Hello, and welcome to the Magna International First Quarter 2025 Results Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. And as a reminder, this call is being recorded. I would now like to hand the call over to Louis Tonelli, VP of Investor Relations. Louis, please go ahead.

Thanks, operator. Hello, everyone, and welcome to our conference call covering our first quarter 2025 results. Joining me today are Swamy Kotagiri and Pat McCann. Yesterday, our Board of Directors met and approved our financial results for the first quarter of ‘25 and our updated outlook. We issued a press release this morning outlining our results. You'll find the press release, today's conference call webcast, the slide presentation to go along with the call, and our updated quarterly financial review, all in the Investor Relations section of our website at magna.com. Before we get started, just as a reminder, discussion today may contain forward-looking information or forward-looking statements within the meaning 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 today's press release for a complete description of our Safe Harbor disclaimer. Please also refer to the reminder slide included in our presentation that relates to our commentary today. With that, I'll pass it over to Swamy.

Thank you, Louis. Good morning, everyone. I appreciate you joining our call today. Before we start, I want to express our deep sadness here at Magna with the passing of our former CFO, Vince Galifi. Vince was not only a remarkable leader, but also a cherished colleague, mentor, and a friend to me and many of us. Vince's contributions to Magna over his 30-plus-year career were invaluable, including playing a crucial role in shaping our financial strategies, providing stability, and ensuring our disciplined, profitable growth. Many of you listening in today benefited from his knowledge, wisdom, and insight. As we mourn his loss, we also celebrate his life and the profound influence he had on Magna. There are some notable takeaways from the quarter that I would like to highlight before getting into some of the details. We are pleased that our Q1 results came in ahead of our quarterly planning cadence, mainly reflecting strong incremental margin on higher sales. You may recall that in our February call, I mentioned that the first half of 2025 would be weaker than the second half, and of the first two quarters, Q1 would be weaker. We returned $187 million to shareholders in the first quarter in the form of dividends and share repurchases. Despite increased uncertainty due to the current tariff environment, we have updated our outlook, which includes higher sales largely due to foreign currency translation, partially offset by slightly lower vehicle production in North America, and a modest reduction in margin, mainly due to the higher euro and decremental margins related to the North American volume reduction. We continue to work closely with our customers to mitigate the tariff impacts and adjust in this rapidly evolving environment, focusing on what is under our control, including cost containment efforts. And we have clearly communicated to our customers our intention to pass on any unmitigated incremental tariff costs. We continue to win new business and advance automotive technologies. We are collaborating with NVIDIA for next-generation, scalable active safety and autonomous driving systems as well as other applications. We have been awarded a new complete ADAS system with a North American-based global OEM. And we are supplying a two-speed, dual motor e-Drive with advanced off-road technology for Mercedes-Benz. Our customers and the industry continue to recognize Magna for excellence in launch and innovation. We recently won GM's Supplier of the Year and Overdrive award. And Automotive News recently selected our AI-based thermal sensing technology as a 2025 PACEpilot Innovation to Watch. As I said earlier, the industry is facing a high degree of uncertainty as a result of the tariffs and trade environment. Let me frame tariffs in the context of Magna. Last year, our North American business was about $20 billion, or less than half of our global sales. In 2024, we imported roughly $2 billion of goods from countries, including Canada and Mexico, that are subject to tariffs, which would result in roughly $500 million in gross tariff costs. Based on our analysis to date, 75% to 80% of our parts crossing the border are already USMCA-compliant, which puts our 2025 annualized direct tariff impact estimate at about $250 million. We continue to evaluate options that will further increase USMCA compliance to mitigate tariff impacts. In some instances, it will require design modifications, validation, and/or customer approvals. We will continue to evaluate the full scope of these opportunities. As a result, we are highly focused on working with customers to consider further mitigation opportunities, utilizing government remission programs where appropriate, continuing cost reduction programs already in place, and remaining disciplined with capital spend. As I said at the outset, we expect 100% of unmitigated incremental direct tariff costs to be recovered from customers. Next, I will cover our updated outlook. Uncertainty in the current business environment caused by tariffs and other trade measures has made forecasting more challenging than normal. Our outlook reflects our strong first quarter performance and near-term OEM production release information, including announced production downtime at certain OEM assembly facilities. Our production assumptions do not contemplate the potential impacts of tariffs and other trade measures on vehicle costs, vehicle affordability, or consumer demand, nor the impact of these on vehicle production. Relative to our previous outlook, we have reduced North American production by about 100,000 units to 15 million, held Europe production unchanged, and have raised our China production assumptions by roughly our Q1 outperformance to 30.2 million units. We also assume exchange rates in our outlook will approximate recent rates. We now expect a higher euro and Canadian dollar for 2025 relative to our previous outlook. The increase in our sales range is predominantly associated with foreign exchange translation due to the higher euro relative to the U.S. dollar, partially offset by lower vehicle production in North America, particularly with respect to certain programs with high Magna content. The lowering of our EBIT margin range reflects the margin-dilutive impact of euro-US dollar translation as well as decremental margin on the lower sales associated with the volume reductions in North America. We increased our tax rate to approximately 26% from approximately 25%, mainly due to the mix of earnings. We expect capital spending to be in the $1.7 billion to $1.8 billion range, down slightly from $1.8 billion previously, reflecting our continuing efforts to defer or reduce capital wherever possible. And our interest expense, net income, and free cash flow ranges are all unchanged from our last outlook. In addition, we are providing some helpful financial modeling guidance with respect to Magna. Our average content per vehicle in North America is approximately $1,300. And we would estimate incremental and decremental margins in North America to be in the 15% to 20% range at the Magna level under normal conditions. We have also seen relatively volatile foreign exchange rate swings over the past few months. As you model sales, keep in mind that a $0.01 change in the euro-USD rate has about a $110 million impact on annual sales, with a margin below our corporate average. And a $0.01 change in the Canadian to U.S. dollar is about $50 million in annual sales with a margin at about our corporate average. Lastly, we are proactively evaluating costs and capital. I would like to reiterate that our guiding principles remain the cornerstone of Magna, a long-term ownership mentality that starts with our culture of accountability and alignment interests at all levels of the Company; managing our portfolio under a consistent set of criteria; and dispassionately assess our product lines in terms of their markets, market positions, and returns. Maintaining a strong balance sheet to have the financial flexibility to manage through the cyclicality of our industry; and a capital allocation strategy that entails a long-term balance of investing for profitable growth, together with returning capital to shareholders. Regardless of where we are in the cycle or challenges we are facing, these overarching principles govern the way we manage Magna for long-term success. With that, I'll pass the call over to Pat.

Thanks, Swamy, and good morning, everyone. As Swamy indicated, we delivered solid first quarter earnings, ahead of our expectations. Recall that we indicated on our February call that we expected our 2025 earnings to be lowest in the first quarter of the year. Now, comparing the first quarter of 2025 to the first quarter of 2024. Consolidated sales were $10.1 billion, down 8%, compared to a 3% decline in global light vehicle production. Adjusted EBIT was $354 million, and adjusted EBIT margin was 3.5%. Adjusted EPS came in at $0.78, down 28% year-over-year, primarily due to decremental margins on lower sales, but ahead of our expectations. And free cash flow used in the quarter was $313 million, ahead of our expectations and compared to $270 million in the first quarter of 2024. Let me take you through some of the details. North American and European light vehicle production decreased 5% and 8%, respectively. And production in China increased 2%, netting to a 3% decrease in global production. On a sales-weighted basis, light vehicle production declined 5% from the prior year. Our consolidated sales were $10.1 billion, compared to $11 billion in the first quarter of 2024. On an organic basis, our sales decreased 6% year-over-year for a negative 1% growth over market in the quarter, in part, reflecting negative production mix from lower D3 production in North America, lower light vehicle production, a decline in complete vehicle assembly volumes, including the end of production of the Jaguar E and I-Pace in Graz, Austria, the end of production of certain other programs, the divestiture of a controlling interest in our metal forming operations in India, the impact of changes in foreign exchange rates, and normal course customer price givebacks. These were partially offset by the launch of new programs, higher commercial recoveries, and customer price increases to recover certain higher production input costs. Adjusted EBIT was $354 million and adjusted EBIT margin was 3.5%, down 80 basis points from Q1 2024. The lower EBIT percent in the quarter reflects positive 60 basis points from operational items, reflecting operational excellence activities, lower engineering spend, and lower net input costs, partially offset by higher new facility costs. Negative 15 basis points related to lower equity income, as a result of lower net favorable commercial items, higher net transactional FX losses, and reduced earnings on lower sales, partially offset by lower launch costs, all with respect to certain equity accounted investments, negative 10 basis points for tariff costs paid out but not yet recovered from customers and volume and other items, which impacted us by negative 150 basis points, reflecting reduced earnings on lower sales and lower net transactional FX gains. In net discrete items, higher net favorable commercial items were completely offset by higher net warranty costs and higher restructuring costs not called out as unusual. Interest was essentially in line with last year. Our adjusted effective income tax rate came in at 25.7%, higher than Q1 of last year, primarily due to higher losses not benefited in Europe, unfavorable foreign exchange adjustments for U.S. GAAP purposes, and a change in the mix of earnings, partially offset by favorable changes in our reserves for uncertain tax positions. Net income was $219 million compared to $311 million in Q1 2024, mainly reflecting lower EBIT, partially offset by lower income tax and lower minority interest. And adjusted EPS was $0.78, compared to $1.08 last year, reflecting lower net income, partially offset by fewer diluted shares outstanding. The fewer shares outstanding largely reflects share repurchases in the fourth quarter of 2024 and the first quarter of 2025. Turning to a review of our cash flows and investment activities. In the first quarter of 2025, we generated $547 million in cash from operations before changes in working capital and used $470 million in working capital. Investment activities in the quarter included $268 million for fixed assets and a $148 million increase in investments, other assets, and intangibles. Overall, we used free cash flow of $313 million in Q1, better than we were forecasting and compared to $270 million in the first quarter of 2024. And we continue to return capital to shareholders, paying $136 million in dividends along with $51 million in share repurchases during the first quarter of 2025. Our balance sheet continues to be strong with investment-grade ratings from the major credit agencies. At the end of Q1, we had just under $4.6 billion in liquidity, including about $1.1 billion in cash. Currently, our adjusted debt-to-adjusted EBITDA ratio is at 1.92x, better than we had anticipated coming into the quarter. In summary, we had solid financial performance in the quarter, ahead of what we had expected. We returned $187 million to shareholders in the quarter in the form of dividends and share repurchases. We updated our outlook, excluding the impacts of tariffs, which includes higher sales, largely due to foreign currency translation, partially offset by lower volumes in North America and a modest reduction in margin, mainly due to the higher euro and decremental margins related to North American volume reduction. And we are working closely with our customers to mitigate tariff impacts and adjust in the rapidly evolving environment. Thanks for your attention this morning. We would be happy to take your questions.

We will now begin the question-and-answer session. And your first question comes from the line of John Murphy with Bank of America. John, please go ahead.

Good morning, guys. Very sorry to hear about Vince. It's tough news for all of us. I think we all learned a lot from him and he was a great friend, so that's a rough way to start the call. Thoughts are out to all you guys. I guess, first here, maybe kind of thinking sort of mid to long-term, Swamy. On the Seating business, it just seems like even adjusting for tariffs, the business remains kind of tough. I'm just curious, as you think about that business mid to long-term, if there's something you need to do on a micro basis organically, or do you need to get larger scale? Because there's a lot of other folks out there that are kind of tripping over that business as well. And it seems like it should be an okay business, but it seems like you just can't get it to turn the corner. What are your thoughts there on Seating?

Good morning, John, and thank you for your comments. Regarding Seating, the significant issue we faced, a one-time warranty cost of around $30 million, is now behind us. Operationally, we are still aligned with our previous performance. Considering the volatility and the program we discussed in South Carolina, which will start next year, the macro factors affecting the Seating business have not changed. Our execution plans remain on track. Moreover, as I mentioned previously, we are continuously reviewing all product lines, which is an integral part of our strategy.

Okay. And then just a second question, as you think about tariffs, and I hate to harp on this. Yesterday, the customs border patrol, they put out a sort of a notice that seems to be an indication that USMCA-compliant parts are going to remain on tariff beyond sort of the 90-day review, but certainly beyond May 3, and it seems like that may be in perpetuity. I'm just curious what you are hearing there and if that's a correct interpretation, because that would create some pretty extreme relief for you guys here, at least in North America.

John, I read that report and you are absolutely right. I think I mentioned in the call that our focus has been on this. We have had work streams examining every part that crosses the border in detail. We are approximately 75% to 80% compliant with USMCA. There are many discussions on how to increase that percentage. Yes, this definitely provides more certainty and relief in our planning process, and that is the assumption we are working with as we hope to gain further clarity and certainty on that decision.

And maybe just to follow on that, I mean, as far as schedule changes and program launch changes, what have you heard from automakers so far? It seems like everybody is kind of trying to plow ahead without making significant changes yet. Have you seen big changes in short-term schedules or potential program launches for the second half of this year or maybe even into next year?

John, we have not, not just looking at releases. So, first, to address the releases, right? April seemed pretty aligned with our planning. May from a visibility perspective also looks normal, but we've always been thinking about depending on any announcements that might change pretty quickly. But as we see it today, it looks pretty aligned. And obviously, we don't stop just by looking at the data here, we have been in conversations with OEMs at least two or three times a week at my level, even to get an understanding and not depend only on the releases. Overall, we have not seen any changes in terms of planning or in terms of production schedules, at least from the programs that we are involved with. But even at a macro level, we are not seeing it. A lot of discussions on how to get more USMCA compliance for sure, but that's where the chips fall today.

And then just lastly, China seems like it's showing some relative strength and absolute strength relative to expectations. Can you just remind us of your footprint or your mix of customers there, domestic Chinese OEMs versus international?

Yes, we were in China about three weeks ago. Approximately $5.5 billion of our revenue comes from China, with over 60% to 65% of that business involving Chinese OEMs. This primarily includes five to six major customers there. Initially, we focused on Western OEMs in China, and we've shifted our mix from 10% to over 65% today. We continue to gain traction; last year, we grew by 15% in China, while the overall Chinese market grew around 5%. We are intentional about which products and customers we focus on, and we continue to improve our mix.

Swamy, I thought about a year ago it was 50-50. Did it change that quickly, or was my estimate off?

Yes.

It did move that quickly.

No, John, your numbers are correct. We continue to make good progress and have traction.

Great. Thank you very much, guys.

Sure. Thanks, John.

And your next question comes from the line of Tamy Chen with BMO Capital Markets. Tamy, please go ahead.

Hi, good morning. Thanks for the question. First, I just wanted to clarify, so, Swamy and Pat, the annualized tariff exposure this year, you said $250 million. So, am I to interpret that is essentially the COGS exposure from you importing into your US plants, parts from Canada and Mexico? And are you saying, this number, you believe you would get 100% recovery from your customers?

So, Tamy, good morning. First, yes, what you said, the $250 million we are talking about where we are the importer of that record tax.

Beyond Canada and Mexico.

Beyond Canada and Mexico.

Canada, Mexico, and China as well.

China and Europe, although those numbers are smaller, but it's very comprehensive. Second, obviously, our first initiative is to mitigate that as much as possible with all our internal actions, resourcing, rebalancing, continuing to work with our customers to increase the U.S. compliance. Some of it might need design modifications or validations or the production part approval process, and we are working with them and we'll continue to do so. Now, anything that is remaining past all those efforts, yes, our intent is to pass it on to the customer, Tamy.

Okay, understood. Yes, regarding the increasing USMCA compliance, I wonder if your customers might also be considering raising U.S. content now that we have some relief and clarity this week. Can you explain how these considerations might affect you in terms of capital investments? What actions will you need to take, and how would both trends impact your operations moving forward?

I think it's important to note that all scenarios are being considered. From what I've gathered in my discussions, this isn't a rash decision. Given the capital allocation and the scale of the discussions, they are approaching this very thoughtfully. The first option is to explore rebalancing, and re-sourcing is another possibility. In my conversations with customers, nobody seems to be reacting impulsively. They are engaged and sharing data with us. Regarding Magna's operations, we have a presence in Canada, Mexico, and the United States. There's typically no spare capacity, but we are exploring options for rebalancing. We can't make these changes on our own; we need to collaborate with our customers. This is our approach to mitigating any potential impacts.

Okay, I understand. My final question is regarding your share buyback. Can you confirm if it is still on pause due to macroeconomic uncertainty? Is this related to your current leverage situation and your expectations moving forward? Thank you.

So, Tamy, yes, you are right. We talked about pausing, and we have always talked about it as a strategy, right, in managing our balance sheet. To answer your question very directly, yes, it is paused given the uncertainty that we have in the market. But as you know, we had the NCIB about to purchase 28.5 million shares, approximately. If uncertainty goes away and there is a lot of clarity, there is always the possibility to look at it later in the year. For now, given where the market is and given where uncertainty is, yes, we have paused. But I'd also add, Tamy, the leverage ratio, as Pat mentioned, is on track, and we continue to make good progress as discussed. And I think we are just a little bit ahead compared to where we are planning, as Pat mentioned in the comments.

And your next question comes from the line of Dan Levy with Barclays. Dan, please go ahead.

Hi, good morning. Thanks for taking the questions. I wanted to first just ask on Advanced Program Launch activity. What have you've seen there? Has there been any change in the activity behavior of automakers on this front? And maybe you could just conclude in that, and what's the tone and tenor of commercial discussions with the automakers right now?

Good morning, Dan. From an overall planning launch perspective, we have not seen any change, right? But in terms of sourcing, there is a lot of scenarios being discussed and thought through. And I think we are fortunate in a way to say that most of our major customers have had discussions with us, because of the footprint and capacity, and our ability. So we are getting a viewpoint on that. So I wouldn't say it has slowed, but I think there is deliberation on the footprint and the cadence of the decision-making. But we are not really seeing a change in what we are going after in terms of business and how it's being sourced.

Okay. Thank you. And then as far as the complete vehicle segment, if you could just give any color on the outperformance in the quarter, but also how should we assess the risk for complete vehicle, given G-Wagon is a central program and there's some questions on the demand in the tariff environment as those are all exported.

I believe part of the outperformance can be attributed to the favorable terms in our complete vehicle assembly segment. As volumes change, there are commercial recoveries due to these terms. Additionally, over the past year, we've focused on restructuring to align the cost structure of that facility with current volume scenarios and ongoing programs. We've mentioned that some of these programs will be concluding towards the end of 2026. We have proactively moved to restructure the cost base, and we continue to see positive effects from that. Regarding the Mercedes G-Wagon, I can't speak for our customers, but the public has noted that they are holding the price. If there is a decline in demand for that vehicle in North America, it could have an impact, but it's important to remember that the margin profile for this business is significantly lower than Magna's typical average.

The only other thing I'd add, Dan, is it comes back to the contracts, what he's talking about. There are fixed recoveries in it. So, even if the volumes fall, we do have that fixed recovery regardless.

And we continue to have discussions, as mentioned, with different OEMs for getting on additional programs, and they seem, I would say, pretty encouraging, Dan.

Okay, thanks. If I could just squeeze one in, just to clarify, the pieces of the business that are not USMCA-compliant, those are which products or in which segments?

Dan, I think it's across. We haven't seen any significant point to make on one specific segment, right? I would say it's all across. But there's not a marked difference from one to the other, so it's kind of across Magna.

And your next question comes from the line of Doug Dutton with Evercore ISI. Doug, please go ahead.

Yes. Hey, Swamy. Hey, team. Just looking at the Body and Exterior segment here, margins were particularly weak. They were down from most of last year, from all of last year, actually. I understand there's some FX volume effect there, but in terms of timing, is this likely to be a first half or first quarter phenomenon, or is this something that could persist with the uncertainty that we're seeing? How do you see those margins progressing throughout the course of '25?

Hi, Doug, it's Pat. So, I'll just grab my numbers here, but I think your thesis broadly speaking is correct. So we're operating where we expect it to operate in the BES group. So we came in at an EBIT number of 5.8%. We're seeing that increase as we progress through the year, and it would be consistent with what we had seen last year. Remember, we're still in a situation where a lot of our commercial rates tend to be recovered in the back half of the year. That's probably going to be amplified this year, given all the volume uncertainty. So I think we're still expecting a strong margin performance in Q4 compared to the first three quarters of the year.

So it may be a cadence, but operationally and fundamentally, this segment BES is really doing well and continues to perform at the same level as last year, with no difference in operations except for volume and other factors I mentioned.

Okay. That's helpful. And then, that's a good segue to my next question here. On Slide 17, you mentioned those tariff costs that have been paid and not recovered from customers as a headwind. Is this going to be the norm going forward where those tariff costs are treated similarly to your cost recoveries from your customers? Basically, it's Magna fronting any incremental cost, and then you will be reimbursed in the future. Is that the correct way to think about this incremental tariff cost?

I believe this is an accounting matter rather than a commercial one. According to accounting rules, until there is a legal agreement with the customer to recover costs, you must expense those costs. In this quarter, the costs were around $10 million gross for context. We are working to resolve this as quickly as possible, so you can expect a similar pattern for all commercial aspects.

Awesome. Thanks, team.

Thanks, Doug.

Thanks, Doug.

And your next question comes from the line of Joe Spak with UBS. Joe, please go ahead.

Thank you, everyone, and I appreciate the information on the tariff impact. I want to clarify some of the calculations. You mentioned $2 billion worth of goods crossing the border, and I understand that 25% of that amounts to $500 million. You also stated that 25% of the parts are not compliant with USMCA. How do you arrive at a $250 million impact? Is it because the compliance percentage you provided is based on parts rather than the dollar value? Essentially, are you indicating that only half of the dollar amount is exempt? Additionally, just to be clear, while I know you're not factoring in any volume changes, does your revenue guidance assume that you will recover $250 million, or rather half of that, on an annualized basis?

So, to clarify, right, in the math, there is also remission programs from governments, right, for example, on the Canada. So that would offset some of the things that are there. And net of that remission is how you get to the $250 million approximate number that you're seeing, Joe. And we are not including the volume impact, right? Is that your question?

I think we can discuss this later, but keep in mind that it's not uniformly 25%. We're importing parts from China and other regions that have tariffs exceeding 25%.

Fair enough. Okay. All right. And then, I know the volume. Yes, okay. I know the volume. Sorry, go ahead.

Sorry, you also asked about…

I know the volume impact from tariffs is not included, but is the recovery of that, let's say, three quarters of that $250 included in the revenue outlook?

We've assumed in our outlook that at the EBIT level, we have zero impact from tariffs. Any residual is going to be recovered from the customer. It's not included in revenues. It's just as a cost recovery.

Okay. So it's not reflected in the revenue, but in reality, it would be, and it has no impact on EBIT?

I can't say for certain, Joe, as it will depend on how we structure those agreements with the customer. It's going to be more complicated than we can answer right now.

Okay. When looking at the margin revisions by segment, it primarily affected BS and Seating. Swamy mentioned that the tariff impact is generally present across all segments. Is this mainly a result of some weaker first-quarter results?

So, just broadly speaking, Joe, when you look at the revenue changes from our outlook in February to our current outlook, midpoint to midpoint, we're seeing roughly about a $1.5 billion increase just related to foreign exchange, and that's spread out quite evenly across our four segments. When you look at the pure volume declines as just manufacturing activity, the bulk of that decline is in BES, and we're seeing weakness in Seating, and the Seating is primarily related to announced shutdowns in April and May already.

Okay. Appreciate it. Thank you.

Thanks, Joe.

And your next question comes from the line of Adam Jones with Morgan Stanley. Adam, please go ahead.

Thank you, Swamy and Pat, and everyone involved. I want to express my condolences for the loss of Vince. He was an incredibly talented, kind, humorous, and gentle person who made the world a better place. I am grateful to have known him. His memory is truly a blessing. If he were here listening to this call, he would likely say, just get back to work, keep focused, and tackle the challenges and opportunities ahead. I believe he would have great faith in the team. I want to extend my condolences to the Magnus family and to his own family and children. That's all I wanted to share. I don't have any questions, so I’ll pass it back to the call. Thank you.

Thanks Adam.

Thank you, Adam. I appreciate it.

I'll pass it on to Joanne and the family.

And your next question comes from the line of James Picariello with BNP Paribas. James, please go ahead.

Good morning, everyone. Swamy, in your prepared remarks, you mentioned that the first quarter exceeded internal expectations and that the EBIT range for 2025 remains unchanged. I'm wondering if you still anticipate that the first half will account for about 40% of the full year, which would suggest a little over $500 million for the second quarter. I understand that tariffs and the timing of recoveries could affect this figure, but if there were to be a full recovery in the second quarter, which seems plausible with the parts rebate mechanism now in place for OEMs and considering Magna's important role as a supplier, what is your perspective on that 40-60 split? Thank you.

I think, James, the simple answer is yes. Based on all the visibility that we have, April behind us, and unless something drastically changes, nowadays that seems to be happening, I would say the 40% in the first half, 60% in the second half is still a good assumption. Yes.

Thank you. My follow-up question is about buybacks. It was mentioned at a recent conference that when a company receives authorization for a buyback, it typically aims to repurchase at least half of that amount. I'm curious if, considering the overall industry volumes and potential recovery from tariff impacts, the goal is still to complete at least half of the authorization this year.

I am not sure about the comment regarding the half. I don't believe it's from us, but as I mentioned, when we consider share repurchases, we view it as a way to return excess liquidity to our investors and shareholders. However, the key aspect is how to maintain liquidity operationally and review our balance sheet while exploring potential programs and opportunities that may arise, such as increased volume or requests from other clients, especially in uncertain times like these. This is why we stated that we have paused our actions; we need to see if conditions return to normal. We will revisit the NCIB authorization we have and assess our surplus at that time, keeping in mind that we are still monitoring our leverage ratio as planned. I wouldn’t say it’s half, nor is our intention from the outset to aim for just half of the NCIB. Our goal has always been to maximize that potential.

And your next question comes from the line of Shreyas Patil with Wolfe Research. Shreyas, please go ahead.

Hey, thanks so much for taking my questions, and my condolences to Vince and his family. Wanted to maybe just come back to the guidance for this year. I understand it does not reflect tariffs, but just to confirm, you have revised it for the latest FX assumptions. I guess just looking at the euro, for example, that alone would be maybe a $650 million benefit to revenue for this year, $35 million or so to EBIT, Canadian dollar is another benefit. And so, is that correct? And if so, can you maybe just expand on the offset that you mentioned? I think there were some headwinds on key programs that you noted.

Good morning, Shreyas. Regarding the foreign exchange, we have accounted for the dollar's position against the euro and the Canadian dollar, as we do each time. I’m not sure of the exact amount that is in Europe. Some is certainly in Europe, and possibly...

I think we'd have to break it down, Shreyas, but just broadly speaking, the FX impact, including Q1, is about $1.5 billion.

Right.

That's the mole. Then the offsets are primarily where we're seeing some volume. Remember, just broadly speaking, our volumes in North America are down just over 100,000 units and that's primarily impacting our BES segment and our Seating segment.

And we have taken what we have seen in terms of closures to date, right.

Revenue is up $1.5 billion from foreign exchange, but this gain is being counteracted by lower volume, which is the main challenge we are facing.

That's 95% of the answer, correct.

Yes.

Okay. Understood. And then just maybe if you could help us just understand mechanically the process by which you would get recovery from the OEM? Because I understand your expectation is to get 100%. I guess what we've seen in the past I think about the semiconductor shortage from '21 and '22 is, there is a bit of a lag in recovery. Would you expect this time around if you're looking at tariff costs to incur a lag through negotiation, or do you feel like, because this is an industry-wide problem, that the pace at which you could get recoveries is much quicker?

So, Shreyas even during the semiconductor crisis, yes, there is a little bit of time, and it depends. We had three-way conversations, some of it was directly with the customers, and keep in mind that we recovered pretty much 95%-plus, if not 100%, of the semiconductor, at that point in time. So we have a process is what I'm trying to say, and we will set up a process again similar to what we have, so would there be a little bit of back-and-forth in terms of timing? Depends on customer and program, and the magnitude of it, but we feel pretty confident, and I have to say that customers have been open to discussion and collaborative as we are discussing. But all I have to say is stay tuned.

Okay. Thanks.

And your next question comes from the line of Mark Delaney with Goldman Sachs. Mark, please go ahead.

Yes, good morning. Thank you very much for taking my questions. And please allow me to pass my sympathies on to Magna and Vince's family on his passing. He was very detail-oriented and always quite generous with his time. So he will be missed for sure.

Thank you.

Thank you.

I did want to speak a bit on schedules and understand your comments that customer production schedules have been stable. When you speak to your broader set of customers on their plans, can you help us better understand what they're indicating they'll do with vehicles being exported and now seeing tariffs? And help us understand why there wouldn't be a change to those exported vehicles, given the tariff dynamic? And then just overall, as you think about the second half, what's the confidence you have in production schedules tracking in line with your prior view for 2H?

Mark, predicting this situation is somewhat uncertain. When we discuss our insights, we're referring to the releases currently in the system, which depend on the programs and platforms we're utilizing. Our observations are largely influenced by these factors. I haven't noticed any significant deviations from the usual fluctuations. The situation you mentioned is more macro in nature; for instance, the impact of tariffs on the 800,000 units imported from Europe to North America could be considerable, but it's challenging to determine the exact effect. It's unclear how customers will react in terms of maintaining market share and managing pricing in the short term, as there are many variables to consider. Therefore, I can't quantify that impact at this moment. Our responses are strictly based on the data we have and our discussions with customers regarding the programs we are involved in.

Thanks for that color, Swamy. My second question was about EBIT margins. The company have been expecting to achieve 75 bps of EBIT margin tailwind over the next two years in total. I'm hoping to better understand if there's been any change in the magnitude of savings or the timing of which it may flow through given the current industry backdrop? Thanks.

No, I would say we are on track, right? We talked about roughly 35 basis points in 2025 and similar in 2026. We had visibility for the continuous improvement and other activities. I can tell you the entire organization is focused on all those actions, plus anything else that we have to mitigate. Fundamentally, the organization is looking at the cost structure to be viable and good at the current levels. And as the volume comes back, we are talking flex up to be able to take advantage and get our incrementals to be better. That's the philosophy. That's the mindset in the entire organization. So we feel pretty good into the given set of volumes, obviously, you know that has a significant impact. If the volumes continue as they are and slowly come back over time and the uncertainty comes down, we feel pretty good about what we're doing now in terms of traction as well as through 2026, which we are keeping a very close eye on.

Thank you.

And your next question comes from the line of Jonathan Goldman with Scotiabank. Jonathan, please go ahead.

Hi, good morning, guys and thanks for taking my questions. Most of them have been asked already, but just one for me then. We see light vehicle inventories come down in the past two months in North America, and maybe that's related to the pull forward in demand. But in your production outlook for North America, does that assume any rebuild of inventories at all this year?

We kind of keep an eye on the inventories, Jonathan. What I would say is where we ended up in December, there was a spike in January and February. What we see today kind of goes back to what December was. But our planning for our production is based on releases, not on where the inventory is or the assumption, whether it's going to fill up or not, right? That's for the customers to make, not us. So I would say what we are telling you is based on releases in the system.

And your final question comes from the line of Michael Glen with Raymond James. Michael, please go ahead.

Good morning. Swamy, thank you for the information regarding European exports for assembled vehicles. Could you provide some insights about Magna's involvement with assembled vehicles in Mexico and Canada? What is the outlook in that area, and what feedback are you receiving from customers about potential changes to production schedules and any anticipated developments?

Good morning, Michael. I will address your question in two parts, and Pat can provide additional insights. Currently, when examining the North American ecosystem, we are not observing any changes in the platform or the mix. Regarding tariffs, we are considering Canada and Mexico, as well as our content across all platforms that involve cross-border supply. This includes vehicles being supplied from Canada for use within Canada, even if they come from elsewhere. We're looking at the situation from a broad perspective. At this moment, I can't offer more details or insights than that.

I think, Michael, we have that data point. I just don't have it handy of OEM production in Canada and Mexico that shift into the U.S. for sale. We have that data. We can follow up with you. I just don't have a handy. But from our point of view, we have sales of just over $4 billion in Canada. About 70% of that is sold into the U.S., where the OEMs are the importer of record. And in Mexico, we're about $5.5 billion of sales, and about 25% of that is sold into the U.S. Your question of what the OEMs are building in those two countries shifted would have to get back to you.

Do you think the 25% tariff on assembled vehicles brought from Canada or Mexico into the U.S. will stay in effect?

You are putting us on a spot, and I don't have the answer for you. I know what I wish, but that doesn't matter.

Okay. Regarding the reshoring efforts, how do you view the Tier 2, Tier 3, or Tier 4 supplier base for increasing USMCA compliance? Do you think this is a feasible option? I'm trying to evaluate the opportunity to bring some of those components back.

Yes. I mean, if you go back to the COVID and the semiconductor crisis, there was a little bit of reshoring or rebalancing. And looking at the possibilities, Michael, this is no different from that perspective, I would say. All those work streams are in place today. Does it mean you can take everything in reshore in the short period of time? I don't think so, but I'm just one voice in the industry. Semiconductors you saw, right? So we'll look at it part by part, and it depends on that. And obviously, as I said, our goal is to figure how to increase the USMCA compliance first. And then we have to follow how the OEMs are thinking and how they are going to optimize or manage their footprint because based on logistics and other things, we have to kind of work collaboratively and cannot make that decision unilaterally.

Okay, that’s it from me. Thank you.

That concludes our question-and-answer session. I will now hand it back over to Swamy Kotagiri for closing remarks. Swamy?

Thanks, everyone, for listening in today. We all talked about the high degree of uncertainty in the industry that we are all facing. But I want to assure you, we remain focused on execution, all things that we control, including cost and capital discipline. Free cash flow is a primary focus and getting back within our target leverage ratio. So we remain highly confident in Magna's future, and thanks for listening in, and have a great day.

That concludes today's call. You may now disconnect.