Magna International has reported a quarterly loss for the fourth quarter of 2008, as expected.
 
The parts maker posted a fourth quarter net loss of US$146m, which compares with net earnings of US$28m in the same quarter of 2007. For 2008 as a whole net earnings were US$71m, 89% down on 2007.
 
“While 2008 was a difficult year for the industry, 2009 is expected to be worse,” especially in the first half, Don Walker, Magna’s Co-Chief Executive Officer, said in a call to investors.
 
The firm blamed lower profits on lower volumes for its major customers across the world and especially in North America.
 
Magna said that its net cash position of US$1.5bn and strong cash flow generation should allow it to swallow up some of its weaker rivals during the turmoil and to step in to fill voids left by companies that fail.


Walker forecast that 25-30% of suppliers could go under in the current downturn, but that he expects ‘orderly restructuring’.
 
Goldman Sachs said in a research note that Magna’s strong liquidity and a negative net-debt position made it ‘by far the best positioned among large Big Three-exposed suppliers from this standpoint.’


Siegfried Wolf, Magna’s Co-Chief Executive Officer said: “We are facing one of the most difficult automotive environments in decades, across numerous markets. Our recent financial results reflect this. We have been taking actions to reduce fixed costs, minimize discretionary spending, and trim capital spending, all in an effort to restore profitability, conserve cash and maintain our strong balance sheet. At the same time, we are prudently investing for the future by spending on new programs, acquisitions and innovation, in order to further improve our competitive position and prospects for future growth when automotive markets finally recover. While these turbulent times have been painful for some of our employees, we believe our actions have been necessary to strengthen Magna for the future.”


Don Walker, further commented: “The extent of financial and other support to the automotive industry made or proposed by governments around the world is encouraging. It shows that many leaders recognize the significant contribution that the automotive industry makes to the economies of their respective countries and to the global economy. I believe certain governments have also come to recognize the vital role that automotive suppliers play in keeping the industry functioning. We are hopeful that governments will recognize the need to protect amounts owing to suppliers in any restructuring of the industry.”

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