North America’s No.1 auto parts maker Magna posts $215 million third-quarter loss

04 Nov 2008


Canadian company Magna International Inc., North America's largest auto-parts maker, fell the most in a month after posting a $215 million third-quarter loss and slicing its dividend in half.

Charges to write down the value of factories helped produce a deficit of $1.93 a share, compared with a year-earlier profit of $155 million, or $1.38, the Aurora, Ontario-based company said today in a statement. Sales slid 9 per cent o $5.53 billion from $6.08 billion in the year-ago period.

North American auto-parts sales fell 18 per cent to $2.51 billion. European parts revenue rose 2 per cent to $1.71 billion, and sales from the rest of the world climbed 43 per cent to $143 million. Global revenue for complete vehicle assembly plunged 20 per cent to $687 million, while complete vehicle assembly volumes dropped 40 per cent to 25,231 units.

The average dollar content of Magna parts per vehicle in North America this year will be $835 to $860, down from the company's August forecast for a range of $850 to $880. The new estimate for Europe is $475 to $495, down from $485 to $510.

The results included an expense of $258 million to write down the value of powertrain, interior and exterior plants in Canada and the US, Magna said. The company said it expects to shut more factories in North America and Europe this year.

The 50 per cent cut in the quarterly dividend to 18 cents a share reflects the ``reduction in profitability and uncertainty about the timing of an industry recovery in our traditional markets,'' Magna said. It said it now expects to post sales of $23.2 billion to $24.3 billion, down from its previous projection of $24.3 billion to $25.6 billion in sales.

Magna said it expects its sales to continue to be hurt by slumping demand for new vehicles in both North America and Europe. The company said it now expects 2008 vehicle production to total about 12.8 million units in North America and about 14.9 million units in Europe.

Magna is struggling with the dwindling light-truck market for General Motors Corp., Ford Motor Co. and Chrysler LLC, which make up about four-fifths of its North American business. US auto sales tumbled 32 per cent in October, the 12th straight monthly decline, as consumers cut spending and the economy shrank by the most in the third quarter since 2001.

``We are preparing ourselves for a sustained downturn,'' Co-Chief Executive Officer Don Walker told analysts on a conference call. Magna expects to take $70 million to $80 million more in charges to close or write down facilities this year, Walker said.

Magna dropped C$3.97, or 9.7 per cent, to C$37.03 at 9:49 a.m. in Toronto Stock Exchange Trading. Earlier, the shares tumbled to $36.22, down 12 per cent, the most in intraday trading since 3 October. Before today, the shares declined 49 per cent this year.

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