<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>2
<FILENAME>feb27_2008-ex99pressrelease.txt
<DESCRIPTION>FOURTH QUARTER AND 2007 RESULTS
<TEXT>
EXHIBIT 99

MAGNA INTERNATIONAL INC.
337 Magna Drive
Aurora, ON, Canada L4G 7K1
Tel:  (905) 726-2462
Fax:  (905) 726-7164


Magna announces fourth quarter and 2007 results

AURORA, ON, February 27, 2008 - Magna International Inc. (TSX: MG.A; NYSE:
MGA) today reported financial results for the fourth quarter and year ended
December 31, 2007.

    <<
    -------------------------------------------------------------------------
                               THREE MONTHS ENDED            YEAR ENDED
                                   DECEMBER 31,             DECEMBER 31,
                           ------------------------  ------------------------
                                 2007         2006         2007         2006
                           -----------  -----------  -----------  -----------

    Sales                  $    6,836   $    6,368   $   26,067   $   24,180

    Operating income       $      203   $       42   $    1,152   $      792

    Net income             $       28   $       29   $      663   $      528

    Diluted earnings
     per share             $     0.24   $     0.26   $     5.86   $     4.78

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


    YEAR ENDED DECEMBER 31, 2007
    ----------------------------
    We posted sales of $26.1 billion for 2007, an increase of 8% over 2006.
This higher sales level was achieved as a result of increases in our North
American, European and Rest of World production sales offset in part by
reductions in complete vehicle assembly sales, and tooling, engineering and
other sales.
    During 2007, North American and European average dollar content per
vehicle increased 11% and 20% respectively, over 2006. During 2007, North
American vehicle production declined 2% while European vehicle production
increased 3%, each compared to 2006.
    Complete vehicle assembly sales decreased 8% to $4.0 billion for 2007
compared to $4.4 billion for 2006 and complete vehicle assembly volumes
decreased 19% to approximately 200,000 units.
    During 2007, operating income was $1.152 billion, net income was
$663 million and diluted earnings per share were $5.86. Excluding the unusual
items recorded during 2007 and 2006 (see "Unusual Items" below), operating
income increased $257 million, net income increased $202 million, and diluted
earnings per share increased $1.65.
    During 2007, we generated cash from operations before changes in non-cash
operating assets and liabilities of $1.7 billion, and invested $94 million in
non-cash operating assets and liabilities. Total investment activities for
2007 were $977 million, including $741 million in fixed asset additions, a
$190 million increase in investments and other assets, and $46 million to
purchase subsidiaries.

    THREE MONTHS ENDED DECEMBER 31, 2007
    ------------------------------------
    We posted sales of $6.8 billion for the fourth quarter ended December 31,
2007, an increase of 7% over the fourth quarter of 2006. This higher sales
level was achieved as a result of increases in North American, European and
Rest of World production sales, offset in part by reductions in complete
vehicle assembly sales, and tooling, engineering and other sales.
    During the fourth quarter of 2007, North American and European average
dollar content per vehicle increased 13% and 26% respectively, over the
comparable quarter in 2006. During the fourth quarter of 2007, North American
vehicle production increased by 1% and European vehicle production declined
1%, each compared to the fourth quarter of 2006.
    Complete vehicle assembly sales decreased 21% to $981 million for the
fourth quarter of 2007 compared to $1.25 billion for the fourth quarter of
2006 and complete vehicle assembly volumes decreased 36% to approximately
42,000 units.
    During the fourth quarter of 2007, operating income was $203 million, net
income was $28 million and diluted earnings per share were $0.24. Excluding
unusual items recorded during the fourth quarters of 2007 and 2006 (see
"Unusual Items" below), operating income increased $102 million, net income
increased $63 million, and diluted earnings per share increased $0.46.
    During the three months ended December 31, 2007, we generated cash from
operations before changes in non-cash operating assets and liabilities of
$429 million, and generated $400 million from non-cash operating assets and
liabilities. Total investment activities for the fourth quarter of 2007 were
$320 million, including $305 million in fixed asset additions, and a
$15 million increase in investments and other assets.

    UNUSUAL ITEMS
    -------------
    During the years ended December 31, 2007 and 2006, we recorded a number
of unusual items: impairment charges related to long-lived assets; a valuation
allowance on future income tax assets; restructuring charges associated with
the assessment of our global operating structure and capacity; and other
charges and gains. The impact of these unusual items on operating income, net
income and diluted earnings per share was as follows:

    <<
                                Three months ended           Year ended
                                   December 31,             December 31,
                           ------------------------  ------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Operating Income       $      (32)  $      (91)  $      (45)  $     (148)
    -------------------------------------------------------------------------
    Net Income             $     (144)  $      (80)  $     (183)  $     (116)
    -------------------------------------------------------------------------
    Earnings per share     $    (1.21)  $    (0.73)  $    (1.61)  $    (1.04)
    -------------------------------------------------------------------------
    >>

    A more detailed discussion of our consolidated financial results for the
fourth quarter and year ended December 31, 2007 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.

    DIVIDEND
    --------
    Yesterday, our Board of Directors declared a quarterly dividend with
respect to our outstanding Class A Subordinate Voting Shares and Class B
Shares for the quarter ended December 31, 2007. The dividend of U.S. $0.36 per
share is payable on March 19, 2008 to shareholders of record on March 10,
2008.

    UPDATED 2008 OUTLOOK
    --------------------
    For the full year 2008, we expect our consolidated sales to be between
$24.9 billion and $26.2 billion, based on full year 2008 light vehicle
production volumes of approximately 14.4 million units in North America and
approximately 15.6 million units in Europe. Full year 2008 average dollar
content per vehicle is expected to be between $845 and $875 in North America
and between $450 and $475 in Europe. We expect our full year 2008 complete
vehicle assembly sales to be between $3.6 billion and $3.9 billion.
    In addition, we expect that full year 2008 spending for fixed assets will
be in the range of $925 million to $975 million.
    This 2008 outlook assumes no significant acquisitions or divestitures,
and no significant labour disruptions in our principal markets. In addition,
we have assumed that foreign exchange rates for the most common currencies in
which we conduct business relative to our U.S. dollar reporting currency will
approximate current rates.
    We are a leading global supplier of technologically advanced automotive
systems, assemblies, modules and components. We design, develop and
manufacture automotive systems, assemblies, modules and components, and
engineer and assemble complete vehicles, primarily for sale to original
equipment manufacturers ("OEMs") of cars and light trucks in North America,
Europe, Asia, South America and Africa. Our product capabilities span a number
of major automotive areas including: the design, engineering, testing and
manufacture of automotive: interior systems; seating systems; closure systems;
metal body and chassis systems; vision systems; electronic systems; exterior
systems; powertrain systems; roof systems; as well as complete vehicle
engineering and assembly.
    We have approximately 84,000 employees in 241 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 fourth quarter results on Wednesday, February 27, 2008 at
    8:00 a.m. EST. The conference call will be chaired by Vincent J. Galifi,
    Executive Vice-President and Chief Financial Officer. The number to use
    for this call is 1-800-940-0570. The number for overseas callers is
    1-212-231-2900. 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
    Wednesday 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 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, without limitation: shifting OEM market shares,
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 compete with suppliers with operations in low cost
countries; our ability to offset price concessions demanded by our customers;
our dependence on outsourcing by our customers; 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; 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; the
termination or non-renewal by our customers of any material contracts; our
ability to fully recover pre-production expenses; warranty and recall costs;
product liability claims in excess of our insurance coverage; expenses related
to the restructuring and rationalization of some of our operations; impairment
charges; our ability to successfully identify, complete and integrate
acquisitions; risks associated with program launches; legal claims against us;
risks of conducting business in foreign countries, including Russia; work
stoppages and labour relations disputes; changes in laws and governmental
regulations; costs associated with compliance with environmental laws and
regulations; the fact that we may be considered to be effectively controlled,
indirectly, by the Stronach Trust and OJSC Russian Machines ("Russian
Machines") for so long as the governance arrangements remain in place between
them; potential conflicts of interest involving the Stronach Trust and Russian
Machines; the risk that the benefits, growth prospects and strategic
objectives expected to be realized from the investment by, and strategic
alliance with, Russian Machines may not be fully realized, may take longer to
realize than expected or may not be realized at all; the possibility that the
governance arrangements between the Stronach Trust and Russian Machines may
terminate in certain circumstances; 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 year ended
December 31, 2007 included in this Press Release, and the audited consolidated
financial statements and MD&A for the year ended December 31, 2006 included in
our 2006 Annual Report to Shareholders. The unaudited interim consolidated
financial statements for the three months and year ended December 31, 2007
have been prepared in accordance with Canadian generally accepted accounting
principles ("GAAP") with respect to the preparation of interim financial
information and the audited consolidated financial statements for the year
ended December 31, 2006 have been prepared in accordance with Canadian GAAP.
    This MD&A has been prepared as at February 25, 2008.

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

    We are a leading global supplier of technologically advanced automotive
systems, assemblies, modules and components. We design, develop and
manufacture automotive systems, assemblies, modules and components, and
engineer and assemble complete vehicles, primarily for sale to original
equipment manufacturers ("OEMs") of cars and light trucks in North America,
Europe, Asia, South America and Africa. Our product capabilities span a number
of major automotive areas including: the design, engineering, testing and
manufacture of automotive: interior systems; seating systems; closure systems;
metal body and chassis systems; vision systems; electronic systems; exterior
systems; powertrain systems; roof systems; as well as complete vehicle
engineering and assembly. We follow a corporate policy of functional and
operational decentralization, pursuant to which we conduct our operations
through divisions, each of which is an autonomous business unit operating
within pre-determined guidelines. As at December 31, 2007, we had 241
manufacturing divisions and 62 product development and engineering centres in
23 countries.
    Our operations are segmented on a geographic basis between North America,
Europe and Rest of World (primarily Asia, South America and Africa). 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.

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

    We are pleased with our 2007 results, including higher sales, average
dollar content per vehicle in both North America and Europe, operating income,
net income, and diluted earnings per share. Our improved results were achieved
despite lower vehicle production volumes in North America, particularly at
General Motors ("GM") and Ford Motor Company ("Ford"), lower complete vehicle
assembly volumes and sales, and continuing price concessions given to our
customers. We also had a number of other achievements in 2007, including the
successful launch or ramp-up of a significant amount of business, important
new business awards, and supplier awards from a number of our customers,
including GM, Ford, Toyota and Honda. In North America, much of the new
business we launched was in the crossover utility vehicle segment, which has
grown rapidly in the past few years. We are well represented in a number of
product areas in this high growth segment. Finally, in 2007 we continued to
grow our business and manufacturing footprint outside of our traditional
markets of North America and Western Europe, which contributed to a 53%
increase in Rest of World production sales. Our growth in Rest of World sales
is important, since much of the future growth in global vehicle production is
expected to occur in emerging markets such as Russia, various countries in
Eastern Europe and Asia.
    In addition to the launch or ramp-up of new business, our improved
results reflect operating efficiencies we realized at some of our facilities
and progress we made at certain underperforming divisions. Despite the many
positives we achieved, 2007 also proved to be a difficult year in a number of
respects. In addition to the industry challenges mentioned above, we continued
to incur losses at a number of underperforming facilities, particularly at
certain powertrain and interiors facilities in North America. Furthermore, our
2007 results were adversely impacted by fixed asset impairment charges in
North America and Europe, restructuring charges related to facility closures
and rationalizations as we continue to migrate our manufacturing footprint
towards lower cost countries, and certain tax-related charges.
    Although no significant acquisitions or dispositions were made during
2007, we completed a plan of arrangement with Russian Machines and signed a
unique Framework of Fairness Agreement with the Canadian Auto Workers' union.
We also completed a substantial issuer bid pursuant to which we purchased for
cancellation 11.9 million Class A Subordinate Voting Shares. In addition to
the substantial issuer bid, we also purchased 2.7 million Class A Subordinate
Voting Shares under an ongoing normal course issuer bid, which allows for the
purchase of an additional 6.3 million shares before its expiry on November 11,
2008.
    We ended 2007 with a strong balance sheet, including a substantial net
cash position. We expect that our net cash will help us "weather the storm" in
the industry and provide opportunities to continue to grow our business and
further enhance shareholder value.
    During 2007, we recorded sales of $26.1 billion, an increase of 8% over
2006. This higher sales level was achieved as a result of growth in our North
American, European and Rest of World production sales offset in part by a
decrease in complete vehicle assembly sales, and tooling, engineering and
other sales. During 2007, our North American and European dollar content per
vehicle increased by 11% and 20%, respectively, over 2006. In addition, during
2007, North American vehicle production decreased 2% while European vehicle
production levels increased 3%, each compared to 2006.
    We reported strong sales in 2007 despite the fact that two of our largest
customers in North America continued to reduce vehicle production levels.
While overall North American vehicle production volumes declined 2% in 2007
compared to 2006, GM and Ford vehicle production declined by 8% and 7%,
respectively.
    Operating income for 2007 increased 45% or $360 million to $1.15 billion
from $792 million for 2006. Excluding the unusual items recorded in 2007 and
2006 (see "Unusual Items" below), operating income for 2007 increased
$257 million or 27%. The increase in operating income excluding unusual items
was primarily due to additional margins earned on the launch of new programs
during or subsequent to 2006, increased margins earned on higher volumes for
certain production programs and productivity and efficiency improvements at
certain facilities, including underperforming divisions. These factors were
partially offset by operational inefficiencies and other costs at certain
underperforming facilities, including certain powertrain and interiors
facilities in North America, lower margins earned as a result of a decrease in
production volumes, costs incurred in preparation for upcoming launches or for
programs that have not fully ramped up production, higher employee profit
sharing and incentive compensation and incremental customer price concessions.
    Net income for 2007 increased 26% or $135 million to $663 million from
$528 million for 2006. Excluding the unusual items recorded in 2007 and 2006
(see "Unusual Items" below), net income for 2007 increased 31% or
$202 million. The increase in net income excluding unusual items was primarily
a result of the increase in operating income (excluding unusual items)
partially offset by higher income taxes (excluding unusual items). Income
taxes were higher due to higher operating income partially offset by a
decrease in our effective tax rate as described in the "Incomes Taxes" section
below.
    Diluted earnings per share for 2007 increased 23% or $1.08 to $5.86 from
$4.78 for 2006. Excluding the unusual items recorded in 2007 and 2006 (see
"Unusual Items" below), diluted earnings per share increased 28% or $1.65
primarily as a result of the increase in net income (excluding unusual items)
partially offset by an increase in the weighted average number of diluted
shares outstanding in 2007, primarily as a result of the Class A Subordinate
Voting Shares issued in 2007 related to the Arrangement, as discussed in the
"Capital Transactions" section below, and stock options exercised during 2006
and 2007, partially offset by the repurchase and cancellation of Class A
Subordinate Voting Shares under the terms of our fully completed Substantial
Issuer Bid and ongoing Normal Course Issuer Bid.

    <<
    UNUSUAL ITEMS
    -------------------------------------------------------------------------

    During 2007 and 2006, we recorded certain unusual items as follows:

                                2007                          2006
                  -----------------------------  ----------------------------
                                        Diluted                       Diluted
                  Operating      Net   Earnings  Operating     Net   Earnings
                    Income    Income  per Share   Income    Income  per Share
    -------------------------------------------------------------------------
    Impairment
     charges(1)    $   (56)  $   (40)  $ (0.35)  $   (54)  $   (46)  $ (0.41)
    Restructuring
     charges(2)        (39)      (27)    (0.24)      (77)      (65)    (0.58)
    Sale of
     facilities(3)     (12)       (7)    (0.06)      (17)      (15)    (0.14)
    Sale of
     property(4)        36        30      0.26         -         -         -
    Foreign
     currency
     gain(4)            26        24      0.21         -         -         -
    Valuation
     allowance on
     future tax
     assets(5)           -      (115)    (1.01)        -         -         -
    Future tax
     (charge)
     recovery(5)         -       (48)    (0.42)        -        10      0.09
    -------------------------------------------------------------------------
    Total unusual
     items         $   (45)  $  (183)  $ (1.61)  $  (148)  $  (116)  $ (1.04)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Impairment Charges

        In conjunction with our annual goodwill impairment analysis and
        consideration of other indicators of impairment of our long-lived
        assets at certain operations, we have recorded long-lived asset
        impairment charges as follows:

                                       2007                      2006
                          ------------------------- -------------------------
                            Operating          Net    Operating          Net
                               Income       Income       Income       Income
        ---------------------------------------------------------------------
        Europe             $       12   $       12   $       41   $       38
        North America              44           28           13            8
        ---------------------------------------------------------------------
                           $       56   $       40   $       54   $       46
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Europe

        Due to recurring losses that were projected to continue as a result
        of existing sales levels and limited sales growth prospects, during
        2007 we recorded asset impairments of $12 million relating to certain
        assets and facilities in Germany, Austria, the Czech Republic and
        Spain.

        During 2006, we recorded asset impairments of $41 million related to
        certain assets and facilities due to recurring losses that were
        projected to continue as a result of existing sales levels and
        limited sales growth prospects. Asset impairments were recorded at an
        exterior systems facility in Germany, a powertrain systems facility
        in Austria, interior systems facilities in the United Kingdom and
        Spain and a seating systems facility in the Czech Republic.

        North America

        During 2007, we recorded asset impairments of $44 million related to
        an interiors systems facility in the United States and certain
        powertrain facilities in the United States and Canada. The asset
        impairments were recorded as a result of: (i) ceasing operations
        and/or use of certain assets at two powertrain facilities; and (ii)
        losses that were projected to be incurred throughout the business
        planning period based on existing and projected sales levels.

        During 2006, we recorded asset impairments of $13 million related to
        certain interior systems facilities in the United States. The asset
        impairments were recorded as a result of losses that were projected
        to be incurred throughout our business planning period based on
        existing and projected sales levels.

    (2) Restructuring Charges

        Europe

        During 2007, we recorded restructuring charges of $4 million related
        to the closure of a sunvisors facility in Spain. During 2006, we
        recorded restructuring charges of $43 million related primarily to
        closure costs of a mirrors facility in Ireland and an exterior
        systems facility in Belgium.

        North America

        In North America, restructuring charges totalled $35 million for 2007
        and $34 million for 2006. Specifically, in 2007 we recorded
        $12 million related to the closure of exterior systems facilities in
        Canada and the United States, $10 million related to the
        consolidation of powertrain facilities in Canada and $9 million
        related to the closure of a mirror facility in the United States. The
        balance of restructuring and rationalization charges related to a
        stamping facility in the United States.

        The restructuring charges in 2006 related primarily to rightsizing a
        powertrain facility in the United States and restructuring and
        rationalization charges related primarily to certain powertrain and
        seating facilities in the United States.

        In addition, we may incur additional restructuring and
        rationalization charges during 2008.

    (3) Sale of Facilities

        During 2007, we entered into an agreement to sell an underperforming
        exterior systems facility in Germany. As a result, we incurred a
        $12 million loss on disposition of the facility. During 2006, we sold
        two underperforming powertrain facilities, which resulted in losses
        on disposition of $12 million and $5 million in Europe and North
        America, respectively.

    (4) Other Unusual Items

        During 2007 we recorded the following unusual items:

        -  we disposed of land and building in the United Kingdom and
           recorded a gain on disposal of $36 million; and
        -  a $26 million foreign currency gain on the repatriation of funds
           from Europe.

    (5) Income Taxes

        In conjunction with our annual goodwill and long-lived asset
        impairment analyses, during the fourth quarter of 2007, we recorded a
        $115 million charge to establish valuation allowances against certain
        of our future tax assets in the United States.

        Accounting standards require that we assess whether valuation
        allowances should be established against our future income tax assets
        based on the consideration of all available evidence using a "more
        likely than not" standard. The factors we use to assess the
        likelihood of realization are our past history of earnings, forecast
        of future taxable income and available tax planning strategies that
        could be implemented to realize the future tax assets. During 2007,
        we determined that valuation allowances were required in the United
        States based on:

        -  three year historical cumulative losses at our interior systems
           and powertrain operations;
        -  the deterioration of near-term automotive market conditions in the
           United States; and
        -  significant and inherent uncertainty as to the timing of when we
           would be able to generate the necessary level of earnings to
           recover these future tax assets.

        Also during 2007, we recorded a $53 million charge to future income
        tax expense as a result of an alternative minimum tax introduced in
        Mexico, offset in part by a $5 million future income tax recovery
        related to a reduction in future income tax.

        During 2006, we recorded a $10 million future income tax recovery as
        a result of a reduction in future income tax rates in Canada.
    >>

    CAPITAL TRANSACTIONS
    -------------------------------------------------------------------------

    During 2007, following approval by our Class A and Class B shareholders,
we completed the court-approved plan of arrangement (the "Arrangement")
whereby OJSC Russian Machines ("Russian Machines"), a wholly owned subsidiary
of Basic Element Limited ("Basic Element"), made a major strategic investment
in Magna. Russian Machines represents the Machinery Sector of Basic Element,
and includes automobile manufacturer GAZ Group, airplane manufacturer Aviacor
and train car manufacturer Abakanvagonmash. Basic Element is a diversified
holding company founded in 1997 with assets in Russia, countries of the
Commonwealth of Independent States, Europe, Africa, South America and
Australia.

    <<
    In accordance with the Arrangement:

    -   Russian Machines invested $1.54 billion to indirectly acquire
        20 million of our Class A Subordinate Voting Shares from treasury.

    -   We purchased 217,400 Class B Shares for cancellation, representing
        all of our outstanding Class B Shares, other than those indirectly
        controlled by the Stronach Trust, for $24 million and the number of
        votes per each Class B Share was reduced from 500 votes to 300 votes.

    -   The Stronach Trust and certain members of our executive management
        combined their respective shareholdings in Magna (in the case of
        executive management, a portion of their shareholdings), together
        with the 20 million Class A Subordinate Voting Shares issued as part
        of the Arrangement into a new Canadian holding company, M Unicar Inc.
        ("M Unicar"). At September 20, 2007, M Unicar indirectly held 100% of
        our outstanding Class B Shares and approximately 16% of our
        outstanding Class A Subordinate Voting Shares collectively
        representing approximately 68.8% of the votes attached to all the
        Class A Subordinate Voting Shares and Class B Shares then
        outstanding.
    >>

    On September 25, 2007, we also completed the previously announced
substantial issuer bid ("SIB") pursuant to which we purchased for cancellation
11.9 million Class A Subordinate Voting Shares, representing 9.2% of our
issued and outstanding Class A Subordinate Voting Shares for an aggregate
purchase price of $1.1 billion. Following completion of the SIB M Unicar held
shares collectively representing approximately 71.0% of the votes attached to
all of our Class A Subordinate Voting Shares and Class B Shares then
outstanding.
    On November 12, 2007, we commenced a normal course issue bid ("NCIB") to
purchase for cancellation and/or for purposes of our long-term retention
(restricted stock), restricted stock unit and similar programs, up to
9 million of our Class A Subordinate Voting Shares. As at December 31, 2007,
we had purchased for cancellation approximately 2.5 million Class A
Subordinate Voting Shares and had also purchased approximately 134,000 Class A
Subordinate Voting Shares for an aggregate purchase price of $219 million. The
NCIB will expire on November 11, 2008, unless extended by us prior to that
time.

    <<
    INDUSTRY TRENDS AND RISKS
    -------------------------------------------------------------------------

    A number of trends continue to have a significant impact on the global
automotive industry and our business, including:

    -   declining North American production volumes;

    -   the increasing market share of Asian-based OEMs in North America and
        Europe and the declining market share and deteriorating financial
        condition of some of our traditional customers in these markets;

    -   the exertion of significant pricing pressure, primarily by North
        American and European OEMs, including through pre-determined price
        concessions, significant demands for retroactive price reductions and
        increased transfer of warranty costs, design and engineering
        expenses, as well as tooling costs;

    -   increased exposure to prices for steel, resin, paints/chemicals and
        other raw materials and commodities, as well as energy prices;

    -   the deteriorating financial condition of the automotive supply base,
        particularly in North America, and the corresponding increase in
        operational and financial exposure as many such suppliers become
        bankrupt or insolvent;

    -   the growth of the automotive industry in China, Korea, Thailand,
        India, Russia, Brazil and other low cost countries, and the migration
        of component and vehicle design, development, engineering and
        manufacturing to such lower cost countries;

    -   growth of the A to D vehicle segments (micro to mid-size cars),
        particularly in emerging markets;

    -   the increasing prevalence of vehicles built off high-volume global
        vehicle platforms; and

    -   increasing customer and consumer demand for lighter, more fuel-
        efficient and environmentally-friendly vehicles, with additional
        safety features, improved comfort, convenience and space optimization
        features 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 economic and political
        conditions, including interest rates, energy prices and international
        conflicts (including acts of terrorism). Automotive production is
        affected by consumer demand and may be affected by the foregoing
        macro factors as well as structural factors such as labour relations
        issues, regulatory requirements, trade agreements and similar
        matters. As a result of these and other factors, some of our
        customers are currently experiencing and/or may in the future
        experience reduced consumer demand for their vehicles, leading to
        declining vehicle production volumes, which could have a material
        adverse effect on our profitability.

    -   Although we supply parts to all of the leading OEMs, a significant
        majority of our sales are to five such customers, three 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 five largest customers could have an
        adverse effect on our profitability, particularly if we are unable to
        further diversify our customer base.

    -   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 a material adverse effect on our
        profitability.

    -   The financial condition of some of our traditional customers has
        deteriorated in recent years due in part to high labour costs
        (including healthcare, pension and other post-employment benefit
        costs), high raw materials, commodities and energy prices, declining
        sales and other factors. Additionally, increased gas prices, have
        affected and could further threaten sales of certain of their 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.

    -   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 will likely 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. To the extent we refuse to make
        price concessions to our customers they may not award new business to
        us, which could also have a material adverse effect on our
        profitability.

    -   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 prior 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. 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. Currently, under most customer
        agreements, we only account for existing or probable warranty 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.

    -   Prices for key raw materials and commodities used in our parts
        production, particularly steel, resin, paints chemicals and other raw
        materials, as well as energy prices, remain at elevated levels
        compared to levels earlier this decade, with the possibility of
        further increases in the future. We have attempted to mitigate our
        exposure to commodities price increases, however, to the extent we
        are unable to fully do so through hedging strategies, by engineering
        products with reduced commodity content, by passing commodity price
        increases to our customers or otherwise, 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 any such supplier could
        disrupt the supply of components to us or our customers, potentially
        causing the temporary shut-down of our or our customers' production
        lines. Any prolonged disruption in the supply of critical components
        to us or 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 one 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 supplier is not able to assume responsibility for
        such amounts, which could have an adverse effect on our
        profitability.

    -   We are dependent on the outsourcing of components, modules and
        assemblies, as well as complete vehicles, by OEMs. The extent of OEM
        outsourcing is influenced by a number of factors, including relative
        cost, quality and timeliness of production by suppliers as compared
        to OEMs, capacity utilization, and labour relations among OEMs, their
        employees and unions. As a result of favourable terms in collective
        bargaining agreements concluded in 2007, the "Detroit 3" OEMs may
        insource some production which had previously been outsourced.
        Outsourcing of complete vehicle assembly is particularly dependent on
        the degree of unutilized capacity at the OEMs' own assembly
        facilities, in addition to the foregoing factors. A reduction in
        outsourcing by OEMs, or the loss of any material production or
        assembly programs coupled with the failure to secure alternative
        programs with sufficient volumes and margins, could have a material
        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, Korea, Thailand, India, Russia, Brazil and
        other low cost countries. 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.

    -   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 and any sustained
        changes in such related currency values could adversely impact our
        competitiveness in certain geographic regions.

    -   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.

    -   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 restructuring 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 related to goodwill,
        future tax assets and fixed assets in recent years and may continue
        to do so 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 our ability to realize future tax
        assets and 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, insourcing 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.

    -   We have completed a number of significant acquisitions in recent
        years and may continue to do so in the future. In those product areas
        in which we have identified acquisitions as critical to our business
        strategy, we may not be able to identify suitable acquisition targets
        or successfully acquire any suitable targets which we identify.
        Additionally, we may not be able to successfully integrate or achieve
        anticipated synergies from those acquisitions which we do complete
        and such failure could have a material adverse effect on our
        profitability.

    -   From time to time, we are awarded new or takeover business by our
        customers. The launch of new business is a complex process, the
        success of which is dependent on a wide range of factors, including
        the production readiness of manufacturing space, as well as issues
        relating to manufacturing processes, tooling, equipment and sub-
        suppliers. Our failure to successfully launch material new or
        takeover business could have an adverse effect on our profitability.

    -   From time to time, we may become liable for legal, contractual and
        other claims by various parties, including, customers, suppliers,
        former employees, class action plaintiffs and others. On an ongoing
        basis, we attempt to assess the likelihood of any adverse judgments
        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 to which we are party will have a
        material adverse effect on our financial position, however, we cannot
        provide any assurance to this effect.
    >>

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

    Accounting Change

    In January 2005, the Canadian Institute of Chartered Accountants approved
Handbook Sections 1530 "Comprehensive Income", 3855 "Financial Instruments -
Recognition and Measurement", 3861 "Financial Instruments - Disclosure and
Presentation", and 3865 "Hedges". We adopted these new recommendations
effective January 1, 2007 with no restatement of prior periods, except to
classify the currency translation adjustment as a component of accumulated
other comprehensive income. With the adoption of these new standards, our
accounting for financial instruments and hedges complies with U.S. GAAP in all
material respects on January 1, 2007.

    Financial Instruments

    Under the new standards, all of our financial assets and financial
liabilities are classified as held for trading, held to maturity investments,
loans and receivables, available-for-sale financial assets or other financial
liabilities. Held for trading financial instruments, which include cash and
cash equivalents, are measured at fair value and all gains and losses are
included in net income in the period in which they arise. Held to maturity
investments are recorded at amortized cost using the effective interest
method, and include long-term interest bearing government securities held to
partially fund certain Austrian lump sum termination and long service payment
arrangements and our investment in asset-backed commercial paper ("ABCP").
Loans and receivables, which include accounts receivable and long-term
receivables, accounts payable, accrued salaries and wages, and certain other
accrued liabilities are recorded at amortized cost using the effective
interest method. We do not currently have any available for sale financial
assets.

    Comprehensive Income

    Other comprehensive income includes the unrealized gains and losses on
translation of our net investment in self-sustaining foreign operations, and
to the extent that cash flow hedges are effective, the change in their fair
value, net of income taxes. Other comprehensive income is presented below net
income on the Consolidated Statements of Income and Comprehensive Income.
Comprehensive income is composed of our net income and other comprehensive
income.
    Accumulated other comprehensive income is a separate component of
shareholders' equity, which includes the accumulated balances of all
components of other comprehensive income which are recognized in comprehensive
income but excluded from net income.

    Hedges

    Previously, under Canadian GAAP derivative financial instruments that met
hedge accounting criteria were accounted for on an accrual basis, and gains
and losses on hedge contracts were accounted for as a component of the related
hedged transaction. The new standards require that all derivative instruments,
whether designated in hedging relationships or not, be recorded on the balance
sheet at fair value. The fair values of derivatives are recorded in other
assets or other liabilities. To the extent that cash flow hedges are
effective, the change in their fair value is recorded in other comprehensive
income. Amounts accumulated in other comprehensive income are reclassified to
net income in the period in which the hedged item affects net income.
    The impact of these accounting policy changes on the consolidated balance
sheet as at January 1, 2007 was as follows:

    <<
    Increase in prepaid expenses and other                        $       28
    Increase in other assets                                              17
    Increase in future tax assets                                         14
    -------------------------------------------------------------------------

    Increase in other accrued liabilities                         $       32
    Increase in other long-term liabilities                               17
    Increase in future tax liabilities                                    13
    -------------------------------------------------------------------------

    Decrease in accumulated other comprehensive income            $        3
    -------------------------------------------------------------------------

    Average Foreign Exchange

                        For the three months             For the year
                         ended December 31,            ended December 31,
                   ----------------------------  ----------------------------
                      2007      2006    Change      2007      2006    Change
    -------------------------------------------------------------------------

    1 Canadian
     dollar equals
     U.S. dollars    1.019     0.877     +  16%    0.936     0.882    +   6%
    1 euro equals
     U.S. dollars    1.450     1.292     +  12%    1.371     1.257    +   9%
    1 British pound
     equals U.S.
     dollars         2.044     1.920     +   7%    2.001     1.845    +   8%
    -------------------------------------------------------------------------
    >>

    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 year ended December 31, 2007 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 were recorded in selling, general and administrative
expenses, impact reported results.

    <<
    RESULTS OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2007
    -------------------------------------------------------------------------

    Sales
                                              2007         2006       Change
    -------------------------------------------------------------------------

    Vehicle Production Volumes
     (millions of units)
      North America                         15.102       15.335       -   2%
      Europe                                15.938       15.536       +   3%
    -------------------------------------------------------------------------
    Average Dollar Content Per Vehicle
      North America                     $      859   $      775       +  11%
      Europe                            $      435   $      362       +  20%
    -------------------------------------------------------------------------
    Sales
      External Production
        North America                   $   12,977   $   11,883       +   9%
        Europe                               6,936        5,624       +  23%
        Rest of World                          411          269       +  53%
      Complete Vehicle Assembly              4,008        4,378       -   8%
      Tooling, Engineering and Other         1,735        2,026       -  14%
    -------------------------------------------------------------------------
    Total Sales                         $   26,067   $   24,180       +   8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

    External Production Sales - North America

    External production sales in North America increased 9% or $1.1 billion
to $13.0 billion for 2007 compared to $11.9 billion for 2006. This increase in
production sales reflects an 11% increase in our North American average dollar
content per vehicle partially offset by a 2% decrease in North American
vehicle production volumes. More importantly, production volumes at our
largest North American customers continued to deteriorate. While overall North
American vehicle production volumes declined 2% during 2007 compared to 2006,
vehicle production volumes at GM and Ford declined 8% and 7%, respectively.
    Our average dollar content per vehicle grew by 11% or $84 to $859 for
2007 compared to $775 for 2006, primarily as a result of:

    <<
    -   the launch of new programs during or subsequent to 2006, including:
        -  the Ford Edge and Lincoln MKX;
        -  the Saturn Outlook, GMC Acadia and the Buick Enclave;
        -  GM's full-size pickups;
        -  the BMW X5;
        -  the Jeep Wrangler and Wrangler Unlimited;
        -  the Ford F-Series SuperDuty;
        -  the Dodge Nitro; and
        -  the Dodge Avenger and Chrysler Sebring; and
    -   an increase in reported U.S. dollar sales due to the strengthening of
        the Canadian dollar against the U.S. dollar.

    These factors were partially offset by:

    -   the impact of lower production and/or content on certain programs,
        including:
        -  the Ford Fusion, Mercury Milan and Lincoln Zephyr / MKZ;
        -  the Ford Explorer and Mercury Mountaineer; and
        -  the Chevrolet HHR;
    -   programs that ended production during or subsequent to 2006,
        including:
        -  the Ford Freestar and Mercury Monterey;
        -  the Saturn ION;
        -  the Buick Rendezvous; and
        -  the Chrysler Pacifica; and
    -   incremental customer price concessions.

    External Production Sales - Europe

    External production sales in Europe increased 23% or $1.3 billion to
$6.9 billion for 2007 compared to $5.6 billion for 2006. This increase in
production sales reflects a 20% increase in our European average dollar
content per vehicle and a 3% increase in European vehicle production volumes.
    Our average dollar content per vehicle grew by 20% or $73 to $435 for 2007
compared to $362 for 2006, primarily as a result of:

    -   the launch of new programs during or subsequent to 2006, including:
        -  the MINI Cooper;
        -  the Mercedes-Benz C-Class;
        -  the smart fortwo; and
        -  the BMW 3-Series;
    -   an increase in reported U.S. dollar sales primarily due to the
        strengthening of the euro and British pound, each against the U.S.
        dollar; and
    -   acquisitions completed during or subsequent to 2006, including the
        acquisition of two facilities from Pressac Investments Limited
        ("Pressac acquisition") in January 2007.

    These factors were partially offset by:

    -   the impact of lower production and/or content on certain programs,
        including
        -  the Mercedes-Benz E-Class; and
        -  the Volkswagen Golf;
    -   the sale of certain facilities during or subsequent to 2006; and
    -   incremental customer price concessions.

    External Production Sales - Rest of World

    External production sales in the Rest of World increased 53% or
$142 million to $411 million for 2007 compared to $269 million for 2006. The
increase in production sales is primarily as a result of:

    -   the launch of new programs during or subsequent to 2006 in Korea,
        China, Brazil and South Africa;
    -   increased production and/or content on certain programs in Korea,
        China and Brazil; and
    -   an increase in reported U.S. dollar sales as a result of the
        strengthening of the Brazilian real, Korean Won and Chinese Renminbi,
        each against the U.S. dollar.
    >>

    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 impact our levels 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.

    <<
                                              2007         2006       Change
    -------------------------------------------------------------------------
    Complete Vehicle Assembly Sales     $    4,008   $    4,378       -   8%
    -------------------------------------------------------------------------

    Complete Vehicle Assembly Volumes
     (Units)
      Full-Costed:                         131,056      157,963       -  17%
        BMW X3, Mercedes E-Class and
         G-Class, and Saab 9(3)
         Convertible
      Value-Added:                          68,913       90,096       -  24%
        Jeep Grand Cherokee,
         Chrysler 300, Chrysler
         Voyager, and Jeep Commander
    -------------------------------------------------------------------------
                                           199,969      248,059       -  19%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Complete vehicle assembly volumes decreased 19% to 199,969 units for 2007
compared to 248,059 units for 2006. Complete vehicle assembly sales decreased
8% or $370 million to $4.0 billion for 2007 compared to $4.4 billion for 2006.
The decrease in complete vehicle assembly sales is primarily the result of:

    -   the end of production of the Mercedes-Benz E-Class 4MATIC at our Graz
        assembly facility in the fourth quarter of 2006, as Mercedes is
        assembling this vehicle in-house; and
    -   a decrease in assembly volumes for the BMW X3, Saab 9(3) Convertible
        and all vehicles accounted for on a value-added basis.

    These factors were partially offset by:

    -   an increase in reported U.S. dollar sales due to the strengthening of
        the euro against the U.S. dollar; and
    -   higher assembly volumes for the Mercedes-Benz G-Class.

    Tooling, Engineering and Other

    Tooling, engineering and other sales decreased 14% or $291 million to
$1.74 billion for 2007 compared to $2.03 billion for 2006.
    In 2007, the major programs for which we recorded tooling, engineering and
other sales were:

    -   GM's full-size pickups;
    -   the Ford Flex;
    -   the BMW X3, Z4, 1-Series and 3-Series programs;
    -   the Dodge Grand Caravan and Chrysler Town & Country;
    -   the Dodge Journey;
    -   the Mazda 6;
    -   the MINI Cooper;
    -   the smart fortwo;
    -   the Audi A5;
    -   the Mercedes C-Class, GL-Class and R-Class; and
    -   the Ford F-Series SuperDuty.

    In 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 Ford Edge and Lincoln MKX;
    -   the BMW X3, Z4, X5 and 3-Series programs;
    -   the Dodge Caliber;
    -   the Ford Escape;
    -   the Saturn VUE;
    -   the Freightliner P-Class;
    -   the Suzuki XL7;
    -   the Mercedes M-Class; and
    -   the Ford F-Series.

    Also in the fourth quarter of 2006, in association with the end of
production of the E-Class 4MATIC complete vehicle assembly program, we
recorded engineering sales related to the final payment received from
DaimlerChrysler for pre-production engineering research and development costs
which were previously being amortized on a units of production basis over the
assembly contract.
    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 increased $499 million to $3.5 billion for 2007 compared to
$3.0 billion for 2006, and gross margin as a percentage of total sales
increased to 13.3% for 2007 compared to 12.3% for 2006. The unusual items
discussed in the "Unusual Items" section above negatively impacted gross
margin as a percentage of total sales in 2007 and 2006 by 0.1% and 0.2%,
respectively. Excluding these unusual items, the 0.9% increase in gross margin
as a percent of sales was primarily a result of:

    -   incremental gross margin earned on new programs that launched during
        or subsequent to 2006;
    -   the end of production of the Mercedes-Benz E-Class 4MATIC at our Graz
        assembly facility, which had a lower gross margin than our
        consolidated average;
    -   the decrease in complete vehicle assembly sales which had a lower
        gross margin than our consolidated average;
    -   the decrease in tooling and other sales that earn low or no margins;
    -   incremental gross margin earned as a result of increased production
        volumes for certain programs;
    -   productivity and efficiency improvements at certain facilities,
        including underperforming divisions; and
    -   improvements as a result of prior years' restructuring activities.

    The factors contributing to the increase in gross margin as a percentage
of sales were partially offset by:

    -   costs incurred in preparation for upcoming launches or for programs
        that have not fully ramped up production;
    -   operational inefficiencies and other costs at certain facilities, in
        particular at certain powertrain and interiors facilities in North
        America;
    -   lower gross margin earned as a result of a decrease in production
        volumes for certain programs;
    -   higher employee profit sharing; and
    -   incremental customer price concessions.

    Depreciation and Amortization

    Depreciation and amortization costs increased 10% or $82 million to
$872 million for 2007 compared to $790 million for 2006. Excluding the unusual
items discussed in the "Unusual Items" section above, depreciation and
amortization increased $76 million 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 facilities that launched
        programs during or subsequent to 2006;
    -   accelerated depreciation on certain program specific assets in North
        America;
    -   additional depreciation and amortization of assets related to the
        Pressac acquisition in January 2007; and
    -   an increase in assets employed to support future business.

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

    SG&A expenses as a percentage of total sales remained unchanged in 2007
compared to 2006 at 5.6%. SG&A expenses increased 7% or $101 million to
$1.5 billion for 2007 compared to $1.4 billion for 2006. Excluding the unusual
items discussed in the "Unusual Items" section above, SG&A expenses increased
by $199 million primarily as a result of:

    -   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;
    -   higher employee profit sharing and incentive compensation;
    -   higher infrastructure costs to support the increase in sales levels,
        including spending related to programs that launched during or
        subsequent to 2006;
    -   cash awarded to a former sales agent pursuant to an unfavourable
        arbitration award;
    -   a $12 million write-down of our investments in ABCP as discussed in
        the "Cash Resources" section below;
    -   increased spending as a result of the Pressac acquisition in January
        2007;
    -   cost incurred to develop and grow our business in Russia; and
    -   increased stock compensation costs related to restricted shares,
        including the acceleration of certain restricted share agreements
        with a former executive, which resulted in a one-time charge to
        compensation expense of approximately $7 million.

    These factors were partially offset by:

    -   the sale or disposition of certain facilities during or subsequent to
        2006;
    -   reduced spending at certain underperforming divisions; and
    -   the recovery of a long-term receivable that was previously written
        off.

    Impairment Charges

    Impairment charges increased $2 million to $56 million for 2007 compared
to $54 million for 2006. For a complete discussion of the impairment charges,
see the "Unusual Items" section above and note 4 of the accompanying unaudited
interim consolidated financial statements for the three months and year ended
December 31, 2007.

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

                                              2007         2006       Change
    -------------------------------------------------------------------------
    North America                       $      688   $      575       +  20%
    Europe                                     359          126       + 285%
    Rest of World                               20            -            -
    Corporate and Other                         23           77       -  70%
    -------------------------------------------------------------------------
    Total EBIT                          $    1,090   $      778       +  40%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Included in EBIT for the years ended December 31, 2007 and 2006 were the
following unusual items, which have been discussed in the "Unusual Items"
section above.

                                                          2007          2006
    -------------------------------------------------------------------------

    North America
      Impairment charges                            $      (44)   $      (13)
      Restructuring charges                                (35)          (34)
      Foreign currency gain                                 23             -
      Sale of facilities                                     -            (5)
    -------------------------------------------------------------------------
                                                           (56)          (52)
    Europe
      Impairment charges                                   (12)          (41)
      Restructuring charges                                 (4)          (43)
      Sale of facility                                     (12)          (12)
      Sale of property                                      36             -
    -------------------------------------------------------------------------
                                                             8           (96)
    Corporate and other
      Foreign currency gain                                  3             -
    -------------------------------------------------------------------------
                                                             3             -
    -------------------------------------------------------------------------
                                                    $      (45)   $     (148)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) EBIT is defined as operating income as presented on our unaudited
        interim consolidated financial statements before net interest expense
        or income.

    North America

    EBIT in North America increased 20% or $113 million to $688 million for
2007 compared to $575 million for 2006. Excluding the North American unusual
items discussed in the "Unusual Items" section above, the remaining
$117 million increase in EBIT is primarily due to:

    -   incremental margin earned on programs that launched during or
        subsequent to 2006;
    -   productivity and efficiency improvements at certain facilities,
        including underperforming divisions;
    -   an increase in reported U.S. dollar sales, net of increased costs,
        due to the currency translation; and
    -   the sale and/or closure of certain underperforming divisions during
        or subsequent to 2006.

    The factors contributing to the increase in EBIT were partially offset by:
    -   operational inefficiencies and other costs at certain underperforming
        divisions, in particular at certain powertrain and interiors
        facilities;
    -   lower margins earned as a result of a decline in production volumes
        for certain programs;
    -   costs incurred in preparation for upcoming launches or for programs
        that have not fully ramped up production;
    -   costs incurred to develop and grow our electronics capabilities;
    -   higher employee profit sharing and incentive compensation;
    -   higher affiliation fees paid to Corporate; and
    -   incremental customer price concessions.

    Europe

    EBIT in Europe increased 185% or $233 million to $359 million for 2007
compared to $126 million for 2006. Excluding the European unusual items
discussed in the "Unusual Items" section above, the remaining $129 million
increase in EBIT is primarily due to:

    -   incremental margin earned on programs that launched during or
        subsequent to 2006;
    -   incremental margin earned as a result of higher production volumes
        for certain production programs;
    -   acquisitions completed during or subsequent to 2006;
    -   productivity and efficiency improvements at certain facilities,
        including underperforming divisions;
    -   the sale and/or closure of certain underperforming divisions during
        or subsequent to 2006; and
    -   an increase in reported U.S. dollar sales, net of increased costs,
        due to the currency translation.

    These factors were partially offset by:

    -   lower margins earned as a result of a decrease in vehicle production
        volumes for certain programs including the end of production of the
        Mercedes-Benz E-Class 4MATIC at our Graz assembly facility in 2006;
    -   operational inefficiencies and other costs at certain facilities;
    -   costs incurred to develop and grow our business in Russia;
    -   cash awarded to a former sales agent pursuant to an unfavourable
        arbitration award;
    -   costs incurred to develop and grow our electronics capabilities;
    -   higher affiliation fees paid to Corporate;
    -   higher incentive compensation and employee profit sharing; and
    -   incremental customer price concessions.

    Rest of World

    In 2007, we generated $20 million of EBIT in the Rest of World compared to
no EBIT for 2006. The increase in EBIT is primarily the result of:

    -   incremental margin earned on the increase in production sales
        discussed above; and
    -   increased equity income earned on our 41% interest in Shin Young
        Metal Ind. Co.

    These factors were partially offset by costs incurred at new facilities,
primarily in China, as we continue to pursue opportunities in this growing
market.

    Corporate and Other

    Corporate and other EBIT decreased 70% or $54 million to $23 million for
2007 compared to $77 million for 2006. Excluding the Corporate and Other
unusual items discussed in the "Unusual Items" section above, EBIT decreased
$57 million as a result of:

    -   increased salaries and wages;
    -   increased incentive compensation, due primarily to an increase in our
        consolidated earnings;
    -   increased consulting fees incurred;
    -   increased stock compensation costs related to restricted shares,
        including the acceleration of certain restricted share agreements
        with a former executive, which resulted in a one-time charge to
        compensation expense of approximately $7 million;
    -   the write-down of our investment in ABCP as discussed in the "Cash
        Resources" section below; and
    -   cost incurred to develop and grow our business in Russia;.

    These factors were partially offset by:

    -   an increase in affiliation fees earned from our divisions; and
    -   the recovery of a long-term receivable that was previously written
        off.

    Interest Income

    During 2007, we earned net interest income of $62 million, compared to $14
million for 2006. The $48 million increase is primarily as a result of:

    -   an increase in interest income earned, including interest earned on
        the net cash received from the Arrangement; and
    -   a reduction in interest expense due to:
        -  the repayment in January 2007 of the third series of our senior
           unsecured notes related to the acquisition of New Venture Gear
           ("NVG"); and
        -  the repayment of long-term debt during 2006, including
           $107 million of senior unsecured notes.
    >>

    Operating Income

    Operating income increased 45% or $360 million to $1.2 billion for 2007
compared to $0.8 billion for 2006. Excluding the unusual items, discussed in
the "Unusual Items" section above, operating income for 2007 increased 27% or
$257 million. The increase in operating income (excluding unusual items) was
the result of the increase in EBIT (excluding unusual items) combined with the
increase in net interest income earned, both as discussed above.

    Income Taxes

    Our effective income tax rate on operating income (excluding equity
income) increased to 42.9% for 2007 from 33.9% for 2006. In 2007 and 2006,
income tax rates were impacted by the unusual items discussed in the "Unusual
Items" section above. Excluding the unusual items, our effective income tax
rate decreased to 29.6% for 2007 compared to 31.9% for 2006. The decrease in
the effective income tax rate is primarily the result of:

    <<
    -   a decrease in losses not benefited, primarily at certain interiors
        facilities in Europe;
    -   an unfavourable Supreme Court of Canada ruling in 2006 against a
        taxpayer which restricts deductibility of certain foreign exchange
        losses; and
    -   a change in mix of earnings, whereby proportionately more income was
        earned in jurisdictions with lower income tax rates.

    Net Income

    Net income increased by 26% or $135 million to $663 million for 2007
compared to $528 million for 2006. Excluding the unusual items, discussed in
the "Unusual Items" section above, net income increased $202 million as a
result of an increase in operating income partially offset by an increase in
income taxes, all as discussed above.

    Earnings per Share

                                              2007         2006       Change
    -------------------------------------------------------------------------

    Earnings per Class A Subordinate
     Voting or Class B Share
      Basic                             $     5.95   $     4.86       +  22%
      Diluted                           $     5.86   $     4.78       +  23%
    -------------------------------------------------------------------------

    Average number of Class A
     Subordinate Voting and Class B
     Shares outstanding
      Basic                                  111.4        108.8       +   2%
      Diluted                                114.1        111.4       +   2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

    Diluted earnings per share increased 23% or $1.08 to $5.86 for 2007
compared to $4.78 for 2006. Excluding the unusual items, discussed in the
"Unusual Items" section above, diluted earnings per share increased $1.65 from
2006 as a result of the increase in net income (excluding unusual items)
partially offset by an increase in the weighted average number of diluted
shares outstanding during the year.
    The increase in the weighted average number of diluted shares outstanding
was primarily the result of the Class A Subordinate Voting Shares issued in
2007 related to the Arrangement and stock options exercised during 2006 and
2007, partially offset by the repurchase and cancellation of our Class A
Subordinate Voting Shares under the terms of our fully completed Substantial
Issuer Bid and ongoing Normal Course Issuer Bid.

    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 2007 was 16.6%, an increase from 11.9% for 2006. The unusual
items discussed in the "Unusual Items" section above negatively impacted 2007
ROFE by 0.6% and 2006 ROFE by 2.1%.
    Excluding these unusual items, the 3.2% increase in ROFE can be
attributed to an increase in EBIT (excluding unusual items), as discussed
above, partially offset by an approximate $60 million increase in average
funds employed for 2007 compared to 2006. The increase in our average funds
employed was primarily as a result of:

    <<
    -   acquisitions completed during or subsequent to 2006 including:
        -  Pressac in January 2007, which added approximately $59 million of
           average funds employed; and
        -  CTS in February 2006, which added approximately $60 million of
           funds employed; and
    -   increased funds employed for new facilities associated with recent or
        upcoming launches.

    The factors contributing to the increase in our average funds employed
were partially offset by:

    -   the closure of certain underperforming facilities during or
        subsequent to 2006; and
    -   a reduction in our average investment in working capital.

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

    Cash Flow from Operations

                                              2007         2006       Change
    -------------------------------------------------------------------------

    Net income                          $      663   $      528
    Items not involving current cash
     flows                                   1,024          911
    -------------------------------------------------------------------------
                                             1,687        1,439   $      248
    Changes in non-cash operating assets
     and liabilities                           (94)         157
    -------------------------------------------------------------------------
    Cash provided from operating
     activities                         $    1,593   $    1,596   $       (3)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (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 flow from operations before changes in non-cash operating assets and
liabilities increased $248 million to $1.7 billion for 2007 compared to
$1.4 billion for 2006. The increase in cash flow from operations was due to
the $135 million increase in net income (as discussed above) and a
$113 million increase in items not involving current cash flows is comprised
of the following:

                                                          2007          2006
    -------------------------------------------------------------------------

    Depreciation and amortization                   $      872    $      790
    Goodwill and long-lived asset impairments               56            54
    Valuation allowance established against future
     tax assets                                            115             -
    Equity Income                                          (11)          (13)
    Future Income taxes and non-cash portion of
     current taxes                                        (123)          (92)
    Other non-cash charges                                 115           172
    -------------------------------------------------------------------------
    Items not involving current cash flows          $    1,024    $      911
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The $31 million change in future income taxes and non-cash portion of
current taxes is due to a decrease in net tax losses not benefited partially
offset by the $53 million charge to future income tax expense as a result of
an alternative minimum tax introduced in Mexico.
    The $57 million decrease in other non-cash charges was due to:

    -   a $41 million increase on gains on disposal of fixed assets,
        including the following items as discussed in the "Unusual Items"
        section above:
        -  the $36 million gain on sale of property in the United Kingdom;
        -  the $12 million loss on sale of facility during 2007; and
        -  the $17 million loss on the disposal of facilities during 2006;
    -   a $30 million decrease in other asset amortization; and
    -   a $23 million decrease in the loss incurred on the write-off and/or
        disposal of assets, related primarily to restructuring activities.

    These factors were partially offset by:

    -   a $21 million increase in dividends received from equity accounted
        investments; and
    -   a $12 million write-down of a portion of our investments in ABCP as
        discussed in the "Cash Resources" section below.

    Cash invested in non-cash operating assets and liabilities amounted to $94
million for 2007 compared to cash generated of $157 million for 2006. The
change in non-cash operating assets and liabilities is comprised of the
following sources (and uses) of cash:

                                                          2007          2006
    -------------------------------------------------------------------------

    Accounts receivable                             $       36    $       14
    Inventory                                              (97)           60
    Prepaid expenses and other                             (13)           15
    Accounts payable and other accrued liabilities         (65)           62
    Income taxes payable                                    66            35
    Deferred revenues                                      (21)          (29)
    -------------------------------------------------------------------------
    Changes in non-cash operating assets and
     liabilities                                    $      (94)   $      157
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During 2007 and 2006 the changes in non-cash operating assets and
liabilities were not significant.

    Capital and Investment Spending

                                              2007         2006       Change
    -------------------------------------------------------------------------

    Fixed assets                        $     (741)  $     (793)
    Investments and other assets              (190)         (99)
    -------------------------------------------------------------------------
    Fixed assets, investments and other
     assets additions                         (931)        (892)
    Purchases of subsidiaries                  (46)        (284)
    Proceeds from disposals                    109           65
    -------------------------------------------------------------------------
    Cash used in investing activities   $     (868)  $   (1,111)  $      243
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Fixed assets, investments and other assets additions

    In 2007 we invested $741 million in fixed assets, including $29 million
related to an agreement we entered into for the purchase of real estate from
Magna Entertainment Corp. ("MEC") as discussed in the "Related Parties"
section below. 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 2007 was for manufacturing equipment for
programs that launched during 2007, or will be launching subsequent to 2007,
including equipment for the following major programs:

    -   Ford F-Series;
    -   the Ford Flex and Lincoln MKS;
    -   the Jeep Liberty; and
    -   the Chrysler 300/300C and Dodge Magnum.

    In 2006 we invested $793 million in fixed assets, including capital for
the following major programs:

    -   GM's next generation full-size pickups and SUVs;
    -   the MINI Cooper;
    -   the Ford Edge and Lincoln MKX;
    -   the BMW X3, Z4, X5 and 3-Series programs; and
    -   the Dodge Caliber.

    In 2007, we invested $190 million in investments and other assets
primarily relating to:

    -   a $130 million investment in ABCP as discussed in the "Cash
        Resources" section below;
    -   fully reimbursable planning, engineering and tooling costs relating
        to programs that launched during 2007 or will be launching during
        2008; and
    -   long-term tooling receivables.

    In 2006, we invested $99 million in investments and other assets primarily
relating to:

    -   the acquisition of a 41% equity interest in Shin Young Metal
        Ind. Co., a Korean-based supplier of major stampings, welded
        assemblies and tooling to the automotive industry;
    -   fully reimbursable planning and engineering costs relating to
        programs that launched during 2006 or 2007; and
    -   long-term tooling receivables.

    Purchase of subsidiaries

    During 2007, we acquired two facilities from Pressac for total
consideration of $52 million, consisting of $46 million paid in cash, net of
cash acquired, and $6 million of assumed debt.
    During 2006, we invested $284 million to purchase subsidiaries, including:

    -   the acquisition of CTS for total consideration of $271 million,
        consisting of $203 million paid in cash and $68 million of assumed
        debt;
    -   the acquisitions from MEC of the Magna Golf Course located in Aurora,
        Ontario and the Fontana Golf and Sports Club located in Austria total
        consideration of $84 million, consisting of $63 million paid in cash
        and $21 million of assumed debt; and
    -   a number of small acquisitions, including manufacturing facilities
        and engineering centres, the cash portion of which amounted to
        $18 million.

    Proceeds from disposition

    For 2007, proceeds from disposition were $109 million, which included:

    -   proceeds received from the sale of property in the United Kingdom, as
        discussed in the "Unusual Items" section above; and
    -   proceeds from normal course fixed and other asset disposals.

    For 2006, proceeds from disposal were $65 million, which included:

    -   proceeds received from the sale of a long-term tooling receivable by
        a facility in the United Kingdom; and
    -   proceeds from normal course fixed and other asset disposals.

    Financing

                                              2007         2006       Change
    -------------------------------------------------------------------------

    Repayments of debt                  $      (79)  $     (275)
    Issues of debt                              28           24
    Issues of Class A Subordinate
     Voting Shares                           1,560           28
    Repurchase of Class A Subordinate
     Voting Shares                          (1,310)           -
    Repurchase of Class B Shares               (24)           -
    Cash dividends paid                       (131)        (163)
    -------------------------------------------------------------------------
    Cash provided from (used in)
     financing activities               $       44   $     (386)  $      430
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The repayments of debt in 2007 included the repayment in January of the
third series of senior unsecured zero-coupon notes issued in connection with
the NVG acquisition.
    The repayments of debt in 2006 included the repayments of:

    -   the second series of senior unsecured zero-coupon notes issued in
        connection with the NVG acquisition; and
    -   senior unsecured notes of $107 million.
    >>

    During the third quarter of 2007, we issued 20.0 million of our Class A
Subordinate Voting Shares for cash proceeds of $1.531 billion (net of issue
costs of $6 million) in connection with the Arrangement. We also purchased for
cancellation 11.9 million or our Class A Subordinate Voting Shares for an
aggregate purchase price of $1.091 billion (including transaction costs of
$2 million) and 217,400 of our Class B Shares for an aggregate purchase price
of $24 million. Each of these transactions is discussed in more detail in the
"Capital Transactions" section above.
    During the fourth quarter of 2007, we repurchased 2.7 million Class A
Subordinate Voting Shares for an aggregate purchase price of $219 million in
relation to the NCIB as discussed above.
    During 2007, we received cash proceeds of $29 million on the exercise of
stock options for Class A Subordinate Voting Shares compared to $28 million
for 2006.
    Cash dividends paid per Class A Subordinate Voting or Class B Share were
$1.15 for 2007 compared to $1.52 for 2006 and total cash dividends paid
decreased to $131 million for 2007 compared to $163 million for 2006.

    <<
    Financing Resources

                                              2007         2006       Change
    -------------------------------------------------------------------------

    Liabilities
      Bank indebtedness                 $       89   $       63
      Long-term debt due within one year       374           98
      Long-term debt                           337          605
    -------------------------------------------------------------------------
                                               800          766   $       34
    Shareholders' equity                     8,642        7,157        1,485
    -------------------------------------------------------------------------
    Total capitalization                $    9,442   $    7,923   $    1,519
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

    Total capitalization increased by 19% or $1,519 million to $9.4 billion
at December 31, 2007 as compared to $7.9 billion at December 31, 2006. The
increase in capitalization is a result of a $1.5 billion increase in
shareholders' equity and a $34 million increase in liabilities.
    The increase in liabilities is primarily the result of an increase in
bank indebtedness to satisfy working capital requirements in certain regions
and the strengthening of the Canadian dollar and euro, each against the
U.S. dollar. This increase in bank indebtedness was partially offset by
decreases in long-term debt as a result of the repayment of the third series
of our senior unsecured notes related to the NVG acquisition.
    The increase in shareholders' equity is primarily the result of:

    <<
    -   Class A Subordinate Voting Shares issued in connection with the
        Arrangement and on the exercise of stock options and stock
        appreciation rights;
    -   net income earned during 2007 (as discussed above); and
    -   a $727 million increase in accumulated net unrealized gains on
        translation of net investment in foreign operations, primarily as a
        result of the strengthening of the Canadian dollar, euro and
        British pound, between December 31, 2006 and December 31, 2007, each
        against the U.S. dollar.

    These factors were partially offset by:

    -   the repurchase for cancellation of Class A Subordinate Voting Shares
        in connection with the SIB and NCIB;
    -   the repurchase for cancellation of Class B Shares in connection with
        the Arrangement;
    -   dividends paid during 2007; and
    -   the reduction in the stated value of our Class A Subordinate Voting
        Shares as a result of the repurchase of Class A Subordinate Voting
        Shares which:
        -  have been awarded on a restricted basis to certain executives; and
        -  are being held in Trust for purposes of our restricted stock unit,
           deferred profit sharing and similar programs.
    >>

    Cash Resources

    During 2007, our cash resources increased by $1.1 billion to
$2.954 billion as a result of the cash provided from operating activities and
financing activities, partially offset by the cash used in investing
activities. In addition to our cash resources, we had term and operating lines
of credit totalling $2.1 billion, of which $1.8 billion was unused and
available. In July 2007, our five-year revolving term facility was extended
for one additional year, expiring on July 31, 2012.
    At December 31, 2007 we held investments in ABCP with a face value of
Cdn $134 million. When acquired, these investments were rated R1 (High) by
Dominion Bond Rating Service ("DBRS"), the highest credit rating issued for
commercial paper, and backed by AAA rated assets, and liquidity agreements.
These investments matured during the third quarter of 2007 but, as a result of
liquidity issues in the ABCP market, did not settle on maturity. As a result,
we have reclassified our ABCP as long-term investments after initially
classifying them as cash and cash equivalents. In addition, we recorded a
$12 million impairment of the value of this investment as follows:

    <<
    -   a charge against potentially non-performing assets (primarily sub-
        prime residential mortgages), which was determined on a probability
        weighted basis;
    -   a charge related to restructured notes which are expected to continue
        performing. The return on these notes is expected to be below current
        market rates for instruments of comparable credit quality, term and
        structure, and accordingly, an impairment charge was recorded using a
        discounted cash flow analysis; and,
    -   costs expected to be incurred by the noteholders related to the
        restructuring.

    Continuing uncertainties regarding the value of the assets that underlie
the ABCP, the amount and timing of cash flows associated with the ABCP and the
outcome of the restructuring process could give rise to a change in the value
of our investment in ABCP, which would impact our earnings.

    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 February 25, 2007 were exercised or
converted:

    Class A Subordinate Voting and Class B Shares                116,072,243
    Subordinated Debentures(i)                                     1,096,589
    Stock options(ii)                                              2,945,973
    -------------------------------------------------------------------------
                                                                 120,114,805
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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 on redemption or maturity. 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

    At December 31, 2007, we had contractual obligations requiring annual
payments as follows:

                                             2009-    2011-   There-
                                    2008     2010     2012    after    Total
    -------------------------------------------------------------------------
    Operating leases with:
      MI Developments Inc.
       ("MID")                   $   164  $   322  $   321  $   699  $ 1,506
      Third parties                  146      226      158      192      722
    Long-term debt                   374      284       18       35      711
    -------------------------------------------------------------------------
    Total contractual
     obligations                 $   684  $   832  $   497  $   926  $ 2,939
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    We had no unconditional purchase obligations other than those related to
inventory, services, tooling and fixed assets in the ordinary course of
business.
    Our unfunded obligations with respect to employee future benefit plans,
which have been actuarially determined, were $316 million at December 31,
2007. These obligations are as follows:

                                                    Termination
                                                            and
                              Pension   Retirement Long Service
                            Liability    Liability Arrangements        Total
    -------------------------------------------------------------------------

    Projected benefit
     obligation            $      301   $       79   $      215   $      595
    Less plan assets             (279)           -            -         (279)
    -------------------------------------------------------------------------
    Unfunded amount                22           79          215          316
    Unrecognized past
     service costs and
     actuarial gains
     (losses)                      11            7          (19)          (1)
    -------------------------------------------------------------------------
    Amount recognized in
     other long-term
     liabilities           $       33   $       86   $      196   $      315
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

    Our off-balance sheet financing arrangements are limited to operating
lease contracts.
    The majority of our facilities are subject to operating leases with MID
or with third parties. Operating lease payments in 2007 for facilities leased
from MID and third parties were $159 million and $92 million, respectively.
Operating lease commitments in 2008 for facilities leased from MID and third
parties are expected to be $164 million and $93 million, respectively. Our
existing leases with MID generally provide for periodic rent escalations based
either on fixed-rate step increases, or on the basis of a consumer price index
adjustment (subject to certain caps).
    We also have operating lease commitments for equipment. These leases are
generally of shorter duration. Operating lease payments for equipment were
$65 million for 2007, and are expected to be $53 million in 2008.
    Although our consolidated contractual annual lease commitments decline
year by year, we expect that existing leases will either be renewed or
replaced. As such, lease commitments are expected to remain at current levels.
Alternatively, we will incur capital expenditures to acquire equivalent
capacity.
    Long-term receivables in other assets are reflected net of outstanding
borrowings from a customer's finance subsidiary of $37 million since we have a
legal right of set-off of the customer's long-term receivable payable to us
against such borrowings, and we intend to settle the related amounts
simultaneously.

    Foreign Currency Activities

    Our North American operations negotiate sales contracts with OEMs for
payment in both U.S. and Canadian dollars. Materials and equipment are
purchased in various currencies depending upon competitive factors, including
relative currency values. The North American operations use labour and
materials which are paid for in both U.S. and Canadian dollars. Our Mexican
operations generally use the U.S. dollar as the functional currency.
    Our European operations negotiate sales contracts with OEMs for payment
principally in euros and British pounds. The European operations' material,
equipment and labour are paid for principally in euros and British pounds.
    We employ hedging programs, primarily through the use of foreign exchange
forward contracts, in an effort to manage our foreign exchange exposure, which
arises when manufacturing facilities have committed to the delivery of
products for which the selling price has been quoted in foreign currencies.
These commitments represent our contractual obligations to deliver products
over the duration of the product programs, which can last for a number of
years. The amount and timing of the forward contracts will be dependent upon a
number of factors, including anticipated production delivery schedules and
anticipated production costs, which may be paid in the foreign currency.
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 (as discussed throughout
this MD&A).

    RELATED PARTIES
    -------------------------------------------------------------------------

    Mr. Frank Stronach and Ms. Belinda Stronach, our Chairman and Executive
Vice-Chairman, respectively, and two members of the Stronach family are
trustees and members of the class of potential beneficiaries of the Stronach
Trust. The Stronach Trust indirectly holds shares which represent a 53% voting
interest in M Unicar Inc., which controls Magna through the right to direct
the votes attaching to 100% of our Class B Shares and approximately 18% of our
Class A Subordinate Voting Shares. The Stronach Trust also controls MID and
therefore MEC, through the right to direct the votes attaching to 66% of MID's
Class B Shares. Various land and buildings used in our operations are leased
from MID under operating lease agreements, which are effected on normal
commercial terms. Lease expense included in the consolidated statements of
income with respect to MID for the years ended December 31, 2007 and 2006 was
$159 million and $153 million, respectively. Included in accounts payable are
trade amounts owing to MID and its subsidiaries in the amount of $1 million.
    During the fourth quarter of 2007, we entered into an agreement to
purchase 225 acres of real estate located in Austria from MEC for $29 million
((euro)20 million). The closing of the transaction is expected to occur during
the first quarter of 2008 following the satisfaction of customary closing
conditions including obtaining all necessary regulatory approvals.
    On March 31, 2006, we purchased a real estate property located in the
United States from MEC for a total purchase price of $6 million.
    Prior to our acquisitions of the Aurora Golf Club and Fontana Golf and
Sports Club from MEC, we had agreements with MEC for the use of the golf
course and clubhouse meeting, dining and other facilities for annual payments
of Cdn $5.0 million and (euro)2.5 million, respectively. The expense included
in the consolidated statement of income with respect to these agreements for
the year ended December 31, 2006 was $6 million.
    We have agreements with affiliates of the Chairman of the Board for the
provision of business development and consulting services. In addition, we
have an agreement with the Chairman of the Board for the provision of business
development and other services. The aggregate amount expensed under these
agreements with respect to the years ended December 31, 2007 and 2006 was
$40 million and $27 million, respectively.
    During the year ended December 31, 2007, trusts, which exist to make
orderly purchases of our shares for employees either for transfer to the
Employee Equity and Profit Participation Program or to recipients of either
bonuses or rights to purchase such shares from the trusts, borrowed up to
$56 million from us to facilitate the purchase of our Class A Subordinate
Voting Shares. At December 31, 2007, the trusts' indebtedness to us was $23
million.
    During the year ended December 31, 2007, we entered into agreements to
provide planning, management and engineering services to companies under Basic
Element's control. Sales to affiliates of Basic Element are typically under
normal commercial terms. Sales included in the consolidated statements of
income for the year ended December 31, 2007 with respect to affiliates of
Basic Element were $7 million. Included in accounts receivable as at
December 31, 2007 are trade amounts owing to Magna in the amount of $6
million. We also formed a joint supply organization with a subsidiary of Basic
Element. Our consolidated financial statements include our proportionate share
of the combined revenues, expenses, assets, liabilities and cash flows of the
jointly controlled entity.

    SUBSEQUENT EVENTS
    -------------------------------------------------------------------------

    On February 22, 2008, the United Auto Workers' Union announced the
ratification of a four-year wage and benefit contract (expiring in September
2011) at a powertrain facility in Syracuse, New York. Under the terms of the
agreement, we will make a number of lump-sum payments to each eligible
employee totalling $87,500 to offset future wage and benefit reductions. These
lump-sum payments will be paid in four annual instalments beginning April 1,
2008.

    <<
    RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED DECEMBER 31, 2007
    -------------------------------------------------------------------------

    Sales
                                                   For the three months
                                                     ended December 31,
                                        -------------------------------------
                                              2007         2006       Change
    -------------------------------------------------------------------------

    Vehicle Production Volumes
     (millions of units)
      North America                          3.658        3.608       +   1%
      Europe                                 3.936        3.970       -   1%
    -------------------------------------------------------------------------

    Average Dollar Content Per Vehicle
      North America                     $      906   $      800       +  13%
      Europe                            $      478   $      378       +  26%
    -------------------------------------------------------------------------

    Sales
      External Production
        North America                   $    3,314   $    2,887       +  15%
        Europe                               1,881        1,499       +  25%
        Rest of World                          124           79       +  57%
      Complete Vehicle Assembly                981        1,246       -  21%
      Tooling, Engineering and Other           536          657       -  18%
    -------------------------------------------------------------------------
    Total Sales                         $    6,836   $    6,368       +   7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

    Total sales increased 7% or $468 million to $6.8 billion for the
fourth quarter of 2007 compared to $6.4 billion for the fourth quarter of
2006.

    External Production Sales - North America

    External production sales in North America increased 15% or $427 million
to $3.3 billion for the fourth quarter of 2007 compared to $2.9 billion for
the fourth quarter of 2006. This increase in production sales reflects a 13%
increase in our North American average dollar content per vehicle combined
with a 1% increase in North American vehicle production volumes. Production
volumes at certain of our largest North American customers continue to
deteriorate. While North American vehicle production volumes increased 1%
during the fourth quarter of 2007 compared to the fourth quarter of 2006,
production volumes at GM and Chrysler declined 6% and 3%, respectively.
    Our average dollar content per vehicle grew by 13% or $106 to $906 for
the fourth quarter of 2007 compared to $800 for the fourth quarter of 2006,
primarily due to:

    <<
    -   the launch of new programs during or subsequent to the fourth quarter
        of 2006, including:
        -  the Saturn Outlook, GMC Acadia and Buick Enclave;
        -  the Ford Edge and Lincoln MKX;
        -  the Dodge Grand Caravan and Chrysler Town & Country;
        -  the BMW X5;
        -  GM's full-size pickups;
        -  the Ford F-Series SuperDuty;
        -  the Jeep Liberty; and
        -  the Ford Escape and Mazda Tribute;
    -   an increase in reported U.S. dollar sales due to the strengthening of
        the Canadian dollar against the U.S. dollar; and
    -   increased production and/or content on certain programs, including:
        -  the Chrysler 300/300C, Dodge Charger and Magnum; and
        -  the Jeep Wrangler and Wrangler Unlimited.

    These factors were partially offset by:

    -   the impact of lower production and/or content on certain programs,
        including:
        -  the Dodge Nitro;
        -  the Ford Fusion, Mercury Milan and Lincoln Zephyr/MKZ;
        -  the Chevrolet Impala;
        -  GM's full-size SUVs;
        -  the Dodge Ram Pickup; and
        -  the Chevrolet Equinox, Pontiac Torrent and Suzuki XL7;
    -   programs that ended production during or subsequent to the fourth
        quarter of 2006, including:
        -  the Saturn ION;
        -  the Buick Rendezvous; and
        -  the Chrysler Pacifica; and
    -   incremental customer price concessions.

    External Production Sales - Europe

    External production sales in Europe increased 25% or $382 million to $1.88
billion for the fourth quarter of 2007 compared to $1.50 billion for the
fourth quarter of 2006. This increase in production sales reflects a 26%
increase in our European average dollar content per vehicle partially offset
by a 1% decline in European vehicle production volumes.
    Our average dollar content per vehicle grew by 26% or $100 to $478 for the
fourth quarter of 2007 compared to $378 for the fourth quarter of 2006,
primarily due to:

    -   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;
    -   the launch of new programs during or subsequent to the fourth quarter
        of 2006, including:
        -  the Mercedes C-Class;
        -  the smart fortwo;
        -  the MINI Clubman; and
        -  the Volkswagen Tiguan;
    -   increased production and/or content on certain programs, including:
        -  the MINI Cooper;
        -  the BMW 3-Series;
        -  the Volkswagen Caddy; and
        -  the Opel Astra; and
    -   the Pressac acquisition in 2007.

    These factors were partially offset by:

    -   the impact of lower production and/or content on certain programs,
        including:
        -  the Mercedes E-Class;
        -  the BMW X3; and
        -  the Jaguar XJ-Series;
    -   incremental customer price concessions; and
    -   the sale of certain facilities during or subsequent to the fourth
        quarter of 2006.

    External Production Sales - Rest of World

    External production sales in the Rest of World increased 57% or
$45 million to $124 million for the fourth quarter of 2007 compared to
$79 million for the fourth quarter of 2006. The increase in production sales
is a result of:

    -   the launch of new programs during or subsequent to the fourth quarter
        of 2006 in Korea, China, Brazil and South Africa;
    -   increased production and/or content on certain programs in Korea,
        China and Brazil;
    -   an increase in reported U.S. dollar sales as a result of the
        strengthening of the Brazilian real, Korean Won and Chinese Renminbi,
        each against the U.S. dollar.


    Complete Vehicle Assembly Sales

                                                For the three months
                                                 ended December 31,
                                        -------------------------------------
                                              2007         2006       Change
    -------------------------------------------------------------------------

    Complete Vehicle Assembly Sales     $      981        1,246       -  21%
    -------------------------------------------------------------------------

    Complete Vehicle Assembly
     Volumes (Units)
      Full-Costed:                          28,841       43,187       -  33%
        BMW X3, Mercedes E-Class and
         G-Class, and Saab 9(3)
         Convertible
      Value-Added:                          13,052       21,919       -  40%
        Jeep Grand Cherokee,
         Chrysler 300, Chrysler Voyager,
         and Jeep Commander
    -------------------------------------------------------------------------
                                            41,893       65,106       -  36%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Complete vehicle assembly sales decreased 21% or $265 million to
$981 million for the fourth quarter of 2007 compared to $1.25 billion for the
fourth quarter of 2006, and complete vehicle assembly volumes decreased 36% or
23,213 units. The decrease in complete vehicle assembly sales was primarily as
a result of:

    -   the end of production of the Mercedes-Benz E-Class 4MATIC at our Graz
        assembly facility in the fourth quarter of 2006, as Mercedes is
        assembling this vehicle in-house; and
    -   a decrease in assembly volumes for the BMW X3, the Mercedes-Benz
        G-Class and all vehicles accounted for on a value-added basis.

    These factors were partially offset by:

    -   an increase in reported U.S. dollar sales due to the strengthening of
        the euro against the U.S. dollar; and
    -   higher assembly volumes for the Saab 9(3) Convertible.

    Tooling, Engineering and Other

    Tooling, engineering and other sales decreased 18% or $121 million to $536
million for the fourth quarter of 2007 compared to $657 million for the fourth
quarter of 2006.
    In the fourth quarter of 2007 the major programs for which we recorded
tooling, engineering and other sales were:

    -   the BMW Z4 and 1-Series;
    -   GM's full-size pickups;
    -   the Dodge Grand Caravan and Chrysler Town & Country;
    -   the Dodge Journey and Nitro programs;
    -   the smart fortwo;
    -   the Mercedes C-Class;
    -   the Jeep Liberty; and
    -   the Ford F-Series SuperDuty.

    In the fourth 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 MINI Cooper;
    -   the Ford Edge and Lincoln MKX;
    -   the Saturn VUE;
    -   the Dodge Journey;
    -   the Dodge Caliber; and
    -   the Mercedes C-Class.

    Also in the fourth quarter of 2006, in association with the end of
production of the E-Class 4MATIC complete vehicle assembly program, we
recorded engineering sales related to the final payment received from
DaimlerChrysler for pre-production engineering research and development costs
which were previously being amortized on a units of production basis over the
assembly contract.
    In addition, tooling, engineering and other sales increased as a result of
the strengthening of the euro, British pound and Canadian dollar, each against
the U.S. dollar.

    EBIT
                                                For the three months
                                                 ended December 31,
                                        -------------------------------------
                                              2007         2006       Change
    -------------------------------------------------------------------------

    North America                       $      115   $       40
    Europe                                      59          (35)
    Rest of World                                8            4
    Corporate and Other                          -           27
    -------------------------------------------------------------------------
    Total EBIT                          $      182   $       36       + 406%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Included in EBIT for the fourth quarters of 2007 and 2006 were the
following unusual items, which are described above in the "Unusual Items"
section.

                                                       For the three months
                                                        ended December 31,
                                                     ------------------------
                                                           2007         2006
    -------------------------------------------------------------------------

    North America
      Impairment charges                             $      (22)  $      (13)
      Restructuring charges                                 (17)          (7)
      Foreign currency gain                                  23            -
    -------------------------------------------------------------------------
                                                            (16)         (20)
    Europe
      Impairment charges                             $      (12)  $      (41)
      Restructuring charges                                   -          (30)
    -------------------------------------------------------------------------
                                                            (12)         (71)
    Corporate and other
      Foreign currency loss                                  (4)           -
    -------------------------------------------------------------------------
                                                     $      (32)  $      (91)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    North America

    EBIT in North America increased 188% or $75 million to $115 million for
the fourth quarter of 2007 compared to $40 million for the fourth quarter of
2006. Excluding the North American unusual items discussed in the "Unusual
Items" section above, EBIT increased $71 million primarily due to:

    -   incremental margin earned on new programs that launched during or
        subsequent to the fourth quarter of 2006;
    -   incremental margin earned as a result of increased production volumes
        for certain programs;
    -   productivity and efficiency improvements at certain facilities,
        including underperforming divisions;
    -   improvements as a result of prior years' restructuring activities;
        and
    -   an increase in reported U.S. dollar sales, net of increased costs,
        due to the currency translation.

    These factors were partially offset by:

    -   operational inefficiencies and other costs at certain underperforming
        divisions, in particular at certain powertrain and interiors
        facilities;
    -   lower margins earned as a result of a decrease in production volumes
        for certain programs;
    -   costs incurred in preparation for upcoming launches or for programs
        that have not fully ramped up production;
    -   higher incentive compensation;
    -   higher affiliation fees paid to Corporate; and
    -   incremental customer price concessions.

    Europe

    EBIT in Europe increased $94 million to $59 million for the fourth quarter
of 2007 compared to a loss of $35 million for the fourth quarter of 2006.
Excluding the European unusual items discussed in the "Unusual Items" section
above, EBIT increased by $35 million, primarily due to:

    -   incremental margin earned on new programs that launched during or
        subsequent to the fourth quarter of 2006;
    -   productivity and efficiency improvements at certain facilities,
        including underperforming divisions;
    -   incremental margin earned as a result of increased production volumes
        for certain programs; and
    -   the sale and/or closure of certain underperforming divisions during
        or subsequent to 2006.

    These factors were partially offset by:

    -   lower margins earned as a result of a decrease in vehicle production
        volumes for certain programs, including the end of production of the
        Mercedes-Benz E-Class 4MATIC at our Graz assembly facility in the
        fourth quarter of 2006;
    -   operational inefficiencies and other costs at certain facilities;
    -   cash awarded to a former sales agent pursuant to an unfavourable
        arbitration award;
    -   costs incurred to develop and grow our electronics capabilities;
    -   higher employee profit sharing;
    -   higher affiliation fees paid to Corporate; and
     -  incremental customer price concessions.

    Rest of World

    EBIT in the Rest of World increased $4 million to $8 million for the
fourth quarter of 2007 compared to $4 million for the fourth quarter of 2006.
The increase in EBIT is primarily the result of the incremental margin earned
on the increased production sales as discussed above and productivity and
efficiency improvements at certain facilities.
    Partially offsetting this additional margin were costs incurred at new
facilities, primarily in China, as we continue to pursue opportunities in this
growing market.

    Corporate and Other

    In the fourth quarter of 2007 no EBIT was generated in Corporate and other
compared to $27 million for the fourth quarter of 2006. Excluding the
Corporate and Other unusual items discussed in the "Unusual Items" section
above, EBIT decreased $23 million primarily as a result of:

    -   increased salaries, wages and incentive compensation;
    -   additional costs related to expanding our business in Russia;
    -   increased consulting fees;
    -   higher stock compensation; and
    -   the $5 million write-down of our investments in ABCP as discussed in
        the "Cash Resources" section above.

    These factors were partially offset by increased affiliation fees received
from our divisions.
    >>

    CRITICAL ACCOUNTING POLICIES
    -------------------------------------------------------------------------
    Our discussion and analysis of our results of operations and financial
position is based upon the unaudited consolidated financial statements, which
have been prepared in accordance with Canadian GAAP with respect to interim
financial information. The preparation of the unaudited consolidated financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and the
related disclosure of contingent assets and liabilities. We base our estimates
on historical experience and various other assumptions that we believe to be
reasonable in the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities. We
evaluate our estimates on an ongoing basis, however, actual results may differ
from these estimates under different assumptions or conditions.
    We believe the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of our unaudited
consolidated financial statements. Management has discussed the development
and selection of the following critical accounting policies with the Audit
Committee of the Board of Directors and the Audit Committee has reviewed our
disclosure relating to critical accounting policies in this MD&A.

    Revenue Recognition

    (a) Separately Priced Tooling and Engineering Service Contracts

    With respect to our contracts with OEMs for particular vehicle programs,
we perform multiple revenue-generating activities. The most common arrangement
is where, in addition to contracting for the production and sale of parts, we
also have a separately priced contract with the OEM for related tooling costs.
Under these arrangements, we either construct the tools at our in-house tool
shops or contract with third party tooling vendors to construct and supply
tooling to be used by us in the production of parts for the OEM. On completion
of the tooling build, and upon acceptance of the tooling by the OEM, we sell
the separately priced tooling to the OEM pursuant to a separate tooling
purchase order.
    Such multiple element arrangements also include providing separately
priced engineering services in addition to tooling and subsequent assembly or
production activities. On completion, and upon acceptance by the OEM, we
generally sell the separately priced engineering services to the OEM prior to
the commencement of subsequent assembly or production activities.
    During 2004, we adopted CICA Emerging Issues Committee Abstract No. 142,
"Revenue Arrangements with Multiple Deliverables" ("EIC-142") prospectively
for new revenue arrangements with multiple deliverables entered into by us on
or after January 1, 2004. Under EIC-142, separately priced tooling and
engineering services are accounted for as a separate revenue element only in
circumstances where the tooling and engineering has value to the customer on a
standalone basis and there is objective and reliable evidence of the fair
value of the subsequent parts production or vehicle assembly. Based on the
typical terms and process for the negotiation of separately priced tooling
contracts, substantially all such tooling contracts are accounted for as
separate revenue elements. However, because of the unique contracts related to
multiple element arrangements involving engineering and subsequent assembly or
production activities, all significant arrangements are evaluated in order to
determine whether the engineering component of the arrangement qualifies as a
separate revenue element. If the engineering component is not considered to be
a separate revenue element, revenues and costs of sales on such activities are
deferred and amortized on a gross basis over the subsequent assembly or
production program.
    Revenues from significant engineering services and tooling contracts that
qualify as separate revenue elements are recognized on a percentage of
completion basis. The percentage of completion method recognizes revenue and
cost of sales over the term of the contract based on estimates of the state of
completion, total contract revenue and total contract costs. Under such
contracts, the related receivables could be paid in full upon completion of
the contract, in instalments or in fixed amounts per vehicle based on
forecasted production volumes. In the event that actual production volumes are
less than those forecasted, a reimbursement for any shortfall will be made
annually.
    Tooling and engineering contract prices are generally fixed, however,
price changes, change orders and program cancellations may affect the ultimate
amount of revenue recorded with respect to a contract. Contract costs are
estimated at the time of signing the contract and are reviewed at each
reporting date. Adjustments to the original estimates of total contract costs
are often required as work progresses under the contract and as experience is
gained, even though the scope of the work under the contract may not change.
When the current estimates of total contract revenue and total contract costs
indicate a loss, a provision for the entire loss on the contract is made.
Factors that are considered in arriving at the forecasted loss on a contract
include, amongst others, cost over-runs, non-reimbursable costs, change orders
and potential price changes.
    For U.S. GAAP purposes, we adopted EITF 00-21, "Accounting for Revenue
Arrangements With Multiple Deliverables" prospectively for new revenue
arrangements with multiple deliverables entered into by us on or after
January 1, 2004, which harmonized our Canadian and U.S. GAAP reporting for
such arrangements. For separately priced in-house tooling and engineering
services contracts provided in conjunction with subsequent production or
assembly services entered into prior to January 1, 2004, the revenues and
costs of sales on such activities continue to be deferred and amortized on a
gross basis over the remaining life of the production or assembly program for
U.S. GAAP purposes.

    (b) Contracts With Purchased Components

    Revenues and cost of sales from separately priced tooling and engineering
services contracts are presented on a gross basis in the consolidated
statements of income when we are acting as principal and are subject to
significant risks and rewards of the business. Otherwise, components of
revenue and related costs are presented on a net basis. To date, substantially
all separately priced engineering services and tooling contracts have been
recorded on a gross basis.
    As reported above, the reporting of sales and cost of sales for our
vehicle assembly contracts is affected by the contractual terms of the
arrangement.
    In addition to our assembly business, we also enter into production
contracts where we are required to coordinate the design, manufacture,
integration and assembly of a large number of individual parts and components
into a modular system for delivery to the OEM's vehicle assembly plant. Under
these contracts, we manufacture a portion of the products included in the
module but also purchase components from various sub-suppliers and assemble
such components into the completed module. We recognize module revenues and
cost of sales on a gross basis when we have a combination of:

    <<
    -   primary responsibility for providing the module to the OEM;
    -   responsibility for styling and/or product design specifications;
    -   latitude in establishing sub-supplier pricing;
    -   responsibility for validation of sub-supplier part quality;
    -   inventory risk on sub-supplier parts;
    -   exposure to warranty; and
    -   exposure to credit risk on the sale of the module to the OEM.
    >>

    To date, revenues and cost of sales on our module contracts have been
reported on a gross basis.

    Amortized Engineering and Customer Owned Tooling Arrangements

    We incur pre-production engineering research and development ("ER&D")
costs related to the products we produce for OEMs under long-term supply
agreements. We expense ER&D costs, which are paid for as part of the
subsequent related production and assembly program, as incurred unless a
contractual guarantee for reimbursement exists.
    In addition, we expense all costs as incurred related to the design and
development of moulds, dies and other tools that we will not own and that will
be used in, and reimbursed as part of the piece price amount for, subsequent
related production or assembly program unless the supply agreement provides us
with a contractual guarantee for reimbursement of costs or the non-cancellable
right to use the moulds, dies and other tools during the supply agreement, in
which case the costs are capitalized.
    ER&D and customer-owned tooling costs capitalized in "Other assets" are
amortized on a units of production basis over the related long-term supply
agreement.

    Impairment of Goodwill and Other Long-lived Assets

    Goodwill is subject to an annual impairment test 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 evaluate fixed assets and other long-lived assets for impairment
whenever indicators of impairment exist. Indicators of impairment include
prolonged operating losses or a decision to dispose of, or otherwise change
the use of, an existing fixed or other long-lived asset. If the sum of the
future cash flows expected to result from the asset, undiscounted and without
interest charges, is less than the reported value of the asset, an asset
impairment must be recognized in the consolidated financial statements. The
amount of impairment to be recognized is calculated by subtracting the fair
value of the asset from the reported value of the asset.
    We believe that accounting estimates related to goodwill and long-lived
asset impairment assessments are "critical accounting estimates" because:
(i) they are subject to significant measurement uncertainty and are
susceptible to change as management is required to make 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; and (ii) any resulting impairment
loss could have a material impact on our consolidated net income and on the
amount of assets reported in our consolidated balance sheet.

    Warranty

    We record product warranty liabilities based on individual customer
agreements. Under most customer agreements, we only account for existing or
probable claims on product default issues when amounts related to such issues
are probable and reasonably estimable. 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 customers' warranty experience.
    Product liability provisions are established based on our best estimate
of the amounts necessary to settle existing claims on product default 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. When a
decision to recall a product has been made or is probable, our estimated cost
of the recall is recorded as a charge to net earnings in that period. In
making this estimate, judgment is required as to the number of units that may
be returned as a result of the recall, the total cost of the recall campaign,
the ultimate negotiated sharing of the cost between us, the customer and, in
some cases a supplier.

    Future Income Tax Assets

    At December 31, 2007 we had recorded future tax assets (net of related
valuation allowances) in respect of loss carryforwards and other deductible
temporary differences of $108 million and $172 million, respectively. The
future tax assets in respect of loss carryforwards relate primarily to U.S.
subsidiaries.
    On a quarterly basis, we evaluate the realizability of future tax assets
by assessing our valuation allowance and by adjusting the amount of such
allowance, if necessary. We have, and we continue to use tax planning
strategies to realize future tax assets in order to avoid the potential loss
of benefits.
    Accounting standards require that we assess whether valuation allowances
should be established against our future income tax assets based on the
consideration of all available evidence using a "more likely than not"
standard. The factor we use to assess the likelihood of realization are our
forecast of future taxable income and available tax planning strategies that
could be implemented to realize the future tax assets. During 2007, we
determined that valuation allowances were required in the United States based
on:

    <<
    (i)    three year historical cumulative losses at our interior systems
           and powertrain operations;
    (ii)   the deterioration of near-term automotive market conditions in the
           United States; and
    (iii)  significant and inherent uncertainty as to the timing of when we
           would be able to generate the necessary level of earnings to
           recover these future tax assets.
    >>

    At December 31, 2007, we had gross income tax loss carryforwards of
approximately $1,040 million, which relate primarily to operations in the
United States, the United Kingdom, Belgium, Germany, Italy and Spain, the tax
benefits of which have not been recognized in our unaudited consolidated
financial statements. Of the total losses, $509 million expire between 2008
and 2027 and the remainder have no expiry date. If operations improve to
profitable levels in these jurisdictions, and such improvements are sustained
for a prolonged period of time, our earnings will benefit from these loss
carryforward pools except for the benefit of losses obtained on acquisition
which would reduce related goodwill and intangible balances.

    Employee Benefit Plans

    The determination of the obligation and expense for defined benefit
pension, termination and long service arrangements and other post retirement
benefits, such as retiree healthcare and medical benefits, is dependent on the
selection of certain assumptions used by actuaries in calculating such
amounts. Those assumptions include, among others, the discount rate, expected
long-term rate of return on plan assets and rates of increase in compensation
costs. Actual results that differ from the assumptions used are accumulated
and amortized over future periods and therefore, impact the recognized expense
and recorded obligation in future periods. Significant changes in assumptions
or significant new plan enhancements could materially affect our future
employee benefit obligations and future expense. At December 31, 2007, we had
unrecognized past service costs and actuarial experience losses of $1 million
that will be amortized to future employee benefit expense over the expected
average remaining service life of employees.

    COMMITMENTS AND CONTINGENCIES
    -------------------------------------------------------------------------
    From time to time, we may be contingently liable for litigation and other
claims.
    Refer to note 21 of our 2006 audited consolidated financial statements,
which describes these claims. On October 26, 2007, we received a favourable
award in a previously disclosed arbitration proceeding involving a steel
supplier.

    CONTROLS AND PROCEDURES
    -------------------------------------------------------------------------
    Changes in Internal Controls over Financial Reporting

    There have been no changes in our internal controls over financial
reporting that occurred during 2007 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

    SELECTED ANNUAL CONSOLIDATED FINANCIAL DATA
    -------------------------------------------------------------------------
    The following selected consolidated financial data has been derived from,
and should be read in conjunction with the accompanying unaudited interim
consolidated financial statements for the year ended December 31, 2007 and our
audited consolidated financial statements for the year ended December 31, 2006
and December 31, 2005 as contained in our 2006 Annual Report, each prepared in
accordance with Canadian GAAP.

    <<
                                              2007         2006         2005
    -------------------------------------------------------------------------

    Income Statement Data

    Vehicle Production Volumes
     (millions of units)
      North America                         15.102       15.335       15.722
      Europe                                15.938       15.536       15.959
    -------------------------------------------------------------------------

    Average Dollar Content Per Vehicle
      North America                     $      859   $      775   $      731
      Europe                            $      435   $      362   $      317
    -------------------------------------------------------------------------

    Sales
      External Production
        North America                   $   12,977   $   11,883   $   11,499
        Europe                               6,936        5,624        5,058
        Rest of World                          411          269          171
      Complete Vehicle Assembly              4,008        4,378        4,110
      Tooling, Engineering and Other         1,735        2,026        1,973
    -------------------------------------------------------------------------
    Total Sales                         $   26,067   $   24,180   $   22,811
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income                          $      663   $      528   $      639

    Earnings per Class A Subordinate
     Voting or Class B Share
      Basic                             $     5.95   $     4.86   $     5.99
      Diluted                           $     5.86   $     4.78   $     5.90

    Cash dividends paid per Class A
     Subordinate Voting or Class B
     Share                              $     1.15   $     1.52   $     1.52
    -------------------------------------------------------------------------

    Financial Position Data

    Cash and cash equivalents           $    2,954   $    1,885   $    1,682
    Working Capital                     $    3,112   $    2,277   $    2,215
    Total assets                        $   15,343   $   13,154   $   12,321

    Financing Resources
      Liabilities
        Bank indebtedness               $       89   $       63   $       89
        Long-term debt due within
         one year                              374           98          131
        Long-term debt                         337          605          700
    -------------------------------------------------------------------------
                                               800          766   $      920
      Shareholders' equity                   8,642        7,157        6,565
    -------------------------------------------------------------------------
    Total capitalization                $    9,442   $    7,923   $    7,485
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Changes from 2006 to 2007 are explained in "Results of Operations - For
the Year Ended December 31, 2007" section above.

    2006 COMPARED TO 2005

    SALES

    External Production Sales - North America

    External production sales in North America increased 3% or $384 million to
$11.9 billion for 2006 compared to $11.5 billion for 2005. This increase in
production sales reflects a 6% increase in our North American average dollar
content per vehicle partially offset by a 2% decrease in North American
vehicle production volumes.
    Our average dollar content per vehicle grew by 6% or $44 to $775 for 2006
compared to $731 for 2005, primarily as a result of:

    -   the launch of new programs during or subsequent to the year ended
        December 31, 2005, including:
        -  GM's next generation full-size pickups and SUVs;
        -  the Ford Fusion, Mercury Milan and Lincoln Zephyr/MKZ;
        -  the Chevrolet HHR;
        -  the Dodge Caliber;
        -  the Chevrolet Impala;
        -  the Ford Explorer/Sport Trac and Mercury Mountaineer; and
        -  the Buick Lucerne;
    -   an increase in reported U.S. dollar sales due to the strengthening of
        the Canadian dollar against the U.S. dollar; and
    -   increased production and/or content on certain programs, including:
        -  the Mercedes M-Class; and
        -  the BMW Z4; and
    -   the acquisition of CTS in February 2006.

    These factors were partially offset by:

    -   the impact of lower production and/or content on certain content
        programs, including:
        -  the Dodge Caravan, Grand Caravan and Chrysler Town & Country;
        -  the Ford Escape, Mercury Mariner and Mazda Tribute;
        -  the Chevrolet Envoy, Buick Rainier and GMC Trailblazer;
        -  the Cadillac STS;
        -  the Ford Freestar and Mercury Monterey;
        -  the Jeep Grand Cherokee;
        -  the Chrysler Pacifica;
        -  the Ford F-Series SuperDuty; and
        -  the Cadillac CTS;
    -   programs that ended production during or subsequent to the year ended
        December 31, 2005; and
    -   incremental customer price concessions.

    External Production Sales - Europe

    External production sales in Europe increased 11% or $566 million to
$5.6 billion for 2006 compared to $5.1 billion for 2005. This increase in
production sales reflects a 14% 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 14% or $45 to $362 for 2006
compared to $317 for 2005, primarily as a result of:

    -   acquisitions completed during or subsequent to 2005, including CTS in
        February 2006;
    -   the launch of new programs during or subsequent to 2005, including
        the Honda Civic;
    -   increased production and/or content on certain programs, including:
        -  the Mercedes B-Class; and
        -  the BMW X3; and
    -   an increase in reported U.S. dollar sales primarily due to the
        strengthening of the euro and British pound against the U.S. dollar.

    The factors were partially offset by:

    -   the impact of lower production and/or content on certain programs,
        including:
        -  the Mercedes C-Class;
        -  the Mercedes A-Class;
        -  the Chrysler Voyager and Grand Voyager; and
        -  the Nissan Micra;
    -   programs that ended production during or subsequent to 2005,
        including production on all MG Rover programs; and
    -   incremental customer price concessions.

    External Production Sales - Rest of World

    External production sales in the Rest of World increased 57% or
$98 million to $269 million for 2006 compared to $171 million for 2005. The
increase in production sales is primarily a result of:

    -   increased production sales at existing facilities in China;
    -   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.

    These factors were partially offset by the closure during 2005 of an
exterior systems facility in Brazil and an engineered glass facility in
Malaysia.

    Complete Vehicle Assembly Sales

    Complete vehicle assembly volumes increased 8% to 248,059 units for 2006
compared to 230,505 units for 2005. Complete vehicle assembly sales increased
7% or $268 million to $4.4 billion for 2006 compared to $4.1 billion for 2005.
The increase in complete vehicle assembly sales is primarily the result of:

    -   the increase in assembly volumes for:
        -  the BMW X3; and
        -  the Saab 9(3) Convertible;
    -   the launch of assembly programs during or subsequent to 2005,
        including:
        -  the Chrysler 300 in the second quarter of 2005; and
        -  the Jeep Commander in the first quarter of 2006; and
    -   an increase in reported U.S. dollar sales as a result of the
        strengthening of the euro against the U.S. dollar.

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

    -   the Mercedes G-Class;
    -   the Mercedes E-Class 4MATIC;
    -   the Chrysler Voyager; and
    -   the Jeep Grand Cherokee.

    The fourth quarter of 2006 marked the end of production for the Mercedes
E-Class 4MATIC at our Graz vehicle assembly facility, as DaimlerChrysler will
assemble this vehicle in-house.

    Tooling, Engineering and Other

    Tooling, engineering and other sales increased 3% or $53 million to
$2.03 billion for 2006 compared to $1.97 billion for 2005. The increase in
tooling, engineering and other sales is primarily as a result of the
strengthening of the Canadian dollar, euro and British Pound, each against the
U.S. dollar. The sustained level of tooling, engineering and other sales
reflects our continued involvement in new production programs.

    Net Income

    Net income decreased by 17% or $111 million to $528 million for 2006
compared to $639 million for 2005. Excluding the unusual items (described in
the "Unusual Items" section above), net income decreased $110 million as a
result of a reduction in operating income partially offset by decreases in
income taxes and minority interest expense, all as discussed above.

                                              2006         2005       Change
    -------------------------------------------------------------------------

    Impairment charges(1)               $      (46)  $      (98)
    Restructuring charges(2)                   (65)         (48)
    Sale of facilities(3)                      (15)          10
    Future tax recovery                         10            -
    Charges associated with MG Rover(4)          -          (13)
    Settlement gain(5)                           -           16
    Foreign currency gain(6)                     -           18
    -------------------------------------------------------------------------
                                        $     (116)  $     (115)  $       (1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The unusual items for 2006 have been discussed in the "Unusual Items"
section above. During 2005, the unusual items were as follows:

    (1) impairment charges including:
           -  asset impairments charges relating to certain exterior systems
              facilities in the United Kingdom, Belgium, Germany and Canada,
              a closure systems facility in the Czech Republic, and certain
              powertrain facilities in the United States; and
           -  a goodwill impairment charge related to our exterior systems
              reporting unit in Europe;
    (2) restructuring charges in Europe related primarily to severance costs
        at a mirrors facility in Ireland, an exterior systems facility in
        Belgium, and an engineering centre in France, and restructuring
        charges in North America related primarily to severance costs
        incurred as a result of the Privatizations and the consolidation
        and/or closure of certain exterior systems, powertrain and stampings
        facilities in Canada and the United States;
    (3) a gain on sale of a non-core seat component facility in North
        America.
    (4) MG Rover Group Limited ("MG Rover") was placed into administration,
        which is similar to Chapter 11 bankruptcy protection in the United
        States. As a result, we recorded charges related to our MG Rover
        assets and supplier obligations;
    (5) receipt of an award 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; and
    (6) a foreign currency gain on the repatriation of funds from Europe.


    Excluding the unusual items, net income decreased $110 million as a result
of increases in SG&A spending and depreciation and amortization of
$114 million and $79 million, respectively. These factors were partially
offset by increases in gross margin, net interest income, and equity income of
$21 million, $20 million, and $5 million, respectively, and a decrease in
income taxes of $25 million and minority interest expense of $12 million.
    Gross margin as a percentage of total sales decreased to 12.3% for 2006
compared to 13.1% for 2005. Excluding the unusual items discussed above, gross
margin as a percentage of total sales for 2006 decreased 0.6% primarily as a
result of:

    -   substantial underperformance at most of our interior systems
        facilities;
    -   operational inefficiencies and other costs at certain facilities;
    -   costs associated with the cancellation of the Ford Freestar and
        Mercury Monterey minivan program;
    -   the accrual of the minimum required payment under our EEPPP;
    -   lower margins as a result of a decrease in production volumes for
        certain programs; and
    -   incremental customer price concessions.

    The factors contributing to the decrease in gross margin as a percentage
of sales were partially offset by:

    -   a favourable revaluation to warranty accruals, substantially in
        Europe;
    -   productivity and efficiency improvements at certain divisions;
    -   price reductions from our suppliers; and
    -   incremental gross margin earned on program launches.

    The increase in depreciation and amortization costs for 2006 was primarily
as a result of:

    -   the purchase of subsidiaries, including depreciation and amortization
        of assets related to the CTS acquisition in 2006 and the amortization
        of fair value increments related to the privatization of our former
        public subsidiaries: Tesma International Inc.; Decoma International
        Inc.; and Intier Automotive Inc. (the "Privatizations");
    -   depreciation and amortization of assets at new facilities that
        launched during or subsequent to 2005;
    -   an increase in assets employed in the business to support future
        growth; and
    -   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.

    SG&A expenses as a percentage of sales increased to 5.6% for 2006 compared
to 5.3% for 2005. Excluding unusual items discussed above, SG&A increased $114
million primarily as a result of:

    -   increased selling, general and administrative expenses related to the
        acquisition of CTS;
    -   increased costs incurred at certain underperforming divisions in
        Europe;
    -   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
    -   higher infrastructure costs to support the increase in sales levels,
        including spending to support program launches.

    These factors were partially offset by:

    -   lower stock option compensation expense; and
    -   lower incentive compensation.

    Minority interest expense decreased by $11 million because no minority
interest expense was recorded in 2006 as a result of the Privatizations.

    Earnings per Share

    Diluted earnings per share decreased 19% or $1.12 to $4.78 for 2006
compared to $5.90 for 2005. Excluding the unusual items described above,
diluted earnings per share decreased $1.13 from 2005 as a result of the
decrease in net income (excluding unusual items) combined with an increase in
the weighted average number of diluted shares outstanding during the year.
    The increase in the weighted average number of diluted shares outstanding
was primarily the result of the additional Class A Subordinate Voting Shares
that were included in the weighted average number of shares outstanding as a
result of the Privatizations.

    Financial Position
    -------------------------------------------------------------------------
    Total assets

    During 2006, total assets increased by $833 million to $13.2 billion
primarily as a result of:

    -   acquisitions during 2006, including the purchase of CTS, which added
        approximately $475 million of total assets;
    -   the growth in our cash resources, as discussed above; and
    -   an increase in U.S. dollar reported amounts of our assets as a result
        of the strengthening of the Canadian dollar, euro and British pound,
        each against the U.S. dollar.

    Financing Resources

    Total capitalization increased by 6% or $438 million to $7.9 billion at
December 31, 2006 compared to $7.5 billion at December 31, 2005. The increase
in capitalization is a result of a $592 million increase in shareholders'
equity, offset in part by a $154 million decrease in liabilities.
    The increase in shareholders' equity is primarily the result of:

    -   net income earned during 2006 (as discussed above);
    -   a $193 million increase in the currency translation adjustment,
        primarily due to the strengthening of the Canadian dollar against the
        U.S. dollar between December 31, 2005 and December 31, 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 2006; and
    -   a $6 million reduction of share capital related to the repurchase of
        Class A Subordinate Voting Shares which were awarded on a restricted
        basis to an executive.

    The decrease in liabilities is primarily the result of:

    -   the repayment in January of the second series of senior unsecured
        notes related to the NVG acquisition;
    -   repayments of $59 million and $48 million of senior unsecured notes
        in May and October, respectively; and
    -   the deconsolidation of a partially owned European subsidiary which
        declared bankruptcy in August and was subsequently sold by the
        administrator.

    These decreases were partially offset by an increase in reported U.S.
dollar amounts, primarily as a result of the strengthening of the euro against
the U.S. dollar.

    Cash resources

    During 2006, our cash resources increased by $203 million to $1.9 billion
as a result of the cash provided from operating activities, partially offset
by the cash used in investing and financing activities.

    SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA
    -------------------------------------------------------------------------
    The following selected consolidated financial data has been prepared in
accordance with Canadian GAAP.

                                       For the three month periods ended
                                   ------------------------------------------
                                     Mar 31,    Jun 30,    Sep 30,    Dec 31,
                                       2007       2007       2007       2007
    -------------------------------------------------------------------------

    Sales                          $  6,423   $  6,731   $  6,077   $  6,836

    Net income                     $    218   $    262   $    155   $     28

    Earnings per Class A Subordinate
     Voting or Class B Share
      Basic                        $   2.00   $   2.40   $   1.40   $   0.24
      Diluted                      $   1.96   $   2.35   $   1.38   $   0.24
    -------------------------------------------------------------------------


                                       For the three month periods ended
                                   ------------------------------------------
                                     Mar 31,    Jun 30,    Sep 30,    Dec 31,
                                       2006       2006       2006       2006
    -------------------------------------------------------------------------

    Sales                          $  6,019   $  6,369   $  5,424   $  6,368

    Net income                     $    212   $    193   $     94   $     29

    Earnings per Class A Subordinate
     Voting or Class B Share
      Basic                        $   1.95   $   1.78   $   0.87   $   0.26
      Diluted                      $   1.91   $   1.75   $   0.86   $   0.26
    -------------------------------------------------------------------------

    In general, sales increased from 2006 to 2007 as a result of product
launches, the acquisition of Pressac in January 2007, and the strengthening of
the Canadian dollar, euro and British pound, each against the U.S. dollar. The
third quarter of both years is generally affected by the normal seasonal
effects of lower vehicle production volumes as a result of OEM summer
shutdowns.
    Included in the quarterly net income are the following unusual items that
have been discussed above:

                                       For the three month periods ended
                                   ------------------------------------------
                                     Mar 31,    Jun 30,    Sep 30,    Dec 31,
                                       2007       2007       2007       2007
    -------------------------------------------------------------------------

    Impairment charges             $      -   $    (14)  $      -   $    (26)
    Restructuring charges                 -        (10)        (5)       (12)
    Sale of facilities                    -          -         (7)         -
    Sale of property                      -          -         30          -
    Foreign currency gain                 -          -          7         17
    Write-off deferred tax assets         -          -          -       (115)
    Future tax (charge) recovery          -          -        (40)        (8)
    -------------------------------------------------------------------------
                                   $      -   $    (24)  $    (15)  $   (144)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                       For the three month periods ended
                                   ------------------------------------------
                                     Mar 31,    Jun 30,    Sep 30,    Dec 31,
                                       2006       2006       2006       2006
    -------------------------------------------------------------------------

    Impairment charges             $      -   $      -   $      -   $    (46)
    Restructuring charges                (9)       (18)        (4)       (34)
    Sale of facilities                    -        (15)         -          -
    Future tax (charge) recovery          -         10          -          -
    -------------------------------------------------------------------------
                                   $     (9)  $    (23)  $     (4)   $   (80)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

    For more information regarding our quarter over quarter results, please
refer to our first, second and third quarter 2007 quarterly reports which 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.

    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, without limitation: shifting OEM market shares, 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 compete with suppliers with operations in low cost countries; our
ability to offset price concessions demanded by our customers; our dependence
on outsourcing by our customers; 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; 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; the
termination or non-renewal by our customers of any material contracts; our
ability to fully recover pre-production expenses; warranty and recall costs;
product liability claims in excess of our insurance coverage; expenses related
to the restructuring and rationalization of some of our operations; impairment
charges; our ability to successfully identify, complete and integrate
acquisitions; risks associated with program launches; legal claims against us;
risks of conducting business in foreign countries, including Russia; work
stoppages and labour relations disputes; changes in laws and governmental
regulations; costs associated with compliance with environmental laws and
regulations; the fact that we may be considered to be effectively controlled,
indirectly, by the Stronach Trust and OJSC Russian Machines ("Russian
Machines") for so long as the governance arrangements remain in place between
them; potential conflicts of interest involving the Stronach Trust and Russian
Machines; the risk that the benefits, growth prospects and strategic
objectives expected to be realized from the investment by, and strategic
alliance with, Russian Machines may not be fully realized, may take longer to
realize than expected or may not be realized at all; the possibility that the
governance arrangements between the Stronach Trust and Russian Machines may
terminate in certain circumstances; 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 AND COMPREHENSIVE INCOME
    (Unaudited)
    (U.S. dollars in millions, except per share figures)

                                    Three months ended       Year ended
                                       December 31,          December 31,
                                   --------------------  --------------------
                            Note       2007       2006       2007       2006
    -------------------------------------------------------------------------

    Sales                          $  6,836   $  6,368   $ 26,067   $ 24,180
    -------------------------------------------------------------------------

    Cost of goods sold                5,981      5,701     22,599     21,211
    Depreciation and
     amortization                       239        210        872        790
    Selling, general and
     administrative           12        403        370      1,461      1,360
    Interest income, net                (21)        (6)       (62)       (14)
    Equity income                        (3)        (3)       (11)       (13)
    Impairment charges         4         34         54         56         54
    -------------------------------------------------------------------------
    Income from operations
     before income taxes                203         42      1,152        792
    Income taxes                        175         13        489        264
    -------------------------------------------------------------------------
    Net income                           28         29        663        528
    Other comprehensive
     income:                2,11
      Net realized and
       unrealized gains
       (losses) on
       translation of net
       investment in
       foreign operations               119        (23)       727        193
      Repurchase of shares   3,9        (25)         -       (181)         -
      Net unrealized losses
       on cash flow hedges               (2)         -         (8)         -
      Reclassifications of
       net (gains) losses
       on cash flow hedges
       to net income                     (2)         -          1          -
    -------------------------------------------------------------------------
    Comprehensive income           $    118   $      6   $  1,202   $    721
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per Class A
     Subordinate Voting or
     Class B Share:
      Basic                        $   0.24   $   0.26   $   5.95   $   4.86
      Diluted                      $   0.24   $   0.26   $   5.86   $   4.78
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash dividends paid per
     Class A Subordinate
     Voting or Class B Share       $   0.36   $   0.38   $   1.15   $   1.52
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average number of Class A
     Subordinate Voting and
     Class B Shares
     outstanding during the
     period (in millions):
      Basic                           117.1      108.8      111.4      108.6
      Diluted                         118.4      110.5      114.1      111.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                    Three months ended       Year ended
                                       December 31,          December 31,
                                   --------------------  --------------------
                            Note       2007       2006       2007       2006
    -------------------------------------------------------------------------

    Retained earnings,
     beginning of period           $  3,640   $  3,784   $  3,773   $  3,409
    Net income                           28         29        663        528
    Dividends on Class A
     Subordinate Voting
     and Class B Shares                 (42)       (40)      (131)      (164)
    Repurchase of Class A
     Subordinate Voting
     Shares                  3,9       (100)         -       (755)         -
    Repurchase of
     Class B Shares            3          -          -        (24)         -
    -------------------------------------------------------------------------
    Retained earnings,
     end of period                 $  3,526   $  3,773   $  3,526   $  3,773
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                           See accompanying notes



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

                                    Three months ended       Year ended
                                       December 31,          December 31,
                                   --------------------  --------------------
                            Note       2007       2006       2007       2006
    -------------------------------------------------------------------------

    Cash provided from
     (used for):

    OPERATING ACTIVITIES
    Net income                     $     28   $     29   $    663   $    528
    Items not involving
     current cash flows                 401        295      1,024        911
    -------------------------------------------------------------------------
                                        429        324      1,687      1,439
    Changes in non-cash
     operating assets
     and liabilities                    400        474        (94)       157
    -------------------------------------------------------------------------
                                        829        798      1,593      1,596
    -------------------------------------------------------------------------

    INVESTMENT ACTIVITIES
    Fixed asset additions              (305)      (249)      (741)      (793)
    Purchase of subsidiaries   6          -        (30)       (46)      (284)
    Increase in investments
     and other assets          5        (15)       (41)      (190)       (99)
    Proceeds from disposition             6         26        109         65
    -------------------------------------------------------------------------
                                       (314)      (294)      (868)    (1,111)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayments of debt                  (18)      (249)       (79)      (275)
    Issues of debt                        1          -         28         24
    Issues of Class A
     Subordinate Voting
     Shares                  3,9          -         12      1,560         28
    Repurchase of Class A
     Subordinate Voting
     Shares                  3,9       (219)         -     (1,310)         -
    Repurchase of Class B
     Shares                  3,9          -          -        (24)         -
    Dividends                           (42)       (40)      (131)      (163)
    -------------------------------------------------------------------------
                                       (278)      (277)        44       (386)
    -------------------------------------------------------------------------

    Effect of exchange rate
     changes on cash and
     cash equivalents                    65          9        300        104
    -------------------------------------------------------------------------

    Net increase in cash
     and cash equivalents
     during the period                  302        236      1,069        203
    Cash and cash equivalents,
     beginning of period              2,652      1,649      1,885      1,682
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                 $  2,954   $  1,885   $  2,954   $  1,885
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                           See accompanying notes



    MAGNA INTERNATIONAL INC.
    CONSOLIDATED BALANCE SHEETS
    (Unaudited)
    (U.S. dollars in millions)

                                                   December 31,  December 31,
                                            Note          2007          2006
    -------------------------------------------------------------------------

    ASSETS
    Current assets
    Cash and cash equivalents                       $    2,954    $    1,885
    Accounts receivable                                  3,981         3,629
    Inventories                                          1,681         1,437
    Prepaid expenses and other                 2           154           109
    -------------------------------------------------------------------------
                                                         8,770         7,060
    -------------------------------------------------------------------------
    Investments                                5           280           151
    Fixed assets, net                          4         4,307         4,114
    Goodwill                                   6         1,237         1,096
    Future tax assets                          2           280           255
    Other assets                               2           469           478
    -------------------------------------------------------------------------
                                                    $   15,343    $   13,154
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
    Bank indebtedness                               $       89    $       63
    Accounts payable                                     3,492         3,608
    Accrued salaries and wages                             544           453
    Other accrued liabilities                2,7           911           426
    Income taxes payable                                   248           135
    Long term debt due within one year                     374            98
    -------------------------------------------------------------------------
                                                         5,658         4,783
    -------------------------------------------------------------------------
    Deferred revenue                                        60            73
    Long term debt                                         337           605
    Other long term liabilities                2           394           288
    Future tax liabilities                     2           252           248
    -------------------------------------------------------------------------
                                                         6,701         5,997
    -------------------------------------------------------------------------

    Shareholders' equity
    Capital stock                            3,9
      Class A Subordinate Voting Shares
        (issued: 115,344,184; December 31,
         2006 - 108,787,387)                             3,708         2,505
      Class B Shares
        (convertible into Class A
         Subordinate Voting Shares)
        (issued: 726,829; December 31,
         2006 - 1,092,933)                                   -             -
    Contributed surplus                       10            58            65
    Retained earnings                          3         3,526         3,773
    Accumulated other comprehensive
     income                               2,3,11         1,350           814
    -------------------------------------------------------------------------
                                                         8,642         7,157
    -------------------------------------------------------------------------
                                                    $   15,343    $   13,154
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                           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 ("GAAP") with
        respect to the preparation of interim financial information.
        Accordingly, they do not include all the information and footnotes as
        required in the preparation of annual financial statements and should
        be read in conjunction with the December 31, 2006 audited
        consolidated financial statements and notes included in the Company's
        2006 Annual Report. These interim consolidated financial statements
        have been prepared using the same accounting policies as the
        December 31, 2006 annual consolidated financial statements, except
        for the accounting change set out in note 2.

        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 December 31, 2007 and the results of operations
        and cash flows for the three-months and years ended December 31, 2007
        and 2006.

    2.  ACCOUNTING CHANGE

        In January 2005, the Canadian Institute of Chartered Accountants
        approved Handbook Sections 1530, "Comprehensive Income", 3855
        "Financial Instruments - Recognition and Measurement", 3861
        "Financial Instruments - Disclosure and Presentation", and 3865
        "Hedges". The Company adopted these new recommendations effective
        January 1, 2007 with no restatement of prior periods, except to
        classify the currency translation adjustment as a component of
        accumulated other comprehensive income. With the adoption of these
        new standards, the Company's accounting for financial instruments and
        hedges complies with U.S. GAAP in all material respects as of
        January 1, 2007.

        Financial Instruments

        Under the new standards, all of Magna's financial assets and
        financial liabilities are classified as held for trading, held to
        maturity investments, loans and receivables, available-for-sale
        financial assets, or other financial liabilities. Held for trading
        financial instruments, which include cash and cash equivalents, are
        measured at fair value and all gains and losses are included in net
        income in the period in which they arise. Held to maturity
        investments are recorded at amortized cost using the effective
        interest method, and include long-term interest bearing government
        securities held to partially fund certain Austrian lump sum
        termination and long service payment arrangements and our investment
        in asset-backed commercial paper ("ABCP"). Loans and receivables,
        which include accounts receivable and long-term receivables, accounts
        payable, accrued salaries and wages and certain other accrued
        liabilities are recorded at amortized cost using the effective
        interest method. The Company does not currently have any available
        for sale financial assets.

        Comprehensive Income

        Other comprehensive income includes unrealized gains and losses on
        translation of the Company's net investment in self-sustaining
        foreign operations, and to the extent that cash flow hedges are
        effective, the change in their fair value, net of income taxes. Other
        comprehensive income is presented below net income on the
        Consolidated Statements of Income and Comprehensive Income.
        Comprehensive income is composed of net income and other
        comprehensive income.

        Accumulated other comprehensive income is a separate component of
        shareholders' equity which includes the accumulated balances of all
        components of other comprehensive income which are recognized in
        comprehensive income but excluded from net income.

        Hedges

        Previously, under Canadian GAAP, derivative financial instruments
        that met hedge accounting criteria were accounted for on an accrual
        basis, and gains and losses on hedge contracts were accounted for as
        a component of the related hedged transaction. The new standards
        require that all derivative instruments, whether designated in
        hedging relationships or not, be recorded on the balance sheet at
        fair value. The fair values of derivatives are recorded in other
        assets or other liabilities. To the extent that cash flow hedges are
        effective, the change in their fair value is recorded in other
        comprehensive income. Amounts accumulated in other comprehensive
        income are reclassified to net income in the period that the hedged
        item affects net income.

        The impact of this accounting policy change on the consolidated
        balance sheet as at January 1, 2007 was as follows:

        Increase in prepaid expenses and other                      $     28
        Increase in other assets                                          17
        Increase in future tax assets                                     14
        ---------------------------------------------------------------------

        Increase in other accrued liabilities                       $     32
        Increase in other long-term liabilities                           17
        Increase in future tax liabilities                                13
        ---------------------------------------------------------------------

        Decrease in accumulated other comprehensive income          $      3
        ---------------------------------------------------------------------

    3.  RUSSIAN MACHINES TRANSACTION

        During 2007, following approval by Magna's Class A Subordinate Voting
        and Class B Shareholders, the Company completed the court-approved
        plan of arrangement (the "Arrangement") whereby OJSC Russian Machines
        ("Russian Machines"), a wholly owned subsidiary of Basic Element
        Limited, made a major strategic investment in Magna.

        The impact of this transaction on the consolidated balance sheet was
        as follows:

                                     Class A
                                Subordinate Voting
                              -----------------------    Class B
                                   Share       Share       Share         Net
                                Issuance  Repurchase  Repurchase      Impact
                                      (a)         (c)         (a)
        ---------------------------------------------------------------------

        Number of shares
         issued (repurchased) 20,000,000 (11,902,654)   (217,400)  7,879,946

        Cash received (paid)       1,531      (1,091)        (24)        416
        ---------------------------------------------------------------------

        Increase (decrease)
         in share capital          1,531        (280)          -       1,251
        Decrease in retained
         earnings                      -        (655)        (24)       (679)
        Decrease in accumulated
         other comprehensive
         income                        -        (156)          -        (156)
        ---------------------------------------------------------------------
        Increase (decrease) in
         shareholders' equity      1,531      (1,091)        (24)        416
        ---------------------------------------------------------------------

        (a) In accordance with the Arrangement:

            (i)   Russian Machines invested $1.54 billion to indirectly
                  acquire 20 million Class A Subordinate Voting Shares of
                  Magna from treasury. Issue costs related to the issuance of
                  these shares were $6 million.

            (ii)  The Company purchased 217,400 Class B Shares for
                  cancellation, representing all the outstanding Class B
                  Shares, other than those indirectly controlled by the
                  Stronach Trust, for approximately $24 million, and the
                  number of votes per Class B Share was reduced from
                  500 votes to 300 votes. The excess cash paid over the book
                  value of the Class B Shares repurchased of $24 million was
                  charged to retained earnings.

            (iii) The Stronach Trust and certain members of the Company's
                  executive management combined their respective
                  shareholdings in Magna (in the case of executive
                  management, a portion of their shareholdings), together
                  with the 20 million Class A Subordinate Voting Shares
                  issued as part of the Arrangement into a new Canadian
                  holding company. At September 20, 2007, the new Canadian
                  holding company indirectly held 100% of the outstanding
                  Class B Shares and approximately 71.1% of the votes
                  attached to all the Class A Subordinate Voting Shares and
                  Class B Shares then outstanding.

        (b) Prior to completion of the Arrangement Magna caused the
            conversion of 148,704 Class B Shares held by the MIC Trust and
            865714 Ontario Inc., a wholly-owned subsidiary of Magna, into
            Class A Subordinate Voting Shares.

        (c) On September 20, 2007, the Company also completed a substantial
            issuer bid pursuant to which it purchased for cancellation
            11.9 million Class A Subordinate Voting Shares, representing 9.2%
            of the issued and outstanding Class A Subordinate Voting Shares
            for an aggregate purchase price of $1.1 billion (including
            $2 million of costs relating to the transaction). The excess paid
            over the book value of the Class A Subordinate Voting Shares
            repurchased of $655 million was charged to retained earnings.

    4.  GOODWILL AND LONG-LIVED ASSETS

        In conjunction with the Company's annual goodwill impairment analysis
        and consideration of other indicators of impairment of its long-lived
        assets at certain operations, the Company recorded long-lived assets
        impairment charges as follows:

                                    Three months ended       Year ended
                                       December 31,          December 31,
                                   --------------------  --------------------
                                       2007       2006       2007       2006
        ---------------------------------------------------------------------

        Europe                     $     12   $     41   $     12   $     41
        North America                    22         13         44         13
        ---------------------------------------------------------------------
                                   $     34   $     54   $     56   $     54
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Europe

        Due to recurring losses that were projected to continue as a result
        of existing sales levels and limited sales growth prospects, during
        2007 the Company recorded asset impairments of $12 million
        ($12 million after tax) relating to certain assets and facilities in
        Germany, Austria, the Czech Republic and Spain.

        During 2006, the Company recorded asset impairments of $41 million
        ($38 million after tax) relating to certain assets and facilities in
        Germany, Austria, the United Kingdom, the Czech Republic and Spain.
        The asset impairments were recorded based on recurring losses that
        were projected to continue as a result of existing sales levels and
        limited sales growth prospects.

        North America

        During 2007, the Company recorded asset impairments of $44 million
        ($28 million after tax) at an interiors systems facility in the
        United States and certain powertrain facilities in the United States
        and Canada. The asset impairments were recorded as a result of:
        (i) ceasing operations and/or use of certain assets at two powertrain
        facilities; and (ii) losses that were projected to be incurred
        throughout the Company's business planning period based on existing
        and projected sales levels.

        During 2006, the Company recorded an asset impairment of $13 million
        ($8 million after tax) relating to certain interior system facilities
        in the United States. The asset impairments were recorded as a result
        of losses that were projected to be incurred throughout the Company's
        business planning period based on existing and projected sales
        levels.

    5.  INVESTMENTS

        At December 31, 2007, the Company held Canadian third party ABCP with
        a face value of Cdn$134 million. When acquired, these investments
        were rated R1 (High) by Dominion Bond Rating Service, which was the
        highest credit rating issued for commercial paper. These investments
        did not settle at the scheduled maturity during the third quarter of
        2007 due to ABCP market liquidity issues. As a result, the Company
        reclassified its ABCP to long-term investments from cash and cash
        equivalents. In addition, the Company recorded a $12 million
        impairment in the carrying value of this investment based on a
        valuation technique estimating the fair value of these investments
        from the perspective of a market participant. Significant estimates
        and assumptions incorporated into the valuation were as follows:

        (i)   a high likelihood of a successful restructuring of the ABCP
              during 2008;

        (ii)  available public information regarding the expected amount and
              timing of estimated underlying cash flows and relevant
              conditions;

        (iii) a charge against potentially non-performing assets (primarily
              sub-prime residential mortgages), which was determined based on
              a probability weighted basis;

        (iv)  a charge related to restructured notes which are expected to
              continue performing. The return on these notes is expected to
              be below current market rates for instruments of comparable
              credit quality, term and structure, and accordingly, an
              impairment charge was recorded using a discounted cash flow
              analysis; and,

        (v)   costs expected to be incurred by the noteholders related to the
              restructuring.

        Continuing uncertainties regarding the value of the assets which
        underlie the ABCP, the amount and timing of cash flows associated
        with the ABCP and the outcome of the restructuring process could give
        rise to a change in the value of the Company's investment in ABCP
        which would impact the Company's earnings.

    6.  ACQUISITIONS

        (a) For the year ended December 31, 2007

            On January 15, 2007, Magna acquired two facilities from Pressac
            Investments Limited ("Pressac"). The facilities in Germany and
            Italy manufacture electronic components for sale to various
            customers, including Volkswagen, Mercedes and Fiat. The total
            consideration for the acquisition amounted to $52 million
            (euro 40 million), consisting of $46 million paid in cash, net of
            cash acquired, and $6 million of assumed debt.

        (b) For the year ended December 31, 2006

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

            On February 2, 2006, Magna acquired CTS, a leading manufacturer
            of roof systems for the automotive industry. CTS manufactures
            soft tops, hard tops and modular retractable hard tops. In
            addition to Porsche, its customers include Mercedes, 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.

            (ii)  Magna Golf Club and Fontana Golf and Sports 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 of
            $46 million. On November 1, 2006, the Company purchased the
            Fontana Golf and Sports Club in Austria from MEC for total
            consideration of $38 million. These transactions were 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.

            (iii) Other

            During 2006, the Company also acquired a number of small
            manufacturing and engineering facilities. Total consideration for
            these acquisitions amounted to $19 million, consisting of
            $18 million paid in cash and $1 million of assumed debt.

    7.  WARRANTY

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

                                                          2007          2006
        ---------------------------------------------------------------------
        Balance, beginning of period                $       94    $       96
        Expense, net                                         3             7
        Settlements                                         (6)           (5)
        Acquisition                                          1             6
        Foreign exchange and other                           1             2
        ---------------------------------------------------------------------
        Balance, March 31,                                  93           106
        Expense, net                                         8             7
        Settlements                                         (7)           (3)
        Foreign exchange and other                           9             5
        ---------------------------------------------------------------------
        Balance, June 30,                                  103           115
        Expense (income), net                                6           (39)
        Settlements                                         (5)           (9)
        Foreign exchange and other                           6             -
        ---------------------------------------------------------------------
        Balance, September 30,                             110            67
        Expense, net                                         2            33
        Settlements                                        (14)          (10)
        Foreign exchange and other                           5             4
        ---------------------------------------------------------------------
        Balance, December 31,                       $      103    $       94
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    8.  EMPLOYEE FUTURE BENEFIT PLANS

        The Company recorded employee future benefit expenses as follows:

                                    Three months ended       Year ended
                                       December 31,          December 31,
                                   --------------------  --------------------
                                       2007       2006       2007       2006
        ---------------------------------------------------------------------

        Defined benefit pension
         plans and other           $      7   $      7   $     22   $     23
        Termination and long
         service arrangements            12          5         28         19
        Retirement medical
         benefits plan                    6          5         15         14
        ---------------------------------------------------------------------
                                   $     25   $     17   $     65   $     56
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    9.  CAPITAL STOCK

        (a) Changes in the Class A Subordinate Voting Shares and Class B
            Shares consist of the following (numbers of shares in the
            following table are expressed in whole numbers):

                                         Class A
                                   Subordinate Voting          Class B
                                  --------------------- ---------------------
                                  Number of     Stated  Number of     Stated
                                     shares      value     shares      value
    -------------------------------------------------------------------------

    Issued and outstanding at
     December 31, 2006          108,787,387   $  2,505  1,092,933   $      -
    Issued under the Incentive
     Stock Option Plan               74,082          5
    Issued under the Dividend
     Reinvestment Plan ("DRIP")       1,381          -
    Release of restricted stock
     (notes 9(c), 10)                     -          3
    -------------------------------------------------------------------------
    Issued and outstanding at
     March 31, 2007             108,862,850      2,513  1,092,933          -
    Issued under the Incentive
     Stock Option Plan              288,644         22
    Issued under Stock
     Appreciation Rights
     (note 9(d))                    301,364         11
    Issued under the DRIP             1,466          -
    Release of restricted stock
     (notes 9(c), 10)                     -          6
    Repurchase (note 9(c))                -         (7)
    -------------------------------------------------------------------------
    Issued and outstanding at
     June 30, 2007              109,454,324      2,545  1,092,933          -
    Issued for cash under the
     Arrangement (note 3)        20,000,000      1,531
    Repurchase and Cancellation
     (note 3)                   (11,902,654)      (280)  (217,400)         -
    Conversion of Class B Shares
     into Class A Subordinate
     Voting Shares (note 3)         148,704          -   (148,704)         -
    Issued under the Incentive
     Stock Option Plan              157,844          6
    Issued under the DRIP             2,004          -
    Release of restricted stock
     (notes 9(c), 10)                     -          1
    Repurchase of Class A
     Subordinate Voting Shares
     (note 9(c))                          -         (1)
    -------------------------------------------------------------------------
    Issued and outstanding at
     September 30, 2007         117,860,222      3,802    726,829          -
    Repurchase and cancellation
     (note 9(b))                 (2,521,553)       (82)
    Issued under the Incentive
     Stock Option Plan                3,240          -
    Issued under the DRIP             2,275          -
    Repurchase (note 9(b))                -        (12)
    -------------------------------------------------------------------------
    Issued and outstanding at
     December 31, 2007          115,344,184   $  3,708    726,829   $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        (b) On November 8, 2007, the Toronto Stock Exchange ("TSX') accepted
            the Company's Notice of Intention to Make a Normal Course Issuer
            Bid (the "Notice") relating to the purchase for cancellation
            and/or for purposes of the Company's long-term retention
            (restricted stock), restricted stock unit ("RSU") and similar
            programs, of up to 9.0 million Class A Subordinate Voting Shares
            of the Company (the "Bid"), representing approximately 9.9% of
            its public float of such shares. The Bid commenced on
            November 12, 2007 and will terminate no later than November 11,
            2008. All purchases of Class A Subordinate Voting Shares will be
            made at the market price at the time of purchase in accordance
            with the rules and policies of the TSX and Rule 10b-18 under the
            U.S. Securities Exchange Act of 1934. Subject to certain
            exceptions for block purchases, the maximum number of shares
            which can be purchased per day during the Bid is 91,737, for
            purchases on the TSX, and 25% of the average daily trading volume
            for the four calendar weeks preceding the date of purchase, for
            purchases on the New York Stock Exchange ("NYSE").

            During the three months ended December 31, 2007, the Company
            repurchased for cancellation 2,521,553 Class A Subordinate Voting
            Shares for aggregate cash consideration of approximately
            $207 million. The excess of the cash paid over the book value of
            the Class A Subordinate Voting Shares repurchased of $100 million
            was charged to retained earnings.

            During the three months ended December 31, 2007, the Company also
            repurchased 133,539 Magna Class A Subordinate Voting Shares for
            aggregate cash consideration of $12 million. These shares are
            being held in trust for purposes of the Company's restricted
            stock unit program and are reflected as a reduction in the stated
            value of the Company's Class A Subordinate Voting Shares.

        (c) At December 31, 2007, 893,541 (December 31, 2006 - 958,688) Magna
            Class A Subordinate Voting Shares, which were purchased by the
            Company at a cumulative cost of $55 million (December 31, 2006 -
            $57 million), have been awarded on a restricted basis to certain
            executives. The stock that has not been released to the
            executives is reflected as a reduction in the stated value of the
            Company's Class A Subordinate Voting Shares.

        (d) On June 29, 2007, following approval by the Company's Corporate
            Governance and Compensation Committee and in accordance with the
            Amended and Restated Incentive Stock Option Plan, the Company
            granted stock appreciation rights ("SARs") to the Company's
            Chairman, Mr. Stronach, and an associated company, Stronach &
            Co., in respect of 648,475 previously granted and unexercised
            stock options.

            Simultaneously, all such SARs were exercised and all of the
            previously granted and unexercised stock options were surrendered
            and cancelled. On exercise of the SARs, Stronach & Co. and
            Mr. Stronach received 301,364 Magna Class A Subordinate Voting
            Shares, representing an amount equal to the difference between
            the aggregate fair market value of the shares covered by the
            surrendered options and the aggregate exercise price of such
            surrendered options. Fair market value was determined based on
            the weighted average closing price of the Company's Class A
            Subordinate Voting Shares on the Toronto Stock Exchange or the
            New York Stock Exchange (based on the surrendered options'
            currency) for the five consecutive trading days ending on the
            trading day immediately prior to the date of exercise.

        (e) The following table presents the maximum number of shares that
            would be outstanding if all the dilutive instruments outstanding
            at February 25, 2008, were exercised or converted:

            Class A Subordinate Voting and Class B Shares        116,072,243
            Subordinated Debentures(i)                             1,096,589
            Stock options(ii)                                      2,945,973
            -----------------------------------------------------------------
                                                                 120,114,805
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (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.

    10. CONTRIBUTED SURPLUS

        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 schedule of contributed surplus:

                                                          2007          2006
        ---------------------------------------------------------------------
        Stock-based compensation
          Balance, beginning of period              $       62    $       62
          Stock-based compensation expense                   2             2
          Exercise of options                               (1)           (3)
          Release of restricted stock (note 9(b))           (3)            -
        ---------------------------------------------------------------------
          Balance, March 31,                                60            61
          Stock-based compensation expense                  14             3
          Exercise of options                               (3)           (3)
          Exercise of stock appreciation rights
           (note 9(c))                                     (11)            -
          Release of restricted stock (note 9(b))           (6)            -
        ---------------------------------------------------------------------
          Balance, June 30,                                 54            61
          Stock-based compensation expense                   2             4
          Release of restricted stock (note 9(b))           (1)            -
        ---------------------------------------------------------------------
          Balance, September 30,                            55            65
          Stock-based compensation expense                   -             3
          Exercise of options                                -            (6)
        ---------------------------------------------------------------------
          Balance, December 31,                             55            62
        Holders' conversion option                           3             3
        ---------------------------------------------------------------------
                                                    $       58    $       65
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    11. ACCUMULATED OTHER COMPREHENSIVE INCOME

        The following is a continuity schedule of accumulated other
        comprehensive income:

                                    Three months ended       Year ended
                                       December 31,          December 31,
                                   --------------------  --------------------
                                       2007       2006       2007       2006
        ---------------------------------------------------------------------
        Accumulated net unrealized
         gains on translation of
         net investment in foreign
         operations
          Balance, beginning of
           period                  $  1,267   $    837   $    814   $    621
          Repurchase of shares
           (notes 3,9)                  (25)         -       (181)         -
          Reclassification of gains
           on translation of net
           investment in foreign
           operations to net income     (19)         -        (26)         -
          Net unrealized gains
           (losses) on translation
           of net investment in
           foreign operations           137        (23)       753        193
        ---------------------------------------------------------------------
          Balance, end of period      1,360        814      1,360        814
        ---------------------------------------------------------------------
        Accumulated net unrealized
         gain on cash flow hedges
          Balance, beginning of
           period                        (6)         -          -          -
          Adjustment for change in
           accounting policy
           (note 2)                       -          -         (3)         -
          Net unrealized losses on
           cash flow hedges(i)           (2)         -         (8)         -
          Reclassifications of net
           losses (gains) on cash
           flow hedges to net
           income(ii)                    (2)         -          1          -
        ---------------------------------------------------------------------
          Balance, end of period        (10)         -        (10)         -
        ---------------------------------------------------------------------
        Total accumulated other
         comprehensive income      $  1,350   $    814   $  1,350   $    814
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (i)  Net of income tax benefit of $1 million for the three months
             ended December 31, 2007 and income tax benefit of $3 million for
             the twelve months ended December 31, 2007.
        (ii) Net of income tax benefit of $1 million for the three months
             ended December 31, 2007 and income tax expense of $nil for the
             twelve months ended December 31, 2007.

        The amount of other comprehensive income that is expected to be
        reclassified to net income over the next 12 months is $1 million (net
        of income taxes of $1 million).

    12. STOCK BASED COMPENSATION

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

                              2007                          2006
                  ----------------------------- -----------------------------
                  Options outstanding           Options outstanding
                  -------------------           -------------------
                                       Options                       Options
                            Exercise      exer-           Exercise      exer-
                   Options   price(i)  cisable   Options   price(i)  cisable
                        No.     Cdn$        No.       No.     Cdn$        No.
    -------------------------------------------------------------------------

    Beginning
     of year      4,087,249   77.45  3,811,336  4,600,039   75.46  4,116,104
    Granted               -       -          -    115,000   87.80          -
    Exercised       (74,082)  63.21    (74,082)  (166,209)  58.32   (166,209)
    Vested                -       -     55,443          -       -     80,100
    Cancelled        (7,306)  73.64     (4,400)   (17,001)  93.35    (12,059)
    -------------------------------------------------------------------------
    March 31      4,005,861   77.72  3,788,297  4,531,829   76.33  4,017,936
    Granted          40,000   88.87          -          -       -          -
    Exercised      (590,008)  64.08   (590,008)  (140,535)  62.92   (140,535)
    Vested                -       -     29,000          -       -      8,138
    Cancelled      (366,686)  69.78   (361,641)    (6,862)  73.11     (2,658)
    -------------------------------------------------------------------------
    June 30       3,089,167   81.41  2,865,648  4,384,432   76.76  3,882,881
    Granted          15,000   95.96          -          -       -          -
    Exercised      (157,844)  59.99   (157,844)   (10,137)  65.55    (10,137)
    Vested                -       -      3,880          -       -    107,004
    Cancelled          (880)  71.71          -    (15,198) 107.83    (15,198)
    -------------------------------------------------------------------------
    September 30  2,945,443   82.64  2,711,684  4,359,097   76.68  3,964,550
    Exercised        (3,240)  58.27     (3,240)  (271,028)  65.16   (271,028)
    Vested                -       -    204,433          -       -    118,429
    Cancelled             -       -          -       (820)  60.25       (615)
    -------------------------------------------------------------------------
    December 31   2,942,203   82.66  2,912,877  4,087,249   77.45  3,811,336
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

            (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. The weighted
            average assumptions used in measuring the fair value of stock
            options granted or modified, during the three-months and years
            ended December 31, 2007 and 2006 are as follows:

                                    Three months ended       Year ended
                                       December 31,          December 31,
                                   --------------------  --------------------
                                       2007       2006       2007       2006
        ---------------------------------------------------------------------

        Risk free interest rate           -          -      4.33%      3.99%
        Expected dividend yield           -          -      1.14%      2.05%
        Expected volatility               -          -        22%        23%
        Expected time until exercise      -          -    4 years    4 years
        ---------------------------------------------------------------------

        Weighted average fair value
         of options granted or
         modified in period (Cdn$)        -          -   $  19.50   $  14.89
        ---------------------------------------------------------------------

        Compensation expense
         recorded in selling,
         general and administrative
         expenses                  $      2   $      1   $      4   $      5
        ---------------------------------------------------------------------

        (c) During 2007, $17 million (2006 - $7 million) was charged to
            compensation expense relating to the restricted stock
            arrangements. At December 31, 2007, unamortized compensation
            expense related to the restricted stock arrangements was
            $36 million (2006 - $42 million), and has been presented as a
            reduction of shareholders' equity.

    13. SEGMENTED INFORMATION

                                             Three months ended
                                              December 31, 2007
                                   ------------------------------------------
                                                                       Fixed
                                      Total   External                assets,
                                      sales      sales     EBIT(i)       net
        ---------------------------------------------------------------------
        North America
          Canada                   $  1,893   $  1,774              $  1,137
          United States               1,540      1,483                   989
          Mexico                        422        364                   380
          Eliminations                 (211)         -                     -
        ---------------------------------------------------------------------
                                      3,644      3,621   $    115      2,506
        Europe
          Euroland                    2,622      2,564                 1,126
          Great Britain                 321        320                    95
          Other European countries      226        192                   136
          Eliminations                  (61)         -                     -
        ---------------------------------------------------------------------
                                      3,108      3,076         59      1,357
        Rest of World                   152        137          8        152
        Corporate and Other             (68)         2          -        292
        ---------------------------------------------------------------------
        Total reportable segments  $  6,836   $  6,836   $    182      4,307
        Current assets                                                 8,770
        Investments, goodwill
         and other assets                                              2,266
        ---------------------------------------------------------------------
        Consolidated total assets                                   $ 15,343
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                             Three months ended
                                              December 31, 2006
                                   ------------------------------------------
                                                                       Fixed
                                      Total   External                assets,
                                      sales      sales     EBIT(i)       net
        ---------------------------------------------------------------------
        North America
          Canada                   $  1,577   $  1,518              $  1,065
          United States               1,361      1,320                 1,096
          Mexico                        441        395                   368
          Eliminations                 (132)         -                     -
        ---------------------------------------------------------------------
                                      3,247      3,233   $     40      2,529
        Europe
          Euroland                    2,630      2,583                 1,032
          Great Britain                 272        272                    84
          Other European countries      164        188                   118
          Eliminations                   (1)         -                     -
        ---------------------------------------------------------------------
                                      3,065      3,043        (35)     1,234
        Rest of World                   103         92          4        127
        Corporate and Other             (47)         -         27        224
        ---------------------------------------------------------------------
        Total reportable segments  $  6,368   $  6,368   $     36      4,114
        Current assets                                                 7,060
        Investments, goodwill
         and other assets                                              1,980
        ---------------------------------------------------------------------
        Consolidated total assets                                   $ 13,154
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------



                                                 Year ended
                                              December 31, 2007
                                   ------------------------------------------
                                                                       Fixed
                                      Total   External                assets,
                                      sales      sales     EBIT(i)       net
        ---------------------------------------------------------------------

        North America
          Canada                   $  7,043   $  6,721              $  1,137
          United States               5,972      5,792                   989
          Mexico                      1,560      1,370                   380
          Eliminations                 (628)         -                     -
        ---------------------------------------------------------------------
                                     13,947     13,883   $    688      2,506
        Europe
          Euroland                   10,021      9,839                 1,126
          Great Britain               1,203      1,201                    95
          Other European countries      793        689                   136
          Eliminations                 (195)         -                     -
        ---------------------------------------------------------------------
                                     11,822     11,729        359      1,357
        Rest of World                   504        446         20        152
        Corporate and Other            (206)         9         23        292
        ---------------------------------------------------------------------
        Total reportable segments  $ 26,067   $ 26,067   $  1,090      4,307
        Current assets                                                 8,770
        Investments, goodwill
         and other assets                                              2,266
        ---------------------------------------------------------------------
        Consolidated total assets                                   $ 15,343
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                                 Year ended
                                              December 31, 2006
                                   ------------------------------------------
                                                                       Fixed
                                      Total   External                assets,
                                      sales      sales     EBIT(i)       net
        ---------------------------------------------------------------------

        North America
          Canada                   $  6,410   $  6,165              $  1,065
          United States               5,594      5,403                 1,096
          Mexico                      1,644      1,493                   368
          Eliminations                 (540)         -                     -
        ---------------------------------------------------------------------
                                     13,108     13,061   $    575      2,529
        Europe
          Euroland                    9,485      9,323                 1,032
          Great Britain                 956        954                    84
          Other European countries      621        541                   118
          Eliminations                 (143)         -                     -
        ---------------------------------------------------------------------
                                     10,919     10,818        126      1,234
        Rest of World                   343        301          -        127
        Corporate and Other            (190)         -         77        224
        ---------------------------------------------------------------------
        Total reportable segments  $ 24,180   $ 24,180   $    778      4,114
        Current assets                                                 7,060
        Investments, goodwill
         and other assets                                              1,980
        ---------------------------------------------------------------------
        Consolidated total assets                                   $ 13,154
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (i) EBIT represents operating income before interest income or
            expense.

    14. RELATED PARTY TRANSACTION

        During the fourth quarter of 2007, the Company entered into an
        agreement to purchase 225 acres of real estate located in Austria
        from MEC for $29 million ((euro) 20 million). The closing of the
        transaction is expected to occur during the first quarter of 2008
        following the satisfaction of customary closing conditions including
        obtaining all necessary regulatory approvals. The transactions 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.

    15. SUBSEQUENT EVENTS

        On February 22, 2008, the United Auto Workers' Union announced the
        ratification of a four-year wage and benefit contract (expiring in
        September 2011) at a powertrain facility in Syracuse, New York. Under
        the terms of the agreement, the Company will make a number of lump-
        sum payments to each eligible employee totalling $87,500 to offset
        future wage and benefit reductions. These lump-sum payments will be
        paid in four annual instalments beginning April 1, 2008.

    16. COMPARATIVE FIGURES

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



</TEXT>
</DOCUMENT>
