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<SEC-DOCUMENT>0000749098-06-000010.txt : 20061107
<SEC-HEADER>0000749098-06-000010.hdr.sgml : 20061107
<ACCEPTANCE-DATETIME>20061107110542
ACCESSION NUMBER:		0000749098-06-000010
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20060930
FILED AS OF DATE:		20061107
DATE AS OF CHANGE:		20061107

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MAGNA INTERNATIONAL INC
		CENTRAL INDEX KEY:			0000749098
		STANDARD INDUSTRIAL CLASSIFICATION:	MOTOR VEHICLE PARTS & ACCESSORIES [3714]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-11444
		FILM NUMBER:		061192573

	BUSINESS ADDRESS:	
		STREET 1:		337 MAGNA DRIVE
		STREET 2:		N/A
		CITY:			AURORA, ONTARIO, CAN
		STATE:			A6
		ZIP:			L4G 7K1
		BUSINESS PHONE:		9057262462

	MAIL ADDRESS:	
		STREET 1:		337 MAGNA DRIVE
		STREET 2:		N/A
		CITY:			AURORA, ONTARIO, CAN
		STATE:			A6
		ZIP:			L4G 7K1
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>nov7_2006-6k.txt
<DESCRIPTION>FORM 6-K THIRD QUARTER 2006 RESULTS
<TEXT>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K
Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of    November 2006
Commission File Number    0-13942

MAGNA INTERNATIONAL INC.

(Exact Name of Registrant as specified in its Charter)
337 Magna Drive, Aurora, Ontario, Canada L4G 7K1

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.           Form 20-F ?          Form 40-F ?
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): _______
Note:  Regulation S-T Rule 101(b)(1) only permits the submission in paper of a
Form 6-K if submitted solely to provide an attached annual report to security
holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): _______
Note:  Regulation S-T Rule 101(b)(7) only permits the submission in paper of a
Form 6-K if submitted to furnish a report or other document that the registrant
foreign private issuer must furnish and make public under the laws of the
jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as
the report or other document is not a press release, is not required to be and
has not been distributed to the registrant's security holders, and, if
discussing a material event, has already been the subject of a Form 6-K
submission or other  Commission filing on EDGAR.
Indicate by check mark whether the registrant, by furnishing the information
contained in this Form, is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.               Yes ?               No ?
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-_______

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



Date:     November 7, 2006
MAGNA INTERNATIONAL INC.
(Registrant)


By:  __________/s/Bassem A. Shakeel___________
Bassem A. Shakeel
Senior Legal Counsel
 and Assistant Secretary



EXHIBITS

Exhibit 99
Press release issued November 7, 2006 in which the Registrant announced its
 interim unaudited financial results for the third quarter
ended September 30, 2006 and declared its quarterly dividend in the amount of
US$0.38 per Class A Subordinate Voting Share and Class B Share.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>2
<FILENAME>nov7_2006-pressrelease.txt
<DESCRIPTION>PRESS RELEASE THIRD QUARTER 2006 RESULTS
<TEXT>
MAGNA INTERNATIONAL INC.
337 Magna Drive
Aurora, ON, Canada L4G 7K1

Telephone 905-726-2462
Facsimile 905-729-7164

Magna announces third quarter and year to date results

November 7, 2006 - Magna International Inc.(TSX: MG.A, MG.B; NYSE: MGA) today
reported financial results for the third quarter and nine months ended
September 30, 2006.

    <<
    -------------------------------------------------------------------------
                                   THREE MONTHS ENDED     NINE MONTHS ENDED
                                      SEPTEMBER 30,          SEPTEMBER 30,
                                  --------------------  ---------------------
                                     2006       2005       2006       2005
                                  ---------  ---------  ---------  ----------

    Sales                         $   5,424  $   5,381  $  17,812  $  16,957

    Operating income              $     155  $     240  $     750  $     817

    Net income                    $      94  $     159  $     499  $     556

    Diluted earnings per share    $    0.86  $    1.44  $    4.52  $    5.16

    -------------------------------------------------------------------------
            All results are reported in millions of U.S. dollars,
                          except per share figures.
    -------------------------------------------------------------------------
    >>


    THREE MONTHS ENDED SEPTEMBER 30, 2006
    -------------------------------------

    We posted sales of $5.4 billion for the third quarter ended September 30,
2006, an increase of 1% over the third quarter of 2005. This higher sales
level was achieved as a result of increases in our European production and
complete vehicle assembly sales offset in part by reductions in North American
production sales and tooling, engineering and other sales.
    During the third quarter of 2006, North American and European average
dollar content per vehicle increased 1% and 18% respectively, each over the
comparable quarter in 2005. During the third quarter of 2006, North American
and European vehicle production declined 7% and 5% respectively, each in
comparison to the third quarter of 2005.
    Complete vehicle assembly sales increased 16% to $1.017 billion for the
third quarter of 2006 compared to $879 million for the third quarter of 2005
and complete vehicle assembly volumes were unchanged from the third quarter of
2006 compared to the third quarter of 2005.
    Our operating income was $155 million for the third quarter ended
September 30, 2006 compared to $240 million for the third quarter ended
September 30, 2005, and we earned net income for the third quarter of 2006 of
$94 million compared to $159 million for the third quarter of 2005.
    Diluted earnings per share were $0.86 for the third quarter ended
September 30, 2006 compared to $1.44 for the third quarter ended September 30,
2005.
    During the third quarter ended September 30, 2006, we generated cash from
operations before changes in non-cash operating assets and liabilities of
$273 million, and generated $49 million from non-cash operating assets and
liabilities. Total investment activities for the third quarter of 2006 were
$255 million, including $198 million in fixed asset additions, $51 million to
purchase subsidiaries, and a $6 million increase in investments and other
assets.

    NINE MONTHS ENDED SEPTEMBER 30, 2006
    ------------------------------------

    We posted sales of $17.8 billion for the nine months ended September 30,
2006, an increase of 5% over the nine months ended September 30, 2005. This
higher sales level was achieved as a result of increases in our North American
and European production sales and complete vehicle assembly sales offset in
part by reductions in tooling, engineering and other sales.
    During the nine months ended September 30, 2006, North American and
European average dollar content per vehicle increased 6% and 11% respectively,
each over the comparable nine-month period in 2005. During the nine months
ended September 30, 2006, North American and European vehicle production
declined 1% and 3%, respectively, each in comparison to the nine months ended
September 30, 2005.
    Complete vehicle assembly sales increased 2% to $3.132 billion for the
nine months ended September 30, 2006 compared to $3.059 billion for the nine
months ended September 30, 2005 and complete vehicle assembly volumes
increased 11% for the first nine months of 2006 compared to the first nine
months of 2005.
    Our operating income was $750 million for the nine months ended
September 30, 2006 compared to $817 million for the nine months ended
September 30, 2005, and we earned net income of $499 million for the first
nine months of 2006 compared to $556 million for the first nine months of
2005.
    Diluted earnings per share were $4.52 for the nine months ended
September 30, 2006 compared to $5.16 for the nine months ended September 30,
2005.
    During the nine months ended September 30, 2006, we generated cash from
operations before changes in non-cash operating assets and liabilities of
$1.1 billion, and invested $317 million in non-cash operating assets and
liabilities. Total investment activities for the first nine months of 2006
were $856 million, including $544 million in fixed asset additions,
$254 million to purchase subsidiaries, and a $58 million increase in
investments and other assets.
    A more detailed discussion of our consolidated financial results for the
third quarter and nine months ended September 30, 2006 is contained in the
Management's Discussion and Analysis of Results of Operations and Financial
Position and the unaudited interim consolidated financial statements and notes
thereto, which are attached to this Press Release.

    OTHER MATTERS
    -------------

    Our Board of Directors today declared a quarterly dividend with respect
to our outstanding Class A Subordinate Voting Shares and Class B Shares for
the quarter ended September 30, 2006. The dividend of U.S. $0.38 per share is
payable on December 15, 2006 to shareholders of record on November 30, 2006.
    We are the most diversified automotive supplier in the world. We design,
develop and manufacture automotive systems, assemblies, modules and
components, and engineer and assemble complete vehicles, primarily for sale to
original equipment manufacturers of cars and light trucks in North America,
Europe, Asia and South America. Our capabilities include the design,
engineering, testing and manufacture of automotive interior systems; seating
systems; closure systems; metal body systems; vision and engineered glass
systems; electronic systems; plastic body, lighting and exterior trim systems;
various powertrain and drivetrain systems; retractable hard top and soft top
roof systems; as well as complete vehicle engineering and assembly.
    We have approximately 83,000 employees in 228 manufacturing operations
and 62 product development and engineering centres in 23 countries.

    -------------------------------------------------------------------------
    We will hold a conference call for interested analysts and shareholders
    to discuss our third quarter results on Tuesday, November 7, 2006 at
    8:30 a.m. EST. The conference call will be co-chaired by Mark T. Hogan,
    President and Vincent J. Galifi, Executive Vice-President and Chief
    Financial Officer. The number to use for this call is 1-800-741-7590. The
    number for overseas callers is 1-416-641-6210. Please call in 10 minutes
    prior to the call. We will also webcast the conference call at
    www.magna.com. The slide presentation accompanying the conference call
    will be available on our website Tuesday morning prior to the call.

    For further information, please contact Louis Tonelli, Vice-President,
    Investor Relations at 905-726-7035.

    For teleconferencing questions, please call Karin Kaminski at
    905-726-7103.
    -------------------------------------------------------------------------

    FORWARD-LOOKING STATEMENTS
    --------------------------

    The previous discussion may contain statements that, to the extent that
they are not recitations of historical fact, constitute "forward-looking
statements" within the meaning of applicable securities legislation.
Forward-looking statements may include financial and other projections, as
well as statements regarding our future plans, objectives or economic
performance, or the assumptions underlying any of the foregoing. We use words
such as "may", "would", "could", "will", "likely", "expect", "anticipate",
"believe", "intend", "plan", "forecast", "project", "estimate" and similar
expressions to identify forward-looking statements. Any such forward-looking
statements are based on assumptions and analyses made by us in light of our
experience and our perception of historical trends, current conditions and
expected future developments, as well as other factors we believe are
appropriate in the circumstances. However, whether actual results and
developments will conform with our expectations and predictions is subject to
a number of risks, assumptions and uncertainties. These risks, assumptions and
uncertainties include, but are not limited to, the impact of: declining
production volumes and changes in consumer demand for vehicles; a reduction in
the production volumes of certain vehicles, such as certain light trucks; our
ability to offset increases in the cost of commodities, such as steel and
resins, as well as energy prices; fluctuations in relative currency values;
our ability to offset price concessions demanded by our customers; our ability
to compete with suppliers with operations in low cost countries; changes in
our mix of earnings between jurisdictions with lower tax rates and those with
higher tax rates, as well as our ability to fully benefit tax losses; other
potential tax exposures; the financial distress of some of our suppliers and
customers; the inability of our customers to meet their financial obligations
to us; our ability to fully recover pre-production expenses; warranty and
recall costs; the termination by our customers of any material contracts;
product liability claims in excess of our insurance coverage; expenses related
to the restructuring and rationalization of some of our operations; impairment
charges; legal claims against us; risks of conducting business in foreign
countries; unionization activities at our facilities; work stoppages and
labour relations disputes; changes in laws and governmental regulations; costs
associated with compliance with environmental laws and regulations; potential
conflicts of interest involving our controlling shareholder, the Stronach
Trust; and other factors set out in our Annual Information Form filed with
securities commissions in Canada and our annual report on Form 40-F filed with
the United States Securities and Exchange Commission, and subsequent filings.
In evaluating forward-looking statements, readers should specifically consider
the various factors which could cause actual events or results to differ
materially from those indicated by such forward-looking statements. Unless
otherwise required by applicable securities laws, we do not intend, nor do we
undertake any obligation, to update or revise any forward-looking statements
to reflect subsequent information, events, results or circumstances or
otherwise.


    -------------------------------------------------------------------------
    For further information about Magna, please see our website at
    www.magna.com. Copies of financial data and other publicly filed
    documents are available through the internet on the Canadian Securities
    Administrators' System for Electronic Document Analysis and Retrieval
    (SEDAR) which can be accessed at www.sedar.com and on the United States
    Securities and Exchange Commission's Electronic Data Gathering, Analysis
    and Retrieval System (EDGAR) which can be accessed at www.sec.gov.
    -------------------------------------------------------------------------


    MAGNA INTERNATIONAL INC.

    Management's Discussion and Analysis of Results of Operations and
    Financial Position
    ------------------------------------------------------------------

    All amounts in this Management's Discussion and Analysis of Results of
Operations and Financial Position ("MD&A") are in U.S. dollars and all tabular
amounts are in millions of U.S. dollars, except per share figures and average
dollar content per vehicle, which are in U.S. dollars, unless otherwise noted.
When we use the terms "we", "us", "our" or "Magna", we are referring to Magna
International Inc. and its subsidiaries and jointly controlled entities,
unless the context otherwise requires.
    This MD&A should be read in conjunction with the unaudited interim
consolidated financial statements for the three months and nine months ended
September 30, 2006 included in this Press Release, and the audited
consolidated financial statements and MD&A for the year ended December 31,
2005 included in our 2005 Annual Report to Shareholders. The unaudited interim
consolidated financial statements for the three months and nine months ended
September 30, 2006 and the audited consolidated financial statements for the
year ended December 31, 2005 are both prepared in accordance with Canadian
generally accepted accounting principles.
    This MD&A has been prepared as at November 6, 2006.

    OVERVIEW
    -------------------------------------------------------------------------

    We are a leading global supplier of technologically advanced automotive
systems, assemblies, modules and components. We follow a corporate policy of
functional and operational decentralization. We conduct our operations through
divisions, each of which is an autonomous business unit operating within
pre-determined guidelines. As at September 30, 2006, we had 228 manufacturing
divisions and 62 product development and engineering centres in 23 countries.
We design, develop and manufacture automotive systems, assemblies, modules and
components, and engineer and assemble complete vehicles, for sale to original
equipment manufacturers ("OEMs") of cars and light trucks in North America,
Europe, Asia and South America. Our product capabilities span a number of
major automotive areas including: interiors; seating; closures; metal body
systems; vision and engineered glass systems; electronics; plastic body,
lighting and exterior trim systems; various powertrain and drivetrain systems;
retractable hard top and soft top roof systems; and complete vehicle
engineering and assembly.
    During 2005, we completed the privatizations of our former public
subsidiaries: Tesma International Inc.; Decoma International Inc. ("Decoma");
and Intier Automotive Inc. (the "Privatizations"). The Privatizations have
allowed us to improve our strategic positioning, particularly with respect to
the development of vehicle modules that cross our traditional product lines,
and to better exploit our various competencies, particularly our complete
vehicle expertise.
    Our operations are segmented on a geographic basis between North America,
Europe, and Rest of World (primarily Asia and South America). A co-Chief
Executive Officer heads management in each of our two primary markets, North
America and Europe. The role of the North American and European management
teams is to manage our interests to ensure a coordinated effort across our
different product capabilities. In addition to maintaining key customer,
supplier and government contacts in their respective markets, our regional
management teams centrally manage key aspects of our operations while
permitting our divisions enough flexibility through our decentralized
structure to foster an entrepreneurial environment.
    Our success is primarily dependent upon the levels of North American and
European car and light truck production by our customers and the relative
amount of content we have on the various programs. OEM production volumes in
different regions may be impacted by factors which may vary from one region to
the next, including general economic and political conditions, interest rates,
energy and fuel prices, international conflicts, labour relations issues,
regulatory requirements, trade agreements, infrastructure, legislative
changes, environmental emission and safety issues. A number of other factors,
discussed below under "Industry Trends and Risks" also affect our success,
including such things as relative currency values, commodities prices, price
reduction pressures from our customers, the financial condition of our supply
base and competition from manufacturers with operations in low cost countries.

    HIGHLIGHTS
    -------------------------------------------------------------------------

    We reported sales of $5.4 billion for the third quarter of 2006, an
increase of 1% over the third quarter of 2005. This higher sales level was
achieved as a result of increases in our European production and complete
vehicle assembly sales offset in part by reductions in North American
production sales and tooling, engineering and other sales.
    In the third quarter of 2006, our largest OEM customers in North America
significantly reduced vehicle production levels, particularly on their light
truck programs. While overall North American vehicle production volumes
declined 7% in the third quarter of 2006 compared to the third quarter of
2005, General Motors ("GM"), Ford and Chrysler light truck production declined
8%, 24% and 26%, respectively.
    The production declines reflect a number of factors that continue to
impact our largest customers in North America, including declining market
share, high inventory levels on certain vehicle programs, and a shift in
consumer preferences away from light trucks. The lower production levels at
our largest OEM customers, particularly for certain light trucks, in the third
quarter of 2006, significantly impacted our sales and earnings, as our content
on a number of these programs is higher than our consolidated average content.
    Operating income for the third quarter of 2006 decreased 35% to
$155 million from $240 million for the third quarter of 2005. Excluding the
unusual items recorded in the third quarters of 2006 and 2005 (see "Unusual
Items" below), operating income for the third quarter of 2006 decreased
$68 million or 30%. The decrease in operating income excluding unusual items
was primarily due to lower sales in North America, operational inefficiencies
and other costs at certain facilities, particularly at certain interior
systems facilities, and incremental customer price concessions. These factors
were partially offset by a favourable revaluation of warranty accruals,
additional margins earned on the launch of new programs during or subsequent
to the third quarter of 2005, increased margins earned on higher volumes for
certain assembly programs and the closure, subsequent to the third quarter of
2005, of certain underperforming divisions which incurred losses during the
third quarter of 2005.
    Net income for the third quarter of 2006 decreased 41% or $65 million to
$94 million from $159 million for the third quarter of 2005. Excluding the
unusual items recorded in the third quarters of 2006 and 2005 (see "Unusual
Items" below), net income for the third quarter of 2006 decreased 36% or
$56 million. The decrease in net income excluding unusual items was primarily
a result of the decrease in operating income (excluding unusual items)
partially offset by lower income taxes. Income taxes were lower despite the
negative impact of an unfavourable tax decision (see "Incomes Taxes" below).
    Diluted earnings per share for the third quarter of 2006 decreased 40% or
$0.58 to $0.86 from $1.44 for the third quarter of 2005. Excluding the unusual
items recorded in the third quarters of 2006 and 2005 (see "Unusual Items"
below), diluted earnings per share decreased 36% or $0.50 primarily as a
result of the decrease in net income (excluding unusual items).

    Unusual Items

    During the three months and nine months ended September 30, 2006 and
2005, we recorded certain unusual items as follows:

    <<
                                    2006                       2005
                        ---------------------------  ------------------------
                                          Diluted                    Diluted
                                             Earn-                      Earn-
                         Operat-             ings   Operat-             ings
                            ing      Net      per      ing      Net      per
                         Income   Income    Share   Income   Income    Share
    -------------------------------------------------------------------------
    Third Quarter
      Restructuring
       charges(1)        $   (5)  $   (4) $ (0.04) $   (14) $   (11) $ (0.10)
      Settlement gain(2)      -        -        -       26       16     0.14
    -------------------------------------------------------------------------
    Total third quarter
     unusual items           (5)      (4)   (0.04)      12        5     0.04
    -------------------------------------------------------------------------

    Second Quarter
      Restructuring
       charges(1)        $  (25)  $  (18) $ (0.16) $    (9) $    (7) $ (0.07)
      Impairment
       charges(1)             -        -        -       (5)      (5)   (0.05)
      Sale of
       facilities(3)        (17)     (15)   (0.14)      16       10     0.09
      Foreign currency
       gain(4)                -        -        -       18       18     0.16
      Future tax
       recovery(4)            -       10     0.09        -        -        -
    -------------------------------------------------------------------------
    Total second quarter
     unusual items          (42)     (23)   (0.21)      20       16     0.13
    -------------------------------------------------------------------------

    First Quarter
      Restructuring
       charges(1)           (10)      (9)   (0.08)      (5)      (4)   (0.04)
      Charges associated
       with MG Rover(5)       -        -        -      (15)     (13)   (0.13)
    -------------------------------------------------------------------------
    Total first quarter
     unusual items          (10)      (9)   (0.08)     (20)     (17)   (0.17)
    -------------------------------------------------------------------------

    Total year to date
     unusual items       $  (57)  $  (36) $ (0.33) $    12  $     4  $  0.03
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (1) Restructuring and Impairment Charges

        (a)   For the nine months ended September 30, 2006

              During the first quarter of 2006, we incurred restructuring and
              rationalization charges of $10 million related to activities
              that were initiated in 2005. Specifically, in January 2006, we
              reached an agreement with the workers' council at a facility in
              Belgium that covers non-contractual termination benefits for
              employees at this facility. As a result, we recorded the
              $8 million cost of this agreement in the first quarter of 2006.

              During the second quarter of 2006, we incurred restructuring
              and rationalization charges of $25 million. Specifically, in
              June, we recorded a $17 million charge as a result of an
              agreement we reached with employees related to rightsizing a
              facility in the United States. In addition, we incurred
              additional restructuring and rationalization charges of
              $4 million related to two facilities in North America and
              $4 million related to two facilities in Europe.

              During the third quarter of 2006, we incurred restructuring and
              rationalization charges of $4 million related to three
              facilities in North America and $1 million related to one
              facility in Europe.

        (b)   For the nine months ended September 30, 2005

              During the first quarter of 2005 we incurred rationalization
              charges of $4 million related to a facility in North America
              and we also expensed previously capitalized bank facility fees
              as a result of the cancellation of Decoma's term credit
              facility.

              During the second quarter of 2005, we incurred restructuring
              and impairment charges totalling $14 million related
              substantially to three European facilities.

              During the third quarter of 2005, we incurred restructuring and
              impairment charges totalling $14 million substantially related
              to a European facility and the Privatizations.

    (2) Settlement Gain

        During the third quarter of 2005, we recorded a settlement gain with
        respect to the receipt of $26 million awarded by a court in a lawsuit
        commenced by us in 1998 in respect of defective materials installed
        by a supplier in a real estate project.

    (3) Sale of Facilities

        During the second quarter of 2006, we entered into agreements for the
        sale of two underperforming powertrain facilities. As a result, we
        incurred losses on disposition of the facilities of $12 million and
        $5 million in Europe and North America, respectively. During the
        second quarter of 2005, we recorded a $16 million gain on sale of a
        non-core seat component facility in North America.

    (4) Other Unusual Items

        During the second quarter of 2006 we recorded a $10 million future
        income tax recovery as a result of a reduction in future income tax
        rates in Canada. During the second quarter of 2005, we recorded an
        $18 million foreign currency gain on the repatriation of funds from
        Europe.

    (5) MG Rover

        In April 2005, MG Rover Group Limited ("MG Rover") was placed into
        administration, which is similar to Chapter 11 bankruptcy protection
        in the United States (the "MG Rover situation"). As a result, we
        recorded charges of $15 million related to our MG Rover assets and
        supplier obligations during the first quarter of 2005.
    >>

    INDUSTRY TRENDS AND RISKS
    -------------------------------------------------------------------------
    A number of trends have had a significant impact on the global automotive
industry in recent years, including:

    <<
    -  the growth of Asian-based OEMs in North America and Europe and
       declining market share at certain of our customers in our traditional
       markets;
    -  increased pressure by OEMs on automotive suppliers to reduce their
       prices, including through retroactive price reductions, and bear
       additional costs;
    -  increases in raw materials and commodity prices, such as steel and
       resin, as well as energy prices;
    -  the deterioration of the financial condition of the automotive supply
       base and certain OEMs;
    -  the growth of the automotive industry in China, Korea, India and other
       Asian countries, as well as parts of eastern Europe, and the migration
       of manufacturing to such lower cost countries;
    -  increased engineering capabilities required in order to be awarded new
       business for more complex systems and modules;
    -  increased outsourcing of larger modules;
    -  increased prevalence of vehicles built off high-volume global vehicle
       platforms; and
    -  increased customer and consumer demand for lighter vehicles,
       additional safety features, improved comfort, convenience and space
       optimization features, alternative fuel systems and advanced
       electronics systems.

    The following are some of the more significant risks that could affect our
ability to achieve our desired results:

    -  The global automotive industry is cyclical and consumer demand for
       automobiles is sensitive to changes in certain economic and political
       conditions, including interest rates, energy prices and international
       conflicts (including acts of terrorism). Automotive sales and
       production can also be affected by other factors, including labour
       relations issues, regulatory requirements and trade agreements. In
       North America, the industry is characterized by significant
       overcapacity, fierce competition and significant pension and other
       post employment benefit costs for the domestic automobile
       manufacturers. In Europe, the market structure is relatively
       fragmented with significant overcapacity. As a result of these
       conditions, some of our customers are currently experiencing or may in
       the future experience reduced consumer demand for their vehicles,
       leading to declining vehicle production volumes. A reduction in
       vehicle production volumes by any of our significant customers could
       have a material adverse effect on our profitability.

    -  Rising healthcare, pension and other post-employment benefit costs are
       having a significant adverse effect on the profitability and
       competitiveness of a number of North American and European OEMs and
       automotive component suppliers. Increased raw materials prices,
       including steel and resins, and energy prices are also adversely
       affecting OEMs and automotive component suppliers. Other economic
       conditions, such as increased gas prices, have affected and could
       further threaten sales of certain models, such as full-size sport
       utility vehicles and light trucks. All of these conditions, coupled
       with a continued decline in market share, could further threaten the
       financial condition of some of our customers, putting additional
       pressure on us to reduce our prices and exposing us to greater credit
       risk. In the event that our customers are unable to satisfy their
       financial obligations or seek protection from their creditors, we may
       incur additional expenses as a result of such credit exposure, which
       could have a material adverse effect on our profitability and
       financial condition.

    -  Although we supply parts to all of the leading OEMs, a significant
       majority of our sales are to four such customers, two of which are
       rated as below investment grade by credit rating agencies. We are
       attempting to further diversify our customer base, particularly to
       increase our business with Asian based OEMs. A decline in overall
       production volumes by any of our four largest customers could have an
       adverse effect on our profitability, particularly if we are unable to
       further diversify our customer base. Moreover, while we supply parts
       for a wide variety of vehicles produced in North America and Europe,
       we do not supply parts for all vehicles produced, nor is the number or
       value of parts evenly distributed among the vehicles for which we do
       supply parts. Shifts in market share among vehicles (including shifts
       away from vehicles we assemble) or the early termination, loss,
       renegotiation of the terms of, or delay in, the implementation of any
       significant production or assembly contract could have an adverse
       effect on our profitability.

    -  The competitive environment in the automotive industry has been
       intensifying as our customers seek to take advantage of lower
       operating costs in China, other countries in Asia and parts of Eastern
       Europe. As a result, we are facing increased competition from
       suppliers that have manufacturing operations in low cost countries.
       While we continue to expand our manufacturing footprint with a view to
       taking advantage of manufacturing opportunities in low cost countries,
       we cannot guarantee that we will be able to fully realize such
       opportunities. Additionally, the establishment of manufacturing
       operations in emerging market countries carries its own risks,
       including those relating to political and economic instability; trade,
       customs and tax risks; currency exchange rates; currency controls;
       insufficient infrastructure; and other risks associated with
       conducting business internationally. The loss of any significant
       production contract to a competitor in low cost countries or
       significant costs and risks incurred to enter and carry on business in
       these countries could have an adverse effect on our profitability.

    -  Prices for key commodities used in our parts production, particularly
       steel and resin, remain at elevated levels with the possibility of
       future increases in some commodities. We expect steel prices will
       remain at elevated levels in 2006 compared to levels earlier this
       decade. Approximately half of our steel is acquired through resale
       programs operated by the automobile manufacturers, which do not expose
       us to steel price increases, and the balance is acquired through spot,
       short-term and long-term contracts. However, a steel supplier has
       challenged its long-term agreements with us for certain steel products
       while steel prices were rising and, to the extent that it successfully
       disputes, terminates or otherwise refuses to honour its contracts, our
       exposure to steel price increases will increase to the extent that
       steel prices remain at elevated levels. We also sell scrap steel,
       which is generated through our parts production process, and the
       revenues from these sales have reduced some of our exposure to steel
       price increases in the past. However, if scrap steel prices decline,
       while steel prices remain high, our ability to reduce our exposure to
       steel price increases will diminish. To the extent we are unable to
       fully mitigate our exposure to increased commodity prices through
       hedging strategies, by engineering products with reduced steel, resin
       or other commodity content, or by passing additional steel and resin
       costs to our customers, such additional commodity costs could have a
       material adverse effect on our profitability.

    -  We rely on a number of suppliers to supply us with a wide range of
       components required in connection with our business. Economic
       conditions, intense pricing pressures, increased commodity prices and
       a number of other factors have left many automotive suppliers in
       varying degrees of financial distress. The continued financial
       distress or the insolvency or bankruptcy of one of our major suppliers
       could disrupt the supply of components to us from these suppliers,
       possibly resulting in a temporary disruption in the supply of products
       by us to our customers. Additionally, the financial distress or the
       insolvency or bankruptcy of a significant supplier to one of our
       customers could disrupt the supply of products to such customer,
       resulting in a reduction in production by our customer. Such a
       reduction in our customer's production could negatively impact our
       production, resulting in unrecoverable losses. Any prolonged
       disruption in the supply of critical components by our suppliers or
       suppliers to one of our customers, the inability to re-source
       production of a critical component from a financially distressed
       automotive components sub-supplier, or any temporary shut-down of one
       of our production lines or the production lines of our customers,
       could have a material adverse effect on our profitability.
       Additionally, the insolvency, bankruptcy or financial restructuring of
       any of our critical suppliers could result in us incurring
       unrecoverable costs related to the financial work-out of such
       suppliers and/or increased exposure for product liability, warranty or
       recall costs relating to the components supplied by such suppliers to
       the extent such suppliers are not able to assume responsibility for
       such amounts, which could have an adverse effect on our profitability.

    -  We have entered into, and will continue to enter into, long-term
       supply arrangements with our customers which provide for, among other
       things, price concessions over a pre-defined supply term. To date,
       these concessions have been fully or partially offset by cost
       reductions arising principally from product and process improvements
       and price reductions from our suppliers. However, the competitive
       automotive industry environment in North America, Europe and Asia has
       caused these pricing pressures to intensify. Some of our customers
       have demanded, and in light of challenging automotive industry
       conditions may continue to demand, additional price concessions and/or
       retroactive price reductions. We may not be successful in offsetting
       all of these price concessions or reductions through improved
       operating efficiencies, reduced expenditures or reduced prices from
       our suppliers. To the extent that we are not able to offset price
       concessions through cost reductions or improved operating
       efficiencies, such concessions could have a material adverse effect on
       our profitability.

    -  Although our financial results are reported in U.S. dollars, a
       significant portion of our sales and operating costs are realized in
       Canadian dollars, euros, British pounds and other currencies. Our
       profitability is affected by movements of the U.S. dollar against the
       Canadian dollar, the euro, the British pound and other currencies in
       which we generate revenues and incur expenses. However, as a result of
       hedging programs employed by us, primarily in Canada, foreign currency
       transactions are not fully impacted by the recent movements in
       exchange rates. We record foreign currency transactions at the hedged
       rate where applicable. Despite these measures, significant long-term
       fluctuations in relative currency values, in particular a significant
       change in the relative values of the U.S. dollar, Canadian dollar,
       euro or British pound, could have an adverse effect on our
       profitability and financial condition.

    -  We continue to be pressured to absorb costs related to product design,
       engineering and tooling, as well as other items previously paid for
       directly by OEMs. In particular, some OEMs have requested that we pay
       for design, engineering and tooling costs that are incurred up to the
       start of production and recover these costs through amortization in
       the piece price of the applicable component. Some of these costs
       cannot be capitalized, which could have an adverse effect on our
       profitability until the programs in respect of which they have been
       incurred are launched. In addition, since our contracts generally do
       not include any guaranteed minimum purchase requirements, if estimated
       production volumes are not achieved, these costs may not be fully
       recovered, which could have an adverse effect on our profitability.

    -  Our customers continue to demand that we bear the cost of the repair
       and replacement of defective products which are either covered under
       their warranty or are the subject of a recall by them. If our products
       are, or are alleged to be, defective, we may be required to
       participate in a recall of those products, particularly if the actual
       or alleged defect relates to vehicle safety. Warranty provisions are
       established based on our best estimate of the amounts necessary to
       settle existing or probable claims on product defect issues. Recall
       costs are costs incurred when government regulators and/or our
       customers decide to recall a product due to a known or suspected
       performance issue, and we are required to participate either
       voluntarily or involuntarily. Costs typically include the cost of the
       product being replaced, the customer's cost of the recall and labour
       to remove and replace the defective part. We continue to experience
       increased customer pressure to assume greater warranty responsibility.
       Currently, under most customer agreements, we only account for
       existing or probable claims. Under certain complete vehicle
       engineering and assembly contracts, we record an estimate of future
       warranty-related costs based on the terms of the specific customer
       agreements, and the specific customer's warranty experience. The
       obligation to repair or replace such products could have a material
       adverse effect on our profitability and financial condition if the
       actual costs are materially different from such estimates.

    -  Contracts from our customers consist of blanket purchase orders which
       generally provide for the supply of a customer's annual requirements
       for a particular vehicle, instead of a specified quantity of products.
       These blanket purchase orders can be terminated by a customer at any
       time and, if terminated, could result in us incurring various pre-
       production, engineering and other costs which we may not recover from
       our customer and which could have an adverse effect on our
       profitability.

    -  We are also subject to the risk of exposure to product liability
       claims in the event that the failure of our products results in bodily
       injury and/or property damage. Currently, we have bodily injury
       coverage under insurance policies. This coverage will continue until
       August 2007 and is subject to renewal on an annual basis. A successful
       claim against us in excess of our available insurance coverage could
       have an adverse effect on our profitability and financial condition.

    -  In response to the increasingly competitive automotive industry
       conditions, it is likely that we may further rationalize some of our
       production facilities. In the course of such rationalization, we will
       incur further costs related to plant closings, relocations and
       employee severance costs. Such costs could have an adverse effect on
       our short-term profitability. In addition, we are working to turn
       around financially underperforming divisions, however, there is no
       guarantee that we will be successful in doing so with respect to some
       or all such divisions.

    -  We recorded significant impairment charges in 2005 and may do so in
       2006 and in the future. Goodwill must be tested for impairment
       annually, or more frequently when an event occurs that more likely
       than not reduces the fair value of a reporting unit below its carrying
       value. We also evaluate fixed assets and other long-lived assets for
       impairment whenever indicators of impairment exist. The bankruptcy of
       a significant customer or the early termination, loss, renegotiation
       of the terms of, or delay in the implementation of any significant
       production contract could be indicators of impairment. In addition, to
       the extent that forward-looking assumptions regarding the impact of
       improvement plans on current operations, in-sourcing and other new
       business opportunities, program price and cost assumptions on current
       and future business, the timing of new program launches and future
       forecasted production volumes are not met, any resulting impairment
       loss could have a material adverse effect on our profitability.

    -  From time to time, we may be contingently liable for contractual and
       other claims with customers, suppliers and former employees. On an
       ongoing basis, we attempt to assess the likelihood of any adverse
       judgements or outcomes to these claims, although it is difficult to
       predict final outcomes with any degree of certainty. At this time, we
       do not believe that any of the claims which we are party to will have
       a material adverse effect on our financial position, however, we
       cannot provide any assurance to this effect.

    RESULTS OF OPERATIONS
    -------------------------------------------------------------------------

    Average Foreign Exchange

                                  For the three months    For the nine months
                                   ended September 30,    ended September 30,
                                  ---------------------   -------------------
                                     2006   2005 Change   2006   2005 Change
    -------------------------------------------------------------------------

    1 Canadian dollar equals
     U.S. dollars                   0.893  0.834   + 7%  0.884  0.818   + 8%

    1 euro equals U.S. dollars      1.275  1.221   + 4%  1.246  1.262   - 1%

    1 British pound equals
     U.S. dollars                   1.877  1.788   + 5%  1.820  1.843   - 1%
    -------------------------------------------------------------------------
    >>

    The preceding table reflects the average foreign exchange rates between
the most common currencies in which we conduct business and our U.S. dollar
reporting currency. The significant changes in these foreign exchange rates
for the three months and nine months ended September 30, 2006 impacted the
reported U.S. dollar amounts of our sales, expenses and income.
    The results of operations whose functional currency is not the U.S.
dollar are translated into U.S. dollars using the average exchange rates in
the table above for the relevant period. Throughout this MD&A, reference is
made to the impact of translation of foreign operations on reported U.S.
dollar amounts where relevant.
    Our results can also be affected by the impact of movements in exchange
rates on foreign currency transactions (such as raw material purchases or
sales denominated in foreign currencies). However, as a result of hedging
programs employed by us, primarily in Canada, foreign currency transactions in
the current period have not been fully impacted by the recent movements in
exchange rates. We record foreign currency transactions at the hedged rate
where applicable.
    Finally, holding gains and losses on foreign currency denominated
monetary items, which are recorded in selling, general and administrative
expenses, impact reported results.

    <<
    RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006
    -------------------------------------------------------------------------

    Sales

                                                For the three months
                                                 ended September 30,
                                                --------------------
                                                   2006       2005    Change
    -------------------------------------------------------------------------

    Vehicle Production Volumes
     (millions of units)
      North America                               3.452      3.722      - 7%
      Europe                                      3.336      3.509      - 5%
    -------------------------------------------------------------------------

    Average Dollar Content Per Vehicle
      North America                           $     756  $     746      + 1%
      Europe                                  $     394  $     335     + 18%
    -------------------------------------------------------------------------

    Sales
      External Production
        North America                         $   2,610  $   2,777      - 6%
        Europe                                    1,315      1,176     + 12%
        Rest of World                                68         47     + 45%
      Complete Vehicle Assembly                   1,017        879     + 16%
      Tooling, Engineering and Other                414        502     - 18%
    -------------------------------------------------------------------------
    Total Sales                               $   5,424  $   5,381      + 1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

    Total sales increased 1% or $43 million to $5.42 billion for the third
quarter of 2006 compared to $5.38 billion for the third quarter of 2005.

    External Production Sales - North America

    External production sales in North America decreased 6% or $167 million
to $2.6 billion for the third quarter of 2006 compared to $2.8 billion for the
third quarter of 2005. This decrease in production sales reflects a 7%
decrease in North American vehicle production volumes partially offset by a 1%
increase in our North American average dollar content per vehicle.
    Our average dollar content per vehicle grew by 1% or $10 to $756 for the
third quarter of 2006 compared to $746 for the third quarter of 2005,
primarily as a result of:

    <<
    -  the launch of new programs during or subsequent to the third quarter
       of 2005, including:
       -  GM's new full-size SUVs;
       -  the Ford Fusion, Mercury Milan and Lincoln Zephyr;
       -  the Dodge Caliber; and
       -  the Mercedes GL Class;
    -  an increase in reported U.S. dollar sales due to the strengthening of
       the Canadian dollar against the U.S. dollar;
    -  increased production and/or content on certain programs, including:
       -  the Chevrolet HHR;
       -  the Chevrolet Impala; and
       -  the Pontiac G6; and
    -  the acquisition of CTS in February 2006.

    These factors were largely offset by:

    -  the impact of lower production and/or content on certain programs,
       including:
       -  the Dodge Caravan, Grand Caravan and Chrysler Town & Country;
       -  the Ford F-Series SuperDuty;
       -  the Hummer H3;
       -  the Ford Escape and Mazda Tribute;
       -  the Chrysler Pacifica;
       -  the Ford Freestar and Mercury Monterey;
       -  the Dodge Durango; and
       -  the Chevrolet Envoy, Buick Rainier and GMC Trailblazer;
    -  programs that ended production during or subsequent to the third
       quarter of 2005;
    -  incremental customer price concessions; and
    -  the sale of certain underperforming divisions during 2006.
    >>

    External Production Sales - Europe

    External production sales in Europe increased 12% or $139 million to
$1.3 billion for the third quarter of 2006 compared to $1.2 billion for the
third quarter of 2005. This increase in production sales reflects an 18%
increase in our European average dollar content per vehicle partially offset
by a 5% decline in European vehicle production volumes.
    Our average dollar content per vehicle grew by 18% or $59 to $394 for the
third quarter of 2006 compared to $335 for the third quarter of 2005,
primarily as a result of:

    <<
    -  acquisitions during or subsequent to the third quarter of 2005,
       including the acquisition of CTS in February 2006;
    -  an increase in reported U.S. dollar sales as a result of the
       strengthening of the euro and British pound, each against the
       U.S. dollar;
    -  increased production and/or content on certain programs, including:
       -  the BMW X3;
       -  the Mercedes B-Class; and
       -  the Volkswagen Transporter and Multivan; and
    -  the launch of new programs during or subsequent to the third quarter
       of 2005, including:
       -  the Honda Civic; and
       -  the Peugeot 207.

    These factors were partially offset by:

    -  the impact of lower production and/or content on certain programs,
       including the Mercedes A-Class and C-Class; and
    -  incremental customer price concessions.

    External Production Sales - Rest of World

    External production sales in the Rest of World increased 45% or
$21 million to $68 million for the third quarter of 2006 compared to
$47 million for the third quarter of 2005. The increase in production sales is
primarily a result of:

    -  increased production sales at existing facilities in China;
    -  an increase in reported U.S. dollar sales due to the strengthening of
       the Korean won and Chinese Renminbi, each against the U.S. dollar;
    -  the ramp-up of production at new facilities in China;
    -  increased production sales at a closures systems facility in Brazil;
    -  the acquisition of a mirrors facility in South Africa; and
    -  increased production sales at our powertrain facilities in Korea.
    >>

    Complete Vehicle Assembly Sales

    The terms of our various vehicle assembly contracts differ with respect
to the ownership of components and supplies related to the assembly process
and the method of determining the selling price to the OEM customer. Under
certain contracts we are acting as principal, and purchased components and
systems in assembled vehicles are included in our inventory and cost of sales.
These costs are reflected on a full-cost basis in the selling price of the
final assembled vehicle to the OEM customer. Other contracts provide that
third party components and systems are held on consignment by us, and the
selling price to the OEM customer reflects a value-added assembly fee only.
    Production levels of the various vehicles assembled by us have an impact
on the level of our sales and profitability. In addition, the relative
proportion of programs accounted for on a full-cost basis and programs
accounted for on a value-added basis also impacts our level of sales and
operating margin percentage, but may not necessarily affect our overall level
of profitability. Assuming no change in total vehicles assembled, a relative
increase in the assembly of vehicles accounted for on a full-cost basis has
the effect of increasing the level of total sales, however, because purchased
components are included in cost of sales, profitability as a percentage of
total sales is reduced. Conversely, a relative increase in the assembly of
vehicles accounted for on a value-added basis has the effect of reducing the
level of total sales and increasing profitability as a percentage of total
sales.

    <<
                                                For the three months
                                                 ended September 30,
                                                --------------------
                                                   2006       2005    Change
    -------------------------------------------------------------------------

    Complete Vehicle Assembly Sales           $   1,017  $     879     + 16%
    -------------------------------------------------------------------------

    Complete Vehicle Assembly Volumes (Units)
      Full-Costed:                               35,827     32,105     + 12%
        BMW X3, Mercedes E-Class and G-Class,
         and Saab 9(3) Convertible
      Value-Added:                               20,266     23,930     - 15%
        Jeep Grand Cherokee, Chrysler 300,
        Chrysler Voyager, and Jeep Commander
    -------------------------------------------------------------------------
                                                 56,093     56,035         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>


    Complete vehicle assembly volumes remained relatively consistent with the
prior year, increasing 58 units to 56,093 units for the third quarter of 2006
compared to 56,035 units for the third quarter of 2005. Complete vehicle
assembly sales increased 16% or $138 million to $1.0 billion for the third
quarter of 2006 compared to $879 million for the third quarter of 2005. The
increase in complete vehicle assembly sales is primarily the result of:

    <<
    -  the increase in assembly volumes for the BMW X3;
    -  an increase in reported U.S. dollar sales as a result of the
       strengthening of the euro against the U.S. dollar;
    -  the launch of the Jeep Commander in the first quarter of 2006; and
    -  higher assembly volumes for the Chrysler 300 which launched in the
       second quarter of 2005.

    These increases were partially offset by a decrease in assembly volumes
for:

    -  the Jeep Grand Cherokee
    -  the Chrysler Voyager
    -  the Mercedes G-Class; and
    -  the Saab 9(3) Convertible.
    >>

    Tooling, Engineering and Other

    Tooling, engineering and other sales declined 18% or $88 million to
$414 million for the third quarter of 2006 compared to $502 million for the
third quarter of 2005.
    In the third quarter of 2006, the major programs for which we recorded
tooling, engineering and other sales were:

    <<
    -  GM's next generation full-size pickups and SUVs;
    -  the Ford Escape and Mazda Tribute;
    -  the MINI Cooper;
    -  the Land Rover Range Rover;
    -  the Saturn Outlook, Buick Enclave and GMC Acadia;
    -  the Freightliner P-Class; and
    -  the BMW X3.
    >>

    In the third quarter of 2005, the major programs for which we recorded
tooling, engineering and other sales were:

    <<
    -  the BMW X5;
    -  GM's next generation full-size pickups and SUVs;
    -  the Dodge Durango;
    -  the Ford F-Series SuperDuty; and
    -  the Cadillac STS;
    >>

    In addition, tooling, engineering and other sales benefited from the
strengthening of the Canadian dollar, euro and British pound, each against the
U.S. dollar.

    Gross Margin

    Gross margin decreased $67 million to $635 million for the third quarter
of 2006 compared to $702 million for the third quarter of 2005. Gross margin
as a percentage of total sales decreased to 11.7% for the third quarter of
2006 compared to 13.0% for the third quarter of 2005. In the third quarter of
2006, the unusual items discussed in the "Highlights" section above negatively
impacted gross margin and gross margin as a percentage of total sales by
$3 million and 0.1%, respectively. Excluding these unusual items, the 1.2%
decrease in gross margin as a percent of sales was primarily a result of:

    <<
    -  lower production sales in North America;
    -  operational inefficiencies and other costs at certain underperforming
       facilities, particularly at certain of our interior systems
       facilities;
    -  an increase in complete vehicle assembly sales for the BMW X3, which
       has a lower gross margin than our consolidated average gross margin
       because the costs of this vehicle assembly program are reflected on a
       full-cost basis in the selling price of the vehicle; and
    -  incremental customer price concessions.

    These factors were partially offset by:

    -  a favourable revaluation to warranty accruals, substantially in
       Europe;
    -  productivity and efficiency improvements at certain divisions;
    -  lower employee profit sharing as a result of the decrease in our
       consolidated earnings; and
    -  price reductions from our suppliers.

    Depreciation and Amortization

    Depreciation and amortization costs increased 10% or $17 million to
$191 million for the third quarter of 2006 compared to $174 million for the
third quarter of 2005. The increase in depreciation and amortization was
primarily as a result of:

    -  an increase in reported U.S. dollar depreciation and amortization due
       to the strengthening of the Canadian dollar and euro, each against the
       U.S. dollar.
    -  depreciation and amortization of assets at new facilities that
       launched during or subsequent to the third quarter of 2005;
    -  an increase in assets employed in the business to support future
       growth; and
    -  depreciation and amortization of assets related to the acquisition of
       CTS.

    Selling, General and Administrative ("SG&A")

    SG&A expenses as a percentage of sales increased to 5.5% for the third
quarter of 2006 compared to 5.3% for the third quarter of 2005. SG&A expenses
increased 4% or $12 million to $299 million for the third quarter of 2006
compared to $287 million for the third quarter of 2005. Excluding the unusual
items discussed in the "Highlights" section above, SG&A expenses decreased by
$2 million primarily as a result of:

    -  a net increase in foreign exchange gains;
    -  lower spending on new facilities in the third quarter of 2006 compared
       to the third quarter of 2005; and
    -  lower incentive compensation.

    These factors were partially offset by:

    -  an increase in reported U.S. dollar SG&A due to the strengthening of
       the Canadian dollar and euro, each against the U.S. dollar; and
    -  increased selling, general and administrative expenses related to CTS.


    Earnings before Interest and Taxes ("EBIT")(1)

                                                For the three months
                                                 ended September 30,
                                                --------------------
                                                   2006       2005    Change
    -------------------------------------------------------------------------

    North America                             $      67  $     159     - 58%
    Europe                                           68         38     + 79%
    Rest of World                                    (4)         2       n/a
    Corporate and Other                              18         43     - 58%
    -------------------------------------------------------------------------
    Total EBIT                                $     149  $     242     - 38%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

    Included in EBIT for the third quarters of 2006 and 2005 were the
following unusual items, which have been discussed in the "Highlights" section
above.

    <<
                                                        For the three months
                                                         ended September 30,
                                                       ----------------------
                                                              2006      2005
    -------------------------------------------------------------------------

    North America
      Restructuring charges                              $      (2) $     (5)
      Impairment charges                                        (2)        -
    -------------------------------------------------------------------------
                                                                (4)       (5)
    -------------------------------------------------------------------------
    Europe
      Restructuring charges                                     (1)       (9)
    -------------------------------------------------------------------------
                                                                (1)       (9)
    -------------------------------------------------------------------------
    Corporate and Other
      Settlement gain                                            -        26
    -------------------------------------------------------------------------
                                                                 -        26
    -------------------------------------------------------------------------
                                                         $      (5) $     12
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) EBIT is defined as operating income as presented on our unaudited
       consolidated financial statements before net interest (income)
       expense.
    >>

    North America

    EBIT in North America decreased 58% or $92 million to $67 million for the
third quarter of 2006 compared to $159 million for the third quarter of 2005.
Excluding the North American unusual items discussed in the "Highlights"
section above, EBIT decreased by $93 million in North America, primarily as a
result of:

    <<
    -  lower margins earned as a result of a decrease in production sales;
    -  operational inefficiencies and other costs at certain underperforming
       divisions, particularly at certain of our interior systems facilities;
    -  incremental customer price concessions; and
    -  costs incurred to develop and grow our electronics capabilities.

    These factors were partially offset by:

    -  margins earned on new programs that launched during or subsequent to
       the third quarter of 2005;
    -  margins earned on increased production and/or content on certain
       programs;
    -  operational improvements at certain underperforming divisions;
    -  lower affiliation fees paid to Corporate; and
    -  lower employee profit sharing as a result of the decrease in our
       consolidated earnings.

    Europe

    EBIT in Europe increased 79% or $30 million to $68 million for the third
quarter of 2006 compared to $38 million for the third quarter of 2005. The
increase in EBIT is substantially the result of a favourable revaluation to
warranty accruals as a result of updated warranty claim data received in the
third quarter of 2006. EBIT was also favourably affected by:

    -  the European unusual items discussed in the "Highlights" section
       above;
    -  operational improvements at certain underperforming divisions;
    -  increased margins earned on higher volumes for certain production and
       complete vehicle assembly programs;
    -  lower affiliation fees paid to Corporate; and
    -  lower employee profit sharing as a result of the decrease in our
       consolidated earnings.

    These factors were partially offset by:

    -  lower margins as a result of a decrease in vehicle production volumes
       on certain programs;
    -  operational inefficiencies and other costs at certain facilities,
       particularly at certain of our interior systems facilities;
    -  costs incurred to develop and grow our electronics capabilities; and
    -  incremental customer price concessions.
    >>

    Rest of World

    EBIT in the Rest of World decreased $6 million to a loss of $4 million
for the third quarter of 2006 compared to income of $2 million for the third
quarter of 2005.
    The decrease in EBIT was primarily as a result of:

    <<
    -  costs incurred at new facilities, primarily in China, as we continue
       to pursue opportunities in this growing market; and
    -  lower profits earned at our closures systems facility in Brazil.

    Partially offsetting these costs was the additional margin earned on the
increased production sales discussed above.

    Corporate and Other

    Corporate and Other EBIT decreased 58% or $25 million to $18 million for
the third quarter of 2006 compared to $43 million for the third quarter of
2005. Excluding the Corporate and Other unusual items discussed in the
"Highlights" section above, EBIT increased $1 million, primarily as a result
of:
    -  a decrease in incentive compensation as a result of the decrease in
       our consolidated earnings; and
    -  an increase in equity income earned on investments.
    >>

    These factors were partially offset by a decrease in affiliation fees
earned from our divisions.

    Interest (Income) Expense, Net

    During the third quarter of 2006, we earned net interest income of
$6 million, compared to net interest expense of $2 million for the third
quarter of 2005. The $8 million positive variance is primarily as a result of:

    <<
    -  a reduction in interest expense due to:
       -  the repayment in January 2006 of the second series of our senior
          unsecured notes related to the acquisition of New Venture Gear
          ("NVG"); and
       -  the repayment of $59 million of senior unsecured notes in May 2006;
          and
    -  an increase in interest income earned.
    >>

    Operating Income

    Operating income decreased 35% or $85 million to $155 million for the
third quarter of 2006 compared to $240 million for the third quarter of 2005.
Excluding unusual items discussed in the "Highlights" section above, operating
income decreased 30% or $68 million for the third quarter of 2006. The
decrease in operating income (excluding unusual items) was the result of the
decrease in EBIT (excluding unusual items) combined with the positive variance
in net interest (income) expense, both as described above.

    Income Taxes

    Our effective income tax rate on operating income (excluding equity
income) increased to 40.4% for the third quarter of 2006 from 33.9% for the
third quarter of 2005. In the third quarters of 2006 and 2005, income tax
rates were impacted by the unusual items discussed in the "Highlights" section
above. Excluding the unusual items, our effective income tax rate increased to
39.7% for the third quarter of 2006 compared to 32.6% for the third quarter of
2005. The increase in the effective income tax rate is primarily the result of
an unfavourable Supreme Court of Canada ruling against a Canadian taxpayer
which restricts deductibility of certain foreign exchange losses. As a result,
we recorded a $23 million tax expense substantially related to the write-off
of a tax asset.
    The impact of this ruling was partially offset by:

    <<
    -  a change in mix of earnings, whereby proportionately more income was
       earned in jurisdictions with lower income tax rates, and;
    -  a decrease in losses not benefited as a result of income tax planning
       strategies.
    >>

    Net Income

    Net income decreased by 41% or $65 million to $94 million for the third
quarter of 2006 compared to $159 million for the third quarter of 2005.
Excluding the $9 million related to unusual items discussed in the
"Highlights" section above, net income decreased $56 million as a result of
the decrease in operating income, and the decrease in income taxes, all as
discussed above.

    <<
    Earnings per Share

                                                For the three months
                                                 ended September 30,
                                                --------------------
                                                   2006       2005    Change
    -------------------------------------------------------------------------

    Earnings per Class A Subordinate Voting
     or Class B Share
      Basic                                   $    0.87  $    1.47     - 41%
      Diluted                                 $    0.86  $    1.44     - 40%
    -------------------------------------------------------------------------

    Average number of Class A Subordinate
     Voting and Class B Shares outstanding
     (millions)
      Basic                                       108.6      108.4         -
      Diluted                                     111.4      111.2         -
    -------------------------------------------------------------------------
    >>

    Diluted earnings per share decreased 40% or $0.58 to $0.86 for the third
quarter of 2006 compared to $1.44 for the third quarter of 2005. Included in
the $0.58 decrease in diluted earnings per share is the net decrease in
diluted earnings per share of $0.08 related to the unusual items discussed in
the "Highlights" section above.
    Excluding the unusual items, diluted earnings per share decreased $0.50
from the third quarter of 2005 to the third quarter of 2006 as a result of the
decrease in net income (excluding unusual items) described above.

    Return on Funds Employed ("ROFE")(1)

    An important financial ratio that we use across all of our operations to
measure return on investment is ROFE.
    ROFE for the third quarter of 2006 was 9.0%, a decrease from 14.9% for
the third quarter of 2005. The unusual items discussed in the "Highlights"
section above negatively impacted ROFE in the third quarter of 2006 by 0.2%
and positively impacted ROFE by 0.7% in the third quarter of 2005.
    Excluding these unusual items, the 5.0% decrease in ROFE can be
attributed to a decrease in EBIT (excluding unusual items) as discussed above
combined with an increase in our average funds employed for the third quarter
of 2006 compared to the third quarter of 2005. The increase in our average
funds employed was primarily as a result of:

    <<
    -  acquisitions completed during or subsequent to the third quarter of
       2005, including CTS in February; and
    -  increased funds employed for new facilities associated with recent or
       upcoming launches.

    FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
    -------------------------------------------------------------------------

    Cash Flow from Operations

                                                For the three months
                                                 ended September 30,
                                                --------------------
                                                   2006       2005    Change
    -------------------------------------------------------------------------

    Net income                                $      94  $     159
    Items not involving current cash flows          179        202
    -------------------------------------------------------------------------
                                                    273        361  $    (88)
    Changes in non-cash operating assets
     and liabilities                                 49       (482)
    -------------------------------------------------------------------------
    Cash provided from operating activities   $     322  $    (121) $    443
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

    Cash flow from operations before changes in non-cash operating assets and
liabilities decreased $88 million to $273 million for the third quarter of
2006 compared to $361 million for the third quarter of 2005. The decrease in
cash flow from operations was due to a $65 million decrease in net income (as
discussed above) combined with a $23 million decrease in items not involving
current cash flows.
    The decrease in items not involving current cash flows was primarily a
result of:

    <<
    -  a $55 million decrease in future taxes as a result of losses benefited
       during the third quarter of 2006 compared to the utilization of losses
       that were previously benefited in the third quarter of 2005; and
    -  a $3 million increase in equity income.

    These decreases were partially offset by:

    -  a $17 million increase in depreciation and amortization; and
    -  an $18 million increase in other non-cash charges.
    >>

    -------------------------------------------------------------------------

    (1) ROFE is defined as EBIT divided by the average funds employed for the
    period. Funds employed is defined as long-term assets, excluding future
    tax assets, plus non-cash operating assets and liabilities. Non-cash
    operating assets and liabilities are defined as the sum of accounts
    receivable, inventory, income taxes recoverable and prepaid assets less
    the sum of accounts payable, accrued salaries and wages, other accrued
    liabilities, income taxes payable and deferred revenues.

    Cash generated by non-cash operating assets and liabilities amounted to
$49 million for the third quarter of 2006 compared to cash invested in
non-cash operating assets and liabilities for the third quarter of 2005. The
change in non-cash operating assets and liabilities is comprised of the
following sources (and uses) of cash:

    <<
                                                        For the three months
                                                         ended September 30,
                                                       ----------------------
                                                              2006      2005
    -------------------------------------------------------------------------

    Accounts receivable                                  $     236  $   (505)
    Inventory                                                  (28)     (116)
    Prepaid expenses and other                                   2       (11)
    Accounts payable and other accrued liabilities            (155)      140
    Income taxes payable                                         5         8
    Deferred revenues                                          (11)        2
    -------------------------------------------------------------------------
    Changes in non-cash operating assets and
     liabilities                                         $      49  $   (482)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

    The cash generated from accounts receivable during the third quarter of
2006 is primarily a result of the decrease in production sales in North
America during the third quarter of 2006 compared to the second quarter of
2006 and the collection of tooling receivables in North America during the
third quarter of 2006. In Europe, no net cash was generated from accounts
receivable as the cash generated from the collection of tooling and
engineering receivables was offset by an increase in complete vehicle assembly
receivables.
    The decrease in accounts payable during the third quarter of 2006 is
associated with the decrease in production sales in North America, as
discussed above, and the payment of tooling related accounts payable. In
Europe, the increase in accounts payable associated with the increase in
complete vehicle assembly sales was offset by a decrease in warranty accruals
as discussed above.
    The increase in accounts receivable during the third quarter of 2005 is
primarily due to the timing of cash receipts whereby approximately
$500 million of cash was received shortly after the end of the third quarter
ended September 30, 2005.
    The increase in inventory during the third quarter of 2005 is a result of
increased tooling inventory on certain programs that launched subsequent to
the third quarter of 2005, an increase in work-in-process at one of our
assembly facilities as a result of temporary supply disruptions and an
increase in raw material inventory to support future production.
    The increase in accounts payable and other accrued liabilities during the
third quarter of 2005 is consistent with the inventory build described above.

    <<
    Capital and Investment Spending

                                                For the three months
                                                 ended September 30,
                                                --------------------
                                                   2006       2005    Change
    -------------------------------------------------------------------------

    Fixed assets                              $    (198) $    (198)
    Investments and other assets                     (6)       (31)
    -------------------------------------------------------------------------
    Fixed assets, investments and other
     assets additions                              (204)      (229)
    Purchases of subsidiaries                       (51)         1
    Proceeds from disposals                           8          7
    -------------------------------------------------------------------------
    Cash used in investing activities         $    (247) $    (221) $    (26)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

    Fixed assets, investments and other assets additions

    In the third quarter of 2006, we invested $198 million in fixed assets.
While investments were made to refurbish or replace assets consumed in the
normal course of business and for productivity improvements, a large portion
of the investment in the third quarter of 2006 was for manufacturing equipment
for programs that launched during the third quarter of 2006 or will be
launching subsequent to the third quarter of 2006, including equipment for
GM's next generation full-size pickups.

    Purchase of subsidiaries

    The purchases of subsidiaries for the third quarter of 2006 includes
$46 million to acquire the net assets of the Magna Golf Course located in
Aurora, Ontario from MEC. The transaction was reviewed by a Special Committee
of, and approved by the independent members of, Magna's Board of Directors
following the unanimous recommendation of the Special Committee.

    Proceeds from disposition

    Proceeds from disposition for the third quarter of 2006 represents normal
course fixed and other asset disposals.

    <<
    Financing

                                                For the three months
                                                 ended September 30,
                                                --------------------
                                                   2006       2005    Change
    -------------------------------------------------------------------------

    Repayments of debt                        $     (10) $     (16)
    Issues of debt                                  108         56
    Issues of Class A Subordinate Voting
     Shares                                           1          6
    Cash dividends paid                             (41)       (41)
    -------------------------------------------------------------------------
    Cash used in financing activities         $      58  $       5  $     53
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The issues of debt during the third quarter of 2006 relates primarily to
an increase in bank indebtedness in certain jurisdictions to support capital
spending requirements.

    Financing Resources

                                                  As at      As at
                                              September   December
                                               30, 2006   31, 2005    Change
    -------------------------------------------------------------------------

    Liabilities
      Bank indebtedness                       $     233  $      89
      Long-term debt due within one year            101        131
      Long-term debt                                652        700
    -------------------------------------------------------------------------
                                                    986        920
    Shareholders' equity                          7,176      6,565
    -------------------------------------------------------------------------
    Total capitalization                      $   8,162  $   7,485  $    677
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total capitalization increased by 9% or $677 million to $8.2 billion at
September 30, 2006 as compared to $7.5 billion at December 31, 2005. The
increase in capitalization is a result of an increase in shareholders' equity
and liabilities of $611 million and $66 million, respectively.
    The increase in shareholders' equity is primarily the result of:

    -  net income earned during the first nine months of 2006 (as discussed
       above);
    -  a $216 million increase in the currency translation adjustment,
       primarily as a result of the strengthening of the Canadian dollar
       against the U.S. dollar between December 31, 2005 and September 30,
       2006; and
    -  Class A Subordinate Voting Shares issued on the exercise of stock
       options.

    The increases in equity were partially offset by:

    -  dividends paid during the first nine months of 2006; and
    -  a $6 million reduction of share capital related to the repurchase of
       our Class A Subordinate Voting Shares which had been awarded on a
       restricted basis to an executive.

    The increase in liabilities is primarily a result of an increase in bank
indebtedness as a result of:

    -  the acquisition of CTS in February;
    -  to support capital spending requirements; and
    -  an increase in reported U.S. dollar amounts as a result of the
       strengthening of the Canadian dollar against the U.S. dollar.

    These increases were partially offset by decreases in long-term debt as a
result of:

    -  the repayment of the second series of our senior unsecured notes
       related to the acquisition of NVG in January 2006;
    -  the repayment of $59 million of senior unsecured notes in May 2006;
       and
    -  the deconsolidation of a partially owned European subsidiary which
       declared bankruptcy on August 16, 2006 and has subsequently been sold
       by the administrator.
    >>

    During the first nine months of 2006, our cash resources decreased by
$33 million to $1.6 billion as a result of the cash used in investing and
financing activities, partially offset by the cash provided from operating
activities as discussed above. In addition to our cash resources, we had term
and operating lines of credit totalling $2.0 billion, of which $1.6 billion
was unused and available.

    Maximum Number of Shares Issuable

    The following table presents the maximum number of shares that would be
outstanding if all of the outstanding stock options and Subordinated
Debentures issued and outstanding at November 3, 2006 were exercised or
converted:


    <<
    Class A Subordinate Voting and Class B Shares                109,729,081
    Subordinated Debentures(i)                                     1,096,589
    Stock options(ii)                                              4,237,182
    -------------------------------------------------------------------------
                                                                 115,062,852
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i)   The above amounts include shares issuable if the holders of the
          6.5% Convertible Subordinated Debentures exercise their conversion
          option but exclude Class A Subordinate Voting Shares issuable, only
          at our option, to settle interest and principal related to the 6.5%
          Convertible Subordinated Debentures. The number of Class A
          Subordinate Voting Shares issuable at our option is dependent on
          the trading price of Class A Subordinate Voting Shares at the time
          we elect to settle the 6.5% Convertible Subordinated Debenture
          interest and principal with shares.

          The above amounts also exclude Class A Subordinate Voting Shares
          issuable, only at our option, to settle the 7.08% Subordinated
          Debentures on redemption or maturity. The number of shares issuable
          is dependent on the trading price of Class A Subordinate Voting
          Shares at redemption or maturity of the 7.08% Subordinated
          Debentures.

    (ii)  Options to purchase Class A Subordinate Voting Shares are
          exercisable by the holder in accordance with the vesting provisions
          and upon payment of the exercise price as may be determined from
          time to time pursuant to our stock option plans.
    >>

    Contractual Obligations and Off-Balance Sheet Financing

    There have been no material changes with respect to the contractual
obligations requiring annual payments during the third quarter of 2006 that
are outside the ordinary course of business. Refer to our MD&A included in our
2005 Annual Report.
    Long-term receivables in other assets are reflected net of outstanding
borrowings from a customer's finance subsidiary of $50 million since we have a
legal right of set-off of the customer's long-term receivable payable to us
against such borrowings and intend to settle the related amounts
simultaneously.

    <<
    RESULTS OF OPERATIONS - FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006
    -------------------------------------------------------------------------

    Sales

                                                For the nine months
                                                 ended September 30,
                                                --------------------
                                                   2006       2005    Change
    -------------------------------------------------------------------------

    Vehicle Production Volumes (millions of
     units)
      North America                              11.727     11.812      - 1%
      Europe                                     11.566     11.894      - 3%
    -------------------------------------------------------------------------

    Average Dollar Content Per Vehicle
      North America                           $     767  $     721      + 6%
      Europe                                  $     357  $     321     + 11%
    -------------------------------------------------------------------------

    Sales
      External Production
        North America                         $   8,996  $   8,519      + 6%
        Europe                                    4,125      3,816      + 8%
        Rest of World                               190        123     + 54%
      Complete Vehicle Assembly                   3,132      3,059      + 2%
      Tooling, Engineering and Other              1,369      1,440      - 5%
    -------------------------------------------------------------------------
    Total Sales                               $  17,812  $  16,957      + 5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

    External Production Sales - North America

    External production sales in North America increased 6% or $477 million
to $9.0 billion for the nine months ended September 30, 2006 compared to
$8.5 billion for the nine months ended September 30, 2005. This increase in
production sales reflects a 6% increase in our North American average dollar
content per vehicle partially offset by a 1% decrease in North American
vehicle production volumes.
    Our average dollar content per vehicle grew by 6% or $46 to $767 for the
nine months ended September 30, 2006 compared to $721 for the nine months
ended September 30, 2005, primarily as a result of:

    <<
    -  the launch of new programs during or subsequent to the nine months
       ended September 30, 2005, including:
       -  GM's new full-size SUVs;
       -  the Ford Fusion, Mercury Milan and Lincoln Zephyr;
       -  the Chevrolet HHR;
       -  the Chevrolet Impala;
       -  the Dodge Charger; and
       -  the Pontiac Torrent;
    -  an increase in reported U.S. dollar sales due to the strengthening of
       the Canadian dollar against the U.S. dollar;
    -  increased production and/or content on certain programs, including the
       Mercedes M-Class; and
    -  the acquisition of CTS in February 2006.

    These factors were partially offset by:

    -  the impact of lower production and/or content on certain programs,
       including:
       -  the Ford Escape and Mazda Tribute;
       -  the Dodge Caravan, Grand Caravan and Chrysler Town & Country;
       -  the Chrysler Pacifica;
       -  the Cadillac STS;
       -  the Jeep Grand Cherokee;
       -  the Chevrolet Equinox; and
       -  the Ford Freestar and Mercury Monterey;
    -  programs that ended production during or subsequent to the nine months
       ended September 30, 2005;
    -  the sale of certain facilities during or subsequent to the third
       quarter of 2005; and
    -  incremental customer price concessions.

    External Production Sales - Europe

    External production sales in Europe increased 8% or $309 million to
$4.1 billion for the nine months ended September 30, 2006 compared to
$3.8 billion for the nine months ended September 30, 2005. This increase in
production sales reflects an 11% increase in our European average dollar
content per vehicle partially offset by a 3% decline in European vehicle
production volumes.
    Our average dollar content per vehicle grew by 11% or $36 to $357 for the
nine months ended September 30, 2006 compared to $321 for the nine months
ended September 30, 2005, primarily as a result of:

    -  acquisitions completed during or subsequent to the first nine months
       of 2006, including CTS in February 2006;
    -  the launch of new programs during or subsequent to the first nine
       months of 2005, including:
       -  the Honda Civic;
       -  the Volkswagen Passat;
       -  the Peugeot 207;
       -  the Mercedes S-Class; and
       -  the Chrysler 300; and
    -  increased production and/or content on certain programs, including:
       -  the Mercedes B-Class; and
       -  the BMW X3.

    These factors were partially offset by:

    -  the impact of lower production and/or content on certain programs,
       including the Mercedes A-Class and C-Class;
    -  a decrease in reported U.S. dollar sales primarily due to the
       weakening of the euro and British pound against the U.S. dollar;
    -  programs that ended production during or subsequent to the nine months
       ended September 30, 2005, including production on all MG Rover
       programs as a result of the MG Rover situation;
    -  the sale of certain facilities during or subsequent to the first nine
       months of 2005; and
    -  incremental customer price concessions.

    External Production Sales - Rest of World

    External production sales in the Rest of World increased 54% or
$67 million to $190 million for the nine months ended September 30, 2006
compared to $123 million for the nine months ended September 30, 2005. The
increase in production sales is primarily a result of:

    -  the ramp-up of production at new facilities in China;
    -  increased production sales at our powertrain facilities in Korea;
    -  an increase in production sales at a closures systems facility in
       Brazil;
    -  the acquisition of a mirrors facility in South Africa; and
    -  an increase in reported U.S. dollar sales due to the strengthening of
       the Korean Won and Chinese Renminbi, each against the U.S. dollar.

    Complete Vehicle Assembly Sales
                                               For the nine months
                                                ended September 30,
                                               --------------------
                                                  2006       2005     Change
    -------------------------------------------------------------------------

    Complete Vehicle Assembly Sales          $   3,132  $   3,059       + 2%
    -------------------------------------------------------------------------

    Complete Vehicle Assembly Volumes
     (Units)
      Full-Costed:                             114,776    111,417       + 3%
        BMW X3, Mercedes E-Class and
         G-Class, and Saab 9(3) Convertible
      Value-Added:                              68,177     53,904      + 26%
        Jeep Grand Cherokee, Chrysler 300,
        Chrysler Voyager, and Jeep Commander
    -------------------------------------------------------------------------
                                               182,953    165,321      + 11%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Complete vehicle assembly volumes increased 11% or 17,632 units to 182,953
units for the nine months ended September 30, 2006 compared to 165,321 units
for the nine months ended September 30, 2005. Complete vehicle assembly sales
increased 2% or $73 million to $3.132 billion for the nine months ended
September 30, 2006 compared to $3.059 billion for the nine months ended
September 30, 2005. The increase in complete vehicle assembly sales is
primarily the result of an increase in full-costed vehicle assembly volumes
combined with the launch of new programs during or subsequent to the nine
months ended September 30, 2005 including the Chrysler 300 in the second
quarter of 2005 and the Jeep Commander in the first quarter of 2006.

    Tooling, Engineering and Other

    Tooling, engineering and other sales decreased 5% or $71 million to $1.369
billion for the nine months ended September 30, 2006 compared to
$1.440 billion for the nine months ended September 30, 2005.
    In the nine months ended September 30, 2006, the major programs for which
we recorded tooling, engineering and other sales were:

    -  GM's next generation full-size pickups and SUVs;
    -  the MINI Cooper;
    -  the Freightliner P-Class;
    -  the Ford Escape;
    -  the Ford Edge;
    -  the Ford F-Series SuperDuty;
    -  the Suzuki XL7;
    -  The Ford 500; and
    -  the BMW Z4.

    In the nine months ended September 30, 2005, the major programs for which
we recorded tooling, engineering and other sales were:

    -  the BMW X5;
    -  GM's next generation full-size pickups and SUVs;
    -  the Ford Fusion, Mercury Milan and Lincoln Zephyr;
    -  the Dodge Caliber;
    -  the Hummer H3;
    -  the BMW X3;
    -  the Mercedes M-Class;
    -  the Dodge Durango; and
    -  the Ford F-Series SuperDuty.

    In addition, tooling, engineering and other sales benefited from the
strengthening of the Canadian dollar against the U.S. dollar.

    EBIT

                                               For the nine months
                                                ended September 30,
                                               --------------------
                                                  2006       2005     Change
    -------------------------------------------------------------------------
    North America                            $     535  $     540
    Europe                                         161        175
    Rest of World                                   (4)         5
    Corporate and Other                             50        102
    -------------------------------------------------------------------------
    Total EBIT                               $     742  $     822      - 10%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Included in EBIT for the nine-month periods ended September 30, 2006 and
2005 were the following unusual items, which have been discussed in the
"Highlights" section above.

                                                         For the nine months
                                                          ended September 30,
                                                        ---------------------
                                                             2006       2005
    -------------------------------------------------------------------------

    North America
      Restructuring charges                             $     (27) $      (9)
      Sale of facilities                                       (5)        16
    -------------------------------------------------------------------------
                                                              (32)         7
    -------------------------------------------------------------------------
    Europe
      Restructuring charges                                   (13)       (16)
      Sale of facility                                        (12)         -
      Charges associated with MG Rover                          -        (15)
      Impairment charges                                        -         (5)
    -------------------------------------------------------------------------
                                                              (25)       (36)
    -------------------------------------------------------------------------
    Corporate and Other
      Restructuring charges                                     -         (3)
      Settlement gain                                           -         26
      Foreign currency gain                                     -         18
    -------------------------------------------------------------------------
                                                                -         41
    -------------------------------------------------------------------------
                                                        $     (57) $      12
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    North America

    EBIT in North America decreased 1% or $5 million to $535 million for the
nine months ended September 30, 2006 compared to $540 million for the nine
months ended September 30, 2005. Excluding the North American unusual items
discussed in the "Highlights" section above, EBIT increased $34 million,
primarily as a result of:

    -  margins earned on new programs that launched during or subsequent to
       the nine months ended September 30, 2005;
    -  margins earned on increased production and/or content on certain
       programs;
    -  operational improvements at certain underperforming divisions;
    -  the closure or sale during or subsequent to the first nine months of
       2005 of facilities that incurred losses during the first nine months
       of 2005;
    -  lower affiliation fees paid to Corporate; and
    -  lower employee profit sharing as a result of the decrease in our
       consolidated earnings.

    These factors were partially offset by:

    -  lower margins as a result of a decrease in production volumes for
       certain programs;
    -  operational inefficiencies and other costs at certain underperforming
       divisions, primarily at certain interior systems facilities;
    -  amortization of fair value increments related to the Privatizations;
    -  incremental customer price concessions.

    Europe

    EBIT in Europe decreased 8% or $14 million to $161 million for the nine
months ended September 30, 2006 compared to $175 million for the nine months
ended September 30, 2005. Excluding the European unusual items discussed in
the "Highlights" section above, EBIT decreased by $25 million, primarily as a
result of:

    -  operating inefficiencies and other costs at certain facilities,
       primarily at certain interior systems facilities;
    -  lower margins as a result of the decrease in sales on certain
       programs;
    -  amortization of fair value increments related to the Privatizations;
       and
    -  incremental customer price concessions.

    These factors were partially offset by:

    -  a decrease in estimated product warranty costs including a favourable
       revaluation to warranty accruals as a result of updated warranty claim
       data received in the third quarter of 2006;
    -  margins earned on assembly and production programs that launched
       during or subsequent to the first nine months of 2005;
    -  increased margins earned on higher volumes for certain assembly
       programs;
    -  lower affiliation fees paid to Corporate;
    -  operational improvements at certain underperforming divisions;
    -  lower employee profit sharing as a result of the decrease in our
       consolidated earnings; and
    -  the acquisition of CTS in February of 2006.

    Rest of World

    EBIT in the Rest of World decreased $9 million to a loss of $4 million for
the nine months ended September 30, 2006 compared income of $5 million for the
nine months ending September 30, 2005. EBIT decreased primarily as a result
of:

    -  costs incurred at new facilities, primarily in China, as we continue
       to pursue opportunities in this growing market; and
    -  lower profits earned at our closures systems facility in Brazil.

    Partially offsetting these costs was the additional margin earned on the
increased production sales discussed above.

    Corporate and Other

    Corporate and Other EBIT decreased 51% or $52 million to $50 million for
the nine months ended September 30, 2006 compared to $102 million for the nine
months ended September 30, 2005. Excluding the unusual items discussed in the
"Highlights" section above, EBIT decreased $11 million primarily as a result
of:

    -  a decrease in affiliation fees earned from our divisions;
    -  higher charitable donations, including hurricane Katrina disaster
       relief; and
    -  foreign exchange losses incurred during the nine months ended
       September 30, 2006.

    These factors were partially offset by:

    -  a decrease in stock compensation expense;
    -  a decrease in incentive compensation as a result of the decrease in
       our consolidated earnings; and
    -  an increase in equity income earned on investments.
    >>

    COMMITMENTS AND CONTINGENCIES
    -------------------------------------------------------------------------

    From time to time, we may be contingently liable for litigation and other
claims. Refer to note 21 of our audited consolidated financial statements,
which describes these claims.

    SUBSEQUENT EVENT
    -------------------------------------------------------------------------

    On November 3, 2006, the Company purchased the Fontana Golf and Sports
Club in Austria from MEC for total consideration of $38 million. The
transaction was reviewed by a Special Committee of, and approved by the
independent members of, Magna's Board of Directors following the unanimous
recommendation of the Special Committee.

    FORWARD LOOKING STATEMENTS
    -------------------------------------------------------------------------

    The previous discussion may contain statements that, to the extent that
they are not recitations of historical fact, constitute "forward-looking
statements" within the meaning of applicable securities legislation. Forward-
looking statements may include financial and other projections, as well as
statements regarding our future plans, objectives or economic performance, or
the assumptions underlying any of the foregoing. We use words such as "may",
"would", "could", "will", "likely", "expect", "anticipate", "believe",
"intend", "plan", "forecast", "project", "estimate" and similar expressions to
identify forward-looking statements. Any such forward-looking statements are
based on assumptions and analyses made by us in light of our experience and
our perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate in the
circumstances. However, whether actual results and developments will conform
with our expectations and predictions is subject to a number of risks,
assumptions and uncertainties. These risks, assumptions and uncertainties
include, but are not limited to, the impact of: declining production volumes
and changes in consumer demand for vehicles; a reduction in the production
volumes of certain vehicles, such as certain light trucks; our ability to
offset increases in the cost of commodities, such as steel and resins, as well
as energy prices; fluctuations in relative currency values; our ability to
offset price concessions demanded by our customers; our ability to compete
with suppliers with operations in low cost countries; changes in our mix of
earnings between jurisdictions with lower tax rates and those with higher tax
rates, as well as our ability to fully benefit tax losses; other potential tax
exposures; the financial distress of some of our suppliers and customers; the
inability of our customers to meet their financial obligations to us; our
ability to fully recover pre-production expenses; warranty and recall costs;
the termination by our customers of any material contracts; product liability
claims in excess of our insurance coverage; expenses related to the
restructuring and rationalization of some of our operations; impairment
charges; legal claims against us; risks of conducting business in foreign
countries; unionization activities at our facilities; work stoppages and
labour relations disputes; changes in laws and governmental regulations; costs
associated with compliance with environmental laws and regulations; potential
conflicts of interest involving our controlling shareholder, the Stronach
Trust; and other factors set out in our Annual Information Form filed with
securities commissions in Canada and our annual report on Form 40-F filed with
the United States Securities and Exchange Commission, and subsequent filings.
In evaluating forward-looking statements, readers should specifically consider
the various factors which could cause actual events or results to differ
materially from those indicated by such forward-looking statements. Unless
otherwise required by applicable securities laws, we do not intend, nor do we
undertake any obligation, to update or revise any forward-looking statements
to reflect subsequent information, events, results or circumstances or
otherwise.

    <<
    MAGNA INTERNATIONAL INC.
    CONSOLIDATED STATEMENTS OF INCOME
    (Unaudited)
    (U.S. dollars in millions, except per share figures)

                                    Three months ended    Nine months ended
                                       September 30,         September 30,
                                  --------------------- ---------------------
                             Note      2006       2005       2006       2005
    -------------------------------------------------------------------------
    Sales                          $  5,424   $  5,381   $ 17,812   $ 16,957
    -------------------------------------------------------------------------

    Cost of goods sold                4,789      4,679     15,510     14,737
    Depreciation and
     amortization                       191        174        580        515
    Selling, general and
     administrative             6       299        287        990        884
    Interest (income)
     expense, net                        (6)         2         (8)         5
    Equity income                        (4)        (1)       (10)        (6)
    Impairment charges                    -          -          -          5
    -------------------------------------------------------------------------
    Income from operations
     before income taxes
     and minority interest              155        240        750        817
    Income taxes                         61         81        251        250
    Minority interest                     -          -          -         11
    -------------------------------------------------------------------------
    Net income                     $     94   $    159   $    499   $    556
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per Class A
     Subordinate Voting
     or Class B Share:
      Basic                        $   0.87   $   1.47   $   4.60   $   5.24
      Diluted                      $   0.86   $   1.44   $   4.52   $   5.16
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash dividends paid per
     Class A Subordinate
     Voting or Class B Share       $   0.38   $   0.38   $   1.14   $   1.14
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average number of Class A
     Subordinate Voting and
     Class B Shares outstanding
     during the period
     (in millions):
      Basic                           108.6      108.4      108.6      106.2
      Diluted                         111.4      111.2      111.3      108.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
    (Unaudited)
    (U.S. dollars in millions)

                                    Three months ended    Nine months ended
                                       September 30,         September 30,
                                  --------------------- ---------------------
                                       2006       2005       2006       2005
    -------------------------------------------------------------------------
    Retained earnings,
     beginning of period           $  3,731   $  3,251   $  3,409   $  2,937
    Net income                           94        159        499        556
    Dividends on Class A
     Subordinate Voting
     and Class B Shares                 (41)       (42)      (124)      (125)
    -------------------------------------------------------------------------
    Retained earnings,
     end of period                 $  3,784   $  3,368   $  3,784   $  3,368
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                           See accompanying notes



    MAGNA INTERNATIONAL INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited)
    (U.S. dollars in millions)

                                    Three months ended    Nine months ended
                                       September 30,         September 30,
                                  --------------------- ---------------------
                             Note      2006       2005       2006       2005
    -------------------------------------------------------------------------
    Cash provided from
     (used for):

    OPERATING ACTIVITIES
    Net income                     $     94   $    159   $    499   $    556
    Items not involving
     current cash flows                 179        202        616        576
    -------------------------------------------------------------------------
                                        273        361      1,115      1,132
    Changes in non cash
     operating assets
     and liabilities                     49       (482)      (317)      (592)
    -------------------------------------------------------------------------
                                        322       (121)       798        540
    -------------------------------------------------------------------------

    INVESTMENT ACTIVITIES
    Fixed asset additions              (198)      (198)      (544)      (527)
    Purchase of subsidiaries    2       (51)         1       (254)      (168)
    Increase in other assets             (6)       (31)       (58)      (100)
    Proceeds from disposition             8          7         39         65
    -------------------------------------------------------------------------
                                       (247)      (221)      (817)      (730)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayments of debt                  (10)       (16)      (128)      (294)
    Issues of debt                      108         56        126        110
    Issues of Class A
     Subordinate Voting
     Shares                               1          6         16         20
    Dividends                           (41)       (41)      (123)      (125)
    -------------------------------------------------------------------------
                                         58          5       (109)      (289)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash and
     cash equivalents                    (2)        34         95        (49)
    -------------------------------------------------------------------------
    Net increase (decrease) in
     cash and cash equivalents
     during the period                  131       (303)       (33)      (528)
    Cash and cash equivalents,
     beginning of period              1,518      1,294      1,682      1,519
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                 $  1,649   $    991   $  1,649   $    991
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                           See accompanying notes



    MAGNA INTERNATIONAL INC.
    CONSOLIDATED BALANCE SHEETS
    (Unaudited)
    (U.S. dollars in millions)
                                                  September 30,  December 31,
                                             Note         2006          2005
    -------------------------------------------------------------------------

    ASSETS
    Current assets
    Cash and cash equivalents                       $    1,649    $    1,682
    Accounts receivable                                  4,068         3,436
    Inventories                                          1,554         1,388
    Prepaid expenses and other                             136            97
    -------------------------------------------------------------------------
                                                         7,407         6,603
    -------------------------------------------------------------------------
    Investments                                            175           142
    Fixed assets, net                                    4,100         4,124
    Goodwill                                    2        1,081           918
    Future tax assets                                      264           208
    Other assets                                           455           326
    -------------------------------------------------------------------------
                                                    $   13,482    $   12,321
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
    Bank indebtedness                               $      233    $       89
    Accounts payable                                     3,555         3,241
    Accrued salaries and wages                             485           474
    Other accrued liabilities                   3          477           394
    Income taxes payable                                   121            59
    Long term debt due within one year                     101           131
    -------------------------------------------------------------------------
                                                         4,972         4,388
    -------------------------------------------------------------------------
    Deferred revenue                                        78            85
    Long term debt                                         652           700
    Other long term liabilities                            275           241
    Future tax liabilities                                 329           342
    -------------------------------------------------------------------------
                                                         6,306         5,756
    -------------------------------------------------------------------------

    Shareholders' equity
    Capital stock                               5
      Class A Subordinate Voting Shares
        (issued: 108,513,183;
        December 31, 2005 - 108,184,395)                 2,487         2,470
      Class B Shares
        (convertible into Class A
        Subordinate Voting Shares)
        (issued: 1,093,983)                                  -             -
    Contributed surplus                         6           68            65
    Retained earnings                                    3,784         3,409
    Currency translation adjustment                        837           621
    -------------------------------------------------------------------------
                                                         7,176         6,565
    -------------------------------------------------------------------------
                                                    $   13,482    $   12,321
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                           See accompanying notes



    MAGNA INTERNATIONAL INC.
    NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
    (All amounts in U.S. dollars and all tabular amounts in millions unless
    otherwise noted)

    1.  BASIS OF PRESENTATION

        The unaudited interim consolidated financial statements of Magna
        International Inc. and its subsidiaries (collectively "Magna" or the
        "Company") have been prepared in United States dollars following
        Canadian generally accepted accounting principles, as set out in the
        2005 annual consolidated financial statements.

        The unaudited interim consolidated financial statements do not
        conform in all respects to the requirements of generally accepted
        accounting principles for annual financial statements. Accordingly,
        these unaudited interim consolidated financial statements should be
        read in conjunction with the 2005 annual consolidated financial
        statements.

        In the opinion of management, the unaudited interim consolidated
        financial statements reflect all adjustments, which consist only of
        normal and recurring adjustments, necessary to present fairly the
        financial position at September 30, 2006 and the results of
        operations and cash flows for the three-month and nine-month periods
        ended September 30, 2006 and 2005.

    2.  ACQUISITIONS

    (a) For the nine months ended September 30, 2006

        (i) CTS Fahrzeug-Dachsysteme GmbH, Bietingheim-Bissingen ("CTS")

        On February 2, 2006, Magna acquired CTS, a leading manufacturer of
        roof systems for the automotive industry based in Germany. CTS
        manufactures soft tops, hard tops and modular retractable hard tops.
        In addition to Porsche, its customers include DaimlerChrysler,
        Ferrari, Peugeot and General Motors. CTS has six facilities in Europe
        and two facilities in North America.

        The total consideration for the acquisition of CTS amounted to
        $271 million, consisting of $203 million paid in cash and $68 million
        of assumed debt. The excess purchase price over the book value of
        assets acquired and liabilities assumed was $175 million, including
        goodwill and intangible assets of $128 million and $74 million,
        respectively.

        (ii) Magna Golf Club

        On August 25, 2006, the Company acquired the net assets of the Magna
        Golf Club located in Aurora, Ontario from Magna Entertainment Corp.
        ("MEC") for total cash consideration $46 million. The transaction was
        reviewed by a Special Committee of, and approved by the independent
        members of, Magna's Board of Directors following the unanimous
        recommendation of the Special Committee.

    (b) For the nine months ended September 30, 2005

        (i) Tesma

        On February 6, 2005, Magna acquired the 56% equity interest in Tesma
        international Inc. ("Tesma") that it did not previously own for total
        consideration of $613 million, which was satisfied by issuing
        6.7 million Magna Class A Subordinate Voting Shares and cash of
        $103 million. In addition, Magna assumed responsibility for the
        existing stock options of Tesma, resulting in an increase in the
        purchase price of $17 million, representing the approximate fair
        value of the stock options assumed. The excess of the purchase price
        over the Company's incremental interest in the book value of the
        assets acquired and liabilities assumed was $270 million, including
        goodwill and intangible assets of $147 million and $110 million,
        respectively.

        (ii) Decoma

        On March 6, 2005, Magna acquired the 27% equity interest in Decoma
        International Inc. ("Decoma") that it did not previously own for
        total consideration of $239 million, which was satisfied by issuing
        2.9 million Magna Class A Subordinate Voting Shares and cash of
        $31 million. In addition, Magna assumed responsibility for the
        existing stock options of Decoma, resulting in an increase in the
        purchase price of $2 million, representing the approximate fair value
        of the stock options assumed. The excess of the purchase price over
        the Company's incremental interest in the book value of the assets
        acquired and liabilities assumed was $78 million, including goodwill
        of $58 million.

        (iii) Intier

        On April 3, 2005, Magna acquired the 15% equity interest in Intier
        Automotive Inc. ("Intier") that it did not previously own for total
        consideration of $202 million, which was satisfied by issuing
        2.3 million Magna Class A Subordinate Voting Shares and cash of
        $50 million. In addition, Magna assumed responsibility for the
        existing stock options of Intier resulting in an increase in the
        purchase price of $23 million, representing the approximate fair
        value of the stock options assumed. The excess of the purchase price
        over the Company's incremental interest in the book value of the
        assets acquired and liabilities assumed was $87 million, including
        goodwill and intangible assets of $49 million and $37 million,
        respectively.

    3.  WARRANTY

        The following is a continuity of the Company's warranty accruals:

                                                             2006       2005
        ---------------------------------------------------------------------
        Balance, beginning of period                     $     96   $     57
        Expense, net                                            7         13
        Settlements                                            (5)        (8)
        Acquisition                                             6          -
        Foreign exchange and other                              2         (3)
        ---------------------------------------------------------------------
        Balance, March 31,                                    106         59
        Expense, net                                            7         24
        Settlements                                            (3)        (2)
        Foreign exchange and other                              5         (4)
        ---------------------------------------------------------------------
        Balance, June 30,                                     115         77
        Expense (income), net                                 (39)        14
        Settlements                                            (9)        (2)
        Foreign exchange and other                              -         (2)
        ---------------------------------------------------------------------
        Balance, September 30,                           $     67   $     87
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    4.  EMPLOYEE FUTURE BENEFIT PLANS

        The Company recorded employee future benefit expenses as follows:

                                     Three months ended    Nine months ended
                                         September 30,        September 30,
                                  --------------------- ---------------------
                                       2006       2005       2006       2005
        ---------------------------------------------------------------------

        Defined benefit pension
         plans and other           $      7   $      4   $     16   $     11
        Termination and long
         service arrangements             4          3         14         11
        Retirement medical
         benefits plan                    4          2          9          7
        ---------------------------------------------------------------------
                                   $     15   $      9   $     39   $     29
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    5.  CAPITAL STOCK

        (a) Changes in the Class A Subordinate Voting Shares for the three-
            month and nine-month periods ended September 30, 2006 are shown
            in the following table (numbers of shares in the following table
            are expressed in whole numbers):

                                                       Subordinate Voting
                                                  ---------------------------
                                                     Number of        Stated
                                                        shares         value
        ---------------------------------------------------------------------
        Issued and outstanding at
         December 31, 2005                         108,184,395    $    2,470
        Issued for cash under the Incentive
         Stock Option Plan                             166,209            11
        Issued under the Dividend
         Reinvestment Plan                               5,770             1
        ---------------------------------------------------------------------
        Issued and outstanding at
         March 31, 2006                            108,356,374         2,482
        Issued for cash under the Incentive
         Stock Option Plan                             140,535            10
        Issued under the Dividend
         Reinvestment Plan                               3,302             -
        Repurchase of Class A Subordinate
         Voting Shares(i)                                    -            (6)
        ---------------------------------------------------------------------
        Issued and outstanding at
         June 30, 2006                             108,500,211         2,486
        Issued for cash under the Incentive
         Stock Option Plan                              10,137             1
        Issued under the Dividend
         Reinvestment Plan                               2,835             -
        ---------------------------------------------------------------------
        Issued and outstanding at
         September 30, 2006                        108,513,183    $    2,487
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

            (i) During the three months ended June 30, 2006, 80,407 Magna
                Class A Subordinate Voting Shares, which were purchased for
                cash consideration of $6 million, were awarded on a
                restricted basis to an executive. Since this stock has not
                been released to the executive, it has been reflected as a
                reduction in the stated value of the Company's Class A
                Subordinate Voting Shares.

        (b) The following table presents the maximum number of shares that
            would be outstanding if all the dilutive instruments outstanding
            at November 3, 2006 were exercised or converted:

        Class A Subordinate Voting and Class B Shares            109,729,081
        Subordinated Debentures(i)                                 1,096,589
        Stock options(ii)                                          4,237,182
        ---------------------------------------------------------------------
                                                                 115,062,852
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

            (i)  The above amounts include shares issuable if the holders of
                 the 6.5% Convertible Subordinated Debentures exercise their
                 conversion option but exclude Class A Subordinate Voting
                 Shares issuable, only at the Company's option, to settle
                 interest and principal related to the 6.5% Convertible
                 Subordinated Debentures. The number of Class A Subordinate
                 Voting Shares issuable at the Company's option is dependent
                 on the trading price of the Class A Subordinate Voting
                 Shares at the time the Company elects to settle the 6.5%
                 Convertible Subordinated Debenture interest and principal
                 with shares.

                 The above amounts also exclude Class A Subordinate Voting
                 Shares issuable, only at the Company's option, to settle the
                 7.08% Subordinated Debentures on redemption or maturity. The
                 number of shares issuable is dependent on the trading price
                 of Class A Subordinate Voting Shares at redemption or
                 maturity of the 7.08% Subordinated Debentures.

            (ii) Options to purchase Class A Subordinate Voting Shares are
                 exercisable by the holder in accordance with the vesting
                 provisions and upon payment of the exercise price as may be
                 determined from time to time pursuant to the Company's stock
                 option plans.

    6.  STOCK BASED COMPENSATION

        (a) The following is a continuity of options outstanding (number of
            options in the table below are expressed in whole numbers):

                              2006                           2005
             -------------------------------- -------------------------------
              Options outstanding             Options outstanding
             -------------------------------- -------------------------------
                                     Options                         Options
                        Exercise     exercis-           Exercise     exercis-
                Options  price(i)       able    Options  price(i)       able
                     No.    Cdn$          No.        No.    Cdn$          No.
    -------------------------------------------------------------------------
    Beginning
     of year   4,600,039   75.46   4,116,104   2,614,376   85.74   2,042,876
    Assumed on
     privati-
     zation            -       -           -   1,053,353   71.31     864,688
    Granted      115,000   87.80           -      35,000   85.75           -
    Exercised   (166,209)  58.32    (166,209)   (170,106)  61.09    (170,106)
    Vested             -       -      80,100           -       -       9,291
    Cancelled    (17,001)  93.35     (12,059)          -       -           -
    -------------------------------------------------------------------------
    March 31   4,531,829   76.33   4,017,936   3,532,623   82.62   2,746,749
    Assumed on
     privati-
     zation            -       -           -   1,377,067   54.11     973,668
    Exercised   (140,535)  62.92    (140,535)    (80,486)  53.67     (80,486)
    Vested             -       -       8,138           -       -      11,775
    Cancelled     (6,862)  73.11      (2,658)    (17,033)  84.60           -
    -------------------------------------------------------------------------
    June 30    4,384,432   76.76   3,882,881   4,812,171   74.94   3,651,706
    Exercised    (10,137)  65.55     (10,137)   (152,211)  60.56    (152,211)
    Vested             -       -     107,004           -       -     281,020
    Cancelled    (15,198) 107.83     (15,198)     (4,506)  94.66      (1,163)
    -------------------------------------------------------------------------
    September
     30        4,359,097   76.68   3,964,550   4,655,454   75.39   3,779,352
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        (i) The exercise price noted above represents the weighted average
            exercise price in Canadian dollars.

        (b) The fair value of stock options is estimated at the date of grant
            using the Black Scholes option pricing model. There were no
            options granted or modified during the three months ended
            September 30, 2006 or 2005. The weighted average assumptions used
            in measuring the fair value of stock options granted or modified,
            during the nine months ended September 30 2006 and 2005 are as
            follows:

                                     Three months ended    Nine months ended
                                         September 30,        September 30,
                                  --------------------- ---------------------
                                       2006       2005       2006       2005
        ---------------------------------------------------------------------
        Risk free interest rate           -          -      3.99%      3.24%
        Expected dividend yield           -          -      2.05%      2.18%
        Expected volatility               -          -        23%        23%
        Expected time until exercise      -          -    4 years    2 years
        ---------------------------------------------------------------------

        Weighted average fair value
         of options granted or
         modified in period (Cdn$)        -          -   $  14.89   $  18.48
        ---------------------------------------------------------------------
        Compensation expense recorded
         in selling, general and
         administrative expenses     $    4   $      4   $     10   $     13
        ---------------------------------------------------------------------

        (c) At September 30, 2006, unamortized compensation expense related
            to the restricted stock arrangements was $43 million, and has
            been presented as a reduction of shareholders' equity.

        (d) Contributed surplus consists of accumulated stock option
            compensation expense less the fair value of options at the grant
            date that have been exercised and reclassified to share capital,
            the accumulated restricted stock compensation expense, and the
            value of the holders conversion option on the 6.5% Convertible
            Subordinated Debentures. The following is a continuity of
            contributed surplus:

                                                             2006       2005
        ---------------------------------------------------------------------

        Stock-based compensation
          Balance, beginning of period                   $     62   $     16
          Impact of privatization transactions                  -         20
          Stock-based compensation expense                      2          2
          Exercise of options                                  (3)        (5)
        ---------------------------------------------------------------------
          Balance, March 31,                                   61         33
          Impact of privatization transactions                  -         25
          Stock-based compensation expense                      3          5
          Exercise of options                                  (3)        (2)
        ---------------------------------------------------------------------
          Balance, June 30,                                    61         61
          Stock-based compensation expense                      4          3
          Exercise of options                                   -         (3)
        ---------------------------------------------------------------------
          Balance, September 30,                               65         61
        Holders conversion option                               3          3
        ---------------------------------------------------------------------
                                                         $     68   $     64
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    7.  SEGMENTED INFORMATION

                                               Three months ended
                                               September 30, 2006
                                   ------------------------------------------
                                                                       Fixed
                                      Total   External                assets,
                                      sales      sales     EBIT(i)       net
        ---------------------------------------------------------------------
        North America
          Canada                   $  1,444   $  1,384              $  1,123
          United States               1,187      1,145                 1,117
          Mexico                        374        334                   349
          Eliminations                 (134)         -                     -
        ---------------------------------------------------------------------
                                      2,871      2,863   $     67      2,589

        Europe
          Euroland                    2,203      2,168                 1,030
          Great Britain                 203        203                    84
          Other European countries      148        118                   107
          Eliminations                  (44)         -                     -
        ---------------------------------------------------------------------
                                      2,510      2,489         68      1,221
        Rest of World                    84         72         (4)       111
        Corporate and Other             (41)         -         18        179
        ---------------------------------------------------------------------
        Total reportable segments  $  5,424   $  5,424   $    149      4,100
        Current assets                                                 7,407
        Investments, goodwill and
         other assets                                                  1,975
        ---------------------------------------------------------------------
        Consolidated total assets                                   $ 13,482
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

                                              Three months ended
                                              September 30, 2005
                                   ------------------------------------------
                                                                       Fixed
                                      Total   External                assets,
                                      sales      sales     EBIT(i)       net
        ---------------------------------------------------------------------
        North America
          Canada                   $  1,599   $  1,502              $  1,060
          United States               1,406      1,353                 1,221
          Mexico                        277        266                   331
          Eliminations                 (154)         -                     -
        ---------------------------------------------------------------------
                                      3,128      3,121   $    159      2,612

        Europe
          Euroland                    1,957      1,926                 1,136
          Great Britain                 196        194                    81
          Other European countries      125         91                    90
          Eliminations                  (35)         -                     -
        ---------------------------------------------------------------------
                                      2,243      2,211         38      1,307
        Rest of World                    59         49          2         79
        Corporate and Other             (49)         -         43        112
        ---------------------------------------------------------------------
        Total reportable segments  $  5,381   $  5,381   $    242      4,110
        Current assets                                                 6,647
        Investments, goodwill and
         other assets                                                  1,621
        ---------------------------------------------------------------------
        Consolidated total assets                                   $ 12,378
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                              Nine months ended
                                              September 30, 2006
                                   ------------------------------------------
                                                                       Fixed
                                      Total   External                assets,
                                      sales      sales     EBIT(i)       net
        ---------------------------------------------------------------------

        North America
          Canada                   $  4,833   $  4,647              $  1,123
          United States               4,233      4,083                 1,117
          Mexico                      1,203      1,098                   349
          Eliminations                 (408)         -                     -
        ---------------------------------------------------------------------
                                      9,861      9,828   $    535      2,589
        Europe
          Euroland                    6,855      6,740                 1,030
          Great Britain                 684        682                    84
          Other European countries      457        353                   107
          Eliminations                 (142)         -                     -
        ---------------------------------------------------------------------
                                      7,854      7,775        161      1,221
        Rest of World                   240        209         (4)       111
        Corporate and Other            (143)         -         50        179
        ---------------------------------------------------------------------
        Total reportable segments  $ 17,812   $ 17,812   $    742      4,100
        Current assets                                                 7,407
        Investments, goodwill and
         other assets                                                  1,975
        ---------------------------------------------------------------------
        Consolidated total assets                                   $ 13,482
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                                  Nine months ended
                                                  September 30, 2005
                                   ------------------------------------------
                                                                       Fixed
                                      Total   External                assets,
                                      sales      sales     EBIT(i)       net
        ---------------------------------------------------------------------

        North America
          Canada                   $  4,794  $  4,568               $  1,060
          United States               4,321     4,130                  1,221
          Mexico                        791       750                    331
          Eliminations                 (426)        -                      -
        ---------------------------------------------------------------------
                                      9,480     9,448   $     540      2,612
        Europe
          Euroland                    6,481     6,350                  1,136
          Great Britain                 702       691                     81
          Other European countries      443       341                     90
          Eliminations                 (137)        -                      -
        ---------------------------------------------------------------------
                                      7,489     7,382         175      1,307
        Rest of World                   152       127           5         79
        Corporate and Other            (164)        -         102        112
        ---------------------------------------------------------------------
        Total reportable segments  $ 16,957  $ 16,957   $     822      4,110
        Current assets                                                 6,647
        Investments, goodwill and
         other assets                                                  1,621
        ---------------------------------------------------------------------
        Consolidated total assets                                   $ 12,378
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i) EBIT represents operating income before interest income or
            expense.

    8.  RELATED PARTY TRANSACTIONS

        On March 31, 2006, the Company purchased a real estate property
        located in the United States from MEC for a total purchase price of
        $6 million.

        On August 25, 2006, the Company purchased the Magna Golf Club from
        MEC for a total purchase price of $46 million (see note 2).

    9.  SUBSEQUENT EVENT

        On November 3, 2006, the Company purchased the Fontana Golf and
        Sports Club in Austria from MEC for total consideration of
        $38 million. The transaction was reviewed by a Special Committee of,
        and approved by the independent members of, Magna's Board of
        Directors following the unanimous recommendation of the Special
        Committee.

    10. COMPARATIVE FIGURES

        Certain of the comparative figures have been reclassified to conform
        to the current period's method of presentation.
    >>



For further information: please contact Louis Tonelli, Vice-President,
Investor Relations at (905) 726-7035

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