Magna International - Earnings Call - Q3 2020
November 6, 2020
Transcript
Operator (participant)
Greetings, and welcome to the third quarter 2020 results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Friday, November 6, 2020. I would now like to turn the conference over to Louis Tonelli, VP Investor Relations. Please go ahead.
Louis Tonelli (VP of Investor Relations)
Thanks, Jason. Hello everyone, and welcome to our third quarter 2020 conference call. Joining me today are Don Walker, Swami Kotagiri, and Vince Galifi. We will have formal comments today from Don and Vince. Yesterday, our board of directors met and approved our financial results for the third quarter ended September 30, 2020. We issued a press release this morning for the quarter. You'll find the press release, today's conference call webcast, the slide presentations that go along with the call, and our updated quarterly financial review all in the investor relations section of our website at magna.com. Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation.
Such statements involve certain risks, assumptions, and uncertainties which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our safe harbor disclaimer. As we review financial information today, please note that all figures discussed are in US dollars unless otherwise noted. We've included in the appendix reconciliations of certain key financial statement lines for Q3 2020 and Q3 2019 between reported results and results excluding unusual items. Our quarterly earnings discussion today excludes the impact of unusual items in Q3 2020 and 2019. Don will comment on the non-cash impairment charge we recorded in the quarter. Please note that when we use the term organic in the context of sales movements, we mean excluding the impact of foreign exchange, acquisitions, and investments.
Lastly, please note that we will be providing our 2021 outlook at the same time as we report our fourth quarter and year-end results in February 2021. Now, I'll pass the call over to Don.
Donald Walker (CEO)
Thanks, Louis. Good morning, everybody. Hope everybody's safe and healthy wherever you are today. Before I start, I would like to acknowledge all Magna employees around the world for their tremendous efforts in meeting and exceeding the challenges of the past nine months. I'd also like to once again reiterate that the health and safety of all of our employees remains our top priority at Magna. Today, I'll review our recent highlights, including our announcement of Swami's appointment as Magna's next CEO, our strong third quarter financial results, a non-cash impairment charge related to our investment in one of our equity accounted transmission joint ventures, our agreement to acquire Hong Li, the start of production in our vehicle manufacturing joint venture with BJEV in China, our announced cooperation with Fisker, and a key program award in camera monitoring.
I'll switch up the order a little bit here in order to start with our strong Q3 results. Following the significant production declines driven by the COVID-19 pandemic, in the first half of the year, we were experiencing a recovery in production which started at the end of the second quarter, particularly in our key markets of North America and Europe as well as China. We were pleased with our operating performance in our quarter. While sales were down 2% year over year, our adjusted EPS increased 38% to $1.95 in the quarter, and we generated $1.3 billion in free cash flow. These strong results reflect our operational focus on world-class manufacturing and the actions we have taken to reduce discretionary and structural costs in response to the lower levels of production.
While production is recovering and auto sales have been fairly robust in the past few months, the resurgence of COVID-19 remains a risk to future sales and production. I believe the government's realized the importance of keeping our industry going. We have shown it has been done safely, so I hope we wouldn't have to shut down manufacturing. We believe the actions we have taken to reduce our cost structure and adjust discretionary spending are once again evident of our operating philosophy and agility in adapting to changes in our operating environment. I would now like to address the non-cash impairment charge we took this past quarter. In the past few years, we have highlighted some of the changes we have faced in our Getrag joint ventures.
Similar to last year, during the third quarter of this year, we began to develop our business plans, including volume projections and cash flows for future years. Based on this, we concluded that the carrying value of our investment in Getrag Jiangling Transmission, or GJT, joint venture, is further impaired, resulting in a $200 million non-cash asset impairment charge after taxes and minority interest. We are disappointed in our future projections in joint venture in the Getrag joint venture, in particular the growth in the Chinese business. The structuring actions we announced last quarter included further charges to right-size GJT. We continue to review ways to optimize our joint venture transmission businesses. On the positive side, our wholly-owned transmission business, which is primarily dual-clutch transmissions or DCTs, continues to be strong.
Our package-neutral hybrid DCT, on which a motor is embedded directly into the transmission, is an important element of our powertrain electrification strategy. You'll recall that we have an award from BMW for transmission technologies for front-wheel drive platforms. This award is for our scalable DCT, including hybrid transmission variants, covering 170 different vehicle applications. We also noted at our investor day earlier this year that we have been awarded 48-volt hybrid DCT business with an additional customer. We begin to launch our hybrid DCT product next year. There continues to be strong interest from other OEMs for our DCT products, and we are confident that this will remain a key product supporting our customers' vehicle electrification strategy going forward. Overall, Getrag has been a good acquisition.
Unfortunately, since we allocated a higher proportion of the value to the JVs at the outset, it has resulted in some impairments in our investments in those JVs. Next, let me discuss some recent developments at Magna, including a couple that highlight our continued focus on expanding in China and a couple that demonstrate the unique position we hold in the industry. We currently have a non-controlling interest in a joint venture with Hong Li, a leading seat supplier to Chinese automakers. Back in September, we signed an agreement to acquire 65% ownership of Hong Li's entire seating business. China is an important market for Magna, and this transaction strengthens our competitiveness in seating through additional manufacturing sites, full engineering and testing, and increased vertical integration.
The majority of Hong Li's plants are vertically integrated with JIT seating assembly structures, foam, and trim capabilities that enable an optimum sourcing solution for automakers. The transaction is expected to close in early 2021. This past quarter, in our complete vehicle manufacturing joint venture facility in China, we began to launch the Arcfox Alpha T, the first vehicle to be produced with the Arcfox brand for BJEV, and our first vehicle assembled outside of Europe. While volumes are not going to be significant through 2020, they are expected to grow over the next couple of years as we ramp up production and additional Arcfox vehicles are introduced. As part of our strategic direction to support traditional automakers as well as new entrants, we signed agreements with Fisker that provide the framework for a platform sharing and manufacturing cooperation for the Fisker Ocean SUV.
Initial production is planned for the fourth quarter of 2022. This is a great example of our strategy to leverage our strong portfolio to scale for future mobility needs and utilize our full vehicle engineering and manufacturing capability. This is a unique competitive position for us, particularly with the new mobility players and OEMs seeking to expand their electrified offerings. As part of the cooperation, Fisker issued Magna warrants to purchase shares currently representing approximately 6% of its equity. In addition, we have recently been awarded business for a new camera monitoring system across multiple vehicle models for a global automaker. Our new Clearview technology will enter the market in 2022 using a unique combination of our camera, mirror, electronic, and software capabilities. The Clearview system creates a complete vision system that enhances driver safety by giving the driver more information about their side and rear surroundings.
This system demonstrates Magna's ability to combine our capabilities to provide optimized solutions for our customers. Lastly, and importantly, I'm happy that we recently announced that the board has appointed Swami Kotagiri as CEO effective January 2021, following my retirement at the end of the year. Leading Magna over these years has been a tremendous honor, and I'm extremely proud of everything we've accomplished. I've truly enjoyed the ongoing dialogue that I've had with the investment community and will miss the regular contact. Fortunately, most, if not all of you, are familiar with Swami through his interactions over the past few years through quarterly investor calls, investor days, and other presentations, as well as through visits to our Troy offices. In addition to Swami's strong technical and operational strengths, he has played an integral role in developing Magna's strategy and advancing our position in the changing mobility landscape.
I am very confident in 's leadership and ability to move Magna forward into the next decade and beyond, and I am also very confident in the extremely strong and experienced management team we have at the senior leadership positions across Magna. With that, and speaking of experienced senior management, I'll pass the call over to Vince.
Vincent Galifi (CFO)
Thank you, Don. Good morning, everyone. As Don mentioned, following the worst year-over-year decline in vehicle production during the second quarter of 2020 that we can recall, we experienced a significant recovery in our key markets in the third quarter, and we quickly bounced back to profitability, stronger margins, and solid free cash flow generation, even on relatively low vehicle production. Our third quarter results include sales of $9.1 billion, adjusted EBIT of $778 million, which is up 39%, adjusted EBIT margin of 8.5% compared to 6% last year, adjusted net income attributable to Magna of $585 million, up 34%, adjusted diluted EPS of $1.95, up 38% over the third quarter of 2019, and free cash flow of $1.3 billion. We also returned $115 million to shareholders through dividends. Lastly, we increased our outlook for 2020. I'm going to cover these in my financial review.
Our third quarter total sales were $9.1 billion, a decline of $190 million, or 2% from the third quarter of 2019. Our sales were negatively impacted by lower assembly volumes at Magna Steyr, lower vehicle production, particularly in Europe, the end of production on certain programs, and net customer price concessions. These were partially offset by the launch of new programs, the negative impact of the labor strike at GM that was reflected in our results in the third quarter of 2019, and currency translation, which was about $117 million tailwinds. On an organic basis in the third quarter, our sales were roughly in line with global production, largely as anticipated coming into this quarter. Year to date, our sales have outgrown production on a Magna-weighted basis by 4%. We also expect solid sales outperformance of the market in the fourth quarter, as you will see in our outlook.
Despite the lower sales, adjusted EBIT increased $220 million, or 39%, to $778 million. Our adjusted EBIT margin also increased compared to last year. We reported 8.5% in the third quarter of 2020, up from 6% in the third quarter of 2019. The increase reflects a higher margin percent earned on sales as a result of discretionary and structural cost savings and efficiencies realized across the company, the labor strike at General Motors, which negatively impacted results in the third quarter of last year, lower launch costs, productivity and efficiency improvements at certain underperforming facilities, lower spending for autonomy as a result of exiting our Lyft partnership at the end of last year, and favorable mix in our complete vehicle segment. Also benefiting our margin in the third quarter by about 70 basis points was COVID-19-related government employee support programs, which have substantially come to an end in the third quarter.
These were partially offset by higher foreign exchange losses and net warranty costs. Each of our segments generated better adjusted EBIT, both percent of sales and dollars, compared to last year. Our effective income tax rate increased to 22.6% this year, compared to 19.6% in Q3 of 2019. The increase was primarily due to lower favorable changes to our reserves for uncertain tax positions, partially offset by change in the mix of earnings. Net income attributable to Magna was $585 million compared to $438 million in Q3 2019, reflecting the higher EBIT, partially offset by higher interest expense and the impact of the higher effective tax rate. Diluted EPS was $1.95 for the second quarter, compared to $1.41 last year. The increase reflects the higher net income and 4% fewer shares outstanding.
I'm going to take a moment to discuss accounting for the non-cash impairment charge against the carrying value of our investment in our GJT joint venture. The legal ownership of the Getrag joint ventures is quite complex. We have included a summary in our appendix. Our net impairment this quarter is $200 million. However, a number of income statement lines are impacted. The pre-tax charge is $337 million, the tax recovery is $62 million, and minority interest recovery is $75 million. Lastly, the US GAAP EPS impact on Magna of the impairment charge is $0.67. I will now review our cash flows and investment activities. During the third quarter of 2020, we generated $1.6 billion in cash from operations compared to $750 million in the third quarter of 2019.
This included $518 million in cash generated from working capital, reflecting, among other things, the collection of customer receivables that had been delayed from the second quarter, as well as a return to normal payment patterns with our supply base. Investment activities amounted to $293 million, including $213 million in fixed assets, $68 million in investments, other assets, and intangible assets, and a $12 million increase in private equity investments. Free cash flow was $1.3 billion in the third quarter. In addition, we returned $115 million to shareholders in the quarter through the payment of dividends. Our balance sheet remains very strong. At the end of the third quarter, our liquidity stood at $5.3 billion, including $1.6 billion in cash. Our adjusted debt to adjusted EBITDA at the end of the third quarter stands at 2.1 times, lower than the 2.35 times in Q2.
As anticipated, this is above our target range given the severe decline in EBITDA in the first half of the year. We will likely stay above the target range in the short term but expect the ratio to normalize back into the range in 2021. Yesterday, our board approved our third quarter dividend of $0.40, reflecting our collective confidence in our liquidity and our future. We announced today that our board approved, subject to approval by the Toronto and New York Stock Exchanges, a new normal-course issuer bid to purchase up to 29.6 million of our common shares. This new bid will expire in November of 2021. Next, let me turn to our updated outlook. As always, our outlook is predicated on a set of vehicle production assumptions.
Compared to other years, there remains a higher degree of uncertainty surrounding future production given risks associated with consumer demand, increasing COVID-19 infection rates, supply chain, or other production challenges and other factors. If actual production varies significantly from our assumptions, our results may also vary significantly. Our 2020 margin and cash flow outlook has improved from our August outlook, primarily reflecting strong operating performance and higher sales expectations. The improved sales expectations relate mainly to higher expected 2020 light vehicle production in key markets and currency tailwinds, some of which we experienced in the third quarter, as well as increased anticipated assembly sales. The improvement in free cash flow outlook mainly reflects better than previously expected cash from operations and a slight decline in our expected capital spending for 2020.
We also reinstated other elements of our outlook, including sales by segment, equity income, and net income attributable to Magna. In the appendix to our conference call slide deck, we've also included expected segment margins for full year 2020. A few observations regarding our implied fourth quarter outlook compared to the fourth quarter of 2019. Vehicle production is expected to be down approximately 4% and 6% in our key markets of North America and Europe, respectively. Overall, we also expect global vehicle production down approximately 10%. We anticipate another solid quarter in Q4, despite production volumes being down year over year. Our total sales range implies sales at worst level with Q4 2019 and at best up 11%, with organic growth over market expected to be strong.
Our EBIT % range implies an EBIT dollar range of about $675 million-$850 million compared to $590 million in the fourth quarter of 2019. Our range for net income attributable to Magna is $515 million-$640 million compared to $433 million in the fourth quarter of 2019. Our free cash flow range for 2020 is now between $800 million and $1 billion, implying a range of $550 million-$750 million for the fourth quarter of 2020, compared to a very strong $1.1 billion in Q4 of 2019. This would bring our second half free cash flow to between about $1.85 billion and $2.05 billion compared to the $1.3 billion-$1.5 billion range we expected back in August. The solid outlook reflects the combined actions we have been taking across our business to address the current industry environment. Thanks for your attention this morning.
We would all be pleased to answer your questions at this time.
Louis Tonelli (VP of Investor Relations)
Thank you.
Operator, would you like to register?
Operator (participant)
Yes, sir.
If you'd like to register a question, please press the one followed by the four on your telephone. You'll hear a three-tone prompt to acknowledge your request. If your question has been answered and you'd like to withdraw your registration, please press the one followed by the three. One moment, please, for the first question. Our first question comes from the line of John Murphy with Bank of America. Please proceed with your question.
John Murphy (SVP)
Good morning, guys. Thanks for all the detail on a lot of developments here. It's very helpful. I just wanted to ask a first question on the outlook events that you just went through, particularly around the fourth quarter, which is very strong, the top line and even at the EBIT level. Are there programs rolling on in the fourth quarter that's giving you this level of confidence? Because, I mean, if you look at the outgrowth versus the market, just simply without sales weighting it, it's up 10-21% above the market. It just seems like you're really outperforming the market in the fourth quarter, and it seems like something must be rolling in.
Vincent Galifi (CFO)
I think what you're seeing in the fourth quarter is the benefit of some new program launches. We're also expecting to see some continued better mix just within our product segments, which helps certainly to grow overall sales. Our old way of defining things is content per vehicle, average content per vehicle. That's certainly helping on the sales line. On the margin side, you look at kind of implied margins in Q4, and if you work the math, it'll be a little lower than where we were in Q3. Remember, Q3 benefited from those government support programs, about 70 basis points. If you kind of neutralize Q3 for that and look at the range of potential Q4 margins, it's in the ballpark of the Q3 net of the government support programs.
Again, I look at that, and I still think that's good margins, strong margins. It's reflecting, obviously, some of the activities we undertook through this year, starting in Q1 and Q2 and actually continuing, where we're rightsizing our company, looking at a whole bunch of structural costs that we've taken out. We took a pretty big impairment on severance costs in Q2, about $150 million. We're expecting some savings, and we're seeing the benefit of that in Q3. We'll continue to see the benefit of that in Q4 and continue to see benefits growing as we get into 2021 on the margin side.
Donald Walker (CEO)
John, the other thing is, for the most part, we've been struggling with some losing divisions in the past years and some difficult launches. Right now, knock on wood, everything seems to be going pretty well. We've made some really good improvement in a number of those areas, so that's helping as well.
Swamy Kotagiri (President)
Yeah. On the sales side, for sure, big programs. There are some launches, including the GM SUVs. Just generally, the GM programs are very strong year over year, stronger, let's say, in the fourth quarter in relative terms compared to where they were in the third quarter. That's definitely helping us. We're launching the Bronco. We've got some content on that. Of course, the Escalade, and we've got content on there. There's a few programs that are launching as well.
John Murphy (SVP)
Okay. That's very helpful. Just a second question, maybe sort of two-pronged on strategy here. I'm just curious if you can remind us of your current seating position in China and what the Hong Li acquisition means to sort of the total portfolio in China. The second strategic question is, when we look at Arcfox and Fisker, I'm just curious how the platform development costs and the platform development, whether you call it a skateboard or how you want to define that EV platform, is getting paid for and shared with these partners. Is there any crossover between what you're doing with Arcfox and what might be the platform for Fisker?
Donald Walker (CEO)
Yeah. Let me start with the seating. Magna has been, as you know, if you look at it historically, we've been relatively small going back 20 years. We first grew in North America and then in Europe. We are a relatively small player still in China, but we have made some acquisitions. We've done some greenfield operations, and this just strengthens our position in China. We believe we can continue to penetrate organically with this winning new business over there. We've got some very big competitors in China, and some have gone through some difficult times. This was a move for us to really give us full capability just to continue our greenfield growth over in China. Maybe I'll turn over to Swami for Fisker.
Fisker, just for us to do, but Fisker and what we're doing for Arcfox, because we're tied up with customers, we're pretty limited in what we can say. We're leaving it up to them what they want to say. Do you want to add anything, Swami, on Fisker and Arcfox?
Swamy Kotagiri (President)
Yeah, John. I think, generally, like you said, we won't be talking specifics, John. Most importantly, I think there is a lot of platform and core technologies across Magna. We've always talked about how that is an advantage in being able to bring all of these platforms together at a system level or from a vehicle perspective. We have done that at different levels. Fisker is one other example of being able to provide that base platform. Obviously, the details and the customization and some of that stuff is different from different OEMs and customers, and we're not able to discuss those details.
John Murphy (SVP)
Okay. Maybe just one follow-up to that. I mean, obviously, you're capable of designing, engineering, and manufacturing an EV, right? I don't think that's a secret. You guys are very good at this stuff. The business question is, the business sense of that is always a big question mark. Somebody else is taking the risk here, being Arcfox and Fisker for you. I mean, it's just, will we ever be able to hear how these development costs and these platforms' costs are shared over time? Because I think there's a lot of interest in, obviously, what you're doing here, but then what you can do in the future based on what you might develop here or what you might do with other partners. I mean, is there going to be a point in time where we can have more disclosure?
I understand what's going on right now, but I think there's a lot of curiosity about what you're doing here.
Swamy Kotagiri (President)
Yeah. Like I said, John, one of the key things that we've always talked about is looking at platforms being modular and scalable at each of the product lines. When I say that, whether it's powertrain within certain power levels, ADAS, the L1, L2 Plus, as we go through each of these, even in Cosmo Exteriors, like what is the underbody, what's the vehicle structure? We have always done it with the outlook on what the vehicles could be in different segments and what is the sweet spot. With our Magna's tire engineering capability and kind of oversight on what they go through from a manufacturing perspective, we are bringing these things together. It is very difficult to say, "Here is a platform overall. This is what we consider to be the core platform technology development," and it happens across the portfolio.
Definitely, going forward, there will be synergies on things that have been developed and used off the shelf going forward, just like any other product. We hope to see that, but difficult to quantify exactly for a specific platform.
John Murphy (SVP)
Okay. And then just lastly, real quick on the GJT write-down. Don, you kind of commented the way that value had been allocated at the point of acquisition may have been less than perfect based on what you know now, right? Maybe it was good when you were doing it. It sounds like there's a lot of value that's developing on the HDT side. It's sort of packet neutral for hybrids. Just curious, in total, if you think about that acquisition, there's really some parts that may be a little bit negative, but then it sounds like there's some parts that are really positive, particularly on the HDT side. Is the GJT write-down really just an accounting rule that you're kind of forced to follow?
There actually is still a lot of value in this Getrag acquisition, and it's not something that's all of a sudden, in total, being really impaired in a significant way.
Swamy Kotagiri (President)
John, I think definitely the product adjacency compared to what we had in our driveline systems, it is definitely a great decision, and it continues to show in our DCT portfolio. As you talked about, we continue to win business in the hybrid dual-clutch transmissions and a lot more inquiries from various customers going way beyond the 2026 timeframe even. We see a strong roadmap there. As a next step, based on the DCT platform, we are also looking at the HT. That is applicable to the hybrid as well as the EV platforms. We see that as the right decision, and it continues to be a foundational step for the electrification process. It's only a matter of regional product application in China where, I think, Vince talked about it. Maybe you can add some color.
is the reason why we are seeing the impairments. Overall, as a product portfolio and the decision on Getrag, we still believe it was the right thing and is the right thing.
Vincent Galifi (CFO)
John, it's just unfortunately, the accounting rules forced me to look at our whole young operations and our equity accounted investments as separate pieces. As we're doing some of the required testing, I got to compare that to how we originally allocated purchase price on this acquisition. That's forcing a pretty significant, as you know, impairment this year. We also took an impairment last year on this business. If these entities were consolidated, and I looked at this through one lens as opposed to two, I'd say substantially all that impairment wouldn't be required. I think there'd be still some fixed asset impairments in the entities because it's a different test that applies whether you're equity accounted or consolidated. Substantially, all that impairment wouldn't be required.
It's just unfortunate because, as Don talked about and Swami talked about, you look at this acquisition, and there's always uncertainty in anything you do, even when you look at a program. In China, we've underperformed, and in Europe, we've outperformed expectations. As Swami talked about, it's positioned extremely well when you think about our electrification strategy. That's just the end result, and we're following the rules.
John Murphy (SVP)
Yeah. Thank you very much. That's incredibly helpful. Thank you.
Operator (participant)
Our next question comes from the line of Itay Michaeli with Citigroup. Please proceed with your question.
Itay Michaeli (Analyst)
Great. Thank you. Good morning. Don, Swami, congrats to you both. First question, going back to the margin discussion, maybe for Vince. It looks like you're exiting kind of in the high 7% range per your guidance. I think you mentioned earlier there's still some additional opportunities there. At a high level, how should we think about kind of the original 2022 guided range, I think, of 7.6-8%? I understand there's a lot of uncertainty out there, but should we think about that as having potential upside over the next couple of years? Any points it takes there would be helpful.
Vincent Galifi (CFO)
Yeah. We are right now in the middle of business plans, so I do not have that information handy right now that I can look at and rely on. We will give a full sort of color in February. ETA, I think, kind of sit back. The way I would think about it is as follows. If our volume and mix assumptions in 2022 were exact, we did pull our guidance, right, given the uncertainty. That gives you a benchmark. I look back at the business and what has happened in the business. Some of the things that we have done this year to improve our cost structure would be additive, I believe, to where we would have been in 2022. That is a plus. I have to remind you too that I do not think the volumes are going to be where they are.
I think they're probably going to be a little bit lower. That is kind of a negative. I do not know when you kind of add one plus two and the changes in new business awards, where that all sort of adds to. We have become, I would say, more efficient on the cost structure. That is just not a Q3 or Q4 item. It is something that is going to continue for the foreseeable future out into 2021, 2022, and 2023. That is my visibility at this point in time.
Itay Michaeli (Analyst)
No, that's very helpful, Vince. Thank you for that. Just secondly, hopefully, you can give us an update broadly on just the new business and quoting pipeline, and maybe particularly on the ADAS business. I know previously you were thinking of the outlook was to take that business to over $1 billion of revenue by 2025. Any updates there in terms of the level of quoting and just new business win activity?
Swamy Kotagiri (President)
Go ahead.
Vincent Galifi (CFO)
Go ahead. Go ahead, Swami. Go ahead.
Swamy Kotagiri (President)
Vince, I think I just was going to make a comment on the programs that we were talking about and which have actually helped us get some of the development process that we've undergone in advanced technologies and has put us in a great position to win some additional business. I think that core platform technology will help significantly. As we look at the growth ranges out to 2022 and 2023, earlier we talked about to be in the 7-9% CAGR from 2019 to 2022. Looking at 2019 to 2023, we are in the 13-15%, but there is some good traction in terms of programs that we're talking based on the core development that we've gone through.
Vincent Galifi (CFO)
If I look at our program awards, and it's hard to just take a quarter and make a conclusion on that. If I look at the first nine months of the year and what's in the pipeline, I'd say specifically on ADAS, we certainly had a plan in terms of what we were targeting. Where results are today, I'm confident that we're going to meet or exceed that plan. We'll quantify that as we get some guidance in February of next year. With respect to some of the other businesses, I think in some areas we've seen some slippage into 2021 as some of the programs have been delayed. It's not that we've lost the business, just that the program awards have been pushed out over what we thought they were, the date that they were going to be awarded.
I'd say overall, we're on track in terms of where we thought we were going to be at the beginning of 2020.
Swamy Kotagiri (President)
Vince, I think just maybe a couple of points on Don mentioned that the program award for camera monitoring, I think, is a good example of how we are basing the existing technology and bringing different systems together. This is the complete intelligent vision system we are talking about, includes the outside mirrors with camera monitoring, inside video mirror, and the remote ECU, and our software, of course. We see this as a trend where it's unique to us to be able to bring systems together. That's a good win. We see a lot more traction and discussions with other OEMs.
Itay Michaeli (Analyst)
Interesting. That's very helpful. Okay. Just sneaking on that, Swami, on the camera monitoring award, any sense of how we should think about the CPV for that?
Swamy Kotagiri (President)
It's difficult because it's based ETA on the number of features and what type of integration is needed. If you look at the mirrors versus the cameras individually versus the overall system, I would say at an average, that would be an increased content for us.
Itay Michaeli (Analyst)
Got it. Perfect. Thanks for all the detail. Thank you.
Operator (participant)
Our next question comes from the line of Christopher Patrick McNally with Evercore ISI. Please proceed with your question.
Chris McNally (Senior Managing Director, Global Automotive and Mobility Research)
Thanks so much. Congratulations again to Don and Swami. Hopefully, Swami, you can get the 23 times return in Magna stock that Don was able to accomplish over his career. We will keep that optimism. One model question and one strategic. On the model, the power and vision margins were particularly impressive. That is one where you have already discussed that you have had a lot of turnaround and a couple of execution issues over the last one to two years. This is a business that you used to have a 10% plus margin goal. Just curious, can we think about this 8% sort of second half floor as something to work off going forward? I know you are working on the three-year plan, but just trying to see if there is anything extraordinary in the mix that gave you such a nice pickup in what looks like the implied second half.
Vincent Galifi (CFO)
Yeah, Chris, let me try to answer that. You look at the margins in Q3 for power and vision, and they came in at 8.3% compared to the 6.2% the year before. I think you got to look at the 8.3% and think about, first of all, the employee support programs. That was probably around 60 basis points, 60 to 65 basis points for power and vision. There was a benefit of not having the GM strike in Q3 last year. Besides that, we did see some margin expansion in our power and vision segment. Part of that came through some efficiencies and restructuring savings. Part of that came through reduced spending on Lyft, which we've talked about. I, Chris, think about this business on this basis. It's still a relatively small business. I know it's growing quite rapidly.
We've been investing in, I'd say, a couple of areas. One is I call it core platform technology. You've heard Swami talk a little bit about that in other areas of the business. We're also spending a lot of money on programs that are going to ramp up and launch over the next couple of years. That core technology spending, once we've got it, it's an asset we have. It's like a fixed asset. Unfortunately, we don't put it on the balance sheet because we expense it. We're going to be able to leverage that for future programs. That should lead to higher margins on its own. Unlike a fixed asset where you depreciate over time and it continues to hit margins, this money's spent. We've got the asset, and we're going to leverage that.
How the margins grow over time is going to be a function of how quickly the business ramps up, how much new business we've got, and what our continued spending is on platform technology. I'd expect the level of spending that we're doing now on sort of gaining and maintaining our capabilities is going to be roughly the same. The variable is going to be application engineering, which is completely related to and tied to new business.
Chris McNally (Senior Managing Director, Global Automotive and Mobility Research)
Okay. That's really helpful in terms of the launch sequence. Maybe my second question is a little bit more strategic. As I think about ESTIR and John, I think alluded to sort of the spirit of the question in his question. I guess high level, you have Austria. You have a similar facility in Serbia, which you can grow. What would it take from an economics perspective, a new customer, to launch sort of a U.S. facility? I think clearly what we're all seeing is there's a huge startup demand from new EV players who really do not have any history in manufacturing, but essentially have all the free capital in the world. It seems like there would be this once-in-a-kind-of-cycle opportunity for Magna to do something with ESTIR in North America and sort of get out ahead of that.
If you could just talk about maybe the hurdle requirements, CapEx requirements, anything about what is the opportunity that looks like we can grow ESTIR significantly from here?
Swamy Kotagiri (President)
I think, Chris, a great question. In terms of looking at the possibility of a footprint in North America, we've always said if the business case makes sense in terms of a longer-term perspective, we would remain open. The position is still the same. To your point, whether it's the incumbent OEMs looking for different variants, whether EV or otherwise, in combination with the new entrants, I think with the flexibility in the manufacturing processes, we still have to look at a volume criteria of how much is required to sensibly have a facility. You can always start with something and have the flexibility to grow or add on. I think that still remains the same. Whether it has to be multiple OEMs or not will depend upon the volume.
If there is a smaller volume criteria with a decent outlook, then it's two or three mix, or maybe just one which has a certain number. Our Graz facility or Graz Hochef facility today can produce up to 200,000 units a year. Kind of gives you a ballpark in terms of the scale and size, plus or minus. Obviously, we can, like I said, have the flexibility to start smaller and grow. We continue to have that discussions, and we are seeing a lot of inquiries. Beyond 2023, we said we would be contemplating and looking at the possibility with Fisker, again, if it makes sense. I think there's a few variables that we need to manage through.
Chris McNally (Senior Managing Director, Global Automotive and Mobility Research)
That's great. Those typical programs, I think you said on previous calls, I mean, you've done programs that are 50,000, but typically they're 75,000 and above. Okay. That makes sense. Thanks so much, and congrats again.
Operator (participant)
Our next question comes from the line of Ryan Brinkman with J.P. Morgan. Please proceed with your question.
Ryan Brinkman (Automotive Equity Research Analyst)
Hi. Thanks for taking my question, which is another one on the Clearview opportunity on, I think it was slide 17. How do you estimate this product stacks up in terms of its cost, weight, packaging, etc., relative to what competitive offerings are out there? Given those characteristics of the market, do you have a targeted amount of sales or market share that you think your product could garner over time? Could this become eventually material for the Power and Vision segment? If so, over what time frame?
Swamy Kotagiri (President)
Good morning. I think the key point there is bringing systems together, which we always talked about was the uniqueness of Magna. This is a good example. As you look forward, we always talked also about mirrors being augmented with other systems to provide information to the drivers and the passengers. This is that. In terms of looking at the value, you cannot just look at the value from the component-to-component comparison. As we have these discussions with the OEM, both in terms of the feature availability to the consumer, plus the one plus one is greater than two is a good example here. Overall, at a system level, the OEMs would look at it only if it makes sense to reduce the cost base for them, right?
For us, it is an increased content, and we are able to bring things together in terms of synergies of software, ECUs, and packaging for sure. It is giving more value to the consumer. In this case, it gives a larger field of view, and that is customizable to user preference. It has improved driver visibility with three cameras creating a merged view. There is a lot of value to the consumer itself. It is a combination of the two that we are able to bring. We think there is a large market for this, especially with the expertise we have on both mirrors, cameras, and software.
Ryan Brinkman (Automotive Equity Research Analyst)
Okay. Great. Thanks. I am just curious, finally, after the announcement of the transaction with Fisker, if you've received any sort of additional inbound interest along these lines. I know you have more capacity, particularly in China coming online. How should we think about the complete vehicle assembly business ramping in terms of potential new awards or transactions with startup automakers that do not have their own manufacturing capacity? How do you think that could trend over the next couple or several years?
Swamy Kotagiri (President)
I think it's not specifically related to the announcement. Actually, even before, Magna's tire capabilities are well known, and we have and continue to have various discussions with the startup new entrants, as well as actually the incumbent OEMs, whether it's variants or regular platforms. We see that as a unique capability. Like Don talked about, we're just starting to launch in China. We see a lot of discussions there, as well as in North America and in Europe. We believe we could be the enabler to the OEMs to widen their portfolio and look at us as an extension, and definitely from a new entrant perspective, to bring reliability, robustness, experience of scale manufacturing to them. We see a good future there.
Ryan Brinkman (Automotive Equity Research Analyst)
Okay. Great. Thank you.
Donald Walker (CEO)
Just want to add one thing to your previous question. We talked about the market size for Clearview. It's always the most difficult to develop something, get it proven out, and get a car maker to say, "I want to put that on a platform." Once you get one, the barrier to entry for others is much lower. As an example, I would look at the electronic latch. It took us almost a decade from the concept to land our first contract. Once you got the first contract and it was tested out, there was a lot of interest from others. It starts to penetrate. I can't give you a dollar range, but expect once you get the first one, you can get others.
Vincent Galifi (CFO)
As we're looking at the very first program, it's still a pretty sizable program. We're estimating sales are about $100 million a year. It's a first step into, I think, additional awards in the future. We are speaking with a number of additional customers about our Clearview technology. I think there's an area of growth for us.
Ryan Brinkman (Automotive Equity Research Analyst)
That's great. Thanks a lot for that color.
Operator (participant)
Our next question comes from the line of Mark Neville with Scotia Capital. Please proceed with your question.
Mark Neville (Analyst)
Hi. Good morning. First off, Don, Swamy, again, congrats folks. Congratulations. I just want to hopefully get a little more color on some of the structural cost savings. It sounds like headcount's a big part of it, but I'm just curious if there's anything else. Maybe it's a challenge to quantify, but how do we think about that in terms of maybe if it's a structurally higher incremental margin or putting a number around those cost savings? Thanks.
Vincent Galifi (CFO)
Mark, it's not all headcount related, right? Some of it is process related. Some of it is just sort of I think we talked about this at the end of Q1, is where the team took an opportunity to look at what we've been doing and just say, "What's real value added and what can we do differently? And what costs can we eliminate?" We’ve done some of that. Even when you look at the headcount, when I think about the improvement, it's not because labor's up or down, because volumes are up or down. We've actually taken headcount out because we reduced our structural costs, and I don't expect that to come back. In terms of trying to quantify it, I don't have a number, Mark.
All I can tell you at this point is we did spend about $150 million or incurred about a $150 million provision in Q2. There continues to be, unfortunately, some severance and restructuring costs even in Q3, and I expect some more in Q4. We did not call them out specifically. It is scattered here and there and everywhere. When we did the analysis, and we spent a lot of time on it in Q2 and just looked at what savings are kind of permanent versus just volume related, at that point, our view was that our savings would be about $200 million on an annual basis. Now, we do not get to that full number until 2022. Obviously, we are getting some of that today, and then the balance of this year, there will be a bigger part of that that is going to fall into 2021.
In 2022, we should see the full 200 impacting our profitability on a positive basis.
Mark Neville (Analyst)
Thanks. I guess I do not want to pick too much on the Q4 guide. You said it is very strong. If I just sort of look at the implied sort of growth rate sequentially, I think sales are up about $700 million. I have not quite done the math with the subsidies, but again, it looks like the incremental margin is a bit lower than I might have thought. Maybe some of those—excuse me—the cost savings are taking some time to come in, or maybe it is mixed. Just curious if you can speak to that.
Vincent Galifi (CFO)
You're looking at kind of sales where, if you look at our sales range implied for Q4, we're kind of 9.4-10.4, and we're just over $9 billion in the quarter. I think mix has got something to do with it. You still have to think about seasonality in our business. You've got Christmas shutdowns still impacting us in Q4, right? I think it's going to be a little different. I hope it's a little different and probably stronger production generally over the holidays. There is that impact typically in Q4 that does hurt our margins on a seasonal basis. You have to factor that into account as well, Mark.
Mark Neville (Analyst)
Okay. Sorry. Just maybe as one last one, just for the accounting on the impairment and the JV, what's the remaining carrying value for that JV? I'm just sort of curious, the last two years sort of what % of the book was written down?
Vincent Galifi (CFO)
Yeah. You know what? You look at the—we've got a number of JVs in there. I think when you look at all of it, I'm just trying to find it over here, certainly a lot less than kind of where we thought. We're probably in the $300 million-$400 million range at the end of the quarter in terms of our carrying value. But you remember our carrying value and our original acquisition price, there'd be a lot of movements in there, right? Because we've taken money out in the form of dividends. We generated some income. It's not an easy tie back to kind of our original purchase price. You got to run through all the various pieces that impact our carrying value on our books.
Mark Neville (Analyst)
All right. Got it. All right. Thanks. I'll pass the line.
Vincent Galifi (CFO)
Thanks again.
Operator (participant)
Our next question comes from the line of Dan Levy with Credit Suisse. Please proceed with your question.
Dan Levy (Senior Equity Research Analyst)
Hi. Good morning. Echoing others' comments, Don and Swamy, congratulations. Wanted to go back to the margin question specific to body exterior structures. You had a 10% margin in the third quarter. Fourth quarter, it's basically implied something like 9%. That's well above what you've done in the past, or at least for the period that you've reported the segment margins. Can you just give us a sense of the underlying dynamics in the business? I mean, I know in 3Q, you obviously had some governance support there, but 4Q is still pretty strong. Is it just the GM truck mix in third quarter and fourth quarter that you're getting a really nice contribution margin on that? I know you mentioned a few things in the release about cost saves or low launch costs, efficiency improvements. Are those unique?
We shouldn't extrapolate those going forward, or is there any sustainability to those results and to those drivers?
Vincent Galifi (CFO)
Yeah. I think when you look at last year's margins for VES, we'll start with last year. There's a couple of things that really stick out in my mind. One is certainly the GM strike, which we called out last year, which was under 50 basis points, but 45 basis points. That has reversed in the quarter. We were impacted by a couple of underperforming operations in our VES group last year. We've been talking about some of the actions that we've taken to improve those operations. Kind of blurred in the first half of the year given reduced volumes with COVID-19. If you look at the performance of those operations in Q3 and expected performance in Q4 and so on, the actions we're taking to improve operations is adding to overall margins.
That's going to continue and should continue to expand as we move into 2021. We've been benefiting a bit through lower launch costs. It's just really the level of activity. Throughout the entire organization at VES, and actually throughout the whole company, we're seeing the benefits of some of the right-sizing actions that we took and some of the efficiencies and restructuring items that we've done. Again, I think that's going to carry on. What will not carry on into Q4 is, again, the impact of the government employee support programs. At VES, we estimate that that's about 90 basis points on their margins. You take the 10-1, they're really running at kind of without that 9-9-2-ish, let's call that. I think that's a good sort of benchmark.
With continued realization of some of the benefits from the cost savings from the restructuring, which should grow over time, as well as continued improvement in some of those underperformers, I do not see any reason why margins cannot continue to inch up over time.
Dan Levy (Senior Equity Research Analyst)
Great. There is some sustainability to that run rate that we see in the fourth quarter. Just to be clear, how much of that is driven by mix? Because GM is particularly strong and they're running all out. I know you have high content on that.
Vincent Galifi (CFO)
Yeah. Dan, on that, I think when you look at overall our VES business, there's a number of customers and a number of programs. I really look at it and kind of highlight what one program may or may not do to overall margins.
Dan Levy (Senior Equity Research Analyst)
Got it. Okay. I want to circle back on the FISTRA question and just really more broadly on complete vehicles. I think we all know about you do the vehicle assembly piece quite well. I mean, we're all well aware of that. I think what is maybe unique to us or what we're seeing more of now is this engineering services piece. First, could you just give us a sense of how new is this or how are you approaching areas like battery, powertrain, electrical architecture that we maybe don't see as much on the assembly side? Obviously, I think we know the appeal of a startup to come to you because they take the asset-light approach.
What is the appeal of a legacy automaker to join you on this platform and take on these engineering services when they obviously have some of that in-house? Is it just really scale or resource allocation?
Swamy Kotagiri (President)
Yeah. I think the important part of it is that the engineering, full-vehicle engineering services, is not new. We have done that with many of our OEMs, both in North America and Europe, at a subsystem level, also at a full-vehicle level engineering and integration. It is not specific or unique only to the new entrants. We have done that in the past. That is the experience that we are leveraging and working through. There is a rich heritage there. I think a little bit goes to our knowledge and depth in different product systems. It is not just bringing things together. We can leverage each of the product groups that we have, get the knowledge. We know how the systems interface and bring it together. On top of that is the experience, like I talked about, is the full-vehicles in the past.
I will not say it is specific to startups only. As the OEMs are looking at it, they know we have the capability and the experience. If they are looking at a variant of the existing platform or looking at taking an existing platform and customizing to something different to meet their needs, I think all of the above, we are able to bring to the table, right? Specific to new entrants, I think we can actually look at the entire value chain and say, "Here are the platforms that we have, core technology that Vince talked about." If we are involved with them way ahead, there is a lot of synergies in terms of time and the development process that could be helpful to come to the market faster. It is a combination of all of those.
Dan Levy (Senior Equity Research Analyst)
Just to clarify, any comments on sort of how you've approached the battery or areas which are a bit more unique?
Swamy Kotagiri (President)
In terms of the integration of the battery, if you remember, we have the knowledge in terms of how the batteries work. We also talk about how do we bring power to the wheels. In terms of the battery chemistry and so on, honestly, there's a lot going on. That is something for us to understand, but not the expertise. In terms of the integration of the battery packs and the rest of the system, we have a lot of expertise and knowledge in that, I should say.
Dan Levy (Senior Equity Research Analyst)
Great. Thank you.
Operator (participant)
Our next question comes from Kevin Chang with CIBC World Markets. Please proceed with your question.
Kevin Chang (Financial Services Representative)
Hi. Thanks for taking my question. Again, congrats, Don and Swamy. Maybe just a couple of clarification questions. Vince, you called out the government wage support impact on margins. I think my math is right. It's about $64 million or mid-$60 million of contribution. That's greater than the decline you saw in your labor cost line. Just wondering, where else would these cost savings show up in your P&L?
Vincent Galifi (CFO)
Yeah. They would be in the overhead SG&A. Yeah. Cost of sales and SG&A, the biggest part of it is going to probably be in cost of sales, Kevin.
Kevin Chang (Financial Services Representative)
Okay. That's helpful. Just a lot of conversation on your complete vehicle manufacturing capabilities. If memory serves me correct, when even margins were closer to 1-2%, you would constantly highlight that the return on invested capital within this division was at a corporate average or in line with your other divisions. Just given the step function improvement you've seen in margins in complete vehicle manufacturing, I wonder how that ROIC looks like today. Would that suggest that you're seeing returns better than the corporate average now with margins closer to 5%?
Vincent Galifi (CFO)
Yeah. With this business here, we've been seeing returns historically that have been better than our corporate average. That continues to be the case, Kevin. I'd say on the negative, what's impacting return on invested capital doesn't offset sort of some of the gains as a result of margin expansion, but it's the capital that we've invested in the new facility in Europe to support some of the Graz activities. Certainly, that's a pretty significant investment that, when you do the math, impacts return on invested capital. All in all today, our STAR business is operating at returns that are better than the corporate average.
Kevin Chang (Financial Services Representative)
Okay. That's helpful. Thank you. Congrats on a good quarter.
Vincent Galifi (CFO)
Thank you.
Operator (participant)
Our next question comes from the line of James Picariello with KeyBank. Please proceed with your question.
James Picariello (Senior Automotive Analyst)
Hey, good morning, guys. What are the restructuring savings you're expecting to achieve by year-end within the $200 million fully targeted? What should be realized this year? Has that changed at all relative to your previous guidance?
Vincent Galifi (CFO)
Given to our previous guidance, I don't have any information at this point that would make me change my views on that. We'll do a deep dive as we get through people's and groups' business plans. I still have the $200 million number. Still, I'd say relatively in the ballpark. In terms of how much of that's going to be realized this year versus next year and 2022, I'd say the bigger bulk of it is going to be in 2021 when we have a full year advantage. We've been operating in this type of environment for six months plus. We should see, everything else being equal, incremental improvements to margins as a result of the activities that were taking place or have taken place and will continue to take place in 2020.
James Picariello (Senior Automotive Analyst)
Okay. Got it. No major change to what's achieved this year.
Vincent Galifi (CFO)
No.
James Picariello (Senior Automotive Analyst)
Okay. All right. At a high level, as we try to bridge to 2021, on the positive side of the ledger, we'll have structural cost savings from that program we just talked about. It sounds as though your top-up payments were fully reimbursed by the government support programs this past quarter. Nothing really to call out on that front. As we think about next year, is there a quantifiable bucket of net temporary cost savings this year that will not repeat in 2021? I mean, could this be an equal offset to your permanent savings next year? How should we be thinking about that? That would be helpful. Next.
Vincent Galifi (CFO)
I think that's going to depend a little bit on what happens with restrictions. I can see, for example, travel costs start to edge up somewhat if travel is now more free. We have been working virtually across this organization. It works fine. I still think the face-to-face meetings in certain situations are important and necessary. I don't think we're going to get to the same level we were in the past. That could certainly edge up somewhat. Are people going to be a little bit, if volumes start to move up and profits start to move up, people are going to be a little bit easier to spend some money on discretionary items, possibly. I don't think that's going to in any way outweigh the benefits we expect from right-sizing our business.
James Picariello (Senior Automotive Analyst)
Got it. And then just last one, the timing of the almost 30 million share buyback program, would you expect to complete that authorization within the one-year term? Just what's been the company's historical track record on fully executing the board's share vehicle authorization?
Vincent Galifi (CFO)
Do you know, James, I think this is the 10th year in a row that we've announced the NCIV. I think there's a couple of periods where it comes to mind we haven't come close to what we were doing and what we were authorized to do. The reason for that is we were allocating capital to the business. I think of the period when we acquired Getrag, for example. We stopped the buyback to bring some more cash into the kitty to pay for the acquisition. Once we got through that, we started buying back again. You look into this NCIV, and I've talked about when do we consider resuming the NCIV. I said, "We're not going to be doing anything in 2020. We're going to get through the end of this year. We'll have an updated business plan for the next three years.
We can come up with a revised strategy. Our capital allocation strategy has not changed. It is going to be a function of how we use our cash and how much of that is used to invest in the business either organically or inorganically. The balance will be buybacks. You could get to the situation where we buy back the complete number of shares. It could be that some of that cash is being used to invest and grow the business. We will just cut back a little bit on the buyback. Unknown at this point in time. In terms of our strategy and how we look at it, James, it has not changed with this announcement here.
James Picariello (Senior Automotive Analyst)
Got it. Congrats to you, Don, and to you as well, Swamy. Thanks.
Vincent Galifi (CFO)
Thank you.
James Picariello (Senior Automotive Analyst)
Thank you.
Operator (participant)
Our next question comes from the line of Rod Lache with Wolfe Research. Please proceed with your question.
Rod Lache (Managing Director and Senior Research Analyst)
Great. Good morning, everybody. You talked a little bit about the opportunity that you see in hybrid drivelines. I was hoping you might just touch on the feedback that you've been getting on the competitiveness of your battery electric vehicle driveline technologies. What's the interest in the motors, gears, and power electronics that you've been developing specifically for EVs? Is there some aspect of that that you think is, in particular, gaining traction with OEMs? Secondly, GM yesterday talked about the decision to transform Oshawa to pickup truck manufacturing starting in 2022. I think you have over $2,000 of content per vehicle on pickups from them. Do you have similar levels of content, or do you have the potential for similar levels of content on some of the electric pickups that are coming out over the next few years?
Swamy Kotagiri (President)
Oh, good morning, Rod. The answer is yes. What I mean by that is, as we look at the eDrive systems, we've talked about how we looked at the building blocks that go into the overall system. Not just on the integration, but actually the value chain of the systems is where we have been looking at. In the two programs that we have and we talked about, obviously, the winning of the business shows the competitiveness for us in getting that. As we go through the launch, we are going through the launch and getting through that process. We actually have a very comprehensive strategy on addressing the power ranges and the torques and so on and so forth.
We believe we have a very, I strongly believe we have a good position in the overall system, which means we have to look at the power electronics, the gearbox, the software, and the inverters and how they all come together. We are looking at it from an overall system perspective and also at a component perspective. I think it's a very good position there. With the two that we have that we are launching, we gain experience. We continue to have a lot of discussions with other programs across OEMs. From a pickup perspective, I think the content, if anything, could be better. Like we talked in the past with electrification with our powertrain, bringing power to the wheels, our market actually opens up to address even the front-wheel drives, not just the four-wheel drive, all-wheel drive market.
We actually see that as a potential upside going forward.
Vincent Galifi (CFO)
Sorry. We could have battery frames as well, which is a pretty high-content product.
Rod Lache (Managing Director and Senior Research Analyst)
Right. So you're saying that because you have front-wheel drive, that would be incremental because most of your content on the pickup trucks is transfer cases in all-wheel drive systems?
Swamy Kotagiri (President)
The way I'm looking at when you say the all-wheel drive, four-wheel drive, it's a feature, Rod, right? Today, we happen to provide that feature with the transfer case. We are doing eDrives. The eDrive functionality can also provide torque to the wheels where and when needed. We are able to provide that functionality, right, going forward. What that mix is going to be is the consumers are going to look at and the customers, the OEMs are going to look at. As we moved into the eDrives and we are making them today, we should be able to address not just only the all-wheel drive, four-wheel drive feature. You can also look at the two-wheel drive feature with the eDrive, right? If anything, it could be an expansion of the market is what I mean.
Rod Lache (Managing Director and Senior Research Analyst)
Okay. Great. You have mentioned battery frames a few times. Just to put this into context for us, what is the content opportunity for you guys? Is it sort of rivaling the kind of content you would have on pickup truck frames or any way to put any context around that?
Swamy Kotagiri (President)
If you look at the battery frames today, actually more than if you look at the content of a full-sized frame, it is more than that, Rod. I think as the scale comes and it evolves, it could change a little bit. I think it will be substantial and easily comparable to a full-vehicle frame.
Rod Lache (Managing Director and Senior Research Analyst)
Okay. Interesting. Great. Thank you.
Operator (participant)
Our next question comes from the line of Peter Sklar with BMO Capital Market. Please proceed with your question.
Peter Sklar (Equity Research Analyst)
All right. Thanks. Vince, just going back to the guidance that you provided in January for 2022, when you provided that guidance, was the restructuring part of that, the restructuring where you plan on getting the $200 million of savings, or should we think of that as that $200 million above and beyond the guidance that you provided back in January?
Vincent Galifi (CFO)
Yeah, Peter, I think there was some of that was baked into our 2022 guidance. But the bulk of it should be incremental to what we had built into 2022.
Peter Sklar (Equity Research Analyst)
Okay. The other thing I wanted to ask about, I do not think there has been any discussion today about the three, you have the three significant ADAS programs where you are moving from engineering into production. When you were talking about some of the moving parts that improved your margins, you did not talk about those programs. Can you give us an update on those programs and where they are in terms of moving from engineering to launch and if they are contributing to the margin?
Vincent Galifi (CFO)
Yeah. I think.
Swamy Kotagiri (President)
Hi, Peter.
Vincent Galifi (CFO)
Swamy, go ahead if you want. I can fill in afterwards.
Swamy Kotagiri (President)
Yeah. No problem, Vince. I think the programs are continuing, and they're hitting the milestones. They are progressing well. We still have to get to the finish line, but in a much better position, like I said. We also anticipate that some of the development that we have undergone during this process will become what I consider to be the core technology and will help put us in a good position to win additional business. From the three programs that you're talking about, Peter, we are moving according to plan.
Vincent Galifi (CFO)
Yeah, Peter, just to add a little bit more color there, I think if you look, remember we talked about those additional social costs in the second quarter. You back those out. I think the first half of this year compared to the first half of last year, we're probably running a little higher. As we get into Q3 and Q4 on a year-over-year basis, we expect those costs to be a little lower. Again, I didn't talk about that in my role discussion because it really is not meaningful. I think the more meaningful impact is going to be in 2021 and in 2022 as these programs near and start to launch.
Swamy Kotagiri (President)
Yep.
Peter Sklar (Equity Research Analyst)
Can you just be a little bit more specific? When do these three programs get into launch? Does it start next year and then unfold over the next two years?
Swamy Kotagiri (President)
I don't know whether we are able to give specific customer timelines, Peter, but the launches would be next year. A substantial part of the engineering activity will be coming or will be over the hump, let's say, already. It is in the next three to four months, three to six months, I would say, continuing towards production. The plans are in 2021. I did not want to get too specific because there are customer timelines.
Peter Sklar (Equity Research Analyst)
Okay. Understand, Swamy. Thanks. Just one last question, Vince. I noticed that you did buy back some shares during the quarter. Is that more you're buying for antediluted purposes, or do you feel comfortable now, given how things have unfolded with COVID and the recovery in the industry, that you can be back to buying stock?
Vincent Galifi (CFO)
No, Peter. They're specifically related to employee commitments. Because we have the NCID, we're buying them under the NCID. They're for employee commitments, and the shares will be distributed to employees. They're not part of realigning our balance sheet structure.
Peter Sklar (Equity Research Analyst)
Right. Okay. That's all I have. Thank you.
Donald Walker (CEO)
I think just because we're almost out of time, I'm just going to say a few closing remarks, maybe Swamy does as well before I lose everybody. Peter, I'm glad you asked the question because, after all, there must be over 100 quarterly investor calls. If you hadn't asked the question at the end, it would have been a little disappointing. I just want to thank everybody for participating today. Q3 was a really strong bounce-back quarter for Magna. I'm also very encouraged from what I see going forward in the fourth quarter and beyond. As I said earlier, I think it really is a testament to the fact that Magna is pretty agile and adapting to issues that come up. In general, I'd like to thank personally, I'd like to thank all the investors for all their support over the years.
I took over operations of Magna back in 1991. I have been CEO for 26 years, if I include the four years I was the CEO of the Interior SpinCo. Specifically, I look at my career here, specifically since 2010 when we did the transaction to go to a single-class share. We have really, really been focused on our three priorities of world-class manufacturing, innovation, and people development. We are a global organization, and it takes time to really get things ingrained into a company. We have corporately been focused heavily for the past number of years on our long-term product strategy and a consistent capital strategy, which I think a lot of people have asked us about, and some other things like free cash flow that we thought were important for the investors in their share price.
Recently, I've been focused with the team on our sustainability efforts, which I think are really important. I think we've got a good plan in our diversity and inclusion program. I think we're really well-positioned to take advantage of the future mobility trends and have a great reputation with our customers as a global supplier powerhouse. That's the feedback I've been getting when I talk to a lot of the CEOs and the head of purchasing of our customers as I explain to them what the change is with Swamy. I think we've got the strongest management team in the industry. We've been working really hard in succession planning across the company for the past five years. I think Swamy is starting out in the role in a really strong position and a really strong team.
I think somebody had mentioned earlier, Swamy, if you can increase the share price 23 times. I think when I took over, when Frank asked me to take over operations, the stock price of Magna was at CAD 2.10. Including the two share splits, we've gone from just over CAD 2 to about CAD 290 if we hadn't had the share split. Swamy, as I've said publicly, and Swamy and I have worked very close together. I'm going to still support Swamy with whatever he needs. I've got a significant amount of equity going forward, which I've accumulated and held over time. I've got a real interest in what happens with the company. Believe me, I would not be stepping down if I didn't think the company was in really strong hands. I'll just turn it over to Swamy.
Swamy, if you can continue to, so we've increased about 100 times since 1991. If you can increase the share price by 10 times over the next 10 years, I'll be happy. I'm not sure about everybody else on the call. Thanks very much, everybody, for all the support over the years. It's been a really great career. I'm going to continue to work on a number of passion projects of mine. Maybe I'll just turn it over to Swamy. Devon, do you want to close off with Swamy?
Swamy Kotagiri (President)
Yeah. Thanks, Don. Appreciate your comments. As always, Don has set the bar in a nice way, a good target for all of us. All kidding aside, since the announcement or as we have been working together, Don, I should have started with a few comments, but it was, "Get your head down and get back to work." Because even after the announcement, the transition the next day felt like a normal day at work. All that credit goes to you for making it so seamless and for the rest of my peer group who have been phenomenal in helping through this process. To all of you who are on the call, since the announcement, I have gotten a lot of calls, many text messages and emails, and so on. I very much appreciate all the good wishes.
I look forward to working even closer with you going forward. Don, I will try my best to meet the target that you have set out there. Thank you very much.
Donald Walker (CEO)
Okay. Thanks, Swamy. I guess the last thing I'd like to say is that I must say, over the years, the investor calls and the questions we get are getting increasingly more complicated and difficult. There's no way we would have been able to give as good an update to the investment community if it wasn't for Louis and Vince, who have done a phenomenal job, in my opinion, in really understanding the questions and the needs of the investment community. Hats go off to both of them because it made my job a hell of a lot easier. Thanks very much, everybody. I appreciate everybody dialing into the call today.
Operator (participant)
That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.