(Adds comments from company conference call in paragraphs 9-12
and 16-17, plus updates stock price in final paragraph.)
DOW JONES NEWSWIRES
Faced with "one of the most difficult automotive environments in
decades," Magna International Inc. (MGA) swung to a fourth-quarter
loss on a 29% drop in sales.
The Canadian-based auto-parts giant lost $148 million or $1.33 a
share in the fourth quarter compared with a profit of $28 million
or 24 cents a share a year earlier.
Results in both periods included a number of items. The total
net charge in the latest quarter was 65 cents a share; in the
year-earlier period, it was $1.21 a share.
Fourth-quarter sales fell to $4.84 billion from $6.84
billion.
The Thomson Reuters mean estimate was for a loss of 66 cents a
share on revenue of $4.71 billion.
In the third quarter, Magna had lost $215 million or $1.93 a
share, also hurt by a number of unusual items.
Magna said Tuesday that, in the latest quarter, its North
American and European average dollar content per vehicle decreased
4% and 9%, respectively, from a year earlier. North American and
European vehicle production declined 25% and 26%, respectively,
versus a year earlier.
It said complete vehicle assembly sales decreased 51% in the
fourth quarter, while complete vehicle assembly volumes fell
60%.
On a conference call with analysts, Don Walker, Magna's co-chief
executive, said the biggest factors hurting North American sales
were the deteriorating U.S. economy, low consumer confidence, and
limited availability of financing for car purchasers.
"While 2008 was a difficult year for the industry, 2009 is
expected to be worse," Walker said, noting that the first half will
be especially challenging as many auto makers "struggle" to reduce
dealer inventories.
He said Magna's financial results haven't been immune to the
declines in vehicle production, particularly in North America and
western Europe. In North America, it's been hit by the shift in
consumer preferences away from light trucks and capacity
adjustments by the "Big Three" in Detroit, he said.
Magna has responded by implementing its own capacity reductions,
closing or selling facilities, reducing discretionary spending, and
cutting or deferring capital expenditures. As a result, it incurred
considerable restructuring charges in 2008, and expects additional
restructuring and downsizing costs in 2009, Walker said.
In a recent note, Scotia Capital Markets said North American
light vehicle production was an "abysmal" 2.7 million units in the
fourth quarter, down 26% year-over-year. Scotia is projecting a
further deterioration in Magna's near-term results as the
deterioration in North American and European light vehicle
production volumes continues.
All auto makers are suffering from the recession and credit
crunch, which have sent sales plummeting. General Motors Corp. (GM)
and Chrysler LLC (C.XX), in the process of restructuring, have
already received money as part of a U.S. government bailout plan,
and may require more. Ford Motor Co. (F), which has told the U.S.
government it doesn't need loans for now, still faces many
challenges.
Magna said Tuesday that the extent of financial and other
support to the automotive industry made or proposed by governments
around the world is "encouraging."
Walker said Magna, which has net cash of $1.5 billion, is seen
as one of the "surviving strong suppliers," and once the bottom of
the downturn is crossed, the company will be extremely
well-positioned to benefit from the recovery.
When asked why he wasn't concerned about the company losing its
receivables given the state of the industry, he said he believes
there's an understanding among governments that the supplier base
can't be allowed to collapse. "The governments don't want to lose
the whole industry. They just can't afford it," he said, adding it
would be "money well spent."
When Magna released third-quarter results, it cut its quarterly
dividend in half to 18 cents a share from 36 cents. It declared an
18-cent dividend this week, payable March 23.
In New York Tuesday, Magna is down 30 cents to $25.48 on about
29,500 shares.
-Judy McKinnon; 416-306-2100; AskNewswires@dowjones.com
(Andy Georgiades in Toronto contributed to this article.)