Frank Stronach resigns from Magna board
Magna International annual general meeting in Toronto, May 10, 2012. THE CANADIAN PRESS/Aaron Vincent Elkaim
Frank Stronach has resigned from the board of Magna International Inc., the autoparts giant he founded in his garage in 1957.
Magna announced the departure Thursday in its third-quarter earnings report, which showed a big increase in profits, boosted by a revaluation of its E-Car business.
Stronach said in a statement that in the two years since he gave up control of the company he has become involved in a number of activities outside the automotive industry.
Earlier this year, he formed a new political party that proposes reforming the euro and introducing a flat tax in Austria.
"I do not want my political views to be confused with my role on Magna's board," he said. "As a result, I feel the time is right to step down."
However CEO Don Walker said Stronach's resignation will not change the way the company is run.
"Frank has made enormous contributions over the many years to the culture and the way we structure our company and motivate people and that's not going to change," Walker said told a conference call with financial analysts.
Stronach said that as honorary chairman he would "always be available to provide any guidance that management or the board requires."
Under an earlier agreement approved by shareholders that saw Stronach give up control of the company, the founder became a consultant with Magna (TSX:MG) and earns a percentage of the company's profits.
The payments are being gradually phased out and will be eliminated at the end of 2014.
Magna earned US$390 million, or $1.66 per diluted share in the three months ended Sept. 30, up from US$102 million or 42 cents a share in the same quarter a year ago.
Sales totalled US$7.41 billion, up from $6.97 billion in the year-ago quarter.
The profits were boosted by a revaluation of the company's E-Car business after Magna acquired the remaining 23 per cent stake in the company owned by the Stronach Group in August for $75 million.
The change added $125 million or 53 cents per share to Magna's earnings for the most recent quarter, while a year ago the company took a $124-million hit in one-time charges related to the sale of a plant in Germany and a patent settlement that shaved 52 cents off its earnings.
BMO Capital Markets analyst Peter Sklar said the results were slightly ahead of expectations.
"Magna's Europe and rest-of-world segments reported operating earnings that were better than our estimates, as the rest-of-world segment returned to profitability following losses in recent quarters," Sklar noted in a report to clients.
Magna also increased its revenue guidance for the year to $30.3 billion to $31.2 billion, up from an earlier forecast of $29 billion to $30.5 billion.
The increase came as the company increased its expectations for North American vehicle production to 15.3 million, up from 14.8 million.
North American production sales is expected to come in between $15.1 billion to $15.4 billion, up from $14.5 billion to $15 billion, while European sales are expected to be $8.6 billion to $8.8 billion, up from $8.4 billion to $8.7 billion.
Guidance for production sales in the rest of the world were slightly narrower at $1.8 billion to $1.9 billion compared with between $1.7 billion and $2 billion.
Complete vehicle assembly sales are expected to be in the range of $2.4 billion to $2.6 billion compared with $2.3 billion to $2.6 billion.
Magna has 305 manufacturing operations and 88 product development, engineering and sales centres offering everything from auto parts production to full vehicle assembly.
Shares in the company closed up 26 cents at $44.71 on the Toronto Stock Exchange.
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