Magna Q4 report warns about 'protectionist sentiments' in North America
Diversified Canadian auto supplier Magna International said increased protectionist measures in North America could pose a substantial risk to the supplier achieving “desired results” in the future.
Magna CEO Don Walker, speaking during the company’s fourth-quarter conference call Friday, said any border-adjustment tax would negatively impact the entire industry. He said it’s too early to make predictions, but Magna will be watching any changes closely.
A company statement said: “The automobile industry is a highly globalized industry which is currently dependent on open borders and the free movement of goods, services, people and capital, particularly in Europe and North America.”
It went on to say the “continued growth of protectionist sentiments” and regulations could have a negative impact on Magna’s operations.
NAFTA renegotiations aimed at the U.S. trade deficit with Mexico could potentially hurt the supplier because its Mexican operations make up 14 percent of total sales, Reuters reported.
Although Magna is looking ahead cautiously, it reported stable fourth-quarter profits and growth in total revenue while vehicle production continued to grow in both North America and Europe.
Net income attributable to Magna's continuing operations dropped to $478 million from $483 million in the fourth quarter. On a per-share basis, however, net income grew to $1.24 from $1.19 during the quarter.
Magna's total sales rose 8 percent to $9.25 billion. The company noted that vehicle production increased 2 percent in both North America and Europe last year.
Magna said the cost of goods sold jumped 7.7 percent to $7.9 billion in the quarter.
Magna, which makes a wide variety of parts for automakers, also assembles cars under contract from motor vehicle manufacturers. Its biggest customers include General Motors, Volkswagen AG, BMW and Ford Motor Co.
Contract vehicle assembly sales in the quarter fell about 30 percent to $439 million. The company said the drop reflected the end of production of the Mini Countryman and Paceman in the quarter.
For the year, Magna said net income from continuing operations grew 4 percent to $2 billion. The company said it posted record revenue of $36.5 billion, up 13 percent from 2015.
"2016 was another great year for Magna, with sales growth well above the market, record earnings and strong operating cash flow," CEO Don Walker said in a statement. "We expect 2017 to be a strong year for Magna as well. We also completed the acquisition of Getrag early last year, and began its integration into Magna."
Trends and outlook
The Magna statement said the company will keep an eye on the trend of industry innovation as a result regulations for fuel economy, greenhouse gas emissions and vehicle safety. Walker mentioned Magna’s continued investment in r&d projects.
At the Detroit auto show in January, the supplier unveiled an ultralight door that could decrease vehicle emissions. The company also teamed up with Innoviz Technologies to get the jump on lidar technologies needed for self-driving vehicles.
Magna is launching programs for the BMW 5 series and a JLR vehicle later this year. In 2018 and after, Magna said it will launch two additional projects with automakers it has yet to disclose.
The company said it expects total 2017 sales to be between $36 billion and $37.7 billion, compared with sales of $36.45 billion in 2016.
Magna, one of the largest suppliers in the world, is headquartered near Toronto. It ranked No. 3 on Automotive News’ 2016 list of top 100 global automotive parts suppliers.
Reuters contributed to this report.
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