Good day, ladies and gentlemen and thank you for standing by. And welcome to the Magna International Incorporated Third Quarter 2015 Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session [Operator Instructions] As a reminder, this conference is being recorded today, Thursday, November 5, 2015. It is now my pleasure to introduce your speaker for today, Mr. Don Walker, Chief Executive Officer with Magna. Please go ahead, sir.

Thank you. Hello everybody and welcome to our third quarter 2015 conference call. Joining me today is Vince Galifi, our CFO; and Louis Tonelli, Vice President Investor Relations. Yesterday, our board of directors met and approved our financial results for the third quarter ended September 30, 2015. We issued a press release this morning for the quarter. You will find the press release, today’s conference call webcast, our updated quarterly financial review, and the slide presentation to go along with the call, all in the Investor Relations section of our website at www.magna.com. Before we get started, just to remind you, the 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. As we have experience through, our 2015 the stronger U.S. dollar negatively impact our reported sales and earnings in the third quarter of 2015. In Europe, while we still work to continue to make operations improvements overall the segment performed in line with our expectations in Q3. Our Rest of World segment, which currently represents our South American operations, also met our expectations for the quarter as we continue to contain the losses even in the base of weak production volumes. Overall, our Q3 operating results were disappointing coming in lower than our expectations. largely attributable to our North America and Asia reporting segments. In North America, we experience some operational inefficiencies primarily due to capacity constraints and new launch activities to certain body and chassis facilities. These issues negatively impacted our Q3 operating results. In…

Thank you, Don and good morning everyone. I would like to review our financial results for the third quarter ended September 30, 2015. All figures I’m going to discussion today are in U.S. dollars. Please note that operating results for the interiors operations that we recently sold are presented as discontinued operations and this review of results will address continuing operations only. Slide package accompanying our call today includes a reconciliation of certain key financial statement lines between reported results and results excluding unusual items. In the third quarter 2015, we recorded a gain on the disposition of a portion of our Bestop business and net restructuring charges related to our European exteriors and interiors businesses. The net of the increased operating income by $124 million, net income attributable to Magna by $68 million, and EPS by $0.15. In the third quarter of 2014, we recorded restructuring charges entirely related to our European exteriors and interiors businesses. These reduced operating income by $7 million, net income attributable to Magna by $6 million, and EPS by $0.01. The following quarterly earnings discussion excludes the impact of these unusual items. In the third quarter, our consolidated sales declined 7% or $586 million relative to the third quarter of 2014 to $7.7 billion. The weakening of certain currencies against our U.S. dollar reporting currency, in particular the euro and Canadian dollar had a significant negative impact on our reported sales for the third quarter of 2015. Foreign currency translation reduced our sales by about $870 million as compared to the third quarter of 2014. Excluding the impact of foreign currency translation, our total sales increased 3% in the third quarter of 2015 compared to the third quarter of 2014. Reported North American production sales increased 2% in the third quarter to $4.3 billion.…

Thank you [Operator Instructions] And our first question will be from the line of John Murphy from Bank of America Merrill Lynch. Please go ahead, sir.

Good morning, guys.

Hi.

Hi John.

If I could just ask a first question on FX, because there was obviously a big factor in the quarter, I know you highlighted the impact on sales, but is there any way to sort of delineate the impact on EBIT in the quarter by region North America, Europe and Asia or even just in aggregate?

John, I think when you look at Europe and Asia and rest of the world. It’s a little - I think that that’s just a pure sort of translation, I need to look at movement in exchange rates and whatever exchange rates you are using your model to where we are now. That will flow through to the bottom-line results in U.S. dollars. When you start looking at North American sales, it’s a little more challenging and that’s because we have a number of hedges in place and also we have substantially U.S. sales will be upside and some of the Canadian sales are hedged. So it is a complete pull through on a dollar-for-dollar basis on currency translation, but with the declining Canadian dollar, there certainly will be a negative impact to operating results reported in U.S. dollars.

Okay. And then on the second question, if you just think about the inefficiencies in this body and chassis plant in North America. We’re now hearing about a lot of disruption for any customers that’s apparent. So just curious if you could give us a little bit more detail on that. If there is been any disruption to the customer and also how long do you expect this to persists, it sounds like into the fourth quarter, but is this something that you sort of hang around into 2016 or is this something that’s just in the ramp of whatever product it is?

Yes. Three facilities and two of them are in Canada, the biggest impact is one in Midwest. We have not had an impact to our customers. However, I’m pretty confident we have plans in place for two of the divisions the third one the biggest one down Midwest has got a lot of launches going on and all their customers rather at full production or pulling over full production. We’re putting an expansion on the plant and we just had a few different impacts of downtime, one is in our press shop, one is in E Coating line. So we have had premium freight, we have outsource product as well as we’re doing trials for the new production run. So that one we are still struggling with, it will be in the Q4 for sure and I suspect that we will have some impact going into 2016, because of the two major launches are happening sort of in the Q1 and into Q2. So we’re in the middle of still working through details of it, lot of resources down there, but I don’t anticipated it hitting to customer, but it’s going to be having a lot of inefficiencies over the foreseeable future.

Yes, John so just to reiterate this is going to spill over into Q4 and it’s going to spill certainly into 2015. If you look at kind of Q4 versus Q3, we are expecting a modest sort of improvement, but a continuing drag on profitability compared to our previous expectation…

And this sounds like a capacity issue more than anything else, is that what it is?

It's a root cause, is capacity, because of the downtimes and because of all of our customers affluence in such a high levels. But once you get into issuing the [indiscernible] we can’t get into maintain the equipments or having more breakdown than we would normally have and we are putting an extension on the plant and we are doing trials for the new launches. So it's a big plant getting bigger and hindsight we probably shouldn’t have put so much in the plant and probably share and put in the second plant. Once it’s up in running, I think it will be good, but we are going through a lot of operational inefficiencies.

Okay. And then just a last question on acquisitions, if you could just give us an update on Getrag and also on Stadco, if you could just give us some information on the sort of the customer base and the end geographies of those sales go into?

I’ll start with Stadco, in Stadco, we’re expecting the transaction to close at some point in Q4 this year. Stadco sales is probably around $400 million plus or minus, its major customer is JLR, in the UK, it’s got operations in the UK, and it’s got one operation in Germany. In the case of Getrag maybe we have been working with the trust stories to putting all the people for fillings. Our best case at this point in time is this transaction is going to close early in 2016 with an effective date being the beginning of 2016. So it’s not going to mess up our year-end accounting and we will start dealing with this in 2016. With respect to kind of any update on sales, John there really is an update from our Getrag call. Getrag is a little bit updating your business plan and we should be getting access to that late this year, so when we come to January and we update not only guidance for existing Magna operation, we will get some more color at that point on Getrag.

Okay great. Thank you very much.

Yes.

Our next question will be from the line of Peter Sklar from BMO Capital Markets. Please go ahead.

These issues that you have had in three body and chassis plants in the third quarter, are you able to give us some kind of order of magnitude of what the drag was on operating earnings versus what you would normally expect from those operations as they are launching?

I guess when you look at it from - Peter, we haven't quantified it, but I can tell you that when I look at from last year to this year, there has been a pretty significant change in profitability, at those three plants, but part of that was expected. We are launching business in those three plants, they part sort of our roll of launch cost in 2014 versus 2015, this was built into it, but there are as Don talked a bit cost that we weren’t expecting as a result some of those inefficiencies. And as I look through kind of sequentially year-over-year and the impact on overall margin [indiscernible] the greatest impact would have been with underperformers of operating issues, some of the other things that potentially had impacted margins, got a little bit more launch cost on a year-over-year basis or sorry quarter-over-quarter basis. Our investment and these facilities that's been a drag in Q3 versus Q2 and a little bit more net commodity cost, so lower scrap revenues, net benefit of reduced working cost, but you may have run through all that so the negatives are the underperformance, the launch cost and new facility costs are expected in terms of lower scrap revenues. Again that was unexpected, but the biggest part of that would have been underperformance. And that's why Peter, we’re bringing down our leg for margin in North America attributable primarily to essentially those three facilities.

Right, okay and lastly, I just wanted to go back to Getrag. When you announced the acquisition, you indicated there is a big ramp going on at Getrag, and I’m just wondering if you could elaborate a little bit on it to the extent you can as what are those programs? where are they? Are they in the joint ventures in China and what’s the timeframe, when do those programs begin to ramp and when do they achieve production maturity?

Yes so Peter, when you look for Getrag and some of these things are going to be consolidated, some of them are going to be equity candid. If you look at something that's consolidated which is some of the European operations. There is just a launch of a new transmission DCT300 transmission and sales start to ramp up actually - 2014 to 2015 were expected to ramp up and continue to ramp up in 2018 with substantial growth in 2019, and there is a multiple number of customers that just reporting. In North America, there is a joint venture with four that is consolidated when you look through the ownership structure, Getrag won 75% of that. This is a business that any production probably at the end of 2018 and there might be some sales in 2019 that’s kind of 2018, 2019. So that’s ramping down we’ve talked about that before its expected moving away from DCTs in North America.

The small car program.

In terms of some of the other areas that are launching - some of the substantial launch are in a joint venture that’s 50% owned by Getrag and it’s in China what’s launching there is a couple of programs the DCT300 and a big part of that is going to be going to Great Wall. And some manual transmissions and sales are ramping up sort on my schedule here at 2015, 2016, 2017, 2018 and 2019 continue to ramp up. In terms of the final joint venture in China, which is 50% own again its couple of transmission with DCT150 and DCT200 and sales structure ramp up in 2017 in this is final joint venture. You know Peter as I mentioned to just on my response to John [indiscernible]. We’re in the middle of our own business [indiscernible] as well as Getrag. Once again a little bit more color and at this point we do have limited information, once we have access to all of Getrag, we’ll provide some more color for you.

Okay. Thank you.

Our next question is from the line of Adam Jonas with Morgan Stanley. Please go ahead.

Hey everybody. Just kind of launching of comment in one of your answers Vince a minute so ago. I think you side the decline in the margin guidance was mainly attributable to the three facilities. That’s a 50 bit reduction on $18 billion of revenue, which mathematically gets into $90 million. And I know you’re not saying - you’re not qualifying it exactly at $90 million, but are we wrong to interpret that at least the majority of that number given your comment would be related to the facilities operational inefficiencies?

There is a bunch of moving pieces right, there is mix in all that, but a substantial portion of that margin decline is attributable to the body and chassis facilities that we’ve been talking about.

Okay. So that’s…

The impact is really half a year on that, right.

Yes. No, I understand. We’ll make run rate assumption but it’s important just for the market to know. How much of the disappointment is related to issues that are kind of not ongoing let’s say or temporary nature [indiscernible].

When we say approximately 10%, it’s approximate.

Understood.

So there is some rounding in there and there is bits and pieces of other things, but this is most significant thing.

Thank you. Just on the FX side, I mean for the quarter for example you are mentioning that $870 million of the negative impact from sales. If I just use as a baseline a pure translation at around 70% margin on 870 of the revenue would lead order Magna $60 million to $65 million reduction of operating profits. Is that a fair baseline to say that I know there is a lot of moving pieces with the hedging and of course where you produce locally, which you do a good job of. But I guess the question is the impact more pure translation like meaning roughly applying that operating margin on the 870 of loss sales to FX or is the net kind of slightly higher or lower than that?

Yes, here is the way I was think about, you need to look at the various segments and we did pretty good job in our MD&A. And I think I would look at it in fashion to give you a approximation. If you look at Europe in Q3 alone and I’ll just focus on Q3 on a year-over-year basis, foreign exchange had an impact of about $350 million. So I think the right way to think about that is to just take the $350 million we reported kind of unit margins of 4% in Europe to give you that number. Asia there is that - which is primarily China is foreign exchange is about $15 million. So it had some impact, but in the big schema things on Magna we are all not that significant, rest of world translation was about 50 million negative. So that probably [indiscernible] money there. And we also have some tooling and tooling year-over-year is about a $100 million so that has minimal or no impact on overall operating margin on a consolidated basis. And then you have got North America and North America its about $250 million of FX and I think if you took the 250 million and use our operating margin in North America that you would over state the impact that translation is happening on the bottom-line, it’s going to be something less than that.

So your position in North America is more in the direction of natural hedge?

Sorry, you repeat that again.

Yes, I mean just to be clear your comment on North America as you are more than translation natural hedge, meaning there is an impact, a negative impact but it’s not in the transaction direction, it’s more of a natural hedge, more neutralized. Is that how you interpret what you just said.

Yes its more neutralized, it consists of our program margin.

Meaning, less in our operating margin. Okay great. That’s very clear, but just last one, I mean any comments, a lot of your supplier peer this earnings season when asked about the Volkswagen issue. And I know you have limited content, of course very little on the engine side, broadly, but they have all said more or less same thing absolutely no impact so far and no expectation of any significant of that going forward. I guess it’s kind of nature given how early to use language like that. Just wanted to offer you a chance to either say something similar or to add any color from your side of the business as we look in to 2016? Thanks guys.

Pretty difficult to estimate what’s going to happen and I don't think they have seen much of an impact on their sales yet and I think they are doing a lot of different things with promotions and sort of read in the paper what they are doing. The impact on the company itself, again it's anybody’s guess, is also a speculation what they are going to do. I’m sure they are going through a very difficult time internally, trying to manage with everything with the changes in people, but Volkswagen is a big people organization. I don't know how anybody can say it can have absolutely no impact, because we don't know what the impact is going to be yet. I think from a very high level, from our perspective, if they have lower sales, then it will depend on through the end consumer decides to buy from and then do we have higher content or lower content with that other vehicle and we have higher profit margins or lower profit margins with the other vehicle. I do think that will have a negative impact on the perception of diesel in North America, which isn’t update, seller here anyway. I don't think it’s going to have a huge impact on diesel sales in Europe and typically people have relatively short memories, so it probably depends on if anything else happens or not. There has been speculation that this will increase the sales of electric vehicles, I think electric vehicles and hybrids from an end consumer standpoint that are they are going to buy them or not based on how much money they want to spend, because they are so expensive and there is difficult to justify payback sort of on electric vehicles. One of thing we’re looking closely at is what will be the impact from the government agencies on the test procedure and will they be - I won’t get into a long discussion here, because it can be a long discussion. But it probably will put more pressure on all of the OEMs to have lower NOX and lower CO2 which probably increases their interest and their rate of adoption new technologies and lighter weight in more efficient power trains, et etera, et etera. So too early to tell, we haven't seen an impact yet, but I guess we’re waiting and see what happens.

Thanks Don, thanks guys.

Our next question is from the line of Steve Arthur with RBC Capital Markets. Please go ahead.

Yes, thank you. Just following up on the Asian margins down quite a lot from Q2 levels down by about half and below anything we’ve seen for a while. I guess importantly looking into Q4, your 6.5 type of level for the year seems to imply some sort of pick up in Q4 margins for Asia. Just on correct view and then just on your understanding now, we've recognized the volumes, but looking into 2016, would you expect margins to be somewhat similar to this level for 2015 given the launch practice and so on?

Let me just answer your sort of second part of the question. When you look at production on our top programs in China, we’ve seen in Q3 a reduction and we’re expecting reduction also in Q4. In terms of 2016 we have some new business that's launching and we need to [indiscernible] business plans, so we need to understand the ups and downs of some of the existing programs and also what our simple launch is, whether it wants you to pay more or less. so I don't have at this point more information of 2016. With respect to overall margins haven’t done a math yet and certainly you have done, but the guidance we’re giving would incorporate the first three course performance, [indiscernible] Asia in Q4.

Remember the numbers are small, so it doesn’t take much to move the margin percentage around a lot.

Right, now it makes sense. Okay. Thanks a lot.

Sure.

Our next question from the line of Rod Lache with Deutsche Bank. Please go ahead.

Good morning everybody. A couple of things, one is just getting back to the $20 million decline in EBIT in North America. I think you said that the margin effect on FX is less than 10% so maybe a mid $20 million negative effect, but if you were to apply the historical 20% incremental margin on the implied volume growth that’s a $60 million positive. So there is 50 million or 60 million in the quarter that we’re just trying to reconcile. I was hoping you can just give us a sense of the magnitude of the scrap headwinds and in terms of the inefficiencies are there tranches of improvement that you have some visibility on or could you maybe give us some timeframe for when you would expect to eliminate it?

Yes Rod, so if I look at the year-over-year North America and I’ll talk about the pieces that are in and out of there. When you look at kind of the incremental sales, less FX were around 20% pull through on that but there are some negatives and I’ll take you through that and I talked about in my formal remarks but last year. There was a fire in one of our body and chassis facilities in China and in Q3 last year we got an insurance recovery

Mexico.

In Mexico we had an insurance recovery of $10 million. So really need to back it out of 2014 as a starting point. We’ve been talking about additional launch costs and new facility costs for the business that’s ramping up in North America and continue to build on our overall sales. So that’s been negative. And we’ve also have on a year-over-year basis a couple of things, when you look at net commodity costs that’s some commodity cost in scrap that’s been a negative. And then the other thing that’s really have an impact is the underperforming operations on a year-over-year basis, but some of that year-over-year variance, we were expecting as a result of new business ramping up, but we had unexpected costs that [indiscernible] sort of what the expectations were in the third quarter. So that’s kind of the math and how you get to kind of where we are at the end of Q3.

By this time next year, do you think that there is a path to eliminating the drag from these underperforming operations or launch costs? And do you have a figure for the magnitude of the scrap headwind?

I would think by Q3 next year that we will be through the issues, two of the plants hopefully before that [indiscernible]. It’s too early to tell, but I would will hope by at this time next year that we will be through them.

Okay. Europe I just want to confirm that you are still anticipating improvements with a 5% margin arrange. Just obviously it was not a huge volume quarter, this quarter, but just want to confirm that and lastly I was hoping you can just give us some color on how we should interpret your plans for execution of the buyback. Is this 40 million meant to signal a magnitude or is that just meant to provide you with flexibility?

On the margin in Europe, things are just still going roughly with the plan. Just had a lot of good things going on there. I don’t really want to comment till we get our business plan update, because we will have that in another month and that gives us a better clarity on where things are. Again we don’t know what [indiscernible] rates, but from an operation standpoint we are pretty well on track.

Yes Rod, with respect to the buyback, we’ve been pretty clear in terms of where we want to be from a leverage ratio standpoint kind of one to 1.5 times. And if look at the end of 2015 and [indiscernible] in my earlier comments, I said I think it tracks in above early January, but we are assuming that transaction took place in 2015, let me just triple over a couple of days. We are going to be at the higher end of our range of one to 1.5, we might be 1.3 to 1.4. So when you kind of look our preliminary view on cash regenerated from the business, assuming we are not making any [indiscernible] in 2016. So 40 million shares flexibility to continue to be in the one to 1.5 times range on an adjusted EBITDA basis.

Okay, got it. Thank you.

Thank you.

Our next question is from the line of Dan Galves with Credit Suisse. Please go ahead.

Okay, thanks. Lot of my questions have been asked, but maybe if you could kind of remind us of who your key customers are in China kind of how focused is the top three or four in terms of the percentage of the business? And I guess based on some early indications are positives from the tax stimulus. How much production growth are you expecting for the industry in Q4 and if you can dial down into your business specifically that will be great.

Right now in Q4, we are expecting overall industry volumes in China to be down both 3% and as we saw in the third quarter, we’re expecting our top program to be down by a larger amount. So we are seeing the same thing in the fourth quarter essentially as we saw in the third quarter. First half of the year, our top 30 programs was actually positive in growth of the volumes but in the third quarter we start to return negative versus overall volumes then we’re seeing the same thing in the fourth quarter. So hopefully the same less than any other state sales are going to improve that going forward, but that what we’re seeing at this point.

Okay. Got and in terms of annual pricing, I think you commented that fuel economy pressures or likely to build on the automakers. There has been some comments from different automakers about trying to extract some additional pricing from suppliers. Can you just remind us that what your, typical annual price downs are as a percentage of revenue and how do you feel your position is in terms of resisting incremental pressure? Thanks.

Yes, the request from give-backs are all over the map and it depends on a lot of different things, could ultimately depends on whether they are awarding a lot of new business and if they are awarding a lot of new business then typically then suppliers would be more aggressive on give backs. If there is no new business out there then people typically don't give reductions. Our overall philosophy, quite frankly with our world-class manufacturing efforts and looking at doing engineer work and redesign product is to offset the give-backs with operational improvements or design ideas or reduction in our supplier. So it is, there is no average percent, people going to be asking anywhere from 0.5% we get request to produce 5%, but it really depends on what a lot of different factors. I don't think we’re seeing any more or any less particularly than in the past, I think with all the changes coming up that the car makers are trying to make in vehicles whether its times driving and lower weight, more efficiency, safety products, whatever they are focused very heavily on major supplier. So give us your best technologies, there is always going to be pricing pressure, but I would say it's a more a level of plain field because there is limited number of good global suppliers and we’ll always negotiate tough. So [indiscernible] are going to be taken tough, where I don't know how they can be tougher and they are probably not going to be any easier either.

Thanks Don its helpful.

Just one question on Europe, I would say everything is go pretty well on track. One exception the European on track is the weakness in Russia and volumes are obviously down, we will have to wait and see what happens there politically and then what happens with the economy.

Our next question will be from the line David Tyerman with Canaccord Genuity. Please go ahead.

Yes. So just two quick clarifications on the body and chassis, is there are anything in there that is permanent or is this just launch issues?

Just launch issues right now, inefficiency, launch issues, outsourcing so there is nothing there should be permanent.

Okay. Thank you and then on the Asian kind of along the same lines, is there anything that you see on this top programs that could cause them to be lower on a sustain basis, or is that just this program or reps are getting greater inventory correction that sort of things?

Yes. It’s hard to say, I mean for a long time, the international OEMs were outperforming the domestics and we start to see earlier this year was a shift of that and based on some new programs are being launched. So I don't know whether we could [indiscernible] sustainable, I mean we will give some guidance, we get into 2016 on where we see our sales and mix relative to the overall volumes, but I don't think it’s something that is necessarily sustainable.

Okay. So it sounds like you are feeling, you saw the better idea by the time you provide the 2016 guidance?

Yes.

Okay. Thank you.

Thank you.

Our next question is from the line of Richard Kwas with Wells Fargo Securities. Please go ahead.

Hi good morning, just following up on Dan’s question, in terms of the customers in China, the Getrag manufacture, base manufacturers and European the German manufacturers as being your top customers any flavor on that?

I would say the Getrag tree and the German tree being a vast majority of our customer base in China.

And then on CapEx you raised it to the top end of the range, Don any thoughts about CapEx investment in China given the slowdown in the market and how you are planning longer term in terms of CapEx investment over there?

Too early to give you much clarity in that. I know the acquisition we are making in Getrag, they have got some big plants there. So I think that we could, if we have more power train, product to launch probably. We could probably fit them in their plant and we have one very big power plant over there, which is very low orders way below where we expect them to be, I'm hoping it’s going to come back, but I think we have open capacity there as well. I still think geographically China is a very good place to do business. So, I know right now there are lot of concern about, they seem to slow down a little bit. I still think there is going to be a powerhouse, I think there is going to be lots of opportunity we continue to focus on. And quite frankly I think that’s a better place for doing business than investing more money in some other geographic region and we are growing, we’re being very, very cautious in what we do in Russia obviously and South America is very challenging. So other than that region in Europe and for the old Western or the Eastern Europe block being areas - we are seeing lots of opportunity, I think China will continue to be one we look at. We don’t want over capitalize, but we are doing a very deep analysis of what we think the volumes would be, who do we think is going to be successful including the Chinese brands and try and grow our content with them.

Was the increase for the top end of the range was that regionally was that in China or North America in terms of the increase, where did that go relative to the outlook?

I think its across, we are seeing a lot of growth opportunity and that’s why our tooling is up as well, a lot of growth opportunity in North America. So I don’t have it on top of my head, but it doesn’t stick out in one predicted area, I wouldn’t say it’s predicted in China.

Okay, alright. And then last question on ADAS. I know it’s a relatively small business for you, but what are you doing in terms of investment on the R&D side there with all the news around the automatic emergency braking, I know your product there and how do you think about that business growth was over the next few years?

We are very big in camera based ADAS from a sensor standpoint. We are making some investments in R&D and some other technologies don’t get into here. We’ve made some relatively small but investments in some new technologies and some DC companies that we think has very interesting technologies, we talked about one in cyber security. We have been taking a very deep look at where we think the technology is going or we think the volume is going to be. I think it’s going to be rapidly growing area, I think whether you are talking about hybrid or ADAS. I don’t think you go from zero do to full implementation in a short time period on anything and I don’t agree what people saying, how quickly we are going to get to complete electric vehicles, but I do think it’s going to be a growing business. We have taken a real deep look at it, we continue to look at it and it’s an area we would like to grow in, but we want to make sure if we are going to make investments in it that we fully understand where the technology is going, how fast its growing. We make good that margins there of what competition is doing. It’s very competitive area.

All right. Thank you.

Our next question is from the line of Itay Michaeli with Citi. Please go ahead.

Great, thanks. Good morning, everyone. Most of my questions have been asked, but I want to maybe touch upon bit of a bigger picture question. Some of the other auto supply that talked a little bit at least for a [indiscernible] that their backlog expectation is going forward. I was hoping you can maybe provide a top down update, I think your January outlook of growing the production revenue, I think about $5 billion or so through 2017. In terms of the percentages, how you are feeling about that as you look at the world today, [indiscernible] kind of think about model in your growth over the next couple of years?

You know what, I think it’s a very good question, I think we are about a month and half, a couple of months way before I talk about that. If you go back to what we talked about in January that’s $5 billion, just there have been some moving pieces, and shares as a longer part of our company and that as a part of that $5 billion. If you go back to January and you kind of want to put box around how big that could have been, I think if you look at the shares that’s 7% of the business and if you take 7% of $5 billion it’s probably not a bad sort of approximation. Foreign exchanges have moved quite a bit, and you can see the impact just along this year that’s that impact that outlook. We’ve also done some acquisitions and some new business and we got different volume assumption. So we are going to put that all together and it’s a bottoms up exercise that’s why we don’t any today and we’ll give you some more guidance starting in January.

No, that’s very helpful. And maybe just a second question. Ii was hoping you can just give us a broad update on raw material exposure and how to think about the potential impact. Both from an earnings perspective, but also from a margin perspective as you have some pass through [indiscernible] that the margins are being fairly favorable sometimes. Just hoping if you can give us a sense of your exposures and how to think about that over the next 12-months or so?

When you look at some of the commodities that we've purchased [indiscernible] under customer retail program or we typically have some fixed contracts for a period of time. The exposures that affect us from a P&L perspective, is resin, in resin pricing we are seeing more and more of our buy on resin moving to resale, probably that 15% higher on resins, which is substantially more than a few years ago. So if resin prices move up that will be negative to us, if they go down that just help us a bit. And then as part of our process we do have some engineered scrap and we do saw that and as steel price have been coming down, again we are insulated from that from customer resell programs the steel we buy. We are seeing some negative impact on scrap recoveries, you have seen that throughout the balance of the first three quarters of 2015, but when I look at steel prices [indiscernible] steel pricing, I was not sure how much lower they can go, but I think a downside there is less significant than what it was at the beginning of the year. Q - Unidentified Analyst That's very helpful. And thanks so much.

Our next question is from the line of Justin Wu with JMP Securities. Please go ahead.

Hi, good morning. Just clearly we’ve seen a ramp up in production schedules in North America for Q3 and Q4 and it seems to me having some negative impact, although fairly isolated on some of your plans, but I was wondering if you can comment, as you kind of look across your footprint in North America, are you see any other kind of divisions where you could see potential issues with capacity problems and resulting inefficiencies if volumes continue to ramp higher?

Difficult question to answer. I don't know of any off the top of my head. None of our plants are running pretty full now with extra shifts. The biggest areas would be painting, if you run a capacity in painting, I can’t think of anything off the top of my head. Stamping and we've already talked there are a couple of facilities where we've got some issues we’re dealing with now in capacity. And power train also been another area. I don't know if any that I can think of that would be a constrain, but we are running full. [indiscernible] kind of a breakdown somewhere. I don't know how much more the volumes will be going up, again if they went up few percent that's wondering if they went up 15% that would be a huge challenge manufacturing wise in some of our plants, but I don't anticipate the volumes went up that much.

Okay. And may be just kind of generally in terms of how we should think about operating leverage or your operating leverage in North America. I mean are we kind of at the point where even if we see additional volume growth that you kind of reached the maximum on operating leverage benefits due to some of the kind of inefficiencies that just come with the higher volumes?

You know what I would say that if you look at where we are today and where we were three or four years ago. I think the operating leverage today is going to be less than where we were three or four years ago [indiscernible] but you really have to walk plant by plant. To see what operating leverage you can attain and we talk a bit some of the big launch that’s taking place in the Midwest. Well there if you look at operating leverage, the operating leverage is going to coming in average margin from that business launches. So it is really difficult to say other than compared to three or four years ago on average the leverage is going to be less.

But in theory, if you get higher sales and you don't have the capacity constraint, which most of our plants can handle then you would expect to have a contribution margin [indiscernible] so borrowing a manufacturing constraint higher sale are good.

Okay great. Thank you.

Our next question is from the line of Patrick Archambault with Goldman Sachs. Please go ahead.

Thank you very much for squeezing me in. A lot of mine had been answer, but just I guess a couple of follow-ups. I guess Dan Galves question on China, I guess one thing I want to clarify was the expectation you have for production we done in the fourth quarter is this kind of a conservative first pass assumption until you get more clarification as to what the market does, or is it based on actual backlog and orders you have. I mean the reason I ask is Ford has come on the call saying that the fourth quarter is actually going to see a big uptake in production and GM sales are up 15% in October in China. So and I understand it takes a while to prepare this guidance and maybe you are putting in a placeholder while some of this is coming through, but just trying to get a sense of how conservative that is?

Well, I don't know about placeholder, but it does take a while to run to the process and we are get news every day, but you can’t update your expectations and your business plans and your forecast every day. So it’s going to reflect, the best information that we have at the time, when we prepare the forecast and the volumes that we assumed and we are looking at releases to validate some of the numbers for sure, but yes it’s always a point in time.

Okay. That's helpful and then just the other question I had is just understanding the Canadian fee dollar impact. I mean I think you said at the beginning of this call, stuff that's produced in Canada, I guess the sale price is also denominated in Canadian dollars, because I know in Mexico, for instance most people producing Mexico sell to contract that are denominated in dollars. So when the peso depreciates, it’s an advantage, but it seems like in Canada that's not the case, I guess.

We actually have contracts in Canada, its normally both in Canadian dollars and in U.S. dollars, and we also purchase goods in Canadian dollars and U.S. dollars. So when you start thinking of that our - on hedging or net exposure. So for the long U.S. dollar by the way and Canada. When you look at revenues and costs and we’ve got hedges in place that we put in place some time ago, it run through our financial, we have an unrealized loss in this foreign exchange contracts, [indiscernible]. So when you start working through math it’s not so just a pure translation like it is in Europe.

Okay. And as a result into negative, but less than your operating margin as you kind of went through earlier?

Yes.

And then just finally my last one is, I know you are at the top end of - or pro forma for Getrag, you are at the top end of the leverage guidance, but I just wanted to get your updated views on, if you would still consider participating in other areas of industry consolidation. As I think we discussed last time, there is a fairly large seeding assets that’s up for sale and I know you had been taking a look at it, but hadn’t really come out any direction on it and I wanted to see if that was still an open possibility or something you were looking at?

I think people ask just a lot of questions if we were looking at or not, I don’t think we commented, we never do comment on acquisitions. Getrag is a large acquisition and it fits well in what we want to do, strategically we've made the announcement, we’re making a number rather acquisition smaller ones like Stadco and a number of others. So I guess to answer your question, we will continue to participate in looking at acquisitions if they make strategic sense to us and if we think it’s a good product as far as what we think the car’s features going to be. We’ve done a lot [indiscernible] a while and we try to put our cash plan idea, we would like to invest our cash and to the extent we don’t then we have plans to cash with thing I just talked about a bit earlier. The likelihood of us making a massive acquisition is I would say low, but there is probably going to be some interesting opportunities coming up, like just we are always looking at. So I'm not going to comment specifically on major seeding acquisition, but that would be a massive acquisition.

Okay, understood. Thanks for all the info you guys have provided today. Very helpful.

Thank you.

Our next question is from the line of Richard Hilgert with Morningstar. Please go ahead.

Thanks for taking my questions this morning. Just wanted to kind of get a little bit more detail on things going forward here with Getrag. Is there much exposure in their business from Volkswagen or diesel engine in general?

Very little exposure to Volkswagen, I think they do a little bit of work with one of their subsidiary companies, actually Volkswagen does a lot of their own DCTs. And diesel I don’t know off the top of my head, it don’t know that would make much difference someone or the other.

Okay. And then the Stadco acquisition. Is there any particular kind of technology or process in Stadco that could potentially help the operations in North America that are having difficulty with their launches?

It’s not a technology acquisition, I would say it’s more geographic customer, but they are very good supplier they have got good capability, they do a lot of aluminum. So it’s nothing revolutionary, but they have good capabilities and both from manufacturing and knowhow standpoint.

Okay. So there is nothing really in there that would make any kind of a difference for the operations in North America that help get them up to speed a little quicker?

No, we know what the issues are, it’s just a matter of getting people on it and getting the equipment running efficiently, in sourcing our dies. We’ve hired a lot of people, we’ve got a lot of energy down there, it’s just a matter of getting through it. There is nothing that we don’t understand.

Okay. And then with the higher scrutiny coming from government oversight both in the United States and now potentially over in Europe. Have you had to take any additional reserves for warranty or you are expecting that you might have to or how is that all impacting Magna?

I'm not sure I can think anything, if you’re talking about the [indiscernible] Volkswagen?

No, just in general, there is a higher level of scrutiny coming from governor organizations whether it’s for recalls or whether it’s EPA. Just the general environment that we find ourselves in these days. Does this cause you to rethink whether or not you might have to take additional reserves for recalls and warranty or does this not affect you with all at this point?

Certainly nothing material I can think of. I think the whole industry is much more - where that if there is problem, the OEMs are extremely cautious and they are going to be more proactive. I think for the most part of they have been doing that anyway. If anything it probably make it a little bit more front and center to the industry. When an OEM is designing a system, especially a safety system to have more clarity as to what they are responsible for in the system, whether its components who is doing what sort of test specifications. Who is doing the test, who is doing the documentation, just so if there is an issue they have a better idea, when you are doing [indiscernible] analysis both on product and manufacturing process and who is responsible for it. This is fairly well known, it’s fairly basic but vehicles are extremely complicated. So I think just more focus on general, I don’t think we’re doing anything different and we wouldn’t expect anything different, but if I look back in five years, you probably will look for the industry and say, while there was more recalls and more investigation as to who’s responsibility was but nothing fundamentally different.

Okay. Great thank you very much.

Thank you.

Mr. Walker we have no further questions at this time sir. I’ll return the call back to you for your closing remarks.

Okay well thank everybody for dialing in today, it’s been a challenging quarter and I’m working hard to deal with the issues we’ve outlined today. So we do have some underperformers I think we will get over them, but I appreciate everybody taking the time to dial-in. Enjoy the rest of your day. Thank you.

Ladies and gentlemen this does conclude the conference call for today. We thank you all for participation today. Have a great day everyone.