We Expect US-Imposed Tariffs Will Harm Magna's Customers

Magna International is one of the largest and most diversified auto-parts suppliers in the world, but that size is no guarantee of economic profit. While breadth in products and services can be advantageous regarding cross-selling—commercial activities that bolster content per vehicle and market penetration—we don’t see margins getting high enough to merit moatworthy returns on invested capital because of the multiple competitors in Magna’s largest segments. The company enjoys customer switching costs, which are common to auto suppliers with moats, but its financial performance does not quite merit one. Magna's revenue mix is over 70% from Detroit Three and German automakers that will suffer from US-imposed tariffs if they last for all of President Donald Trump's term.