Ladies and gentlemen, thank you for standing by, and welcome to the Magna International Second Quarter 2017 Results Call. During today's presentation, all participants will remain in a listen-only mode. Afterwards, we will conduct a question-and-answer session with instructions to follow at that time. Please note, ladies and gentlemen, that today's call is being recorded, Friday, August 11, 2017. It is now my pleasure to turn today's conference over to Mr. Louis Tonelli, Vice President of Investor Relations. Please go ahead, sir.

Thanks, Bridget. Hello, everyone, and welcome to our second quarter 2017 conference call. Joining me today are Don Walker, Chief Executive Officer, and Vince Galifi, Chief Financial Officer. Yesterday, our board of directors met and approved our financial results for the second quarter ended June 30, 2017. We issued a press release this morning for the quarter. You'll find the press release, today's conference call webcast, the slide presentation to go along with the call, and our updated quarterly financial review, all in the Investor Relations section of our website at magna.com. Before we get started, just as a 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. As we review financial information today, please also note that all figures discussed are in U.S. dollars unless otherwise noted. We've included a reconciliation of certain key financial statement lines between reported results and results excluding unusual items. Our quarterly earnings discussion today excludes the impact of unusual items. In the second quarter of 2017, we recorded an additional restructuring charges at our European powertrain facility in which we initiated restructuring in the fourth quarter of 2016. These reduced EBIT and net income attributable to Magna each by $3 million and EPS by $0.01. There were no unusual items in the second quarter of 2016. And now, I'll pass the call over to Don.

Thanks, Louis. Hello, everyone. Let me start off with some of the highlights from the second quarter. We continued our organic growth in excess of vehicle production. We posted record Q2 results and Vince will walk you through the specifics. We returned $484 million to shareholders in the form of share repurchases and dividends. Other highlights for the quarter include recent Magna activities in autonomous driving, new technologies that we have highlighted lately, and an update in Magna Steyr, which is in the midst of heavy launch activity over the next couple of years. For the past year, we have been demonstrating our ongoing performance of our organic sales growth relative to light vehicle production and this continued in the second quarter of 2017. In the second quarter, North American production sales grew 2% over the second quarter of 2016. Our organic sales growth, excluding foreign exchange movements, was 3%. This compares to a 3% decline in the North American light vehicle production or 6% outperformance to the market. European production sales, which essentially flat excluding foreign exchange movements and acquisitions compared to a decline of 1% for European light vehicle production. This represented the modest 1% outperformance relative to the market. And in Asia, a market we have been highly focused on over the past two years, production sales grew 20% organically compared to 5% for Asian production, representing 15% market outperformance. Adding to this are our unconsolidated joint venture sales in Asia, grew about 47% in the second quarter. In addition, to all-time record quarterly sales, we posted second quarter records in net income attributable to Magna and diluted earnings per share. Autonomous driving is very hot topic right now, and we've recently announced we're bringing our vision and software systems expertise, as well as our secured connectivity…

Thanks, Don, and hello, everyone. Overall, we posted solid second quarter consolidated results in line with our internal expectations. Consolidated sales were $9.7 billion, a new all-time quarterly record. Net income attributable to Magna was a second quarter record, $564 million. Diluted EPS was $1.49, also a second quarter record for us, that's up 6%. We've returned $484 million to shareholders through share repurchases and dividends and, we have a number of positive revisions to our 2017 outlook, which are driving an increase in expected earnings and free cash flow compared to our previous outlook. I'll cover each of these in my financial review. Consolidated sales increased 3% to $9.7 billion in Q2. This increase reflected higher North America, Asia, and Rest of World production sales along with higher complete vehicle assembly sales, partially offset by lower European production sales and lower tooling sales. In North America, production sales were up 2% despite a 3% decline in vehicle production. The increase largely reflected the launch of new programs, partially offset by $68 million decrease due to the year-over-year weakening of the Canadian dollar against the U.S. dollar. In Europe, production sales declined 1% compared to Q2 of last year. The decline reflects lower volumes as production was down 1% in Europe as well as a $71 million decline due to a lower euro, British pound, and Turkish lira, slightly offset by the Russian ruble relative to the U.S. dollar, and lower content on the MINI Countryman and Paceman compared to the previous model, which was assembled at Magna Steyr and on which we had substantial production content. These were offset by the launch of new programs and acquisitions, which contributed $35 million to sales. We expect to see a reacceleration of production sales outperformance compared to vehicle production in the…

Thank you. Our first question comes from the line of Rod Lache. Please proceed with your question.

Hi. This is Shreyas Patel on for Rod. So, I just had a couple of questions. So, first off, can you help quantify the operational inefficiency that you mentioned in Europe? And also, you mentioned that you're expecting out of the GETRAG contribution there to be a little lower than previously expected. Can you kind of give us a little more color on that?

Yeah. Certainly, I'll try to do that. We were launching some programs in this specific facility in 2016. The volumes have been ramping up in quite a substantial way over and above what we certainly were anticipating and expecting. And as a result, we had some additional cost in the quarter, which I don't think are going to go away. For the balance of the year, they are going to be reduced, but won't go away. So, if I look at the overall, I guess, European margins, the impact in the second quarter alone of this facility was about 0.3% under that. As I look at the kind of second half of the year, we do see some improvements, but I still think that this facility is going to negatively impact European margins for the second half by under 0.2%. So we'll see some improvement, but continued deterioration. In the case of GETRAG, what we're seeing is, there is reduced sales with a particular customer. And as a result of reduced sales, our equity income is going to be lower, and again, that's sort of a headwind to European margin in the second half of the year compared to our previous expectations. Just to finish off Europe, because I'm sure there will be much more questions on Europe. The other sort of from a margin perspective, what's impacting Europe in the second half of the year compared to previous expectations, is higher tooling sales. So, again, if you think about tooling sales where we don't really make any money on tooling, if you are increasing sales on changing EBIT, it will have a negative impact on reported margins, not necessarily a negative impact on reported EBIT. So those three items alone has resulted in us slightly lowering our margin expectations in Europe for the full year of 2017.

Okay. And then, also, can you just kind of remind us again of what's the Canadian dollar impact on revenues and flow-through to op margins? I believe, it's something in the neighborhood of $70 million per $0.01 change and like 10% flow-through, is that kind of right?

Yes, it's about $60 million on sales for every $0.01 on an annual basis. And we don't talk about the profit impact and if you assume approximately the same margin as we have in North America, it's a reasonable assumption, that's all we are saying.

Okay. And then just the last one, I saw that the free cash flow guidance has been raised for 2017. Can you just kind of help us bridge from 2017, you're looking to do roughly $1.3 billion to what you talked about previously for 2019, I think it's over $2 billion of free cash flow. I know CapEx should be down over that period, that looks like it might be a $200 million, $300 million benefit. But can you kind of just help us with some of the other items?

Yeah, there's a couple of components that are going to help to contribute to the increased free cash flow. First is our earnings, we're expecting sales to continue to grow, we continue to expect margin expansion in Europe. We'll probably see some improvement in booking capital as we ramp up our vehicle assembly business. And as we've been focusing on capital, we're expecting capital in absolute dollars to come down. We've talked about our capital spending profile over a number of years and if you think about kind of 2014, 2015 and 2016, capital spend and even 2017, capital has been in more elevated levels and when I think about our capital spending, obviously we're spending capital to grow the business, and we also got some maintenance capital. But, capital is also kind of lumpy. So, we've been putting in some lumpy type capital expenditures, you put them in place and the capital is around for 15 years, 20 years, but there seems to have been more of those lumpy expenditures over the last several years. So, all of that should contribute to lower capital as we look out into 2018 and 2019.

Okay. And that lumpy capital is kind of like investments, for example in the CVA business, adding a paint facility, for example, so it's not – even as you're growing, your bookings are growing your new business, you can still support that at a lower CapEx level relative to sales.

That's a good example. The paint facility that we're putting in is a lumpy type capital, you put that in there, that's in there for a period of time. But I can look at other business units as well. I think in our powertrain business, we're putting in capacity to support the growth in transmissions, or even if I look at our Cosma business, where we've been putting in a number of hot stamping lines, it's going to be in place for quite some time, but it's been lumpy, because it's all been pretty concentrated in the last couple of years.

And the same facility costs are already in our numbers.

Okay. All right. Thanks.

Our next question comes from the line of David Tyerman of Cormark Securities. Please proceed with your question.

Yes. Good morning. I just wanted to get an idea of how the puts and takes on the Steyr launch and the GETRAG launches affect your margins over, call it, the next year, year-and-a-half?

Yeah. I think if you look at GETRAG, they continued to ramp up business and contribute more to profitability, that should continue to be accretive to overall margins, whether that's in Europe or whether that's in Asia. With respect to Magna Steyr, David, my recollection is that as we continue to grow sales of Magna Steyr, because Magna Steyr operates at lower margins, it's a decent return on capital business, but a lower margin, it's going to have a negative impact to overall margins in Europe as well as North America. But having said all that, when we kind of looked at our margin expectations for 2019, so Steyr is negative, GETRAG's positive, other areas of our business continue to expand margins. So all-in-all, we're still expecting margins in Europe to expand.

All right.

And GETRAG, remember, we talked about U-shape, so Q2 came in lower, Q3 will get lower, Q4 we start to get the benefits of some of the programs that are launching, so that should be positive again.

Yeah. So, carrying that into 2018, should we see continued improvements within GETRAG, given that you're getting past the bulk of the launches or are there more big slugs of launches that may cause more U's along the way?

No David, we're expecting continued improvements into 2018.

Okay. And the same thing in Magna Steyr, like it's being dragged down right now it sounds like by the 5-Series, presumably as that matures it gets better, but then you've got other launches. So I'm just wondering when you take all that into account, what should we be thinking?

Yeah. The way I would think about it is, certainly the launch cost we'll incur on the 5-Series will go away as we continue to ramp that up. We'll probably have some of the Jaguar programs. But, I think the bigger impact on margins in Europe as it relates to Magna Steyr is the growth in revenue. So (31:38) grow revenue. And even though we are generating positive profit, it'll be a negative impact to reported margins.

The bigger part of our overall European business (31:47).

All right. Okay. That's helpful. Thank you.

Our next question comes from the line of Peter Sklar of BMO Capital. Please proceed with your question.

Thanks. Don, I'm just wondering if you could comment on this as hybrid vehicles gain further penetration in global vehicle production over the next number of years. Can you just talk about how you see this playing out in your powertrain business, what are the puts and takes for you?

Sure. Swamy had covered in quite a bit of detail some of the products that we have in the ICE engines and then hybrid and then battery electric vehicles, so we've given you a lot of detail. In fact, I talked in Traverse City a couple of weeks ago about what we thought the penetration rates are going to be. I think the rate of penetration for pure electric vehicles will be slower than a lot of people are anticipating. However, it doesn't really matter to us how fast they penetrate because we do have good content in any version. If you look at our content per vehicle in internal combustion engines or what would be typically available to us, it's about $2,000. As we move into hybrid, it actually goes up to about $3,000 per vehicle. So, it obviously depends on the rate we win the business, but that is a benefit. When it goes to pure electric vehicles, it comes down again to about $2,500, so I still think over the next 10 years the predominant powertrain is going to be internal combustion engines; however, we're going to see more and more penetration to hybrids, especially as you see all the issues with diesel. So that's we're going to be seeing I think more hybrid. But overall it depends on the win rate, but I think we're pretty well-positioned in all of them. We can go into more detail if you want product by product but that's a high level view.

And hybrid includes the internal combustion engine, of course.

Yeah.

Right. So, on the internal combustion engine associated with the hybrid, I mean, that would be a smaller displacement engine than a pure ICE engine. Does that affect your content at all?

Well. What we've tried to do is we've taken a look at what the average – so a typical ICE engine and we've taken a look at what a typical hybrid would be. So, it doesn't necessarily mean it's going to be a much smaller ICE engine, but it could be depending on what the configuration is going to be. If you look at hybrids coming up, we have a hybrid dual-clutch transmission. So, if somebody orders it with the – as a hybrid, then we put the motor in it. It's designed that way. You're going to see more 48-volt systems and you're going see the axle systems, the electronic power slip (34:51) differentials, so it's going to be more electronic pumps. So, it really depends on the application, and hybrids are all over the place. But our available content to quote on as we move from an internal combustion engine to a hybrid engine actually goes up. So there is not a lot of hybrids out there yet, so it will depend on how much business we win; but, the potential actually goes up for our powertrain business.

And does that apply for GETRAG? Is there a better opportunity for GETRAG as we transition to hybrid?

I think if you look at the fuel efficiencies of a dual-clutch transmission, that's one of the advantages; and, we're seeing lot more pressure going away from diesels and a lot more pressure, I think, on moving into hybrids or electrification of the powertrain. So one of the things we liked about GETRAG was they have good manual transmission capability, very efficient, but they've also got very good dual-clutch transmission. It has the hybrid feature available into it. So the more pressure that we see on fuel efficiency targets, then it's good – I think it's good for the application of dual-clutch transmissions, which is where the technology really resides in GETRAG; but, they're also very strong in manuals and manuals still have a huge penetration around the world.

Okay. And then just lastly, do you mind – I know you've talked about this before, but just reviewing, again, what are the larger content opportunities for Magna on pure battery electric vehicles that make-up that $2,500 of potential content?

Well, the transmission would be much simpler, but you still need a transfer – we call it transfer case, or transmission. You still have to get the power outside. It could be a single or a multi-speed. Those are areas where we're going to be involved with. As you move into electric – it depends on the configurations. If you look at electric drive systems, whether it's an e-axle, that's another opportunity; and also, the thermal management. It still needs pumps and other products. So those are some of the bigger areas.

We still need to get power to the wheels somehow, and that's our expertise.

Right.

In theory, the way that we've designed our powertrain is we're very small in engines, so what we're really focused on is, whether it's an internal combustion engine or a hybrid or a battery electric vehicle or a hydrogen vehicle or a fuel cell vehicle, you still need to get that energy from that power source to drive the wheels; and, that's really what we've focused on for years.

And keep in mind we're big in four-wheel drive, all-wheel drive, but that is a limited-sized market; whereas if you're talking about some sort of e-drive system that takes the power to the wheels, that's a much bigger market. That isn't just confined to the four-wheel and all-wheel drive. It's a bigger market.

Right. Okay. Thanks very much.

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

Good morning, guys. This is Aileen Smith on for John. With respect to North America, if we were to look at IHS forecasts, production schedules clearly decelerated through the course of the quarter. Can you talk about how that trend impacted your business? How quickly are you able to pull cost out and adjust your production lines to meet your automaker customers, and how much notice in advance do you need from them to appropriately adjust your own production?

Yeah. I mean, volume has ended up for sure being lower than we had anticipated even in our own forecast. So, we did see some of the deceleration in the volumes.

It really depends on where the reduction comes, what car line, what our content is, and then what type of product we've got in there as well. But one of the fundamental things about Magna is we're a very decentralized company. Every plant runs fairly autonomously. We do leverage our size in purchasing and best practices. But the plants are highly motivated because of their compensation that if there is a downturn, they will immediately adjust their costs to the extent they can; but, it really depends on whether we're talking about a stamping operation, a fascia operation. We will know releases from customers months in advance for the most part, and then we make adjustments to it. We still think that there is still a good demand over the next three years built up in North America, but (39:49) we just have to react to it.

And in terms of the actions we take, it really depends. If there's a slowdown, do we think it's temporary? Is it permanent? How big of a slowdown might it be? And do you move work that's on the outside and you bring it in to keep your facilities full? How do you deal with labor? How do you deal with discretionary expenditures? As Don talked about, it really is specific on the plant and, certainly, the view that we take on how long and how severe any downturn may be.

And if the question is, did it impact us in the quarter in North America? The answer is no, not really.

Okay, great. That's very helpful. And then, to get some insight on the cadence of earnings through the back half of the year, GM's obviously going to be taking production downtime, or is, on the K2XX platform retooling and that's just one part of your business. But is it fair to assume that your 3Q earnings might be a bit seasonally lighter, given the downtime for the program along with some of the other drivers, like GETRAG, that you had mentioned, while 4Q might be a bit seasonally stronger as production ramps back up?

Yeah, in terms of K2XX, we do have some downtime that's baked in. And don't forget these are programs that launch in kind of the 2018, 2019, 2020 timeframe, but we do have Fort Wayne that's currently down. It's down for five weeks. So, if you look at first half versus second half for K2XX, it is going to be negative; we're down kind of 9% in the second half of the year and that does impact us, but there's lots of programs in our top 30 and it isn't the only program.

Yeah. In terms of quarterly kind of guidance, we're not providing that, but let me just help you kind of think about North America. In the first half, our EBIT percent in North America was just over 10%. And if you think about our kind of full-year guidance, we're still holding at around 10%. So, that would indicate second half and first half (41:56) about the same. Keep in mind Q3 and Q4 are impacted just by the summer shutdowns – normal summer shutdowns in July, and then you have the Christmas shutdowns. So, we're still expecting a fairly strong second half in North America.

And as Louis said, the changeover is staggered and depending on what plant you're looking at, Fort Wayne, (42:20) or Flint. But our content on both the truck and the SUV goes up model-to-model, so the smoother and the faster it is, the better for us.

Okay, great. And then, maybe just one last one for you, Don. Thanks for the insight on your product portfolio plans, especially in light of some moves made by other companies. To ask a different, but somewhat related question, are there any specific product lines or divisions in your business that you might be looking to expand going forward? And if we start to see other companies make similar moves to Delphi or express similar interest in separating businesses, are there areas in your business like powertrain or electronics that you may look to make acquisitions and further grow your scale?

Well, we spend a lot of time looking at our product portfolio and the value creation, business growing and the profitability, what we should be doing from a technology aspect, as you would expect. We have made some changes, sold interiors, bought GETRAG, but we also have been sold off some smaller business units, so we'll continue to fine tune our offerings. As far as where we're focused, we typically have focus in two areas. One is, where we get the best return on invested capital and the best free cash flow per business unit, but we also know that there are a lot of changes happening in the autonomous driving, electrification of vehicles, just electrification in general, and the changes in the powertrain we've talked about. So, those are areas we would continue to invest in, whether it be an acquisition, new technologies, in new startup companies, we've done a number of those in the last couple of years, so those would be areas we'll continue to focus in. It doesn't really make a difference to me, what other companies do. We understand what Delphi did, we understand why they did it. So, we are focused on long-term value creation inside our company and we very clearly understand that by giving more clarity in our technologies, in our product lines, will help people outside the company understand what we're doing, but we have a lot of synergies inside the company given our size, given our product breadth. Our electronics business is working on ADAS, but it's also working with our groups on electrification of a lot of different product areas, whether it be in eLatch or the mirror group or powertrain. So, we continue to take a good look at how we can continue to enhance shareholder value and also long-term grow the company profitably.

Great. That's very helpful. Thank you very much.

Our next question comes from the line of Mark Neville of Scotiabank. Please proceed with your question.

Hey, good morning. I just had a couple of points of clarification. I guess first, just to follow-up on – I think it was David's questions from earlier on GETRAG. I guess, when I think about U-shape, at some point to me that I guess implies a step change in profitability or margin, and it almost sounds like you're talking as early potentially as Q4 2017, Q1 2018. I don't know if that's too optimistic or if I'm thinking about that correctly or if it's actually more of a gradual improvement through 2018 and 2019.

No, Mark, you should expect an improvement in the fourth quarter of this year in GETRAG as the launch cost get behind them and they ramp up the business. Just a little bit more color on GETRAG, when we started the year, and we indicated that GETRAG for 2017 on Magna's overall EBIT margins was negative, we would say about negative 0.2%. We have had some outperformance in GETRAG as we look at the balance of the year, we now think that the impact of GETRAG on Magna's overall consolidated EBIT margin has been reduced to about 0.1%, as we did talk about softness in sales at GETRAG, but I want to leave you with the impression that things are actually going better than what we anticipated overall in the GETRAG operations around the world.

Okay, no, that was clear. But I guess, more specifically, more directly, I guess, again thinking about the U, at some point, it implies a very steep improvement. So, I guess, can we expect that as early as 2018?

I think you should expect it as early as Q4 2017.

And into 2018.

Okay. Now, that's what I was looking for, thanks. I guess, on the guidance just the adjustments to the production numbers, was that just based on second half expectations or what we saw in Q1 already?

It was actually based in Europe. It's largely based on what we saw in Q2. And in North America also, partly Q2 and partly back half of the year. There are a couple of programs that incrementally from our old forecasts, there's just more downtime baked in, mainly in passenger cars.

Okay.

So, there's a little bit of that in the back half. So, for both North America and Europe, we did see some of that. Europe, all of it essentially was Q2 related.

All right. Okay. Maybe just one last one. The adjustments to the margin guidance by region, any sort of longer-term implications there for – I don't remember if it was 2018 or 2019, but you had given some targets previously by region as well.

Hey, Mark. Just in terms of what we're doing for the quarter, or the second half of this year, I wouldn't read into kind of longer-term margins. We're still expecting North America margins maintain roughly where they are, continued growth in Asia that will continue to outperform our expectations in Asia. In Europe, as I talked about earlier in the call, Magna Steyr is going to have a negative impact, but with GETRAG ramping up business that should help margins as well as continue operating improvements in new contracts in the rest of our European production plants. (48:48), we'll update kind of where we think next couple of years' margins are once we get our business plan completed later on this year.

Okay. Thanks for taking my questions.

Thank you.

Our next question comes from the line of Rich Kwas of Wells Fargo. Please proceed with your question.

Hi, good morning, everyone. Just a point of clarification around vision, I think Don, you talked about vision expertise and systems expertise, there's been no change in the sensor sourcing, correct, around how you're looking at this longer term with regards to data, is that the right assumption?

When you say no change in sensor sourcing as far as whether it's camera, radar, LiDAR...

Well, who you are using basically? I mean, you're not developing your own sensors, correct, your own detection, object detection?

We still work with Mobileye, but it's around camera, we have a lot of technology in camera and we work with Mobileye, we also do some of our own analysis and, certainly, manipulation of the data to make decisions, so it's a combination. There has really been no change except we have been developing what we believe could be very interesting radar technology as well as in investment which we make in LiDAR, which we think could be very interesting and lower cost, so we're continuing to work in a lot of different areas.

Okay.

And the rear camera, we've got a lot of technology in the rear side particularly.

Right. Right. That's helpful. And then on radar, what's the timing of that in terms of production?

Yeah, we're still R&D testing, it's looking quite good, but we still need to get through all the final tests. And we've had a lot of discussion with the customer, so I really can't say much more about it at this point in time.

Okay. But it's fair to say it's out probably into the early part of next decade, right, before it would go into production?

Yeah. Typically, we're looking at three years from the time you get an award to the time it's really in the vehicle, so – and that would be – that's accurate.

Okay. And then just on some of the mirror technology, is that being coded right now. I assume it's being coded, but have you won any business, any production contracts in some of the mirror technology that you cited in the presentation.

We're coding a lot, we do have lot of new technology in mirrors, the one we're specifically talking about has been shown to customers now, so it would be future contracts.

Okay. Okay. And then one quick one for Vince on FX, the $1.11 is the average for the euro for the year, correct, not the go forward assumption?

Correct.

Okay. And then in terms of the European margin, I assume that FX being coming in a little bit better than expectation may have had some dampening effect on the overall euro margin as well. Is that...

(52:02) outlook – are you referring to the quarter or the...

No, just not for the year given, I mean, I know there are some other bigger operational issues having more impact, but I mean it would seem like the Europe...

Yeah, a little bit of the euro, I would say that, when you look at kind of Europe first half to second half, very tough to build the facility, the stamping facility, the impact on that, higher tooling, certainly reduced sales in GETRAG. But the other thing is driving margins in the second half of the year compared to the first half, the seasonality. You've got the shutdown in summer and the fall. Even though we're not necessarily altering our sales forecast second half to first half, our sales are actually down in euros because of seasonality, but the FX is actually inputting (53:05) those back to U.S. dollars. So even lower sales in Europe you're going to have decremental margins, which is factored into our numbers, even though from a U.S. dollar reported standpoint, you may look at it and say sales are unchanged in Europe. They are in fact down other than for FX.

The big chunk of FX that's in the second half.

Right. Right. That's what I thought, so. Okay. Thank you.

And our next question comes from the line of Todd Coupland of CIBC World Markets. Please proceed with your question.

Yeah, hi. Good morning, everyone. One quick question on capital allocation, if I could, pretty active in the share buyback. Is that something you plan to continue as you move into the second half?

Yeah, Todd. We have been pretty active and where we sort of sit from a target leverage ratio, we still have room to buy back more stock, so our expectation is that we will continue to be active in the market for the balance of the year.

Okay. And secondly, if I could just return to the strategic question on the thought process of creating value, so I guess you said it for a couple of quarters now that it's not a priority and you want to keep the businesses that you have in the portfolio. Is that a no forever decision or have you put some benchmarks out there to say, it possibly could get back on the table if business A is large enough for valuations in the market justified, et cetera? How are you actually thinking about that as we go through time? Thanks very much.

It's an ongoing process. We continue to look always at our product offerings, our product portfolios, what our customers want, what's happening in the mobility of the future, what our competitors are doing. So, it's an ongoing process. One of the things we have. So, we continue to look at what we think is right for the long term of the business, but we're quite aware what is going on in the market, – we do think our stock is undervalued. We've had a lot of discussions about that. We're showing more technology, we're trying to give more information about our various product areas, and why we think they're good businesses. But after having said that we will continue to look at what's the best way to structure the company. One of the things we have been looking at is assessing whether providing more transparency within the business units, in the product areas would further highlight the attractiveness of our various business lines and help investors better understand the quality of our business. So it's an ongoing evaluation, but right now, we do think there's a lot of benefits we see given our product offerings, our size, how we can work on systems in the vehicle, our complete vehicle understanding, and come up with better solutions and growing our company, which we've demonstrated over the long term with our customers. But we'll continue to...

Todd, let me add just a couple of other comments here. When I think about how we invest money in the company, whether it's for a particular program or it's an acquisition or another opportunity, we're always looking at how do we invest money. How do we manage the business to drive cash flow? Because, ultimately, I believe that cash flow creates earnings, creates value. And when I think about our existing structure, I think the structure does maximize the cash flow for our entire organization. Given our positioning and how we're able to talk to and approach customers and all the synergies – cross-synergies – cross-group synergies we're getting that Don talked about earlier in some other comments.

Okay. Thanks, gentlemen. I appreciate the color.

And our next question comes from the line of David Tamberrino of Goldman Sachs. Please proceed with your question. David Tamberrino - Goldman Sachs & Co. LLC: Thank you. Good morning, gentlemen. Couple of – just questions on some of the upcoming changeovers. Can you give us a sense of what the content per vehicle or how much content per vehicle you might be seeing moving from one program to the next on some of the North America truck launches that'll be coming over the next 18 months?

Yeah. So on the K2XX, which is obviously – it's the biggest platform – it's a very big platform in North America. We're going from about $1,800 to somewhere between $2,000 and $2,100, depending on which program. They're not all exactly the same, but – so we're moving up pretty substantially on those programs. The SUVs are a little bit higher, more like $2,100, and the pickups are more like closer to $2,000, on average. David Tamberrino - Goldman Sachs & Co. LLC: Got it. And then, again, just even from the switch we've seen from passenger cars more towards the light trucks, there's a pretty significant pick up in content as you move from one to the other for you, correct?

Yeah. I don't know what the average content on the truck side is, but about 80% of our business in North America is going to be car, truck, SUV and that mini-van in that segment. So if you look at our top programs, they're riddled with trucks and they tend to be $2,000, $3,000. They're all big – they're all well above our average content. So it's definitely a positive shift when that happens. David Tamberrino - Goldman Sachs & Co. LLC: Got it. And then, just lastly, from your ADAS perspective, correct me if I'm wrong, but shouldn't you be seeing a good pick up in the back half of this year as the GM Super Cruise starts to get launched on the Cadillac vehicles? Can you remind us what content you have on that program?

I don't recall off the top of my head. I'd have to look it up. David Tamberrino - Goldman Sachs & Co. LLC: Okay. I'll follow up offline. Thank you.

Yeah.

Our next question comes from the line of Michael Glen of Macquarie Securities. Please proceed with your question.

Hi. Good morning. Just to follow-up on the hybrid and electric questions – so when you look at your – what you have in terms of your product portfolio, and then we see sort of the vehicle environment migrate towards more hybrid, electric over time, is this – should we expect Magna to sort of naturally evolve or is there sort of – do you have to do M&A to get more exposure into those segments where the growth will be?

With the product lines we're in now and what we've already invested in and what we're offering to our customers, I think you will see a natural transition. As we get into pure electric vehicles, which I think, again, is quite a ways out before we get into any volume, we are taking a look at what we think are the new technologies, which are the new product areas you want to get into. Would we do it organically? Would we cooperate with some – that is something we can – our powertrain group continues to look at, but we have a lot of product offerings right now as we move into hybrids, specifically, and then longer term into electric vehicles.

In terms of what you see, is there interesting opportunities in those segments out there that you can potentially look at, or is there kind of a lack of businesses that you could look at from an acquisition perspective with capabilities in those areas?

I think there's going continue to be lots of new technologies developed by all sorts of different people. So, we're pretty comfortable with what we have. We just made the big acquisition in GETRAG. They have a lot of capability as well, which we are working together with our powertrain to develop new products and bring them to market. But after having said that, I think there's going to continue to be new innovations to drive fuel efficiency, to drive efficiencies in the various components. So, I think it'll be a pretty dynamic in the area of the vehicle if you look at future mobility. And I think over the next 20 years, we're going to continue to see new ideas come to market. So, it'll be an area we've got big focus; and, too early to tell whether we are successful on developing and bringing to market our own technologies or whether we make an acquisition or a combination, thereof.

And, how is your – like the internal spending you're doing towards these areas? How should we think of that sort of evolving? Has that been increasing at a significant rate over the past couple of years or we should anticipate it to grow quite materially going forward?

We have been spending a lot of money, both in our traditional Magna powertrain area as well as what GETRAG has been doing. We have a huge engineering organization. It continues to evolve into more software-based expertise. So, we have been increasing our software capability. Across Magna, we have over 10,000 product engineers and we've got thousands in our powertrain group. So we'll continue to build it up, but we've been doing a lot of activity in R&D and development.

Okay. That's all my questions. Thanks.

And our next question comes from the line of Matt Stover of SIG. Please proceed with your question.

Thank you very much. Two questions. The first is, I was wondering if you could quantify the impact of the commodity costs and just how you look at the slope of the curve as the year develops?

Yeah. Just in terms of commodity costs, if I look at that on a...

Net-net.

...year-over-year basis, we're seeing some higher pricing on resin. We're seeing some higher pricing on steel. We're seeing some recoveries in scraps. So when you kind of look at it all together on a year-over-year basis, it's been flat. The pluses and minuses, it all kind of equates to zero. I think as you're looking forward...

Pretty flat.

...pretty flat. We're not expecting a big move up or down in a net basis.

Okay. And the second question is given your exposure to certain areas and size of your engineering organization, I'm wondering on a year-to-year basis if higher R&D as a percent of total was a headwind, and kind of how we should think about that over the coming few years or there's a lot of new revenue opportunities, but you've to make some investments to launch those revenue opportunities?

We have been increasing our spending on R&D and product development over the past number of years, I don't see a step function.

Yeah.

But it has been a priority for at least five years, now one of our top two priorities of innovation. So we've been spending money internally. We've been working with outside companies. We've made investments in new technologies, whether it's a venture capital or just buying the technology. So I don't think we'll see a step function, but we will continue to increase our R&D. There is a lot of new technology that's coming to market and ultimately that's what allows us to grow the top and bottom line faster. So it's a real focus for us.

Again, Matt, as we absolutely – I'm sorry, Matt, if I could just add a little more comment to that.

Sure.

The absolute spending on R&D as I look across the organization has been increasing. But so are our sales. So I think if you look at it, is that a negative overall to margins, I probably say fairly neutral, even though the absolute spending on R&D has been going on.

And you have to kind of take out the assembly sales because that then inflates the overall sales numbers.

Yeah. I mean – and that's on the adjusted for the CVA sales. So if I look at the company excluding the CVA sales, the R&D as a percent of total would be flattish.

Yeah. It's flattish. It might be up, it might be down a little bit, but it's flattish, as I said absolute spending is increasing.

Yeah. I think it's up from, say, four, five years ago, but I think going forward it probably just continues to go up at the same rate, so, yeah.

Okay. Thank you.

And our final question comes from the line of Colin Langan of UBS. Please proceed with your question.

Oh, great. Thanks for taking my question. I just wanted to follow up on a comment earlier. You said you're considering the way you might disclose the segments in regard to sort of questions about M&A. I mean, what are you thinking about? I mean, are you thinking about actually reporting quarterly sales and EBIT by product instead of region? I'm trying to understand that thought going into that?

Hey, Colin, it's Vince. We've been spending some time of it looking at how we disclose information to investors. As you look at what we do today, it's geographic. As we get quarterly sale and profits numbers, we get some color on assets employed, and once a year, we've been giving some color on overall sales and growth profile on the sell side. So we're doing some work internally to see if it makes more sense to look at a grouping of our product areas and provide a full segment disclosure, not only geographic but on a group basis which would include sales, profitability and a measure of assets employed. So we're thinking about that, we'll probably do something, but the earliest we want to do that is in 2018. Remember it, if you're changing segments, the part of all of that, we got to make sure that all aligns with our management structure too and a way that we're making decisions because that will be a requirement of the SEC in terms of changing overall segment reporting. Please do expect more information or less information as we get into 2018.

Okay. That's very helpful. And just lastly, I mean, is there any update in terms of the – I think, on your Investor Day, you indicated the size of your ADAS sales, I mean, where does that stand today in terms of total revenue? And any color in the number of sort of engineers that are focused on this, in terms of the size or the robustness of the engineering staff in ADAS?

Yeah. We're certainly increasing our focus in the number of people working on it. We have said previously that our sales are about $450 million, specifically in ADAS, obviously the electronics business is bigger than that. And we would update where we are after business plan and lots of activity, lots of coding going on. We'll be able to give an update where we think that number will be close to the end of the year.

Okay. All right. Thanks for taking my question.

Okay. Well, I appreciate everybody calling in. We're looking forward to a continued strong performance in second half of 2017, and I appreciate it. Thank you.

Ladies and gentlemen, that does conclude today's presentation. We do thank you for your participation and ask that you please disconnect your lines. Have a great rest of the day everyone.