverage ratio, as Pat mentioned, is on track, and, you know, we continue to make good progress as discussed, and I think we're just a little bit ahead compared to where we're planning, as Pat mentioned in the comments. Great, thank you.

Speaker Change: Thank you Ed.

Speaker Change: The leverage ratio as Pat mentioned is on track.

Speaker Change: We continue to make good progress as discussed and I think we're just a little bit ahead compared to where we are planning as Pat mentioned in the comments.

Speaker Change: Okay.

Speaker Change: Great. Thank you.

Speaker Change: Okay.

Dan Levy: And your next question comes from the line of Dan Levy with Barclays Dunn. Please go ahead. Hi, good morning. Thanks for taking the question. Wanted to first just ask on advanced programs, launch activity, what have you seen there? Has there been any change in the activity or behavior of automakers on this front? Maybe you can just, you know, conclude in that. And what's the tone and tenor of commercial discussions with the audience?

Speaker Change: And your next question comes from the line of Dan Levy with Barclays. Please go ahead.

Dan Levy: Hi, good morning, Thanks for taking the question.

Dan Levy: Wanted to first just ask on advanced program launch activity.

Dan Levy: What have you seen there has there been any change in.

Dan Levy: The activity or behavior automakers on this front.

Dan Levy: Maybe you could just including that and whats the tone and tenor of commercial discussions with the automakers right now.

Swami Kotagiri: Good morning, Dan. From an overall planning launch perspective, we have not seen any change, right? But in terms of sourcing, there is a lot of scenarios being discussed and thought through. And I think we are fortunate in a way to say that most of our major customers have had discussions with us because of the footprint and capacity and our ability. So we are getting a viewpoint on that. So I wouldn't say it has slowed, but I think there is deliberation on the footprint and the cadence of the decision making. But we are not really seeing a change in what we are going after in terms of business and how it's being sourced.

Speaker Change: Good morning, Dan.

Speaker Change: From a overall planning.

Speaker Change: Launch perspective.

Speaker Change: We have not seen any change right but.

Speaker Change: In terms of sourcing there is a lot of scenarios being against cost and talked through.

Speaker Change: And I think we are fortunate in a way to say that most of our major customers have been discussions with us because of the footprint and capacity and our ability. So we are getting a viewpoint on that so I wouldn't say it has slowed but I think there is deliberation on the footprint and the <unk>.

Speaker Change: Cadence so.

Speaker Change: The decision, making but we have not really seen.

Speaker Change: A change in what we're going after in terms of business and how it's being sold.

Dan Levy: Okay, thank you.

Speaker Change: Okay. Thank you.

Swami Kotagiri: And then as far as the complete vehicle segment, if you could just give any color on the outperformance in the quarter, but also how should we assess the risk for complete vehicles given G-Wagon is a central program and there's Some questions on the demand in the tariff environment as those are all exported. Yeah, Dan, I think part of the performance has been based on how our complete vehicle assembly segment has the terms, right? So there is commercial recoveries as volumes go, you know, change because of how the terms are there. So that's one. And over the last year, we've been talking about restructuring and getting the cost structure of that facility to the current volume scenarios and the programs that we have had.

Speaker Change: And then as far as the complete vehicles segment.

Speaker Change: If you could just give any color on the outperformance in the quarter, but.

Speaker Change: Also how should we assess the risk for complete vehicles given G wagon.

Speaker Change: Our central program.

Speaker Change: Some questions on the demand.

Speaker Change: In the tariff environment those are all export it.

Speaker Change: Yes.

Dan Levy: Dan I think part of the outperformance has been.

Speaker Change: Based on how our complete vehicle Assembly segment has the term strike. So there is commercial recoveries.

Dan Levy: As volumes go chase.

Dan Levy: Change because of how the terms aren't there so thats one.

Dan Levy: And what was the last year, we've been talking about restructuring and getting the cost structure of scent.

Dan Levy: Facility.

Dan Levy: The current volume scenarios in the program.

Swami Kotagiri: We talked about some of the programs ending and some coming to an end in the 2026 towards the end of 26. So we have proactively taken steps to restructure the cost base and we continue to see that flow through. On the Mercedes G-Wagon, I won't comment for our customers, obviously, but you've seen the public statement of holding the price. But if there is a demand reduction for that vehicle in North America, I'm sure there will be an impact. But you've got to keep in mind the. margin profile of that business is substantially lower than the normal magma average.

Dan Levy: You talked about some of the program spending and some coming to an end.

Dan Levy: 2026 towards the end of 2006, so we have proactively taken steps to.

Restructured the cost base and we continue to see that flow through.

Dan Levy: On the Mercedes G bag, and I won't comment for our customer sub USD, but you've seen the public statement of bold.

Dan Levy: <unk> the price.

Dan Levy: But if there is a.

Dan Levy: Demand reduction for that vehicle in North America.

Dan Levy: I'm sure there will be an impact, but you got to keep in mind there.

Dan Levy: Margin profile of that business is substantially lower than the normal Magnum average.

Pat McCann: The only other thing I'd add, Dan, is it comes back to the contracts while he's talking about their fixed recoveries in it. So even if the volumes fall, we do have that fixed recovery for Carlos. And we continue to have discussions, as mentioned, with different OEMs for getting on additional programs and they seem, I would say, pretty encouraging, Dan.

Dan Levy: The only thing I would add Dan is that comes back to the contracts while he's talking about there are fixed recovery.

Dan Levy: So even if the volumes fall we can have that.

Dan Levy: Coverage, regardless and we continue to.

Dan Levy: Discussions have mentioned.

Dan Levy: Different Oems.

Dan Levy: Or.

Dan Levy: Gating on additional programs.

Dan Levy: I would say pretty encouraging them.

Dan Levy: Okay, thanks. If I could just squeeze one in just to clarify, the pieces of the business that are not USMCA compliant, those are which products are in which segment? Dan, I think it's a cross. We haven't seen any significant point to make on one specific segment, right? I would say it's all across, but there is Not a marked difference from one to the other, so it's kind of a cross magna. Great, thank you.

Speaker Change: Okay. Thanks, if I could just squeeze one in just to clarify the pieces of the business that are not U S. MCA compliant.

Dan Levy: Saar, which products or which segment.

Speaker Change: Dan.

Dan Levy: It's across and we haven't seen any significant point to make on one specific segment I would say it's all across.

Speaker Change: But.

Speaker Change: Not a marked difference from one to the other so it's kind of across Magna.

Speaker Change: Great. Thank you.

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

Speaker Change: And your next question comes from the line of Doug <unk> with Evercore ISI Doug. Please go ahead.

Doug: Yeah, Hey, Thanks, Hey, Tim just looking at the body and exterior segment here margins were particularly weak they were down from most of last year from all of last year actually.

Speaker Change: I understand there is some FX volume effect there, but in terms of timing is this likely to be a first half or first quarter phenomenon.

Speaker Change: Or is this something that could persist with the uncertainty that we're seeing how do you see those margins progressing throughout the course of 'twenty five.

Doug Dutton: Hi Doug, it's Judge Stroup, I forgot my numbers here, but I think your thesis, broadly speaking, is correct. You know, we're operating where we expected to operate in the BES group. So we came in at and an event number of 5.8%. We're seeing that increase as we progress through the year, and it would be consistent with what we had seen last year. Remember, we're still in a situation where a lot of our commercial deliveries tend to be recovered in the back half of the year. That's probably going to be amplified this year, given all the volume uncertainty.

Doug: Hi, Doug its past scrap correct my numbers here.

Speaker Change: Your thesis broadly speaking is correct.

Speaker Change: We're operating where we expect it to operate in the Pds group. So we came in at.

Speaker Change: An EBIT number of five 8% were seeing that increase.

Speaker Change: As we progressed through the year and it would be consistent with what we had seen last year remember, we're still in a situation where a lot of our parcel up rates tend to be recovered in the back half of the year.

Speaker Change: That's probably going to be amplified this year, given all of the volume uncertainty.

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

Speaker Change: So I think we're still expecting.

Speaker Change: Strong margin performance in Q4.

Speaker Change: <unk> to the first three quarters of.

Speaker Change: Of the year, so it might be a cadence, but operationally and foundational lead this segment.

Speaker Change: Really doing well and continues to perform at the level of debt.

Speaker Change: Tennessee.

Speaker Change: No difference in the operations from where we had last year versus now except volume and not.

Speaker Change: Just talked about.

Doug Dutton: Okay, that's helpful.

Speaker Change: Okay. That's helpful. And then that's a good segue into my next question here on Slide 17, you mentioned those tariff costs that had been paid and not recovered from customers as a headwind is this going to be the norm going forward, where those tariff costs are treated similarly to your cost recoveries from your customers basically it's magna fronting.

Pat McCann: And then that's a good segue into my next question here. On slide 17, you mentioned those tariff costs that have been paid and not recovered from customers as a headwind. Is this going to be the norm going forward where those tariff costs are treated similarly to your cost recoveries from your customers? You know, basically, it's Magna fronting any incremental costs, and then you will be reimbursed in the future. Is that the correct way to think about this incremental tariff cost? Yeah, I think, Doug, this is an accounting issue. It's not really the commercial side of it.

Speaker Change: And the incremental cost and then you will be reimbursed in the future is that the correct way to think about this incremental tariff cost.

Speaker Change: Yes, I think Doug. This is an accounting issue, it's not really the commercial side of it under the accounting rules until you have a legal agreement with your customer for coverage you have to expense those costs.

Pat McCann: Under the accounting rules, until you have a legal agreement with your customer to recover it, you have to expense those costs. The costs in the corridor are about $10 million gross, for perspective. Obviously, we're pushing to close as quickly as we can, but that is expect that same cadence as other commercial.

Speaker Change: Costs in the quarter were about $10 million.

Speaker Change: Offer perspective.

Speaker Change: Obviously, we're pushing it.

Speaker Change: Those as quickly as we can but that is expect that same cadence as all the commercial.

Pat McCann: Awesome. Thanks, team.

Dave: Awesome. Thanks, Dave.

Pat McCann: Thanks Valiant Steps.

Speaker Change: Thanks, Dan Thanks, Doug.

Okay.

Joe Spak: And your next question comes from the line of Joe Spak with UBS.

Speaker Change: And your next question comes from the line of Joe Spak with UBS Joe. Please go ahead.

Joe Spak: Joe, please go ahead. Thank you, everyone. And thanks for the the tariff impact color. Sorry to go back to this. I just want to understand some of the math here. The $2 billion of goods that cross the border. I get, you know, 25% of that's the 500 million. Then you're saying 25% of the parts are non-USMCA compliant. So how do you get to a $250 million impact? Is that because The compliance, that percentage you gave is parts-based, not dollar-weighted, so you really mean only half the dollars are exempt? And then just to be very clear, I know you're not assuming any volume impact, but in the guidance, are you assuming in the revenue guidance that you recover that 250, I'm sorry, the the half of that on an annual basis.

Joe Spak: Thank you everyone and thanks for the tariffs impact color.

Speaker Change: Sorry to go back because I just wanted to understand.

Joe Spak: Some of the math here, the 2 billion of goods.

Joe Spak: That cross the border I get 25% of that is the $500 million. Then you are saying 25% of the parts are non youll. Some say compliant. So how do you get to a $250 million impact is that because.

Joe Spak: The compliance.

Speaker Change: Percentage, you gave us part space not dollar weighted so you really mean only half the dollars are exempt.

Speaker Change: And then just to be very clear I know youre, not assuming any volume impact but in the guidance are you assuming in the revenue guidance that you recover that 250 I'm sorry.

Speaker Change: The half of that on an annualized basis.

Swami Kotagiri: So I think to clarify, right in the map, there is also remission programs from governments, right, for example, on the Canada, so that would offset some of the things that are there. And net of that remission is how you get to the 250 approximate number that you're seeing, Joe, and we are not including the volume impact, right? Is that your question? Well, yeah, the remissions would help further, right? I guess what I'm saying is just very simple math. If you're saying, you know, 500 across. The remissions are included is what I'm saying after remissions. We are having the 250.

Speaker Change: So I think.

Speaker Change: To clarify writing the math.

Speaker Change: There is also a emission programs from government stripe for example on the Canada, So that would offset some of the things that are out there.

Joe Spak: And net offset to our mission is how you get to the 250 approximate number that youre seeing Joe.

Joe Spak: And we are not including the volume impact is that to your question.

Joe Spak: Yes, sorry <unk>.

Joe Spak: The remissions would help further right I guess, what I'm, saying is very simple math, if youre, saying no note 500 carrying cost.

Speaker Change: Remington Turing Cuda is what I am saying after emissions.

Joe Spak: Having the $2 50.

Swami Kotagiri: Alright, maybe we could take it offline. But because again, if 25% is not compliant. I would have thought the impact would have been 125 before remissions and remissions would bring it down further.

Joe Spak: Maybe you could take it offline but.

Because again.

Joe Spak: It's 25% does not compliance I would've thought the impact would have been $1 25 before remissions in remission to bring it down further.

Swami Kotagiri: I think Joe, we can take it offline. But don't forget that it's not all 25% across the board. We are importing parts from China and other parts of the world that have a higher tariff than 25%. Fair enough. Okay. Oh, sorry, go ahead.

Joe Spak: I think Joe we can take it offline.

Joe Spak: Yes.

Speaker Change: Don't forget that it's not all 25% across the board we are important parts from China and other parts of the world that have a higher cure at 25% fair enough. Okay, and then I know that the Permian question, Yes.

Joe Spak: Okay.

Joe Spak: All positive.

Joe Spak: Oh, sorry go ahead sorry.

Swami Kotagiri: Sorry, no, you also asked about the revenue. I know the volume of impact from tariffs not included, but is the recovery of that, you know, let's say three quarters of that 250 included in the revenue out? We've we've assumed in our work that at the EBIT level, we have zero impact from tariffs, any residual, it's going to be recovered from the customer. It's not included in rep. It's just as a cost recovery. Okay. So it's not in the revenue, but then you assume, but in reality it would be, but then it's zero impact. I can't, it's going to depend, Joe, on how we structure those agreements with the customer.

Joe Spak: Sorry, you also asked about Oh, sorry.

Joe Spak: The volume impact from tariffs not included but is the REIT.

Joe Spak: Hover.

Joe Spak: That lets say three quarters of that $2 50 included in the revenue outlook.

Joe Spak: We've assumed in our outlook that at the EBIT level, we have zero impact from tariffs just any residual.

Joe Spak: Could it be recovered from the customer it's not included in revenues.

Joe Spak: It's just as a cost recovery. Okay. So it is not in the revenue, but then you assume but in reality it would be but then it's zero impact to EBIT.

Joe Spak: Okay.

Joe Spak: It's going to depend Joe on how we structure those agreements with the customer it's going to be more complicated than we could answer just yet.

Swami Kotagiri: It's going to be more complicated than we can answer just yet.

Pat McCann: Okay. And then I guess just on the, you know, when you look at some of the margin revisions by segment, you know, it was mostly in BS and seeding, and I know Swami just said the tariff impact is um you know mostly uh or across sort of all all segments so is that really just uh a result of um some of the the softer one cue result So I, I, I am. Just broadly speaking, Joe, if you look at the revenue changes from our outlook in February to our current outlook midpoint to midpoint we're seeing roughly about a $1.5 billion increase just related to bond exchange.

Joe Spak: Okay.

Joe Spak: And then I guess just on the when.

Joe Spak: When you look at some of the margin.

Joe Spak: Revisions by by segment.

Joe Spak: It was mostly in MBS in seating and I know Tom you just said.

Joe Spak: The tariff impact is.

Joe Spak: Mostly.

Joe Spak: Across sort of all segments. So is that really just a result of.

Joe Spak: Some of the softer <unk> results.

Joe Spak: Alright.

Joe Spak: Just broadly speaking Joe when you look at the revenue changes from.

Joe Spak: Our outlook in February to our current outlook midpoint to midpoint, we're seeing.

Joe Spak: Roughly about a $1 $5 billion increase is related to foreign exchange and thats spread out quite <unk>.

Pat McCann: And that's spread out quite evenly across our four sectors. When you look at the pure volume declines, as you know, just manufacturing activity, the bulk of that decline is in BES, and we're seeing weakness in seeding. And the seeding is primarily related to announced shutdowns in April and May already.

Joe Spak: We've only across our.

Joe Spak: Both segments.

Joe Spak: When you look at the pure volume declines.

Joe Spak: Manufacturing activity the bulk of that decline.

Joe Spak: And we're seeing weakness in seeds and seeding those primarily related to announced shutdowns.

Joe Spak: In April and May already.

Joe Spak: Okay I appreciate it thank you.

Joe Spak: Okay, I appreciate it, thank you. Welcome.

Joe Spak: Welcome.

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

Speaker Change: And your next question comes from the line of Adam Jonas with Morgan Stanley Adam. Please go ahead.

Adam Jones: Thanks Swami and Pat and everybody I wanted to offer my condolences for the loss of Vince. He was a really talented, kind humorous and gentle soul who left the world a better place than he found it and I was lucky enough to know him. His memory is a real blessing and I think if you were listening to this call from up above, he'd be saying, you know, just alright, back to work, keep your head down and get through the challenges and the opportunities of the day and I think he would have great confidence in the team and I just wanted to offer my condolences to the Magna family and his own family and children as well and that's all I want to say.

Adam Jonas: Thanks, Swamy, and Pat and everybody I wanted to offer life if.

Adam Jonas: My condolences for the loss events.

Adam Jonas: Was a really talented tie ins here.

Adam Jonas: Morris and gentle fall, who left the world a better place for <unk>.

Adam Jonas: So I was lucky enough to know him.

Adam Jonas: His memory is a real blessing.

Speaker Change: We're also listen to this call.

Adam Jonas: Bob.

Adam Jonas: Alright that door dash.

Adam Jonas: Hello.

Adam Jonas: What are the challenges on the Apple changed in a day and I think he would have great confidence in the team.

Adam Jonas: I just wanted to offer my condolences to the Magna, formerly Amazon formally in children.

Adam Jonas: Children as well and that's all I want to say I don't have any questions.

Adam Jones: I don't have any questions, so get back to the call. Thank you. Thanks Adam. Thank you Adam, I appreciate it.

Adam Jonas: Back to the call. Thank you.

Speaker Change: Thank you Adam I appreciate it and pass it onto Joanne and the family.

Louis Tonelli: We'll pass it on to Joanne and the family.

Louis Tonelli: And your next question comes from the line of James Picariello with BNP Paribas. James, please go ahead. All right. Good morning, everybody. My question is on, Mr. Swamy, you mentioned in your prepared remarks that the 1Q exceeded internal expectation. and the 2025 EBIT range is unchanged. Just curious, do you still expect the first half to represent about 40% of the full year? All right, this would imply something, you know, modestly above 500 million for the second quarter. I know tariffs, the timing of recoveries could swing the answer, but if you were to get full recovery in the second quarter, which I don't think is, I don't, you know, I imagine is pretty reasonable given that the parts rebate mechanism is now in place for OEMs and given Magna's, you know, critical role as a supplier to your customers.

Speaker Change: And your next question comes from the line of James Picariello with BNP Paribas James. Please go ahead.

James Picariello: Hi, good morning, everybody.

Speaker Change: My question is.

Speaker Change: Swamy you mentioned in your prepared remarks is that the <unk> exceeded internal expectations.

Speaker Change: And the 2025 EBIT range is unchanged just curious do you still expect the first half to represent about 40% of the full year alright. This would imply something modestly above $500 million for the second quarter.

Speaker Change: No tariffs and the timing of recoveries could swing the answer but if you were to get full recovery in the second quarter.

Speaker Change: I don't think I don't know Matt.

Speaker Change: June is pretty reasonable given that the parts rebate mechanism is now in place for Oems and given magna's critical role as a <unk>.

Speaker Change: As a supplier to your customers.

James Picariello: Just, you know, how are you thinking about that 40-60 split?

Speaker Change: Or are you thinking about that 40 60 split.

Swami Kotagiri: I think, James, the simple answer is yes, based on all the visibility that we have, April behind us, and, you know, unless something drastically changes, and nowadays that seems to be happening, I would say the 40% in the first half, 60% in the second half is still a good assumption. Yes. Got it.

James Picariello: I think James the simple answer is yes.

Speaker Change: Based on all the visibility that behalf.

Speaker Change: And us and <unk>.

Speaker Change: Unless something drastically changes noticed that seems to be happening.

I would say the 40% in the first half 60 in the second half is still a good assumption yes.

Speaker Change: Got it. Thank you and then my follow up is just on.

James Picariello: Thank you.

James Picariello: And then my follow up is just on on on buybacks. I think it was mentioned at a, you know, Magna mentioned at a at a recent conference. that typically when you get the authorization for buyback, a company would typically want to buyback at least half of the authorization. That was something, again, mentioned at a conference, you know, not necessarily my words. Just wondering if volumes overall for the industry you know, hang in, you get, you know, you get full recovery or most recoveries for the tariff exposure that you have. Is that, you know, is that kind of the target, you know, at least half of this authorization gets done this year?

Speaker Change: On buybacks I think it was mentioned that day.

Speaker Change: Yes.

Speaker Change: Magna mentioned at a recent conference that typically for the when you get the authorization for buyback.

Speaker Change: You want to.

Speaker Change: Our company would typically want to buyback at least half of the authorization.

Speaker Change: That was something again mentioned.

Speaker Change: At a conference.

Speaker Change: Necessarily my words.

Speaker Change: Wondering.

Speaker Change: If volumes overall for the industry.

Speaker Change: Hanging in you get you get full recovery or most recoveries for the tariff exposure that you have is that is that.

Speaker Change: Is that kind of the target.

Speaker Change: At least half of this authorization gets done this year.

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

Speaker Change: I don't know about the comment of a behalf.

Speaker Change: The only thing James it from us but.

Speaker Change: Like I said, when we look at share repurchases, we always looked at it as a tool to give.

Speaker Change: <unk> excess liquidity back to our investors and shareholders, but.

Speaker Change: But the most important thing is.

Speaker Change: Operationally, how do you maintain liquidity and have the balance sheet and look at.

Speaker Change: Possible programs.

Speaker Change: And.

Speaker Change: Opportunities even that come up in the normal course drive additional volume.

Speaker Change: Programs from others.

Speaker Change: Places that customers might reach out to us.

Speaker Change: In terms of uncertainty like this.

Swami Kotagiri: Beyond that, and that's the reason why we said we are paused. We have to see if everything returns back to normalcy. We would still go back to the NCIB authorization that we have, and we have to assess, you know, our surplus at that point of time, given we are still tracking the way we wanted to for our leverage ratio. I wouldn't say it's half, or our intent when we start is to say we want to get as close as to the NCIB as possible, right? Our intent is always that. And you're set.

Speaker Change: Beyond that and that's the reason why we said we have passed.

Speaker Change: We have to see a favorable grid tons back to normalcy, we would still.

Speaker Change: Go back to the in CIB authorization that we have and we have PSS.

Speaker Change: Sure.

Speaker Change: Surplus at that point of time, given we are still tracking the way we wanted to put our leverage ratio I wouldn't say, it's half or our intent when we start to use <unk>.

Speaker Change: We want to get as close as to the CIB as possible.

Speaker Change: Our intent has always been.

Speaker Change: Understood. Thank you.

Swami Kotagiri: Thank you.

Shreyas Patil: And your next question comes from the line of Shreyas Patil with Wolf Research. Shreyas, please go ahead. Hey, thanks so much for taking my questions.

Speaker Change: And your next question comes from the line of Shai <unk> with Wolfe Research. Please go ahead.

Shai: Hey, Thanks, so much for taking my questions and my condolences to Vince and his family.

Shreyas Patil: And my condolences to Vince and his family. Wanted to maybe just come back to the guidance for this year. I understand it does not reflect tariffs, but Just to confirm, you have revised it for the latest FX assumptions. I guess just looking at the URL, for example, that alone would be maybe a 650 million benefit to revenue for this year, or 35 million or so to EBIT, Canadian dollars, another benefit. And so is that correct? And if so, can you maybe just expand on the offset that you mentioned? I think there was some headwinds on key programs that you noted.

Shai: Wanted to maybe just come back to the guidance for this year I understand that does not reflect tariffs but.

Shai: Just to confirm you have revised it for the latest FX assumptions could I guess just looking at the Euro for example that alone would be maybe a $650 million benefit to revenue for this year at $35 million or so the EBIT Canadian dollars and other benefit and so is that correct and if so can you maybe just expand on the <unk>.

Shai: That you mentioned I think there were some headwinds on key programs.

Shai: That you that you noted.

Swami Kotagiri: So good morning, Shreyas. I think the effects, what we have taken is as dollar stands with respect to euro and Canadian dollar today, right, which is how we do every time. I don't know the exact number or how much of that is in Europe. Some of it is in Steyr, some of it is in Europe, for sure. And perhaps maybe I think we'd have to break it down. But just broadly speaking. The FX impact, including Q1, is $1.5 billion. Right. That's the role. Then the offsets are primarily where we're seeing some volume. Remember, just broadly speaking, our volumes in North America are down just over 100,000 units, and that's primarily impacting our BES segment and our seeding segment.

Shai: So good morning shifts I think.

Speaker Change: The effects, what we have taken is as Douglas <unk> with respect to Euro and Canadian dollar today, right, which is how we do every time.

Shai: I don't know the exact number for how much of that is in Europe. Some upward his entire somewhat produced in Europe for sure.

Speaker Change: B.

Speaker Change: We'd have to break it down but just broadly speaking.

Speaker Change: The FX impact, including Q1, it's about $1 $5 billion.

Speaker Change: First of all then the offsets are primarily where.

Speaker Change: Where we're seeing some volume remember just broadly speaking our volumes in North America are down just over 100000 units and Thats, primarily impacting our BNS segment and our <unk> segment.

Swami Kotagiri: And we have taken what we have seen in terms of closures to date. Right. Okay, um, yeah, so just just so basically revenues up a billion and a half on FX and then it's all set by And then maybe if you could help us just understand mechanically the process by which you would get recovery from the OEM, because I understand your expectation is to get 100%. I guess what I think about the semiconductor shortage from 21 and 22 is there is a bit of a lag in recovery. Would you expect this time around if you're looking at tariff costs to incur a lag through negotiation or do you feel like because this is an industry-wide problem that the pace at which you could get recovery is much quicker?

Speaker Change: And we have taken what we are seeing in terms of closures to date right.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes. So just just so basically revenues up one 1 billion and a half on FX and then it's offset by.

Speaker Change: Bye Bye bye lower volume that's the primary headwind.

Speaker Change: 95% of the answer correct, yes, okay.

Speaker Change: Okay understood and then just maybe if you could help us just understand mechanically.

Speaker Change: The process by which you would get recovery from the OEM because I understand your expectation is to get 100%.

Speaker Change: I guess, what we've seen in the past.

Speaker Change: I think about the semiconductor shortage from 'twenty, one and 'twenty. Two is there is a bit of a lag in recovery.

Speaker Change: Would you expect this time around if youre looking at tariff costs to incur a lag through negotiation or do you feel like because this is an industry wide problem.

Speaker Change: The pace at which you could get recoveries is much quicker.

Swami Kotagiri: So, Shreyas, even during the semiconductor crisis, yes, there is a little bit of time and it depends. We had three-way conversations. Some of it was directly with the customers. And keep in mind that we recovered pretty much 95 plus percent, if not 100 percent of the semiconductor at that point in time. So, we have a process is what I'm trying to say. And we'll set up a process again similar to what we have. So, would there be a little bit of back and forth in terms of timing? Depends on customer and program and the magnitude of it, but we feel pretty confident.

Speaker Change: So even during the semiconductor crisis, yes, there is a little bit.

Speaker Change: Of time and it depends.

Speaker Change: Three big conversations some of it was directly with.

Speaker Change: Customers and keep in mind that we recover pretty much 95, plus percent if not 100% of fees.

Speaker Change: Semiconductor at that point in time so.

Speaker Change: We have a process.

Speaker Change: What I'm trying to say and we will set up a process again similar to what we have so would there be a little bit of back and forth in terms of timing depends on customer return program and the magnitude opex, but we feel pretty confident.

Swami Kotagiri: And I have to say the customers have been open to discussion and collaborative as we are discussing.

Speaker Change: And I have to say the customers have been.

Speaker Change: Open to discussion and collaborative as we are discussing.

Swami Kotagiri: But, you know, all I have to say is stay tuned. Okay, thanks.

Speaker Change: But.

Speaker Change: I'll have to say stay tuned.

Speaker Change: Okay. Thanks.

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

Speaker Change: And your next question comes from the line of Mark Delaney with Goldman Sachs. Mark. Please go ahead.

Mark Delaney: Yes, good morning, and thank you very much for taking my questions and please allow me to pass my sympathies on to Magna and ventures family on his passing.

Mark Delaney: Thank you very much for taking my questions and please allow me to pass my sympathies on to Magna and Vince's family on his passing. He's very detail-oriented and always quite generous with his time, so he will be... Thank you. I did want to speak a bit on schedules and understand your comments that customer production schedules have been stable.

Speaker Change: A detail oriented and always quite generous with his time. So he will be you will invest for sure.

Mark Delaney: Thank you.

Speaker Change: I did want to speak.

Mark Delaney: I'll speak a bit on schedules and understand your comments that customer production schedules have been stable.

Swami Kotagiri: When you speak to your broader set of customers on their plans, can you help us better understand what they're indicating they'll do with vehicles being exported and now seeing tariffs and help us better understand why there wouldn't be a change to those exported vehicles given the tariff dynamic? And then just overall, as you think about the second half, what's the confidence you have in production schedules tracking in line with your prior view for QE? Mark. It's a little bit of a crystal ball, right? When we made the comments, we are talking about releases that are in the system, and it also depends on what programs and platforms we are on, right?

Mark Delaney: When you speak to your broader set of customers that are on their plans can help us better understand what they are indicating they will do with vehicles being exported and now seeing tariffs and how much I understand why there wouldn't be a change to those export vehicles given the tariff dynamic and then just overall as you think about the second half what's the confidence you have in production schedule is.

Mark Delaney: Tracking in line with your prior view for two H.

Mark Delaney: Mark.

Mark Delaney: It's a little bit of a crystal ball right. When we made the comments we are talking about release of the system and it also depends on them.

Mark Delaney: What programs and platforms, we are on right. So our comments are.

Swami Kotagiri: So our comments are You know, very much dependent on that, and we haven't seen, I would say, any significant change compared to the normal course of going up and down a little bit. You know, what you're talking about is a little bit macro, if there is what 800,000 units that are imported from Europe into North America, because of tariffs, would that have an impact on those 800,000 units? I think so. But difficult to quantify what that would be depending on, you know, What would the customers look at? Keeping the market share, managing pricing for the short term, there's so many variables here, I would not know how to quantify that yet, but our answers are purely based on the data that we are seeing and based on the conversations we are having with our customers on the programs that we are at.

Mark Delaney: Very much dependent on that and we haven't seen I would say any significant change compared to the normal course, so clean up and down a little bit.

Mark Delaney: What youre talking about is a little bit macro if it is about 800000 units that are imported from Europe into North America.

Speaker Change: Because of Paris would that have an impact on those 800000 units I.

Mark Delaney: I think so.

Mark Delaney: Difficult to quantify what that would be depending on.

Mark Delaney: <unk>.

Mark Delaney: With the customers look at.

Mark Delaney: Keeping the market share managing pricing for the short term.

Mark Delaney: Theres so many variables here.

Mark Delaney: I would not know how to quantify that yet.

Mark Delaney: Our answers are purely based on the data that we've seen and based on the conversations we're having with our customers on the programs that we are active.

Speaker Change: Thanks for that color Swamy. My second question was about EBIT margin. The company had been expecting to achieve 75 bps of EBIT margin tailwind over the next two years in total I'm, hoping to better understand if theres been any change in either the magnitude of.

Swami Kotagiri: My second question was about EBIT margins. The company had been expecting to achieve 75 BIPs of EBIT margin tailwind over the next two years in total. I'm hoping to better understand if there's been any change in either the magnitude of savings or the timing of which it may flow through given the current industry background. No, I would say we are on track, right? We talked about roughly 35 basis points in 2025 and similar in 2026. They had visibility for the continuous improvement and other activities. I can tell you the entire organization is focused on all those actions, plus anything else that we have to mitigate.

Speaker Change: Savings or the timing of which it may flow through given the current industry backdrop. Thanks.

Speaker Change: No I would say we are on track, we talked about roughly 35 basis points in 2025 and.

Speaker Change: And similar in 2026.

Speaker Change: We have visibility for the continuous improvement and other activities.

Speaker Change: Can tell you the entire organization is focused on all of those actions plus anything else that we have to mitigate fundamentally.

Swami Kotagiri: Fundamentally, the organization is looking at the cost structure. to be viable and good at the current levels. And as the volume comes back, we are talking flex up to be able to take advantage and get our incrementals to be better. That's the philosophy. That's the mindset in the entire organization. So we feel pretty good into the. Given set of volumes, obviously, you know that has a significant impact. The volumes continue as they are and slowly come back over time and the uncertainty calms down. We feel pretty good about what we're doing now in terms of our actions as well as through 2026, which we are keeping a very close eye on.

Speaker Change: <unk> is looking at the cost structure.

Speaker Change: To be viable and good at the current levels and as the volume comes back we are talking flex pump to be able to take advantage and get our incrementals to be better.

Speaker Change: That's the philosophy, that's the mindset and the entire organization. So we feel pretty good into the.

Speaker Change: Given setup volumes, obviously, you know that has a significant impact as the volumes continue as they are and slowly come back over time and uncertainty.

Speaker Change: Comps down we feel pretty good that we are doing now in terms of collections as well as through 2026.

Speaker Change: Keeping a very close IHOP.

Speaker Change: Okay.

Speaker Change: Thank you.

Jonathan Goldman: And your next question comes from the line of Jonathan Goldman with Scotiabank.

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

Jonathan Goldman: Jonathan, please go ahead. Hi, good morning, guys, and thanks for taking my questions. Most of them have been asked already, but just one for me then, we seem to like vehicle inventories come down in the past two months. you know, in North America, and maybe that's related to the pull forward and demand. But in your production outlook for North America, does that assume any rebuilding inventories at all this year? We kind of keep an eye on the inventories, Jonathan. What I would say is where we ended up in December, there was a spike in January, February, what we see today kind of goes back to what December was.

Jonathan Goldman: Hi, Good morning, guys and thanks for taking my questions.

Jonathan Goldman: Most of them have been asked already but just one for me then we seemed light vehicle inventories come down in the past two months.

Jonathan Goldman: In North America, and maybe that's related to the pull forward in demand, but in your production outlook for North America does that assume any rebuild of inventories at all this year.

Jonathan Goldman: We kind of keep an eye on the inventory Jonathan.

Jonathan Goldman: I would say is where we ended up in December there was a spike in January February what we see today kind of goes back toward December launch.

Swami Kotagiri: But our planning or our production is based on releases, not on where the inventory is, so the assumption whether it's going to fill up or not, right? That's for the customers to make, not us. So, I would say what we're telling you is based on releases in the system. No, that's fair. I appreciate the color.

Jonathan Goldman: But our planning our production is based on releases knockdown greater inventory so the assumption whether it's on a pillar.

Jonathan Goldman: Alright, thats for the customers to make us so I would say what we are telling you is based on.

Jonathan Goldman: It relieves us in the system.

Speaker Change: No that's fair I appreciate the color. Thanks Shlomi.

Swami Kotagiri: Thanks for me.

Jonathan Goldman: Thanks Scott.

Michael Glen: And your final question comes from the line of Michael Glen with Raymond James. Michael, please go ahead. Hey, good morning.

Speaker Change: And your final question comes from the line of Michael Glen with Raymond James Michael. Please go ahead.

Michael Glen: Hey, good morning.

Michael Glen: Swami, thank you for the answer with regard to the European export for assembled vehicles, but could you provide some context to Magna's exposure to Mexico, Mexican and Canadian assembled vehicles, what the outlook is there and maybe what customers are communicating to you in terms of what might happen with those production schedules and any movement we might see? Good morning, Michael. Maybe two parts. I'll try to get it and Pat can add color. We, when we talk about phases, obviously, looking Across the North America ecosystem, we're not seeing a change in the platform or the mix at this point of time.

Speaker Change: Swamy. Thank you for the answer with regard to the European.

Michael Glen: Export.

Michael Glen: For assembled vehicles, but could you provide some context to magna.

Michael Glen: Magna has exposure to Mexico, Mexican and Canadian assembled vehicles with the with the outlook is there and maybe what customers are communicating to you in terms of.

Michael Glen: What might happen with those production schedules and any movement, we might see.

Michael Glen: Good morning, Michael.

Speaker Change: Maybe two part I'm trying to get at and Pat can add color.

Speaker Change: We when we talk about fees is obviously looking.

Speaker Change: Across the North America ecosystem, we are not seeing a change in the.

Speaker Change: Platform called the mix at this time.

Swami Kotagiri: And when we talked about tariffs, again, we are taking Canada and Mexico and our content in All these platforms. You know, crossing borders, whether it's the supply in from Canada into Canada vehicles, but those vehicles might be coming over. We are looking at it broadly. I don't know if I can give more color than that at this point of time, or I have more than that to give you. I think, Michael, we have that data point. I just don't have it handy. OEM production in Canada and Mexico that's shipped into the US for sale. We have that data.

Speaker Change: And when we talked about again, we are taking.

Speaker Change: King.

Speaker Change: Canada, and Mexico, and our content in.

Speaker Change: All of these platforms.

Burgers, whether it's the supply chain.

Speaker Change: From Canada into Canada vehicles, but those vehicles might be coming or.

Speaker Change: We're looking at broadly I don't know if I can give more color than that at this point of time or have more than that to give you.

Speaker Change: I think Michael we have that data point I, just don't have it handy.

Speaker Change: OEM production in Canada, and Mexico that ship.

Speaker Change: Into the U S for sale.

Pat McCann: We can follow up with you. I just don't have it. But from our point of view, we know our sales piece, we have sales of just over $4 billion in Canada. About 70% of that is sold into the US, where the OEMs are the importer of record. And in Mexico, we're about $5.5 billion of sales, and about 25% of that is sold into the US.

Speaker Change: Have that data we can follow up with you I just don't have it handy.

Speaker Change: But from our point of view are we know.

Speaker Change: Our sales piece, we have sales of just over $4 billion in Canada.

Speaker Change: About 70% of that is sold into the U S.

Speaker Change: The Oems importer of record and in Mexico were about $5 5 billion of sales and about 25% of that is sold to the U S. Your question of what the Oems are building most of the countries and shifted to.

Swami Kotagiri: Your question of what the OEMs are building in those two countries and ship it to the US, we'd have to get back. And not to put you on the spot with this question or anything like that, but like when you do you believe that the 25% on assembled vehicles from Canada or Mexico into the US will remain in place? You are putting us on the spot and I don't have the answer for you. I know what I wish, but that doesn't matter.

Speaker Change: To get back to you.

Speaker Change: And.

Speaker Change: Not to put you on the spot with this question or anything like that but.

Speaker Change: When you do you believe that the 25% on assembled vehicles from Canada or Mexico into the U S will remain in place.

Speaker Change: You are putting us on a spot and I don't have the answer for you.

Speaker Change: Yeah.

Speaker Change: I know, what I wish, but that doesn't matter.

Swami Kotagiri: Okay, and just some of the reshoring efforts that you might look for to pursue to increase USMCA compliance. How do you think about the Tier 2, Tier 3 or Tier 4 supplier base? Do you see this as feasible? Like, I'm just trying to assess your opportunity to reshore some of those components. Yeah, I mean, if you go back to the COVID and the semiconductor crisis, there was a little bit of reshoring, or I would say rebalancing. You know, and looking at the possibilities, Michael, this is no different from that perspective, I would say. All those work streams are in place today.

Speaker Change: Okay, and just some of the re shoring efforts that you might look for to pursue to increase U S. MCA compliant.

Speaker Change: How do you think about the tier two tier three or tier four supplier base do you.

Speaker Change: Do you see this has feasible like I'm, just trying to assess your opportunity to resource some of those components.

Speaker Change: Yes, I mean, if you go back to the Covid into semiconductor crisis, there was a little bit of reassuring.

Speaker Change: Rebalancing.

Speaker Change: And looking at the possibilities Michael this is no different from that perspective, I would say.

Speaker Change: All of those work streams are in place today.

Swami Kotagiri: Does it mean you can take everything and be sure? In the short period of time, I don't think so. But I'm just 1 voice in the industry. You know, semiconductors you saw, right? So we'll look at it part by part. It depends on that and. And obviously, as I said, our goal is to figure out how to increase the USMCA complied costs. And then we have to follow how the OEMs are thinking and how they are going to. uh optimize or manage their footprint because you know based on logistics and other things we have to kind of work collaboratively and cannot make that decision unilaterally.

Speaker Change: Does it mean, you can take everything and be sure.

Speaker Change: In the short period of time I don't think so.

Speaker Change: But I am just one voice in the industry.

Speaker Change: Semiconductors, you saw right.

Speaker Change: So we didn't look at it part by part it depends on that.

Speaker Change: And obviously as I said, our goal is to figure how to increase the U S. MCA compliant.

Speaker Change: And then we have to follow how the Oems are thinking and how they're going to.

Optimizer managed their footprint because.

Speaker Change: Based on logistics and other things, we have to kind of work collaboratively and cannot make that decision unilaterally.

Swami Kotagiri: Okay, I think my point Swami's point is very, very important because it's a business case that the customer has to agree to behind each of these three showing off.

Speaker Change: Okay. Thank Mike Jeremy Thank you swap points <unk> points, very very important because there's a business case that the customer has to a green shoot behind each of these re shoring opportunities.

Operator: Right, so that it's a it's a it's a granular bottoms up case by case analysis that the customer has to sign off on with commercial terms. That concludes our question and answer session.

Speaker Change: Alright, so that it's a it's a granular bottoms up case by case analysis that the customer has to sign.

Speaker Change: With commercial terms.

Tom: That concludes our question and answer session I will now hand, it back over to Tom <unk> for closing remarks.

Swami Kotagiri: I will now hand it back over to Swami Kotagiri for closing remarks. Swami. Thanks, everyone, for listening in today. We all talked about the high degree of uncertainty in the industry that we're all facing. But I want to assure you, we remain focused on execution. All things that we control, including cost and capital discipline, free cash flow is primary focus and getting back within our target leverage ratio. So we remain highly confident in Magna's future. And thanks for listening in and have a great day.

Thanks, everyone for listening in today.

Tom: Maybe I'll talk about the high degree of uncertainty in the industry that we're all facing but I want to assure you. We remain focused on execution are all things that we control, including cost and capital discipline free cash flow is primary focus and getting back within our target leverage ratio.

Tom: So we remain highly confident in magna's future and thanks for listening in and have a great day.

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

That concludes today's call you may now disconnect.

Tom: [music].

Yes.

Tom: [music].