Magna's 2009 Forecast Grim After $148M Q4 Loss

Times were tough for auto parts maker in 2008 but 2009 promises to be worse, with a number of very large threats looming on the horizon, the company said Tuesday.

TORONTO --- Times were tough for auto parts maker Magna International Inc. in 2008 but 2009 promises to be worse, with a number of very large threats looming on the horizon, the company said Tuesday as it reported a US$148-million fourth-quarter loss.

The loss amounted to $1.33 per share and reversed a year-earlier profit of $28 million or 24 cents per share.

"We are facing one of the most difficult automotive environments in decades, across numerous markets," Magna co-CEO Siegfried Wolf said in a statement.

"Our recent financial results reflect this."

Magna, which reports results in U.S. dollars, said total sales tumbled 29 percent to $4.8 billion as sales fell at its North American, European and rest of world production sales and complete vehicle assembly sales, offset in part by increases in tooling, engineering and other sales.

The results included a number of unusual items, including restructuring charges, impairment charges associated with long-lived assets and future tax assets, foreign currency gains and a future tax charge.

"While 2008 was a difficult year for the industry, 2009 is expected to be even worse," the company said, with the first half expected to be "particularly challenging" as the Detroit Three skirt bankruptcy, two seeking bailouts from Washington that could even see one of them disappear in a merger.

During the quarter, Magna's average dollar content per vehicle decreased four percent and nine percent in North American and European vehicles respectively, compares with the prior-year quarter. North American and European vehicle production declined 25 percent and 26 percent respectively.

For all of 2008, Magna said it recorded a net profit of $71 million, 62 cents per share, down from $663 million, $5.86 per share, in 2007. Annual sales were $23.7 billion, a decrease of nine percent from 2007.

Magna said it expects to see some recovery in the auto sector after 2009 -- but not until then.

"The bankruptcy of one or more of our major customers remains a significant negative risk to our business, including our results from operations, financial condition and cash flow, although the extent of risk is difficult to estimate," the company said.

"The extent of financial and other support to the automotive industry made or proposed by governments around the world is encouraging," said co-CEO Don Walker.

"We are hopeful that governments will recognize the need to protect amounts owing to suppliers in any restructuring of the industry."

At the end of December Magna had about 74,000 employees in 240 manufacturing divisions and 86 product development, engineering and sales centers in 25 countries.

The company announced this month it will close its New Process Gear plant in Syracuse, N.Y., after union workers rejected a new contract the company said was essential to keep the plant operating. The shutdown affects 1,400 workers.

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