Magna International Inc. (MG) Earnings Call Transcript & Summary

Welcome to the Magna International Inc. Annual Meeting. My name is Luke, and I will be your operator. [Operator Instructions] I will now turn the call over to William Young. William, please begin.

Good morning. The meeting will now come to order. As Chairman of Magna's Board of Directors, I welcome everyone participating in this virtual Annual Meeting of Shareholders of Magna International Inc. Before I turn the meeting over to the Corporate Secretary, to handle the legal formalities. I would like to make a few general comments on behalf of the Board. In spite of some challenges, the Board was pleased with Magna's performance in 2019. Magna continued to win important new business, a good example of being a contract for traditional and hybrid dual-clutch transmissions for BMW, the largest transmission contract in Magna's history. The company also continued to execute its strategy, including through acquisitions supporting its seating and lighting businesses, sale of the fluid pressure and controls business as well as a joint venture in China to assemble electric vehicles, Magna's first complete vehicle manufacturing facility outside of Europe. Throughout the year, Magna continued to invest for future growth and to return capital to shareholders, all while maintaining a strong balance sheet. We witnessed the company's succession planning processes operate seamlessly through the transition of 4 operating group leaders since 2018 and 2 senior executives in 2019. And the Board appointed Swamy Kotagiri as Magna's President, another strong demonstration of Magna's talent pipeline working effectively to supply the next-generation of the company's leaders. Board itself continued to evolve to enable it to act as affected stewards of shareholders' investments, including through the addition of Lisa Westlake in 2019, and Peter Harder earlier this year. The developments of 2019 have placed the company, its management and the Board in a position of strength and resilience. Both of these are needed in the face of the COVID-19 pandemic, which has brought harm to the health of so many people. Within our company, the virus has claimed the lives of 4 employees. I want to convey the Board's sorrow and condolences to the families, coworkers and friends of these 4 members of the Magna family. For those within the Magna family, who are currently dealing with the virus, our thoughts are with you. And to those who have recovered, we are inspired by your strength. The COVID-19 pandemic and necessary protective actions have also created unprecedented global economic disruption. After suspension of production, company is now beginning to remobilize operations. As management oversees that difficult work, employee safety is at the forefront of their efforts and the Board's concerns. We continue to assess the strategic impact of macroeconomic, technological, social and other disruptions arising from the pandemic. In doing so, we aim to ensure that Magna remains in the right product areas to generate attractive returns over the long term while maintaining a strong balance sheet. Within those product areas, we seek to satisfy ourselves that each of Magna's product groups has the capabilities, technology and people needed to execute a strategy. Where gaps have been identified, we have supported management efforts to close them, whether through M&A, joint ventures, technology partnerships and investments or in-house R&D. And we intend to continue supporting Magna's strategic growth in all these ways including as the current economic circumstances, create new opportunities for a company with Magna's financial strength. We are confident that through the continued efforts of our incredible employees and seasoned management. Magna has a bright future as a leading global supplier of automotive technology solutions and products. And the Board will continue to work on your behalf with a focus on long-term vision and value creation to help make sure the goal is realized. In closing, I would like to thank Magna's employees for their dedication and contribution to the company's continued success. I would also like to commend management for their hard work and, most importantly, focus on the safety and well-being of employees in this pandemic. Lastly, I would like to thank shareholders for your continued support. I would now like to ask Bassem Shakeel, Magna's Vice President, Corporate Secretary, proceed with the legal formalities of today's meeting on my behalf. Bassem?

Thank you, Bill. Mr. Chairman, with your consent, I will confirm a proper calling of the meeting and presence of a quorum. The minutes of Magna's May 9, 2019, Annual Meeting of Shareholders will also be presented. Once those preliminary items have been addressed, we will cover the following items of business identified in the notice of meeting. Presentation of the company's 2019 annual report, nomination and election of directors, reappointment of Deloitte LLP as Magna's independent auditors and related matters, and an advisory vote on the company's approach to executive compensation. Only registered shareholders or duly appointed proxy holders are entitled to vote at this meeting. Please note the following with respect to voting and questions. Any voting during the meeting today will be conducted by virtual or online ballot. If you previously sent in your proxies or voted via telephone or Internet and do not intend to change your vote, you need not vote again. Your vote will be counted. If you are eligible to vote but have not yet done so, or if you want to change your vote, please vote online so that your vote will be counted in the final voting results. The voting box is located in the upper right-hand side of your screen, and voting will be open throughout the formal portion of the meeting. Questions or comments relating to a motion on an item of business can be submitted using the Ask a Question text box on the lower left-hand side of your screen. Only registered shareholders and duly appointed proxy holders will be able to submit questions at the meeting today. After the formal portion of the meeting concludes, Magna's CEO, Don Walker, will provide some remarks on behalf of management. We will then hold a general question-and-answer session following Don's remarks. Questions to be addressed in the general Q&A session can also be submitted using the Ask a Question text box on the lower left-hand side of your screen. Please note that we have Joseph Cosentino, an employee of Magna, and a proxy holder, to move the motions at the meeting today to facilitate the proceedings. With respect to the proper calling of the meeting, I confirm that notice of this meeting was mailed on April 7, 2020, to each shareholder of record as of the close of business on March 20, 2020. Each current director and new nominee and representatives of Deloitte LLP. Proof of the mailing in the form of a statutory declaration signed by an authorized representative on behalf of Broadridge Investor Communications Corporation, will be kept with the records of the meeting, along with a copy of the notice. Broadridge has agreed to act as Scrutineer for this meeting through its representatives, Leanne Branston and Rosemary Colakic. Based on the Scrutineer's preliminary report, I can confirm that there is a quorum of shareholders participating directly or by proxy in this meeting. Notice of the meeting having been duly given and a quorum being present, with your consent and on your behalf, Mr. Chairman, I declare this Annual Meeting to be properly called and duly constituted for the transaction of business. The next item is the presentation of the minutes of the May 9, 2019 Annual Meeting of Shareholders. The meeting minutes were previously posted for review on Magna's website at magna.com and are available at the corporation's head office. A link to the minutes also appears in the lower right-hand side of your screen. No further action is required with respect to the minutes at this meeting. The meeting is now open to deal with the items of business listed on your screen. According to the preliminary Scrutineer's report, a clear majority of votes has been cast for the election of each nominee identified in the proxy circular, the appointment of Deloitte and the advisory resolution on executive compensation. The final voting results, which will include the results of online voting, will be disclosed by press release and filed on SEDAR and EDGAR within 24 hours after this meeting. The first item of formal business is the presentation of Magna's 2019 Annual Report, which includes consolidated financial statements for the year ended December 31, 2019, together with the independent auditor's reports on the financial statements and on internal controls. A link to the corporation's 2019 Annual Report appears in the lower right-hand box of your screen. Apart from presenting the financial statements, no further action is required with respect to them. The second item on the agenda is the nomination and election of directors. The names of the 12 nominees listed in the management proxy circular are shown on your screen. I now ask Mr. Cosentino to read the names of Directors standing for election and make the motion for the nomination of the directors.

I nominate the following persons for election as Directors of the corporation: Scott B. Bonham, Peter G. Bowie, Mary S. Chan, The Hon. V. Peter Harder; Dr. Kurt J. Lauk, Robert F. MacLellan, Cynthia A. Niekamp, William A. Ruh; Dr. Indira V. Samarasekera, Donald J. Walker, Lisa S. Westlake, and William L. Young.

May I now have a motion for the election of the 12 nominees whose names are listed in the proxy circular and on your screen. Mr. Cosentino?

So moved.

Those shareholders and proxy holders who have not yet voted may do so by checking the "for" or "withhold" box on your screen for each individual Director. I now invite discussion on the motion. Cosentino, have you received any question or discussion on this motion?

We have not received any questions or discussion on the motion?

Discussion on the motion is now closed. As the preliminary Scrutineer's report confirms that a clear majority of votes has been cast for the election of each nominee, I declare the motion carried. The third item on the agenda relates to the reappointment Deloitte LLP as Magna's independent auditors and authorization of the Audit Committee of the Board to fix their remuneration. Mr. Cosentino, may I have a motion?

So moved.

For those shareholders and proxy holders who have not yet voted may do so by checking the "for" or "withhold" box on your screen. I now invite discussion on the motion. Joe Cosentino, have you received any question or discussion on this motion?

We have not received any questions or discussion on the motion.

Discussion on the motion is now closed. As the preliminary Scrutineer's report confirms that a clear majority of votes has been cast for the reappointment of Deloitte, I declare the motion carried. The last item of business to be considered is the advisory resolution on Magna's approach to executive compensation as detailed in the management proxy circular for this meeting. May I have a motion in the form stated in the proxy circular. Mr. Cosentino?

So moved.

Those shareholders and proxy holders who have not yet voted may do so by checking the "for" or "against" box on your screen. I now invite discussion on the motion. Mr. Cosentino, have you received any question or discussion on this motion?

We have not received any questions or discussion on this motion.

Discussion on the motion is now closed. As the preliminary Scrutineer's report confirmed that a clear majority of votes has been cast for the advisory resolution on the executive compensation, I declare the motion carried. That concludes the formal portion of the meeting; however, management remarks and Q&A will follow. Please note that voting is now closed. As indicated earlier, final voting results, including online votes at today's meeting, will be disclosed by press release and filed on SEDAR and EDGAR within 24 hours after the meeting. With the consent of the meeting, the meeting is now terminated. Please note that the management remarks, which follow are subject to and expressly qualified by the cautionary disclaimers that are set out in our most recent press release and regulatory filings. In particular, please refer to our most current MD&A, AIF and Form 40-F as replaced or updated by any of our subsequent filings. All of these documents are also available at magna.com. I would now like to call on Don Walker, Magna's Chief Executive Officer. Don?

Thanks, Bassem, and thanks, Bill, for your remarks. We had our investor call this morning, so I won't repeat everything that was said in that call. But let me first start by making some comments on 2019. It was a challenging year in many ways, especially with the slowdown in the industry. But despite this, we delivered solid operating results and continued to make headway in many areas. In our efforts around world class manufacturing, we have seen ongoing steady improvement in our quality ratings, launch performance and improvements in underperforming divisions. This has been highlighted by many customer quality, delivery and performance awards as well as winning new business. In the area of innovation, we continue to develop new products and processes that have led to new business awards and have been recognized by our customers and the industry, including the Automotive News PACE Award that our Exteriors group won for our new composite space frame liftgate reinforcement that was debuted on the 2020 Toyota Supra. In the area of people development and succession, we continue to build future leaders throughout the organization, as mentioned by Bill in his remarks. We're also making headway in the area of diversity and inclusion, and this continues to be a focus this year. I'm also very proud that Fortune magazine named Magna to its World's Most Admired Companies list in 2020. For the fourth straight year, Magna has won this award. 2020 has been an extremely busy year so far based on the global impact of COVID-19 on the automotive industry as well as the world overall. I've been very pleased and proud of the efforts across Magna to manage all the work streams put in place to deal with the pandemic. First and foremost, we have been focused on the health and well-being of our employees and indirectly their families and society where we operate. Since this began months ago, we have been monitoring the situation with our employees on a daily basis. Our thoughts go to everyone who has lost love ones due to this virus, and I would like to give our heartfelt condolences to the families of 4 Magna employees who have passed away. We are monitoring all of those who are still infected, and we are happy to see that there are many employees in the Magna family who have recovered from the virus. We've also been focused on making or purchasing personal protective equipment or PPE for frontline health care workers and more recently, for our own employees, when we get back to work. We've also been coordinating with the industry to have a common approach to a safe restart of the automotive industry and working closely with governments. We've been preparing for and implementing safe restarts in our plants, working closely with our customers and suppliers across the global industry. We've also been continuing our engineering and launch activities throughout the lockdown. And we've been tracking the health of the industry and running scenarios to make sure we have adequate liquidity and a strong balance sheet to come out of this situation in a very strong position. Going forward, I believe there will be impacts to our industry and opportunities for Magna. We may see more consolidation of the supply base. I think we're going to see some new opportunities in the area of future mobility. And I expect to see with more cooperation amongst our customers on new technology development to conserve some of their cash and increase the volumes for suppliers who have the best technical capability and are the most competitive. Finally, I believe that the move towards a sustainable planet will continue and remains a very high priority to continue advances in our product offerings and our manufacturing operations. I believe this can be a competitive advantage for us in the future. I'd like to close by thanking all of the hard-working people at Magna who have made a big difference over these past few months. We have a lot of hard work ahead, but I'm convinced this terrible situation will make us even stronger as a company and that we are in a position to grow in many areas. With that, we'll be happy to open it up and answer any questions anybody may have.

It's an opportunity for shareholders and proxy holders to submit any questions.

Operator if you're on the line, can you just remind people how to ask any questions if there are any?

[Operator Instructions]

As there are no questions coming through, this concludes today's Annual Meeting of Magna International. Thank you, everyone, for participating.