Magna International Inc. (MGA) posted a net loss of $205 million, or $1.83 per share, in the second quarter of 2009 as opposed to net earnings of $227 million, or $1.98 per share, in the corresponding quarter of 2008. Reported losses were considerably higher than the Zacks consensus loss of $0.95 per share. Significantly lower demand due to bankruptcies of major customers, General Motor and Chrysler LLC, resulted in losses for the Canada-based auto part manufacturer.
Chrysler stopped vehicle production after seeking bankruptcy protection and, consequently, its North American vehicle production in the second quarter declined 84% year over year. General Motors also ceased operations at a number of its North American vehicle assembly facilities under bankruptcy protection leading to a 53% decline in its vehicle production during the period. Although both companies have regained their positions, their parts manufacturers are yet to overcome effects of the bankruptcies.
Magna’s revenue slipped 45% year over year to $3.7 billion. Sales in the North American Production segment, which comprises sales in North America, Europe and rest of the world, declined 43% to $2.9 billion. Sales in North America fell 55% to $1.4 billion while that in Europe were down 33% to $1.4 billion. However, revenue from rest of world rose 4% to $154 million, helped by higher sales in China and Brazil.
Revenue in the Complete Vehicle Assembly segment dropped 60% to $423 million. The decrease in Complete Vehicle Assembly sales was primarily a result of a fall in assembly volumes for BMW X3, Saab 93 Convertible, Chrysler 300, Jeep Commander and Grand Cherokee. Sales in Tooling, engineering and other sales segment declined 16% to $336 million.
Year over year, North American vehicle production fell 49% to 1.8 million units while the average dollar content per vehicle decreased 10%. European vehicle production slipped 28% to 3.1 million units while average dollar content per vehicle fell 7%.
Outlook
Magna did not provide any financial guidance. However, the company is optimistic about the CARS stimulus programs. Recently, the US government implemented the Car Allowance Rebate System (CARS), an incentive program effective Jul 24, 2009 (for vehicles purchased on or after July 1, 2009), for stimulating sales of new vehicles. The company expects U.S. automotive sales to stabilize going forward. July auto sales were the highest so far this year, driven by the incentive program.
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