(Adds comments from company conference call throughout and
updates stock-price activity.)
Magna International Inc. (MGA) suffered through one of the
toughest periods in its history in the first quarter of 2009,
posting losses on a GAAP and operating basis as its major customers
struggled to restructure, and vehicle production plummeted.
The auto-parts giant suspended its quarterly dividend Wednesday
in a bid to conserve cash, and warned that its results will be hurt
in the short term by planned shutdowns at its major customers.
Magna swung to a loss of $200 million or $1.79 a share in the
first quarter from earnings of $207 million or $1.78 a year
earlier. Sales tumbled 46% to $3.6 billion.
Its operating loss was $230 million, compared with operating
earnings of $286 million a year earlier.
The Thomson Reuters mean estimate had called for a loss of $1.61
a share in the latest quarter.
On a conference call, co-chief executive Don Walker said the
company faces extremely challenging times, noting that North
American auto production declined 50% in the quarter, the biggest
slump it has ever seen since 1970, when it started keeping
records.
Auto-parts suppliers are reeling from the unprecedented downturn
in the U.S. auto industry, which has sent some auto-makers
scrambling for government aid and which led Chrysler LLC (C.XX) to
seek bankruptcy protection in the U.S. last week. Both Chrysler and
General Motors Corp. (GM) also plan lengthy temporary shutdowns
this year, which will further reduce demand.
Magna said GM is its largest customer and Chrysler its fourth
largest.
Magna is one of the few suppliers with a strong balance sheet
that would allow it to capitalize on industry woes. For instance,
it confirmed earlier this week that it's part of a consortium in
talks to acquire a stake in Opel, GM's German car unit.
During the call, Magna declined to go into details about Opel
except to say that it could be a good opportunity to share
platforms and major modules with an "intelligent corporation."
Magna has embarked on several cost-reduction initiatives, such
as rationalizing and downsizing facilities, implementing short-week
schedules, freezing wages and cutting discretionary bonuses at the
end of 2008.
However, the company also sees reasons for optimism, as U.S. car
sales appear to have bottomed and consumer confidence for car
buying is on the rise.
In the first quarter, Magna's North American and European
average dollar content per vehicle rose 4% and fell 4%,
respectively, from a year earlier. North American vehicle
production was sharply lower, down 50%, while European vehicle
production fell a steep 40%.
Tne company said its complete vehicle assembly sales fell 63% in
the quarter. Complete vehicle assembly volumes fell 72%.
Magna said the auto crisis will reduce its cash resources, but
could have a more severe impact on other auto suppliers. "This
should provide us with further opportunities to gain additional
business, either through acquisitions or takeover business, and
position us for recovery when North American auto production
returns to more sustainable levels," Magna said.
In New York Wednesday, Magna is up $1.03, or 2.8%, at $37.94 on
about 1.0 million shares.
(Andy Georgiades contributed to this article.)
-Carolyn King; 416-306-2100; AskNewswires@dowjones.com