Magna leery of bor­der tax

CEO of Cana­dian auto parts gi­ant says mea­sure would hurt whole in­dus­try

The Hamilton Spectator - - CANADA & WORLD - FRED­ERIC TOMESCO Bloomberg

North Amer­ica’s largest auto parts maker said a bor­der ad­just­ment tax be­ing stud­ied by United States Pres­i­dent Don­ald Trump would prob­a­bly hurt the au­to­mo­bile in­dus­try, while also in­creas­ing the odds that fu­ture fac­to­ries will be lo­cated in the U.S.

Canada’s Magna In­ter­na­tional said the growth of “pro­tec­tion­ist sen­ti­ments” could hurt its op­er­a­tions and prof­itabil­ity, ac­cord­ing to a com­pany state­ment Fri­day. The man­u­fac­turer is closely watch­ing a po­ten­tial tax over­haul in the States, chief ex­ec­u­tive Don Walker said on a con­fer­ence call with an­a­lysts and in­vestors.

“The in­dus­try as a whole is try­ing to get all the facts to the right peo­ple so at least they un­der­stand what the im­pact might be,” Walker said. “The lat­est I un­der­stand is that the dif­fer­ence be­tween Canada and the U.S. as far as trade is con­cerned re­ally isn’t an is­sue. Hav­ing said that, any bor­der ad­just­ment tax I think would be neg­a­tive for the whole in­dus­try.”

The maker of bod­ies and chas­sis, car elec­tron­ics and vi­sion sys­tems re­lies on the U.S. for about one quar­ter of sales, and counts on Mex­ico for an­other 12 per cent. In a meet­ing with Trump on Thurs­day, U.S. man­u­fac­tur­ers pressed their case that a tax on im­ports would lead to higher do­mes­tic em­ploy­ment. While Trump dis­cussed the po­ten­tial ben­e­fits of such a mea­sure af­ter the dis­cus­sions, he stopped short of en­dors­ing the pro­posal.

Based on re­cent de­vel­op­ments, “there’s prob­a­bly a larger like­li­hood” that car com­pa­nies con­tem­plat­ing new in­vest­ments would put new plants in the U.S. if they had to make a de­ci­sion now, Walker said. Still, he said, “peo­ple will wait to see what the end re­sult is here and make their de­ci­sion.”

Magna’s earn­ings from con­tin­u­ing op­er­a­tions were $1.24 (all fig­ures US) a share in the fourth quar­ter, trail­ing the $1.35 av­er­age of an­a­lysts’ es­ti­mates com­piled by Bloomberg. Sales were $9.25 bil­lion, top­ping the av­er­age es­ti­mate of $9.21 bil­lion. The Aurora, Ont.based com­pany reaf­firmed its 2017 sales fore­cast.

The U.S. is Magna’s big­gest mar­ket, ac­count­ing for more than $9 bil­lion i n pro­duc­tion sales a year, Walker said. About 90 per cent of that ends up in assem­bly plants within the coun­try, he said.

Canada gen­er­ates about $6 bil­lion of an­nual rev­enue for Magna, with Mex­ico gen­er­at­ing an­other $4.5 bil­lion, Walker also said. Most of Magna’s Mex­i­can rev­enue comes from parts that are shipped to car­mak­ers within the Latin Amer­i­can coun­try, he said.

The big is­sue for Magna will be “where our fu­ture in­vest­ments are go­ing to be lo­cated,” Walker said.

TORONTO STAR FILE PHOTO

Magna CEO Don Walker: “Try­ing to get all the facts to the right peo­ple …”

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.