Canadian supply giant Magna International Inc. has lowered its 2019 financial outlook to reflect the estimated impact of the UAW strike at General Motors in the United States.
The strike lasted 40 days and stretched from the latter part of the third quarter and into the fourth.
Magna, which supplies body exteriors and structures and power technologies, said Friday that it experienced reduced third-quarter sales as a result of the UAW’s job action.
At its Innovation Day in Detroit last month, Magna said GM accounted for 15 per cent of its global sales by customers in 2018.
The supplier said its third-quarter sales fell three per cent to $9.32 billion, down from $9.62 billion in the same period last year.
Magna experienced a net loss of $233 million, as compared to a gain of $554 million in the same period last year.
A substantial portion of the net loss in the third quarter came from Magna’s recorded non-cash impairment charges within the power and vision segment related to its equity accounted investment in manual and dual-clutch transmissions acquisition Getrag.
The non-cash impairment charge included in net loss attributable to Magna was $537 million, based on lower than expected sales, increased pricing pressure in the China market, declines in volume projections in certain global markets, and in-sourcing of transmissions by certain Chinese automakers.
Magna leaders estimate a total revenue impact of $500 million for 2019, with an impact of approximately $140 to $150 million in the third quarter, and the balance in fourth quarter.
“All things considered, our third-quarter earnings were relatively in line with our expectations,” Vince Galifi, Magna’s chief financial officer, said in a statement. “However, we have made some adjustments to our outlook, largely to reflect estimated lost volume related to the GM strike and higher launch costs."
Magna says it now expects total sales this year of between $38.7 billion and $39.8 billion, a reduction of $1.3 billion on the top end of the range. The cut also reflects the impact of higher launch costs.
The supplier also cut its full-year net-income outlook to between $1.8 billion and $1.9 billion from a previous range of $1.9 billion to $2.1 billion.
“The GM strike contributed to margin declines for [body exteriors and structures], power and vision and seating,” Galifi said in a call with investors Friday.
Sales in Magna’s body exteriors and structures segment fell five per cent to $4 billion, down from $4.2 billion in the same period last year, while sales in the power and vision segment fell nine per cent to $2.7 billion, down from $2.9 billion in the same period last year.
Both fell as a result of lower global light-vehicle production, the end of production of certain programs in and the strike, Galifi said.
Magna’s seating business rose four per cent to $1.3 billion, up from $1.2 billion in the same period last year, primarily as a result of new program launches.
Magna CEO Donald Walker said on the call that the impact of the strike will continue throughout the remainder of the year.
“The GM strike, which continued into October, will also impact our fourth quarter results,” Walker said.
Shares of Magna were up less than one per cent to $56.67 in Friday morning trading.
Walker said despite the setbacks, he expects Magna to grow in its wholly-owned Getrag acquisition operations.
The supplier also recently announced that BMW Group awarded it the largest production order for transmission technologies, for dual-clutch transmissions including hybrid variants, under a multi-year contract.
Magna International Inc., of Ontario, Canada, ranked No. 3 on the Automotive News list of the top 100 global suppliers, with worldwide sales to automakers of $40.83 billion in 2018.