Robert Wildeboer – Executive Chairman Pat D'Eramo – President, Chief Executive Officer & Director Fred Tosto – Chief Financial Officer & Head of Investor Relations

Mark Neville – Scotia Capital Steve Arthur – RBC Capital Markets Todd Coupland – CIBC World Markets, Inc. David Tyerman – Cormark Securities Peter Sklar – BMO Capital Ben Jekic – GMP Securities Michael Glen – Macquarie Capital Markets

Good morning, everyone. Thank you for joining us today.

We always look forward to talking with our shareholders and we hope to inform you well and answer your questions. With me this morning are Pat D'Eramo, Martinrea's CEO and President; and our CFO, Fred Di Tosto.

Today, we will be discussing Martinrea's results for the quarter ended September 30, 2016. I will make some opening remarks, Pat will make some operational and strategic comments, Fred will review the financial results, I'll make some further comments, and then we'll open the call for questions and we'll endeavor to answer them for you.

Our press release with key financial information discussed on a fairly detailed basis has been released. Our MD&A, AIF and full financials are filed on SEDAR and are available.

These reports provide a detailed overview of our company, our operations and strategy, and our industry and the risk we face everything from macroeconomic conditions, without directly naming Brexit or the U.S. election, to customer-related risks, such as potential labor stoppages, to things we see ourselves.

Given the detail in our press release and filed documents, our formal remarks on the call today will be generally overview in nature and fairly brief. We're very open at discussing in our remarks, and we hope in the Q&A, some highlights of the quarter or year, the state of the industry today, how we are addressing the challenges and progressing our operations.

As always, we want you to see how we see the world. As for our usual disclaimer, I should note that some of the information that we are sharing with you today may include forward-looking statements, even if qualitative.

We remind you that these statements are based on assumptions that are subject to significant risks and uncertainties. This is particularly the case given the present automotive and economic environment.

Although Martinrea believes that the expectations reflected in these forward-looking statements are reasonable, we can obviously give no assurance that the expectations of any forward-looking statements will prove to be correct. Our public record, which includes the AIF and MD&A of operating results, I've just mentioned, is available on SEDAR.

You may look at the full disclosure record of the company there. I also refer you to the disclaimers in our press release, our MD&A, and our AIF.

Let's talk about the state of the industry and the macro view for a minute. Our industry continues to be fairly robust, despite some pessimism about our industry or the economy in some circles, and continuing automotive valuation contractions.

However, the reality is that our industry just seems to keep trekking along generally. We've seen some announcements of inventory adjustments in the third and upcoming quarter, particularly from Ford and some from Chrysler, which will impact our fourth quarter somewhat and did shave a little off our Q3 revenues and profits.

Despite the adjustments, we remain positive and optimistic about our industry. U.S.

economy seems to have had some good numbers recently, and in the auto world, miles driven is up, fuel prices are low, customer profits and production levels are pretty robust, and it appears increasingly the case that the traditional automakers, and not Google or Apple, are going to make the vast majority of cars and light trucks in the future, whether combustion or electric-driven or hybrid or whether they are driverless or not. We don't think we're headed for a recession overall in auto.

We do think people will eventually see that and valuations in our industry will, at some point, improve. Today, we are trading at a historically low valuation of enterprise value to EBITDA ratio using 2016 EBITDA estimates as are some others in our industry.

And to a large extent, that won't change until sentiment changes, but we are very focused about improving our key metrics, even in a flat or declining environment, real or perceived. That's it for the macro view from our perspective, although we are happy to take questions on it.

Meanwhile, we got a really good quarter from many perspectives, a lot of great things are happening, we throw a lot of pucks in the net, and the future looks great. Now, here is Pat D'Eramo.

Thanks, Rob. I continue to be pleased with the team's performance as they deliver on key metrics.

This is our eight quarter in a row of record year-over-year earnings. Our margin target achievement is on plan, along with our leverage ratio improvement.

Our 2.0 strategy continues to gain momentum in the organization at a strong forward pace. Our learn-by-doing philosophy is affecting all parts of the organization, including floor-based kaizen training for my staff, one of the many activities supporting our high-performance culture pillar.

Operational excellence has been a primary instrument of our improvement, whether basic waste elimination, kaizen exercises, visual control or equipment improvement, the efficiency gains drop to the bottom line and we are only scratching the surface of our true capabilities. I'm very enthusiastic about the future in this area.

We like to say the customer is king and we mean it. Our objective is to be Casper the Ghost, quietly delivering quality parts on time, every time.

As a past plant manager of a car assembly plant at one of our OEMs, my favorite suppliers were Casper the Ghost. I didn't know they were there until I needed them.

Our most notable accomplishment in this area has been our new model launches. Not long ago, it was our Achilles heel.

Now, we are working hard to make it a company-wide advantage for Martinrea. We launched 72 new programs within our four business units with no significant issues in 2016.

It's strong improvement over our recent past. We are now completing our 2016 business reflection process, reviewing where we did well meeting our objectives, where we fell short, and what we have learned so we can continue to improve.

We settled ourselves with challenging targets in 2016, and I'm pleased with our progress. The 2017 business planning process is well underway and we are happy with the adoption of our 2.0 plan these last two years, and we will continue with our four-pillar strategy as we work to develop the Martinrea 2.0 culture.

We recently announced the construction of a new technical center in Auburn Hills, Michigan. This facility will held our sales, product engineering, purchasing and our growing research and development activity in the backyards of our customers.

Almost all global OEMs have a presence in the Detroit area. We currently have a sales office and engineering office in Troy, Michigan and a test lab in Auburn Hills.

This will double the size of the testing and research and development efforts in bringing the Detroit area team under one roof. We see growing opportunity in the product development, especially in our aluminum business, and finding methods to optimize vehicle structure to continue to find better ways to take weight out of vehicles by optimizing our multiple steel materials with our aluminum technology.

This is very exciting time for us. As we better the base business related to expectations, launch and quality, we are now simultaneously investing more in product and process development.

Lastly, related to the market, we are confident in steady sales in 2017. As you know, Ford recently took a few weeks out of their schedule in the fourth quarter on some of their products to balance their inventory, a strategy from their One Ford philosophy that they continue to act on responsibly.

Fred will touch on this more in a moment. It's important to recognize many OEMs continuously balance inventory with line speed adjustments.

Others, based on employee contracts and so forth, pull assembly time out of their schedules. So, the processes may vary from OE to OE, the targeted results are the same, build what the customer wants.

Of course, the supply base response to these changes similarly. In any case, the outlook continues to be healthy.

With that, I'd like to pass it to Fred.

Thanks, Pat, and good morning, everyone. The third quarter was another solid quarter for us, our best third quarter ever from a profit and EBITDA perspective.

Based on our Q3 financial performance, it is clear that our operations continue to improve as we progress towards our goals. Third quarter sales, excluding CAD 38 million in tooling sales, were CAD 877 million, slightly below our previously provided sales guidance range due to lower than anticipated sales volumes in certain programs, including the Ford Escape, as the customer slows production to manage inventory levels which is expected to continue to the fourth quarter, and the Chrysler 200 platform, as production on that platform continues to drop as it approaches its official end by the end of this year.

Overall sales of the third quarter were slightly lower year-over-year by CAD 15 million or 1.6%. Overall sales for the nine months ended September 30, 2016, were up year-over-year by CAD 147 million or 5.2%.

I'll refer you to our Q3 MD&A for a full account of the year-over-year variances. From an earnings perspective, the third quarter was another record quarter.

Net earnings per share in Q3 on a basic and diluted basis was CAD 0.34, in line with previous earnings guidance, despite the lower production sales, and up nicely year-over-year. We do not have any adjustments to earnings for the quarter.

As you likely recall, the third quarter in any given year is generally weaker in terms of revenues, margins and profits than the second quarter, because of OEM's summer plant shutdowns which happened this year too, but compared to last year, we saw a nice positive margin trend. Margins were up year-over-year, whether it be gross margin, operating income margin or EBITDA margin.

Operating income margin for the quarter increased year-over-year from 4.3% to 4.7%, a nice increase representing about CAD 3.2 million in additional operating income on lower production sales. We reiterate our interim target of at least 6% operating income margin by the end of 2017.

This is now the eighth consecutive quarter of year-over-year operating income margin improvement. So the trend line is very clear.

We're on our way to a 6% interim target, everything is on track. Several variables have played into this improvement, but suffice it to say that we're getting better in a lot of places and this is translating to higher EBITDA numbers.

Adjusted EBITDA for the quarter was a record third quarter of CAD 80.6 million, up 6.4% year-over-year, from CAD 75.8 million, an increase of CAD 5 million in cash on lower production sales. Our trailing 12 months adjusted EBITDA has increased nicely to CAD 348 million.

Our view of the coming quarter is noted in our press release. We see production revenues of CAD 860 million to CAD 900 million.

These revenues do not include tooling sales and we see adjusted earnings per share in the range of CAD 0.33 to CAD 0.37 on a basic and diluted basis. We hope to have a record fourth quarter from an earnings perspective.

There are a couple of positive and negative factors for us in the fourth quarter. On the positive side, we anticipate another year-over-year increase in operating and EBITDA margins, reflecting improvements in operations, mix, and so forth.

On the negative side, production sales are expected to be impacted by a customer announcement of plant shutdowns to reduce vehicle inventories. Ford has announced some shutdowns in the Ford Escape and Fusion platforms, a couple of aging platforms and two very competitive segments.

We also expect some lower volumes based on recent releases we have seen on some Chrysler business. In addition, the roll off in our German operations, which we have talked about in the past, is hitting its peak in Q4.

The Ford programs, in particular, negatively affected our top line as the Escape and Fusion platforms are two of our top three largest platforms in North America. Both platforms remain good sellers, and frankly, it is nice to see our customers non-engaging over the aggressive pricing to push product down the pipeline.

To give you a sense of the overall impact, the various inventory adjustments of our customers in the fourth quarter are expected to impact EPS by CAD 0.03 to CAD 0.04 per share. Another reality for us in the fourth quarter is that four of our plants are preparing for a significant launch of GM's new Equinox program scheduled to start ramping up during the first half of 2017.

This is a fabulous platform for us; we have pre-launch costs in the fourth quarter as we get ready for the ramp up next year. All in all, 2016 continues to be good year for us and should be the best in our earnings history.

We anticipate, as we have said, a better year in 2017 from a financial point of view, and 2018 should be even better. Earnings, EBITDA, operating income margins are all trending up.

I also just wanted to quickly touch upon the balance sheet. Net debt for the second quarter decreased by CAD 3 million quarter-over-quarter.

Our trailing net debt to adjusted EBITDA continues to trend down now under 2 times at 1.96 times, another quarter-over-quarter decrease from 2 times at the end of the second quarter from 2.18 times at the end of the fourth quarter. Progress is clearly being made in this area.

If you go back to Q3 2014, just before Pat joined us and just after we had acquired the minority interest in Martinrea Honsel with debt, which added a significant amount of debt to our balance sheet. Net debt-to-adjusted EBITDA was 2.54 times.

So, leverage ratio has dropped drastically. And it's not all been a result of increasing EBITDA.

Since Q3 2014, excluding the impact of foreign exchange translation, our net debt has actually decreased by approximately CAD 52 million. And this as we continue to invest in the future of the business.

So, on the face of our balance sheet, net debt has increased from Q3 2014, but at constant FX rates that has actually gone down by CAD 52 million. We're well on our way to our target, which still remains to be at 1.5 times net debt-to-adjusted EBITDA by the end of 2017.

Thank you. And I now turn you back over to Rob.

Thanks, Fred. I want to talk a little bit a couple of aspects of our future and our metrics following up on some of Fred's points, Pat's comments on our operations and my initial remarks on the macro view of auto and economy.

First, 2016 has been a great year for us so far on so many levels. It's a great year for One Martinrea coming together, building momentum with our people, our customers.

We see it and we feel it. Our strategies are good.

Our team is performing and our future is great. We've just completed our budget process for the next three years.

And we've talked on this call so far about the state of the industry, what we are doing at our company and some of the financial results and metrics for the quarter just past and the one coming, which will result in a record 2016 for us on so many fronts. Let me comment on a few items as we look at the future.

We believe that we are a company that has built its footprint and has focused very hard on doing that. We bought a lot of companies at cheap prices overall, but they required fixing, restructuring, getting rid of old bad habits and putting in new, getting rid of poorly-priced programs and replacing them with better-priced ones and so forth.

A company starting out in growth mode, in this way, is going to see some metrics look pretty good and some look less good when compared to others, but which will improve over time and it takes time. For example, our growth rate has been phenomenal.

That top line growth, absent acquisitions cannot and will not continue, although we believe we have some businesses such as aluminum that will grow a lot. As we have stated, in an industry with flat slightly increasing or perhaps slightly declining volumes, our top line revenues will be flatter than in the past for the next two years to three years as we focus more on margins and returns and strengthening the core of our business.

We have stated, and we reiterate for you, that total sales in 2018 would be between CAD 4 billion and CAD 4.5 billion before we sold Soest and closed the Detroit, Michigan plant. Combined, revenues for those two platforms were over CAD 150 million annually.

So that CAD 4 billion to CAD 4.5 billion range is CAD 3.85 billion to CAD 4.35 billion. We're going to see one other phenomenon kick in for us sometime in 2017, depending on the customers' timing for changeover on our assembly business on the Equinox platform in our London, Ontario facility.

Now let me talk about pass-through revenue in our assembly business. As we have stated many times before, a fair amount of our revenues in Martinrea Classic currently approximately 15% is in pass-through assembly business, where we essentially buy parts, assemble them together with our parts and shift the module to the customer.

Where that happens, our revenues reflect the price of the pass-through parts as our selling prices grossed up to include the cost of the purchased components generally with minimal margin contribution for Martinrea. The other model for assembly is what is called the VAA model, where we are simply paid a fee to assemble parts and the purchased components are on consignment to us.

And, as such, not grossed up in our selling price to the customer and revenues. Typically, under the VAA model, the customer guarantees the recovery of the upfront direct capital investments we make.

Thus revenue contributions are lower, but risks are also lower and margins in percentage terms are meaningfully higher. At some point in 2017, our assembly work for the Equinox based in London, Ontario and eventually replaced in Ingersoll, Ontario will transfer from the first model to the VAA model.

I note that a significant amount of our assembly work today is on the VAA model, but we have close to CAD 300 million on the former model as it relates to the Equinox. When the transfer on the Equinox occurs, our assembly-based sales are going to go down on an annualized basis by more than CAD 250 million with the full annual effect substantially kicking in, in 2018, although we're still performing the same task, the same work to the same extent.

Frankly, all these two factors, the sale, the closing of two plants and the shift to a VAA model for some of our business will flatten our expected revenue profile for the next two years to three years, they're both positive and progressive for our business, contributing to improving margins and profitability while reducing risk. In terms of some metrics that people like to talk about, let us draw the following observations representing our perspective.

Our net debt to EBITDA ratio is coming down very nicely. Frankly, at under 2 times, we think that is a very healthy ratio.

And the ratio is only that high because we did not issue equity to finance the Honsel acquisition, but wrote a check instead. All other things being equal, that ratio will continue to come down, and we are on our way to our stated target of 1.5 times by the end of 2017.

Our ROIC and ROE metrics are reflective of a company that has built a high percentage of its operations from the ground up and has made a lot of acquisitions where plants had to be filled, improvements made and so forth. Those metrics will continue to improve, we believe.

We believe the correct way to look at these metrics is over a longer term, but those metrics, as I said, will continue to improve. Our other metrics are all on the upswing.

And we believe we'll continue to be even in a flat revenue environment; gross margin, operating income margin, EBITDA margin, earnings per share. For simplicity and for comparison to what seems to be the focus in this industry, we have given you an operating income margin target of 6% at the end of 2017, which, as Fred noted, we are on track to achieve a 50% improvement from where we were in 2014.

I believe our growth in these percentages has been pretty good over the past couple of years as we have continued to have quarterly earnings records, and our earnings and EPS growth has been really good as well. We do believe that all these metrics will continue to improve as we continue to stress lean manufacturing, delight our customers with our product offerings and our service and so forth.

We believe we will be leaders in our fields and has state-of-the-art facilities to serve our customers. If you see our leading-edge facilities in fluids such as our Saltillo facility, or our Anting facility, or our metallic such as our Hermosillo facility, which achieved the highest possible ranking for a supplier plant from our customer, or our Alfield facility which is launching a modern and sophisticated line for the new Equinox in a few weeks with leading-edge weld and assembly equipment in robotics and which just this week won our supplier quality award.

Or our assembly, such as our new Ingersoll facility, which has leading-edge robotics and which will service the customer with virtually no people handling. Or in aluminum where our plants are state-of-the-art including our Queretaro facility, which just in the last week won a supplier quality award from Chrysler, and it's so clean, you can eat off the floor.

You will see where we are going with this company. Our people are working our butts off to make this happen and we will make it happen.

On a general level, we do not intend to stop at a 6% operating income margin or any margin metric. We believe that we will achieve industry average margins or better on all relevant metrics by the end of the decade, regardless of revenue growth.

That is, we can do it and we will do it even in a flat market. Also, our cash flow will continue to grow and we will pay down debt or have the flexibility to invest our cash in other ways.

Already, we are becoming a significant cash flow generator and that is going to improve. Someone once told me, you have to run your business with long-term focus as if you were the only shareholder.

That way, you can focus on doing the right thing for the business in terms of long-term investment in technology, in terms of investing for the long-term, in terms of investing for your people and your customers, and that is what we are doing. And that is what we will continue to do.

We believe in our vision, mission and guiding principles. Every officer, VP and up, has a share ownership requirement and knows what it is like to be an owner.

We're all building for the long-term to be the best in the business in what we do. 2016 will finish as a good year, a record for us in many ways including financially.

2017 will be better, we believe. Further, the rest of the decade will be better still.

Now it's time for questions. We see we have shareholders, analysts and even competitors on the phone, so we may have to be a little careful with our comments but we'll answer what we can.

Thank you for calling.

Hi. Good morning, guys.

Good morning.

Good morning.

On a CAD 0.03 to CAD 0.04 you mentioned for Q4, you did mention some Chrysler programs. I'm just curious is that just the 200 or is there some other programs as well?

No. It's actually not the 200.

It's some other programs, a few them. And it affects our engine block over broad range of platforms.

Okay. And on the CAD 0.03 to CAD 0.04, I mean do you have sort of a rough estimate of how much is Ford versus Chrysler?

It's probably 60/40 split. And then to give you a sense, the Fusion and Escape platforms, as you know, they're two of our top three platforms in North America, quite substantial level of revenue base on those platforms approximately CAD 600 million.

So, when there's some inventory justice there, we feel it.

Okay. You mentioned the Escape and Fusion, but is the F-150 not a major program for you?

I thought there are some shutdowns there as well.

It's not a major program for us. We have some content on it, but it's not a significant program.

We have a lot more content on the GM trucks and some on the ramp, so we're on pickups overall. But quite a less on the F-150 than those other Ford programs that Fred mentioned.

Okay. And sorry, I did miss the revenue number you gave out for the Edge and the Fusion.

CAD 600 million, approximately.

That's a combination...

Annually.

That's a combination of both those programs.

Both those platforms.

Right. Okay.

And Rob, when you were talking about the 2018 revenue, the new targets, I guess, with the adjustments, you mentioned CAD 3.85 billion to CAD 4.35 billion. The CAD 250 million of assembly sales, I guess, is just the change in how it's going to be recognized.

So, does that bring the number of CAD 3.6 billion to CAD 4.1 billion, or is that in the CAD 3.85 billion to CAD 4.35 billion, if my question is clear?

If you're somewhere in the mid-range, it will drop off from that number, but we're not saying the number is CAD 3.6 billion to CAD 4.2 billion.

Okay.

I got that wrong, CAD 4.1 billion.

Yeah, yeah.

Too much math. So, I think that there will be a flattening in revenues over time.

As assembly work changes from the flow-through model to the VAA model. We have some other assembly work that's like that.

We'll see where that's going. The one customer that we have is focused more on a VAA model.

That has not been their traditional approach. So, five years ago, 10 years ago, that was not the traditional approach.

Quite frankly, we're a little bit indifferent to that if we have a good program, there're different ways to treat it. But the reality is – oh, that was my phone, sorry.

We all are here for a customer call but that's not a customer so we don't. Another part, sorry.

Yeah. Go ahead.

Okay. The Fairfax launched we had this past year is a VAA model on the module assembly side.

We also, in that case, provide the sub frame, but that's been the latest and greatest of how GM approaches that.

Okay.

Just to be clear on that. It is a tradeoff.

So, our revenues will come down when a margin percentages increase. So, I just want to give – I mean, to a certain extent, when you have flow through in your revenues, there is kind of an understating of margins, right?

Right.

Because to a certain extent, if we've got 100 – let's just use hypothetical. If we have CAD 100 million of flow through and we're effectively being paid a couple million bucks to handle something, that's a 2% margin and a lot of revenues.

If you essentially, just gets hold look, I want to pay you a fee to handle this and we'll do it on consignment. So, it doesn't hold through your revenue statement.

Obviously, the margin is higher but your revenues are down. So, I think given the changeover we wanted to reflect that.

Overall, on the Equinox program, which as Fred said, it's a fabulous program for us. Going forward say a year out, we will have a lot more production revenue on the platform and less revenue flowing through from effectively the assembly.

So, we've a very big launch coming up next year. We have Equinox content in four plants, our Ingersoll plant, which is the assembly plant where we'll be paid on a VAA model rather than a flow-through model.

And then Alfield is getting ready for a launch. Quite frankly, I invite a lot of people on the call to come and see it when it's running.

It's going to be very impressive. And also some plants in Mexico.

Okay. And again, just trying to understand the timing.

You mentioned it's 2017, 2018 sort of the impact of lower sales higher margin from the [indiscernible] assembly. Again, I'm just trying to get an idea of when that sort of starts happening and when we sort of see the full change.

It's going to start in 2017. It's hard to unequivocally say right now because the customers are going to be running both the old and new platform at the same time.

So, it all depends on the ramp down of the old and the ramp up of the new, but [indiscernible] in 2017 with essentially the full substantial impact kicking in 2018.

Yeah. In the moment, it'll be late 2017.

Okay. Thanks, guys.

I'll get back in the queue.

Great.

Great. Thank you.

Just to clarify a couple of things. I guess, first, just wrapping up the VAA conversation.

Is this an approach now that's more typical and something you expect for most of the future programs?

This is Pat. I've seen it over the course of 30-odd years go back and forth.

It'll go through a decade of VAA, and then it'll go through a decade of pass-through revenues. So, whatever way the customer wants it, we'll jump on board.

Because at the end of the day, that's the activity of – even the assembly is the same. But I think of both ways, from multiple suppliers over couple of different companies, or a couple different OEs rather.

And it's the latest trend today, but it could change in the next four years, five years.

But I guess, looking through it, I understand revenue down, margin percentage up, but margin dollar per part that's probably negotiated pretty consistently in either direction?

Well, I'd say the one difference is, when you do have the VAA model, your risk gets reduced because they're paying you fees for certain things, and then paying you fees for the volume. And the reference that Rob made to risk reduction when you're not purchasing the parts is true.

So, we certainly see some benefit from that, and, of course, the margin improvement because we're not buying all the pass-through material.

Yeah. I think the negotiation with the customer is always one where we're obviously trying to negotiate the best fee possible and the best return possible, and they're trying to do the opposite.

So, there's not a fixed agreement on what margin is going to be in, quite frankly, any of the products that we do.

I can say one thing about it in our case, and I've been in the few other companies where we did similar work. We, at Martinrea, are really good at this.

Our quality is exceptional. Our launches have been exceptional.

And so, it's attractive to us because we're good at it, and we can turn a decent profit.

Okay. Thank you.

Just a different topic, the European rollout spread, I think you mentioned those peaking in Q4. Any sense of what that quarterly impact looks like Q3 into Q4?

How much of a decline? And then looking through to the other side of that, any sense of the trajectory of the ramp at these facilities over the next year, two, three?

Yeah. So, I've quantified that in the past.

So, over the last 12 months to 24 months, we've probably lost somewhere in the range CAD 50 million to CAD 60 million of production sales in Germany just from the rollout from a distressed situation like before we bought it. It's peaking on in Q4 as I noted.

Q4, the impact is probably in the range of CAD 10 million, give or take. And then, in terms of looking forward based on book business, so it has a business in its backlog that's going to start launching in 2017.

You're going to see some increase in 2017, nothing substantial. Then in 2018 and 2019, you see a bigger ramp-up.

And then, it'll probably start hitting its peak book in mid-2019, late 2019.

Okay. Thanks for that.

And one final one, just the EPS impact, CAD 0.03 to CAD 0.04 on those programs you discussed a few minutes ago, any sense of the revenue impact of that, those same programs in Q4?

Well, I provided you with the annualized sales on the two largest platforms. So you can probably do some math on that.

I mean, I think the one thing I would look at is, when you look at our Q4 production sales guidance range, and conceptually, you take the midpoint of that range, the sales are the same as Q3 essentially, which is unusual for us. Right?

Q4 is usually higher, right? So, these shutdowns in our inventory are having a big impact on us, right, so?

Just a general comment. I think it's actually good to see customers with discipline with respect to Ford.

Alan Mulally really installed inventory management as a key discipline. And so, to talk to the Ford people, which we do all the time, they say, this is the way we want to run things.

In the past, very often, what would happen as you keep running full bore, you find yourself with excess inventory, you increase incentives to get rid of the inventory or fill up the fleet sales with that. And at the end of the day, nobody really wins because it causes other people to do the same thing.

And then ultimately, the customer doesn't ultimately sell more vehicles. There has to be an adjustment or a price to pay somewhere down the road and our customers ultimately earn less money from that type of competition.

And whenever customers lose less money, they tend to look at other people to try and make it up, and often where they look is the supply base.

Okay. Thanks for the comments.

All right.

Yeah. Good morning, everyone.

Good morning.

Firstly, on the assembly work. So, it's roughly 6%, let's say, CAD 4 billion.

So, should we take it off that number and not take 6% off of EBITDA and EPS? Is that what you're saying?

I thought there was a modest nuance there where you may not be getting quite what you're getting today.

There is an element of that. So, again, the risks stayed with the customer in a lot of areas, so absolute dollars could be down.

However, still meeting our hurdle rates and everything like that. So, we're content with the business.

But the math, the way it works out is, is the percentage increase substantially. It's just that way it works.

I think the reality is in the future, more and more of our percentage of revenues will be production work, which is higher margin business.

Yeah. Absolutely.

Okay? And if you want to put it another way, our exposure to the Equinox platform will be more profitable overall going forward than in the past.

And so, if you're going to do, let's say, CAD 250 million to CAD 300 million on a program, it is better to do CAD 250 million or CAD 275 million on production revenue and CAD 25 million to CAD 50 million in assembly revenue than the other way around at CAD 250 million on assembly revenue and CAD 50 million on production. So, the Equinox, going forward, are having significantly higher percentage of the exposure to that platform on production revenue.

Okay. And sorry to just to sort of kill this CAD 600 million point as well.

So, you're basically saying simple math, it's CAD 150 million impact roughly to Q4 with these inventory adjustments?

No. No.

It's CAD 600 million annualized in this platform. So, the shutdowns are a couple of weeks on each.

So, it's two weeks of production disappearing off that. Sorry, weaker production is like CAD 12.5 million.

Yeah.

So, CAD 24 million.

Sorry. I didn't understand that.

Okay.

But then, you have the impact of Chrysler as well. And then, also the roll-off in Germany as we talked about.

Right. Right.

Okay. And just to follow up on the inventory.

So, it seems to me if I look across sort of different platforms out there, that there are still some elevated pickup truck inventory at OEMs that have an announced production halts. What do you think about that?

Are those guys is just going to let a ride, are they going to discount, or maybe we'll see a few more slowdowns in production as we go through the end of this year beginning of next year?

We haven't really seen in the trucks that we supply for the other OEs. We haven't really seen an outlook of a change over the next few months.

So, whether they decide to do something incentive-wise or not, I'm not sure, but we are not seeing anything at this point.

So, the guys that are running at 90 days, they've made a decision to do something else, is that how we should think about it?

I'm not sure. The reality is – so, let's talk about an economic reality.

The larger vehicles for the North American OEMs are the profit makers. The suburbans and the F-150s and so forth.

Some people are a little surprised at the F-150 adjustment, more surprised of the F-150 adjustment than some of the midsize. If you have a scenario overall where sales are flat, and actually, October was a little higher year-over-year when you take into account selling days.

But if sales are flat and people are buying more of the big stuff, which they are, the sales got to come off somewhere else. So, that's point one.

Point two, the big stuff are the vehicles where an OEM might be making CAD 10,000 per vehicle. So, at the end of the day, there's generally more of a tendency to try and get those out the door than there might be, say, on a small vehicle, and a small vehicle, certainly small cars, the profits.

The profits per vehicle sold are quite a bit less. So, we see an element of that in the marketplace.

I think, again, the important thing, what they decide to do relative to incentives or not, obviously, is the OE's call. But when you just look at the releases, and we have quite a bit of business in our fluids group on the Silverado, we're not seeing any change in releases at this point.

And typically, we would see it by now if there was going to be – so between here and the end of the year, it looks pretty much normal.

That's actually the one I was thinking about because I think they're around 90 days due for that vehicle.

Yeah. We haven't seen anything different.

They're good vehicles. You should go buy one.

And we're confident on that.

All right. I appreciate the color, guys.

Thanks.

All right.

Yeah. So, good morning, guys.

Good morning.

Good morning.

Just wanted to come back to the change in the way you solved the accounted. Just in simple math, your old guidance, how would you in 2018 at the midpoint at CAD 4.25 billion take a CAD 150 million off or stuff that's disappeared, so CAD 4.1 billion.

Are you saying then we should be seeing at least the equivalent EBIT of CAD 4.1 billion times 6% in 2018 that'd be about CAD 250 million, so that hasn't changed?

Conceptually, yes.

Okay. Thank you.

The other question I had is just on the Rest of the World area. The margins went down more in Q3 than they have in the rest of the year.

So, I'm just wondering and the sales are up at least sequentially, just wondering what's going on there and how we should think about that going forward?

Sorry, I missed the first part of your question, just Rest of the World?

Rest of the World to the margins were negative 9% in Q3. The first half of the year, they were around minus 4.5% or so.

So, they've got worse, yet higher sales actually in Q3 than Q2, so it's not just volume, I don't think. So, I'm just wondering what's going on and then how do we see this unfolding?

Yeah. So, I mean, overall, the Rest of the World is a segment that will grow for us.

So, right now, what we're seeing is, is that it'll be positive overall than 2017, as our organization worked towards 6% target. In the moment, the Martinrea Honsel plant that we open up in China, it has one piece of business there that were ramping up the Cadillac CT6 to the sub-frame for that vehicle.

The volumes in that have been actually quite low. So, it's still early stages.

We see how that vehicle performs over time, but that's having an impact in the moment on our margin in the Rest of the World.

Okay. So, based on releases, and I don't know, I guess release is the same way and I imagine they do.

Would you expect that to leak into Q4?

In the rest, yes, I do. The other thing that is playing out there is, our fluid plant is actually continuing to grow.

So, we're in the process of actually moving that into a larger facility.

Almost double the size.

Almost double the size. So...

There's some expense from that that will kind of clean it selves up here in the next month because it will be moved by the end of the month.

Okay.

And the aluminum plant's got another product starting in 2017.

Okay. So, when I'm thinking about it, it sounds like Q4 is another weak quarter in ROW.

When do you see the inflection point, if you're going to have a positive year for Rest of the World, when does that happen? Is it Q1 or does it...?

Well, I think the fluid plant this year, and I believe it was the first quarter, was a positive contributor to the organization. I think when you look at the aluminum plant it's still early stages.

The game-changer for that facility will be when it gets the second piece of business in 2017, which is going to be in the second half of 2017. It's essentially the Jaguar Land Rover control arms and knuckles we do in Spain, and we're going to also do in China.

A substantial amount of volume on that program as well. So, when that kicks in, then that facility will turn positive.

Okay.

And similarly, there is an expense there as the expansion pulls from their funds as well.

Yeah. Brazil continues to be a sideway story.

Sure.

But we are seeing some glimmers of volume increases there. We think that Brazil is a place that make sense over time.

We think it makes sense as an aluminum facility serving our customers on a worldwide basis that have some operations there. But to be there is a little bit of labor of love, as we kind of said before.

We have some commercial vehicles business there. We are starting to see some release activity as you go into next year.

So, we're hopeful that that situation will continue to improve.

Okay. Very good.

That's very helpful. Thank you.

Thank you.

Good morning.

Good morning.

Good morning.

Good morning

How are you doing?

I'm doing great. Fantastic business.

And you guys are doing bang-up job. I'm still in my car so you might get some background noise.

I'm actually really sorry I'm in the car because they redirected a route here in Montreal. So, I'm stuck.

My questions today are pretty simple. We're becoming a significant cash flow generator.

And we're going through what appears to be a sort of extended period of a lack of willingness to purchased shares in our part of the automotive industry, and drive share price forward, at least, a little bit. So, at this point, my first question is, when we look at the debt ratio decrease, is that exclusive of the $0.34 per share or are we taking some of that CAD 0.34 per share and putting it back in to reduce that debt?

Are they exclusive of each other?

So, we are obviously paying down debt, as I noted on the call in the opening remarks. Since Q3 2014, excluding forex translation, we've paid down the debt by CAD 50 million, and that's obviously contributed to the volume reduction.

We expect that to continue over the next while. So, [indiscernible] has dropped drastically, and we're happy to see that, and we're committed to the 1.5 times.

So, we plan to be there by the end of next year. Yeah.

Just to give you a sense, the way the bank account basically works, it's a revolving facility. So, as cash comes in, it's either in a cash account or based on debt.

As it goes out, as we pay our expenses, as we spend money on capital equipment, as we pay our employees and so forth, then it goes back and forth. So, what you see, as of September 30, all is the balance of where that is, a picture of where that it at that time.

So, of that CAD 0.34, to put it in a particular way, if money comes in the business, it's part of the overall asset cash, lower debt mix. And as it goes out, it goes the other way.

So, the trend line on the debt is down, and the trend line on the cash flow coming in are EBITDA, which is what we use as the accounting term and we talk about all the time, is up. And as the debt goes down and then the EBITDA goes up, that debt-to-EBITDA ratio goes down.

And that's why we talk to it because a lot of people are looking at that in the context of our industry right now. On a very macro level, very simply stated, people are concerned about overall macro aspects of our industry, whether the sales volumes that are pretty robust will continue for a period of time.

And so there's a concern whenever people see risk in that that caused a certain amount of multiple contraction and that's what we're seeing. And in those circumstances, people find it relevant to look at what debt levels are, people in the industry at the time.

And that's why every call, we're talking about it because we know it's of interest to our investors. And when something is of interest to our investors, we always try and answer that questions or touch on the issues they like to raise.

From where we sit, it's as if we're going to keep our...

Well, excuse me, just a minute. [Foreign Language] (49:50-49:57) Okay.

Thanks for that. Sorry, the police was just asking me questions.

I got to tell you, we've been doing this for a long time, that is the first time we have that. But if the policeman has any question for us, we're happy to try and answer them as well.

Yeah. They've actually closed down a highway here in Montreal.

So, okay. Let me ask the question in a little different way.

The CAD 0.34, the earnings, is that net? So, is that just CAD 0.34 that we can plow into the future?

The reason I asked this question, I'll get right to the bottom line. So, as a longstanding patient shareholder, I'm sitting here and I'm seeing that the share price is CAD 7.50 this week, which is a little discouraging.

I'm wondering why can't we put a payout as a – with the cash flow becoming robust, why can't we juice up the dividend a little bit? Why can't give us a CAD 0.06 dividend instead of a CAD 0.03 dividend?

Overall, that's a good topic for discussion and the issue is what do we do with our cash as we get it, and we have that discussion every year with our board of directors. We have discussions with shareholders and others that have opinions.

I would say that opinions vary amongst shareholders. There are some that say, at some point, you should be buying back some of your shares, at some point, you should be increasing your dividend.

There are some that say, you should be focused on paying down your debt, given the level of debt and the overall macroeconomic concerns. As we've gone through this year, we have determined at least so far that the best thing to do is to apply our cash to investment in capital equipment and the things that we need for our business and to reduce the debt.

And I think that that's the general consensus or wise thing to do with the money, but we monitor all that all time. I do think personally that over time, as we generate more cash flow, as we pay down debt, as we improve that ratio – and I think I said that in our remarks, we will look for things to do with the cash.

The reality is that there are also companies out there that are increasing their debt and increasing their dividend and increasing their share repurchase, because they think that, for example, a debt-to-EBITDA ratio should be around 1.5 times, they're below it and they're trying to get up to it. So, it's certainly a good question in the concept of what do we do with our cash and dividends.

And I think we've indicated this year that our focus is on reducing the debt. Next year, we may have a different discussion.

I'm not providing any hints or whatever, except to say that we're very aware of those discussions and we do discuss those things continuously.

Okay. I mean I would throw it out there and repeat the point simply because there's a huge fluctuation in the share price.

I mean, literally, on a weekly basis, CAD 0.50. If there was penny or two or three more, maybe it would give a little bit more of stability, give a bit of a boost to the share price, a bit of stability.

Although the share price, I don't think it's fairly values the company, and I think that everyone is on agreement on that. Anyway, that's my point and question for today?

All right. Thank you very much.

Good luck with your traffic jam.

It's all split up. The last car that they told, not to go, then they all disappeared, so I guess my luck is changing.

Maybe I'll get a dividend boost tomorrow.

Okay. Thank you very much.

Great. Thanks.

Thanks. I just wanted to make sure I understand the revenue thinking for 2018.

So, the previous guidance was CAD 4 billion to CAD 4.5 billion. Then CAD 150 million is coming off because of the two plant closures, I think, it's Soest and the Detroit, where you're doing the Chrysler 200.

Yeah. One is a sale.

[indiscernible].

Okay. So, you sold that.

Yeah. I'm sorry.

That's correct.

No problem.

And then after that you're going to have this effect on the Equinox, where you're going to a different arrangement with GM, the VAA effect. Is that the right way to think of it?

So the right way to think of it is our formal guidance for 2018 is CAD 3.85 billion to CAD 4.35 billion. So, we're going to come somewhere in between those two goalposts.

Sorry. Say that again, Fred?

The old guidance was?

Sorry. The formal guidance adjusted for those two facilities for 2018 is CAD 3.85 billion to CAD 4.35 billion.

Okay.

So, nothing has changed. Okay.

So, we do still believe despite this change in the VAA to come summer and between those two goalposts.

Okay.

Yeah. We're more likely to be at the lower end than the higher end because of the CAD 250 million, right?

So, there's a negative impact on top line.

Yes. That is possible.

Yeah. But absent the VAA thing and the two plants, I mean, we would otherwise have growth in our production sales, I mean, that's the reality.

We are launching quite a bit of work, right, so.

Okay. And on the new Equinox, can you just talk about – has your content changed at all?

I know on the old Equinox, you did that big – I think it's like rear suspension model. I'm just wondering how your content has changed on the new one.

Yeah. This one, first off, we still have the assembly work as we've discussed, but it's now VAA.

But the bigger piece of the story is we got a significant amount of body-in-white structural parts. Not so much suspension, but what we view is actually very good work from our capability level which is in the body-in-white area.

So, a lot of stampings, a lot of welding, and it's done in multiple parts of North America and Mexico. So, it's going to be a really good business for us.

As Rob indicated earlier, we're getting production businesses versus assembly pass-through business, so we're very excited about it.

And putting aside just this VAA arrangement, so does that mean your content has gone up on the new Equinox?

Absolutely. Yes.

Yeah. Absolutely.

Yes. Significantly.

Yeah. I've answered the question already.

Yes.

Significantly, would be an understatement.

Okay.

More. Yeah.

Really significantly.

Yeah. Really is.

Okay. And then, Pat, I just wanted to ask you – sorry, just on the – I just want to ask a little bit about the aluminum effect.

So, as you know, on the F-Series trucks, where it seems you have lesser exposure, they've converted to aluminum. So I'm just wondering how that has played out for you in your stamping business.

Have you lost any business because of this conversion to aluminum? And in any event, like just philosophically, do you think of that as good thing, because that leads to all kinds of opportunity at Honsel?

So, I'm just wondering how that is playing out and what the mixture looks like for you.

We didn't have a lot of content ahead of that. So, we didn't see any significant change specifically to the F-150.

However, we're capable of – and do stamp aluminum. It's not a significant part of our business, but we have capability in multiple plants.

So, if we have the opportunity to make aluminum parts, whether it's structural or otherwise, certainly, we would bid on those just like we do steel parts. As far as Honsel goes, it's more cast aluminum, and so that really wasn't – the F-150 didn't affect the suspension and the frame of the vehicle.

It's still very similar, I think, to how it was before. Although, again, we didn't have a lot of content on it.

In our Honsel business, what we're seeing is the structural parts related to control arms and subframes and so forth, but also in vehicle wide architecture has changed, and getting more and more structural parts both low-pressure and high-pressure and take more high-end vehicles at this point. But we see that changing over time or there will be more opportunity for Honsel on larger volume vehicles as well, but I think it'd be a good marriage between our two businesses.

One of the things that's unique about us compared to any of our competitors is our balance between stamping, welding in the traditional or classic sense, and aluminum, especially in structural parts, is very balanced in our portfolio. You have some big aluminum makers out there, but they don't do anything in the stamping area, and you got some big stampers out there that do a little bit of aluminum.

And we have a great opportunity here to say, okay, one of the different things we can do to create new product where you start to blend these products structurally. And as you know, we just announced the new tech center in Auburn Hills, and part of the core activity in that tech center is the development of lighter, stronger structures using both our technologies that we've got quite a bit background in now.

So, to me, it's a huge advantage for us as a supplier.

Okay. And lastly, Fred, I just had a question on the interest expense line.

The interest expense line is down quite a bit, whether you look year-over-year or quarter-over-quarter, like more than what the debt pay down has been. So, I'm just wondering what's going on there.

Is some of it floating rate or is it translation? Just trying to understand that line a little bit.

Yeah. I'm not sure if it's actually gone now.

In Q3, it was CAD 6 million; last quarter, it's around CAD 6 million. It is down slightly year-over-year, because our leverage ratio has come down.

So, I'm not sure what numbers you're looking at, but it's pretty flat quarter-over-quarter.

Yeah. Well, I'm looking say, for example – it's down about CAD 1 million year-over-year, I think on a reported basis.

I think it's 6.5% versus 6%. Yeah.

So, our leverage ratio has come down during that period of time, and as our leverage ratio comes down, our cost of borrowing goes down with it. Yeah.

Our cost of borrowing is very cheap and there are inflection rates that we go down.

Okay. Thank you.

Thanks.

Good morning. I just want to close the loop on these 2018 rates.

So, is it then effectively fair to assume that excluding these CAD 250 million from the VAA transition, the 2018 range would be CAD 3.6 billion to CAD 4.1 billion?

No. It's CAD 3.85 billion to CAD 4.35 billion.

So we're not – we're still – our original guidance is not changing. We're just adjusting it for the loss of those two facilities.

But at the same time, we say it's going to be closer to the bottom than the top, because of the CAD 250 million, right? We lost [indiscernible].

Correct. And if you adjust that way then, obviously, your margin percentage would balance that out, I mean, give and take there, right?

Okay. And that VAA transition, is it solely 2018 or it may start in the second half or kind of later in 2017?

It's going to start in 2017, in the back half of 2017, and then annualized, it's going to have the biggest impact starting in 2018.

Okay. And sort of the last question now, I have is a few offline.

Just conceptually, the kind of difference between VAA, what's the incentive for the customer to switch to a model that would give a supplier higher margin? Is there something that I'm missing or is it -?

The purpose of the VAA versus the pass-through is who's responsible for getting the parts, buying the parts, and negotiating price even to some extent, unless it's directed by. So, in other words, in the past, we would decide in some cases what parts we were going to buy, unless they were directed by the customer, we would manage the purchase of those parts and we would have to collect the receivables.

We would have to carry a cost of those parts.

Got you.

Under the VAA model, they carry the cost of the parts, they decide who they're going to deal with. So, we don't have to carry cost of the parts anymore, but the control mechanism where we were doing the front end, we're no longer doing.

So again, it depends on their philosophy at that time and I've seen customers go both ways, back and forth again, depending on who is leading their purchasing effort, depending on the condition and their belief that they can negotiate a better deal on supplied parts versus making it a Tier 2 activity. So, those would be the biggest variables, I'd say.

So Ben, the other way, when you say margin going up, the percent is going up, but the dollar margin isn't necessarily going up.

That's right.

Right. So, effectively then we could model higher than 6% EBIT in 2018?

Not that I'm asking for guidance, but directionally. Directionally.

Mathematically, that's the way you should look at it.

Okay.

So, higher than 6% EBIT in 2018. Yeah.

I mean, I think, we've said directionally, we're going to hit 6% margin EBIT by 2017, and it's going to continue to increase. So, I think that's consistent with what we've been saying all along.

Right. Understood.

Thank you. Perfect.

Okay. Good.

Hi. Thank you for taking the question.

No problem.

Just in terms of the Canadian revenue being down 7% year-on-year, is that primarily related to the Escape program?

No. It's primarily actually the Equinox program.

Again, it's a platform that's reaching the end of its lifecycle and moving into new generation. So, inherently over time, volume come down and we're seeing some of that in Canada.

The Escape is surrounding the U.S.

Right. But it's also the VAA.

Yeah.

The London plant is the one that carries most of that difference.

Right. I will say in a general sense from the Canadian perspective seeing a lot of Canadians on this call, we've had some pretty good news in the Canadian auto industry over the last little while with the GM Oshawa announcement, which is good for us and it's good for Canadian auto parts suppliers with footprint in Ontario for work.

And we've obviously benefited from the Equinox activity and CAMI. And we think that it's actually also very good news for the Chrysler announcement of the paint shop in Bramalea is going to be a facility that's got a modern paint shop as opposed to one that, I think, is well over 20 years old.

And it's got to be good in terms of footprint and future activities. That's the facility in Bramalea that does the Charger and the Challenger and the Chrysler 300, which is effectively Chrysler's mid-sized car, power car or muscle car, whatever you want to call it.

I think this is very good for the next generation and the generation after that. A lot of Canadian suppliers have content on that and will get content on the next vehicle, including us, we have significant content on basically what is made in those facilities.

But if you look at our Canadian footprint, all our stamping and welding plants are pretty full. We just won some good business in the fluids plant.

Both fluids plants now will be full. The module difference, the assembly differences goes to that pass-through issue, which is affected the London plant.

But overall, our Canadian footprint is pretty full and remains pretty full for the near future, so.

Yeah. And our plants – Alfield and Ingersoll – Ingersoll is an assembly facility which is ramping up.

It is state-of-the-art technology. And Alfield, which is a stamping plant, some of you have been there in the past, is going to be a very modernized stamping and assembly facility with a lot of work on that new Equinox.

So, when you guys saw the outcomes coming out of those Unifor negotiations with [indiscernible] you found that as constructive overall for the Canadian automotive industry?

Yeah. And to tell you the truth, I mean, we're personally involved in a lot of that stuff.

In the context, there were different players at those negotiations and that has to include the Ontario Government and Federal Government, everything from – not just writing a check, but facilitating a number of things that you need to do, so that the all-in costs for the assembler is lower and things can get done. Anyone making an investment in Canada looks at two things, one is overall cost, but also the environment in which you operate, the ease of doing business and so forth.

And we work very hard on that proposition. It's been a labor of love for a number of us here.

But Martinrea, as one of the leading Canadian suppliers, we have spent a lot of time with our governments to do that. Now, at the same time, we also spent a lot of time in Michigan where – when we opened the R&D facility or groundbreaking, which is a leased facility by the way.

A leased facility, we're not owning it and we're not spending terrific capital on the ownership of a building. We work closely with the Government of Michigan and we also, in Mexico, work closely with governments there as China and so forth.

So, wherever we are, we try and encourage a healthy environment. But we are Canadian-based, we do think it is very valuable to have the head office here, take advantage of the technology here and a great workforce here, and a lot of other things that we think we have to offer.

And so we don't want to be a Canadian-based company with a lower footprint, because assembly operations leave. And so, I think it's good for everybody.

And we do work with Unifor on these things, but ultimately, the success of those investments, it's not just a union success, I think it's a Canadian success, it's the success of the supply base and everybody else.

It's all about assembly plants. Where the assembly plants are, they want the supply base next door.

So, having those assembly plants down here, it makes a substantial difference.

Yeah. And it actually affects all you, too.

Because if we don't have assembly plants and the supply base moves, we don't have Canadian-based suppliers, then we don't have a need for any auto analysts.

Yeah. That will be unfortunate.

And then maybe just to take the other side of this. Are you guys following what's happening down the U.S.

in terms of the election, and have you thought about maybe some of the potential implications coming out of that?

Is there anything else to talk about?

No. I guess I'm the American here, I'd be able to talk to it.

I think that there's a lot of concern with policy on how is it going to affect NAFTA. And if you take a look between Canada and the U.S.

especially, the view – especially from an industrial point of view is that we don't view it as an imbalance at all. I think it's viewed very balanced between Canada and U.S.

I know some natural resources out west that there might be a little different view there, but certainly, one person doesn't decide to change NAFTA. NAFTA has to go through a whole lot of people.

We have a balanced government in U.S., at least I like to think we do. And so, significant changes, I don't expect, regardless of who wins, significant changes in NAFTA.

I think there'll be some discussions, there'll be some trade-offs, but in general I think, especially in between Canada and the U.S., and Michigan and Ontario, you're going to continue to see the millions of dollars’ worth of the parts running back and forth just like they do today.

Okay. That's great.

Thanks for taking the questions.

No problem.

Good morning.

Good morning.

Good morning.

Just wondering like in terms of your [indiscernible] OE release numbers were pretty down like over the past two quarters. I don't know like how you could get slightly impact of this on going forward basis for your production?

I think – sorry, there was bit of a break up in the thing there. So, I think you're saying the OE numbers were lower and what's the impact on our future production.

Am I correct on that? Did I get that right?

Yeah. Like if I take the average of your [indiscernible] platform?

Yes.

They were down like 10% like in the second quarter or some kind of thing?

Well, quarter-over-quarter decline from Q2 to Q3 is typical in our business, in our industry, because of the summer shutdowns of OEs. So, that wasn't necessarily surprising if you look historically at our trends.

I mean, Q3 is usually our weakest from a volume perspective. I think, looking forward, when you look at these inventory adjustments in the fourth quarter, at the current time, we're viewing these as temporary adjustments, just the customer, I guess, being prudent.

And the other thing to note on the Fusion, Escape, in particular, two of our largest platforms, but those are vehicles laying their life cycle as well, approaching the end. And inherently any given vehicle platform, you see volumes trend down.

And so, it's not necessarily normal. Looking forward, again, we view this as more temporary than anything.

Okay. Thanks for the color.

No problem. Thank you.

Hi, guys. The Chrysler programs for Q4 – that are impacting Q4, do you name those?

No.

Okay. I guess, just more broadly, the 6% EBIT margin that you talked about, that you're working towards.

I'm just curious, how much of that is volume dependent, I guess, specifically in North America – just I guess biggest picture, how to put that or to think about that?

We've said that volumes remain flat relatively. We will continue to improve our margin.

And now, you see at this quarter, volumes were less than expected this quarter. As Fred said, they're usually down, but they're down more, yet our margin is continuing to grow as expected.

We don't see any change in that growth. And in fact as Rob said earlier, we're going to continue on past that.

I mean the improvement activity in the plants is going extremely well and as I said in my part, we're scratching the surface. There is just tremendous opportunity still.

Now, if volumes start to drop substantially, especially depending on what program it is, then obviously like everybody else, you might get impacted. But all things being equal, we're right on schedule.

Okay. Thanks.

Okay. I would like to thank you all for your questions.

Feel free to contact any of us, 416-749-0314, and have a great day.