Magna International Inc at Barclays Global Automotive and Mobility Tech Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Dan Levy - Barclays Capital Inc. - Analyst : So with that, I want to just start with Patrick McCann, the company's CFO and Louis Tonelli, who head the IR efforts. Pat, Louis, maybe we could just start taking a look at 2024 as we exit the year obviously, challenging year, a lot of volatility, customer mix issues. Give us a sense of when we look at back at the year, how much the customer mix issues, some of the production disruptions or whatever that we've had have been a drag to you and what the setup is into 2025?

Question: Dan Levy - Barclays Capital Inc. - Analyst : Right. And then from a customer mix standpoint, obviously, that's been a dynamic. Do you have any preliminary views on how customer mix may factor into '25? And then how do you manage around that? When we saw for instance there was a large OEM that was down a lot in the third quarter. How do you plan around that when you see these customers with elevated inventory?

Question: Dan Levy - Barclays Capital Inc. - Analyst : I mean on the EV point maybe looking out a little bit is the question we got everyone. Look, we don't know what's going to happen post-election, but there are indications EV policy may ease. What do you hear if at all from your customers? Has there been any change in the bidding activity that you've had?

Question: Dan Levy - Barclays Capital Inc. - Analyst : Let's talk about the margin side and let's just start -- remind us this year and I recognize incrementals, decrementals vary by segment. Remind us just briefly what the baseline incremental, detrimental margin should be. If there should be any variation as we think into '25.

Question: Dan Levy - Barclays Capital Inc. - Analyst : And from a recovery standpoint pricing when we look back at 2024 just in (technical difficulty) how did that fair? What's the opportunity ahead? I mean and let's think about pricing in two ways. One is (technical difficulty) recovery of remaining inflation that you incurred over the last two years. Two is you and everyone else bid and won a number of EV programs over the last few years. Clearly, those volumes have come in low expectations. What's the process of recouping the investment, whether it was on R&D or CapEx for some of that spend?

Question: Dan Levy - Barclays Capital Inc. - Analyst : How about the megatrend spend. This year, you talked about $90 million of lower megatrend spending. Is there opportunity to take more out in (technical difficulty)--?

Question: Dan Levy - Barclays Capital Inc. - Analyst : And then the operational improvements that you referenced. So being 30 -- 35 to 40 basis points from the '24, '25 targets 75 basis points. What's the line of sight on these operational improvements? Maybe you could just remind us what exactly those are -- those underlying operational improvements you talk about the margin.

Question: Dan Levy - Barclays Capital Inc. - Analyst : You talked about restructuring just two footprint questions. First on Europe, 17 million LVP today, obviously, well below 22 million pre-COVID. I think most people are going to say we're not going back to 22 million. Do you feel like it sounds like maybe you're making some actions on the margin? Do you feel like your footprint today matches the current volume levels or is there structurally more that you have to do? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 21, 2024 / 6:10PM, MG.TO - Magna International Inc at Barclays Global Automotive and Mobility Tech Conference

Question: Dan Levy - Barclays Capital Inc. - Analyst : Another footprint question. Post-election, we've heard a lot of questions on what happens with Mexico potential tariffs. Again, still very early days, but maybe you can remind us within North America what your Mexico footprint is and what ability you have to offset any potential tariffs.

Question: Dan Levy - Barclays Capital Inc. - Analyst : Yeah, when USMCA was enacted in 2019, '20, was that any impact to you?

Question: Dan Levy - Barclays Capital Inc. - Analyst : And your components are mostly locally sourced is not much reliance in North America from China.

Question: Dan Levy - Barclays Capital Inc. - Analyst : Thank you. Great. Let's just go into some of the segments. We could just talk about 4Q implies a step-up from what you did in 3Q call it 6.8%. What's the right jumping off point into 2025? Or are there still ongoing performance issues at some of these facilities? And then again, and I think you said before, like you're watching the inventory situation carefully that's the (multiple speakers)--

Question: Dan Levy - Barclays Capital Inc. - Analyst : Great. Power and vision second half looks like it's doing better after what was a tougher first quarter again starting point and then how do we think about within power and vision? The pace of the [B&E] synergies, which I think you said was $70-million plus annual run rate by '25.

Question: Dan Levy - Barclays Capital Inc. - Analyst : Seating. What is the path going forward? It had some underperformance over the years. And I think a lot of this has been a customer mix and key programs. I think Chrysler minivan that's been a tough one. What's the path forward to getting this business more on track from a margin standpoint?

Question: Dan Levy - Barclays Capital Inc. - Analyst : Yeah. Okay. Complete vehicles, what is the process of (technical difficulty) -- now that fiscal is maybe you could just remind us, I think capacity who's still there, what's being how much that uses and how much capacity you have to fill. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 21, 2024 / 6:10PM, MG.TO - Magna International Inc at Barclays Global Automotive and Mobility Tech Conference

Question: Dan Levy - Barclays Capital Inc. - Analyst : And then maybe just more of a modeling note if we're looking either an FX perspective, raw math based on where we see prices today. If that hold, what does that do on '25?

Question: Dan Levy - Barclays Capital Inc. - Analyst : Okay. Megatrends, help us understand strategically what has changed at Magna versus what is a pivot? Obviously, you and others geared up for a significant EV opportunity. The volumes haven't played out. You talked about reduced spend. Is the approach of Magna, should we view this as a strategic pivot or is this more just the portfolio is in place but you're more so geared around current market conditions?

Question: Dan Levy - Barclays Capital Inc. - Analyst : If EV is delayed, ICE is extended. What's the impact of Magna? Is the point that you can have ICE extensions and the resource outlay on your part is relatively minimal?

Question: Dan Levy - Barclays Capital Inc. - Analyst : A quick China question and then we'll wrap on the capital allocation. To what extent are you seeing competition from Chinese suppliers in the West? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 21, 2024 / 6:10PM, MG.TO - Magna International Inc at Barclays Global Automotive and Mobility Tech Conference

Question: Dan Levy - Barclays Capital Inc. - Analyst : Okay. Let's free cash capital location to close it out. Give us a sense on the free cash dynamics because this year you're going to do $700 million at the midpoint. When I look at what you did pre-COVID, you averaged $1.8 billion per year. I know you've guided $1.8 billion to $2.1 billion for 2026. What are the drivers beyond the EBIT improvement to get you to have a more substantial free cash flow recovery?

Question: Dan Levy - Barclays Capital Inc. - Analyst : That would be a large increase in your free cash flow.

Question: Dan Levy - Barclays Capital Inc. - Analyst : Great. Final one. How do we think about the dynamic of leverage going forward? You have a 1 to 1.5x target, you ended 3Q at 1.9 times leverage. How critical is it to be operating in that range? And you resumed share buybacks. We just think about this as basically all the free cash flow can go toward the share buybacks.

Question: Dan Levy - Barclays Capital Inc. - Analyst : Both, thank you.