Financial overview

Factors
note 1) : External Production North America
- This increase in production sales reflects an 11% increase in its North American average dollar content per vehicle partially offset by a 2% decrease in North American vehicle production volumes.
- More importantly, production volumes at its largest North American customers continued to deteriorate. While overall North American vehicle production volumes declined 2% during 2007 compared to 2006, vehicle production volumes at GM and Ford declined 8% and 7%, respectively.

The Company's average dollar content per vehicle grew by 11% or $84 to $859 for 2007 compared to $775 for 2006, primarily as a result of:

1) The launch of new programs during or subsequent to 2006, including:
- the Ford Edge and Lincoln MKX;
- the Saturn Outlook, GMC Acadia and the Buick Enclave;
- GM's full-size pickups;
- the BMW X5;
- the Jeep Wrangler and Wrangler Unlimited;
- the Ford F-Series SuperDuty;
- the Dodge Nitro; and
- the Dodge Avenger and Chrysler Sebring; and
2) An increase in reported U.S. dollar sales due to the strengthening of the Canadian dollar against the U.S. dollar.

These factors were partially offset by:
1) The impact of lower production and/or content on certain programs, including:
. the Ford Fusion, Mercury Milan and Lincoln Zephyr / MKZ;
. the Ford Explorer and Mercury Mountaineer; and
. the Chevrolet HHR;
2) Programs that ended production during or subsequent to 2006, including:
. the Ford Freestar and Mercury Monterey;
. the Saturn ION;
. the Buick Rendezvous; and
. the Chrysler Pacifica; and
3) Incremental customer price concessions.

note 2) : External Production Europe
- This increase in production sales reflects a 20%increase in our European average dollar content per vehicle and a 3%increase in European vehicle production volumes.

The Company's average dollar content per vehicle grew by 20% or $73 to $435 for 2007 compared to $362 for 2006, primarily as a result of:

1) The launch of new programs during or subsequent to 2006, including:
- the MINI Cooper;
- the Mercedes-Benz C-Class;
- the smart fortwo; and
- the BMW 3-Series;
2) An increase in reported U.S. dollar sales primarily due to the strengthening of the euro and British pound, each against the U.S.
dollar; and
3) Acquisitions completed during or subsequent to 2006, including the acquisition of two facilities from Pressac Investments Limited in January 2007.

These factors were partially offset by:
1) The impact of lower production and/or content on certain programs, including:
- the Mercedes-Benz E-Class; and
- the Volkswagen Golf;
2) The sale of certain facilities during or subsequent to 2006; and
3) Incremental customer price concessions.

note 3) : External Production Rest of World
- External production sales in the Rest of World increased 53% or $142 million to $411 million for 2007 compared to $269 million for 2006.

The increase in production sales is primarily as a result of:
1) The launch of new programs during or subsequent to 2006 in Korea, China, Brazil and South Africa;
2) Increased production and/or content on certain programs in Korea, China and Brazil; and
3) An increase in reported U.S. dollar sales as a result of the strengthening of the Brazilian real, KoreanWon and Chinese Renminbi, each against the U.S. dollar.

Joint Ventures
In October 2007, the Company announced that it will establish a joint venture in India to manufacture oil and water pumps and other engine-related units.
>>> See Investment for more details

Acquisitions
During 2007, the Company acquired two facilities from Pressac for total consideration of $52 million.

Development in Russia
- During 2007, following approval by shareholders, the Company completed the court-approved plan of arrangement whereby Russian Machines, a wholly owned subsidiary of Basic Element Limited ("Basic Element"), made a major strategic investment in the Company. Russian Machines represents the Machinery Sector of Basic Element, and includes automobile manufacturer GAZ Group, airplane manufacturer Aviacor and train car manufacturer Abakanvagonmash. In accordance with the arrangement, Russian Machines invested $1.54 billion to the Company by acquiring the Company's shares.

- In November 2007, the Company launched sales negotiations with five automakers including Japanese companies in efforts to win supply contracts in Russia. The Company plans to start local production of stamping products, interior and exterior plastic parts, and seats in Russia in 2010. Its plants will be established in both St. Petersburg, where Toyota Motor Corporation and Suzuki Motor Corporation will start assembling cars, and Volga, a hub of the Russian auto industry. The company is working on winning businesses from a number of carmakers in order to maximize the advantage of scale and increase its competitive edge in the emerging market. (From an article in the Nikkan Jidosha Shimbun on Nov. 29, 2007)

- In August 2007, the Company announced at a press conference in Tokyo a strategy to explore new business opportunities with Japanese automakers. With regard to business with Toyota Motor Corporation, the Company will focus on enhancement and expansion of partnership with Toyota Group suppliers. In non-English-speaking markets like Russia, where Japanese automakers have relatively weak presences, the Company will leverage its already-established personnel and production advantages to develop greater corporation with Toyota suppliers. The Company is planning to raise its sales share to Japanese automakers among its global customers from the current approximately 5 % to over 10% in 2010. To reach the target, it is indispensable to expand sales to Toyota, according to the company.(From an article in the Nikkan Jidosha Shimbun on Aug. 22, 2007)

R&D Expenditure
-The Company has historically emphasized technology development and has a policy, embodied in its Corporate Constitution, to allocate a minimum of 7% of its Pre-Tax Profits (as defined in the Corporate Constitution) for each financial year to research and development during that financial year or the next succeeding financial year.

New Product Development
Total Blind Zone Management (TBZM) System:
In April 2007, the Company announced development of the Total Blind Zone Management (TBZM) System, a new technology to help eliminate blind zones around the vehicle. It plans to market this new system to automakers and parts suppliers as a technical proposal integrating the latest devices including a rear view monitor, corner cameras and a side mirror system.TBZM is a concept to combine technologies and devices to help eliminate blind zones around the vehicle. It consists of five devices: ReversAid rear camera system or a display by a rear camera, BlindZone Mirror or a convex mirror integrated into the vehicle's side mirror, BabyVue to monitor passengers in the backseat, CornerVue or the camera integrated in the front bumper, and Predictive Front Lighting of movable headlights. (From an article in the Nikkan Jidosha Shimbun on Apr.12, 2007)

BioFoam Seat:
In November 2007, the Woodbridge Group and Intier Automotive Seating, an operating unit of the Company announced the availability of bio-based seating, an environmentally friendly solution for seating products. BioFoam, a bio-based polyurethane foam developed by The Woodbridge Group and validated for manufacturing earlier in 2007, is derived from the oils of various plant seeds, such as Soy beans. The Woodbridge Group and Intier Automotive Seating have partnered to introduce BioFoam seat cushions in the Ford Escape launching in 2008, with the urethane foam cushions being supplied by Woodbridge and the final seat assembly being performed by Intier. Currently, BioFoam can include up to 40% bio-polyol in various applications including seat cushions, head restraints, armrests, headliners and occupant protection products. (From a press release on Nov. 25, 2007)

Capital Expenditure

In 2007, the Company invested $741 million in fixed assets. While investments were made to refurbish or replace assets consumed in the normal course of business and for productivity improvements, a large portion of the investment in 2007 was for manufacturing equipment for programs that launched during 2007, or will be launching subsequent to 2007, including equipment for the following major programs:
- Ford F-Series;
- the Ford Flex and Lincoln MKS;
- the Jeep Liberty; and
- the Chrysler 300/300C and Dodge Magnum.

Overseas Investments
Russia
- In July 2008, the Company announced that it will establish a flexible production system in Russia in a bid to win more business from carmakers operating in the country. Although a number of auto giants from Japan, the U.S., and Europe are increasingly becoming active in the market, vehicle production by these companies is projected to remain in a limited volume. For the purpose of meeting these automakers' needs to build a wide variety of models in small lots, the company plans to set up efficient manufacturing lines, which will lead to greater business worldwide. (From an article in the Nikkan Jidosha Shimbun on Jul.23, 2007)

China
- In August 2007, Magna Powertrain announced that Magna Powertrain (Changzhou) Co. Ltd. had been established and put into production in the Changzhou National Hi-Tech District in Jiangsu, where the company has founded the first engineering (R&D) center in this district of China, besides the already-existing manufacturing facility. The investment in Magna Powertrain (Changzhou) Co. Ltd. totaled 50 million US dollars. Magna Powertrain (Changzhou) Co. Ltd. is producing and will assemble in its serial production transmission oil pumps, mass balancer systems, and power take off units. Around 130 employees are currently producing products for SGM and 2010 onwards. (From a press release on August 23, 2007)

Asia-Pacific (AP)
- In September 2007, the Company will enhance its production capacity in the Asia-Pacific (AP) region. In addition to 16 plants that currently manufacture automotive parts, 8 new plants will start full-scale production in 2007, which allows the company to establish a commercial production structure with 24 production bases in total. Seeking a competitive advantage, the company will enhance its capacity focused on China and India in order to expand the supply capability in the two countries, where further growth is expected in the future. The Company will also clarify its plan for joint venture production in Thailand where it currently has no production facilities. (From an article in the Nikkan Jidosha Shimbun on Sep. 5, 2007)

Mexico
- In October 2007, the Company announced that it will establish a joint venture in India to manufacture oil and water pumps and other engine-related units, which is scheduled to start production in early 2009. It will be a fifty-fifty joint venture between Magna Powertrain Inc., an engine/transmission products supplier of the Magna Group, and Rico Auto Industries Ltd., a general supplier of powertrain products in India. In the meantime, the new company will output parts for Indian and European markets. In addition to assembling pumps, it will produce aluminum housings at the plant to open in Gurgaon, Haryana. (From an article in the Nikkan Jidosha Shimbun on Oct. 25, 2007)