Greetings and welcome to the Q3 2023 results. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference, you need to reach an operator, you may press the star, followed by the zero. As a reminder, this conference is being recorded Friday, November 3, 2023. I would now like to turn the conference over to Louis Tonelli, Vice President, Investor Relations. Please go ahead.

Thanks Tommy. Hello everyone and welcome to our conference call covering our third quarter of 2023. Joining me today are Swamy Kotagiri and Pat McCann. Yesterday, our board of directors met and approved our financial results for the third quarter of ’23 as well as our updated ’23 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, 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. Please also refer to our reminder slide included in the 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 all joining our call today as we share our third quarter earnings results. Before I share some of the details, I want to thank my team for their continued progress and solid results, so let’s get started. Some key highlights to mention before I dive into the details. Our organic sales grew by 10% year-over-year, surpassing weighted production by 4% excluding complete vehicles and 2% including complete vehicles. Our third quarter showcased strong operating performance with higher organic sales once again contributing to robust earnings that represented a significant improvement year-over-year. We continue to benefit from our activities in operational excellence and cost containment, leading to improved margins. We have raised our 2023 adjusted EBIT margin and adjusted net income outlook ranges for 2023, demonstrating solid operating performance even with the negative impact of the UAW strike in the third and fourth quarters, and recently announced our commitment to achieving net zero across Magna by 2050. Our industry continues to experience incremental improvements, including renewed supply constraints, stronger and more stable production schedules, and resilient auto sales in a number of markets. However, the global economy continues to face some interlocking challenges, including continuing elevated labor inflation, higher interest rates, geopolitical risks, and slowing economic growth. These challenges are impacting our entire industry. In North America, the Detroit 3 experienced UAW labor stoppages for about six weeks, which cost the industry approximately 220,000 units. The UAW has now reached tentative agreements with all three OEMs which need to be ratified. Our outlook reflects the full extent of the strike. We remain highly focused on containing costs and improving our margins. This is being achieved through ongoing operational improvement and cost recovery initiatives, as well as executing flawless launches across Magna. At…

Thanks Swamy, and good morning everyone. As Swamy indicated, once again we delivered strong earnings this past quarter despite the onsite of the UAW strike in September. Comparing the third quarter of 2023 to ’22, consolidated sales were $10.7 billion, up 15% compared to a 4% increase in global light vehicle production. Adjusted EBIT was $615 million and adjusted EBIT margin increased 90 basis points to 5.8%. Adjusted EPS came in at $1.46, up 33% year-over-year, and free cash flow generated in the quarter was $23 million compared to a $210 million use in the third quarter of ’22, despite our higher capital spend this quarter to support record program awards in ’22. During the quarter, we paid dividends of $128 million and we increased our adjusted EBIT margin and earnings outlook despite the negative impact of the UAW strike. Let me take you through some of the details. North American and European light vehicle production were up 7% and 14% respectively, while Chinese production declined 2%, netting to a 4% increase in global production. Our consolidated sales were $10.7 billion, up 15% over the third quarter of ’22. On an organic basis, our sales also increased 10% year-over-year for a 2% growth over market, or 4% growth over market excluding complete vehicles. The sales increase was primarily due to higher global vehicle production, the launch of new programs, adjustments to recover certain higher input cost, the acquisition of Veoneer Active Safety net of the divestiture of our manual transmissions plant in Europe, and the net strengthening of currencies against the U.S. dollar. These were partially offset by lower complete vehicle sales mainly due to a program changeover and an estimated $55 million impact from the UAW strike. Adjusted EBIT was $615 million and adjusted EBIT margin was 5.8% compared…

Thank you. [Operator instructions] Our first question on the line is from Chris McNally with Evercore. Please go right ahead.

Thanks so much, team. Appreciate all the detail. Maybe we could start with the--you know, obviously the big topic of the week is around EV demand, and maybe you could just kind of level-set--you know, just remind us of your exposure particularly in powertrain, you have $800 million in last year, growing to, I think it’s about a billion this year. You have targets of, I think, $4 billion in the out years. What percentage is maybe pure EV versus [indiscernible] and hybrid - that would be helpful, and then just a pace on battery enclosures, which is obviously a new growth area. Just anything around ’23, ’24 - again, you’ve given longer term targets, and just remind us maybe some of the programs or geographic exposure. Those are the big questions, I think that you’ll probably get several times in the queue from the rest of the analysts, and maybe we can start there.

Hi Chris, good morning. We will try to address the different aspects of the questions. I think from an EV perspective, just generally to address macro, we have always said electrification is a secular, irreversible trend and it’s here to stay, but the question was going to be the predictability of the take rates, how soon is it going to come, so it’s basically a very long tail and it’s still very early days of electrification. Also if you look at the last three or four years as we talked about electrification, we have generally said the global penetration will be somewhere in the mid-30s in percentage by 2030. Given those circumstances, our policy or our [indiscernible] has been to look at the volumes by program, by customer, look at external sources - IHS and our own internal volume predictions, and have been using that to come up with the numbers that you talked about. In the past, not just related to EV, the volume uncertainty has been there on every program if you go back a few decades, and we have a mechanism to go through that in our planning process and how we put the capital forward, how we plan scalability and modularity, but beyond that even have the discussions with the customers when there is a significant change in volumes. But all that said, and a few questions specifically that you asked about, in electrification of powertrain specifically, we talked about $3 billion in 2025 managed sales and about $4 billion during our investor day in 2027. When we talk about those numbers, we have always taken into account the mechanism that I talked about of coming up with our own volumes, looking at multiple sources, looking at the take rates, which I would say are a little bit more conservative than what the customers in the markets have been talking, right, so that’s one piece. On the battery enclosure side, I think, Louis, we are in the $300 million, $400 million this year--

Yes.

--and we were talking about $1.6 billion by 2025, and there we talked about the product line where we are using existing assets, whether it’s castings or exclusions or stampings, [indiscernible] and so on, and the dedicated assembly lines are considered tooling which is paid by the customer, right, so that continues, and that is also a strategic product in the sense that when you look at the frames and the underbody and so on, we see a path going forward, and we talked about the analogy to the frames in the past, where we did in the late 90s, and we continue to do the third and fourth generation of the same product today, so this is a long term play and we feel pretty good about that. I know I tried to address different aspects of the question. Did I miss anything there?

And the 48 volt is just under a quarter of our sales in ’27, of that managed sales number.

And then what about plug-in as well, because obviously there is definitely more of a concern about pure EV than plug-in has sort of continued. There is a decent amount of PHEV, right, in your high voltage for powertrain as well?

Yes, I think most of our--if you look at the general sales for overall powertrain, a significant pace I think is in the 48 volt, substantially in the hybrids. There is a product line that we talked about in the PHEVs, but it’s predominantly in 48 volts which could be applied to the PHEV part of it, and pure EV switches in the A-drives.

Okay, and then the only last bit of detail, within battery enclosures, since it’s new and obviously there is one large platform that you discussed a win on, how diversified, if I look to 2025, is that $1.6 billion? Are we talking a handful of OEMs or is it five to eight?

I think we are talking about eight OEMs, Chris, but talking outer years, that’s included in the projections that we mentioned in the figures. That’s eight OEMs--

And that’s global.

And it’s global.

That’s great. If I could just squeeze one last on pricing recoveries, obviously we’ve talked so much about EVs over the last week that we’ve kind of forgot about the older issues that we all used to talk about on Q2. Could you talk about the pace of recoveries, how it’s going, maybe just what’s left, and in terms of--you know, could this be an extended tailwind into ’24, because obviously you get the annualization of any price recoveries you’ve gotten in the second half. Thanks so much.

Thanks Chris. We’ve been disclosing, I would say, the net impacts rather than specific amounts, and if you look at certain costs in energy have declined, there is an improving trend in commodities in certain cases, and I would say we are on track to obtain the recoveries necessary to meet our outlook. Maybe a little bit of color - we talked about the $100 million at the beginning of the year as headwinds, and in our last call, we talked about that being reduced to $50 million. As we stand here today, we are at zero - that means the $100 million has been brought down to zero, but we continue our discussions and the focus still remains on all the things, whether it is operational excellence, whether it is looking at every program, and continuing discussions with customers not specific only to ’23. We have always talked about looking at it holistically from ’22 and even going forward, planning into ’24.

Thank you very much. We’ll proceed with our next question on the line. It is from Mark Delaney with Goldman Sachs. Please go right ahead.

Yes, good morning. Thanks very much for taking my questions. First, as you guys are thinking about your prior target to reach profitability in mega-trend areas in 2025, as you’re seeing some of the traditional OEMs revisit the rate of their ramps around EVs, including some in North America where you’ve disclosed wins, do you still think you can reach that profitability target in 2025, and if so, are you contemplating having to make some changes in order to still get there?

Good morning Mark. Yes, when we talked about the mega-trend areas, it’s not purely electrification. Part of it is ADAS also and other products that are included in there. We will go through the customer changes in the road map, if any, as we are going through the plan right now, but I would say we have in some cases had, call it different business models which are kind of tied not--you know, completely tied to volumes, but I will give an example this year on one program where there was a change in volume, we had a commercial settlement. In some cases, we are looking at models where the capital inlay is put forward by the customer related to an EV program, so there are multiple ways we are looking at it to mitigate or minimize risk. Obviously you cannot take all risk away. We have been doing this, but I think this is a little bit more deliberate and more proactive when we talk about the EV platforms. I think we’ll be able to give more color when we come back in February for the outlook.

Yes, and I think, Mark, when we talk about the mega-trends, there was a big improvement in the ADAS business specifically as we start launching these programs, and that’s regardless of whether it’s on or distributed across ICE and EVs in that space, so you’re expensing significant engineering today and as those revenues launch, we should have a lot of contribution margin dropping to the bottom line, so it’s really not just an EV explanation into ’25.

Very helpful, thanks. In terms of the updated EBIT margin guide, you’re taking up your margin guidance on pretty similar revenue and despite the UAW strike headwind that you’re now having to overcome. You gave us a number of metrics around various puts and takes, but maybe just level-set us and summarize a bit what’s driving the better EBIT margin despite some of these headwinds, and is there anything unusual that you would say is more temporal helping the margins in the second half of this year, or do you think this is illustrative of the profit potential and gives you guys some good momentum toward the at least 230 BPs of margin expansion by 2025 that you’d previously talked about? Thanks.

I can start and Swamy can jump in. When we look at the, I think guide to guide, we’re really just executing where we expect it to be. Volumes have come in a little bit stronger. If you look on an annual basis, we’ve said since the beginning of February that we’re going to improve our margins as we go through the year, and that was driven by launches, some changeovers, but also just the timing of recoveries of our commercial settlements. I think we’re tracking on that plan. The one change, I would say since February really has been the execution on the operational front that we’re exceeding our targets for, whether it’s cost recoveries or cost containment, and our acceleration of our improvement plans. I think that’s the big driver, and that’s what’s given us confidence. We’re reiterating what we said in September, that we have confidence in our ’25 numbers.

And we’re taking our input costs down. We said it was going to be a headwind of 50 last time around, and we’re saying it’s basically neutral now, so that’s another contributor to the outlook to outlook improvement.

Yes, in summary, I would say, Pat, there is not any temporal topic that has added to the expansion, but it’s just operational excellence and the right trend of the materials and energy.

Correct.

Thank you.

Thank you very much. We’ll proceed with our next question on the line from Tom Narayan with RBC. Please go right ahead.

Hi guys, thanks for taking the question. First one, sorry I missed this in the prepared comments, could you review the UAW impact, just the absolute revenue and EBIT impact that you’ve--EBITDA or EBIT impact that you’ve had thus far, or you expect in ’23?

Yes, hi Tom, it’s Pat. Just to level-set, our Q3 impact was $55 million in sales, about 10 basis points on margin. Q4, we’re estimating an additional about $255 million, so on a full-year basis $310 million of sales with an impact of 10 to 15 basis points on our guide.

Okay, thank you. Obviously my next question is on the EV side. I guess the question has to do with how orders work, your order book works. We saw some commentary yesterday from a couple of suppliers suggesting maybe some caution on the order book. Just curious in terms of how susceptible or how concerning could cancellations be should this downturn get more severe, or quote-unquote, EVs slow down and get severe. Do you have a lot of visibility on the orders? It’s a situation of, like, 50% growth going to 30% growth, so you have inertia to help you? Just trying to get a sense of the visibility on the order book around electrification.

Good morning Tom. As we look at it, we haven’t really seen any cancellations, and as I had mentioned to one of the previous questions, if there is a volume change in terms of the planning, it is a discussion that we have with the customer, and I wouldn’t say we have seen anything significant. Maybe one topic or one point that might help, if you look at just not electrification but all content on EV platforms, we are in single digits as a percent of sales, right, in 2023. Going out to 2025, maybe one-fifth of our business roughly is connected to EV platforms. But again, I want to reiterate, we always look at volume planning from our perspective based on customer, based on platform, based on segment of the vehicle, looking at IHS data and other sources, so there is, call it the Magna volume that we have to have a judgment on. That’s one aspect of it. The other one, like I said, even on ICE, there are several programs which don’t hit the volumes that we had predicted, and we have mechanisms to have those discussions with the customers. This is besides having capital outlay in tranches, having flexible manufacturing so that we can flex as the volumes change, obviously within reason, and there are some cases where the volumes are up. It’s a complex [indiscernible] here, but we have had this with customers and there is a little bit of uncertainty, and that’s where I said in some cases, the models on the EV platforms, the customers has come forward with the capital, and some we already had settlements on where the volumes changed significantly. In some cases, we are looking at the same product where the platform has both ICE and EV, so depending on which does better, there’s a little bit of a natural hedge. There’s a lot of these things that we look at it from our planning perspective to again mitigate risk, not completely but it gives us enough comfort.

Okay. Another thing that we heard yesterday was that there seems to be this kind of divergence of opinion on this EV decline story geographically, with a lot of Americans, let’s say, thinking that we’re in this Armageddon scenario, and then over in Europe it’s an opposite view. Just curious in terms of your OEM exposure to EVs, specifically investment, is that something that’s pretty geographically balanced, or how would you characterize your EV exposure geographically on OEMs?

Yes, I think generally if you look at our overall sales, we are about 60% or so in North America and about 35% in Europe, and the rest in other, but predominantly China. We have said from a regional perspective, the electrification take rates are higher in China, followed by Europe, followed by North America, but Tom, this is very specific on platforms. We have to not just look overall which segment--you know, it’s a little bit of a judgment to say when we have relationships with the customer, where we’re having reasonable conversations in terms of the business models, which platform, a lot of that comes in rather than a generic view on region by region.

Got it, yes. My last one is just on that other topic, the price mix topic. Obviously the OEMs benefited on the way up in the past three years, and if we do get a normalization in price mix, one of the fears is that potentially the OEMs could go to the suppliers and ask for price downs. How has that happened historically in the past? Was it that you guys typically benefit on volume recovery regardless if price mix is coming down for your OEM customers, or do they have the ability to squeeze you guys as price mix comes down?

Yes, those conversations have never been easy, and like you said, even when they were doing well in the last three years, I would say the conversations still were not easy. But I can say that we talked about various things in recoveries, looking at underperforming programs, programs coming to an end, input cost inflation, whether it was semiconductors or others. They were tough conversations, and I talked about getting the headwinds to be neutralized this year. All I can say is they will continue to be. They recognize that we have been living in this tough environment of inflation and chip shortages and supply constraints over the last three years, so we already have been living in that. I think we are not going to change our thinking process to be speaking [indiscernible] with data. We have had tough conversations, but I would say they were fair and cordial.

Okay, great. Thank you so much.

Thank you. We’ll get to our next question on the line, and it’s from Dan Levy with Barclays. Please go right ahead.

Hi, good morning. Thank you for taking the questions. Wanted to just follow up on the last question, and specifically the commercial recoveries in the quarter. Just any color, was that at all--you know, was it retroactive, is it piece price? Any color on what the recoveries were in the quarter that you saw, and magnitude as well.

I think we talked about it - again, net impact other than gross, and I talked about the $100 million, and there is a complexity of talking productivity versus inflation recoveries and a whole bunch of other things. I would say about two-thirds of the recoveries in general are more related to flow through purchase orders indexing and so on, that would continue going forward, and about roughly one-third are one-time, right, so the ones that are more mechanism-based, whether getting on an index or purchase orders and so on and so forth, will flow through into the following years, and the conversation of the one-time depends on, for example, energy and where they are versus what the recovery needs to be, so it’s kind of a mix.

And Dan, if I can just add, when you compare to our expectations, we didn’t have a win on recoveries or commercial in our guidance. Really, when we’re talking about our increase in net inflation, the pick-up, it’s related to last year on the commercial side, and we’ve been guiding all year that we have roughly a 45 basis point headwind related to commercial issues, and that’s what’s coming through.

Thank you. Then the second, if you can maybe give us a sense of what’s happening within the segments, and specifically seating - I know it doesn’t get a lot of air time, but the best margin you’ve posted in a while, so just any voiceover on seating. Then complete vehicles, we know that you’ve said that there would be a changeover and that would drag it, you know, negative margins that I don’t think any of us expected. Maybe you could just give us a sense of when you get past this changeover and where those margins in complete vehicles should normalize to.

Good morning. I think again, as we’ve talked a little bit about seating, I think we’ve been saying over the last few quarters on calls that we had really unfavorable mix in ’22, and with the chip supply getting better, we are seeing a more normalized volume on some of the big platforms that we have and therefore we see the flow through materializing. A lot needs to be said about the continuing to focus on executing as we had talked about various initiatives, so that’s--we’ve been talking about seating for the mix issue, and it is really showing up, right? I think you are right on the complete vehicles, where we have said that the changeover and the launch cycle is what’s impacting, and it’s still in line with the expectations that we had in that segment, and I think as we get past this year into the next year, we’ll be able to give more color when we come back in February. But as we stand here today, I think it’s tracking to what we expect.

Great, thank you.

Thank you very much. We’ll proceed with our next question on the line from Colin Langan with Wells Fargo. Please go right ahead.

Great, thanks for taking my questions. If I look at the implied second half margin, it’s around 5.6%, which is clearly above your full year outlook. Should we be thinking of that as the right sort of jumping off point as we go into ’24, or you kind of mentioned that there’s a cadence of recoveries, so is there sort of a little help from the recoveries in the first half that’s helping that second half margin, making it maybe not a good base to be thinking about?

Yes, hi Colin, good morning. I think when you look at second half, you’re correct, but this is what we had been expecting as we get through the back half of the year, that recovery is going to be more back half loaded. As we move into--and as Swamy said earlier, we’re still comfortable with where we’re going in our ’25 projections, and we’re in the middle of our BP process, but we do have to get some volumes and assumptions and whatnot. But coming in, do we expect to have a reduction in margins into ’24? No. Do we think we can launch from the mid-5s upwards? I agree with that thought.

Okay, got it. Then you mentioned before--so how should we think about the cadence as we go into next year, because it sounds like you still have a third of your recoveries might need to get renegotiated in some form, so does that mean there is going to be this sort of continued tougher Q1 until you get those recoveries, or is this becoming more of an automatic formula because, if certain conditions are met, you could kind of just get them January 1?

Oh, I think it’s way too early to comment on cadence in 2024. We need to get through our planning process and then we’ll have a better sense for that.

I guess I was trying to get at how it normally works. Do you have to start those negotiations at the beginning of next year again, or is it more of a--I’m just trying to understand the triggers that would help you get those recoveries for whatever’s not locked into piece price.

Colin, I think like I said, the one that is in a mechanism basis that kind of flows through, but the other will be data-based on where our set of assumptions are in terms of energy and commodities and so on. That will be very fact-based. Some conversations for ’24 are already on the table, to the extent that we know the information, and if you remember, in the last two calls I said, when we talk ’23, it’s not just only ’23, some of it is ’22 and some of it is forward-looking, to think about what ’24 what would look like. But like Louis said, that will become more definite once we finish our set of assumptions and have the plan in front of us.

Got it, all right. Thanks for taking my questions.

Thank you very much. We’ll proceed with our next question on the line from Joseph Spak with UBS Securities. Please go right ahead.

Good morning everyone. Maybe a little bit of housekeeping just to start, because I’m a little bit confused on the amortization color you provided. You adjusted your prior guidance by about 10 basis points, which suggests about $40 million; but then when I look in the quarter, it looks like you added back $32 million in the quarter, so how do we square that because it doesn’t seem like that--was the amortization abnormally high in this quarter? Like, why would it step down? Maybe you could just give us a better sense as to what you think--what the full year amortization was last year, this year, and what the right run rate is going forward, so we can properly adjust our models.

Morning Joe. On amortization, we’re trying to get an apples and apples comparison, so what we’ve done, when you look at our financial reporting that will come out today, it’s very clearly listed on our analyst report in our financials. But just specifically to the numbers, when we guided in August, we said $30 million for half a year for Veoneer, so Veoneer is about $60 million of an impact annually. When we did our final scrub of all the other acquisitions that we had out there, on an annual basis there’s approximately another 50 that is going to flow through, so on an annual basis for the next couple years, it’s going to ebb and flow as stuff rolls off, but you’re in that $110 million range.

Okay, so--

And last year would have been about 50.

Fifty - thank you.

So it’s 50, and going forward it’s one-time?

Correct, and this year would be 80.

Right, so then the--I know you said you sort of restated prior years, maybe this is in the document and I didn’t get a chance to look through, but as we’re thinking about fourth quarter, what’s the right jumping off point for the new measure of adjusted EBIT? Is it that same, like $11 million or so that we need to add back to the fourth quarter?

Yes, $11 million relative to what we said last quarter, because we basically would have implied 15, so about 11 is what we would have, incremental to what we said last quarter.

Okay. The second question is if we look at BES margins implied in the fourth quarter and look at your full year guidance, there’s a step down. I know that segment has been performing better year to date, in part I think with some better performance at some of those underperforming facilities. But how much of that step down is strike related, because I know there’s some big customers there, and how much of it is maybe a little bit of a push-out from the battery enclosures business? I guess related to battery enclosures, I know you’ve made big capex investment, is there any thinking to sort of maybe slow or re-time some of that spend, or is this something you just need to invest through?

I think there’s two parts to the question, so I’ll start with the first one. From Q3 into Q4, you’re correct - obviously the impact of the strike at the UAW is higher in the fourth quarter relative to the third, so that’s a drag on margins. The other issue--or not issue, just fact is we continue to launch business. We tend to launch business more in the fourth quarter relative to the third, so that’s dragging margins, but that would have been as expected. This isn’t really a change from guidance to guidance, and that’s reflected in our increased guidance range for BES for the full year. On the second part of the question related to battery trays, battery trays really aren’t dragging the margin in the sense that most of the spend in the battery tray space is related to capital, and it gets put onto the balance sheet. As far as timing of spend, we’re sequencing our capital as required. Just to be clear, we’re not in a situation of building something and waiting for business to happen. We have facilities and we’re scaling the build related to the customers’ production plans, so we’re scaling our capital as needed. As Swamy said earlier, if those plans change, we’re going to adapt as well so that we can delay our spend to the amount needed, or as necessary. We have to push forward in this space, but it’s not really a margin impact related to this year, Joe.

Yes, I would just add, in terms of the UAW strike, it is a little more weighted not only Q4 versus Q3, but a little more weighted to BES versus the other segments, so [indiscernible]. If you look at our implied fourth quarter, it really didn’t change that much, so it isn’t really sales impacted really in any one segment all that meaningfully, it’s really just the more weighting on the UAW strike, I think in BES.

So is something like an 8-handle a better underlying rate for that business at this point, if we sort of back out some elevated launch activity in the fourth quarter and the strike?

Well I mean, we’re implying kind of a range of 5 to 6.5 for the fourth quarter, right?

Right, but I thought you just mentioned there’s some unusual stuff in the fourth quarter, at least the strike.

Yes, we’re not going to comment on where we’re expecting to go beyond this. We’ll give more color, I think, in February.

Okay, thank you.

Thank you very much. We’ll get to our next question on the line. It is from James Picariello from BNP Paribas. Please go right ahead.

Hi, good morning everyone. Back on the seating [indiscernible], I know you guys don’t provide a backlog, but of course you have one. One of your competitors, also back on the EV topic, one of your competitors, they stated that their new business backlog, about 80% of it for next year was tied to EV programs, and they went ahead and cut that backlog contribution for next year by 20% just based on their perceived visibility or real visibility in what those EV build schedules look like. Just curious what your EV program mix in the new business draw for the coming years, what that could look like in the seating business, and if any other major product categories that are of course powertrain agnostic come to mind in terms of this EV exposure. Thanks.

Good morning James. I think one of the things I mentioned overall if look at Magna this year, all content or total sales related to EV platforms is less than 10%, and if you look at the specific question I think you’re talking about in seating, I think Louis, the content for us on EV platforms today in seating is not material--

No.

--so we don’t see that impact. Obviously going forward into the outer years, which it’s too premature to comment in terms of volumes because, given just tight operations and so on in outer years as we launch, I think we’ll have to recalibrate with the customers if there is a significant change. Again, going back to my previous comments, we’ll work with them to see how we need to recalibrate and what needs to be really put in place if there is a substantial change.

Okay, understood. Then just one quick on the LG powertrain JV, as we think about the targeted revenue ramp to $1.5 billion or $1.6 billion, whatever the number is over the coming years, just in terms of the customer regional mix of that joint venture, what that looks like.

Yes, I think we were roughly talking about a billion this year, Louis, right?

Mm-hmm.

If you look at it, the customer mix is between North America and we are getting into Europe, right, and it is in programs that have been already there, and obviously some will be going forward and launching. This is what I would call a building block, which is like the emission and the inverter mature platform, and we think [indiscernible] specific only to a program. There is a certain amount of specificity to a program, but there is also a generalized asset which applies to emissions in general, so I think there is a certain amount of flexibility as we talk about the manufacturing and the engineering related to this, and it’s not tied to one program. Again, going back to--this is where we talked about flexibility there. Again, we’ll have to look at the numbers that we get from the customers, if there is substantial change, but as we sit here today and look at what’s out there, we haven’t seen a big drop or change, but we’ll be able to update based on our plans coming back into February again.

Thanks.

Thank you. We’ll proceed with our next question on the line from Jonathan Goldman from Scotiabank. Go right ahead.

Good morning, and thanks for taking my questions. Just a quick one on the macro. I believe your previous North American production outlook did not factor in the impact from strikes, so if we strip out the impact that you’re projecting, your underlying production outlook would be up from previous expectations. Can you just discuss what you’re seeing in the macro environment that supports the relatively better outlook?

Yes, good morning. Exactly, so when we guided in August, we guided ex--we didn’t assume any UAW or Unifor issues at 15.2 million units. Our estimate is that we lost 220,000 units as a result of the UAW labor disruptions, which would imply 15.4. Of the 15.4, the 200 increase, that primarily came through in the third quarter.

Is that more new products or product launches, or market growth? Any puts and takes there?

Can you repeat the question? It just broke up a bit.

Yes, so the incrementally positive market outlook, can you just discuss any puts and takes that you’re seeing?

Just higher volume draws from our customers relative to what we were anticipating.

Okay, fair enough, and then another housekeeping one. You raised the margin guidance, but it looks like below the line items are flat, so you maintained the free cash flow guidance for the year. Could you just help me bridge the delta there?

Yes, I think the simple answer is that it’s just a movement within the range. When you work through the math, we were comfortable holding the range where it was at.

And there’s nothing particularly going on with working cap or anything else?

No, exactly.

Okay, thanks for taking my questions.

Thank you. We’ll get to our next question on the line from Michael Glen with Raymond James. Go right ahead.

Hey, thanks for getting me in. Can you just talk a little bit about power and vision margins? What I’m just trying to understand is the sequential uptick from Q2 into Q3, even excluding the amortization of intangible dynamic. You’re showing a pretty notable lift from Q2 into Q3. Was Veoneer accretive to power and vision margin in the quarter? I’m just trying to figure out exactly what’s behind the lift.

Hi Michael, good morning. I think if we look at the first half, we had a warranty item, and there was a negative net commercial item in the Q too and there was higher engineering costs, so that’s kind of the sum in the first half. If we look at the second half--and obviously we also had net input costs which were a headwind in the first half, so if you look at the higher sales in the second half and you take out all the one-timers and the warranty item, the higher engineering costs out, that added to the bottom line and the equity income was higher.

Okay, and in Veoneer, any comments on the contribution of Veoneer in the quarter to EBIT, power and vision EBIT?

I would say the comments that we gave in the last call, that we are in line with expectations that we had during closing with Veoneer, and we continue to have good traction to realize the synergies that we talked about.

Okay. Then just in terms of North America, I know that this quarter there was the strike and everything like that, but would you say performance this quarter was consistent--like, I’m trying to assess at the platform level, and you identify your larger platforms each year in the AIF, would you say there was a pickup in the quarter across some of the smaller programs that you have in North America, or was it generally consistent with prior periods, as in are the larger and more profitable programs at the level you expected in the period?

You know, to be completely honest, I don’t have that in front of me, so it’s really hard. We don’t look at it by region, so. I’d have to look at it and see how it compares to what we’ve seen historically. I don’t think there’s anything notable that I can see in the quarter, but I’ll have to look at it a little more closely.

Got it, thanks a lot.

Thank you very much. Mr. Kotagiri, there are no further questions at this time. I’ll now turn the call back to you for any closing remarks.

Thanks everyone for listening in today. I’m happy with our continued progress in 2023. We have a relentless focus on execution of our strategy and meeting our mid and long term targets, and we have ongoing confidence in our ability to meet our plan. Thank you and have a great day.

That does conclude the conference call for today. We thank you for your participation and ask that you disconnect your lines. Have a great day, everyone.