Ladies and gentlemen, thank you for standing by. Welcome to the First Quarter 2014 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, May 8, 2014. I would now like to turn the conference over to Don Walker, Chief Executive Officer. Please go ahead, sir.

Thank you. Good afternoon, and welcome to our first quarter 2014 conference call. Joining me today is Vince Galifi, Chief Financial Officer; and Louis Tonelli, Vice President of Investor Relations. Yesterday, our Board of Directors met and approved our financial results for the first quarter ended March 31, 2014, and we issued a press release this morning for the quarter. You'll find a press release, today's conference call webcast and our updated quarterly financial review and the slide presentation to go along with the call all at the Investor Relations section of our website at www.magna.com. Before we get started, just reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. Such statements involve certain risks, assumptions and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our Safe Harbor disclaimer. Since many of you have listened in to our shareholders' meeting earlier today, I'm going to keep my comments short and allow more time for question-and-answer. Overall, we were pleased with Magna's performance in the quarter, with first quarter records for sales and earnings. In North America, we posted record sales for any quarter of $4.4 billion, up 9% from the first quarter of 2013. We posted a strong adjusted EBIT percent of 9.5% despite a few challenging launches in the quarter. We anticipate an EBIT margin percent between 9.5% and 10% in North America for the full year 2014. In Europe, another good quarter. We reported adjusted EBIT of $127 million in Q1, up from $72 million in Q1 of 2013. Our adjusted EBIT percentage increased to 3.4% this quarter from 2% in the…

Thanks, Don, and good afternoon, everyone. I would like to review our financial results for the first quarter ended March 31, 2014. Please note, all figures discussed today are in U.S. dollars. The slide package accompanying our call today includes a reconciliation of certain key financial statement lines between reported results and results excluding unusual items. In the first quarter of 2014, we recorded restructuring entirely related to our European exteriors and interiors business and a charge to income taxes resulting from tax reform in Austria. These together reduced pretax income by $22 million, net income attributable to Magna by $52 million and EPS by $0.23 in the first quarter of 2014. In the first quarter of 2013, we recorded restructuring charges substantially all related to our European exteriors and interiors business. This reduced pretax and net income attributable to Magna by $6 million and reduced EPS by $0.02 in the first quarter of 2013. The following quarterly earnings discussion excludes the impact of these items. In the first quarter, our consolidated sales increased 7% relative to the first quarter of 2013 to $9 billion. North American production sales increased 9% in the first quarter to $4.4 billion, reflecting in part a 4% increase in vehicle production to 4.2 million units. In addition, the increase is a result of the launch of new programs and these factors were partially offset by the weakening of the Canadian dollar against the U.S. dollar and net customer price concessions. European production sales increased 8% from the comparable quarter, in line with the 8% increase in European vehicle production, to 5.1 million units. In addition, the increase is a result of the strengthening of the euro against the U.S. dollar and the launch of new programs. These factors were partially offset by a decline…

Thanks, Vince. Good afternoon, everyone. I'll review our updated 2014 full year outlook. I will only provide a summary of our outlook since we covered the our details in our press release today. With respect to vehicle production expectations, we expect 2014 North American light vehicle production to be approximately 16.8 million units, up about 100,000 units from our March outlook. In addition, the Canadian dollar has strengthened modestly against the U.S. dollar since our last outlook. In Europe, we expect 2014 total European light vehicle production to be approximately 19.5 million units, higher than the 19.3 million units from our previous outlook. As well, in Europe, we're assuming a higher euro relative to our previous outlook. The increase in North American and European vehicle production, together with the higher expected euro and Canadian dollar relative to our previous outlook, are the biggest drivers of increased expected sales in these regions. Our production sales ranges in Asia and Rest of World are unchanged from our previous outlook. As a result of our higher production sales ranges in North America and Europe, our higher assembly sales ranges and an increase in expected tooling and other sales, our total sales for 2014 are now expected to be between $34.9 billion and $36.6 billion. At the low-end of this range, we would exceed last year's record sales. We now expect our consolidated operating margin percentage to be in the mid-to-high 6% range, up from the mid-6% range in our previous outlooks. And for the full year 2014, we expect our effective tax rate to be approximately 24.5% and fixed assets spending to be approximately $1.4 billion, both consistent with our March outlook. Our expected restructuring costs for 2014, which are entirely related to our exteriors and interiors operations in Europe are expected to be approximately $75 million before tax. This concludes our formal remarks. Thanks for your attention today. Sharlene, we'll be pleased to answer any questions.

[Operator Instructions] Our first question comes from the line of Mark Neville with Scotia.

In looking at Q1 results, would it be safe to assume that the increase in margin guidance is because of Europe, or are you just feeling more positive about North America and Asia as well?

When you look at our overall sort of Q1 margin and our outlook for entire 2014, there's a lot of moving pieces. So we're expecting in North America to get into a margin range of kind of 9.5% to 10% and we see some pretty good results in Europe, as well as in Asia. And when you start adding up all the divisions across the board and you look at different currencies and different mix, we're comfortable moving up our margin outlook for the entire 2014 compared to our previous outlook that we gave in February.

Okay. I guess on Europe. Aside from, I guess, any normal seasonal variations, I mean should we use Q1 sort of as a base to build from or is there maybe a reason -- it could step down just because it's so strong in Q1?

I think you got to -- you look at our business and you got a couple of slower -- typically slower quarters in the year. You got your summer shutdowns, your Christmas shutdowns, so it's not always a good assumption to use Q1 as a proxy for what's going to happen in the balance of the year. In terms of as well launches and when they occur, typically launches take place after the summer shutdown. So the Q1 margin, although directionally is stronger than where we were last year and we're guiding overall European margins to be higher in 2014 versus 2013, I don't think using Q1 as a proxy is the right thing to do because there is seasonality in our numbers.

Yes, I know. I guess what I was getting at is Q1 this year is a lot stronger than last year. Your guidance is for sort of a modest increase.

Yes. That's our best guess right now. We can take a look at it after Q2. As Vince said, we've got a lot of things going on there. I was pleasantly surprised with Q1 results. We'll have to give an update later in the year if we think it's going to change from the range we've given.

Okay. And maybe just a question on the NCIB. I mean you've amended that, so now you can purchase up to 20 million shares. I mean is there any reason to think that you wouldn't max that out just given your existing cash, the attention to take that to 0, and just given the fact that your earning so much free cash and have access to a lot of debt to fund growth outside of planned CapEx?

Well, if you -- we are generating a lot of cash and our capital spending, although it's at high levels, is still generating excess cash. And as we look at our overall targets, to get to kind of 1 to 1.5x till the end of 2015. Our existing NCIB, that allowed us to buy 12 million shares, would have been exhausted next quarter given the rate we're buying back stock. So we needed to move that up to give us more flexibility. So we'll see how the year progresses, but certainly it's our intention to continue to buy back stock and achieve the leverage targets that we've clearly stated over and over again.

The only thing I would change probably is if we do a fairly sizable acquisition. If we were going to do that, then we would slow it down.

Our next question comes from the line of Colin Langan with UBS.

When you look at North America, if you take out the E-Car amortization margins, looks like they would have fallen even though sales rose. So any color on why the -- there's slight underlying weakness in the core North America business when you pull out the E-Car sort of year-over-year benefit.

Let me just give you those numbers and then we can respond to your questions. So if you remove E-Car amortization in North America in Q1 of 2013, we would have reported a 9.7% margin. And in the first quarter 2014, we would have reported a 9.5% margin. So on year-over-year basis x E-Car amortization, there is a slight decline. And when you look at the factors for that -- the primary factor for that is launch costs associated with some new program launches and inefficiencies that -- probably about 4 plants in launching new business in Q1 of 2014. That would have negatively impacted our overall profitability and margins in the first quarter.

So most of those hit us -- well, they all hit us in Q1. But most of them we've got a handle on them and it's coming down. We're going to have some bit spill over into Q2 but we're in much better shape now than we were in the first quarter.

Okay. But the E-Car benefit will continue through the rest of the year when we look at it year-over-year, right? So...

Yes, the E-Car amortization is absolutely done, right? And when we quote our operating margins and even when we refer to where we were last year, we typically back up the E-Car amortization. So for example, last year, for the full year x E-Car, our operating margin on a consolidated basis was 6.3%. And our -- today's guidance is sort of mid-to-high 6% range. Those are the numbers you should be comparing to.

Okay. And when we look at Europe, maybe you've indicated you should have been hit by many -- some of the business rolling off and walking away from some unprofitable business. But your overall sales were in line with the market. So is it just anything unique in the quarter that drove this maybe a bit stronger than expected mix, or is the timing of some of the business that rolled off is going to roll off more later in the year? Any color there?

Some of it is currency and some of it is timing.

I think when you look at the -- on quarter-over-quarter basis in Europe, and we're about -- just over $2.4 billion last year and we're just over $2.6 billion this year. Sort of the single biggest change year-over-year is foreign exchange, so with the strengthening of the euro against the U.S. dollar. But we also benefited from new programs that launches offset by some programs that balanced that. But all in all, it was a plus, and we certainly benefited from a change in volumes.

Okay. And just one last question. Last week, Visteon announced the sale of their interiors business. It looks like JCI is considering -- possibly considering divesting theirs. Any color on how you're currently thinking about the business? Is that something that you're still focused on fixing, or does some of the recent transactions actually change your view in terms of how you would look at the timeline for that business?

No surprise on what's going on in the market in the interiors business. We have separated our interiors business from our exteriors business, which they were separate a couple of years ago, we're just trying to get to a closer focus on it with a global precedent. We're continuing to focus on the profitability, on continuing to win profitable business. It is still a challenging business unit where there's lots going on. We've had a number of discussions with various customers on what their interest level is. I still see that being a challenging business going forward, but we're still analyzing what's the best thing to do. And right now, we've got our heads down just trying to run it as efficiently as possible and look where the technology is going and win profitable business going forward.

Our next question comes from the line of John Murphy with Bank of America Merrill Lynch.

First, a follow-up question on the interiors, Don. The business, you said now, was separated from the exteriors. How tied is that to sort of the quoting activity in the rest of your business? I'm just trying to understand sort of maybe what the cost of exit would be there before because in the past, you've tried to get out of underperforming businesses and then had to get back in just at the request the customers. Is this separated enough that you might be able to exit that business at some time down the road through divestiture or closure?

No, I think we've got pretty good segregation between interiors and exteriors. And most of our business are pretty segregated. We've got a few plants that have multiple products in them. The business you are talking about that we exited and we reacquired was the carpet business and it had substantial losses. And we sold it December, we thought was a -- well, they were a carpet supplier, we thought they would be capable and, quite frankly, they didn't execute very well. So the customers wanted us to take it back and we did. On the interiors business, I don't know exactly where we're going to end up because we're still looking at it and, hopefully, it will be a good business going forward. If we decided that we're going to do something with it -- whenever we're going to do anything with a business, we want to make sure it would be in the hands of a competent buyer because we do a lot of business with their customers. We don't like letting them down. But it really is a standalone business. So like any other business unit in Magna -- if we decide we want to do some of that, I think we have the ability, but we can't just give it to somebody who is going to fail in launches and in supporting the customer obviously.

Okay. And then sort of a second follow-up on the European margins. Was there anything in the quarter or what you're seeing right now in Europe that would lead you to a different outcome of saying that your European margins would basically half what they would be in North America? I mean because it seems like you're performing much better. And you might, down the line, a couple of years, be -- you'd sort of be in the 5% to 6% range as oppose to the 4% to 5%?

There's nothing that, John, we're seeing that would indicate that what we've talked about for Europe is any different. And just to be absolutely clear, what we've talked about in Europe is, including our assembly operations, we should be getting to 4.25% to 4.75%, which is slightly less than kind of half of North American margins. And again, the European margins have been diluted by the Magna Steyr assembly operations.

We have an update at where we think we can get to. With a 5-year plan we're -- I guess, we're 3 years into that. We're almost 3 years into that, 2.5 years. And I'm pleased with the progress we're making. We're slightly ahead of where I thought we would be. But I still think we're -- we'll achieve what we said. I would want to probably wait another 6 months and take a look at next year's business plan. There's no fundamental reason why we should be operating at different margins, but the fact of the matter is, I guess, we are for a number of reasons. I think once we get through the final restructuring, which we've got a very good plan right now, we're doing -- getting to most of it this year and we're working on our footprint, we're working on efficiencies in the plant. So we can update later. But there's no fundamental reasons that says that we -- we would always be at half the margins.

Okay. And then 2 just specific questions. First on the outlook. You kind of alluded to currencies being a big driver of the reason that you raised sales guidance. But your operating income guidance is going up substantially as well because you're raising the range on the margin on a, now, higher base of sales. Is there any impact of ForEx in the operating margin guidance or is the rise in the operating margin guidance really a function of performance in the first quarter and what you expect for the rest of the year? Because it's -- without -- I mean with that inflation in revenue because of ForEx, it makes that increasing your operating margin actually that much more impressive.

John, there's a couple of things that are going on and impacting our sales guidance. The first is certainly foreign exchange. That would be -- our current outlook is based on a higher Canadian and euro exchange rates versus the U.S. dollar. But we've also moved up our guidance for production in both North America and Europe. So it's -- the combination of currencies and higher volumes is generating the higher sales. So this higher production volume is generally into your bookings. Pull-through being at closer to contribution margins as opposed to average margins, that's going to help to move your operating margin up. And those will be the biggest factors impacting both sales and operating margins.

Okay. So it's fair to say that the operating margin was not changed around at all by ForEx, it was really the revenue line that was -- that had the impact?

That's correct.

Okay. And then just lastly on the amortization. I know, obviously, E-Car dropped off as we got through the second half of last year. But the step-down from Q4 to first quarter on D&A from $284 million to $217 million, is a big drop-off when you look at Q4 to Q1. Is there's anything that's seasonal that's going on in D&A or something else that's going on it that would drive that drop off sequentially.

Yes, John. Sorry, I just wanted to point out that the amortization for E-Car did not drop off in the middle of last year. It dropped off in the fourth quarter of last year. So what you're seeing between Q1 -- sorry, Q4 and Q1, I think there's about $39 million -- $39 million to $40 million that's related E-Car amortization.

So it's almost entire change.

Okay. So the $217 million that we saw in the first quarter, is it a decent run rate quarterly going forward? Is that...

That's right.

So that's your capital coming in.

Get into capital spending and the $1.4 billion, and that's going to -- will most likely move D&A up as we move through the course of the year.

Our next question comes from the line of Ravi Shanker with Morgan Stanley.

A few follow-ups. First in the divestitures. Don, Vince, you both said in the past that you're going to be look -- you're taking a look at the portfolio business that you guys have in Magna, and you maybe had a few business that's considered to be non-core. Is there any update on how you're thinking about those businesses? And is there any way to quantify just how much of revenues may actually come from these non-core businesses?

Not really any update. A couple -- we reviewed it with our board yesterday actually, and we don't want to talk publicly because if we're going to do something that obviously impacts our customers and our employees. But we're in no panic and some of the business units that we were looking at as being not strategic, we have actually makes some pretty good improvements in it. Long-term, we may still think the best thing to do from a value creation and, quite frankly, for the business unit itself is if that we don't think we're going to be big enough on a global basis, we may want to joint venture or sell it to somebody who is strategic in that area. But I don't have anything to update and I just had the question on interiors. That's a significant segment of Magna. Anything else that we've had any discussions on is not -- some of them are -- and maybe hundreds of millions of dollars, but it's not like it's material to the company.

Got it. On North America, I apologize if I missed this, but did you quantify the launch costs in the first quarter that were a headwind?

No, we didn't quantify it, and it's -- some of them were more, quite frankly, unexpected. We had a capacity issue, in one plant, we had some other quality issues. So we haven't quantified it. We'll be getting back to -- when you look at the margins, the guidance we've given, I think we're going to have some spill -- we'll have some spillover in the Q2 that's already in Q2. But I think you could -- there's really no way, I guess, to model it, but I don't want to get into the specifics on how much it was.

Got it. And just finally on the NCIB, it's frankly fairly staggering number of shares that you guys have to buy back now in the next couple of quarters. But just looking ahead, would you see this as a one-time event? Or do you think, given the cash flow you've generated and the state of your balance sheet even the end of this, that this is something you can maybe continue on a sustainable basis for a couple of years at least? The size of the NCIB, I mean.

Ravi, if you look at kind of our target, kind of 1 to 1.5x, and if you run the -- what that would mean at the end of March of 2014. To get to our target capital structure, we've got to deploy cash between $1.7 to $3.2 billion. So if we're not investing in acquisitions or if our capital spending is not growing up -- growing in a very substantial way, we're going to continue to generate excess cash between now and the end of 2015. So if you kind of run the math on the assumption that there's no acquisition and capital may go up, but it's not going to double, we're going to continue with the buyback until the end of at least 2015. If we come become across an opportunity that makes a lot of sense that it consumes some cash, then we may scale down on the buyback. But past 2015, we'll reassess where we are in the balance sheet and what our targets are going to be, but we've got a game plan at least certainly for the next 7 quarters.

Our next question comes from the line of Rod Lache with Deutsche Bank.

Just a few things. In North America, you mentioned these launch costs for the new programs and inefficiencies in 4 plants. Are these at what you would characterize as unusually high levels right now? So all things being equal, if we're thinking about next year on year-over-year basis, they should become tailwinds?

I don't -- I can't think what we got next year, if we got more or less launch, we got some other -- we got some greenfield plants going up. But these launch inefficiencies were not expected, and I would say, they are unusually high. Whenever we have launch of a program, you expect costs and we have that built into our business plan, but the -- but it is [ph] in the first quarter in these 3 or 4 divisions was unexpected.

So thinking about what you're run rate of profitability was last year, you did around 10% x E-Car in North America. Is that something -- is that a level that you would characterize as a reasonable base?

I think, Rod, in terms of the guidance that we've given for north America specifically, 9.5% to 10% for 2014, and we talked about that sort of target being appropriate for the next couple of years. We look at Q1, we're at the low end of that range, and Don has talked about of some issues that we've had. There's also seasonality in North America. Again, we talked about -- if you look at summer shutdown and Christmas, so we're -- even though we're a little bit behind where we thought could be for Q1, we're still confident we're going to get to the range that we talked about for the balance or for the full year of 2014 in North America.

I'd have to calculate some numbers. To get to 10%, I don't know if we would be there or not, but it's certainly -- the 9.5% is certainly lower where we should have been in Q1.

Right. But if you -- just sort of squaring something. If you were doing 10% x E-Car last year and that was that's at the high-end of your long-term range. You've got something like $1.6 billion of top line growth that you're expecting in North America through 2016. What are the factors that would mitigate the operating leverage from what we saw last year in North America, if any?

Well, I guess, Rod, to the extent that we're putting in additional capacity, i.e, new plant, then you look at a margin of a new plant, it's going to be more the average margins of those incremental margin. If you're increasing throughput and existing plant and you're adding another shift or you're adding more employees because the capacity then -- you'd probably pull through at a number that's higher than your average margin. And then you have this coming in, going out, you've got changes in mixtures. So there's a lot of moving pieces, Rod, You've got a give-back feature, you're trying to offset all that. So we sit back and look at our business plan, our forecast for 2014 and 2015, the 9.5% to 10% range is something that we're comfortable with. We're striving to exceed that, but we're seeing that's a reasonable range to be in over the next couple of years.

Okay. Just kind of a separate issue on North America. A number of automakers are struggling with, let's say, an elevated level of recall activity, a lot of sensitivity to that kind of thing. And do you think that, that situation that exist today has any implications for you as a supplier in any way? Does that maybe mitigate your ability to affect VAVE to mitigate pricing, or anything along those lines?

No, it's certainly a concern. If you look at what's going on in the industry at the OEM level and, obviously, quite a few of those root cause come from the supply base, we've always had this issue to deal with and that's why we're focused so heavily on our program management, on our failure mode and effect analysis. So when you go into your product development process, you look at what possible things should go wrong in the product, what possible things could go wrong in the process. And if we are following what we're trying to really live by in our world-class manufacturing, in theory, you eliminate any potential issue, and there's always issues you can come up with a variety of factors in a vehicle or environmental factors that we didn't anticipate during tests. So I don't think anything is fundamentally changed. I think the governments are certainly more focused on issues and there is more sensitivity around them, so it worries me that the fines that are being levied to companies, and I don't know that the root cause of these issues and I'm not close enough to it. But I think as long as people look reasonably at these things and look at the facts reasonably, I don't see anything fundamentally changing for us. But it just reinforces our focus on making sure we really understand what potential things could go wrong in the product design, the tooling and the process.

So you don't see any friction in your ability to implement engineering changes to take costs out to get approval for that to mitigate productivity?

I don't think so. And again, there's always a couple of factors. One, I'm sure that it's a safety critical part they're going to be very careful in what they're going to approve, they go through testing. But my experience is they've always been very -- they really look at this closely and for anybody to think that the car companies don't take really serious look at recalls and what they're going to do, if it's a field action, my experience is they've always really taken a hard look at this and there's a lot of scrutiny. So I know it's in the paper a lot more. So it was the safety critical part, you might be right, they may be a little bit more skeptical of making a change unless it's a really good payback. On the flip side, the car companies are all highly motivated to continue to reduce cost, and for the most part, they understand that the best way to do that is rather than arguing with us and squeezing us out of our margins is to come up with a change in something where we can take costs out, whether it's through transportation, whether it's through a product design or improvements in some areas. So I think on balance, it's about the same.

Okay. And just lastly, can you remind us what your Eastern Europe versus Western Europe exposure is? And would you characterize Eastern Europe weakness as something that could be material for you or no at this point?

I don't know. Louis is looking it up here.

I think, Rod, when you look at Eastern Europe and, in particular, sort of you might be referring to Russia, when you look at our overall sales in Russia for 2014 -- about $450 million in 2013.

$450 million?

Yes, $450 million.

I think there's going to be some impact for sure on what's going on over there in sales, no doubt about it. We're -- we just talked briefly about it at our annual meeting, we've got reasonable presence there in some of our product areas, and I still think it's going to be a good long-term place to do business but I am sure the car companies are going to be very reluctant to be forging ahead with anything right now until they see what happens, and I think the supply base were basically the same. It just means there's higher risk, we need to have more certainty on what the returns would be and mitigate the risk somehow if we decide to continue to invest there. So I think the next few months will be very interesting to see where things shape out.

Our next question comes from the line of Peter Sklar with BMO Capital Markets.

I just wanted to have a better understanding of where you're getting the pickup from in Europe over the next few years, as you achieve that target margin guidance you're providing. Because if you look at what you have done so far, there's been a significant amount of operational improvement, restructuring, pricing discipline. And so I'm just wondering like what gets you to the next level? Is it more of the same or is it moving your footprint? I'm just wondering if you can talk a little bit about what's going to happen over the next couple of years?

It's basically more of the same. We still have some significant losing divisions over there. We've got -- 2014 is a big part of finishing the restructuring that we've already identified. Some of it will spill into other years, but we're really getting through the bulk of it. I think we've got some good initiatives and good headway in operating efficiencies over there. We have renegotiated some pricing, but some of it, quite frankly, we still have losing contracts which will fall off over the next couple of years. We will only get to replace the business if it's properly priced. We're not doing a massive change in our footprint, but we are growing in Eastern Europe and we've already -- part of the restructuring is making sure that we are getting to a point where we can be making money. It was a little bit of surprise from the market I think when we gave guidance and where our sales is going to be in Europe in the next couple of years, I don't think there should have been, because as I've said and specifically in our exterior and interior group, but a little bit in some other areas, when you're going through some restructuring and talking with the customer about getting recovery in some of the losses and it's very difficult to get new business, and quite frankly, we weren't aggressively pursuing new business in all of our product areas. We are over that now. I think we've got good relations. We're winning more business. So I think it's just getting -- continuing to do what we're doing and getting to steady-state.

Peter, some of the restructuring activities, we've booked some costs in the quarter of $22 million. We're expecting cost for the full year to be about $75 million. But there's typically a timeline from the time that you actually book the expense and you undertake the activity, and that lag could be 3, 6 months, in some cases, a year and a half. So a lot of the restructuring initiatives and expenses that we've taken, we've seen benefits and we'll continue to see benefits. But some of the activities, the benefits we're not going to see until 2015 and 2016. So that will continue to add to overall operating performance improvement in our European segment.

Okay. And what about the footprint? Are you satisfied with the footprint of your facilities, or is there kind of an overexposure in Western Europe and has to be a gradual migration into lower-cost jurisdictions?

Well, if you're starting with a clean sheet of paper, I'm sure you would end up with a different footprint than we have now. But we've got some division where we think we are really challenged to be able to grow it and make profit and get rate of return. We've dealt with most of them. There's a couple of other divisions that are probably not optimally located. But as long as we're going to make -- we're going to be profitable and we can make a reasonable return. We may not be heavily capitalized in future programs. So it's very similar to what we've been doing over the last 15 years in North America. We had to move some facilities. Some of them relocated because they shouldn't have been down in Mexico or the South. But it's not as if we have to do a massive shuffle from our footprint standpoint. I think it'll be gradual. And a lot of it, quite frankly, will be dictated by whether we continue to win business or not. And if we don't, it's sort of an natural evolution that we'll have plants quoting each other and see who wins the business. But the assembly plants, for the most part, aren't moving, and there's still a big footprint of assembly plants over there. And a lot of the products we make are big, bulky hard-to-ship parts, so hopefully, we can be competitive where we are.

[Operator Instructions] Our next question comes from the line Ryan Brinkman with JPMorgan. Ryan J. Brinkman - JP Morgan Chase & Co, Research Division: I know you're a lot more diversified in North America than in the past. But I think that the GMT900 or K2XX platform is still very important to you. So presumably you incurred some inefficiencies there as they transitioned the last of the vehicles over to the new program, would it be fair to say that this could drive a decent sequential tailwind in 2Q relative to 1Q just cycling past that changeover and then join the higher volumes? And maybe update us on how material that program is for you these days?

The K2XX is our largest program, we're about $2,000 on average of content, and we are expecting higher volumes in Q2 versus Q1 grid [ph]. I think it kind of launches -- launch usually takes more than one quarter and we're launching the SUVs right now, so it's going to continue to affect us I think going forward. But in terms of volumes, certainly, we're higher in Q2 than Q1.

And one of the plans we had some launch issues was for this program as well. So as I said, certainly, as they get the steady-state in their volumes and we get through the launch, it helps. Ryan J. Brinkman - JP Morgan Chase & Co, Research Division: Okay, that's helpful. And then maybe just comment on the incremental margin in Europe in the quarter, it looks like really strong 25% at the EBIT level. Obviously, to get to the kind of margins you're talking about, you have to generate strong incremental margins. But how was -- was there anything unusual driving that? How should we think about the cadence of incremental margins there throughout the remainder of the year?

When I look at Europe, looking Q4 to Q1, let me just get my piece of paper here, and kind of run through it, from Q4 to Q1, we had produced warranty costs from Q4 to Q1, which benefit the bottom line. Launch costs were a little less in Q1 versus Q4. But besides that, the substantial change was just operating performance. Again, going forward, when you think about Europe, you've got to keep in mind, we've talked about this already before in the call, but the seasonality, as you get into Q3, you should -- we were expecting that margins are going to be pressured as a result of just lower volumes in that particular quarter. I think as you look throughout the entire year, we believe and we expect that margins in '14 will be higher than '13. But they're going to move quarter-to-quarter depending on production volumes, and as we move into Europe, that have a negative impact until these programs start to launch. Ryan J. Brinkman - JP Morgan Chase & Co, Research Division: Okay, great. And then last question for me. I know you're engaged in a longer-term effort, right, to increase your exposure to growth in your emerging markets, but presumably, you also feel pretty good these days about your relatively smaller footprint in South America compared to many other suppliers. Have events there caused you to reconsider maybe the amount of capital that you would allocate to organic growth in the region?

Absolutely. I covered it very briefly at the Annual Meeting today. We have -- obviously, we're looking on lot of different geographic regions. But if you look at Brazil, which is primarily Brazil for us, in fact, I was just down in Brazil. We also had some operations in Argentina. Argentina is very challenging for a lot of reasons, from the rules down there, inflation, currency. But our bigger presence is in Brazil. I still think Brazil long-term would probably be a good place to do business. It seems to go through cycles. We've got some very good plants. We have a few plants that are -- we made through an acquisition, which we still have to make some improvements operationally in. But we are having significant challenges on FX issues, inflation issues, raw material costs, which the customers, because they're struggling they don't want to recognize. And if we don't get recognition or help from our customers on things that we think are valid, then we obviously won't put in more capital down there. Many of our customers are working with us on that, a few are really difficult right now. So we will only make new investment if we think we understand the risk. We are going to have a mechanism to handle it with our customers and we're going to hit the acceptable returns. and When we look at places like Brazil or India because of the some of the issues either politically or FX or inflation wise, then we have a higher hurdle rate. So we're not -- right now, we're not putting a lot of new capital in Brazil or India, or probably Sweden and Russia.

Our next question comes from the line of David Tyerman with Canaccord Genuity.

A quick question on South America. Don, in the last call, I think you said there was a possibility of cutting the losses in half there. It obviously didn't make progress in Q1. Do you think that's still possible, or is it going to be a slower process of improving?

Vince is just looking at the numbers. I haven't updated it, but we did say we were going to cut them in half. I know -- and as you mentioned, we're still at the same level as we were in Q1. We have made progress in a number of areas. I think a lot of it will depend on whether we can get the recoveries that we think are reasonable and we think we will get from our customers. It really depends on what happens to the lot of factors outside of our control, and whether we're able to offset them with the customers. So our target will still be to hit -- sort of cut in half. If we miss that by a little bit, it wouldn't surprise me that much, but I really haven't had a real good look to see where we are for the rest of the year.

David, keep in mind that we lost $27 million in Q3, $21 million in Q4. So sequentially, we have made progress.

Yes, but I think we'll have to see. At the end of the year, we go through our conclusion on where we end up in commercial issues, so...

David, I guess, we're still looked at -- we look at kind of where we track in Q1 versus our budget. We're tracking pretty well on track. They may be a little bit better. But again, just what happens in price and price recoveries, but it -- if we continue to meet our budgeted numbers, we should see that loss just about shrink in half in '14 versus '13.

Quite frankly, if we can hit that, I'll be pleased given where I think we stand from a realistic standpoint. But there's a lot of discussion going on. And I think the customers, even though they don't want to recognize some of these costs, they realize if they don't offset the costs, they won't have a supply base down there long-term. So I think they're coming to the conclusion that they want to work with us and at least be reasonable.

Great, okay. Just to clarify then, Vince you said you're on track versus the budget. Are there a number of factors for the remainder of the year that are outside of your control that you need to have happened to continue on that budget track?

Yes, the biggest I've known just what's going to happen with inflation, does that have an impact in raw material, is there going to be FX changes that we don't expect right now and can we get the commercial negotiations to sort of mid-level or expect them to be with our customers, and whether they draw a real hard-line which will give us short-term pain, but long-term of this would lower investment down there.

Sure. Okay, fair enough.

From an operational standpoint, we're pretty well on track with what we want to do.

Okay. Second question is just on the tax rate. You reiterated the guidance. Does that include the impact of a 32.5% in Q1?

The 32 -- the impact of the Austrian tax reform, that's excluded from our 26.5% rate that we booked in the first quarter, David. Guidance of 24.5% is on operating income x unusuals, and we're still expecting to get to 24.5% through the year. As you look at kind of the tax rate quarter-by-quarter, they may bounce around a little higher than the average rate for 2014. Part of that just relates to some permanent items and timing event that will reverse themselves as the year progresses. So if I look at the quarter in 26.5% versus 24.5%, 2% on our numbers means about $0.05 per share, which should come back in the balance of the year.

Okay, fair enough. And then just on depreciation and amortization, I hear what you say year-over-year, but this thing came down a lot sequentially. When we're thinking about modeling D&A, is there something else that drives the level in quarters because it's kind of all over the place?

David, there's going to be -- what drives depreciation is a couple of things. Clearly, for the balance of '14, when you look at a comparable quarter, the E-Car intangibles which was $39 million to $40 million a quarter, there's going to be a difference. We're going to have additional depreciation as it relates to new capital spending, including spending for new facilities. The other thing that impacts depreciation on a quarter-by-quarter basis is exchange rates. So exchange rates moved down or moved up compared to the previous quarter, Canadian dollar was lower in the first quarter of 2014 versus the fourth quarter of 2013. That's going to reduce the amount of depreciation we recorded in U.S. dollars -- may not impact Canadian dollar depreciation but certainly U.S. dollar depreciation. So those are the moving pieces. There's nothing in depreciation line that's unusual.

Right. Okay, that's very helpful. So keep an eye on FX. And then just last question I had. Is there a minimum cash balance that you'd like to keep?

Yes. David, as you look through where we operate in the world, we've got -- it's difficult to get cash in and out. When you look at payables and receivables and the margin inflows and outflows, we calculate we need about $750 million to run our business. Again, it depends on what time you measure that too, right. But depending if you got a huge receipt at the end of the quarter, that $750 million may be higher. If you've got a huge outflow of payables, that may be lower. But roughly about $750 million to run this business.

Our next question comes from the line of Todd Coupland with CIBC World Markets.

So two quick questions for me, if I could. Firstly, on the NCIB. Of the $12 million, how much have you bought back so far?

Yes. So we've got of the $12 million, we bought back just over 6.6 million shares, and that's to May 2, 2014. So just in Q4 last year, we bought 2.5 million, in Q1, we bought 2.7 million and in the months of April and I guess the first couple of days in May, we bought an additional 1.4 million.

Okay. Okay, great. My second question is, I just want to make sure I have the European messaging from you guys correct. It seems like you were saying it's a bit better than plan. Obviously, you had your plan for restructuring and you're working your way through that. But the volumes have surprised you, and that has been the biggest driver to the margin coming in higher than what you thought it might have. So I guess my question -- if that's correct, so then my question is, you guys kind of have a flat outlook for Europe. Europe has actually been coming in better than that. So our read-through is if these volumes continue to do better than flat in that region, then your margin should continue to be better than your plan. Is that a right interpretation?

Yes, let me answer and ask Louis just to chime in at the end specifically on the German 3 volumes. When I say we're slightly better than plan, going back, I forget the year, and I think it was 2012 we started, we said over a 5-year period, we would go from basically a breakeven or losing a bit of money, I think, as we were back then. We'd get to half the margins on -- excluding assembly sales that we were in North America. So that's why I said, that's the plan we're tracking. Last year, we were slightly ahead of plan, so I'm pleased with some of the efforts we're doing, specifically in operational efficiencies. The volume really hasn't -- Louis may contradict me here, but my view is that volumes really haven't made much impact because most of our sales are to BMW and Mercedes, Volkswagen, Audi, JLR actually is pretty good as well. So the -- we're not getting huge pickup from volumes in -- on those customers. So it's above where we expect and I don't -- it depends on if the volumes increased, what customers they'll increase with. But do you have the volumes here?

I think when you look at the -- our full year forecast, our recent guidance in Europe is that volumes are up by 1% over where we were last year. And when I look at kind of our internal assumptions on the mix of business, the German 3 where we have the most exposure, they're up 1%. So they're moving along with the market. But just to reiterate what Don said, the improvements in operating margins in Europe is a result of what we're doing to deal with operations, whether it's restructuring activities, world-class manufacturing efforts, being [ph] positions that we received that should benefit us in '13 that continue to benefit us in '14. It isn't volumes. And certainly, if volumes for the German 3 pick-up and we're on those programs, that should be able to help us as we should be generating some positive contribution margin on those additional sales.

And there are no further questions at this time. I'll turn the call back over to you.

Great. Well, thanks, everybody, for joining us today. It's always good to get to the Annual Meeting and be able to talk about the full year. I think we've got a lot of good things ahead of us. We expect to continue with our strong performance for the remainder of the year, and hopefully the economy stays up. We'll be tracking a lot of things, the events that are going around the world, but we're pleased with what we see coming forward. So thanks very much for your time and attention, and we'll talk soon. Bye.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.