Magna vigilant about contingencies

Vince Galifi, CFO of Magna International, was a crucial member of the Canadian supply giant's leadership team as it navigated the unprecedented challenges of the Great Recession that shook the industry just more than a decade ago.

Magna responded to the 2008 financial meltdown by bolstering its cash and liquidity position, emphasizing financial discipline and establishing clear communications with customers and its supply base on which programs might be delayed.

Galifi, CFO since 1997, has engaged the current pandemic crisis with the same basic strategies.

"We were all going through that for the very first time," he recalled of the company's financial crisis plan. "Look at where we're at today — we have learned and opened up the playbook."

In 2008, Magna prioritized better understanding of three big business variables: the customer, the ins and outs of its cash flow and the strengths and challenges of Magna's supply base, Galifi said.

"We had a strong financial position back in '08 and '09, unlike some of the others in the industry," he told Automotive News. "What we learned was that it's really important to have a strong balance sheet. It gives a lot of assurance to our employees. It gives a tremendous amount of assurance to our customers. And it allows us to look past some of the challenges we're facing and think about the future."

Over the past decade, Magna has maintained the same vigilance, and established protocols and procedures in the event of another downturn. That contingency planning became an integral part of the company's overall business strategy, Galifi said.

As a way to stay prepared for possible troubles, he regularly has the senior leadership team run what-if downturn scenarios. What if economic conditions suddenly change? What if a customer changes a plan unexpectedly? What if assumptions change?
"Let's shock the system," Galifi said of the exercises. "We've been doing that on a pretty regular basis. It's not until it really happens that you have to work through it, but I think it gets people thinking about it."

Magna also learned to not cut planned investments in new launches and future programs. Not investing in capital needed for a future program will put the company behind once it comes back up in two or three years, Galifi said.

"We didn't cut back on the essentials," he said. "As we're coming into this time frame, cash conservation is top of mind for everybody in the industry. We know this industry is going to come around and we want to be in a position to be able to launch those future programs efficiently."