Magna dented by US$200M loss, suspends dividend as Q1 sales sag 46 per cent

A 46 per cent drop in sales and a US$200-million loss in the first quarter have driven Magna International Inc. (TSX:MG.A) to suspend its dividend to shareholders and preserve cash for its operations.

Magna International Inc. Chairman Frank Stronach attends the company's annual general meeting of shareholders in Markham

TORONTO — A 46 per cent drop in sales and a US$200-million loss in the first quarter have driven Magna International Inc. (TSX:MG.A) to suspend its dividend to shareholders and preserve cash for its operations.

The 70,000-employee auto parts maker described the first quarter of 2009 as one of the most difficult in its 50-year history due to the unprecedented sales drop experienced by many of its customers, notably General Motors and Chrysler.

Total vehicle industry production skidded by 50 per cent in North America and 40 per cent in Europe compared with the year-earlier period.

Magna disclosed that Chrysler, which filed for bankruptcy protection in the U.S. last week, represents 11 per cent of its sales. General Motors, working on a restructuring plan for presentation to U.S. and Canadian governments by the end of the month, accounts for 19 per cent of Magna’s business.

Co-CEO Donald Walker said it’s too soon to tell what impact their restructuring actions will have on Magna, but there’s no doubt carmaker plant shutdowns “will continue to impact our financial results in the short term.”

GM has said it will close 13 of its U.S. plants for nine weeks this summer, while all of Chrysler’s North American plants have been shut indefinitely until its restructuring is complete.

Walker told a conference call that Magna is participating in supplier receivables protection programs in case Chrysler or GM are unable to meet their obligations. And he said the shutdowns could provide growth opportunities for Magna as smaller suppliers with less cash on their books are forced out of business.

“The near-term shutdowns of all Chrysler plants and several GM plants may be a tipping point for many suppliers on the edge,” he said.

Walker said Magna has already won some business from struggling suppliers and is “hopeful on a number of other takeover opportunities.”

He confirmed that Magna has been in talks with GM’s Opel AG division in Germany about various opportunities, including taking a minority stake in the company.

Magna founder and chairman Frank Stronach told the annual meeting that while Magna may have to further reduce its global workforce — down by about 14,000 since the start of last year — he’s optimistic that many employees will be rehired as things improve “later on this year.”

Magna, based north of Toronto but reporting in U.S. dollars, said Wednesday it lost $200 million or $1.79 per share in the first quarter as revenue fell to US$3.57 billion. This compared with net income of $207 million or $1.78 per share in the year-ago period, when revenue was $6.62 billion.

Magna also announced it would scrap its dividend — previously halved in November to 18 cents per share quarterly — to conserve cash.

Just Posted

Alberta hiring more paramedics and buying new ambulances, none for Red Deer

Red Deer Mayor Tara Veer is not concerned the provincial government didn’t… Continue reading

‘My nightmare began again’: Close call as bus carrying Humboldt crash survivor rear-ended

CALGARY — A terrifying ordeal for Humboldt Broncos survivor Ryan Straschnitzki this… Continue reading

Halifax airport operations normalize after Boeing 747 runway overshoot

HALIFAX — The Halifax Stanfield International Airport has resumed normal operations a… Continue reading

Bentley family left without a home grateful for community support

Central Albertans are coming together to support a Bentley family left homeless… Continue reading

Red Deer RCMP ready for new mandatory alcohol screening law

Red Deer RCMP are ready to enforce a new law intended to… Continue reading

WATCH: Red Deer and District Kennel Club Dog Show at Westerner Park

The Red Deer and District Kennel Club is holding a dog show… Continue reading

Brothers, 20, face second-degree murder charge in death of teen: police

MISSISSAUGA, Ont. — Police west of Toronto say two brothers have been… Continue reading

A young mayor, his friend, and a fatal attraction to opioids

MOUNT CARBON, Pa. — Janel Firestone found her son — the 24-year-old,… Continue reading

GM fights to retain key tax credit amid plant closing plans

WASHINGTON — General Motors is fighting to retain a valuable tax credit… Continue reading

TTC union asks provincial government to step in on transition to Presto

TORONTO — The union representing transit workers in Canada’s most populous city… Continue reading

Small pot growers find roadblocks on path to microcultivation licences

Yan Boissonneault’s daughter was turning blue. Without warning, his baby had stopped… Continue reading

No winning ticket for Friday night’s $60 million Lotto Max jackpot

TORONTO — There was no winning ticket for the $60 million jackpot… Continue reading

In Hollywood of Mississippi, voter fraud like a movie script

CANTON, Miss. — In a town that calls itself the Hollywood of… Continue reading

Trump picks Army chief of staff as next top military adviser

WASHINGTON — President Donald Trump announced Saturday that he’s picked a battle-hardened… Continue reading

Most Read