Total sales are off 45%.
Magna International Inc. (TSX: MG.A; NYSE: MGA) today reported that it lost U.S. $205 million in the second quarter and $467 million in the first half of 2009 as sales to major automaker clients plummeted.
The Canadian-based conglomerate, with 71,000 employees in 247 manufacturing operations and 86 product development and engineering centers in 25 countries, is an excellent barometer of the auto industry.
During the second quarter of 2009, vehicle production declined 49% to 1.8 million units in North America and 28% to 3.1 million units in Europe, each compared to the second quarter of 2008.
Also during the second quarter of 2009, Magna’s North American and European average dollar content per vehicle decreased 10% and 7% respectively, each compared to the second quarter of 2008.
Complete vehicle assembly sales by Magna decreased 60% to $423 million for the second quarter of 2009 compared to $1.1 billion for the second quarter of 2008, while complete vehicle assembly volumes declined 65% to approximately 14,100 units.
As a result of the “significant declines in vehicle production in North America and Europe, lower average dollar content per vehicle in these two markets, and decreases in assembly sales and tooling, engineering and other sales,” Magna’s total sales decreased 45% to $3.7 billion for the second quarter of 2009 as compared to $6.7 billion for the second quarter of 2008.
|
Magna International Q2 2009 |
||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||
| 2009 | 2008 | 2009 | 2008 | |
| Sales | $3,705 | $6,713 | $7,279 | $13,335 |
| Operating (loss) income | $(237) | $319 | $(467) | $605 |
| Net (loss) income | $(205) | $227 | $(405) | $434 |
| Diluted (loss) earnings per share | $(1.83) | $1.98 | $(3.62) | $3.75 |
| All results are reported in millions of U.S. dollars, except per share | ||||
One of the reasons Magna wants Opel is so that it can control the sale of its component parts. But such a strategy is not without risks, admitted Co-Chief Executive Officer Don Walker during a conference call with analysts and reporters. He said a “firewall” would be erected between the auto components business and Opel to ensure that trade secrets would not be exchanged. Still, some existing customers might not use Magna because of such concerns and the fact that Opel competes with them.
Walker said Magna submitted an offer for Opel that divides 55% interest with Russian Sberbank; GM would own 35% and Opel employees have 10%. Eventually a €500 million investment would come from the consortium. He declined to speculate further about the outcome of the talks, or Magna’s strategy for Opel if it is successful.
General Motors said yesterday that no decision on the sale has been made, but the Magna bid is complicated and difficult to implement. The other bid by RHJ International SA (RHJI.BT) is cleaner, gives GM more control and doesn’t present intellectual property concerns, including GM’s defense business, which exists with the Russians.
Six Months Ended June 30, 2009
Nowhere is the extent of the Great Recession, the biggest since the Great Depression, clearer than in the results of large suppliers to automakers. During the first six months of 2009, vehicle production declined 50% to 3.5 million units in North America and 34% to 5.6 million units in Europe, compared to the first six months of 2008.
Also during the first six months of 2009, Magna’s North American and European average dollar content per vehicle decreased 3% and 5% respectively, each compared to the first six months of 2008.
Complete vehicle assembly sales decreased 61% to $824 million for the six months ended June 30, 2009 compared to $2.1 billion for the six months ended June 30, 2008, while complete vehicle assembly volumes declined 69% to approximately 26,100.
As a result of the significant declines in vehicle production in North America and Europe, lower average dollar content per vehicle in these two markets, and decreases in Rest of World sales, assembly sales and tooling, engineering and other sales, Magna’s total sales decreased 45% to $7.3 billion for the six months ended June 30, 2009 as compared to $13.3 billion for the six months ended June 30, 2008.
During the six months ended June 30, 2009, operating loss was $467 million, net loss was $405 million and diluted loss per share was $3.62, decreases of $1.1 billion, $839 million and $7.37, respectively, each compared to the first six months of 2008.
The out look for the balance of the year is cautiously optimistic. The company noted that production schedules are starting to increase, if ever so slightly.