Magna International Inc (MGA) 2010 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Magna International first-quarter results 2010 conference call.

During the presentation all participants will be in a listen-only mode.

Afterwards we will conduct a question-and-answer session.

(Operator Instructions) As a reminder this conference is being recorded Thursday, May 6, 2010.

I would now like to turn the conference over to Mr.

Don Walker, Co-Chief Executive Officer.

Please go ahead, sir.

Thank you.

Good morning and welcome to our conference call.

Joining me today are Siegfried Wolf, Co-CEO; Vince Galifi, Executive Vice President and Chief Financial Officer; and Louis Tonelli, Vice President Investor Relations.

We issued two press releases earlier this morning.

The first release covers our first-quarter results.

The second release announced an important proposed transaction that shareholders are being asked to consider and ultimately vote on.

You will find the press releases, today's conference call webcast, and the slide presentation to go along with the call all at the Investor Relations section of our website at www.Magna.com.

We will also post our remarks relating to the proposed transaction on our website later.

Today we will comment first on the quarter then elaborate on the proposed transaction.

We will then open the call to answer your questions.

Before we get started just as a reminder the discussion today may contain forward-looking statements within the meanings of applicable securities legislation.

Such statements involve certain risks, assumptions, and uncertainties which may cause the Company's actual or future results and performance to be materially different from those expressed or implied in these statements.

Please refer to both of today's press releases for a complete description of our Safe Harbor disclaimer.

We will keep our quarter-related comments brief today as we want to discuss the proposed transaction and since we are making presentations later this morning at our annual meeting.

We were pleased with our first-quarter results which were achieved in a period when vehicle production in our principal markets remains relatively low compared to historical levels.

In North America we continue to experience a recovery in the auto industry.

Auto sales continue to show improvement and as a result North American light vehicle production increased for the fourth straight quarter in Q1.

Given the rapid decline in vehicle production during the last half of 2008 and the first half of 2009 along with some of the actions taken by our customers in North America, we restructured and right-sized our capacity and reduced overheads.

And we have tried to remain disciplined on the cost side as volumes in North America are recovering.

These efforts go a long way to explain the improvements of our results in North America.

I will let Siggy make a few comments on our European business.

Thank you, Don.

Good morning, ladies and gentlemen.

I am happy with the progress we have made over the past couple of quarters in Europe.

We have been very focused on improving underperforming divisions and as a result our operations outside of Magna Steyr have shown improvement in profitability.

As you all know the crisis started months later in Europe than in North America and we are well on the way to improve our margins in Europe.

And we are quite sure that we will be in the same level what we had before.

There is more work to do and we are moving absolutely in the right direction.

With respect to Magna Steyr we have said in the past that this unit is undergoing a complete turnover on its business in 2010 with three new customers and the up-front cost of new assembly programs are significant.

That has impacted our overall profitability in Europe.

However, we are right now launching the [Peugeot RCZ] Coupe and the Aston Martin Rapide.

Costs are declining.

Magna Steyr results should continue to improve as it begins to launch the MINI Countryman starting this summer.

We are concerned about the macroeconomic environment in Europe as well as the payback of the vehicle scrappage programs that have been in place since 2009 which many will come to an end.

On the positive side the recent weakening to the euro provides an opportunity for European OEMs to export more vehicles, particularly in the recovering North American market.

Daimler and BMW, both large customers of Magna, should benefit from this trend.

With that I will hand over to Vince.

Thanks, Siggy.

Good morning, everyone.

I would like to review our financial results for the first quarter ended March 31, 2010.

Please note all figures discussed today are in US dollars.

In the first quarter consolidated sales increased 54% relative to the first quarter of 2009 to $5.5 billion.

North American production sales increased 75% in the first quarter to $2.7 billion reflecting a 57% increase in vehicle production to 2.9 million units and a 5% increase in North American content to $953.

Excluding the effect of foreign exchange, our average dollar content per vehicle declined primarily as a result of unfavorable production relative to industry volumes and our lower content on certain programs including GM's full-size pickups and SUVs, BMW X5 and X6, the Ford F Series, the Dodge Ram, and the Mercedes R, M, and GL class; programs that ended production during or subsequent to the first quarter of 2010, including the Pontiac G5 and G6; and net customer price concessions subsequent to the first quarter of 2009.

Partially offsetting these were new launches, favorable production relative to industry volumes, and/or increased content on certain programs including the Ford Fusion, Edge, and Flex; the Chevrolet Traverse and Cobalt; the Dodge Journey; and Chrysler-made minivans; and acquisitions completed during or subsequent to the first quarter of 2009 including several facilities from Meridian.

New launches contributing to content growth quarter over quarter include the Chevy Equinox and its variants, the Cadillac SRX, and the Chevy Camaro.

Given what an unusual quarter Q1 2009 was in North America, perhaps a better comparison is between North American content in Q1 versus Q4 2009.

Content increased 10% from $868 in the fourth quarter of 2009 to $953 in the first quarter of 2010.

The biggest driver of this increase in content was improved mix as a number of high-content vehicles outperformed the increase in overall production volume over the same period.

European production sales increased $609 million or 53% from the comparable quarter.

European vehicle production increased 33% to 3.4 million units while European content increased 15% to $521.

Key contributors to the increase in European content include acquisitions completed during or subsequent to the first quarter of 2009, including Cadence, and the strengthening of the euro and British pound each against the US dollar.

The launch of new programs including the Porsche Panamera, the Opel Astra, the Mercedes-Benz E Class, and the Audi A5 also helped content.

These factors were partially offset by unfavorable production relative to industry volumes and their lower content on certain programs in the first quarter of 2010 including the smart fortwo, the MINI Cooper, and the BMW 3 series; programs that ended production during or subsequent to Q1 2009; and net customer price concessions subsequent to the first quarter of 2009.

Rest of world production sales more than doubled to $229 million primarily as a result of increased production and/or content on certain programs, particularly in China, Korea, and Brazil; the launch of new programs during or subsequent to the first quarter of 2009 in China and Japan; and the strengthening of the Brazilian and Korean currencies.

Complete vehicle assembly volumes increased 49% from the comparable quarter and assembly sales increased 11% or $45 million to $446 million.

The increase largely reflects sales on new vehicle launches as well as the strengthening of the euro against the US dollar partially offset by lower volumes on certain assembly programs.

In summary, consolidated sales excluding tooling sales increased approximately 60% or $1.9 billion in the first quarter.

The primary reasons for this increase are the significant increases in vehicle production in both North America and Europe, higher rest of world and assembly sales, and increased content per vehicle in our primary markets.

Tooling, engineering, and other sales declined modestly by $9 million from the prior year.

Gross margin in the quarter was 13.5% compared to 6.8% in the first quarter of 2009.

The increase in gross margin percentage was substantially due to the significantly higher vehicle production volumes as well as lower costs associated with restructuring and downsizing activities, productivity and efficiency improvements at certain facilities, the benefit of restructuring and downsizing activities and cost-saving initiatives that were undertaken during or subsequent to the first quarter of 2009, acquisitions completed subsequent to the first quarter of 2009, and a decrease in tooling sales that earned low or no margins.

These factors were partially offset by higher costs incurred in preparation for upcoming launches, primarily in Europe; employee profit sharing as no profit sharing was reported in 2009; higher electric vehicle development costs; higher costs incurred to develop and grow our electronics capabilities; an increase in complete vehicle assembly sales, which have a lower gross margin than our consolidated average; and net customer price concessions subsequent to the first quarter of 2009.

Included in SG&A was a $14 million gain on the sale of a facility in the first quarter of 2010.

The positive impact of the gain was also $14 million on net income and $0.12 on earnings per share.

The following discussion excludes the impact of the gain.

Magna's consolidated SG&A as a percentage of sales was 5.7% in the first quarter of 2010 compared to 8.4% in Q1 2009.

This decline is substantially due to higher revenues associated with a significant increase in vehicle volumes combined with our deliberative efforts to contain costs.

This was partially offset by higher incentive and executive compensation.

Largely as a result of the higher gross margin percentage and higher equity and interest income and lower SG&A percentage our operating margin percentage improved to 4.9% in the first quarter of 2010 from negative 6.4% in the first quarter of 2009.

Our effective tax rate of 23.4% represented a return to a more normal level in the first quarter of 2010 as a result of our return to profitability in most jurisdictions.

In addition, the effective rate for the first quarter of 2010 was reduced by losses that were previously not benefited.

Net income of $209 million in the quarter compared to a loss of $200 million in the first quarter of 2009.

Diluted earnings per share were $1.85 compared to a diluted loss per share of $1.79 in the first quarter of 2009.

The increase in diluted earnings per share is a result of an increase in net income partially offset by an increase in the weighted average number of diluted shares outstanding during the quarter.

The increase in the weighted average number of diluted shares outstanding was primarily due to an increase in the number of diluted shares associated with restricted stock and stock options since such shares were anti-dilutive in the first quarter of 2009.

I would like to discuss incremental margins in North America and Europe for the first quarter of 2010 relative to the fourth quarter of 2009.

In North America total sales increased $300 million of which $326 million relates to production sales.

Excluding unusuals and removing the impact of the fourth-quarter significant items discussed last quarter, Q4 EBIT improved approximately $106 million.

I should say Q1 EBIT improved approximately $106 million.

This represents an incremental margin percent on production sales of approximately 32%.

In Europe, external sales declined by $208 million sequentially while EBIT improved $28 million after removing the impact of the significant items in Q4.

The increase in EBIT in Europe despite lower sales reflects both a reduction of launch costs, particularly at Magna Steyr, as well as our efforts in turning around underperforming operations.

I will now review our cash flow and investment activities.

During the first quarter of 2010 we generated $395 million in cash from operations prior to changes in non-cash operating assets and liabilities and invested $339 million in non-cash operating assets and liabilities.

This investment largely reflects the increase in accounts receivable, inventory, accounts payable, accrued salaries and wages, and other accrued liabilities in the first quarter of 2010 which was primarily due to the increase in production activities compared to be the first quarter of 2009.

The increase in income taxes payable was primarily due to a higher tax provision resulting from increased earnings combined with reduced installment requirements.

For the quarter investment activities amounted to $166 million comprised of $133 million in fixed assets, a $31 million increase in investments and other assets, and $2 million to purchase subsidiaries.

Given our return to profitability, our Board of Directors yesterday voted to reinstate our quarterly dividend with respect to our Class A subordinate voting shares and Class B shares.

A dividend of $0.18 per share is payable on June 15 to shareholders of record on May 31, 2010.

Our balance sheet remains strong with $1.2 billion in cash net of debt as of March 31, 2010.

We also have an additional $1.8 billion in unused credit available to us from a credit facility that extends until July 2012.

Next, I would like to review our current 2010 full-year outlook.

We have increased our vehicle production expectations in North America and Europe from our outlook in February.

We now expect 2010 North American vehicle production to be approximately 11.2 million units compared to 10.5 million units in our February outlook.

We expect 2010 European light vehicle production to be approximately 11.6 million units compared to our February outlook of 11.4 million units.

Note that we continue to be cautious about the European economy and on the impact of the end of scrappage programs in Europe.

While we increased full-year vehicle production expectations in Europe, that increase is due to stronger first-quarter production volumes than we expected.

We have in fact reduced expectations for the final three quarters of the year compared to our previous outlook.

Our North American content per vehicle expectations have increased to between $940 and $970 for 2010 compared to the range of $895 to $925 in our previous outlook.

Higher volumes on certain key programs that are launching, a strengthening Canadian dollar, and slightly improved mix all together account for the improvement.

Content per vehicle in Europe is now expected to be in the range of $515 to $540, slightly below than our previous outlook range of $510 to $535.

We expect complete vehicle assembly sales to be between $1.7 billion and $2 billion, up from $1.5 billion to $1.8 billion in our last outlook due to higher volumes in certain programs assembled at Magna Steyr.

As a result of the increased expectations for vehicle production and content in both North America and Europe, as well as higher vehicle assembly sales, we now expect total sales to be in the range of $21 billion to $22 billion, up $2 billion dollars from our previous outlook.

And for the full-year 2010 our expectations for fixed asset spending are unchanged from our previous outlook in the range of $750 million to $800 million.

I am now going to pass the call back over to Don to discuss our proposed transactions.

Thanks, Vince.

Earlier today Magna announced a proposed transaction that management believes should unlock significant value from Magna shareholders by reducing or eliminating the discount at which Magna currently trades relative to its peers, broadening the market for Magna shares, and establishing a joint venture to pursue our opportunities in the vehicle electrification business.

As outlined in the press release issued earlier today, management believes the proposed transaction also responds to shareholder concerns by eliminating Magna's multiple voting shares structure and more closely aligning the interests of Magna's founder with those of the Company's public shareholders.

I would like to provide some background to the proposed transaction.

I will then ask Vince to walk you through the terms and potential benefits.

Siggy will offer some closing remarks and then we will be happy to take your questions.

Magna's multiple voting share structure was put in place in 1978 to ensure that Magna's management could make decisions based on the best long-term interests of the Company.

In the decade following the conversion to multiple voting structure Magna adopted the first and only corporate constitution of its kind, expanded its business, and grew revenues tenfold to $1 billion per year.

30 years later Magna has reported peak sales of over $26 billion per year and is one of the leading automotive suppliers in the world with approximately 74,000 employees in operations in 25 countries.

In light of this growth and with a seasoned management team in place at the executive, group, and divisional levels, Frank has turned his attention to issues of succession, leadership, and how best to position Magna for continued and long-term success.

At the same time and for some time now, management and the Board have been considering ways of closing the valuation gap between Magna and its peers and addressing concerns about Magna's share structure.

It was in this context that we and executive management approached Frank with a conceptual proposal that included conversion to a one-vote, one-share structure.

While Frank has always regarded the Stronach Trust control block as an intergenerational asset and remains satisfied with the status quo, he confirmed that management should feel free to explore alternatives that could enhance long-term shareholder value while preserving the Magna culture, which we all agree has been a cornerstone to Magna's success.

He also made it clear to us that any proposal would have to be approved by a majority of the Class A shareholders, a voluntary but binding condition of the transaction we are proposing today.

In order to explore opportunities for a win-win proposal executive management presented a concept to the Board which established a special committee of independent directors to review and consider possible terms for a proposal for discussion with the Stronach Trust and, if acceptable to the trust, for consideration ultimately by our public shareholders.

The proposal announced today is a result of this process.

Before I turn it over to Vince to walk you through the proposal it is important to reiterate that Frank is comfortable with the status quo at Magna.

He is also supportive of the proposal so long as the majority of Class A shareholders approve it.

If shareholders decide not to support the transaction, Magna's Board, including Frank as Chairman, and the executive management team will continue as we have been running what we believe is a very successful and growing global automotive business.

With that I will turn it back over to Vince.

Thanks, Don.

As you have seen from our press release, executive management has proposed and Frank, companies under his control, and the Stronach Trust have agreed to accept an exchange of their Class B shares for Class A shares plus cash in a transaction with the following terms, all of which is subject to majority approval by Class A shareholders.

All Class B shares held by the Stronach Trust will be repurchased, canceled, and deleted from Magna's authorized capital.

Magna would issue nine million Class A shares from treasury and pay $300 million in cash to the Stronach Trust.

Magna's consulting arrangements with Frank and companies associated with him would be amended to extend the term to December 31, 2014, after which the arrangements would be terminated, and reduced the percentage of pretax profits used to calculate the fees payable over the remaining contract term on a declining scale basis as detailed in the press release.

And Magna and Frank would establish a joint venture that we believe should accelerate Magna's hybrid electric vehicle strategy while mitigating our investment risks.

If shareholders approve the transaction, Magna will be a one-share, one-vote company no longer controlled by the Stronach Trust.

Management believes the proposed transaction should enhance shareholder value in the following ways.

First, it should reduce or eliminate the valuation discount on Magna's shares attributable to our multi-voting share structure.

We believe one reason Magna's shares trade at a discount to our peers is our share structure.

We have heard it from many of you for a number of years; our proposed new shares structure will unlock value for all shareholders.

I will put some potential numbers around this point in a minute.

Second, this transaction should enhance the liquidity and marketability of Magna's shares to investors.

A simplified capital structure, more consistent with our key competitors, and more typical of companies trading on the New York Stock Exchange should attract investors that as a matter of preference or policy do not invest in companies with multiple voting shares structures.

Third, it will provide clarity into the future of our consulting arrangements with Frank and affiliated entities, which we know have long been on the minds of shareholders.

Under the proposal the arrangements would have a fixed term that ends on December 31, 2014, prior to which the percentage of profit payable declines each year.

During this time Magna will continue to benefit from Frank's leadership, vision, and relationships across the global automotive industry.

Fourth, the transaction will allow all equity holders proportionate voting rights on a one-share, one-vote basis unifying the economic and voting rights of Magna's shareholders.

Fifth, as it stands today the holders of Magna's Class B shares have the right to sell their control stake without any consideration being paid to holders of Magna's A shares.

This right will be eliminated under the proposed new capital structure.

Six, Magna will hold a 73% equity stake in a new vehicle electrification joint venture with the Stronach Trust that we believe is a good way for Magna to pursue an opportunity that has significant growth potential but which is also not without risk.

If the proposed transaction is approved, the Stronach Trust will own approximately nine million common shares or approximately 7.5% of Magna.

Let's turn to the potential value of this transaction for Magna's shareholders.

As many of you know, our historical financial performance has been in line with or better than our peer group and we fully expect to continue to deliver strong performance going forward as our earnings today indicate.

We are successfully diversifying our sales and reducing reliance on Detroit's Big Three and we have one of the strongest balance sheets in the industry, which has allowed us to weather the storm while many of our peers filed for bankruptcy and destroyed shareholder value.

Yet despite all this, Magna shares have historically been valued at a significant discount to our US industry peers.

Enterprise value to EBITDA, or earnings before interest, tax, depreciation, and amortization is one of the metrics most commonly used by the automotive analyst community to assess relative value.

For the purposes of the following discussion we have used March 31, 2010, US share price and EBITDA numbers as this was quarter-end and prior to US peers reporting their first-quarter results.

From 2001 to 2007, on average, Magna traded at a 1.4 times discount to its peers on a forward EBITDA basis.

Based on consensus 2010 EBITDA we currently trade at a discount of 2.4 times compared to those same peers.

As Don said, Magna believes the elimination of the multiple voting shares structure and other elements of today's proposed transaction should reduce or eliminate that discount.

Allow me to show you the potential of an improved Magna multiple on our share valuation.

The Street's 2011 consensus estimate for Magna's EBITDA is approximately $1.64 billion.

This implies that we were trading at an enterprise value to EBITDA multiple of 3.6 times 2011 consensus EBITDA.

Our peers on average were trading at 5.4 times 2011 consensus EBITDA.

If our multiple increases only modestly, by 0.4 times EBITDA to four times 2011 consensus EBITDA, the proposed transaction would be neutral to our share price.

If we close the gap by about 60% to multiple of 4.7 times 2011 consensus EBITDA, our pro forma share price would increase by 15%.

If our multiple moves to 5.4, the average of our peer, group the pro forma share price would increase by about 30%.

And obviously an above-average EBITDA multiple would drive even greater share price appreciation.

Given that our business performance has been in line with or better than our peers, we believe our EBITDA multiple should also be in line with or better than our peers under a one-share, one-vote share structure.

We believe the potential for this kind of increase in trading value combined with the one-share, one-vote structure going forward is a compelling combination.

Another, though smaller part of the value equation, is the proposed joint venture.

Hybrid and electric vehicles have been getting a great deal of attention recently in the automotive industry and amongst policymakers around the world.

We have no doubt that the market for hybrid electric vehicles is going to grow, although the rate and timing of that growth is very difficult to estimate.

The proposed joint venture is a way for us to pursue this opportunity under Frank's visionary leadership but with shared investment risks.

Under the terms of the proposed joint venture the JV would involve the engineering, development, and integration of electric vehicles of any type; the development, testing, and manufacturing of batteries and battery packs toward hybrid and electric vehicles; and all auxiliary activities in connection with electric vehicle technologies.

Magna would invest $220 million for a 73% interest.

The Stronach Group would invest $80 million in cash for a 27% stake in the joint venture.

Magna's contribution would include the assets of Magna's recently established E-Car systems, vehicle electrification and battery business unit, certain other vehicle electrification assets, and the balance in cash.

Among other operations Magna E-Car includes the Ford battery electric vehicle integration program that launches next year and a talented collection of people that Frank has pulled together from across the organization.

The JV would be governed by a five-member Board comprised of three members appointed by the Stronach Trust and two by Magna.

Magna will have veto rights in certain business matters such as and including related party transactions.

Magna would not be restricted in any way from competing against the joint venture, neither party would be obligated to provide any future funding or financial assistance beyond their initial contributions, and Magna's operating groups will have a preferred opportunity to supply contracts and products to the joint venture on competitive terms.

This new group will benefit from a strong and visionary leader who is able to drive this business forward in much the same way that Frank drove Magna through its own startup and early growth years.

So that addresses the terms of the transaction, the potential benefit to our shareholders, and the proposed joint venture.

Let me speak briefly about the mechanics and then Siggy will close and we will open the call to questions.

The principal mechanics of the proposed transaction are contained in the press release and will be described more fully in the proxy circular for a special meeting of shareholders to be called to consider the proposal.

But by way of summary, the transaction would be affected through a court-approved plan of arrangement under Ontario law.

In addition to the requirement for court approval, though not required by law, the plan will only proceed if it is approved by a majority of the votes cast by disinterested Class A shareholders.

Completion of the proposed transaction is also subject to finalizing definitive documentation and customary closing conditions.

Thank you, Vince and Don.

This has been a long call so I will be brief.

As Don and Vince have outlined, management believes this proposal has several potential benefits for Magna shareholders.

The proposal also preserves two things that have been very important to Magna's success.

The first is that the proposal doesn't compromise the Company's financial strengths, and, second, it leaves Magna's culture [in tact] and the care of the management team that believes in the Magna culture and lives it every day.

To close we believe this transaction should unlock significant value for Magna shareholders and create a strong foundation for the Company's continued and long-term success.

The decision for shareholders is either to approve the transaction or maintain the status quo.

Frank, management, and our Board are all committed to serving the best interests to the Company and its shareholders and whichever outcome (inaudible).

That completes our formal remarks.

Thanks for your attention this morning.

We will be pleased now to answer your questions.

(Operator Instructions) John Murphy, Bank of America.

Good morning.

First question is why the timing of this transaction now?

I think this has been a -- the shareholders have had this concern for a really long time and I was just curious why now is there an impetus to really drive this change in the shareholder structure.

John, we have been asked for years now about what options do we have to try and get our multiples closer to our peers.

We have discussed it internally for a long time.

I can't answer for Frank why he is open to the suggestion right now but we have had a number of discussions over the past several years.

Vince, Louis, and I are answering questions on a continual basis about the various aspects of what drives our share price.

We sat around the table and talked about it, made a proposal to Frank, and Frank said he would consider it if it's something that shareholders would consider.

So we have talked to the Board, the Board has considered it, gone through a special committee, and Frank is willing to consider it at this point in time.

I can't speak for Frank but it's something we have been looking at for many years now.

Okay.

And then second, just on Europe, the EBIT loss was about $6 million in the quarter.

Obviously you have had some problems in Europe as far as profitability for a while now.

Just curious as we go forward through the rest of the year if there are any incremental steps you will be taking there or is it more blocking and tackling?

And with the potential decline in volumes in Europe could there be significantly more pressure than even what we saw in the first quarter?

Well, John, there is a number of things that are taking place in Europe.

If you think about where we were Q4 of 2009 and Q1 of 2010 we have made substantial progress.

We made substantial progress in a number of areas.

We have been focusing on underperforming divisions.

As Siggy talked about, we have been looking at reducing our cost burden and doing some right-sizing.

The slowdown in Europe has taken place a few quarters, two, three, four quarters, after the North American slowdown but the biggest impact in Europe over the last I would say two to three quarters has been the significant launch costs we have incurred.

We talked about Magna Steyr and essentially when you look at Magna Steyr it's complete sales base and programs is switching over.

That is not going to be complete really until the end 2010 so sequentially we have been seeing improvements.

And I talked about that in the past and what we see at Magna Steyr is consistent or better than what we were expecting.

We have also had some launch costs in other areas of our business.

I have talked about our roof business in the past where we have had some substantial launch costs.

There has been a substantial reduction in those costs as those programs start to ramp up.

So going forward what I would say is that we are going to continue to see the benefit of the launches at Magna Steyr and other divisions and reduce costs.

There may be some headwind with reduced volumes, but our team has a plan in place and I think that we are going to be tackling, if there is a shortfall of volumes, stray dots.

And just lastly, Vince, I missed all of the commentary that you had on the incremental margins in North America, 32% sequential as you highlighted here.

I was just wondering as we step forward through the course of the year, do you think that is a reasonable number to be using or will we see raw materials and costs creep and potentially erode that margin?

Just trying to get an idea if that is a good number to use going forward?

It is a number of things that impact margins.

One thing is going to be mix, and we certainly have our estimate of mix, but that could change as the quarter progresses.

With respect to commodity costs, with respect to -- we are pretty well locked in for 2010, so that is not going to have a positive or negative impact in a significant way for the balance of the year.

With respect to residence, there is more volatility there.

I think that is going to be a little bit of a headwind going forward.

How big that is going to be, not sure, but not something that is going to be very significant in any way.

So you're just going to have to wait and see where the margins turn out to be.

But as Don has talked about and Siggy has talked about, we have been restructuring and downsizing this company.

We have taken fixed costs out of the system.

Our SG&A is down, our overheads are down, and our task is to ensure that those costs don't creep up too fast as volumes start to pick up.

Great, thank you very much.

Chris Ceraso, Credit Suisse.

Thanks, good morning.

Along the lines of the discount in the stock that you are trying to unlock I think one other item that probably took a backseat to the two class structure, but still something that people talk about, is the large cash balance.

Does anything here in the new structure maybe open up your thinking to doing something a little bit more aggressive with the balance sheet using that cash, putting it to work rather than sitting on such a large balance?

Let me try and address that.

Frank, as you know, has been very conservative and wants to maintain a very strong balance sheet.

And that goes back to when we went through the restructuring back in 1990, 1991.

If we complete the transaction -- I think Frank has always been focused on shareholder value and employees and everything else.

He is certainly going to be completely aligned on shareholder value until he will be essentially the largest shareholder.

I don't think Frank's opinion would change on whether we want to take on a lot of debt and I don't think that management would be comfortable in taking on a lot of debt.

But I personally have been of the view that we could use the cash on the balance sheet to maybe stay at a neutral amount -- so no net debt, no net cash -- to take advantage of opportunities whether it's through acquisitions, moving into greenfield areas.

But on a go-forward basis it will be a decision of the Board.

I think we will always maintain a strong balance sheet but we have been extremely conservative in the past.

Everybody will have different views but I think we can take advantage of some of the cash we have got there.

Okay.

So that sounds somewhat encouraging.

The second question, I am not sure I understand why the need for the JV.

It's a pretty small business for Magna at the moment but maybe one with some promise.

Why set yourself up this way?

And then also what are the current losses that that JV is generating that you will run through now?

Let me just -- I will let Vince talk about the financial situation there.

Part of the decision Frank is making here is a very personal one.

He has had -- he feels Magna is part of his blood and he feels that he has done a very good job as an entrepreneurial visionary in setting up the culture, the structure.

On a go-forward basis he is a very big believer in the future of electric vehicles, which would include hybrids as well.

Everybody has got their own opinion on how large that market is going to be.

I believe that it will be an evolving market.

I think there is still challenges to get the volume up.

Frank has been heading up our newly-formed E-Car group.

It's batteries, it's packs, it's a bit of testing, and also looking at doing vehicle conversions.

It has not been making money.

I think it will be a challenge but there is a big opportunity there.

Frank wants to keep engaged and from Magna's perspective a lot of the benefit on getting into electric vehicles is the spin-off on a lot of components and we still have that.

So on a go-forward basis there will be -- there is a -- anybody is open to compete, which has always been Frank's philosophy, but we will still have the majority.

Frank is going to devote his full time and attention on this.

And I think with Frank putting his own cash in on a pro rata basis he will be completely aligned with what Magna wants to do.

I agree with your comment, it's not a huge business unit for us now.

I don't think it's going to be a huge business unit for years and years to come.

If Frank can be as successful in that area as he has been in Magna then it will be a big benefit to Magna, but I don't think it's something that we are walking away from or giving up.

I think Frank has assembled a pretty good team.

Some people internally, he has brought a lot of people externally, and there is still a lot of unknowns there.

But as part of this transaction, in my view, it's a relatively minor part of it.

Chris, I just wanted to add to that really in a new start-up you really do need someone that is going to drive this going forward, have that vision.

Frank, in my view, is the best person to be able to do that.

This unit is pretty small within the organization.

If you look back to the first quarter of last year, the spending in this area really wasn't significant at all.

It was less than $10 million.

To put things into perspective, if you look over the last couple of quarters spending has been somewhere in the range of $10 million to $15 million.

The biggest part of that is for customer programs where we are going to have some -- we have some sales and sales coming online.

So it's not a significant unit but if the joint venture is successful and growing in this new market area, and I don't how big that market is going to be and how quickly, it will increase the value for everybody.

Okay.

Last question.

When you introduced the concept here about the change in the structure you mentioned that Frank was starting to have thoughts about succession planning.

What is Belinda's current role in the Company and is there anything else that is going to be put in place or steps that will be taken that start to formalize the succession plan for Frank?

Chris, Belinda currently is a Director.

She is also an Executive Vice Chairman.

She is involved on a day-to-day basis with our business.

With this transaction nothing is going to change, she is going to continue to be involved in our business.

She will sit, at the pleasure of shareholders presumably, on the Board.

When we have, in our comments, talked about Frank and succession planning I think the way you should think about that is succession planning with respect to the ownership of Magna, the control of Magna within the Stronach Trust.

So what this transaction does, it provides clarity to the control of Magna.

So if shareholders approve this transaction the Stronach Trust will no longer control.

It will be a public company, as it is today, widely held, not one shareholder being able to elect the majority of the directors.

In terms of succession planning within the Company, Don and Siggy have a tremendous amount of succession planning in place and the Board has considered, obviously, what to do with respect to Don and Siggy as well from a succession planning standpoint.

Okay, that makes sense.

Thank you very much.

Rich Kwas, Wells Fargo Securities.

Good morning, guys.

Vince, with the JV how should we think about these electric vehicle costs that you have incurred here over the last year or so and your expectations for that going forward?

Does that all get transferred to the JV or how much of that stays?

How much of that gets shared with Frank going forward?

Going forward it's going to be shared based on our ownership interest so it's going to be 73% and 27%.

Just a couple things, we are going to be looking at these bundles of assets, we are going to be transferring them to the joint venture at fair value.

So our contribution is going to be $220 million in cash, that is the fair value of the assets being contributed.

Frank is going to put in $80 million so there is $300 million package of assets.

It's going to be a JV.

We are going to consolidate it and there will be a minority interest expense or a minority interest recovery depending on the results of that business unit.

But when we look at the size of this business, guys, think about it we have a $20 billion company.

This is a startup operation.

It's not going to have any significant impact on our results.

More importantly we got to make sure that we continue to drive sales and profitability.

That is what is going to drive results and cash flow in our company.

One last comment, what we have got is pretty well defined and so the Board has asked outside advisers to take a view of what is in there, what is the value.

It's almost complete.

We still have a few fine-tuning to go through but that will be something the Board decides on what the dollar value is.

Okay, all right.

And then on -- just staying on that in terms of the Board with Frank having three and Magna having two, what was the rationale for that with the investment being made by Magna?

The rationale, Rich, relates -- it goes back to really the foundation of Magna.

When Frank had the multiple voting share structure of approved by shareholders he was of the view, and rightly so, that he needed the authority to make the decisions for the long-term interest of the Company, whether that dealt with management, whether it dealt with capital investments, whether it dealt with even capital structure.

And if we look back over the number of years since the structure has been put in place clearly we have grown from a company of about $100 million to one of the largest in the world operating in 25 countries.

So as we looked at this joint venture and Frank today -- for getting this proposed transaction Frank is the driver of our E-Car strategy or electrification strategy today and to drive this forward is exactly the same principle.

It's a start-up.

Frank wanted to drive this, wanted to have the day-to-day control to make decisions that may not necessarily result in the best profit today because he is going to be making investments for the long-term.

So hopefully he is able to replicate what he did with Magna with E-Car.

Okay.

And then on margins rest of the world and then when you think about Europe on mix going forward, rest of world very strong margin here.

Is the 11.5% sustainable?

And second European mix, been hearing that good mix over there with CD&E production.

What is your expectations for the rest of the year?

Rich, just in the rest of world we did talk about a gain of $14 million in the quarter.

That was in the rest of the world segment.

Okay.

So strip that out, okay.

Strip that out.

With respect to margins going forward, rest of the world I don't have that number handy.

I wouldn't give you the guidance if I had it in any event.

With respect to Europe, I think that both Siggy and I have given some flavor on this call in terms of sort of reduced launch costs, improved efficiencies, reduction of costs, and that should imply that there should be margin expansions going forward in Europe.

But do you think mix is going to continue to get better over there as it has here in the first quarter?

Top line.

I guess the way to ask it, were you surprised in the first quarter with mix?

I know volume was a surprise, but have you been surprised by mix?

Really not surprised by mix but more surprised by volumes.

We have been saying, Rich, all along that we didn't really benefit in a substantial way with the scrappage programs in 2009.

And with the scrappage programs coming to an end in 2010 we think it was going to be as big of an impact because if you look at where we have most of our content it's going to be on the more luxury segment.

I can comment on this.

With the scrappage program going to an end people are starting to buy more those cars where we have a bigger stake on it.

A lot of new cars are starting where we have a lot of content, let's say, the Audi A1; very nice, good looking car, small segment.

And I am quite sure that the mix will go in our benefit.

Okay, great.

That is helpful.

Thanks so much.

Himanshu Patel, JPMorgan.

Do you envision in the future any sort of major capital contributions into the electric JV?

The reason I ask is could one of those transactions result in the 73%/27% between Stronach Magna shifting dramatically down the road?

Well, we started off with whatever the assets are and a lot of cash, so nobody is obliged to put more cash in.

If there is a requirement for more cash then both parties can make their own decision.

There is no imminent requirements for a large amount of cash so I think that will be a couple of years.

I would suspect that will be a couple of years down the road at the earliest for us to even have to consider doing that.

Ultimately, it will be a business decision but this gives them plenty of cash to operate the business for a while.

I think what you have got to keep in mind too is with the joint venture we don't have any obligation to put additional capital, neither does the Stronach Trust.

But as this business unit grows and is successful and if it does require additional cash, there is always the opportunity to raise cash from third parties.

And if that was the case then our interests -- if we didn't do a proportionate contribution or the Stronach Trust interest they didn't do their proportionate contribution would be diluted.

And on the other hand, if you really look on this electric vehicle I think Europeans driving this more the politician than the carmaker itself.

It will take a couple of years.

The next couple of years we will need, let's say, to team up with one or other OEM to go in the right direction.

First priorities at the OEM level at the time is the hybrid and after it is electric vehicle.

But we should get positioned -- we should get very clear in line with the customer expectation and I am quite sure the whole electric hype is a very strong one but will take a couple of years before you see profits there as well.

Okay.

And then I guess on a somewhat related note, Frank has obviously shown an interest in acquiring an OEM in the past.

I am wondering is this JV strictly in its commercial sense a JV around electric vehicle technology or could this be a vehicle that eventually morphs itself into being part of a larger carmaker down the road?

The terms of the joint venture or even -- this material is going to be available at some point because it's public documentation.

Its focus is entirely on the electrification of a vehicle.

That could be working on trucks, could be working on buses, could be working on bikes, could be on passenger vehicles but the focus is the entire sort of hybrid electrification of transportation.

I think that is sort of a broad concept to think about that.

If the JV were to pursue a business outside that defined the terms then Magna would have a veto right over that decision.

Okay.

The $220 million of contribution from Magna into that JV, have you determined what the cash portion of that is going to be yet?

Not yet, we are working with the financial advisors and our special committee but I don't expect that to be any more than sort of $50 million to $70 million.

Okay.

And then just the earlier comment on sort of balance sheet.

I think the message was we want to maintain a strong balance sheet but maybe we would be more willing in the future to use some of the cash for acquisitions.

Did I hear correctly that you would consider basically a zero net debt position as the optimal capital structure down the road?

That was me -- that was Don answering that.

I think we would all have opinions; I will give you my personal opinion.

But as a management team we have talked about what is the best return on our invested capital.

Obviously keeping cash in the bank is not a good return.

So I can't speak for everybody on the management team but I would say the Board and I think management would be comfortable with getting to that level.

We are looking at a number of acquisitions.

Nothing big is imminent, but I think in the past Frank has been very conservative.

We want to invest the cash and we get good return.

I just want to clarify one thing.

You asked about the cash portion moving into the joint venture.

I was referring to the fair value of the electric vehicle type assets and that is $50 million to $70 million.

So the cash is going to be $220 million less the fair value of these assets being transferred.

Just to clarify that.

Okay.

And then last question, just on that acquisition comment that does potentially free up a decent amount of money to be used for acquisitions if you wanted to go down that route.

Just where is the landscape right now?

Are there two or three things that you are looking at that are kind of bolt-on in nature which collectively could add up to several hundreds of millions of dollars in potential acquisition spending or is there nothing like that on the horizon right now?

We are always looking at a basket of acquisitions.

There is a lot of opportunities out there.

We don't comment on what we are going to do but I think it's safe to assume we did three acquisitions last year we have got -- we have recently bought Karmann, the Japan operation.

It's up to the regulators whether we can buy the rest of the European assets or not.

That will come out on a go-forward basis.

But there is lots of opportunities out there.

We are looking at growing in emerging markets.

We are looking at technology so it's an ongoing part of the business.

Okay, thank you.

Rod Lache, Deutsche Bank.

Good morning, everybody.

Was hoping -- just first of all can you review your FX assumptions for this year?

And what does your content per vehicle basically imply for year-over-year changes ex currency for the year?

Sure.

Well, our FX assumptions are pretty close to where rates are today.

We have got the Canadian dollar just under $0.99.

We have the euro at about $1.33 for the full year.

Currency was at $68 in North America and $32 in Europe in a quarter.

This is quarter over quarter.

Rod, I think if you look at Q1 rates and the current rates for the full year we sort of got Q1 content, we also have given you full-year guidance.

The rates at the end of -- average rates for Q1 and forecasted rates for the balance of the year that we have built into our assumptions, they are relatively close.

So what you are seeing and moving from Q1 to full-year estimates is change in mix and content changes.

Okay, thank you.

Can you just address maybe -- for the core Magna how should we be thinking about the organic growth profile prospectively and where do you see the growth focus becoming?

It seemed like although the [EV] program was still pretty small.

It seems like that was a significant part of what you expected to drive organic growth in the future over the long run.

So how does that change now for the core of Magna going forward?

I don't necessarily agree that that was going to be a big part of our growth.

We have looked at -- in our E-Car we are looking at battery cells, battery packs.

I think it's a challenging business.

We will be looking at new technologies.

Then we have looked at sort of developing rolling chassis.

We have got a couple of contracts but the one we have talked about is Ford and there is other potential ones.

I think the real growth opportunity for Magna, quite frankly, is looking at the trends in the industry.

So emerging markets is a huge opportunity for us.

Changes in powertrain technology another big area for us.

Improvements in either emissions or reducing weight across all of our groups to get better mileage is being driven by the public and by governments.

So there is a lot of shakeout in the supply industry.

I suspect that will continue; there is global platforms.

So every group that we talk about inside Magna has got a growth plan that they are pursuing with technologies, with things I just talked about.

We will talk a little bit about it at the annual meeting.

I think it's important -- in the overall perspective of this deal there is a transaction that Frank has agreed to that changes the B share and there is a financial part of that transaction which people will have to look at and ultimately decide is this going to be positive or negative to the share price short term and long term.

There is going to be a lot of discussion, I suspect, based on the questions we are getting here on E-Car.

E-Car is a very, very small part of this.

If it's successful, and I hope it is, then Magna benefits with 73% ownership.

Every dollar that is invested Frank is going to look at it very carefully since it's his money.

So we are going to be intimately involved in what is going on like we have been in the past.

But the big growth area is going to be in our core groups and that is what is going to drive us forward.

Can you give us, Don, just a sense of the backlog-driven growth that you have visibility on over the next few years?

Any kind of quantification of what that would look like so that we can gauge it relative to the production changes?

Rod, we haven't given forward guidance beyond 2010.

We will continue to update guidance.

As we get to the end of 2010 we will get some clarity on 2011 but we have stayed shy that for a number of years doing that.

Okay.

And just lastly do you have an estimate for the fixed cost reduction in Europe that you have achieved at this point just as the -- so we can kind of gauge the leverage impact as production comes off a bit from the levels we saw in Q1?

Rod, I am not -- I don't have that handy and I don't have that at the top of my tongue.

It's something, truthfully, I didn't really want to share in terms of fixed cost structure in North America or Europe or rest of the world.

All I can tell you is when you look at the results, whether you are looking at Q3/Q4 or Q4/Q1, that you are seeing some improvements and it's coming from two sources.

One is reduced volumes cost as I have talked about, and one is incremental margin sales as well as a reduction of costs.

Just one comment I guess far as where we stand on some restructuring.

We have made some very good headway during the downturn on our losing divisions which is coming through in North America and we also took the time to focus on sort of driving efficiencies through our operations.

I think if the market continues where we expect it's going to continue, we have done most of the restructuring required in North America.

There is always fine-tuning going forward as we have had for the last decade and we will continue to have.

Depending on what happens in Europe we may see require meant for some more restructuring.

As a Siggy pointed out earlier, it's a couple of months behind.

It will depend on what happens with the economy over there and the market so that is I think directionally where we are from having to take restructuring actions.

But on the other hand you have to see as well we had a very strong start now within Magna Steyr, two successful launch of two new products with two new customers.

In summer we have the next big change of a program; this will put MINI Countryman there.

You have to hold some management in advance and I think this will be a very clear balance between North America and Europe in the next couple of two, three months.

Thank you.

Itay Michaeli, Citigroup.

Thanks, good morning.

Just curious if you have spoken with some of our major customers yet about the proposed transaction and maybe if you have received any feedback on it yet.

We haven't.

We just had an internal conference call before for this one to talk to our employees.

This won't have any impact, I don't think, on our customers.

We have a communication going out if they ask.

First of all, we won't know for a month and a half whether the transaction goes through or not.

Second of all, the management that they deal with doesn't change, the structure doesn't change, the culture doesn't change.

And E-Car we talked about is a very small part of our business with only a couple of contracts so will communicate the change in Frank having a direct ownership.

But they already know that Frank is intensely interested in this so I don't think it has any impact on our customers.

I think the way to think about this is we have proposed a change in the share structure, which we as management believe can unlock significant value for all shareholders.

But below the share structure if you think about the Board, management, and our employees and our customers, it's business as usual.

Nothing is going to change tomorrow or nothing is going to change in a year and a half.

We are all going to be focused on growing our business and looking at new technologies, focusing on emerging markets.

Hopefully we make the right acquisitions going forward and just good opportunities.

So it's business as usual in our organization.

There has been a few questions because of the Opel situation a while ago.

A couple of customers were concerned and we talked about in the past about what is Magna's long-term strategy.

This will make it 100% clear and we have told them anyway that Magna is a parts company.

That is great.

And then just back to Europe again, can you maybe talk about just the longer-term EBIT margin potential there?

I think you were in the 2.5% to 3% EBIT margin range back to kind 2005, 2007, how do you view those margins in the context of what you could potentially get to in the next couple of years?

Better or same, maybe a little bit lower?

Any help there would be helpful.

I am not going to give you a lot of help.

I am not going to answer questions about going forward.

I think you have got to draw your own conclusion based on our comments.

I would focus in particular on launch costs declining.

We are having ramp ups in Magnus Steyr, which is a key contributor to sales and profitability in Europe.

We have taken some restructuring actions, we have reduced costs in Europe, and that should all benefit us.

Great.

Then just one last quick one and I might have missed this, but can you share what your assumption is for Detroit three market share in the latest North America CPV guidance?

I don't have that handy.

We can probably get that to you, though.

Okay, great.

Thank you.

I am not sure if this is what you are getting at.

Historically, there has been some concern with Magna's exposure to the Big 3, specifically with the amount of our sales to them in North America.

And obviously, it has been declining over the last couple years, but it has been in the 50 plus range for Magna's total sales to Ford, GM and Chrysler in North America.

That number in the last year is just over one-third, so it is going in the right direction.

Obviously, we want to keep our capacity full.

We are still anxious to do business with all of them in North America.

But I think the big opportunity, and I think we are making headway, is to continue to work on global programs with Ford and GM as they have some great products coming out, global platforms.

We want to continue to support them with new technologies and gain business in those emerging markets with them.

Absolutely.

Thank you.

David Tyerman, Genuity Capital Markets.

A quick question on the European margins.

Vince, you said that based on the factors you described, margins should improve going forward.

Is that with the current forecast that you are thinking of for Europe in terms of volume?

David, yes, we have brought down our numbers, as in my comments, a little bit down for Q2, Q3 and Q4.

But that may have a dampening impact, I would say, on margins.

But overall, we are still expecting margins to improve for the things that I mentioned.

Okay, that is helpful.

Then just a quick question on Don's comment about bringing -- redeploying the cash and perhaps getting to a roughly no net debt situation.

Under some calculations you would already be at that.

In particular, I would cite the operating leases.

And if you consider those debt, which I would consider them, you are probably at no net debt now.

So the implication that you would be thinking in a holistic sense of going to like 10% or 15% net debt to cap?

Dave, I am going to answer the question for Don.

From our perspective we believe that as management it's important to have a conservative balance sheet.

You can take operating leases capitalize those and come up with your own number, but at the end of the day if you look at our balance sheet today we have $1.2 billion of debt.

The question to Don was -- sorry, $1.2 billion of cash; thank you, Don -- it has been a long morning already.

$1.2 billion of cash.

I think the way to think about our balance sheet is as things start to improve generally in the economy we have seen that in North America and we will hopefully see that in Europe real soon.

I think we are going to have -- we will be more inclined to use our cash and reduce our cash resources because we are comfortable that the North American economy is getting stronger; Europe is going to stabilize.

And we have had a lot of cash to weather that downturn.

You can look at a number of our peers that didn't have the cash balances and what has happened to them.

So I think as a function of just the economy changing, the macroeconomic conditions, and I think management is going to be supportive of looking at our cash balances and putting that more to use in the business.

Right.

Okay, that is fair.

And then the last question I had, can you give us any kind of broadbrush as to how you arrived at the numbers with respect to shares and cash and so on in the deal that is being voted on by the Class A shareholders?

Dave, that is a really good question.

Particularly Jeff Palmer and I and to a lesser degree Don, we sort of see with bankers and private equity firms and so on a tremendous amount of ideas about what the Class B shareholder can do with the shares.

We have had that in the back of our mind and the numbers are significant or have been significant.

And as we have talked about during the Russian Machines transaction, I think we disclosed in our proxy, there was actually a transaction on the table that was going to create substantial value for the B shareholder.

We all thought we had a great idea and Frank made it absolutely clear to us that he was not supportive of that transaction even though he was walking away from a lot of value.

The reason he wasn't supportive of that was that he wanted to ensure that Magna had a strong foundation that didn't have a ton of debt because a lot of these transactions would be debt transactions.

We moved to the Russian Machines transaction and if you look at that transaction there is essentially $1.5 billion injected into the joint company.

The Stronach Trust essentially had 50% of that.

There was $150 million of cash that was paid on that transaction.

That gave us another benchmark in terms of what transaction had -- and that actually did go ahead and Frank did not give up control he had joint -- the Stronach Trust did not give up control, they had joint control.

So as we sat back and looked at this we said we have got to come up with a concept that ultimately works for two groups.

One is the Stronach Trust because without the Stronach Trust agreeing to the transaction we wouldn't be here discussing this proposed transaction.

And two, one that is fair to all shareholders.

So as we have played and modeled and had discussions and continue to have discussions management came up with a proposal that we thought worked for everybody.

And as Don talked about in his formal remarks, we went to Frank and Frank said why don't you go ahead and continue to explore that.

We convened a Board meeting, struck a special committee.

There was lots of deliberation on the special committee.

We had lots and lots of meetings and lots and lots of financial people looking at this transaction, and we ended up where we are today.

If you sit back and look at this, I believe that -- and, David, I know you from a long time.

I know what your views on our multiple is and how we are undervalued compared to our peers.

A multiple bump that doesn't even get us to our peer group that moves us up by 1.1 -- you know we are trading at substantially below that -- unlocks about 15% share price appreciation for our shareholders and we think that is really good.

I think that is a real conservative estimate.

There is no reason why we should be should be trading at less than our peers.

In fact, I think we should be trading at more than our peers.

So there is a lot of value to unlock, trading value.

We think this transaction does that and, ultimately, we are going to have the shareholders decide whether they want to proceed with this or remain with the status quo.

It's a decision that is, ultimately, in the hands of shareholders.

Okay, that is very helpful.

I am extremely pleased to see this happen.

I never believed I would see it.

Michael Willemse, CIBC.

Great, thank you.

The launch costs in Europe in the first quarter, are we still talking tens of millions or were we lower than that in the first quarter?

Mike, there were tens of millions.

Have you been to Austria to see our facility there?

If you look at that huge facility where we have capacity once everything starts to run, 125-plus units.

It's a major job shutting down that facility and relaunching it and Magna Steyr is really good at doing all that.

They have done that historically; they are going to continue to do that but the numbers are significant.

We expand all the engineering and we brought three new vehicles in production.

I am talking about the Mercedes-Benz SLS AMG where we have second-to-none technology and know-how build up in aluminum bodies.

This is really an expertise what we need for the future, especially going in those niche vehicles.

We show [Peugeot RCZ] complete new car, complete new direction with a lot of involvement.

It will be a masterpiece of demonstrating Magna Group's involvement in a complete vehicle.

The next program, the MINI Countryman, new car as well; new platform compared to the BMW X3.

It means three complete new types of vehicles, three new customers.

And I just would like to say it's a very good performance what we have in [grads].

Just last days (inaudible) announced as the best performing car was the BMW X3 on a total lifecycle of the car.

Seven years best-performing compared to all other cars produced in Germany and this was a huge step forward.

Building on this we invested a lot, as we said, a lot of millions; expands all the engineering and looking forward to be where we have been.

Operator, we will take one more question.

Andrew McKendry, BMO Capital Markets.

Thank you.

Just wondered if you could speak to the timing and what are the events, timing with respect to this transaction?

I think you talked about a shareholder meeting in June/July but when could we expect to see the proxy circular and when would these transactions be expected to close?

Andrew, it's Vince.

I will answer that question.

What our immediate plans are is starting on Monday we are going to get on the road, Don and I and Louis, and talk to our shareholders.

So we will probably be on the road for a couple of weeks.

The lawyers are going to be busy with paperwork and putting a proxy together that has to be mailed to shareholders.

That is probably two to three weeks away depending on how particular the lawyers are in drafting all this.

That will then -- we will then convene a shareholders' vote.

That is going to be typically 35 days away, five weeks.

Once the vote is in place I guess it's going to close that day or the day after, very shortly thereafter.

So we can see it -- in theory we can see a transaction completed by the end of our second quarter.

That is great.

Thank you.

I would like to thank everybody for calling in.

Sorry we had to cut off the Q&A because I am sure there is lots more questions, but we have got to get ready for our annual meeting coming up here.

There has been a lot of discussion at the Board level.

Vince and Jeff and the advisers have spent a lot of time over the last little while.

David, you said you never thought you would see this day.

I have been here for 23 years and I think I would echo your comments.

I think Frank -- he is comfortable either way with this.

We are going to get out and we will explain it in more detail to all of our major shareholders over the next couple of weeks.

But from a management point of view, I am happy that we at least get to come back to shareholders with something we have been asked about for years now.

With the proposal I think we have a -- I think the shareholders have a one-time decision to make.

And believe me, this has been debated back and forth and negotiated so we will make it clear.

We will clarify the process, we will bring everybody up to date, and I think it will be great that the shareholders have an option to see what they want to do.

Life carries on either way from a business standpoint.

I think everybody is comfortable either way, but I am personally very pleased that we have been able to bring something that is acceptable to Frank and I think will be very good for shareholders.

So thanks very much for calling in today.

I am sure we will see a couple of you at our annual meeting coming up.

Thank you.

Ladies and gentlemen, that does conclude the conference call for today.

We thank you for your participation and ask that you please disconnect your lines.