Q3 2025 Magna International Inc Earnings Call

October 31, 2025

Calvin: Good morning, ladies and gentlemen, thank you for standing by. My name is Calvin, I will be your conference operator today. At this time, I would like to welcome everyone to the Magna International Q3 2025 Results Webcast. All lines have been placed on mute to prevent any background noise. 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 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. Thank you. I would now like to turn the call over to Louis Tonelli, Vice President of Investor Relations. Please go ahead.

Speaker #3: Good morning , ladies and gentlemen , and thank you for standing by . My name is Calvin , and I will be your conference operator today .

Speaker #3: At this time , I would like to welcome everyone to the Magna International third quarter 2025 results webcast . All lines have been placed on mute to prevent any background noise .

Speaker #3: After the speakers 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 one on your telephone keypad .

Speaker #3: If you would like to withdraw your question , please press star one again . Thank you . I would now like to turn the call over to Louis Tonelli Vice President of Investor Relations .

Speaker #3: Please go ahead .

Speaker #4: Thanks . Operator . Hello , everyone , and welcome to our conference call covering our third quarter 2025 results . Joining me today are Swami Kotagiri and Phil Fracassa , our CFO .

Louis Tonelli: Thanks, operator. Hello, everyone, welcome to our conference call covering our Q3 of 2025 results. Joining me today are Swamy Kotagiri and Philip Fracassa, our CFO. Yesterday, our board of directors met and approved our financial results for the Q3 of 2025 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. Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation.

Speaker #4: Yesterday , our board of directors met and approved our financial results for the third quarter of 2025 . And our updated outlook . We issued a press release this morning outlining our results .

Speaker #4: You'll find the press release for today's conference call webcast, the slide presentation to go along with the call, and our updated quarterly financial review.

Speaker #4: All in the Investor Relations section of our website at magticom . Before we get started , just as a reminder , the discussion today may contain forward looking information or forward looking statements within the meaning of applicable securities legislation .

Speaker #4: Such statements involve certain risks, assumptions, and uncertainties that 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: Such statements involve certain risks, assumptions and uncertainties which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our Safe Harbor disclaimer. Please also refer to the reminder slide included in our presentation that relates to our commentary today. With that, I'll pass it over to Swamy.

Speaker #4: Please refer to today's press release for complete description of our safe harbor disclaimer . Please also refer to the reminder slide included in our presentation that relates to our commentary today .

Speaker #4: With that , I'll pass it over to Swami .

Speaker #5: Thank you . Luis . Good morning everyone . I appreciate you joining our call today . Let's get started . I'm pleased to share a few key highlights from our strong third quarter .

Swamy Kotagiri: Thank you, Louis. Good morning, everyone. I appreciate you joining our call today. Let's get started. I'm pleased to share a few key highlights from our strong third quarter. Our financial performance reflects continued solid execution across the business and meaningful progress on our performance improvement initiatives. Quarterly results exceeded expectations and showed year-over-year improvements. Sales grew 2%. Adjusted EBIT increased 3%. Adjusted EBIT margin expanded by 10 basis points despite a 35 basis point headwind from unrecovered tariffs. Adjusted diluted EPS rose 4%, driven by stronger earnings and a lower share count. Free cash flow improved by nearly $400 million. Looking ahead, we are raising our full-year outlook, including higher sales supported by improved light vehicle production and continued launch execution.

Speaker #5: Our financial performance reflects continued solid execution across the business and meaningful progress on our performance improvement initiatives . Quarterly results exceeded expectations and showed year over year improvements .

Speaker #5: Sales grew 2% , adjusted Ebit increased 3% , adjusted Ebit margin expanded by ten basis points despite a 35 basis point headwind from unrecovered tariffs .

Speaker #5: Adjusted diluted EPS rose 4%, driven by stronger earnings and a lower share count. Free cash flow improved by nearly $400 million.

Speaker #5: Looking ahead , we are raising our full year outlook , including higher sales supported by improved light vehicle production and continued launch execution .

Speaker #5: An increase in the low end and midpoint of our adjusted EBIT margin range, reflecting strong pull-through on higher sales and benefits from cost savings initiatives; higher adjusted net income, primarily driven by increased adjusted EBIT and a lower effective tax rate.

Swamy Kotagiri: An increase in the low end and midpoint of our adjusted EBIT margin range, reflecting strong pull-through on higher sales and benefits from cost savings initiatives. Higher adjusted net income, primarily driven by increased adjusted EBIT and a lower effective tax rate. We remain focused on generating robust free cash flow and maintaining a disciplined approach to capital allocation. You can see this in our reduced capital spending outlook, now approximately $1.5 billion or 3.6% of sales, below our prior range and well below our initial outlook of $1.8 billion. With higher earnings and lower capital spend, we have increased our full-year free cash flow outlook by $200 million. This positions us to reduce our leverage ratio to below 1.7 by year-end. We also continue working with customers to mitigate tariff impacts.

Speaker #5: We remain focused on generating robust free cash flow and maintaining a disciplined approach to capital allocation . You can see this in our reduced capital spending outlook .

Speaker #5: Now , approximately 1.5 billion , or 3.6% of sales below our prior range and well below our initial outlook of 1.8 billion . With higher earnings and lower capital spend .

Speaker #5: We have increased our full year free cash flow outlook by 200 million . This positions us to reduce our leverage ratio to below 1.7 by year end .

Speaker #5: We also continue working with customers to mitigate tariff impacts . During the quarter , we reached agreements with additional OEMs for recovery of 2025 net tariff exposures .

Swamy Kotagiri: During the quarter, we reached agreements with additional OEMs for recovery of 2025 net tariff exposures. Negotiations with remaining customers are ongoing, and we expect to substantially complete this by year-end. Our outlook assumes less than a 10 basis point impact to 2025 adjusted EBIT margin from tariffs. Overall, these results reinforce our confidence in the strategy and our ability to deliver sustainable value for shareholders. I would like to take a moment to highlight some recent business awards and technology program launches. First, we were awarded complete vehicle assembly business with a Chinese-based OEM, Changan. This is a significant milestone. It marks the first time a Chinese automaker has chosen Magna's complete vehicle operations in Austria to serve the European market. Serial production began this past quarter on 2 electric vehicle models for this customer.

Speaker #5: Negotiations with remaining customers are ongoing , and we expect to substantially complete this by year end . Our outlook assumes less than a ten basis point impact to 2025 .

Speaker #5: Adjusted Ebit margin from tariffs . Overall , these results reinforce our confidence in the strategy and our ability to deliver sustainable value for shareholders .

Speaker #5: I would like to take a moment to highlight some recent business awards and technology program launches . First , we were awarded complete vehicle assembly business with a Chinese based OEM shop , Hang .

Speaker #5: This is a significant milestone. It marks the first time a Chinese automaker has chosen Magna's complete vehicle operations in Austria to serve the European market.

Speaker #5: Serial production began this past quarter on two electric vehicle models for this customer . In addition , we launched production in the third quarter on a vehicle program for a second .

Swamy Kotagiri: In addition, we launched production in Q3 on a vehicle program for a second China-based OEM with another program for that customer scheduled to start next year. These wins reinforce Magna's strong position in vehicle manufacturing and demonstrate the value of our flexible state-of-the-art production process, which enable fast-to-market, high-quality vehicles for the European market. As we have for decades, we continue to launch innovative technologies that support our customers. This past quarter, we began launching a dedicated hybrid drive with a leading China-based OEM. Our 800-volt solution delivers a winning combination of efficiency, versatility, and comfort for consumers. Our driveline portfolio spans all powertrain configurations from ICE and mild hybrids to high-voltage hybrids and full battery electric vehicles. This success underscores the strength of our building block strategy in powertrain.

Speaker #5: China based OEM with another program for that customer scheduled to start next year . These wins reinforce Magna's strong position in vehicle manufacturing and demonstrate the value of our flexible , state of the art production process , which enable fast to market high quality vehicles for the European market .

Speaker #5: As we have for decades , we continue to launch innovative technologies that support our customers . This past quarter , we began launching a dedicated hybrid drive with a leading China based demo .

Speaker #5: Our 800 volt solution delivers a winning combination of efficiency , versatility and comfort for consumers . Our driveline portfolio spans all powertrain configurations from ice and mild hybrids to high voltage hybrids and full battery electric vehicles .

Speaker #5: This success . Underscores the strength of our building blocks strategy in powertrain and in advanced safety . Our mirror integrated driver and occupant monitoring system is meeting growing global demand for DMs technologies .

Swamy Kotagiri: In advanced safety, our mirror-integrated driver and occupant monitoring system is meeting growing global demand for DMS. As you may recall, this product earned a 2024 Automotive News PACE Award for its innovation and safety impact. We are launching this system with multiple customers worldwide, and volumes are expected to reach several million units annually. Next, let me cover our improved outlook. While the current environment makes forecasting more challenging than usual, we remain focused on what we can control and continue to adapt to evolving conditions. Compared to our previous outlook, we have increased our North American production forecast to 15 million units, up about 300,000 units. Roughly two-thirds of this increase reflects expected outperformance in the second half, with the remainder tied to adjustments to first half estimates. We are holding Europe production relatively unchanged.

Speaker #5: As you may recall, this product earned a 2024 Automotive News Pace Award for its innovation and safety impact. We are launching this system with multiple customers worldwide.

Speaker #5: And volumes are expected to reach several million units annually . Next , let me cover our improved outlook . While the current environment makes forecasting more challenging than usual , we remain focused on what we can control and continue to adapt to evolving conditions .

Speaker #5: Compared to our previous outlook . We have increased our North American production forecast to 15 million units , up about 300,000 units , roughly two thirds of this increase reflects expected outperformance in the second half , with the remainder tied to adjustments to first half estimates .

Speaker #5: We are holding Europe production relatively unchanged for China . We have raised our estimate to 31.5 million units , about half of this increase reflects second half outperformance and the other half relates to adjustments to first half estimates .

Swamy Kotagiri: For China, we have raised our estimate to 31.5 million units. About half of this increase reflects second half outperformance, and the other half relates to adjustments to first half estimates. We have also updated our foreign exchange assumptions to reflect recent rates, now expecting a slightly stronger euro, Canadian dollar, and Chinese RMB for 2025 compared to our prior outlook. We have increased our sales estimate range largely as a result of the expected higher light vehicle production, particularly in North America. We also raised the low end and midpoint of our adjusted EBIT margin range and now expect margins between 5.4% and 5.6%, reflecting our solid Q3 results, supported by continued execution in Q4. Looking sequentially, we expect Q4 margins to improve from Q3, driven primarily by commercial and net tariff recoveries from customers.

Speaker #5: We have also updated our foreign exchange assumptions to reflect recent rates . Now expecting a slightly stronger euro Canadian dollar and Chinese RMB for 2025 compared to our prior outlook .

Speaker #5: We have increased our sales estimate range largely as a result of the expected higher light vehicle production , particularly in North America . We also raised the low end and midpoint of our adjusted Ebit margin range , and now expect margins between 5.4 and 5.6% , reflecting our solid Q3 results supported by continued execution in the fourth quarter .

Speaker #5: Looking sequentially , we expect fourth quarter margins to improve from the third quarter , driven primarily by commercial and net tariff recoveries from customers .

Speaker #5: And as of today , we are on track to achieve those . We updated our interest outlook due to some expense booked in the third quarter related to a discrete prior year tax settlement .

Swamy Kotagiri: As of today, we are on track to achieve those. We updated our interest outlook due to some expense booked in Q3 related to a discrete prior year tax settlement. We lowered our assumptions for taxes to approximately 24% from 25%, mainly due to better utilization of tax attributes and a favorable change in equity income. Factoring all that in, we increased adjusted net income to a range of $1.45 to 1.55 billion, largely reflecting increases in adjusted EBIT and the lower effective tax rate. We are reducing our capital spending outlook to approximately $1.5 billion, reflecting our continued efforts to optimize investment without compromising growth.

Speaker #5: We lowered our assumptions for taxes to approximately 24% , from 25% , mainly due to better utilization of tax attributes and a favorable change in equity income .

Speaker #5: Factoring all that in . We increased adjusted net income to a range of 1.45 to $1.55 billion , largely reflecting increases in adjusted Ebit and the lower effective tax rate .

Speaker #5: We are reducing our capital spending outlook to approximately 1.5 billion , reflecting our continued efforts to optimize investment without compromising growth . As a result of higher earnings and lower capital spending , we have raised our free cash flow range by about 200 million to 1 point 0 to 1.2 billion , representing more than 70% of adjusted net income at the midpoint .

Swamy Kotagiri: As a result of higher earnings and lower capital spending, we have raised our free cash flow range by about $200 million to $1.0 to 1.2 billion, representing more than 70% of adjusted net income at the midpoints. To summarize, we remain confident in our Q4 outlook, supported by strong year-to-date execution and ongoing operational discipline despite industry challenges. We are on track to deliver the full-year outlook we shared in February, a testament to the resilience of our business and the capability of our global team. Before I turn the call over, I would like to welcome Phil Fracassa, who joined Magna as our new CFO in September. He brings extensive public company CFO, automotive, and industrial sector experience, as well as a proven track record of driving profitable growth and shareholder value creation through disciplined capital allocation.

Speaker #5: To summarize , we remain confident in our fourth quarter outlook , supported by strong year to date execution and ongoing operational discipline . Despite industry challenges .

Speaker #5: We are on track to deliver the full-year outlook we shared in February, a testament to the resilience of our business and the capability of our global team.

Speaker #5: Before I turn the call over , I would like to welcome Phil Fracassa , who joined Magna as our new CFO in September .

Speaker #5: He brings extensive public company CFO, automotive, and industrial sector experience, as well as a proven track record of driving profitable growth and shareholder value creation through disciplined capital allocation.

Speaker #5: Phil succeeds Pat McCann , who stepped down from the CFO role and is serving in an advisory capacity until his retirement in February 2026 .

Swamy Kotagiri: Phil succeeds Pat McCann, who stepped down from the CFO role and is serving in an advisory capacity until his retirement in February 2026. I would like to thank Pat for his many contributions to Magna over his distinguished 26-year career. With that, I'll pass the call over to Phil.

Speaker #5: I would like to thank Pat for his many contributions to Magna over his distinguished 26-year career. With that, I'll pass the call over to Phil.

Speaker #6: Thanks , Swami , and good morning , everyone . I'm pleased to be with you today . Magna is a company that I've admired for a long time for its history of innovation , unmatched capabilities , and deep relationships with customers .

Philip Fracassa: Thanks, Swamy, good morning, everyone. I'm pleased to be with you today. Magna is a company that I've admired for a long time for its history of innovation, unmatched capabilities, and deep relationships with customers. In my initial time here, I've seen our guiding principles in action, and I'm energized by the ownership mentality that our entire team brings to all that we do. We operate in a sector of the economy where the only constant these days is change, but this creates opportunities, and Magna is well-positioned to capitalize on them. I'm excited to partner with Swamy and the team as we work to drive durable shareholder value. Now on to our results. As Swamy indicated, we delivered a strong Q3, up year-over-year and ahead of our expectations almost across the board.

Phil Fracassa: Thanks, Swamy, good morning, everyone. I'm pleased to be with you today. Magna is a company that I've admired for a long time for its history of innovation, unmatched capabilities, and deep relationships with customers. In my initial time here, I've seen our guiding principles in action, and I'm energized by the ownership mentality that our entire team brings to all that we do. We operate in a sector of the economy where the only constant these days is change, but this creates opportunities, and Magna is well-positioned to capitalize on them. I'm excited to partner with Swamy and the team as we work to drive durable shareholder value. Now on to our results. As Swamy indicated, we delivered a strong Q3, up year-over-year and ahead of our expectations almost across the board.

Speaker #6: In my initial time here , I've seen our guiding principles in action , and I'm energized by the ownership mentality that our entire team brings to all that we do .

Speaker #6: We operate in a sector of the economy where the only constant these days is change. But this creates opportunities, and Magna is well positioned to capitalize on them.

Speaker #6: So I'm excited to partner with Swami and the team as we work to drive durable shareholder value . Now on to our results .

Speaker #6: As Swami indicated , we delivered a strong third quarter . Up year over year and ahead of our expectations almost across the board .

Speaker #6: Comparing our third quarter to the same period last year, consolidated sales were $10.5 billion, up 2%. This compares to a 3% increase in global light vehicle production.

Philip Fracassa: Comparing our Q3 to the same period last year, consolidated sales were $10.5 billion, up 2%. This compares to a 3% increase in global light vehicle production. Adjusted EBIT was up 3% to $613 million. Our margin was 5.9%, up 10 basis points from last year, and that's despite a continued headwind from tariffs. Adjusted EPS came in at $1.33, up 4%, and free cash flow in the Q was $572 million, up $398 million from last year and well ahead of our expectations. Now I'll take you through some of the details. Let's start with sales.

Phil Fracassa: Comparing our Q3 to the same period last year, consolidated sales were $10.5 billion, up 2%. This compares to a 3% increase in global light vehicle production. Adjusted EBIT was up 3% to $613 million. Our margin was 5.9%, up 10 basis points from last year, and that's despite a continued headwind from tariffs. Adjusted EPS came in at $1.33, up 4%, and free cash flow in the Q was $572 million, up $398 million from last year and well ahead of our expectations. Now I'll take you through some of the details. Let's start with sales.

Speaker #6: Adjusted Ebit was up 3% to 613 million . Our margin was 5.9% , up ten basis points from last year . And that's despite a continued headwind from tariffs adjusted EPs came in at $1.33 , cents , up 4% , and free cash flow in the quarter was 572 million , up 398 million from last year .

Speaker #6: And well ahead of our expectations . Now , I'll take you through some of the details . Let's start with sales . Looking at the market , North American , European and Chinese light vehicle production were all higher in the quarter .

Philip Fracassa: Looking at the market, North American, European, and Chinese light vehicle production were all higher in the quarter, and overall global production increased 3% compared to Q3 of last year. On a sales-weighted basis for Magna, light vehicle production increased an estimated 5%. Our Q3 sales were up 2% from last year. Excluding currency, organic sales were up modestly but lagged the market in the quarter as we had expected. The increase in our total sales largely reflects the launch of new programs, including VW's Škoda Elroq, the Ford Expedition Lincoln Navigator, and Cadillac CELESTIQ, the favorable impact of foreign currency translation, and higher global light vehicle production.

Phil Fracassa: Looking at the market, North American, European, and Chinese light vehicle production were all higher in the quarter, and overall global production increased 3% compared to Q3 of last year. On a sales-weighted basis for Magna, light vehicle production increased an estimated 5%. Our Q3 sales were up 2% from last year. Excluding currency, organic sales were up modestly but lagged the market in the quarter as we had expected. The increase in our total sales largely reflects the launch of new programs, including VW's Škoda Elroq, the Ford Expedition Lincoln Navigator, and Cadillac CELESTIQ, the favorable impact of foreign currency translation, and higher global light vehicle production.

Speaker #6: And overall global production increased 3% compared to the third quarter of last year. On a sales-weighted basis for Magna, light vehicle production increased an estimated 5%.

Speaker #6: Our third quarter sales were up 2% from last year , excluding currency . Organic sales were up modestly , but lagged the market in the quarter as we had expected .

Speaker #6: The increase in our total sales largely reflects launch of new programs , including Skoda LRoc , the Ford Expedition , Lincoln Navigator and Cadillac Bustech .

Speaker #6: The favorable impact of foreign currency translation and higher global light vehicle production . These were partially offset by lower production on certain programs , including end of production on the Chevy Malibu .

Philip Fracassa: These were partially offset by lower production on certain programs, including end of production on the Chevrolet Malibu, the expected decline in complete vehicle assembly volumes, including end of production on the Jaguar E-PACE and I-PACE in Austria, and normal course customer price concessions. Moving next to EBIT. Third quarter adjusted EBIT was $613 million, which was up $19 million or 3% from last year. Adjusted EBIT margin was 5.9%, up 10 basis points. In the quarter, our EBIT margin was impacted positively by 65 basis points from net operational performance improvements.

Phil Fracassa: These were partially offset by lower production on certain programs, including end of production on the Chevrolet Malibu, the expected decline in complete vehicle assembly volumes, including end of production on the Jaguar E-PACE and I-PACE in Austria, and normal course customer price concessions. Moving next to EBIT. Third quarter adjusted EBIT was $613 million, which was up $19 million or 3% from last year. Adjusted EBIT margin was 5.9%, up 10 basis points. In the quarter, our EBIT margin was impacted positively by 65 basis points from net operational performance improvements.

Speaker #6: The expected decline in complete vehicle assembly volumes, including the end of production on the Jaguar E and I-PACE in Austria, and normal course customer price concessions.

Speaker #6: Moving next to Ebit , third quarter adjusted Ebit was 613 million , which was up 19 million , or 3% from last year .

Speaker #6: Adjusted Ebit margin was 5.9% , up ten basis points in the quarter . Our Ebit margin was impacted positively by 65 basis points from net operational performance improvements .

Speaker #6: This reflects strong execution on our operational excellence and other cost savings initiatives , partially offset by higher labor and other input costs , as well as new facility costs and 30 basis points related to higher equity income .

Philip Fracassa: This reflects strong execution on our operational excellence and other cost savings initiatives, partially offset by higher labor and other input costs as well as new facility costs, and 30 basis points related to higher equity income as several of our equity method JVs, including China JVs, delivered strong performance in the quarter with higher sales and favorable mix, net favorable commercial items, and other productivity and cost improvements. These were partially offset by negative 50 basis points from discrete items. This is comprised mainly of lower net favorable commercial items compared to last year and 35 basis points for tariff costs incurred but not yet recovered.

Phil Fracassa: This reflects strong execution on our operational excellence and other cost savings initiatives, partially offset by higher labor and other input costs as well as new facility costs, and 30 basis points related to higher equity income as several of our equity method JVs, including China JVs, delivered strong performance in the quarter with higher sales and favorable mix, net favorable commercial items, and other productivity and cost improvements. These were partially offset by negative 50 basis points from discrete items. This is comprised mainly of lower net favorable commercial items compared to last year and 35 basis points for tariff costs incurred but not yet recovered.

Speaker #6: As several of our equity method JVs, including our China JVs, delivered strong performance in the quarter with higher sales, favorable mix, net favorable commercial items, and other productivity and cost improvements.

Speaker #6: These were partially offset by -50 basis points from discrete items . This is comprised mainly of lower net favorable commercial items compared to last year , and 35 basis points for tariff costs incurred , but not yet recovered .

Speaker #6: This is mainly timing as we continue to pursue recovery from our customers and we remain on track for tariffs to be only a modest headwind to margins for the full year , less than ten basis points .

Philip Fracassa: This is mainly timing as we continue to pursue recovery from our customers. We remain on track for tariffs to be only a modest headwind to margins for the full year, less than 10 basis points as we said before. Note that volume and other items were essentially flat in the quarter as earnings on higher sales and foreign currency gains were substantially offset by the impact of higher compensation expense. Looking below the EBIT line, interest was $11 million higher than last year, due mainly to some discrete interest expense in the quarter for the settlement of a prior year tax audit. Our Q3 adjusted tax rate was 26.5%, lower than last year, primarily due to the favorable year-over-year impact of currency adjustments recognized for U.S. GAAP.

Phil Fracassa: This is mainly timing as we continue to pursue recovery from our customers. We remain on track for tariffs to be only a modest headwind to margins for the full year, less than 10 basis points as we said before. Note that volume and other items were essentially flat in the quarter as earnings on higher sales and foreign currency gains were substantially offset by the impact of higher compensation expense. Looking below the EBIT line, interest was $11 million higher than last year, due mainly to some discrete interest expense in the quarter for the settlement of a prior year tax audit. Our Q3 adjusted tax rate was 26.5%, lower than last year, primarily due to the favorable year-over-year impact of currency adjustments recognized for U.S. GAAP.

Speaker #6: As we said before , note that volume and other items were essentially flat in the quarter as earnings on higher sales and foreign currency gains were substantially offset by the impact of higher compensation expense .

Speaker #6: Looking below the Ebit line , interest was 11 million higher than last year , due mainly to some discrete interest expense in the quarter .

Speaker #6: For the settlement of a prior year tax audit , our third quarter adjusted tax rate was 26.5% , lower than last year , primarily due to the favorable year over year impact of currency adjustments recognized for US .

Speaker #6: This was partially offset by an unfavorable change in our jurisdictional mix of earnings, increases in our reserves for uncertain tax positions, and a slight decrease in tax benefits related to R&D.

Philip Fracassa: This was partially offset by an unfavorable change in our jurisdictional mix of earnings, increases in our reserves for uncertain tax positions, and a slight decrease in tax benefits related to R&D. Net income was $375 million, $6 million or about 2% higher than last year, mainly reflecting the higher EBIT, partially offset by the higher interest expense. Q3 adjusted earnings per share was $1.33, up 4% from last year, reflecting the higher net income as well as 2% fewer diluted shares outstanding resulting from share buybacks over the past 12 months. Let's take a brief look at our segment performance for the quarter, which you can see summarized on this slide. Three of our four operating segments posted increased sales year-over-year, with a notable 10% increase in seating.

Phil Fracassa: This was partially offset by an unfavorable change in our jurisdictional mix of earnings, increases in our reserves for uncertain tax positions, and a slight decrease in tax benefits related to R&D. Net income was $375 million, $6 million or about 2% higher than last year, mainly reflecting the higher EBIT, partially offset by the higher interest expense. Q3 adjusted earnings per share was $1.33, up 4% from last year, reflecting the higher net income as well as 2% fewer diluted shares outstanding resulting from share buybacks over the past 12 months. Let's take a brief look at our segment performance for the quarter, which you can see summarized on this slide. Three of our four operating segments posted increased sales year-over-year, with a notable 10% increase in seating.

Speaker #6: Net income was 375,000,006 million , or about 2% higher than last year , mainly reflecting the higher Ebit . Partially offset by the higher interest expense and third quarter adjusted earnings per share was $1.33 , up 4% from last year , reflecting the higher net income as well as 2% fewer diluted shares outstanding resulting from share buybacks over the past 12 months .

Speaker #6: Let's take a brief look at our segment performance for the quarter , which you can see summarized on this slide . Three of our four operating segments posted increased sales year over year , with a notable 10% increase in seating .

Speaker #6: The exception was complete vehicles, which was down 6%. This was largely expected and reflects the end of production of the Jaguar E and I-Pace at the end of 2020.

Philip Fracassa: The exception was complete vehicles, which was down 6%. This was largely expected and reflects the end of production of the Jaguar E-PACE and I-PACE at the end of 2024. As Swamy mentioned earlier, we're excited about our recent new business wins with China-based OEMs, which is a new growth market for our complete vehicle business. Three of our four segments also posted improved adjusted EBIT margin year-over-year, with notable margin expansion and strong incremental margins in body exteriors and structures. The exception was Power & Vision, where margins were down on a tough comp last year. In the quarter, P&V was impacted by lower sales on a local currency basis, lower net favorable commercial items, and higher tariff costs, as P&V has relatively more exposure to tariffs than other Magna segments.

Phil Fracassa: The exception was complete vehicles, which was down 6%. This was largely expected and reflects the end of production of the Jaguar E-PACE and I-PACE at the end of 2024. As Swamy mentioned earlier, we're excited about our recent new business wins with China-based OEMs, which is a new growth market for our complete vehicle business. Three of our four segments also posted improved adjusted EBIT margin year-over-year, with notable margin expansion and strong incremental margins in body exteriors and structures. The exception was Power & Vision, where margins were down on a tough comp last year. In the quarter, P&V was impacted by lower sales on a local currency basis, lower net favorable commercial items, and higher tariff costs, as P&V has relatively more exposure to tariffs than other Magna segments.

Speaker #6: For but as Swami mentioned earlier , we're excited about our recent new business wins with China based OEMs , which is a new growth market for our complete vehicle business .

Speaker #6: In three of our four segments, we also posted improved adjusted EBIT margin year over year, with notable margin expansion and strong incremental margins in body exteriors and structures.

Speaker #6: The exception was Power and Vision, where margins were down on a tough comp from last year. In the quarter, Power and Vision was impacted by lower sales on a local currency basis.

Speaker #6: Lower net favorable commercial items and higher tariff costs, as NV has relatively more exposure to tariffs than other Magna segments. These were partially offset by continued productivity and efficiency improvements.

Philip Fracassa: These were partially offset by continued productivity and efficiency improvements, higher equity income, and lower launch costs. Despite being down year-over-year, P&V margins were slightly ahead of our expectations for the quarter, and we have held the low end of our EBIT margin range in our updated outlook for P&V. Our Power & Vision segment has differentiated technologies and a strong market position, and we're confident in the long-term margin outlook for this segment. Turning to a review of our cash flow, in the Q3, we generated $787 million in cash from operations for changes in working capital, along with $125 million from favorable working capital movements. Investment activities in the quarter included $267 million for fixed assets and a $100 million increase in investments, other assets, and intangibles.

Phil Fracassa: These were partially offset by continued productivity and efficiency improvements, higher equity income, and lower launch costs. Despite being down year-over-year, P&V margins were slightly ahead of our expectations for the quarter, and we have held the low end of our EBIT margin range in our updated outlook for P&V. Our Power & Vision segment has differentiated technologies and a strong market position, and we're confident in the long-term margin outlook for this segment. Turning to a review of our cash flow, in the Q3, we generated $787 million in cash from operations for changes in working capital, along with $125 million from favorable working capital movements. Investment activities in the quarter included $267 million for fixed assets and a $100 million increase in investments, other assets, and intangibles.

Speaker #6: Higher equity income and lower launch costs. Despite being down year on year, PNB margins were slightly ahead of our expectations for the quarter, and we have held the low end of our EBIT margin range and our updated outlook for PNB.

Speaker #6: Our power and segment has differentiated technologies and a strong market position , and we're confident in the long term margin outlook for this segment .

Speaker #6: Turning to a review of our cash flow in the third quarter , we generated $787 million in cash from operations for changes in working capital .

Speaker #6: Along with $125 million from favorable working capital movements . Investment activities in the quarter included $267 million for fixed assets and 100 million increase in investments .

Speaker #6: Other assets and intangibles . Overall , we generated free cash flow of $572 million in the third quarter , higher than we were forecasting , and 398 million better than the same period a year ago .

Philip Fracassa: Overall, we generated free cash flow of $572 million in Q3, higher than we were forecasting, and $398 million better than the same period a year ago. The increase was driven mainly by lower capital spending and favorable working capital performance. We continued to return capital to shareholders, paying dividends of $136 million in the quarter. Our balance sheet and capital structure remain strong, with low single A investment-grade ratings from the major credit rating agencies. At the end of September, we had $4.7 billion in total liquidity, including $1.3 billion of cash on hand, which provides ongoing financial flexibility. During the quarter, we repaid $650 million of near-term maturing senior notes. Our refinancing is now complete. We have no senior note maturities until 2027.

Phil Fracassa: Overall, we generated free cash flow of $572 million in Q3, higher than we were forecasting, and $398 million better than the same period a year ago. The increase was driven mainly by lower capital spending and favorable working capital performance. We continued to return capital to shareholders, paying dividends of $136 million in the quarter. Our balance sheet and capital structure remain strong, with low single A investment-grade ratings from the major credit rating agencies. At the end of September, we had $4.7 billion in total liquidity, including $1.3 billion of cash on hand, which provides ongoing financial flexibility. During the quarter, we repaid $650 million of near-term maturing senior notes. Our refinancing is now complete. We have no senior note maturities until 2027.

Speaker #6: The increase was driven mainly by lower capital spending and favorable working capital performance , and we continue to return capital to shareholders , paying dividends of 136 million in the quarter .

Speaker #6: Our balance sheet and capital structure remained strong , with low single a investment grade ratings from the major credit rating agencies at the end of September .

Speaker #6: We had 4.7 billion in total liquidity , including 1.3 billion of cash on hand , which provides ongoing financial flexibility . During the quarter , we repaid 650 million of near-term maturing senior notes , a refinancing is now complete and we have no senior note maturities until 2027 .

Speaker #6: Currently , our adjusted debt to EBITDA ratio is at 1.88 times a little better than we anticipated coming into the quarter . We have been executing well on deleveraging throughout 2025 , and as Swami said earlier , we expect to end the year below 1.7 times .

Philip Fracassa: Currently, our adjusted debt-to-EBITDA ratio is at 1.88 times, a little better than we anticipated coming into the quarter. We have been executing well on delevering throughout 2025, and as Swamy said earlier, we expect to end the year below 1.7 times. Lastly, subject to the approval by the Toronto Stock Exchange, our board yesterday approved a new normal course issuer bid, or NCIB, authorizing the company to repurchase up to 10% of our public float, or around 25 million shares. We expect the NCIB to be effective in early November and remain in effect for a period of one year. Since the initiation of the NCIB approved last year, Magna has repurchased 5.8 million shares, or roughly 2% of shares outstanding.

Phil Fracassa: Currently, our adjusted debt-to-EBITDA ratio is at 1.88 times, a little better than we anticipated coming into the quarter. We have been executing well on delevering throughout 2025, and as Swamy said earlier, we expect to end the year below 1.7 times. Lastly, subject to the approval by the Toronto Stock Exchange, our board yesterday approved a new normal course issuer bid, or NCIB, authorizing the company to repurchase up to 10% of our public float, or around 25 million shares. We expect the NCIB to be effective in early November and remain in effect for a period of one year. Since the initiation of the NCIB approved last year, Magna has repurchased 5.8 million shares, or roughly 2% of shares outstanding.

Speaker #6: And lastly , subject to the approval by the Toronto Stock Exchange , our board yesterday approved a new normal course issuer bid , or NCIB , authorizing the company to repurchase up to 10% of our public float , or around 25 million shares .

Speaker #6: We expect the NCIB to be effective in early November and remain in effect for a period of one year . Since the initiation of the NCIB approved last year , Magni has repurchased 5.8 million shares , or roughly 2% of shares outstanding .

Speaker #6: This allowed us to return 253 million in cash to shareholders , while still reducing leverage and navigating a challenging environment . Our new NCIB reinforces our commitment to share buybacks as a key component of our disciplined capital allocation strategy .

Philip Fracassa: This allowed us to return $253 million in cash to shareholders while still reducing leverage and navigating a challenging environment. Our new NCIB reinforces our commitment to share buybacks as a key component of our disciplined capital allocation strategy as we look ahead to 2026. In summary, we delivered strong financial performance in Q3, which exceeded our expectations and showed both top and bottom line improvements versus last year, despite the unfavorable impact of tariffs and commercial items in the quarter. We're benefiting from operational excellence initiatives across the company, and we expect these efforts to drive further margin upside over time. We've also increased our outlook to reflect our Q3 performance and expectations for a solid finish to the year.

Phil Fracassa: This allowed us to return $253 million in cash to shareholders while still reducing leverage and navigating a challenging environment. Our new NCIB reinforces our commitment to share buybacks as a key component of our disciplined capital allocation strategy as we look ahead to 2026. In summary, we delivered strong financial performance in Q3, which exceeded our expectations and showed both top and bottom line improvements versus last year, despite the unfavorable impact of tariffs and commercial items in the quarter. We're benefiting from operational excellence initiatives across the company, and we expect these efforts to drive further margin upside over time. We've also increased our outlook to reflect our Q3 performance and expectations for a solid finish to the year.

Speaker #6: As we look ahead to 2026 , so in summary , we delivered strong financial performance in the third quarter , which exceeded our expectations .

Speaker #6: And showed both top- and bottom-line improvements versus last year. Despite the unfavorable impact of tariffs and commercial items in the quarter, we're benefiting from operational excellence initiatives across the company, and we expect these efforts to drive further margin upside over time.

Speaker #6: We've also increased our outlook to reflect our third quarter performance and expectations for a solid finish to the year . We're planning for higher sales , supported by an increased and expected light vehicle production , particularly in North America , and that's net of the expected fourth quarter impact of potential supply chain disruptions .

Swamy Kotagiri: We're planning for higher sales, supported by an increased and expected light vehicle production, particularly in North America, and that's net of the expected Q4 impact of potential supply chain disruptions. We raised the low end and midpoint of our adjusted EBIT margin range, and we increased our outlook for adjusted net income, largely due to the higher expected EBIT. We'll continue to focus on free cash flow generation and capital discipline, as evidenced by a further reduction in our capital spending outlook. As a result of this and expected higher earnings, we have raised our 2025 free cash flow outlook by about $200 million. Lastly, we continue to mitigate the impact of tariffs. We settled with additional OEMs in Q3, and we're on track to complete substantially all remaining customer negotiations by year-end.

Phil Fracassa: We're planning for higher sales, supported by an increased and expected light vehicle production, particularly in North America, and that's net of the expected Q4 impact of potential supply chain disruptions. We raised the low end and midpoint of our adjusted EBIT margin range, and we increased our outlook for adjusted net income, largely due to the higher expected EBIT. We'll continue to focus on free cash flow generation and capital discipline, as evidenced by a further reduction in our capital spending outlook. As a result of this and expected higher earnings, we have raised our 2025 free cash flow outlook by about $200 million. Lastly, we continue to mitigate the impact of tariffs. We settled with additional OEMs in Q3, and we're on track to complete substantially all remaining customer negotiations by year-end.

Speaker #6: We raised the low end and midpoint of our adjusted EBIT margin range, and we increased our outlook for adjusted net income, largely due to the higher expected EBIT.

Speaker #6: We'll continue to focus on free cash flow generation and capital discipline , as evidenced by a further reduction in our capital spending outlook as a result of this , and expected higher earnings .

Speaker #6: We have raised our 2025 free cash flow outlook by about 200 million . And lastly , we continue to mitigate the impact of tariffs .

Speaker #6: We settled with additional OEMs in the third quarter , and we're on track to complete substantially all remaining customer negotiations by year end .

Speaker #6: Let me close where I started and reiterate how thrilled I am to be part of the talented and dedicated Magna team . This past quarter was a testament to the resilience of our business and the effectiveness of our strategy , and we're excited about the opportunities that lie ahead .

Swamy Kotagiri: Let me close where I started and reiterate how thrilled I'm to be part of the talented and dedicated Magna team. This past quarter was a testament to the resilience of our business and the effectiveness of our strategy, and we're excited about the opportunities that lie ahead. With that, we'd be happy to take your questions. Operator?

Phil Fracassa: Let me close where I started and reiterate how thrilled I'm to be part of the talented and dedicated Magna team. This past quarter was a testament to the resilience of our business and the effectiveness of our strategy, and we're excited about the opportunities that lie ahead. With that, we'd be happy to take your questions. Operator?

Speaker #6: With that , we'd be happy to take your questions . Operator .

Speaker #3: Ladies and gentlemen , we will now begin the question and answer session . I would like to remind everyone to ask a question .

Calvin: Ladies and gentlemen, we will now begin the question-and-answer session. I would like to remind everyone to ask a question, please press the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. One moment please for your first question. Your first question comes from the line of Etienne Ricard of BMO Capital Markets. Please go ahead.

Operator: Ladies and gentlemen, we will now begin the question-and-answer session. I would like to remind everyone to ask a question, please press the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. One moment please for your first question. Your first question comes from the line of Etienne Ricard of BMO Capital Markets. Please go ahead.

Speaker #3: Please press the start button , followed by the number one on your telephone keypad . If you would like to withdraw your question , please press star one again .

Speaker #3: One moment please . For your first question . Your first question comes from the line of Etienne Ricard of BMO Capital Markets . Please go ahead .

Speaker #7: Thank you and good morning . As we think about 2026 , can you remind us what improvement to operating margins we should see from efficiency gains and across which segments do you still have lots of potential to expand margins ?

Etienne Ricard: Thank you and good morning. As we think about 2026, can you remind us what improvement to operating margins we should see from efficiency gains? Across which segments do you still have lots of potential to expand margins?

Étienne Ricard: Thank you and good morning. As we think about 2026, can you remind us what improvement to operating margins we should see from efficiency gains? Across which segments do you still have lots of potential to expand margins?

Speaker #5: Good morning Etienne . I think the best way to look at this is a little bit going back into the previous calls , where we talked about margin improvement from 2324 .

Swamy Kotagiri: Good morning, Etienne. I think the best way to look at this is a little bit going back into the previous calls where we talked about margin improvement from 2023, 2024. We said we were gonna do about 115 basis points, which was done. We talked about an additional 75 basis points split between 2025 and 2026. I can say that 2025, we are well on our way and on track, and we have good visibility for the 35 to 40 basis points going into 2026. If you look at the 5.5, which is the midpoint of the range, we are talking about finishing 2025 and add the operational improvements of the 35 to 40 basis points, it should give you a good foundation of how we are going into 2026.

Speaker #5: We said we were going to do about 115 basis points , which was done . We talked about an additional 75 basis points split between 25 and 26 .

Speaker #5: I can say the 25 year well on our way and on track , and we have good visibility for the 35 to 40 basis points going into 26 .

Speaker #5: So if you look at the five and a half , which is the midpoint of the range , we're talking about finishing 25 and at the operational improvements of the 35 to 40 basis points .

Speaker #5: It should give you a good foundation of how we are going into 26 . On top of that , there are some programs which we have talked about which are coming in , like launching now into 26 with new economics compared to what we had from the inflation impacted time frame of 23 to 25 .

Swamy Kotagiri: On top of that, there are some programs which we have talked about which are coming in, like launching now into 2026 with new economics compared to what we had, you know, from the inflation impacted timeframe of 2023 to 2025. Take all of that in, if you assume volumes to be flattish going from 2025 to 2026, we see the margins building on top of the exit of the 5.5% in 2025. The second part of the question, I think it's a little bit difficult to talk, you know, segment by segment, but I can tell you the operational activities are across the company, and that's what is giving us traction, and we are very optimistic about it.

Speaker #5: So take all of that in . If you assume volumes to be flattish , going from 25 to 26 , we see the margins building on top of the exit of the 5.5% in 25 .

Speaker #5: The second part of the question , I think it's a little bit difficult to talk , you know , segment by segment , but I can tell you the operational activities are across the company and that's what is giving us traction .

Speaker #5: And we are very optimistic about it.

Speaker #7: Okay . Appreciate the details . And I also want to to cover the the lower pace of capital expenditures . So this is good for free cash flow for the near term .

Etienne Ricard: Okay. Appreciate the details. I also want to cover the lower pace of capital expenditures. This is good for free cash flow over the near term, but could you please remind us why this is not expected to materially affect growth prospects in future years?

Étienne Ricard: Okay. Appreciate the details. I also want to cover the lower pace of capital expenditures. This is good for free cash flow over the near term, but could you please remind us why this is not expected to materially affect growth prospects in future years?

Speaker #7: But could you please remind us why this is not expected to materially affect growth prospects in future years?

Speaker #5: So I think we have always said our long term average ratio CapEx to sales ratio is , I would say , the low to mid fours .

Swamy Kotagiri: Etienne, I think we have always said our long-term average ratio, CapEx to sales ratio is, I would say, the low to mid 4s. If you've looked at the CapEx spend in the past years, going into 2022, 2023, 2024, we had a higher CapEx spend cycle, and that depends very much on the you know, the cycle that the OEMs go through in giving out programs. We went through a big cycle of EV releases at that point in time. With that investment behind us, we have been constantly talking about looking at different, as part of our continuous improvement and operational activities, looking at efficiencies, looking at consolidations and closing of facilities, looking at optimizing footprint.

Speaker #5: And if you've looked at the CapEx spend in the past years going into 22 , 23 , 24 , we had a higher CapEx spend cycle .

Speaker #5: And that depends very much on the you know , the cycle that the OEMs go through in giving out programs , right ? Then we went through a big cycle of EV releases at that point in time .

Speaker #5: Now, with that investment behind us, we have been constantly talking about looking at different aspects as part of our continuous improvement and operational activities, looking at efficiencies, looking at consolidations and closing of facilities, and looking at optimizing our footprint.

Speaker #5: All of that has given us the opportunity to optimize. But I can very clearly tell you that the team is very focused on not curtailing CapEx at the expense of growth.

Swamy Kotagiri: All of that has given us the opportunity to optimize. I can very clearly tell you that the team is very focused on not curtailing CapEx at the expense of growth. We are very much focused on organic growth with right profitability.

Speaker #5: We are very much focused on organic growth with the right profitability.

Speaker #7: Thank you very much .

Etienne Ricard: Thank you very much.

Étienne Ricard: Thank you very much.

Speaker #6: Thank you .

Swamy Kotagiri: Thank you.

Speaker #3: Your next question comes from the line of Dan Levy of Barclays . Please go ahead .

Calvin: Your next question comes from the line of Dan Levy of Barclays. Please go ahead.

Operator: Your next question comes from the line of Dan Levy of Barclays. Please go ahead.

Speaker #7: Hi .

Speaker #8: Good . Good morning . Thank you for taking the questions . First , maybe you could just talk through what you've embedded in your guidance and what you're seeing as it relates to some of these production disruptions out in the market between Ford , Novalis , Jay and Nexperia .

Dan Levy: Hi. Good morning. Thank you for taking the questions.

Swamy Kotagiri: Hi, Dan.

Dan Levy: First, maybe you could just talk through what you've embedded in your guidance and what you're seeing as it relates to some of these production disruptions out in the market between Ford, Novellus, JLR, and Nexperia. Just what's the impact to you, and what's embedded in the guidance and how you're planning around those?

Speaker #8: Just what's the impact to you and what's embedded in the guidance and how you're planning around those ?

Speaker #5: Hi , Dan , good morning . I think the novelis and Nexperia situation are still a little bit fluid , but we have taken into account based on the releases that we have , and their is visibility .

Swamy Kotagiri: Hi, Dan. Good morning. I think the Novellus and the Nexperia situation are still a little bit fluid. We have taken into account, based on the releases that we have, and there is visibility. Obviously, there is more color as we have conversations with the customers. We have taken all of that in the Q4. There is a little bit of indirect impact too, right? Because this situation is impacting OEMs and other suppliers. If that has an impact on the overall production, obviously, that could have an indirect impact. We have taken to the best of our knowledge, the information that's been provided already in the outlook that we have given.

Speaker #5: Obviously , there is more color as we have conversations with the customers . We have taken all of that in the Q4 , but there is a little bit of indirect impact too , because this situation is impacting OEMs and other suppliers .

Speaker #5: So that has an impact on the overall production . Obviously , that could have an indirect impact , but we have taken to the best of our knowledge , the information that's been provided already in the outlook that we have given .

Speaker #6: Yeah . Dan , if I could maybe just add this is Phil . Good morning . You know , so the 15 million unit assumption that we have in for the full year for North America would reflect our estimate of lost production .

Philip Fracassa: Yeah, Dan, if I could maybe just add, this is Phil. Good morning. You know, the 15 million unit assumption that we have in for the full year for North America would reflect our estimate of lost production. If you compare that number to maybe some of the external forecast, it is a little bit lower, and that's where we would have embedded our assumption.

Phil Fracassa: Yeah, Dan, if I could maybe just add, this is Phil. Good morning. You know, the 15 million unit assumption that we have in for the full year for North America would reflect our estimate of lost production. If you compare that number to maybe some of the external forecast, it is a little bit lower, and that's where we would have embedded our assumption.

Speaker #6: So if you compare that number to maybe some of the external forecast , it is a little bit it is a little bit lower .

Speaker #6: And and that's where we would have embedded our assumption .

Speaker #8: Okay . And I know it's a wide range of potential outcomes . But we are a month in and you do have a large electronics business .

Dan Levy: Okay. Nexperia, and I know it's a wide range of potential outcomes, but we are a month in, and you do have a large electronics business. You know, what's the, is there any sort of range of outcomes that you might be gauging within the results?

Speaker #8: You know what's the is there any sort of range of outcomes that you might be gauging within the results ?

Swamy Kotagiri: Yes, I think it impacts largely the electronics group, but it's not only for the electronics group, Dan. You can imagine there is associated systems in powertrain and, you know, other parts of Magna. We have an task force activity that's obviously very active in looking at the supply chain analysis, the run out dates. We have identified and released alternative parts, obviously, in conversation with the customers. We are tracking the EMS suppliers, the, you know, wherever possible, purchase through brokers. There's a very constant communication with customers and suppliers. I don't know if we can get into every segment by segment, but I can say we have taken the impact to the extent we have seen, again, just not from the outside forecasters, but also program by program customer discussions.

Speaker #5: Yes , I think it impacts largely the electronics group , but it's not only for the electronics group . Then you can imagine there is associated systems in powertrain and , you know , other parts of Magna .

Speaker #5: We have an task force activity that's obviously very active in looking at the supply chain analysis . The run out dates we have identified and released alternative parts .

Speaker #5: Obviously in conversation with the customers , we're tracking the suppliers . There's , you know , wherever possible , purchase through brokers . So there is a very constant communication with customers and suppliers .

Speaker #5: I don't know if we can get into every segment by segment , but I can say we have taken the impact to the extent we have seen .

Speaker #5: Again, just not from the outside forecasters, but also program by program customer discussions.

Speaker #8: Okay . Got it . Thank you . And then maybe as a follow up , if you could just walk through the large implied step up into margins in the fourth quarter , that are within your guides .

Dan Levy: Okay. Got it. Thank you. Then maybe as a follow-up, if you could just walk through the large implied step-up into margins in the Q4 that are within your guides. I mean, pretty much all of the segments have a large step up in margins. Perhaps you could just talk to the underlying strength in those.

Speaker #8: I mean , pretty much all of the segments have have a large step up in margins . Perhaps you could just talk to the underlying strength in those .

Speaker #8: .

Speaker #5: So, a couple of points, Dan. I think as you look through, obviously one is the traction of the operational activities that we've been talking about.

Swamy Kotagiri: A couple of points, Dan. I think as you look through, obviously one is the traction of the operational activities that we've been talking about. The second part is we have mentioned the second half of the year being heavy in tariff and commercial recoveries, and obviously, it's heavy ended into Q4. We have substantially negotiated with the customers. There is some ongoing discussions, but we feel pretty good with the frameworks that are in place. We believe the roughly 10 basis points impact due to tariff for the year, I think we feel comfortable at this point in time. I would say those are the key points. If you remember last time we talked about, I know, 35 basis points of the full-year EBIT coming in Q4.

Speaker #5: The second part is we have mentioned the second half of the year being heavy in tariff and commercial recoveries , and obviously it's heavy ended into the fourth quarter .

Speaker #5: But we have substantially negotiated with the customers . There is some ongoing discussions , but we feel pretty good with the frameworks that are in place , and we believe the roughly ten basis points impact due to tariff for the year .

Speaker #5: I think we feel comfortable at this point in time . I would say those are the key points , and if you remember last time we talked about .

Speaker #5: I don't know , 35 basis points of the full year Ebit coming in fourth quarter . That was very relevant . And we are trying to give cadence going from Q3 to Q4 has been a little bit of a stronger Q3 .

Swamy Kotagiri: That was very relevant, and we are trying to give cadence going from Q3 to Q4. It's been a little bit of a stronger Q3. Now, if you look at the math of the midpoint of the sales and the midpoint of the EBIT, I would still say we are in the low 30s, you know, as a percent of EBIT for the full year. All in all, it's on track and looking good.

Speaker #5: Now, if you look at the math of the midpoint of the sales and the midpoint of the EBIT, I would still say we are in the low 30s.

Speaker #5: You know , as a percent of Ebit for the full year . So all in all , it's on track and looking good .

Speaker #8: Great . Thank you .

Dan Levy: Great. Thank you.

Speaker #3: Your next question comes from the line of James Picariello of BNP Paribas. Please go ahead.

Calvin: Your next question comes from the line of James Picariello of BNP Paribas. Please go ahead.

Operator: Your next question comes from the line of James Picariello of BNP Paribas. Please go ahead.

Speaker #9: Good morning everybody . I wanted to first ask about the the latest Ford recalls . You know , that happened over the last few months regarding a rear facing their rear facing camera , which I believe is magna's and correct me on the number .

James Picariello: Good morning, everybody. I wanted to first ask about the latest Ford recalls, you know, that happened over the last few months, regarding a rear-facing, you know, their rear-facing camera, which I believe is Magna's. Correct me on the number, but, you know, it's well north of 1 million vehicles, I think. I'm just curious what, you know, how that maybe translates or not to future warranty spend for you guys. Yeah, that's my first question.

Speaker #9: But , you know , it's well north of a million vehicles . I think I'm just curious what you know , how that maybe translates or not to future warranty spend for you guys ?

Speaker #9: Yeah , that's my first question .

Speaker #5: Good morning James . Yes . You know , we'll disclose the warranty expenses in our quarterly and annual reports . As you know , we are working constructively with our customers to reach resolution for the more recent announcements .

Swamy Kotagiri: Good morning, James. Yes, you know, we'll disclose the warranty expenses in our quarterly and annual reports, as you know. We are working constructively with our customers to reach resolution. For the more recent announcements, James, I would say the information is still coming through. Need a little bit better understanding of the scope of the issue. As you can imagine, there is complexities in the system with various interfaces. We have to assess the overall. It's a little bit early from that standpoint. As we gain more information, we will definitely be in a better position to come back and give you more granularity.

Speaker #5: James , I would say the information is still coming through . Need a little bit better understanding of the scope of the issue .

Speaker #5: As you can imagine , there is complexities in the system with various interfaces . They have to assess the the overall , it's a little bit early from that standpoint , and as we gain more information , we'll definitely be in a better position to come back and give you more granularity .

Speaker #9: Got it . Understood . Thank you . And then my follow up just can you speak to the new nameplates that are at Magna Steyr and what that could translate to in terms of future , future volumes .

James Picariello: Got it. Understood. Thank you. My follow-up, just, can you speak to the new nameplates that are at Magna Steyr, and, you know, what that could translate to in terms of future volumes, you know, run rate production?

Speaker #9: Run rate production and then just latest thoughts on on capital allocation with respect to share buybacks . Thank you .

[Analyst] (BNP Paribas): Just latest thoughts on capital allocation with respect to, you know, share buybacks. Thank you.

James Picariello: Just latest thoughts on capital allocation with respect to, you know, share buybacks. Thank you.

Speaker #5: Yeah, James. Again, I think one of the key things is the flexibility that we have in our Magna facility to be able to do multiple propulsion systems or multiple models on the same line.

Swamy Kotagiri: Yeah, James, again, I think, you know, one of the key things is the flexibility that we have in our Magna site facility to be able to do multiple propulsion systems or multiple models through the same line. I don't think you'll see a significant, given the capability and the way it is set up and the business model that we have working with the customers there, we don't expect to see a uptick in capital because of those programs in Steyr. Now, with respect to the programs, it's as I mentioned in my remarks, Sherpa Inc, we are doing SKD of 2 models, and there is another Chinese OEM we are working with, which is due to launch a 3rd model in there. All in all, you know, we are excited about that.

Speaker #5: So, I don't think you'll see a significant change given the capability, the way it is set up, and the business model that we have working with the customers there. We don't expect to see an uptick in capital because of those programs in Steyr.

Speaker #5: Now , with respect to the programs , as I mentioned in my remarks , Shuofang , we are doing SKD of two . Models and there is another Chinese OEM we are working with , which is due to launch a third model in there .

Speaker #5: So all in all , you know , we are excited about that . If you remember , we have capacity of roughly 150,000 units .

Swamy Kotagiri: If you remember, we have capacity of roughly 150,000 units, I would say. If you look averaged out over years, long period of time, I would say we do well with about 100 to 120,000 units. Typically, that's what has been the average. We are continuing to work, launching these programs, but there is additional discussions ongoing to further optimize the facility there.

Speaker #5: I would say . But if you look averaged out over years long period of time , I would say we do well with about 100 to 120,000 units .

Speaker #5: Typically . That's what has been the average . So we are continuing to work launching these programs . But there is additional discussions are ongoing to further optimize the facility .

Speaker #5: There .

Speaker #6: Yeah . And maybe to the point on share buybacks . So , you know , obviously share buybacks remain an essential part of our capital allocation strategy at the company .

Philip Fracassa: Yeah. Maybe to the point on share buybacks. You know, obviously, share buybacks remain an essential part of our capital allocation strategy at the company. As you know, we've kinda paused this year just given all the uncertainty that's been out there. We've shifted and focused instead on delevering, and that's gone very well. It's actually trending ahead of schedule. We did announce, as you saw, the new NCIB, which would allow the company to purchase up to 10% of our shares over the next 12 months.

Phil Fracassa: Yeah. Maybe to the point on share buybacks. You know, obviously, share buybacks remain an essential part of our capital allocation strategy at the company. As you know, we've kinda paused this year just given all the uncertainty that's been out there. We've shifted and focused instead on delevering, and that's gone very well. It's actually trending ahead of schedule. We did announce, as you saw, the new NCIB, which would allow the company to purchase up to 10% of our shares over the next 12 months.

Speaker #6: As you know , we've we've kind of paused this year just given all the uncertainty that was that's been out there . We've shifted and focused instead on Delevering .

Speaker #6: And that's gone very well . It's actually trending ahead of schedule . And we did announce , as you saw , the new NCIB , which would allow the company to purchase up to 10% of our shares over the next 12 months .

Speaker #6: So I think that , you know , the leverage coming down quicker than we anticipated , the strong free cash flow , which we expect to continue .

Philip Fracassa: I think that, you know, the leverage coming down quicker than we anticipated, the strong free cash flow, which we expect to continue, I think, sets us up really well, you know, to lean into buybacks as we're looking ahead to 2026. I think that it will continue to factor in.

Phil Fracassa: I think that, you know, the leverage coming down quicker than we anticipated, the strong free cash flow, which we expect to continue, I think, sets us up really well, you know, to lean into buybacks as we're looking ahead to 2026. I think that it will continue to factor in.

Speaker #6: I think sets us up really well , you know , to , you know , to lean into buybacks as , you know , as we're looking ahead to 2026 and and , you know , I think that it will continue to continue to factor in .

Speaker #6: .

Speaker #9: That sounds great. Thank you, guys.

[Analyst] (BNP Paribas): That sounds great. Thank you, guys.

James Picariello: That sounds great. Thank you, guys.

Speaker #6: Thank you .

Philip Fracassa: Thank you.

Phil Fracassa: Thank you.

Speaker #3: Your next question comes from the line of Joe Spak of UBS. Please go ahead.

Calvin: Your next question comes from the line of Joseph Spak of UBS. Please go ahead.

Operator: Your next question comes from the line of Joseph Spak of UBS. Please go ahead.

Speaker #10: Hi . Thanks . Good good morning Swami . And welcome Phil . Just was wondering if you could help me a little bit here if I , if I track the impact all year long on tariffs and in your comment of less than ten basis points impact for the year , it seems like you're counting on , I don't know , at least 40 million , maybe a little bit more of recovers in the fourth quarter .

Joseph Spak: Thanks. Good morning, Swamy, and welcome, Phil. Just wondering if you could help me a little bit here. Like, if I track the impact all year long on tariffs and then your comment of less than 10 basis points impact for the year, it seems like you're counting on, I don't know, at least $40 million, maybe a little bit more recoveries in Q4. Is that math right? I know you said that was one of the drivers of the margin inflection in Q4. I just wanna make sure we're properly calibrated there. I know you said you're making progress on negotiations, but is there any risk, do you think, to receiving them, given some of the distractions at the customers?

Joe Spak: Thanks. Good morning, Swamy, and welcome, Phil. Just wondering if you could help me a little bit here. Like, if I track the impact all year long on tariffs and then your comment of less than 10 basis points impact for the year, it seems like you're counting on, I don't know, at least $40 million, maybe a little bit more recoveries in Q4. Is that math right? I know you said that was one of the drivers of the margin inflection in Q4. I just wanna make sure we're properly calibrated there. I know you said you're making progress on negotiations, but is there any risk, do you think, to receiving them, given some of the distractions at the customers?

Speaker #10: And is that math right ? I know you said that was one of the drivers of the margin inflection in in the fourth quarter .

Speaker #10: I just want to make sure we're properly calibrated . There and then . I know you said you're making progress on negotiations , but is there any risk , do you think , to receiving them , given some of the distractions at the at the customers ?

Speaker #5: Good morning Joe . I think if you look at the overall in our last calls , we mentioned roughly an annualized impact of about 200 million .

Swamy Kotagiri: Good morning, Joe. I think if you look at the overall in our last calls, we mentioned roughly an annualized impact of about $200 million. As you know, the tariff situation started, Luis, I would say April.

Speaker #5: But as you know , the tariff situation started , Louis , I would say April , March , April time frame . So you can take the 200 annualized and get the number for the year .

Philip Fracassa: Yeah.

Phil Fracassa: Yeah.

Swamy Kotagiri: March, April timeframe. You can take the 200 annualized and get the number for the year. I think too, in Q4, you know, there's more than 40, I would say. There is frameworks in place, Joe, which gives me the comfort to say we are working through. The framework is there. Discussions have been collaborative, which gives me comfort. Is there a risk? Obviously, there could be, you know, just as you know, in this industry. Looking at the past history, looking at the status of where we are today, I feel comfortable. As we talk about 10 basis points, right, which is roughly in the $30 million range that we believe would be the tariff impact for 2025, that's unrecovered or unmitigated.

Speaker #5: I think in the fourth quarter , I you know , there's more than 40 . I would say , but there is frameworks in place , Joe , which gives me the comfort to say we are working through the framework .

Speaker #5: Is there the discussions have been collaborative , which gives me comfort . Is there a risk ? Obviously there could be , you know , just as you know , in this industry , but looking at the past history , looking at the status of where we are today , I feel comfortable .

Speaker #5: And as we talk about ten basis points , right , which is roughly in the 30 million range that we believe would be the tariff impact for 2025 , that's unrecovered or unmitigated .

Speaker #10: Okay. Thank you. That's helpful. And then I know you're going to be pretty limited today in sort of talking about next year.

Joseph Spak: Okay. Thank you. That's helpful. You know, I know, you're gonna be pretty limited today in sort of talking about next year, but just again, so we think about this now. It does seem, right, like, you know, maybe you have this positive in Q4. You're fairly neutral for the year. If we think about, you know, maybe if for 2026, are things, are recoveries and headwinds sort of better aligned? You know, the margin variation quarter to quarter related to this should be much reduced, so we don't have this, like, big, you know, one half, two half, inflection like you did in 2025. Is that a good baseline to think about for next year, that it's a little bit more balanced?

Joe Spak: Okay. Thank you. That's helpful. You know, I know, you're gonna be pretty limited today in sort of talking about next year, but just again, so we think about this now. It does seem, right, like, you know, maybe you have this positive in Q4. You're fairly neutral for the year. If we think about, you know, maybe if for 2026, are things, are recoveries and headwinds sort of better aligned? You know, the margin variation quarter to quarter related to this should be much reduced, so we don't have this, like, big, you know, one half, two half, inflection like you did in 2025. Is that a good baseline to think about for next year, that it's a little bit more balanced?

Speaker #10: But just just again . So we think about this now . It does seem right . Like you know , maybe you have this positive in the fourth quarter .

Speaker #10: You're fairly neutral for the year . So if we think about , you know , maybe if for 26 is our things are recoveries and headwinds sort of better aligned .

Speaker #10: So you know the margin variation quarter to quarter related to this should be much reduced . So we don't have this like big one half to half inflection like like like you did in 25 .

Speaker #10: Is that is that a good baseline to think about for next year that it's a little bit more balanced ?

Speaker #5: I think that will be the focus, Joe. But you know, tariffs were a new thing this year, as you know.

Swamy Kotagiri: I think that will be the focus, Joe. You know, tariffs was a new thing this year, as you know, and we had to come up with the framework. I would say there is good groundwork and framework in place, this being the first year. As we are coming towards the end, that should help going into 2026 if we have to deal with it. I think there is still gonna be some amount of cadence topics going from Q1 to the other, just based on continuous improvements, the programs finishing and the new programs coming, you know, and so on and so forth. We are in the process of the business planning now.

Speaker #5: And we had to come up with the framework. I would say there is good groundwork and framework in place, this being the first year.

Speaker #5: And as we are coming towards the end , that should help going into 2026 , if you have to deal with it . I think there is still going to be some amount of cadence topics going from one quarter to the other , just based on continuous improvements .

Speaker #5: The programs finishing and the new programs coming . You know , and so on and so forth . But we are in the process of the business planning now , I think by the time we come to February , we'll get him much better picture to at least give you somewhat of a sense of , you know , is there more lumpiness or it's getting back to normalcy ?

Swamy Kotagiri: I think by the time we come to February, we'll get a much better picture to at least give you somewhat of a sense of, you know, is there more lumpiness or it's getting back to normalcy.

Speaker #10: Thank you very much .

Tom Narayan: Thank you very much.

Speaker #3: Your next question comes from the line of Tom Narayan of RBC Capital Markets. Please go ahead.

Calvin: Your next question comes from the line of Tom Narayan of RBC Capital Markets. Please go ahead.

Operator: Your next question comes from the line of Tom Narayan of RBC Capital Markets. Please go ahead.

Speaker #9: Hey , thanks .

Tom Narayan: Hey, thanks. Hi, Swamy, Phil, and best wishes to Pat. My first question is on the seating margins as guided for Q4. You know, I know a lot of the segments are seeing this, but it's especially magnified in seating, it seems. I know this segment had some challenges in the past due to just some program-specific things. Just curious if you could help us understand how much of this sequential improvement is coming from the tariff and commercial recoveries, and then how much is just underlying, you know, kind of business improvement. I know you also called out engineering coming down. I'm not sure if that impacts Q4 as well. Just curious on your thoughts on seating in Q4 and how we should think about that going forward.

Speaker #11: Hi , Swami . Phil , and best wishes to Pat . My first question is on the seating margins . This guided for Q4 .

Speaker #11: You know , I know a lot of the segments are seeing this , but it's especially magnified in seating . It seems and others .

Speaker #11: This segment was had some challenges in the past due to just some program specific things . Just curious if you could help us understand how much of this sequential improvement is coming from the tariff and commercial recoveries , and then how much is just underlying , kind of business improvement ?

Speaker #11: I know you also called out engineering coming down . I'm not sure if that impacts Q4 as well , but just curious on your thoughts on seating in Q4 and how we should think about that going forward .

Speaker #6: Yeah , maybe , I'll maybe , maybe I'll start . Tom . So on seating , obviously , really strong third quarter with revenue up and good margin performance .

Philip Fracassa: Maybe I'll start, Tom. On seating, obviously really strong Q3 with revenue up and good margin performance. To your question, the margin improvement Q3 to Q4, you know, the big contributors would be recoveries for tariffs because seating does have, you know, pretty large tariff exposure, so there are the recoveries we've got to get. You know, there's also continued operational excellence initiatives there too. If we had to point to the primary drivers of the margin, you know, because we do expect, you know, the implied guidance would say volumes would be down a little bit year-on-year and even down a little bit sequentially. We've got the volume headwind in there too, but overcoming it with, you know, the recoveries, commercial tariffs, and also continued focus on operational excellence.

Phil Fracassa: Maybe I'll start, Tom. On seating, obviously really strong Q3 with revenue up and good margin performance. To your question, the margin improvement Q3 to Q4, you know, the big contributors would be recoveries for tariffs because seating does have, you know, pretty large tariff exposure, so there are the recoveries we've got to get. You know, there's also continued operational excellence initiatives there too. If we had to point to the primary drivers of the margin, you know, because we do expect, you know, the implied guidance would say volumes would be down a little bit year-on-year and even down a little bit sequentially. We've got the volume headwind in there too, but overcoming it with, you know, the recoveries, commercial tariffs, and also continued focus on operational excellence.

Speaker #6: But to your question , the margin improvement Q3 to Q4 , you know , the big , big contributors would be recoveries for tariffs because seating does have , you know , pretty large tariff exposure .

Speaker #6: So there are the recoveries . We've got to get . But , you know , there's also continued operational excellence initiatives there to .

Speaker #6: But if we had to point to the primary drivers of the margin , you know , because we do expect , you know , the implied guidance would say volumes would be down a little bit year on year and even down a little bit sequentially .

Speaker #6: So we've got the volume headwind in there too . But overcoming it with , you know , the recoveries , commercial tariffs and also continued focus on operational excellence .

Speaker #4: There's a there's a little bit of engineering that's coming down . So it should be a bit of a tailwind for us .

Louis Tonelli: There's a little bit of engineering that's coming down, so should be a bit of a tailwind for us.

Speaker #5: And that's for the fourth quarter in general . Right I think Tom , just maybe stepping back , I want to say seating is a good business .

Swamy Kotagiri: That's for Q4 in general, right?

Tom Narayan: That's for Q4 in general, right?

Louis Tonelli: Yes.

Swamy Kotagiri: I think, Tom, just maybe stepping back, I wanna say, seating is a good business. You know, past couple of years, there was pressure on margins due to program-specific issues like end of production of Ford Edge. There was a cancellation of Explorer EV and Chevrolet Equinox moved from Ontario. As you mentioned, rightly, I've been talking about a European OEM program in North America, which had issues and you know, that's gonna be behind us. The newer version with the right, call it financial metrics, launches in 26 into 27, and you'll see that additional impact going forward in 27. I would say structurally, it's a really good business. It's got a strong position in China with China-based OEMs.

Speaker #5: You know, the past couple of years there has been pressure on margins due to program-specific issues, like the end of production of the Ford Edge.

Speaker #5: There was a cancellation of DV explorer and Chevy Equinox , moved from Ontario . And as you mentioned rightly , I've been talking about a European OEM program in North America , which had issues .

Speaker #5: And , you know , that's going to be behind us . The newer version with the right call it financial metrics launches in 26 into 27 , and you'll see that additional impact going forward in 27 .

Speaker #5: So I would say structurally , it's a really good business . It's got a strong position in China with China based OEMs . So all in all , you know , it's it's the team has done the seating team has done a great job taking costs out as part of the operational excellence .

Swamy Kotagiri: All in all, you know, the seating team has done a great job taking costs out as part of the operational excellence. I think we'll continue to see the margin improve going forward.

Speaker #5: So I think we'll continue to see the margin improve going forward .

Speaker #11: Great. In my follow-up, it has to do with Steyr and the Chinese OEM wins. Does this create like a flywheel to sell other Magna products from other segments? And then, just curious, were there any kind of frictions from your European OEM customers?

Tom Narayan: Great. My follow-up has to do with Steyr and the Chinese OEM wins. Does this create like a flywheel to sell other Magna products from other segments? Just curious if there were any kind of frictions from your European OEM customers, legacy ones, given the, you know, encroachment of Chinese OEMs into Europe is a very hot topic, and I know some of the OEMs are kind of concerned about it. Thanks.

Speaker #11: Legacy ones , given the , you know , encroachment of Chinese OEMs into Europe is a very hot topic , and I know some of the OEMs are kind of concerned about it .

Speaker #11: Thanks .

Speaker #5: I think , Tom , we would like to look at each of the business that needs to stand on itself , right . Obviously , if there are opportunities for other parts , other systems of Magna to be , you know , there , yes .

Swamy Kotagiri: I think, Tom, we would like to look at each of the business that needs to stand on itself, right? Obviously, if there are opportunities for other parts, other systems of Magna to be, you know, there, yes, we are not gonna make one dependent on the other, right? It's a standing on its own merit. That's how we're gonna look at it. Obviously, there could be opportunities. We have to look at it. To be honest, no, we have not seen, you know, any discussions with other OEMs. This is part of a business for Magna. We have worked with various OEMs in the past, right, as you know.

Speaker #5: But we're not going to make one dependent on the other . Right ? So it's a standing on its own merit . That's how we're going to look at it .

Speaker #5: Obviously , there could be opportunities , but we have to look at it to be honest . No , we have not seen , you know , any discussions with other OEMs .

Speaker #5: This is part of a business for Magna . And we have worked with various OEMs in the past . Right . As you know , and we are following the same business model , same principles .

Tom Narayan: Yeah.

Swamy Kotagiri: we are following the same business model, same principles. we have not heard anything. we are very close-

Speaker #5: So we have not heard anything . And we are very close to the customers . As you know .

Tom Narayan: Got it.

Swamy Kotagiri: To the customer, as you know.

Speaker #11: Great . Thank you .

Tom Narayan: Great. Thank you.

Speaker #5: Thank you .

Swamy Kotagiri: Thank you, Tom.

Speaker #6: Thanks , Tom .

Philip Fracassa: Thanks, Tom.

Phil Fracassa: Thanks, Tom.

Speaker #3: Your next question comes from the line of Emmanuel Rosner of Wolfe Research . Please go ahead .

Calvin: Your next question comes from the line of Emmanuel Rosa of Wolfe Research. Please go ahead.

Operator: Your next question comes from the line of Emmanuel Rosa of Wolfe Research. Please go ahead.

Speaker #12: Great . Thank you so much . Good morning . So I appreciate your early thoughts on some of the operational performance that could continue into 2026 .

Emmanuel Rosner: Great. Thank you so much. Good morning. I appreciate your early thoughts on some of the operational performance that could continue into 2026. Another angle I was, you know, hoping to get an update on is, you know, you've in the past pointed to a large amount of new business that would launch and ramp up into 2026, boosting revenue pretty materially and obviously coming with some operating leverage and helping margins further into next year. Can you maybe talk to us about how those launches are progressing, whether the magnitude of the revenue uptick into next year from those is still broadly similar to what you've mentioned in the past? Any other consideration on that launches and revenue uptick, please.

Speaker #12: Another angle was hoping to get an update on is , you know , you have in the past pointed to a large amount of new business that would launch and ramp up into 2026 , boosting revenue pretty materially .

Speaker #12: And obviously coming with some operating leverage and helping margins further into next year. So can you maybe talk to us about how those launches are progressing, whether the magnitude of revenue uptake into next year from those is still broadly similar to what you've mentioned in the past, and any other considerations on that.

Speaker #12: Launches and revenue uptake, please.

Speaker #5: Yeah . Good morning , Emmanuel . I think for 2025 going into 26 , when we talked about launches , we talked about it in the context of new economics , right .

Swamy Kotagiri: Yeah. Good morning, Emmanuel. I think for 2025 going into 2026, when we talked about launches, we talked about it in the context of new economics, right? You know, the terms of setting labor back, you know, labor rates and labor discussions, at the start of production, not when we won the program as an example, and so on. We have specifically always talked about winning programs based on returns. If you just look at all of those, that was the step up, I would say, or inflection, in the profitability going with these new programs. As far as the launches, and the cadence goes, looking at our team, they're doing very good. We look at it very periodically, right, at a high amount of detail. I can say there is nothing that stands out today.

Speaker #5: You know , the terms of setting labor back , you know , labor rates and labor discussions at the start of production , not when we run the program .

Speaker #5: As an example . And so on . We have specifically always talked about winning programs based on returns . If you just look at all of those , that was the step up .

Speaker #5: I would say , or inflection in the profitability going with these new programs . As far as the launches and the cadence goes , looking at our team , they're doing very good .

Speaker #5: We look at it very , very periodically , right at a high amount of detail . I can say there is nothing that stands out today .

Speaker #5: All the launches are moving pretty good .

Swamy Kotagiri: All the launches are moving pretty good.

Speaker #4: Yeah . We got to look at , you know , what the volumes are going to be on all the programs . It's something we're going to go through as part of our business planning process .

Louis Tonelli: Yeah. We gotta look at, you know, what the volumes are gonna be on all the programs. It's something we're gonna go through as part of our business planning process. What are the revised volume expectations for all the key programs? What does that do to our sales growth, et cetera. That's still part of our planning process that's coming.

Emmanuel Rosner: Yeah. We gotta look at, you know, what the volumes are gonna be on all the programs. It's something we're gonna go through as part of our business planning process. What are the revised volume expectations for all the key programs? What does that do to our sales growth, et cetera. That's still part of our planning process that's coming.

Speaker #4: What are the revised volume expectations for all the key programs ? What does that do to our sales growth , etc. ? So that's still part of our planning process that's coming .

Speaker #5: Yeah, I think we can say we're doing a good job with controlling the controllables in our hand, but the externalities of volumes and so on.

Swamy Kotagiri: Yeah. I think we can say we're doing a good job of controlling the controllables in our hand, but the externalities of volumes and so on, we still are gonna go through and understand better in the business plan process.

Speaker #5: We still are going to go through and understand better in the business plan process .

Speaker #6: Yeah. So more to come in February on that. Yep.

Philip Fracassa: Yeah. More to come in February on that.

Phil Fracassa: Yeah. More to come in February on that.

Swamy Kotagiri: Yep.

Speaker #12: Yeah . Now looking forward to that . Just quick follow up on this . And then I wanted to ask you also about the the fourth quarter drivers .

Emmanuel Rosner: Yeah. No, looking forward to that. Just quick follow-up on this, and then I wanted to ask you also about the Q4 drivers. Just quick follow-up on this top-line thing. Are we still talking about launches of decent managers? I understand the volume themselves would fluctuate, but we're not, you know... Are you experiencing, you know, cancellations or, you know, major pushouts or anything like this?

Speaker #12: But just a quick follow up on this top line thing . Are we still talking about a launches of decent magnitude . So I understand the volume themselves .

Speaker #12: Would fluctuate . But we're not you know , are you experiencing you know , cancellations or you know , major push outs or anything like this ?

Speaker #5: I wouldn't say manual anything of significance . We already talked in the past about the big EV programs that everybody knows about . Other than that we haven't seen anything substantial beyond .

Swamy Kotagiri: I wouldn't say, Manuel, anything of significance. We already talked in the past about the big EV programs that everybody knows about. Other than that, we haven't seen anything substantial beyond.

Speaker #12: Okay . And then I guess my second question was , so when , you know , you've spoken earlier in the year about this big step up in , margin between the first half and the second half , which you reiterating today , I mean , some of it was commercial recoveries .

Emmanuel Rosner: Okay. I guess my second question was, you know, you've spoken earlier in the year about this big step up in margin between the first half and the second half, which you're reiterating today. I mean, some of it was commercial recoveries. There was some engineering recoveries. There was some tariff recoveries in there. You know, all that stuff seems, you know, to be on track. I think there was also a piece of the uptick that was supposed to be tied to warranty costs. Is that still also on track and helping towards Q4?

Speaker #12: There was some engineering recoveries . There was some tariff recoveries in there . You know , all that stuff seems , you know , to be on track .

Speaker #12: I think there was also a piece of the uptick that was supposed to be tied to warranty costs . Is that still also on track and helping in towards the fourth quarter ?

Speaker #5: Yeah , I in terms of looking at my comments from the last time to where we are , you're right . We need to keep our focus on obviously executing operationally .

Swamy Kotagiri: Yeah. In terms of looking at my comments from the last time to where we are, you're right. We need to keep our focus on obviously executing operationally. Yes, you mentioned commercial and tariff. That is still continuing as I mentioned in my remarks. Nothing specific about warranty. I think if you're talking about there was 1 topic on seeding in Q1, I would say we are in a good place with respect to that. Nothing, no surprise there.

Speaker #5: You mentioned commercial and tariff . That is still continuing . As I mentioned in my remarks , nothing specific about warranty . I think if you're talking about there was one topic on seeding in the first quarter .

Speaker #5: I would say we are in a good place with respect to that . Nothing . No surprise . There .

Speaker #6: Yeah . I mean , yeah , I would agree . I think when you think of the fourth quarter , you've got it's really continued execution on the operational excellence initiatives is in there .

Philip Fracassa: Yeah. I mean, Yeah, I would agree. I think, when you think of the Q4, you've got what's really continued execution on the operational excellence initiatives is in there, the recoveries, commercial tariffs. I would say, you know, there's nothing material related to warranty, you know, baked into the Q4, if you will. It's really mainly volume sold, not executing well, and then continuing on the focus on cost controls.

Phil Fracassa: Yeah. I mean, Yeah, I would agree. I think, when you think of the Q4, you've got what's really continued execution on the operational excellence initiatives is in there, the recoveries, commercial tariffs. I would say, you know, there's nothing material related to warranty, you know, baked into the Q4, if you will. It's really mainly volume sold, not executing well, and then continuing on the focus on cost controls.

Speaker #6: The recoveries commercial tariffs , I would say , you know , there's nothing material related to warranty , you know , baked into the fourth quarter , if you will .

Speaker #6: It's really mainly volumes holding up executing well . And then continuing on the focus on cost controls . .

Speaker #5: And just maybe a year over year , the warranty in 25 has been higher . So the outlook that we are talking about in performance is despite that increase in warranty .

Swamy Kotagiri: just maybe year-over-year, the warranty in 2025 has been higher. The outlook that we are talking about in performance is despite that increase in warranty.

Speaker #9: Great .

Emmanuel Rosner: Great. Thank you.

Speaker #12: Thank you .

Speaker #3: Your next question comes from the line of Colin Langan of Wells Fargo . Please go ahead .

Calvin: Your next question comes from the line of Colin Langan of Wells Fargo. Please go ahead.

Operator: Your next question comes from the line of Colin Langan of Wells Fargo. Please go ahead.

Speaker #13: Hello . Thanks for taking my question . Earlier , you mentioned we have the five and a half base for 2025 . You have about 35 to 40 basis points of continued sort of performance help that gets you to five nine .

Colin Langan: Thanks for taking my question. Early you mentioned sort of we have the 5 and a half base for 2025. You have about 35 to 40 basis points of continued sort of performance help. That gets you to, like, 5.9, I think you mentioned some of the launches are coming in at more profits, and maybe you could go a bit higher. I believe the last update, I think from Q4, was 6 and a half to 7.2. It seems still like a big jump for you kind of walking. Is that just kind of stale at this point, or should we still think of that as a relevant target as we think about 2026?

Speaker #13: And then I think you mentioned some of the launches are coming in at more profits than maybe you could go a bit higher .

Speaker #13: I believe the last update , I think , from Q4 was six and a half to seven , two . It seems still like a big jump for your kind of walking .

Speaker #13: Is that just kind of stale at this point , or should we still think of that as a relevant target as we think about 26 ?

Speaker #5: Good morning Colin . I think let us finish the business plan process . I think , as you know , one of the big variables is going to be volumes in the market , right ?

Swamy Kotagiri: Good morning, Colin. I think, let us finish the business plan process. I think, as you know, one of the big variables is gonna be volumes in the market, right? When I talk to you about the 35 to 40 basis points, obviously that's again controlling what we have in our hands in terms of operations and executing. We feel pretty good about that. You know, some of it will obviously depend on the volumes. Given all the activities that we've done in setting up the right cost structure, it's a journey. We're not stopping there. We continue to look at it. With the discipline we have had in capital, we see a good path going into 2026. As volumes come, you'll see obviously the flow through to the bottom line to be much better.

Speaker #5: When I talk to you about the 35 to 40 basis points , obviously that's again controlling what we have in our hands in terms of operations and executing .

Speaker #5: We feel pretty good about that . You know , some of it will obviously depend on the volumes given all the activities that we have done in setting up the right cost structure .

Speaker #5: And we it's a journey . We're not stopping there . We'll continue to look at it with the discipline we have had in capital .

Speaker #5: We see a good path going into 26 and as volumes come , you'll see obviously the flow through to the bottom line to be much better .

Speaker #4: Because Swami's point , if you look at where we said we thought North American volumes would be in February for 26 , it was like 15 for where I is today .

Louis Tonelli: Yeah. I mean, to Swamy's point, if you look at where we said we thought North American volumes would be in February for 2026, it was like 15.4. As is today, it's 14.7. Maybe by the time we get there, it's higher than that. I mean, that delta has to be, it's going to have an impact.

Speaker #4: It's 14 seven . So maybe by the time we get there it's higher than that . But I mean that Delta has to be it's going to have an impact right ?

Colin Langan: Right. Got it. Then any update on how the ADAS business is performing? 'Cause if I look at Power & Vision, sales seem actually fairly flat. I thought there was supposed to be some ADAS growth driving there. Is that still up? If it is, what is offsetting some of that weakness in there?

Speaker #13: Got it . And then any update on how the Adas business is performing . Because if I look at power and vision , sales seem actually fairly flat , I thought they were supposed to be some Adas growth driving there .

Speaker #13: Is that still up ? And if and if it is , what is offsetting some of that ? That weakness in there ?

Swamy Kotagiri: As we go through that segment has a lot of dynamic factors, as you can imagine, powertrain, EVs and hybrids and the ICE mix and program changes. From ADAS perspective, Colin, I would say there is some, again, industry dynamics there. The OEMs are continuing to still evaluate the architectures. Some decisions have been pushed out from a China strategy in terms of looking at chips and their own perception strategy, and the Western OEMs continue to take a path. We've been a little bit cautious. I would say the growth that we would have assumed maybe three or four years ago to what we are looking is a little bit dampened. The only reason is that we wanna be cautious of how many platforms we want to work, right?

Speaker #5: As we go through that segment, it has a lot of dynamic factors. As you can imagine, powertrain EVs and hybrids, and the ICE mix, along with program changes from an ADAS perspective.

Speaker #5: Colin , I would say there is some , again , industry dynamics there . The OEMs are continuing to still evaluate the architecture .

Speaker #5: Some decisions have been pushed out from a China strategy in terms of looking at chips and their own perception strategy and the Western OEMs continue to take a path .

Speaker #5: So we've been a little bit cautious . I would say the the growth that we would have assumed maybe 3 or 4 years ago to what we are looking is a little bit dampened .

Speaker #5: And the only reason is that we want to be cautious of how many platforms we want to work . Right . We have to be focused on picking a platform so that we can engineer once and deploy multiple times .

Swamy Kotagiri: We have to be focused on picking a platform so that we can engineer once and deploy multiple times. There is a little bit of, you know, more work to do on the ADAS side. Again, based on the industry and OEMs and architectures and trends.

Speaker #5: So there is a little bit of , you know , more work to do on the Adas side . Again , based on the industry and OEMs and architectures and trends .

Speaker #13: Got it . All right . Thanks for taking my questions .

Mark Delaney: Got it. All right. Thanks for taking my questions.

Colin Langan: Got it. All right. Thanks for taking my questions.

Speaker #3: Your next question comes from the line of Mark Delaney of Goldman Sachs . Please go ahead .

Calvin: Your next question comes from the line of Mark Delaney of Goldman Sachs. Please go ahead.

Operator: Your next question comes from the line of Mark Delaney of Goldman Sachs. Please go ahead.

Speaker #14: Hi . Yes . Good morning . Thank you very much for taking the questions . I'd like to thank Pat for all his help and wish him the best going forward .

Mark Delaney: Yes, good morning. Thank you very much for taking the questions. I'd like to thank Pat for all his help and wish him the best going forward. Phil, looking forward to working with you going forward. I do. Question on the complete vehicles business. Swamy, you mentioned earlier in the call that 100 to 120,000 is a more comfortable level to be operating. I do want to clarify with the awards and momentum you've been seeing in that business with some of the Chinese-based OEM programs. Do you already have line of sight into volumes getting the complete vehicle business to that kind of level in Austria? Or do you need to win additional business to get there?

Speaker #14: And Phil , looking forward to working with you , going forward . I do question on the complete vehicles business and Swami , you mentioned earlier in the call that 100 to 120,000 is a more comfortable level to be operating .

Speaker #14: I do want to clarify with the awards and momentum you've been seeing in that business with some of the Chinese based OEM programs , do you already have Line of sight into volumes ?

Speaker #14: Getting the complete vehicle business to that kind of level in Austria, or do you need to win additional business to get there? And the second part of the question: if you get to those sorts of volumes, what should we think about in terms of more normalized EBIT margin within the complete vehicle business?

Mark Delaney: You know, the second part of the question, you know, if, if you get to those sorts of volumes, what should we think about in terms of more normalized EBIT margin within the complete vehicle business? I think at times in the past, it was at 3%, 4%, or, and wondering if it can get back to at least those sorts of levels, if not maybe even higher as you ramp some of this new business.

Speaker #14: Because I think at times in the past , it was 3 or 4% or and wondering if it can get back to at least those sorts of levels , if not maybe even higher , as you ramp some of those new business .

Speaker #5: So Mark , good morning . I think a couple of points to mention . You know , the 100 hundred and 20 I mentioned was more a context of what the business is run typically in the past , right ?

Swamy Kotagiri: Mark, good morning. I think a couple of points to mention. You know, the 100, 120 I mentioned was more a context of what the business has run typically in the past, right? We've been talking over the last year and a half where we restructured or the team has done a great job restructuring to the current volumes and the current visibility. Even with the lower volumes running there, they've been able to maintain the margin. That's one thing to note. The second one, as you know, this business or this segment runs on a different business model. It's a little bit on capacity utilization, so the risk exposure is a little bit different or lower.

Speaker #5: We've been talking over the last year and a half where we restructured our team has done a great job restructuring to the current volumes and the current visibility .

Speaker #5: So even with the lower volumes running there , they've been able to maintain the margin . So that's one thing to note . The second one , as you know , this business or this segment runs on a different business model , it's a little bit on capacity utilization .

Speaker #5: So the risk exposure is a little bit different or lower . And when you talk about margins , as you know , besides complete vehicle assembly in that segment , we also have engineering revenue .

Swamy Kotagiri: When you talk about margins, as you know, besides complete vehicle assembly, in that segment, we also have engineering revenue, right? Which has a little bit of ups and downs depending upon the seasonality. That changes the EBIT percentage, you know, depending on how much of what mix, right? We feel pretty comfortable that we have the right cost structure or we have optimized. We are not keeping the cost structure hoping new business will come. We'll continue to, you know, look for the right opportunities there. The engineering continues. It's a good strength of ours, and we'll look at it. I feel to expect somewhere in the mid-2s to a 3% range would be normal.

Speaker #5: Right . So which has a little bit of ups and downs depending upon the seasonality . So that changes the Ebit percentage . You know , depending on how much of what makes right .

Speaker #5: We feel pretty comfortable that we have the right cost structure or we have optimized . We are not keeping the cost structure , hoping new business will come .

Speaker #5: We'll continue to , you know , look for the right opportunities there and the engineering continues . It's a good strength of ours and we'll look at it .

Speaker #5: So I feel to expect somewhere in the mid-2% to 3% range would be normal.

Speaker #14: Okay . That's helpful on the margins I guess just in of the volumes maybe it's not quite at those sorts of volumes as it was historically , but the business is operated to , to be profitable at lower levels .

Mark Delaney: Okay. That's helpful on the margins. I guess just in terms of the volumes, maybe it's not quite at those sorts of volumes as it was historically, but it, the business is operated to be profitable at lower levels. Is that the right understanding?

Speaker #14: Is that is that the right understanding ?

Speaker #5: Exactly .

Swamy Kotagiri: Exactly.

Speaker #14: Okay . And then the other , the other point , the other question I had was was also on the complete vehicle business and with some of the AV upfitting work that Magna is doing , I wanted to check is that reported within complete vehicles or another part of the business , and you realize the volume of EVs are still small , but but imagine that might be an opportunity for us .

Mark Delaney: Okay. The other point, the other question I had was also on the complete vehicle business. With some of the AV upfitting work that Magna is doing, I wanted to check, is that reported within complete vehicles or another part of the business? You know, we realize the volume of AVs are still small, but, you know, imagine that might be an opportunity for, yes, this is some engineering collaboration. I just wanna understand how impactful some of the AV announcements where that Magna is doing AV upfitting, you know, just kinda how big that might be for your business today. Thanks.

Speaker #14: You know , some some engineering collaboration and just want to understand how impactful some of the AV announcements where Magna is doing EV upfitting just how big that might be for your business today .

Speaker #14: Thanks .

Speaker #5: Yeah . Mark , you're right . The the upfitting of the full autonomous vehicles is in this segment . You know , it's it's an interesting one , but continue to look at it .

Swamy Kotagiri: Yeah. Mark, you're right. The upfitting of the full autonomous vehicles is in this segment. You know, it's an interesting one, but continue to look at it, look at the business model and, you know, work with them. We are at the table is the best way to put it, and we have a advantage of being at the table. We're also looking what's the value that we can bring, and we do, I think, from an engineering perspective and the expertise of, you know, integrating vehicles. There is a possible opportunity there, but too early to quantify.

Speaker #5: Look at the business model . And , you know , work with them . We are very we are at the table is the best way to put it .

Speaker #5: And we have a advantage of being at the table . But we also looking what's the value that we can bring . And we do .

Speaker #5: I think from an engineering perspective and the expertise of, you know, integrating vehicles. So there is a possible opportunity there.

Speaker #5: But too early to quantify .

Speaker #14: Thank you .

Mark Delaney: Thank you.

Speaker #3: Your next question comes from the line of Jonathan Goldman of Scotiabank . Please go ahead .

Calvin: Your next question comes from the line of Jonathan Goldman of Scotiabank. Please go ahead.

Operator: Your next question comes from the line of Jonathan Goldman of Scotiabank. Please go ahead.

Speaker #15: Hi . Good morning , team , and thanks for taking my questions . Maybe we can circle back to 2026 . And I respect you're still in the planning stages .

Jonathan Goldman: Hi, good morning, team. Thanks for taking my questions. Maybe we can circle back to 2026. I respect you're still in the planning stages. Swamy, you alluded to maybe flat next year in terms of volumes. Rather than put a fine point on any number, what's your expectation in terms of production being aligned with sales?

Speaker #15: But Swami , you alluded to maybe flat next year in terms of volumes . And rather than put a fine point on any number , what's your expectation in terms of production being aligned with sales ?

Swamy Kotagiri: Good question, Jonathan. I think you're asking me to look at the crystal ball a little bit. I think our assumption has been always to look at bottom-up, what we get from our customers, the releases, and our own information that's available at Magna and then triangulate with the, you know, external forecasters. Right? If the tariffs and, you know, the price continues the way it is versus being passed on to the consumers, there might be a pressure on the sales side of things. Don't know. That is something we have to see. At this point in time, and this is just me personally looking at it, and we are looking, it could be flattish.

Speaker #5: Good question Jonathan , I think you're asking me to look at the crystal ball a little bit . I think our assumption has been always to look at bottoms up .

Speaker #5: What we get from our customers , the releases and our own information that's available at Magna . And then triangulate with the , you know , external forecasters .

Speaker #5: Right . If the tariffs and , you know , the price continues the way it is versus being passed on to the consumers , there might be a pressure on the sales side of things .

Speaker #5: Don't know . There is something we have to see at this point of time . And this is just me personally looking at it .

Speaker #5: And we are looking it could be flattish , but like Lewis mentioned in , you know , a few minutes ago , you know , in the next few months , we'll get a little bit more visibility on that .

Swamy Kotagiri: Like Louis mentioned in, you know, a few minutes ago, you know, in the next few months we'll get a little bit more visibility on that.

Speaker #4: And I mean , inventory levels in North America , particularly , are pretty healthy level for any reason , to believe that they're going to bring those numbers , you know , they're going to work off inventory .

Louis Tonelli: Yeah. I mean, inventory levels in North America in particular are pretty healthy levels.

Swamy Kotagiri: Yeah, pretty healthy.

Louis Tonelli: Is there a reason to believe that they're gonna bring those numbers, you know, that they're gonna work off inventory? I don't think that's an issue. Whether they decide to build more than they sell. Yeah, it's really up to the OEMs. We can't really determine that.

Speaker #4: I think that's an issue . Whether they decide to build more than they sell or . Yeah , it's really up to up to the OEMs .

Speaker #4: We can't really determine that .

Speaker #15: Yeah , that's a fair comment . And I guess my second question then is on CapEx , thinking about it , maybe going forward , I think you've cut CapEx guidance four times in a row , which is pretty impressive .

Jonathan Goldman: Yeah, that's a fair comment. I guess my second question then is on CapEx, thinking about it maybe going forward. I think you've cut CapEx guidance four times in a row, which is pretty impressive. I think this year, you know you're going to be at the mid threes. Should that be the appropriate rate going forward if we're thinking about modeling CapEx in 2026 and beyond?

Speaker #15: I think this year , you know , you're going to be at the mid threes . Should that be the appropriate rate going forward .

Speaker #15: If we're thinking about modeling CapEx in 26 and beyond .

Speaker #5: No , Jonathan , I like I said , I would look at the 4 to 4 and a half or low force to mid force being the long term average .

Swamy Kotagiri: No, Jonathan. I, like I said, I would look at the 4 to 4.5 or low 4s to mid-4s being the long-term average. That's kinda how we look at business. Like I said, it's important for us, the organic growth, free cash flow, you know, equal balance. Given we had 2 or 3 years of high CapEx, we have been super focused on looking at everything, which programs and how there is enough uncertainty in the market too. That discipline will stay on. I think the best way to look at it is over a longer period of time do we average the 4 to 4.5.

Speaker #5: That's kind of how we look at business . Like I said , it's important for us the organic growth , free cash flow .

Speaker #5: You know it's a good balance given we had 2 or 3 years of high CapEx . We have been super focused on looking at everything which programs and how there is enough uncertainty in the market , too .

Speaker #5: So that discipline will stay on . But I think the best way to look at it is over a longer period of time , do we average the 4 to 4 and a half ?

Speaker #5: But with that said , going into 26 , I would look at the low force as a good way to start , which doesn't mean we're not going to stop further optimizing it .

Swamy Kotagiri: With that said, going into 2026, I would look at the low 4s as a good way to start, which doesn't mean we're not going to stop further optimizing it, but I would say that's a good starting point.

Speaker #5: But I would say that's a good starting point .

Speaker #15: Okay . Makes sense . I'll get back in queue . Thanks for taking my questions .

Jonathan Goldman: Okay. Makes sense. I'll get back in queue. Thanks for taking my questions.

Speaker #3: Your next question comes from the line of Michael Glenn of Raymond James . Please go ahead .

Calvin: Your next question comes from the line of Michael Glen of Raymond James. Please go ahead.

Operator: Your next question comes from the line of Michael Glen of Raymond James. Please go ahead.

Speaker #16: Hey good morning . Swami , can you provide an update in terms of how your customers are viewing the cross-border supply chains in North America right now is the approach to auto parts moving ?

Michael Glen: Hey, good morning. Swamy, can you provide an update in terms of how your customers are viewing the cross-border supply chains in North America right now? Is the approach to auto parts moving to the US to become more US-centric, something you're hearing more about and how Magna is positioned in the US right now from a capacity perspective?

Speaker #16: To the US to become more US centric ? Something you're hearing more about and how Magna is positioned in the US right now from a capacity perspective .

Swamy Kotagiri: Good morning, Michael. I think the customers are, I would say, taking a very calm approach of figuring out. As you know, our industry is a long cycle. What we are producing today has been decided 3 or 4 years ago. I think the big topic has been how to mitigate what we have in our control, like increasing the USMCA content, looking at the supply base, looking at vertical integration and so on and so forth. That's where the focus is. I haven't seen any substantive changes that will impact right away. Are they looking at scenarios, you know, 2 or 3 years down the road as they contemplate new models and new vehicles? Yes.

Speaker #5: Good morning Michael . I think the customers are , I would say , taking a very calm approach of figuring out , as you know , our industry is a long cycle , what we are producing today has been decided 3 or 4 years ago .

Speaker #5: I think the big topic has been how to mitigate what we have in our control . Like increasing the Usmca content , looking at the supply base , looking at vertical integration and so on and so forth .

Speaker #5: That's where the focus is . I haven't seen any substantive changes that will impact right away , but are they looking at scenarios , you know , 2 or 3 years down the road as they contemplate new models and new vehicles ?

Speaker #5: Yes . The good thing is , as Magna , we have a footprint in US and you know , we'll we'll look at how we can optimize working with the customers .

Swamy Kotagiri: The good thing is, as Magna, we have a footprint in US and, you know, we'll look at how we can optimize working with the customer. This is a long-term thinking process rather than a reaction to what's happening now and today.

Speaker #5: So but this is a long term thinking process rather than a reaction to what's happening now and today .

Speaker #16: Okay . And just to follow up on that , are you able to give some thoughts into the pluses and minuses to Magna Redomicile Redomicile to the US ?

Michael Glen: Okay. Just to follow up on that, are you able to give some thoughts into the pluses and minuses to Magna redomiciling to the US?

Speaker #5: That's not on the table and we have not considered it . Magna is a Canadian company , has been headquartered there . We are a global company .

Swamy Kotagiri: That's not on the table, and we have not considered it. Magna is a Canadian company, has been headquartered there. We're a global company. We have a great footprint and a great employee base. Like I said, our focus is right now on, you know, grinding through and, you know, being as flexible as possible.

Speaker #5: We have a great footprint and a great employee base . Like I said , our focus is right now on , you know , grinding through and , you know , being as flexible as possible .

Speaker #16: Excellent . Thank you .

Michael Glen: Excellent. Thank you.

Speaker #5: So thank you and thanks , everybody . Thanks everyone for listening in today . We continue to execute and we remain focused on the initiatives that are driving value for our customers .

Swamy Kotagiri: Thank you and thanks every-.

Calvin: Thank you for your question.

Operator: Thank you for your question.

Swamy Kotagiri: Thanks everyone for listening in today. We continue to execute, and we remain focused on the initiatives that are driving value for our customers and shareholders, including operational excellence as a big focus, new launches, capital discipline, and free cash flow generation. We plan to both get back within our target leverage ratio and are committed to our capital allocation strategy, including share buybacks. We remain highly confident in Magna's future. Thank you for listening, and have a great day.

Speaker #5: And shareholders , including operational excellence is a big focus . New launches , capital discipline and free cash flow generation . We plan to both get back within our target , leverage ratio and our committed to our capital allocation strategy , including share buybacks , and we remain highly confident in Magna's future .

Speaker #5: Thank you for listening and have a great day .

Calvin: Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect.

Operator: Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect.

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