Annual Information Form Dated March 25, 2021
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Annual Information Form MARCH 25, 2021 Magna International Inc. Contents Annual Information Form 2 Forward-Looking Statements 4 Corporate Structure 4 About Magna 6 Our Industry 9 Our Business & Strategy 15 Risk Factors 21 Description of the Business 34 Innovation and Research & Development 37 Capital Structure, Financings & Credit Ratings 40 Directors & Executive Officers 43 Legal Proceedings 44 Other Information 45 Schedules A-1 Appendix 1 – Sustainability Report 2020 26MAR202116283793 Important Information About this Document This Annual Information Form (‘‘AIF’’) provides information about Magna International Inc. (‘‘Magna’’), including its industry, corporate structure, strategy, risk factors relating to its business and operations, products and services, sustainability activities, and other information related to its business activities. Readers should note that in this AIF: • we use the terms ‘‘you’’ and ‘‘your’’ to refer to the shareholder, • sales figures disclosed have been prepared in accordance with while ‘‘we’’, ‘‘us’’, ‘‘our’’, ‘‘company’’ and ‘‘Magna’’ refer to Magna United States Generally Accepted Accounting Principles International Inc. and, where applicable, its subsidiaries; (U.S. GAAP); • we use the term ‘‘Executive Management’’ to refer to our Chief • where we have referred to specific customers or competitors, the Executive Officer, together with all other corporate Executive reference includes the customers’ or competitors’ operating Vice-Presidents; divisions and subsidiaries, unless otherwise stated; • we use the term ‘‘Operating Group management’’ to refer to our • facility and employee figures include certain equity-accounted management within each of the product-based business units operations, unless otherwise indicated; corresponding to the capabilities described in ‘‘Section 6 – • references to our ‘‘Circular’’ refer to our Management Information Description of the Business – Products & Services’’ in this AIF; Circular/Proxy Statement dated March 25, 2021 for our • dollar amounts in this AIF are stated in U.S. dollars, unless virtual-only 2021 Annual Meeting of Shareholders to be held on otherwise indicated; May 6, 2021 (the ‘‘Meeting’’); and • a reference to ‘‘fiscal year’’ is a reference to the fiscal or financial • information is current as of March 19, 2021, unless otherwise year from January 1 to December 31 of the year stated; indicated Forward-Looking Statements We disclose ‘‘forward-looking information’’ or ‘‘forward-looking statements’’ (collectively, ‘‘forward-looking statements’’) to provide information about management’s current expectations and plans. Such forward-looking statements may not be appropriate for other purposes. Forward-looking statements may include financial and other projections, as well as statements regarding our future plans, objectives or economic performance, or the assumptions underlying any of the foregoing, and other statements that are not recitations of historical fact. We use words such as ‘‘may’’, ‘‘would’’, ‘‘could’’, ‘‘should’’, ‘‘will’’, ‘‘likely’’, ‘‘expect’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘intend’’, ‘‘plan’’, ‘‘aim’’, ‘‘forecast’’, ‘‘outlook’’, ‘‘project’’, ‘‘estimate’’, ‘‘target’’ and similar expressions suggesting future outcomes or events to identify forward- looking statements. Forward-looking statements in this AIF include, but are not limited to, statements relating to: • implementation of our business strategy, including: increasing • our approach to capital structure, including future returns of capital deployment toward areas aligned with the ‘‘Car of the capital to our shareholders through dividends and share Future’’; driving operational excellence; and unlocking new repurchases; business models and markets; • implementation of our sustainability strategy and initiatives and • implementation of our segment-specific strategic initiatives; achievement of sustainability targets; and • estimates of future environmental clean-up and remediation costs Forward-looking statements are based on information currently available to us, and are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. While we believe we have a reasonable basis for making such forward-looking statements, they are not a guarantee of future performance or outcomes. Whether actual results and developments conform to our expectations and predictions is subject to a number of risks, assumptions and uncertainties, many of which are beyond our control, and the effects of which can be difficult to predict, including, without limitation: 2 Annual Information Form Risks Related to the Automotive Industry Warranty/Recall Risks • economic cyclicality; • costs to repair or replace defective products, including due to a • regional production volume declines, including as a result of the recall; COVID-19 pandemic; • warranty or recall costs that exceed warranty provisions or • intense competition; insurance coverage limits; • potential restrictions on free trade; • product liability claims; • trade disputes/tariffs; Acquisition Risks Customer and Supplier Related Risks • competition for strategic acquisition targets; • concentration of sales with six customers; • inherent merger and acquisition risks; • inability to significantly grow our business with Asian customers; • acquisition integration risk; • emergence of potentially disruptive Electric Vehicle OEMs; Other Business Risks • OEM consolidation and cooperation; • shifts in market shares among vehicles or vehicle segments; • risks related to conducting business through joint ventures; • shifts in consumer ‘‘take rates’’ for products we sell; • our ability to consistently develop and commercialize innovative • dependence on outsourcing; products or processes; • quarterly sales fluctuations; • our investments in technology companies; • potential loss of any material purchase orders; • our changing business risk profile as a result of increased • a deterioration of the financial condition of our supply base; investment in electrification and autonomous/assisted driving, including: higher R&D engineering costs, and challenges in Manufacturing/Operational Risks quoting for profitable returns on products for which we may not • product and new facility launch risks; have significant quoting experience; • operational underperformance; • risks of conducting business in foreign markets; • restructuring costs; • fluctuations in relative currency values; • impairment charges; • an increase in our pension funding obligations; • labour disruptions; • tax risks; • COVID-19 shutdowns; • reduced financial flexibility as a result of an economic shock; • supply disruptions and applicable costs related to supply • inability to achieve future investment returns that equal or exceed disruption mitigation initiatives, including as a result of the past returns; COVID-19 pandemic; • changes in credit ratings assigned to us; • climate change risks; • the unpredictability of, and fluctuation in, the trading price of our • skilled labour attraction/retention and leadership succession; Common Shares; • a reduction or suspension of our dividend; IT Security/Cybersecurity Risks Legal, Regulatory and Other Risks • IT/cybersecurity breach; • product cybersecurity breach; • antitrust risk; • legal claims and/or regulatory actions against us; Pricing Risks • changes in laws and regulations, including those related to • pricing risks between time of quote and start of production; vehicle emissions; and • price concessions; • environmental compliance costs. • commodity price volatility; • declines in scrap steel/aluminum prices; In evaluating forward-looking statements or forward-looking information, we caution readers not to place undue reliance on any forward- looking statement, and readers should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by such forward-looking statements, including the risks, assumptions and uncertainties above that are discussed in greater detail in this AIF under ‘‘Section 5 – Risk Factors’’. Magna International Inc. 3 1. Corporate Structure Issuer Magna was originally incorporated under the laws of the Province of Ontario, Canada on November 16, 1961. Our charter documents currently consist of amended and restated articles of incorporation dated December 31, 2017, which were issued pursuant to the Business Corporations Act (Ontario). Our registered and head office is located at 337 Magna Drive, Aurora, Ontario, Canada L4G 7K1. Our Common Shares trade on the Toronto Stock Exchange (MG) and the New York Stock Exchange (MGA). For a list of our principal subsidiaries and investments, please refer to Schedule A. 2. About Magna Overview Magna is a mobility technology company with more than 158,000 entrepreneurial-minded employees, 342 manufacturing and assembly operations and 91 product development, engineering and sales (‘‘PDE&S’’) centres in 27 countries, as follows. 80 48 Western Europe 47 Canada 10 Eastern Europe 38 57 2 11 USA 74 Asia 1 17 Mexico 31 Africa 0 1 South America 13 3 Manufacturing / Assembly Product Development / Engineering / Sales 24MAR202120461158 We are a global automotive supplier that has complete vehicle engineering and contract manufacturing expertise, as well as product capabilities which include body, chassis, exterior, seating, powertrain, active driver