News

Magna says tariffs still a problem, but USMCA could eventually give it leg up

Magna says tariffs still a problem, but USMCA could eventually give it leg up
Autos
The head of Magna International Inc. says U.S. tariffs on Canadian steel and aluminum continue to dent the auto parts maker, but suggested President Donald Trump s move to rev up production lines on U.S. soil could give it an advantage.

"I think the tariffs continue to hurt us," chief executive Don Walker said Friday, citing higher costs.

"It s mainly hurting our U.S. plants right now, because it s very difficult to get offsets for that.

The U.S. slapped tariffs of 25 per cent and 10 per cent on steel and aluminum imports, respectively, from Canada in June, prompting retaliatory tariffs by Canada.

However, the U.S.-Mexico-Canada Agreement, signed in November but still awaiting ratification, encourages auto companies to invest or expand in the U.S. and Canada. It requires that 40 per cent of a car s content be made where auto workers earn at least $16 an hour and sets a higher threshold for North American content.

"I think, logically, the more production is brought into the States, the better it should be for Magna because we re the biggest supplier here. We have a big footprint by a large amount over anybody else," Walker told a conference earnings call with investors to discuss the company s latest results.

The Ontario-based company has about 25,000 employees in the U.S., 23,000 in Canada and 28,000 in Mexico, placing it in the middle of ongoing uncertainty around the tariffs and the trade deal.

Just how soon the renewed trade agreement can be implemented remains up in the air. Former Canadian and American ambassadors told a panel in Washington, D.C., on Thursday that it can t be passed until the tariffs are lifted. Meanwhile, a number of Democrats and Republicans maintain they won t support the trade pact in its current form.

Magna estimates the U.S. tariffs will cost it between US$45 million and US$50 million in 2019, following a US$30-million hit in the last two quarters.

A spokeswoman said the number could go down, "depending on mitigation efforts," or up if the U.S. follows through on threats to raise tariffs on $200 billion worth of Chinese goods to 25 per cent from 10 per cent.

"I m not a big fan of tariffs in general," Walker said. "There s higher tariffs between the U.S. and China, so the input costs go up a little bit."

U.S. tariffs against China have triggered a tit-for-tat trade war affecting hundreds of billions of dollars in goods over the past year.

"There are so many moving pieces right now. It s hard to tell what s going to happen," Walker said.

Magna raised its dividend Friday as it reported its fourth-quarter profit fell from the same period a year earlier.

The company, which keeps its books in U.S. dollars, said it will now pay a quarterly dividend of 36.5 cents per share, up from 33 cents per share.

The increased payment to shareholders came as Magna said it earned $456 million or $1.37 per diluted share for the quarter ended Dec. 31. That compared with a profit of $559 million or $1.54 per share in the same quarter a year earlier.

Sales totalled $10.14 billion, up from $9.68 billion.

On an adjusted basis, Magna said it earned $1.63 per share for the quarter, up from $1.58 per share a year earlier.
Read more on CTVnews
News Topics :
Similar Articles :
Business
AURORA, ONT.—Magna International Inc. stock had one of its biggest one day declines of the year on Wednesday after it lowered expectations for the second half of 2018 amid uncertainty surrounding...
Business
Magna International Inc. will raise its dividend 10 per cent, but warned Friday that Brexit and the election of Donald Trump could harm its business and the auto sector generally....
Business
AURORA, Ont. Magna International Inc. jumped higher Monday after the Canadian auto parts giant announced a dividend increase and better financial results than analysts were expecting. Magna shares TSX MG...
Business
AURORA, Ont. Magna International Inc. raised its dividend as it reported its fourth quarter profit fell from the same period a year earlier. The Ontario based auto parts maker, which keeps...
Business
Metro Inc. s performance in its most recent financial year fell in line with company expectations, even as the grocer grappled with supplier pressure to raise prices. We have accepted...