Financial Overview

(in million Canadian dollars)

	FY2009	FY2008	Rate of change (%)	Factors
Overall Corporate Results
Sales	1,675.9	2,257.0	(25.7)	-
Operating Earnings	(50.5)	103.6	-	-
Powertrain/Driveline
Sales	1,514.6	1,813.4	(16.5)	1)
Operating Earnings	(10.1)	67.3	-	2)

Factors
1)
Sales for the Powertrain/Driveline segment increased by $15.5 million, or 3.7% in Q4 2009 compared with Q4 2008. The sales increase in the fourth quarter was impacted by the vehicle volumes starting to recover in the global vehicle markets and specifically by:
-Higher sales driven by increased consumer demand in the USA since Q2 2009;
-Higher sales from the Asian operations in Q4 2009;
-The acquisition of the company’s joint venture partner’s 40% interest in Eagle Manufacturing LLC in January 2009; and
-The ramping up of key programs that were in the start-up phase in 2008 including 6 speed transmissions. -Sales for Powertrain/Driveline decreased by $298.8 million, or 16.5% in 2009 compared with 2008. The key factor impacting the fourth quarter was the significant reduction in global vehicle markets in 2009 compared to 2008.

2)
Q4 2009 operating earnings for Powertrain/Driveline were higher by $35.7 million or 517.4% over Q4 2008. The Powertrain/Driveline segment experienced the following in Q4 2009:
-Improved margins as production volumes increased while operating under a leaner cost structure;
-Increase due to changes in key accounting estimates as previously described in the analysis relating to general stores inventory and the useful life of certain capital assets;
-Improved results in Asia from the sales growth;

These improvements were partially offset by:
-The charges recorded in the quarter related to the announcement of the wind down of Invar; and
-The additional capital asset impairments recorded in the quarter. Annual operating earnings for Powertrain/Driveline were lower by $77.4 million. The 2009 operating earnings were impacted by the same factors as Q4. In addition, the Powertrain/Driveline segment experienced the following in 2009:
-Under absorption of fixed costs due to the significant volume reductions in the global vehicle markets;
-Partially offset by cost savings from the Company’s overhead and fixed cost reduction program that was executed throughout the year;
-Expenses relating to the release of employees as the segment adjusted to new sales volumes;
-Increased raw material costs as a result of a shift to higher material content products and, to a lesser extent, issues with certain financially distressed suppliers;
-The capital asset impairments from Q2 2009 related to the bankruptcy filings of General Motors and Chrysler;
-The intangible asset impairment from Q2 2009 related to the McLaren reporting unit;

Contracts

-In June 2009, the Company was awarded a multi-year supply contract for driveline modules with a major European auto manufacturer. The start of production is scheduled for 2011. The Company expects annualized sales associated with this order to be in excess of 200 million CDN once the program reaches full production, which is expected to occur in 2014. (From a press release on June 22, 2009)

Acquisitions

-On January 30, 2009, the Company acquired the remaining 40% interest in Eagle Manufacturing II, LLC (Eagle Mfg), a machining facility in Florence, Kentucky, USA. The joint venture was established in September 1998, with the original ownership interest of 60% owned by the Company and 40% owned by Navistar. The Company accounted for its interest in the joint venture using the proportionate consolidation method until the date of acquisition. After the date of acquisition, Eagle Mfg’s results were fully consolidated in the accounts of the Company. Total consideration for the acquisition of the remaining 40% interest has amounted to 1.2million CDN.

Restructuring

-On December 3, 2009, the Company announced that it would close its subsidiary Invar Manufacturing Corporation, located in Batawa, Ontario, Canada, over the next few months. All 134 jobs at the automotive components plant will be cut. (From a press release on December 3, 2009)

R&D Structure

-The Company acquired McLaren Performance Technologies in 2003 to integrate the team with its Operating Group as an internal advanced product and process development resource. In 2005, McLaren Performance Technologies Division developed a new mission statement and organizational structure to focus on delivering innovative cost-effective products in support of the Linamar Group strategies and goals. In early January 2006, the Company announced the establishment of the Linamar Automotive Customer Center that combined the Detroit-based sales team with McLaren Performance Technologies to support the Group. Throughout 2006, McLaren Performance Technologies Division will focus on delivering their mandate, which is to offer support in the design, testing and analysis of engine transmission and chassis systems.

-In September 2009, the Company opened the Frank Hasenfratz Centre of Excellence in Manufacturing in Guelph, Ontario, Canada. The Centre is dedicated to innovation in the engineering and processing of the Company's products. The establishment of the facility was funded by the Ontario Government through their Ontario Automotive Investment Strategy (OAIS). (From a press release on September 21, 2009)