00:00We're going to get to the quarter into earnings, but I want to just start with some news that we
00:03heard from the president. Just a little earlier today, the U.S. is set to hike a tariff rate on
00:07EU auto imports to 25 percent. This coming from the president just a little earlier today.
00:13What does that do for Magna International? Yeah, we've been dealing with trade policies and
00:19tariffs over the last one year. As you know, Tim and Carol, we have a footprint in Europe and
00:26other parts of the world. The important thing is in most of the places where we are present,
00:32we are aligned with the OEM and we produced systems and components and supplied to them locally.
00:38So really not much travels across ocean for us. So it's going to be how the strategy of the OEM
00:46changes, not as much an effect for us. And mostly, in most of the cases, the OEM is the recorder.
00:54The importer, they're responsible for it. So, Swami, in this case, this news doesn't,
01:01in other words, doesn't have any effect on your company, nothing material?
01:05Not the first order effects, obviously. You know, as vehicles start having a different price point and
01:12different hurdles as they come across, there might be an effect on the demand of the vehicles,
01:17but not directly to Magna.
01:18One thing I want to ask you, as of early 2026, average transaction price for a new car in the
01:24U.S. officially exceeded $50,000, with Bloomberg reporting a record of roughly a little bit above
01:30that. And I'm just, you know, we're buying bigger vehicles, EVs are more expensive. How does that at
01:38all impact your business?
01:41Yeah, Carl, that's a great question. You know, the DNA of the Magna, especially the auto industry,
01:47but more so for Magna, is continuous improvement. We call it operational excellence.
01:53We go through this improvement process year over year. And that is the reason why we have been able
02:01to post such good results in even in the first quarter where we expanded margins, generated solid cash flow
02:08and reaffirmed a full year outlook. And that is nothing but execution despite the software production
02:15environment. So we have to continue that process and, you know, do little by little. We call it
02:21inches make champions. And, you know, we look for every penny everywhere in the organization.
02:28One thing that we're trying to get a good handle on, Swami, and we're going to be speaking to some
02:32other CEOs in our three and four o'clock hour, is what the consumer looks like, not just in the
02:37United States, but around the world and how that behavior has changed with gas prices moving higher.
02:42What can you tell us just what you're hearing from OEMs right now and really what you're seeing
02:48as far as your product moving?
02:50Yeah, I think, as you know, Tim, we have a broad portfolio. So we have the chance to have those
02:56strategic discussions with the OEMs. From a consumer perspective, affordability is definitely,
03:03you know, top of the list. From a consumer preference, they're looking at different features
03:08in terms of safety, comfort, and convenience. That is what is defined as the software-defined
03:15vehicle or the smart car, whatever name you want to give it. You know, there is a balance now of
03:22how to
03:23get all of this into platforms so that you can still get the features that the consumers in the market
03:29demand, but in a way that is economical. And that you can get by scale, right? And that is where
03:35we at Magna
03:37talk about modularity and scalability so you can engineer once and deploy it many times. And that is the thing,
03:45you know, over the last few years, there has been a significant change in trends. It's been EV, it's been
03:51autonomous, it's, you know, a whole bunch of things changing, connectivity. So we're seeing the
03:58confluence that we've never seen before. Now the question is, how do you prioritize so that you can
04:04give the consumer what they want and still keep it affordable? Yeah, you know, just I think about
04:11the factors right now, you know, Swami coming at car buyers, right? Higher gas prices, cars just
04:20expensive. You know, you know it, you see this flat production environment globally, particularly on
04:27the back of those rising gasoline prices. So I'm just curious, you mentioned, you know, really squeezing
04:34out costs. Is that the strategy? That's how you guys navigate through all of this to keep the
04:39business where you want it to be? Carol, you bring up a good point. One of it, one of the
04:45things that
04:46you have to remain flexible and be resilient. We work in an industry that has long cycles. It used to
04:54be four years and three years. Now we're talking about two years, but still a long cycle. So in other
04:58words, what you're producing today has been designed at least two or three years before, right? So you have
05:06no option but to think of scalable and be resilient so you can react and be agile about it.
05:14And from a design perspective, that's where I talk about modularity and scalability.
05:19The trends are changing. So you can't say, I designed this and that's all it's going to be.
05:23You look at our powertrain, we are addressing EVs, we are addressing hybrids, we are addressing
05:28ICE vehicles. As the trend changed, for example, in North America from EVs, pulled back a little,
05:35and now we are starting to see a significant trend in hybrids. The portfolio was set in such a way
05:41that doesn't matter which way it goes, you know, we can lever up the particular module scale and get
05:48back to the market. So on the design aspect, that's how we are looking at it. We have to do
05:53the same
05:53thing in assembly lines and process. If the volumes go up and down in demand, we have to be able
05:58to react
05:58to it. And on top of that is what I said, you got to look at every penny across the
06:04organization.
06:04So it's a combination of all of this to stay competitive in the market.
06:08We have about a minute left, Swami. In this environment, we're seeing higher commodity costs
06:13with oil still above $100 a barrel. We talk, of course, about higher gas prices, but then the second
06:19order derivatives that come from that when it comes to refining and refined products. Just in 30 seconds,
06:24how does that affect your business? Yeah. Some of the pressures that we see,
06:29obviously, now with what's happening in the Middle East is energy, freight, and certain input
06:33costs like resins, right? The playbook is the same. You know, first order is mitigate operationally as
06:40much as you can. Then you work through commercial recovery mechanisms that are in place over time,
06:45and you need to do this, you know, collaboratively with the customers.
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