Auto parts maker Magna International Inc. says General Motors Co.’s plant shutdown in Oshawa, Ont., will be among the factors that hurt the company’s 2019 sales.
Aurora, Ont.-based Magna said in its financial outlook on Tuesday its revenue will also be negatively affected by the stronger U.S. dollar and the US$1.2-billion sale of its fluid pressure and control division to South Korea’s Hanon Systems.
For 2019, Magna expects sales of US$40.2-billion to US$42.4-billion, and profit of US$2.1-billion to US$2.3-billion.
Peter Sklar, a stock analyst at Bank of Montreal, said Magna’s guidance implies earnings-per-share will fall short of expectations. Mr. Sklar calculates Magna’s per share profit will be in a range of US$6.47 to US$7.09, compared with BMO’s estimate of US$7.23 and the analyst consensus of US$7.19.
“Over all, we consider the 2019 guidance to be below expectations as Magna is guiding for a decline in [earnings before interest and taxes] margin as a result of a decline in equity income, a higher proportion of lower-margin complete vehicle sales, higher commodity costs, and increased spending on electrification and autonomy,” Mr. Sklar said in a note to clients. “In addition, management is anticipating higher-than-forecasted interest expense as well as a higher tax rate.”
Magna, which employs more than 173,000 people at hundreds of plants around the world, based its forecast on little or no change in vehicle production in North America and Europe for the next three years.
GM said in November assembly plants in Oshawa, Detroit and Lordstown, Ohio, and two U.S. parts factories will close by the end of this year as it ends production of poorly-selling sedans and focuses on SUVs and invests in electric and autonomous technology.
The Oshawa move will eliminate about 3,000 jobs and is expected to reverberate through the Ontario automotive sector. Shortly after the GM announcement, Martinrea International Inc. said it will close a plant that supplies the Oshawa assembly line with components for the Chevrolet Impala and Cadillac XTS.
Meanwhile, Magna announced in Detroit that its Magna Steyr division in Graz, Austria, will assemble the new Toyota GR Supra sports car. Production is expected to begin early this year, said Magna, which will also supply the car’s seats and other components.
GM’s shutdowns occupied much of the attention at the Detroit annual car show. Jerry Dias, president of Canadian Auto Workers’ union Unifor, met with Ontario Premier Doug Ford and Navdeep Bains, federal Minister of Economic Development, to urge them to find a way to save the Oshawa plant.
“We need all the allies we can get,” said Mr. Dias, who predicts Canadians will stop buying GM vehicles in response. “I’m always optimistic GM is going to change its mind. The only one that doesn’t understand that is GM.”
In a statement, Mr. Bains said he met with Mary Barra, GM’s chief executive officer, and urged her to reverse the decision to shut down the Oshawa factory, which he said was a “mistake.”
“I regret that GM’s position on Oshawa has not changed, but our government has been clear from the start: we stand ready to play an active role to find a solution for Oshawa’s workers and in shaping the future of the auto industry,” Mr. Bains said.
Eric Atkins