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Magna Announces Second Quarter and Year to Date Results

August 9, 2013

AURORA, ON, Aug. 9, 2013 /PRNewswire/ – Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the second quarter ended June
30, 2013.


                          THREE MONTHS ENDED           SIX MONTHS ENDED
                              JUNE 30,                    JUNE 30,

                          2013         2012          2013          2012  

    Sales             $  8,962     $  7,727     $  17,323     $  15,393  

    Adjusted EBIT(1)  $    547     $    475     $   1,014     $     919  

    Income from       $    543     $    470     $   1,000     $     909
    operations before
    income
      taxes

    Net income        $    415     $    349     $     784     $     692
    attributable to
    Magna
      International
    Inc.

    Diluted earnings  $   1.78     $   1.48     $    3.35     $    2.94
    per share

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

    (1) Adjusted EBIT is the measure of segment profit or loss as
    reported in the Company's attached unaudited interim
         consolidated financial statements.
        Adjusted EBIT represents income from operations before income
    taxes; interest expense, net; and other expense, net.

THREE MONTHS ENDED JUNE 30, 2013

We posted record sales of $8.96 billion for the second quarter ended
June 30, 2013, an increase of 16% from the second quarter of 2012. We
achieved this sales increase in a period when vehicle production
increased 7% in North America and declined 1% in Europe, both relative
to the second quarter of 2012. In the second quarter of 2013, our North
American, European and Rest of World production sales, as well as
complete vehicle assembly sales and tooling, engineering and other
sales increased, in each case relative to the comparable quarter in
2012.

Complete vehicle assembly sales increased 23% to $796 million for the
second quarter of 2012 compared to $645 million for the second quarter
of 2012, while complete vehicle assembly volumes increased 17% to
approximately 39,000 units.

During the second quarter of 2013, income from operations before income
taxes was $543 million, net income attributable to Magna International
Inc. was $415 million and diluted earnings per share were $1.78,
increases of $73 million, $66 million and $0.30 respectively, each
compared to the second quarter of 2012.

During the second quarter ended June 30, 2013, we generated cash from
operations of $714 million before changes in non-cash operating assets
and liabilities, and invested $12 million in non-cash operating assets
and liabilities. Total investment activities for the second quarter of
2013 were $285 million, including $232 million in fixed asset additions
and $53 million in investments and other assets.

SIX MONTHS ENDED JUNE 30, 2013

We posted record sales of $17.32 billion for the six months ended June
30, 2013, an increase of 13% from the six months ended June 30, 2012.
This higher sales level reflected increases in our North American,
European and Rest of World production sales, as well as complete
vehicle assembly sales and tooling, engineering and other sales, in
each case relative to the first six months of 2012.

During the six months ended June 30, 2013, vehicle production increased
4% to 8.3 million units in North America and decreased 5% to 9.8
million units in Europe, each compared to the first six months of 2012.

Complete vehicle assembly sales increased 28% to $1.59 billion for the
six months ended June 30, 2013 compared to $1.24 billion for the six
months ended June 30, 2012, while complete vehicle assembly volumes
increased 21% to approximately 76,000 units.

During the six months ended June 30, 2013, income from operations before
income taxes was $1.00 billion, net income attributable to Magna
International Inc. was $784 million and diluted earnings per share were
$3.35, increases of $91 million, $92 million and $0.41, respectively,
each compared to the first six months of 2012.

During the six months ended June 30, 2013, we generated cash from
operations before changes in non-cash operating assets and liabilities
of $1.32 billion, and invested $468 million in non-cash operating
assets and liabilities. Total investment activities for the first six
months of 2013 were $527 million, including $426 million in fixed asset
additions and a $101 million increase in investments and other assets.

A more detailed discussion of our consolidated financial results for the
second quarter and six months ended June 30, 2013 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.

DIVIDENDS

Yesterday, our Board of Directors declared a quarterly dividend of $0.32
with respect to our outstanding Common Shares for the quarter ended
June 30, 2013. This dividend is payable on September 16, 2013 to
shareholders of record on August 30, 2013.

UPDATED 2013 OUTLOOK


    Light Vehicle Production (Units)
          North America                                16.1 million
          Europe(1)                                    18.6 million

    Production Sales
          North America                       $16.0 - $16.4 billion
          Europe                                $9.5 - $9.8 billion
          Rest of World                         $2.2 - $2.5 billion

          Total Production Sales              $27.7 - $28.7 billion   

    Complete Vehicle Assembly Sales             $2.8 - $3.1 billion   

    Total Sales                               $33.3 - $34.7 billion   

    Operating Margin(2)(3)                       Approximately 5.8%   

    Tax Rate(2)                                 Approximately 23.5%   

    Capital Spending                     Approximately $1.4 billion   

    (1)     Effective the first quarter of 2013, we disclose total
    European rather than Western European light vehicle production
    (2)     Excluding other expense, net
    (3)     Excluding $158 million amortization of intangibles related
    to the acquisition of E-Car

In this 2013 outlook, in addition to 2013 light vehicle production, we
have assumed no material acquisitions or divestitures. 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.

ABOUT MAGNA

We are a leading global automotive supplier with 314 manufacturing
operations and 89 product development, engineering and sales centres in
29 countries. Our 123,000 employees are focused on delivering superior
value to our customers through innovative processes and World Class
Manufacturing. Our product capabilities include producing body,
chassis, interior, exterior, seating, powertrain, electronic, vision,
closure and roof systems and modules, as well as complete vehicle
engineering and contract manufacturing. Our common shares trade on the
Toronto Stock Exchange (MG) and the New York Stock Exchange (MGA). For
further information about Magna, visit our website at www.magna.com.

We will hold a conference call for interested analysts and shareholders
to discuss our second quarter results on Friday, August 9, 2013 at 8:00
a.m. EDT. The conference call will be chaired by Don Walker, Chief
Executive Officer. The number to use for this call is 1-800-909-7814.
The number for overseas callers is 1-212-231-2939. Please call in at
least 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 Friday morning prior to the call.

FORWARD-LOOKING STATEMENTS

——————————

The previous discussion contains statements that constitute
“forward-looking information” or “forward-looking statements” within
the meaning of applicable securities legislation, including, but not
limited to, statements relating to: forecast light vehicle production
volumes in North America and Europe; Magna’s expected production sales
in its North American, European and Rest of World segments; total
sales; complete vehicle assembly sales; consolidated operating margin;
average effective income tax rate; capital spending; and other matters.
The forward-looking information in this press release is presented for
the purpose of providing information about management’s current
expectations and plans and such information may not be appropriate for
other purposes. 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, and other statements that are not recitations of
historical fact. We use words such as “may”, “would”, “could”,
“should”, “will”, “likely”, “expect”, “anticipate”, “believe”,
“intend”, “plan”, “forecast”, “outlook”, “project”, “estimate” and
similar expressions suggesting future outcomes or events to identify
forward-looking statements. Any such forward-looking statements are
based on information currently available to us, and 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, many of which are
beyond our control, and the effects of which can be difficult to
predict, including, without limitation: the potential for a
deterioration of economic conditions or an extended period of economic
uncertainty; declines in consumer confidence and the impact on
production volume levels; risks arising from the recession in Europe,
including the potential for a deterioration of sales of our three
largest German-based OEM customers; inability to sustain or grow our
business with OEMs; restructuring actions by OEMs, including plant
closures; restructuring, downsizing and/or other significant
non-recurring costs; continued underperformance of one or more of our
operating divisions; our ability to successfully launch material new or
takeover business; liquidity risks; bankruptcy or insolvency of a major
customer or supplier; a prolonged disruption in the supply of
components to us from our suppliers; scheduled shutdowns of our
customers’ production facilities (typically in the third and fourth
quarters of each calendar year); shutdown of our or our customers’ or
sub-suppliers’ production facilities due to a labour disruption; our
ability to successfully compete with other automotive suppliers; a
reduction in outsourcing by our customers or the loss of a material
production or assembly program; the termination or non-renewal by our
customers of any material production purchase order; a shift away from
technologies in which we are investing; risks arising due to the
failure of a major financial institution; impairment charges related to
goodwill, long-lived assets and deferred tax assets; shifts in market
share away from our top customers; shifts in market shares among
vehicles or vehicle segments, or shifts away from vehicles on which we
have significant content; risks of conducting business in foreign
markets, including China, India, South America and other
non-traditional markets for us; exposure to, and ability to offset,
volatile commodities prices; fluctuations in relative currency values;
our ability to successfully identify, complete and integrate
acquisitions or achieve anticipated synergies; our ability to conduct
appropriate due diligence on acquisition targets; ongoing pricing
pressures, including our ability to offset price concessions demanded
by our customers; warranty and recall costs; risk of production
disruptions due to natural disasters; pension liabilities; legal claims
and/or regulatory actions against us; our ability to understand and
compete successfully in non-automotive businesses in which we pursue
opportunities; 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;
inability to achieve future investment returns that equal or exceed
past returns; the unpredictability of, and fluctuation in, the trading
price of our Common Shares; work stoppages and labour relations
disputes; changes in credit ratings assigned to us; changes in laws and
governmental regulations; costs associated with compliance with
environmental laws and regulations; 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, we caution readers not to place undue
reliance on any forward-looking statements and 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

Management’s Discussion and Analysis of Results of Operations and
Financial Position

——————————

Unless otherwise noted, 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, which are in U.S. dollars. 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 six months
ended June 30, 2013 included in this press release, and the audited
consolidated financial statements and MD&A for the year ended
December 31, 2012 included in our 2012 Annual Report to Shareholders.

This MD&A has been prepared as at August 8, 2013.

OVERVIEW

——————————

We are a leading global automotive supplier with 314 manufacturing
operations and 89 product development, engineering and sales centres in
29 countries. Our 123,000 employees are focused on delivering superior
value to our customers through innovative processes and World Class
Manufacturing. Our product capabilities include producing body,
chassis, interior, exterior, seating, powertrain, electronic, vision,
closure and roof systems and modules, as well as complete vehicle
engineering and contract manufacturing. Our Common Shares trade on the
Toronto Stock Exchange (MG) and the New York Stock Exchange (MGA). 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.

HIGHLIGHTS

——————————

Our second quarter 2013 sales increased 16% over the second quarter of
2012 to a record $8.96 billion, as North American, European and Rest of
World production sales, as well as complete vehicle assembly sales and
tooling, engineering and other sales all increased over the comparable
quarter. North American light vehicle production increased 7% in the
second quarter of 2013 to 4.3 million units. In Europe, light vehicle
production in the second quarter of 2013 declined 1% to 5.0 million
units.

Our income from operations before income taxes increased 16% to $543
million for the second quarter of 2013, compared to $470 million in the
second quarter of 2012. Our diluted earnings per Common Share increased
20% to $1.78 in the second quarter of 2013, compared to $1.48 for the
second quarter of 2012.

Our North America segment continues to perform well, with Adjusted EBIT(1) of $422 million, which included $40 million of amortization related to
the August 2012 acquisition of Magna E-Car Systems Partnership
(“E-Car”). This result compares to Adjusted EBIT of $415 million in the
second quarter of 2012.

Our Europe segment showed further improvement in the second quarter of
2013, despite continued weak levels of vehicle production in Europe. We
generated an Adjusted EBIT of $120 million for the second quarter of
2013, compared to $65 million in the second quarter of 2012.

In our Rest of World segment, we reported $2 million of Adjusted EBIT in
the second quarter of 2013, compared to an Adjusted EBIT loss of $16
million in the second quarter of 2012. Within our Rest of World
segment, our Asia Pacific business again generated a profit while our
business in South America recorded a loss.

We continue to focus on improving operating results in both Europe and
South America, and we expect to generate improved Adjusted EBIT in both
regions during 2013 compared to 2012.

Lastly, during the second quarter of 2013, we repurchased 5.2 million
Common Shares for aggregate consideration of $337 million pursuant to
our outstanding Normal Course issuer bid that expires in November of
this year. We intend to continue purchasing our Common Shares under the
bid.

___________________

(1) Adjusted EBIT represents income from operations before income taxes;
interest expense, net; and other expense, net

FINANCIAL RESULTS SUMMARY

——————————

During the second quarter of 2013, we posted sales of $8.96 billion, an
increase of 16% from the second quarter of 2012. This higher sales
level was a result of increases in our North American, European and
Rest of World production sales, our tooling, engineering and other
sales and complete vehicle assembly sales. Comparing the second quarter
of 2013 to 2012:

        --  North American vehicle production increased 7% and our North
            American production sales increased 10% to $4.30 billion;
        --  European vehicle production decreased 1% while our European
            production sales increased 14% to $2.56 billion;
        --  Rest of World production sales increased 38% to $572 million;
        --  Complete vehicle assembly sales increased 23% to $796 million
            and complete vehicle assembly volumes increased 17%; and
        --  Tooling, engineering and other sales increased 43% to $733
            million.

During the second quarter of 2013, we earned income from operations
before income taxes of $543 million compared to $470 million for the
second quarter of 2012. The $73 million increase was primarily as a
result of:

        --  margins earned on higher production sales;
        --  incremental margin earned on new programs that launched during
            or subsequent to the second quarter of 2012;
        --  productivity and efficiency improvements at certain facilities;
        --  the benefit of restructuring and downsizing activities
            undertaken in Europe during or subsequent to the second quarter
            of 2012;
        --  a loss on disposal of an investment in the second quarter of
            2012;
        --  higher equity income;
        --  acquisitions completed during or subsequent to the second
            quarter of 2012, including ixetic Verwaltungs GmbH ("ixetic");
            and
        --  lower costs incurred in preparation for upcoming launches.

These factors were partially offset by:

        --  intangible asset amortization of $40 million related to the
            acquisition and re-measurement of E-Car;
        --  programs that ended production during or subsequent to the
            second quarter of 2012;
        --  a larger amount of employee profit sharing;
        --  the recovery of due diligence costs in the second quarter of
            2012;
        --  increased pre-operating costs incurred at new facilities;
        --  favourable settlement of certain commercial items in the second
            quarter of 2012;
        --  a $5 million net decrease in revaluation gains in respect of
            asset-backed commercial paper ("ABCP"); and
        --  operational inefficiencies and other costs at certain
            facilities.

During the second quarter of 2013, net income was $412 million, an
increase of $63 million compared to the second quarter of 2012.

During the second quarter of 2013, our diluted earnings per share
increased $0.30 to $1.78 compared to $1.48 for the second quarter of
2012. The increase in diluted earnings per share is a result of the
increase in net income attributable to Magna International Inc. and a
decrease in the weighted average number of diluted shares outstanding
during the second quarter of 2013. The decrease in the weighted average
number of diluted shares outstanding was due to the repurchase and
cancellation of Common Shares, during or subsequent to the second
quarter of 2012, pursuant to our normal course issuer bids and the
cashless exercise of options, partially offset by the issue of Common
Shares related to the exercise of stock options and an increase in the
number of diluted options outstanding as a result of an increase in the
trading price of our common stock.

INDUSTRY TRENDS AND RISKS

——————————

Our success is primarily dependent upon the levels of North American and
European car and light truck production by our customers and the
relative amount of content we have on various programs. OEM production
volumes in different regions may be impacted by factors which may vary
from one region to the next, including but not limited to general
economic and political conditions, consumer confidence levels, interest
rates, credit availability, energy and fuel prices, international
conflicts, labour relations issues, regulatory requirements, trade
agreements, infrastructure, legislative changes, and environmental
emissions and safety standards. These factors and a number of other
economic, industry and risk factors which also affect our success,
including such things as relative currency values, commodities prices,
price reduction pressures from our customers, the financial condition
of our supply base and competition from other suppliers, are discussed
in our Annual Information Form and Annual Report on Form 40-F, each in
respect of the year ended December 31, 2012. The economic, industry and
risk factors remain substantially unchanged in respect of the second
quarter ended June 30, 2013, except that, as a result of general
economic conditions in Western Europe together with restructuring
actions being taken by us, our customers and other suppliers, there may
be a heightened risk of labour disruptions which could impact some of
our Western European divisions from time to time. While we do not
anticipate any such labour disruption having a material impact on our
results of operations, we cannot predict whether or when any labour
disruption may arise, or how long it lasts if it does arise.

RESULTS OF OPERATIONS

——————————

Average Foreign Exchange


                    For the three months                For the six months

                          ended June 30,                   ended June 30,

                  2013      2012     Change        2013       2012     Change

    1            0.977     0.990     -   1%                            -   1%
    Canadian
    dollar                                        0.984      0.994
    equals
    U.S.
    dollars

    1 euro       1.307     1.283     +   2%                            +   1%
    equals                                        1.313      1.297
    U.S.
    dollars 

    1            1.536     1.582     -   3%                            -   2%
    British
    pound                                         1.543      1.576
    equals
    U.S.
    dollars 

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 changes in these foreign exchange rates
for the three months and six months ended June 30, 2013 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, foreign currency transactions in the
current period have not been fully impacted by movements in exchange
rates. We record foreign currency transactions at the hedged rate where
applicable.

Finally, foreign exchange gains and losses on revaluation and/or
settlement of monetary items denominated in a currency other than an
operation’s functional currency impact reported results. These gains
and losses are recorded in selling, general and administrative expense.

RESULTS OF OPERATIONS – FOR THE THREE MONTHS ENDED JUNE 30, 2013

——————————


    Sales                                                                  

                                         For the three months              

                                             ended June 30,                

                                           2013           2012       Change

    Vehicle Production Volumes
    (millions of units)

      North America                       4.263          3.990      +    7%

      Europe                              4.993          5.050      -    1%

    Sales                                                                  

      External Production                                                  

        North America                  $  4,301   $      3,907      +   10%

        Europe                            2,560          2,249      +   14%

        Rest of World                       572            415      +   38%

      Complete Vehicle Assembly             796            645      +   23%

      Tooling, Engineering and              733            511      +   43%
      Other  

    Total Sales                        $  8,962   $      7,727      +   16%

External Production Sales – North America

External production sales in North America increased 10% or $394 million
to $4.30 billion for the second quarter of 2013 compared to $3.91
billion for the second quarter of 2012. The increase in external
production sales is primarily as a result of:

        --  the launch of new programs during or subsequent to the second
            quarter of 2012, including the:
      o Ford Fusion and Lincoln MKZ;
      o Ford Escape;
      o Honda Accord; and
      o GM full-size pickups;
        --  higher production volumes on certain existing programs; and
        --  acquisitions completed during or subsequent to the second
            quarter of 2012 which positively impacted sales by $46 million,
            including STT Technologies ("STT").

These factors were partially offset by:

        --  programs that ended production during or subsequent to the
            second quarter of 2012, including the Jeep Liberty;
        --  a decrease in reported U.S. dollar sales primarily as a result
            of the weakening of the Canadian dollar against the U.S.
            dollar; and
        --  net customer price concessions subsequent to the second quarter
            of 2012.

External Production Sales – Europe

External production sales in Europe increased 14% or $311 million to
$2.56 billion for the second quarter of 2013 compared to $2.25 billion
for the second quarter of 2012. The increase in external production
sales is primarily as a result of:

        --  the launch of new programs during or subsequent to the second
            quarter of 2012, including the:
      o Mercedes-Benz A-Class;
      o MINI Paceman;
      o Ford Transit Custom;
      o Ford Kuga; and
      o Mercedes-Benz CLA-Class;
        --  acquisitions completed during or subsequent to the second
            quarter of 2012, which positively impacted sales by $126
            million, including ixetic and the re-acquisition of an interior
            systems operation; and
        --  an increase in reported U.S. dollar sales primarily as a result
            of the strengthening of the euro against the U.S. dollar.

These factors were partially offset by lower production volumes on
certain existing programs.

External Production Sales – Rest of World

External production sales in Rest of World increased 38% or $157 million
to $572 million for the second quarter of 2013 compared to $415 million
for the second quarter of 2012, primarily as a result of:

        --  the launch of new programs during or subsequent to the second
            quarter of 2012, primarily in Brazil and China; and
        --  higher production volumes on certain existing programs.

These factors were partially offset by a $14 million decrease in
reported U.S. dollar sales as a result of the net weakening of foreign
currencies against the U.S. dollar, including the Brazilian real and
Argentine peso.


    Complete Vehicle Assembly
    Sales

                                    For the three months              

                                       ended June 30,                 

                                      2013          2012        Change

    Complete Vehicle Assembly     $    796   $       645     +     23%
    Sales 

    Complete Vehicle Assembly       38,605        33,064     +     17%
    Volumes (Units) 

Complete vehicle assembly sales increased 23%, or $151 million, to $796
million for the second quarter of 2013 compared to $645 million for the
second quarter of 2012 and assembly volumes increased 17% or 5,541
units.

The increase in complete vehicle assembly sales is primarily as a result
of:

        --  the launch of the MINI Paceman during the fourth quarter of
            2012;
        --  an increase in assembly volumes for the Mercedes-Benz G-Class;
            and
        --  a $14 million increase in reported U.S. dollar sales as a
            result of the strengthening of the euro against the U.S.
            dollar.

These factors were partially offset by:

        --  a decrease in assembly volumes for the:
      o MINI Countryman; and
      o Peugeot RCZ; and
        --  the end of production of the Aston Martin Rapide at our Magna
            Steyr facility during the second quarter of 2012.

Tooling, Engineering and Other Sales

Tooling, engineering and other sales increased 43% or $222 million to
$733 million for the second quarter of 2013 compared to $511 million
for the second quarter of 2012.

In the second quarter of 2013, the major programs for which we recorded
tooling, engineering and other sales were the:

        --  Skoda Octavia;
        --  GM full-size pickups and SUVs;
        --  Ford Transit;
        --  Ford Fusion;
        --  MINI Paceman;
        --  Qoros 3;
        --  Range Rover Evoque; and
        --  Mercedes-Benz M-Class.

In the second quarter of 2012, the major programs for which we recorded
tooling, engineering and other sales were the:

        --  Ford Fusion;
        --  MINI Countryman;
        --  Qoros 3;
        --  Audi A1;
        --  Mercedes-Benz GL-Class;
        --  Mercedes-Benz SLS AMG;
        --  Cadillac ATS; and
        --  Chevrolet Silverado and GMC Sierra.

    Cost of Goods Sold and Gross Margin                                

                                                  For the three months 

                                                      ended June 30, 

                                                    2013           2012

    Sales                                       $  8,962   $      7,727

    Cost of goods sold                                                 

      Material                                     5,800          4,940

      Direct labour                                  556            510

      Overhead                                     1,438          1,292

                                                   7,794          6,742

    Gross margin                                $  1,168   $        985

    Gross margin as a percentage of sales          13.0%          12.7%

Cost of goods sold increased $1.05 billion to $7.79 billion for the
second quarter of 2013 compared to $6.74 billion for the second quarter
of 2012 primarily as a result of:

        --  higher material, overhead and labour costs associated with the
            increase in sales, including wage increases at certain
            operations;
        --  $181 million related to acquisitions completed during or
            subsequent to the second quarter of 2012, including ixetic, STT
            and E-Car and the re-acquisition of an interior systems
            operation;
        --  a net increase in reported U.S. dollar cost of goods sold
            primarily due to the strengthening of the euro against the U.S.
            dollar partially offset by the weakening of the Canadian
            dollar, Brazilian real, Argentine peso and British pound, each
            against the U.S. dollar; and
        --  a larger amount of employee profit sharing.

Gross margin increased $183 million to $1.17 billion for the second
quarter of 2013 compared to $0.99 billion for the second quarter of
2012 and gross margin as a percentage of sales increased to 13.0% for
the second quarter of 2013 compared to 12.7% for the second quarter of
2012. The increase in gross margin as a percentage of sales was
primarily due to:

        --  margins earned on higher production sales;
        --  incremental margin earned on new programs that launched during
            or subsequent to the second quarter of 2012;
        --  the closure of certain facilities;
        --  lower costs incurred in preparation for upcoming launches; and
        --  productivity and efficiency improvements at certain facilities.

These factors were partially offset by:

        --  an increase in tooling, engineering and other sales that have
            low or no margins;
        --  an increase in complete vehicle assembly sales which have a
            higher material content than our consolidated average;
        --  programs that ended production during or subsequent to the
            second quarter of 2012;
        --  a larger amount of employee profit sharing;
        --  increased pre-operating costs incurred at new facilities;
        --  favourable settlement of certain commercial items in the second
            quarter of 2012;
        --  the re-acquisition, in the second quarter of 2012, of an
            interior systems operation; and
        --  operational inefficiencies and other costs at certain
            facilities.

Depreciation and Amortization

Depreciation and amortization costs increased $76 million to
$260 million for the second quarter of 2013 compared to $184 million
for the second quarter of 2012. The higher depreciation and
amortization was primarily as a result of:

        --  intangible asset amortization of $40 million related to the
            acquisition and re-measurement of E-Car;
        --  $21 million related to acquisitions completed during or
            subsequent to the second quarter of 2012, including ixetic,
            E-Car and STT;
        --  depreciation related to new facilities; and
        --  capital spending during or subsequent to the second quarter of
            2012.

Selling, General and Administrative (“SG&A”)

SG&A expense as a percentage of sales was 4.6% for the second quarter of
2013 compared to 4.8% for the second quarter of 2012. SG&A expense
increased $42 million to $410 million for the second quarter of 2012
compared to $368 million for the second quarter of 2012 primarily as a
result of:

        --  increased costs incurred at new facilities;
        --  $10 million related to acquisitions completed during or
            subsequent to the second quarter of 2012, including ixetic,
            E-Car, and STT;
        --  higher incentive compensation;
        --  higher labour and other costs to support the growth in sales,
            including wage increases at certain operations;
        --  an increase in reported U.S. dollar SG&A related to foreign
            exchange;
        --  the recovery of due diligence costs in the second quarter of
            2012; and
        --  a $5 million net decrease in revaluation gains in respect of
            ABCP.

These factors were partially offset by:

        --  a loss on disposal of an investment in the second quarter of
            2012; and
        --  lower restructuring and downsizing costs.

Equity Income

Equity income increased $7 million to $49 million for the second quarter
of 2013 compared to $42 million for the second quarter of 2012. Equity
income for the second quarter of 2012 included $10 million of equity
loss related to our investment in E-Car and $2 million of equity income
related to our investment in STT. Excluding this $8 million net equity
loss, the $1 million decrease in equity income is primarily as a result
of lower income from our equity accounted investments in North America.

Other Expense, net

During the second quarter of 2013 and 2012, no other expense, net was
recorded. We expect full year 2013 restructuring charges to be
approximately $100 million.

During the first quarter of 2013, we recorded net restructuring charges
of $6 million ($6 million after tax) in Europe at our exterior and
interior systems operations.

Segment Analysis

Given the differences between the regions in which we operate, our
operations are segmented on a geographic basis between North America,
Europe and Rest of World. Consistent with the above, our internal
financial reporting segments key internal operating performance
measures between North America, Europe and Rest of World for purposes
of presentation to the chief operating decision maker to assist in the
assessment of operating performance, the allocation of resources, and
our long-term strategic direction and future global growth.

Our chief operating decision maker uses Adjusted EBIT as the measure of
segment profit or loss, since we believe Adjusted EBIT is the most
appropriate measure of operational profitability or loss for our
reporting segments. Adjusted EBIT represents income from operations
before income taxes; interest expense, net; and other expense, net.


                                          For the three months ended June 30, 

                              External Sales                       Adjusted EBIT 

                       2013       2012     Change          2013      2012     Change

    North          $  4,589   $  4,111   $    478       $   422    $  415   $      7
    America

    Europe            3,755      3,166        589           120        65         55

    Rest of             609        444        165             2      (16)         18
    World  

    Corporate
    and                   9          6          3             3        11        (8)
    Other  

    Total
    reportable

      segments     $  8,962   $  7,727   $  1,235       $   547    $  475   $     72

North America

Adjusted EBIT in North America increased $7 million to $422 million for
the second quarter of 2013 compared to $415 million for the second
quarter of 2012 primarily as a result of:

        --  margins earned on higher production sales;
        --  incremental margin earned on new programs that launched during
            or subsequent to the second quarter of 2012; and
        --  productivity and efficiency improvements at certain facilities.

These factors were partially offset by:

        --  intangible asset amortization of $40 million related to the
            acquisition and re-measurement of E-Car;
        --  programs that ended production during or subsequent to the
            second quarter of 2012;
        --  operational inefficiencies and other costs at certain
            facilities;
        --  increased commodity costs;
        --  lower equity income;
        --  a larger amount of employee profit sharing;
        --  higher warranty costs of $3 million; and
        --  net customer price concessions subsequent to the first quarter
            of 2012.

Europe

Adjusted EBIT in Europe increased $55 million to $120 million for the
second quarter of 2013 compared to $65 million for the second quarter
of 2012 primarily as a result of:

        --  margins earned on higher production sales;
        --  incremental margin earned on new programs that launched during
            or subsequent to the second quarter of 2012;
        --  the benefit of restructuring and downsizing activities
            undertaken during or subsequent to the second quarter of 2012;
        --  lower costs incurred in preparation for upcoming launches;
        --  decreased commodity costs;
        --  acquisitions completed during or subsequent to the second
            quarter of 2012, including ixetic; and
        --  productivity and efficiency improvements at certain facilities.

These factors were partially offset by:

        --  favourable settlement of certain commercial items in the second
            quarter of 2012;
        --  a larger amount of employee profit sharing;
        --  higher restructuring and downsizing costs;
        --  higher affiliation fees paid to corporate;
        --  the re-acquisition, in the second quarter of 2012, of an
            interior systems operation; and
        --  operational inefficiencies and other costs at certain
            facilities.

Rest of World

Rest of World Adjusted EBIT increased $18 million to income of $2
million for the second quarter of 2013 compared to a loss of $16
million for the second quarter of 2012 primarily as a result of:

        --  margins earned on higher production sales, including margins
            earned on the launch of new facilities and new programs;
        --  productivity and efficiency improvements at certain facilities;
        --  lower restructuring and downsizing costs; and
        --  higher equity income.

These factors were partially offset by:

        --  higher costs related to new facilities;
        --  higher launch costs; and
        --  increased commodity costs.

Corporate and Other

Corporate and Other Adjusted EBIT decreased $8 million to $3 million for
the second quarter of 2013 compared to $11 million for the second
quarter of 2012. The loss related to our equity accounted investment in
E-Car included in Corporate and Other was $10 million for the second
quarter of 2012. Excluding E-Car, Corporate and Other Adjusted EBIT
decreased $18 million to $3 million for the second quarter of 2013
compared to $21 million for the second quarter of 2012 primarily as a
result of:

        --  the recovery of due diligence costs in the second quarter of
            2012;
        --  a $5 million net decrease in revaluation gains in respect of
            ABCP; and
        --  higher incentive compensation.

These factors were partially offset by:

        --  a loss on disposal of an investment in the second quarter of
            2012; and
        --  an increase in affiliation fees earned from our divisions.

Interest Expense, net

During the second quarter of 2013, we recorded net interest expense of
$4 million compared to $5 million for the second quarter of 2012.

Income from Operations before Income Taxes

Income from operations before income taxes increased $73 million to $543
million for the second quarter of 2013 compared to $470 million for the
second quarter of 2012. The increase in income from operations before
income taxes is the result of the increase in EBIT and the decrease in
net interest expense, as discussed above.

Income Taxes

The effective income tax rate on income from operations before income
taxes decreased to 24.1% for the second quarter of 2013 compared to
25.7% for the second quarter of 2012 primarily as a result of a
decrease in losses not benefitted in Europe partially offset by a
change in mix of earnings, whereby proportionately more income was
earned in jurisdictions with higher tax rates.

Net Income

Net income of $412 million for the second quarter of 2013 increased $63
million compared to the second quarter of 2012. The increase in net
income is the result of the increase in income from operations before
income taxes partially offset by higher income taxes.

Net Loss Attributable to Non-controlling Interests

Net loss attributable to non-controlling interests was $3 million for
the second quarter of 2013 compared to $nil for the second quarter of
2012.

Net Income attributable to Magna International Inc.

Net income attributable to Magna International Inc. of $415 million for
the second quarter of 2013 increased $66 million compared to the second
quarter of 2012 as a result of the increase in net income, as discussed
above.


    Earnings per
    Share

                                       For the three months             

                                          ended June 30,                

                                        2013           2012       Change

    Earnings per
    Common Share

      Basic                          $  1.80   $       1.50     +    20%

      Diluted                        $  1.78   $       1.48     +    20%

    Average number of Common Shares
    outstanding (millions)

      Basic                            230.6          232.5     -     1%

      Diluted                          233.2          235.3     -     1%

Diluted earnings per share increased $0.30 to $1.78 for the second
quarter of 2013 compared to $1.48 for the second quarter of 2012. The
increase in diluted earnings per share was a result of the increase in
net income attributable to Magna International Inc. and a decrease in
the weighted average number of diluted shares outstanding during the
second quarter of 2013.

The decrease in the weighted average number of diluted shares
outstanding was due to the repurchase and cancellation of Common
Shares, during or subsequent to the second quarter of 2012, pursuant to
our normal course issuer bids and the cashless exercise of options,
partially offset by the issue of Common Shares related to the exercise
of stock options and an increase in the number of diluted options
outstanding as a result of an increase in the trading price of our
common stock.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

——————————


    Cash Flow from Operations                                              

                                         For the three months              

                                            ended June 30,                 

                                         2013            2012        Change

    Net income                         $  412    $        349              

    Items not involving current           302             237
    cash flows  

                                          714             586      $    128

    Changes in non-cash
    operating assets and                 (12)           (122)
    liabilities  

    Cash provided from                 $  702    $        464      $    238
    operating activities

Cash flow from operations before changes in non-cash operating assets
and liabilities increased $128 million to $714 million for the second
quarter of 2013 compared to $586 million for the second quarter of
2012. The increase in cash flow from operations was due to a $63
million increase in net income, as discussed above, and a $65 million
increase in items not involving current cash flows. Items not involving
current cash flows are comprised of the following:


                                                    For the three months 

                                                        ended June 30, 

                                                    2013             2012

    Depreciation and amortization                 $  260   $          184

    Amortization of other assets included in          36               31
    cost of goods sold    

    Other non-cash charges                            58               48

    Deferred income taxes                            (3)               16

    Equity income                                   (49)             (42)

    Items not involving current cash flows        $  302    $         237

Cash invested in non-cash operating assets and liabilities amounted to
$12 million for the second quarter of 2013 compared to $122 million for
the second quarter of 2012. The change in non-cash operating assets and
liabilities is comprised of the following sources (and uses) of cash:


                                                    For the three months 

                                                        ended June 30, 

                                                     2013            2012

    Accounts receivable                           $    26   $          56

    Inventories                                      (93)           (148)

    Prepaid expenses and other                        (6)              17

    Accounts payable                                  197           (122)

    Accrued salaries and wages                       (72)            (64)

    Other accrued liabilities                        (53)              83

    Income taxes payable                              (9)              57

    Deferred revenue                                  (2)             (1)

    Changes in non-cash operating assets and      $  (12)   $       (122)
    liabilities  

The increase in inventories was primarily due to higher tooling
inventory and increased production inventory to support launch
activities. The increase in accounts payable was primarily due to an
increase in production activities at the end of the second quarter of
2013 and timing of payments. The decrease in accrued salaries and wages
was primarily due to employee profit sharing payments.


    Capital and Investment
    Spending

                                         For the three months             

                                            ended June 30,                

                                            2013         2012       Change

    Fixed asset additions              $   (232)   $    (267)             

    Investments and other assets            (53)         (35)             

    Fixed assets, investments and          (285)        (302)
    other assets additions 

    Purchase of subsidiaries                           19             

    Proceeds from disposition                 30           25             

    Cash used for investment           $   (255)   $    (258)     $      3
    activities 

Fixed assets, investments and other assets additions

In the second quarter of 2013, we invested $232 million in fixed assets.
While investments were made to refurbish or replace assets consumed in
the normal course of business and for productivity improvements, a
large portion of the investment in the second quarter of 2013 was for
manufacturing equipment for programs that will be launching subsequent
to the second quarter of 2013.

In the second quarter of 2013, we invested $42 million in other assets
related primarily to fully reimbursable tooling costs for programs that
launched during the second quarter of 2013 or will be launching
subsequent to the second quarter of 2013, as well as $11 million in
equity accounted investments.

Purchase of subsidiaries

During the second quarter of 2012, we re-acquired an interior systems
operation located in Germany. This acquisition resulted in acquired
cash of $19 million (net of $1 million cash paid).

Proceeds from disposition

In the second quarter of 2013, the $30 million of proceeds include
normal course fixed and other asset disposals.


    Financing                                                              

                                          For the three months             

                                             ended June 30,                

                                            2013         2012        Change

    Increase (decrease) in bank         $     21   $      (23)
    indebtedness

    Repayments of debt                      (60)         (120)             

    Issues of debt                            25           158             

    Issues of Common Shares on                11
    exercise of stock options 

    Repurchase of Common Shares            (337)                       

    Contribution to subsidiaries               4
    by non-controlling interests  

    Dividends paid                          (72)          (64)             

    Cash used for financing             $  (408)   $      (49)     $  (359)
    activities 

During the second quarter of 2013, we repurchased 5.2 million Common
Shares for an aggregate purchase price of $337 million under our normal
course issuer bid.

Cash dividends paid per Common Share were $0.32 for the second quarter
of 2013, for a total of $72 million.


    Financing Resources                                                   

                                     As at              As at             

                                  June 30,       December 31,             

                                      2013               2012       Change

    Liabilities                                                           

      Bank indebtedness         $       54     $           71             

      Long-term debt due               211                249
      within one year  

      Long-term debt                    99                112             

                                       364                432             

    Non-controlling                     28                 29
    interest  

    Shareholders' equity             9,430              9,429             

    Total capitalization        $    9,822     $        9,890     $   (68)

Total capitalization decreased by $68 million to $9.82 billion at June
30, 2013 compared to $9.89 billion at December 31, 2012, primarily as a
result of a $68 million decrease in liabilities. The decrease in
liabilities relates primarily to lower bank term debt in our Rest of
Word segment and reduced bank indebtedness.

Shareholders’ equity increased $1 million as a result of net income
earned in the first six months of 2013 partially offset by:

        --  the repurchase of Common Shares in connection with our normal
            course issuer bid;
        --  the $224 million net unrealized loss on translation of net
            investment in foreign operations; and
        --  dividends paid during the first six months of 2013.

Cash Resources

During the second quarter of 2013, our cash resources increased by
$32 million to $1.28 billion as a result of the cash provided from
operating activities partially offset by cash used for investing and
financing activities, as discussed above. In addition to our cash
resources at June 30, 2013, we had term and operating lines of credit
totalling $2.57 billion of which $2.20 billion was unused and
available.

On June 20, 2013, we amended our existing $2.25 billion revolving credit
facility to become a five year facility with a maturity of June 20,
2018. The facility now includes a $200 million Asian tranche, a $50
million Mexican tranche and a tranche for Canada, U.S. and Europe,
which is fully transferable between jurisdictions and can be drawn in
U.S. Dollars, Canadian Dollars or euros.

Maximum Number of Shares Issuable

The following table presents the maximum number of shares that would be
outstanding if all of the outstanding options at August 8, 2013 were
exercised:


    Common Shares                          228,116,201

    Stock options (i)                        5,008,598

                                           233,124,799

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

Contractual Obligations and Off-Balance Sheet Financing

There have been no material changes with respect to the contractual
obligations requiring annual payments during the second quarter of 2013
that are outside the ordinary course of our business. Refer to our MD&A
included in our 2012 Annual Report.

RESULTS OF OPERATIONS – FOR THE SIX MONTHS ENDED JUNE 30, 2013

——————————


    Sales                                                                 

                                         For the six months               

                                            ended June 30,                

                                            2013        2012        Change

    Vehicle Production Volumes
    (millions of units)

      North America                        8.279       7.960     +      4%

      Europe                               9.805      10.342     -      5%

    Sales                                                                 

      External Production                                                 

        North America                  $   8,348   $   7,822     +      7%

        Europe                             5,006       4,571     +     10%

        Rest of World                      1,088         823     +     32%

      Complete Vehicle Assembly            1,594       1,244     +     28%

      Tooling, Engineering and             1,287         933     +     38%
      Other  

      Total Sales                      $  17,323   $  15,393     +     13%

External Production Sales – North America

External production sales in North America increased 7% or $526 million
to $8.35 billion for the six months ended June 30, 2013 compared to
$7.82 billion for the six months ended June 30, 2012. The increase in
external production sales is primarily as a result of:

        --  the launch of new programs during or subsequent to the six
            months ended June 30, 2012, including the:
      o Ford Fusion and Lincoln MKZ;
      o Honda Accord;
      o Ford C-MAX;
      o Tesla Model S;
      o Cadillac ATS; and
      o Nissan Pathfinder;
        --  acquisitions completed during or subsequent to the six months
            ended June 30, 2012 which positively impacted sales by $87
            million, including STT; and
        --  higher production volumes on certain existing programs.

These factors were partially offset by:

        --  programs that ended production during or subsequent to the six
            months ended June 30, 2012, including the:
      o Jeep Liberty;
      o Mazda 6; and
      o Chevrolet Colorado;
        --  a decrease in reported U.S. dollar sales primarily as a result
            of the weakening of the Canadian dollar against the U.S.
            dollar; and
        --  net customer price concessions subsequent to June 30, 2012.

External Production Sales – Europe

External production sales in Europe increased 10% or $435 million to
$5.01 billion for the six months ended June 30, 2013 compared to $4.57
billion for the six months ended June 30, 2012. The increase in
external production sales is primarily as a result of:

        --  the launch of new programs during or subsequent to the second
            quarter of 2012, including the:
      o MINI Paceman;
      o Mercedes-Benz A-Class;
      o Ford Transit Custom;
      o Ford Kuga;
      o Skoda Rapid and SEAT Toledo; and
      o Mercedes-Benz CLA-Class;
        --  acquisitions completed during or subsequent to the six months
            ended June 30, 2012, which positively impacted sales by $289
            million, including ixetic and BDW and the re-acquisition of an
            interior systems operation; and
        --  an increase in reported U.S. dollar sales primarily as a result
            of the strengthening of the euro against the U.S. dollar.

These factors were partially offset by lower production volumes on
certain existing programs.

External Production Sales – Rest of World

External production sales in Rest of World increased 32% or $265 million
to $1.09 billion for the six months ended June 30, 2013 compared to
$0.82 billion for the six months ended June 30, 2012, primarily as a
result of:

        --  the launch of new programs during or subsequent to the six
            months ended June 30, 2012, primarily in Brazil and China; and
        --  higher production volumes on certain existing programs.

These factors were partially offset by a $37 million decrease in
reported U.S. dollar sales as a result of the net weakening of foreign
currencies against the U.S. dollar, including the Brazilian real and
Argentine peso.


    Complete Vehicle Assembly Sales                                        

                                          For the six months               

                                             ended June 30,                

                                           2013          2012        Change

    Complete Vehicle Assembly           $  1,594   $    1,244     +     28%
    Sales 

    Complete Vehicle Assembly             76,044       62,999     +     21%
    Volumes (Units) 

Complete vehicle assembly sales increased 28%, or $350 million, to $1.59
billion for the six months ended June 30, 2013 compared to
$1.24 billion for the six months ended June 30, 2012 and assembly
volumes increased 21% or 13,045 units.

The increase in complete vehicle assembly sales is primarily as a result
of:

        --  an increase in assembly volumes for the Mercedes-Benz G-Class;
        --  the launch of the MINI Paceman during the fourth quarter of
            2012; and
        --  a $19 million increase in reported U.S. dollar sales as a
            result of the strengthening of the euro against the U.S.
            dollar.

These factors were partially offset by:

        --  the end of production of the Aston Martin Rapide at our Magna
            Steyr facility during the second quarter of 2012; and
        --  a decrease in assembly volumes for the:
      o MINI Countryman; and
      o Peugeot RCZ.

Tooling, Engineering and Other Sales

Tooling, engineering and other sales increased 38% or $354 million to
$1.29 billion for the six months ended June 30, 2012 compared to $0.93
billion for the six months ended June 30, 2012.

In the six months ended June 30, 2013, the major programs for which we
recorded tooling, engineering and other sales were the:

        --  GM full-size pickups and SUVs;
        --  Ford Transit;
        --  Ford Fusion;
        --  Skoda Octavia;
        --  Jeep Grand Cherokee;
        --  Qoros 3;
        --  MINI Paceman; and
        --  MINI Countryman.

In the six months ended June 30, 2012, the major programs for which we
recorded tooling, engineering and other sales were the:

        --  Ford Fusion;
        --  MINI Countryman;
        --  Qoros 3;
        --  Mercedes-Benz M-Class;
        --  Ford Escape;
        --  Chevrolet Silverado and GMC Sierra; and
        --  Mercedes-Benz GL-Class.

    Segment
    Analysis

                                              For the six months ended June 30, 

                                 External Sales                       Adjusted EBIT 

                         2013        2012       Change         2013      2012     Change

    North           $   8,877   $   8,190   $      687     $    803    $  820   $   (17)
    America

    Europe              7,260       6,319          941          192       128         64

    Rest of             1,174         872          302            2      (25)         27
    World  

    Corporate
    and                    12          12                    17       (4)         21
    Other  

    Total
    reportable

      segments      $  17,323   $  15,393   $    1,930     $  1,014    $  919   $     95

Excluded from Adjusted EBIT for the six months ended June 30, 2013 was
the $6 million net restructuring costs recorded in our Europe segment,
as discussed in the “Other Expense” section.

North America

Adjusted EBIT in North America decreased $17 million to $803 million for
the six months ended June 30, 2013 compared to $820 million for the six
months ended June 30, 2012 primarily as a result of:

        --  intangible asset amortization of $79 million related to the
            acquisition and re-measurement of E-Car;
        --  programs that ended production during or subsequent to the six
            months ended June 30, 2012;
        --  operational inefficiencies and other costs at certain
            facilities;
        --  increased commodity costs;
        --  a larger amount of employee profit sharing;
        --  higher affiliation fees paid to Corporate; and
        --  net customer price concessions subsequent to June 30, 2012.

These factors were partially offset by:

        --  margins earned on higher production sales;
        --  incremental margin earned on new programs that launched during
            or subsequent to the six months ended June 30, 2012;
        --  lower restructuring and downsizing costs;
        --  lower costs incurred in preparation for upcoming launches; and
        --  productivity and efficiency improvements at certain facilities.

Europe

Adjusted EBIT in Europe increased $64 million to $192 million for the
six months ended June 30, 2013 compared to $128 million for the six
months ended June 30, 2012 primarily as a result of:

        --  margins earned on higher production sales;
        --  incremental margin earned on new programs that launched during
            or subsequent to the six months ended June 30, 2012;
        --  acquisitions completed during or subsequent to the six months
            ended June 30, 2012, including ixetic;
        --  the benefit of restructuring and downsizing activities
            undertaken during or subsequent to the six months ended June
            30, 2012;
        --  lower costs incurred in preparation for upcoming launches;
        --  decreased commodity costs; and
        --  productivity and efficiency improvements at certain facilities.

These factors were partially offset by:

        --  favourable settlement of certain commercial items in the second
            quarter of 2012;
        --  a larger amount of employee profit sharing;
        --  higher restructuring and downsizing costs;
        --  the re-acquisition, in the second quarter of 2012, of an
            interior systems operation; and
        --  operational inefficiencies and other costs at certain
            facilities.

Rest of World

Rest of World Adjusted EBIT increased $27 million to $2 million for the
six months ended June 30, 2013 compared to a loss of $25 million for
the six months ended June 30, 2012 primarily as a result of:

        --  margins earned on higher production sales, including margins
            earned on the launch of new facilities and new programs;
        --  productivity and efficiency improvements at certain facilities;
            and
        --  lower restructuring and downsizing costs.

These factors were partially offset by:

        --  higher costs related to new facilities;
        --  higher affiliation fees paid to Corporate; and
        --  a larger amount of employee profit sharing.

Corporate and Other

Corporate and Other Adjusted EBIT increased $21 million to $17 million
for the six months ended June 30, 2013 compared to a loss of $4 million
for the six months ended June 30, 2012. The loss related to our equity
accounted investment in E-Car included in Corporate and Other was $22
million for the six months ended June 30, 2012. Excluding E-Car,
Corporate and Other Adjusted EBIT decreased $1 million to $17 million
for the six months ended June 30, 2013 compared to $18 million for the
six months ended June 30, 2012 primarily as a result of:

        --  the recovery of due diligence costs in the second quarter of
            2012;
        --  higher incentive compensation; and
        --  lower equity income.

These factors were partially offset by:

        --  $10 million of cash received related to the settlement of ABCP
            between the Investment Industry Regulatory Organization of
            Canada and financial institutions;
        --  an increase in affiliation fees earned from our divisions; and
        --  a loss on disposal of an investment in the second quarter of
            2012.

COMMITMENTS AND CONTINGENCIES

——————————

From time to time, we may be contingently liable for litigation, legal
and/or regulatory actions and proceedings and other claims.

Refer to note 15 of our unaudited interim consolidated financial
statements for the six months ended June 30, 2013, which describes
these claims.

For a discussion of risk factors relating to legal and other
claims/actions against us, refer to “Item 3. Description of the
Business – Risk Factors” in our Annual Information Form and Annual
Report on Form 40-F, each in respect of the year ended December 31,
2012.

CONTROLS AND PROCEDURES

——————————

There have been no changes in our internal controls over financial
reporting that occurred during the six months ended June 30, 2013 that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

FORWARD-LOOKING STATEMENTS

——————————

The previous discussion contains statements that constitute
“forward-looking information” or “forward-looking statements” within
the meaning of applicable securities legislation, including, but not
limited to, statements relating to: light vehicle production and
operating performance in our reporting segments; implementation of
improvement plans in our underperforming operations, and/or
restructuring actions, including but not limited to, Europe and South
America; improved future financial results in South America and Europe;
and future repurchases of Common Shares under our Normal Course Issuer
Bid. The forward-looking information in this MD&A is presented for the
purpose of providing information about management’s current
expectations and plans and such information may not be appropriate for
other purposes. 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, and other statements that are not recitations of
historical fact. We use words such as “may”, “would”, “could”,
“should”, “will”, “likely”, “expect”, “anticipate”, “believe”,
“intend”, “plan”, “forecast”, “outlook”, “project”, “estimate” and
similar expressions suggesting future outcomes or events to identify
forward-looking statements. Any such forward-looking statements are
based on information currently available to us, and 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, many of which are
beyond our control, and the effects of which can be difficult to
predict, including, without limitation: the potential for a
deterioration of economic conditions or an extended period of economic
uncertainty; declines in consumer confidence and the impact on
production volume levels; risks arising from the recession in Europe,
including the potential for a deterioration of sales of our three
largest German-based OEM customers; inability to sustain or grow our
business with OEMs; restructuring actions by OEMs, including plant
closures; restructuring, downsizing and/or other significant
non-recurring costs; continued underperformance of one or more of our
operating divisions; our ability to successfully launch material new or
takeover business; liquidity risks; bankruptcy or insolvency of a major
customer or supplier; a prolonged disruption in the supply of
components to us from our suppliers; scheduled shutdowns of our
customers’ production facilities (typically in the third and fourth
quarters of each calendar year); shutdown of our or our customers’ or
sub-suppliers’ production facilities due to a labour disruption; our
ability to successfully compete with other automotive suppliers; a
reduction in outsourcing by our customers or the loss of a material
production or assembly program; the termination or non-renewal by our
customers of any material production purchase order; a shift away from
technologies in which we are investing; risks arising due to the
failure of a major financial institution; impairment charges related to
goodwill, long-lived assets and deferred tax assets; shifts in market
share away from our top customers; shifts in market shares among
vehicles or vehicle segments, or shifts away from vehicles on which we
have significant content; risks of conducting business in foreign
markets, including China, India, South America and other
non-traditional markets for us; exposure to, and ability to offset,
volatile commodities prices; fluctuations in relative currency values;
our ability to successfully identify, complete and integrate
acquisitions or achieve anticipated synergies; our ability to conduct
appropriate due diligence on acquisition targets; ongoing pricing
pressures, including our ability to offset price concessions demanded
by our customers; warranty and recall costs; risk of production
disruptions due to natural disasters; pension liabilities; legal claims
and/or regulatory actions against us; our ability to understand and
compete successfully in non-automotive businesses in which we pursue
opportunities; 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;
inability to achieve future investment returns that equal or exceed
past returns; the unpredictability of, and fluctuation in, the trading
price of our Common Shares; work stoppages and labour relations
disputes; changes in credit ratings assigned to us; changes in laws and
governmental regulations; costs associated with compliance with
environmental laws and regulations; 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, we caution readers not to place undue
reliance on any forward-looking statements and readers should
specifically consider the various factors which could cause actual
events or results to differ materially from those indicated by such
forward-looking statements. Unless otherwise required by applicable
securities laws, we do not intend, nor do we undertake any obligation,
to update or revise any forward-looking statements to reflect
subsequent information, events, results or circumstances or otherwise.






MAGNA INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF INCOME

[Unaudited]

[U.S. dollars in millions, except per share figures]


                                           Three months ended             Six months ended 

                                                  June 30,                      June 30, 

                           Note               2013          2012           2013         2012

    Sales                              $     8,962    $    7,727      $  17,323    $  15,393

    Costs and
    expenses

      Cost of goods                          7,794         6,742         15,111       13,427
      sold

      Depreciation
      and                                      260           184            515          355
      amortization

      Selling,
      general and             11               410           368            777          766
      administrative

      Interest                                   4             5              8           10
      expense, net

      Equity income                           (49)          (42)           (94)         (74)

      Other expense,           2           --       --              6      --
      net

    Income from
    operations                                 543           470          1,000          909
    before income
    taxes

    Income taxes                               131           121            221          219

    Net income                                 412           349            779          690

    Net loss
    attributable to                              3       --              5            2
    non-controlling
    interests

    Net income
    attributable to
    Magna                               $      415    $      349      $     784    $     692
    International
    Inc.

    Earnings per               3
    Common Share:

      Basic                             $     1.80    $     1.50      $    3.39    $    2.98

      Diluted                           $     1.78    $     1.48      $    3.35    $    2.94

    Cash dividends
    paid per Common                     $    0.320    $    0.275      $   0.640    $   0.550
    Share

    Average number
    of Common Shares
    outstanding
    during

      the period [in           3
    millions]:

      Basic                                  230.6         232.5          231.5        232.5

      Diluted                                233.2         235.3          234.2        235.3

                                                     See accompanying notes






CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

[Unaudited]

[U.S. dollars in millions]


                                                 Three months          Six months ended
                                                   ended   

                                                  June 30,                   June 30, 

                               Note           2013         2012         2013        2012

    Net income                             $   412    $     349      $   779   $     690

    Other comprehensive
    (loss) income, net           13
    of tax: 

      Net unrealized
      loss on
      translation of net
      investment

        in foreign                            (91)        (194)                     (95)
      operations                                                       (224)

      Net unrealized
      loss on                                  (5)          (1)          (4)         (4)
      available-for-sale
      investments 

      Net unrealized
      (loss) gain on                          (36)         (14)         (28)          37
      cash flow hedges 

      Reclassification
      of net gain on
      cash flow hedges
      to

        net income                             (6)          (8)         (12)         (5)

      Reclassification
      of net loss on                             3      --            6     --
      pensions to net
      income 

    Other comprehensive                      (135)        (217)                     (67)
    loss                                                               (262)

    Comprehensive                              277          132          517         623
    income  

    Comprehensive loss
    attributable to                              3      --            5           1
    non-controlling
    interests  

    Comprehensive income
    attributable to
        Magna
    International Inc.                     $   280    $     132      $   522   $     624

                                                  See accompanying notes






MAGNA INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

[Unaudited]

[U.S. dollars in millions]


                                         Three months ended            Six months ended 

                                                June 30,                     June 30, 

                          Note             2013           2012          2013         2012

    Cash provided
    from (used
    for):

    OPERATING
    ACTIVITIES

    Net income                        $      412    $      349      $     779   $     690

    Items not
    involving                4               302           237            542         427
    current cash
    flows 

                                             714           586          1,321       1,117

    Changes in
    non-cash
    operating                4              (12)         (122)          (468)       (424)
    assets and
    liabilities 

    Cash provided
    from operating                           702           464            853         693
    activities  

    INVESTMENT
    ACTIVITIES

    Fixed asset                            (232)         (267)          (426)       (517)
    additions 

    Purchase of                          --            19        --        (23)
    subsidiaries  

    Increase in
    investments and                         (53)          (35)          (101)        (69)
    other assets 

    Proceeds from                             30            25             60          78
    disposition  

    Cash used for
    investing                              (255)         (258)          (467)       (531)
    activities 

    FINANCING
    ACTIVITIES

    Increase
    (decrease) in                             21          (23)            (5)        (22)
    bank
    indebtedness 

    Repayments of                           (60)         (120)          (101)       (215)
    debt  

    Settlement of                        --       --           (23)         (4)
    stock options 

    Issues of                                 25           158             57         272
    debt  

    Issue of Common                           11       --             50           3
    Shares 

    Repurchase of           12             (337)       --          (425)     --
    Common Shares 

    Contribution to
    subsidiaries by                            4       --              4     --
    non-controlling
    interests  

    Dividends paid                          (72)          (64)          (145)       (127)

    Cash used for
    financing                              (408)          (49)          (588)        (93)
    activities 

    Effect of
    exchange rate
    changes on cash                          (7)          (29)           (41)         (1)
    and cash
    equivalents 

    Net increase
    (decrease) in
    cash and cash
    equivalents

      during the                              32           128          (243)          68
    period  

    Cash and cash
    equivalents,                           1,247         1,265          1,522       1,325
    beginning of
    period  

    Cash and cash
    equivalents,                     $     1,279    $    1,393      $   1,279   $   1,393
    end of period  

                                                   See accompanying notes






MAGNA INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS

[Unaudited]

[U.S. dollars in millions]


                                                 As at               As at

                                              June 30,        December 31,

                                  Note            2013                2012

    ASSETS                                                                

    Current assets                                                        

    Cash and cash                    4      $    1,279      $        1,522
    equivalents 

    Accounts receivable                          5,552               4,774

    Inventories                      5           2,705               2,512

    Deferred tax assets                            203                 170

    Prepaid expenses and                           179                 157
    other  

                                                 9,918               9,135

    Investments                     14             398                 385

    Fixed assets, net                            5,143               5,273

    Goodwill                                     1,485               1,473

    Deferred tax assets                             89                  90

    Other assets                     6             661                 753

                                            $   17,694      $       17,109

    LIABILITIES AND
    SHAREHOLDERS' EQUITY

    Current liabilities                                                   

    Bank indebtedness                       $      54       $           71

    Accounts payable                            4,885                4,450

    Accrued salaries and                           631                 617
    wages  

    Other accrued                    7           1,453               1,185
    liabilities 

    Income taxes payable                             7                  93

    Deferred tax                                    20                  19
    liabilities  

    Long-term debt due               8             211                 249
    within one year 

                                                 7,261               6,684

    Long-term employee               9             544                 560
    benefit liabilities 

    Long-term debt                   8              99                 112

    Other long-term                 10             196                 154
    liabilities 

    Deferred tax                                   136                 141
    liabilities  

                                                 8,236               7,651

    Shareholders' equity                                                  

    Capital stock                                                         

      Common Shares                                                       

        [issued:
        228,068,985;                12           4,342               4,391
        December 31, 2012 -
        233,115,783] 

    Contributed surplus                             64                  80

    Retained earnings                            4,812               4,462

    Accumulated other               13             212                 496
    comprehensive income 

                                                 9,430               9,429

    Non-controlling                                 28                  29
    interests  

                                                 9,458               9,458

                                            $   17,694      $       17,109

                                        See accompanying notes






MAGNA INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

[Unaudited]

[U.S. dollars in millions]


                                          Common Shares                                                                              

                                                                                                                Non -
                                                   Stated      Contributed       Retained      AOCI        controlling          Total
                          Note         Number       Value          Surplus       Earnings        (i)          Interest         Equity

                                          [in
                                    millions]                                                                                        

    Balance, December                            $           $                 $             $           $               $
    31, 2012                            233.1       4,391               80          4,462        496                29          9,458

    Net income                                                                        784                          (5)            779

    Other comprehensive
    loss                                                                                       (262)                            (262)

    Issues of shares by
    subsidiaries                                                                                                     4              4

    Shares issued on
    exercise of stock                                                                                                                

      options                             1.7          68             (18)                                                         50

    Repurchase and
    cancellation under                                                                                                               

      normal course
    issuer bid              12          (6.8)       (129)                           (274)       (22)                            (425)

    Release of
    restricted stock                                    7              (7)                                                    --

    Stock-based
    compensation
    expense                 11                                          18                                                         18

    Settlement of stock
    options                 11                                         (9)           (10)                                        (19)

    Dividends paid                        0.1           5                           (150)                                       (145)

    Balance, June 30,                           $            $                 $             $          $                 $
    2013                                228.1       4,342               64          4,812        212                28          9,458

                                            Common Shares                                                                            

                                                                                                                Non -
                                                   Stated      Contributed       Retained      AOCI        controlling          Total
                          Note         Number       Value          Surplus       Earnings        (i)          Interest         Equity

                                          [in
                                    millions]                                                                                        

    Balance, December                            $           $                 $             $           $               $
    31, 2011                            233.3       4,373               63          3,317        422                27          8,202

    Net income                                                                        692                          (2)            690

    Other comprehensive
    loss                                                                                        (68)                 1           (67)

    Divestiture of
    subsidiaries                                                                                                   (4)            (4)

    Shares issued on
    exercise of stock                                                                                                                

      options                             0.1           4              (1)                                                          3

    Release of
    restricted stock                                    5              (5)                                                    --

    Stock-based
    compensation
    expense                 11                                          18                                                         18

    Settlement of stock
    options                 11                                         (1)            (2)                                         (3)

    Dividends paid                        0.1           2                           (129)                                       (127)

    Balance, June 30,                            $           $                 $             $           $                $
    2012                                233.5       4,384               74          3,878        354                22          8,712

    (i)     AOCI is Accumulated Other Comprehensive Income.

                                                                                    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. SIGNIFICANT ACCOUNTING POLICIES

[a] 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 United
States generally accepted accounting principles ["GAAP"] as further
discussed in note 1[b] and the accounting policies as set out in note 1
to the annual consolidated financial statements for the year ended
December 31, 2012.

The unaudited interim consolidated financial statements do not conform
in all respects to the requirements of GAAP for annual financial
statements. Accordingly, these unaudited interim consolidated financial
statements should be read in conjunction with the December 31, 2012
audited consolidated financial statements and notes included in the
Company’s 2012 Annual Report.

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 June 30, 2013 and the results of operations,
changes in equity and cash flows for the three-month and six-month
periods ended June 30, 2013 and 2012.

[b] Accounting Changes

Intangibles

In July 2012, the Financial Accounting Standards Board issued Accounting
Standards Update ["ASU"] 2012-02, “Intangibles – Goodwill and Other
(Topic 350): Testing Indefinite-Lived Intangible Assets for
Impairment”. ASU 2012-02 provides an option to first perform a
qualitative assessment to determine whether it is more-likely-than-not
that an indefinite-lived intangible asset is impaired. The adoption of
this ASU did not have a material impact on the Company’s consolidated
financial statements.

[c] Seasonality

The Company’s businesses are generally not seasonal. However, the
Company’s sales and profits are closely related to its automotive
customers’ vehicle production schedules. The Company’s largest North
American customers typically halt production for approximately two
weeks in July and one week in December. Additionally, many of the
Company’s customers in Europe typically shutdown vehicle production
during portions of August and one week in December.

2. OTHER EXPENSE, NET

During the first quarter of 2013, the Company recorded net restructuring
charges of $6 million [$6 million after tax] in Europe at its exterior
and interior systems operations.

3. EARNINGS PER SHARE


                                Three months ended         Six months ended

                                       June 30,                 June 30,

                                 2013         2012         2013        2012

    Basic earnings per
    Common Share:

    Net income
    attributable to
    Magna                     $   415    $     349      $    784    $   692
    International
    Inc. 

    Average number of
    Common Shares               230.6        232.5         231.5      232.5
    outstanding   

    Basic earnings per        $  1.80    $    1.50      $   3.39    $  2.98
    Common Share  

    Diluted earnings
    per Common Share:

    Net income
    attributable to
    Magna                     $   415    $     349      $    784    $   692
    International
    Inc. 

    Average number of
    Common Shares               230.6        232.5         231.5      232.5
    outstanding  

    Adjustments                                                            

      Stock options
      and restricted              2.6          2.8           2.7        2.8
      stock [a]   

                                233.2        235.3         234.2      235.3

    Diluted earnings          $  1.78    $    1.48      $   3.35    $  2.94
    per Common Share  

    [a]  For the three and six months ended June 30, 2013, diluted earnings
         per Common Share exclude nil [2012 - 2.6 million] and 0.2 million
         [2012 - 2.1 million] Common Shares issuable under the Company's
         Incentive Stock Option Plan because these options were not
         "in-the-money".

4. DETAILS OF CASH FROM OPERATING ACTIVITIES

[a] Cash and cash equivalents:


                                            June 30,        December 31,

                                                2013                2012

    Bank term deposits, bankers'          $    1,112     $         1,220
    acceptances and government paper

    Cash                                         167                 302

                                          $    1,279     $         1,522

[b] Items not involving current cash flows:


                                 Three months ended        Six months ended

                                        June 30,                 June 30,

                                  2013         2012         2013       2012

    Depreciation and           $   260    $     184      $   515   $    355
    amortization  

    Other non-cash                  58           48           82         67
    charges  

    Amortization of other
    assets included in              36           31           66         56
    cost of goods sold   

    Deferred income taxes          (3)           16         (27)         23

    Equity income                 (49)         (42)         (94)       (74)

                               $   302    $     237      $   542   $    427

[c] Changes in non-cash operating assets and liabilities:


                            Three months ended            Six months ended 

                                   June 30,                    June 30, 

                             2013            2012          2013        2012

    Accounts              $    26    $         56      $  (948)    $  (695)
    receivable 

    Inventories              (93)           (148)         (251)       (302)

    Prepaid expenses          (6)              17          (33)          18
    and other 

    Accounts                  197           (122)           525         307
    payable 

    Accrued salaries         (72)            (64)            29           9
    and wages 

    Other accrued            (53)              83           262         201
    liabilities 

    Income taxes              (9)              57          (51)          41
    payable  

    Deferred                  (2)             (1)           (1)         (3)
    revenue 

                          $  (12)    $      (122)      $  (468)    $  (424)

5. INVENTORIES

Inventories consist of:


                                        June 30,  December 31,

                                            2013          2012

    Raw materials and supplies          $    931  $        911

    Work-in-process                          276           260

    Finished goods                           300           283

    Tooling and engineering                1,198         1,058

                                        $  2,705  $      2,512

Tooling and engineering inventory represents costs incurred on tooling
and engineering services contracts in excess of billed and unbilled
amounts included in accounts receivable.

6. OTHER ASSETS

Other assets consist of:


                                                     June 30,  December 31,

                                                         2013          2012

    Preproduction costs related to long-term
    supply agreements with
      contractual guarantee for
    reimbursement                                    $    289  $        297

    Long-term receivables                                 115            95

    Patents and licences, net                              32            34

    Unrealized gain on cash flow hedges                    21            32

    E-Car intangible                                       79           158

    Other, net                                            125           137

                                                     $    661  $        753

7. WARRANTY

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


                                            2013    2012

    Balance, beginning of period          $   94  $   76

    Expense, net                               9      10

    Settlements                              (5)     (5)

    Foreign exchange and other                 8       2

    Balance, March 31                        106      83

    Expense, net                              11       9

    Settlements                              (6)     (7)

    Foreign exchange and other               (9)     (1)

    Balance, June 30                      $  102  $   84

8. LONG-TERM DEBT

On June 20, 2013, the Company amended its existing $2.25 billion
revolving credit facility to become a five year facility with a
maturity of June 20, 2018. The facility now includes a $200 million
Asian tranche, a $50 million Mexican tranche and a tranche for Canada,
U.S. and Europe, which is fully transferable between jurisdictions and
can be drawn in U.S. dollars, Canadian dollars or euros.

9. LONG-TERM EMPLOYEE BENEFIT LIABILITIES

The Company recorded long-term employee benefit expenses as follows:


                                 Three months ended      Six months ended 

                                        June 30,               June 30, 

                                  2013         2012     2013          2012

    Defined benefit pension plan $   4  $         3    $   8  $          5
    and other  

    Termination and long service     6            7       14            15
    arrangements   

    Retirement medical benefit       1            1        1             1
    plan   

                                 $  11  $        11    $  23  $         21

10. OTHER LONG-TERM LIABILITIES

Other long-term liabilities consist of:


                                               June 30, December 31,

                                                   2013         2012

    Long-term portion of income taxes          $    121  $        94
    payable 

    Asset retirement obligation                      38           39

    Long-term portion of fair value of               28           10
    hedges 

    Deferred revenue                                  9           11

                                               $    196  $       154

11. STOCK-BASED COMPENSATION

[a] Incentive Stock Option Plan

The following is a continuity schedule of options outstanding [number of
options in the table below are expressed in whole numbers]:


                                     2013                               2012 

                 Options outstanding                            Options
                                                            outstanding

                                           Number                             Number
                    Number  Exercise   of options       Number Exercise   of options
                of options    price   exercisable           of   price   exercisable
                                 (i)                   options      (i)

    Beginning    6,623,242     35.39    3,227,574    6,867,367    31.54    2,066,700
    of period 

    Granted      1,060,000     57.02      --    1,341,500    48.22      --

    Exercised                  29.76  (2,178,383)    (321,454)    25.83    (321,454)
    (ii)       (2,178,383)

    Cancelled     (37,500)     50.17     (20,000)      --  --      --

    Vested         --   --    2,105,501      --  --    2,366,667

    March 31     5,467,359     41.73    3,134,692    7,887,413    34.61    4,111,913

    Granted        --   --      --       47,500    48.22      --

    Exercised    (329,881)     37.05    (329,881)      (5,000)    32.75      (5,000)

    Cancelled     (81,665)     52.05     (41,667)     (46,966)    57.14     (36,966)

    Vested         --   --       30,002      --  --      --

    June 30      5,055,813     41.87    2,793,146    7,882,947    34.56    4,069,947

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

    (ii)     On February 27, 2013, 133,333 options were exercised on a
             cashless basis in accordance with the applicable stock option
             plans.  On exercise, cash payments totalling $3 million were
             made to the stock option holder. 

             On March 14, 2013, the Company's Honorary Chairman and
             Founder, Mr. Stronach exercised 716,666 options on a cashless
             basis in accordance with the applicable stock option plans. On
             exercise, cash payments totalling $20 million were made to Mr.
             Stronach.

             All cash payments were calculated usingthe difference between
             the aggregate fair market value of the Option Shares based on
             the closing price of the Company's Common Shares on the
             Toronto Stock Exchange ["TSX"] on the date of exercise and the
             aggregate Exercise Price of all such options surrendered.

The weighted average assumptions used in measuring the fair value of
stock options granted or modified and the compensation expense recorded
in selling, general and administrative expenses are as follows:


                           Three months ended            Six months ended

                                   June 30,                   June 30,

                               2013        2012           2013         2012

    Risk free interest      --       2.23%          1.32%        2.23%
    rate

    Expected dividend       --       2.00%          2.00%        2.00%
    yield 

    Expected                --         43%           34%           43%
    volatility 

    Expected time           --   4.5 years      4.5 years    4.5 years
    until exercise 

    Weighted average
    fair value of
    options
      granted or
    modified in period
    [Cdn$]              $  --  $     12.11    $     14.02  $     15.37

[b] Long-term retention program

The following is a continuity of the stock that has not been released to
the executives and is reflected as a reduction in the stated value of
the Company’s Common Shares [number of Common Shares in the table below
are expressed in whole numbers]:


                                             2013                 2012 

                                       Number  Stated       Number   Stated

                                    of shares   value    of Shares    value

    Awarded and not released,         882,988  $   30    1,026,304  $    35
    beginning of period 

    Release of restricted stock     (152,512)     (5)    (143,316)      (5)

    Awarded and not released, March   730,476  $   25      882,988  $    30
    31 and June 30

[c] Restricted stock unit program

The following is a continuity schedule of restricted stock units
["RSUs"] and Independent Director stock units ["DSUs"] outstanding
[number of stock units in the table below are expressed in whole
numbers]:


                                              2013                                          2012

                     Equity   Liability  Liability                 Equity   Liability  Liability
                 classified  classified classified             classified  classified classified
                       RSUs        RSUs       DSUs     Total         RSUs        RSUs       DSUs     Total

    Balance,        605,430      20,099    206,923   832,452      367,726      29,806    198,446   595,978
    beginning of
    period  

    Granted          70,636      14,825     10,013    95,474       94,238      15,364      8,565   118,167

    Dividend            415         194      1,206     1,815          467         263      1,201     1,931
    equivalents

    Released        (8,259)     --  (113,007)                (8,259)     --    --   (8,259)
                                                   (121,266)

    Balance,        668,222      35,118    105,135   808,475      454,172      45,433    208,212   707,817
    March 31 

    Granted          71,391     --      7,523    78,914      101,672     --      8,838   110,510

    Dividend            348         164        626     1,138          558         325      1,522     2,405
    equivalents 

    Released       (10,386)     --    --  (10,386)     (10,123)     --    --  (10,123)

    Balance,        729,575      35,282    113,284   878,141      546,279      45,758    218,572   810,609
    June 30

[d] Compensation expense related to stock-based compensation

Stock-based compensation expense recorded in selling, general and
administrative expenses related to the above programs is as follows:


                                   Three months ended     Six months ended

                                          June 30,              June 30,

                                    2013         2012      2013       2012

    Incentive Stock Option Plan    $   4  $         5     $   8  $       9

    Long-term retention                1            1         2          2

    Restricted stock unit              5            4         8          8

                                      10           10        18         19

    Fair value adjustment for          2          (1)         4          2
    liability classified DSUs 

    Total stock-based compensation $  12  $         9     $  22  $      21
    expense 

12. COMMON SHARES


    [a]  During the six months ended June 30, 2013, the Company purchased
         for cancellation 6,787,803 Common Shares under a normal course
         issuer bid for cash consideration of $425 million.

    [b]  The following table presents the maximum number of shares that
         would be outstanding if all the dilutive instruments outstanding
         at August 8, 2013 were exercised or converted:

    Common Shares                      228,116,201

    Stock options (i)                    5,008,598

                                       233,124,799

    (i)  Options to purchase Common 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.

13. ACCUMULATED OTHER COMPREHENSIVE INCOME

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


                                                         2013          2012

    Accumulated net unrealized gain on translation of
    net investment in foreign operations

      Balance, beginning of period                    $   629   $       547

      Net unrealized (loss) gain on translation of      (133)            98
      net investment in foreign operations 

      Repurchase of shares under normal course issuer     (5)       --
      bid

      Balance, March 31                                   491           645

      Net unrealized loss on translation of net          (91)         (194)
      investment in foreign operations

      Repurchase of shares under normal course issuer    (17)       --
      bid 

      Balance, June 30                                    383           451

    Accumulated net unrealized (loss) gain on cash
    flow hedges (i)

      Balance, beginning of period                         34          (23)

      Net unrealized gain on cash flow hedges               8            51

      Reclassification of net (gain) loss on cash         (6)             3
      flow hedges to net income 

      Balance, March 31                                    36            31

      Net unrealized loss on cash flow hedges            (36)          (14)

      Reclassification of net gain on cash flow           (6)           (8)
      hedges to net income 

      Balance, June 30                                    (6)             9

    Accumulated net unrealized (loss) gain on
    available-for-sale investments

      Balance, beginning of period                          1             5

      Net unrealized gain (loss) on investments             1           (3)

      Balance, March 31                                     2             2

      Net unrealized loss on investments                  (5)           (1)

      Balance, June 30                                    (3)             1

    Accumulated net unrealized loss on long-term
    employee benefit liabilities (ii)

      Balance, beginning of period                      (168)         (107)

      Reclassification of net loss on pensions to net       3       --
      income 

      Balance, March 31                                 (165)         (107)

      Reclassification of net loss on pensions to net       3       --
      income  

      Balance, June 30                                  (162)         (107)

    Total accumulated other comprehensive income      $   212   $       354

(i) The amount of income tax obligation that has been netted in the
accumulated net unrealized gain on cash flow hedges is as follows:


                                                          2013    2012

    Balance, beginning of period                       $  (13)  $   12

    Net unrealized gain                                    (4)    (21)

    Reclassifications of net gain (loss) on cash flow        2     (1)
    hedges to net income

    Balance, March 31                                     (15)    (10)

    Net unrealized loss                                     13       7

    Reclassifications of net gain to net income              3       2

    Balance, June 30                                   $     1  $  (1)

(ii) The amount of income tax benefit that has been netted in the
accumulated net unrealized loss on long-term employee benefit
liabilities is as follows:


                                                        2013   2012

    Balance, beginning of period                        $  36  $  24

    Reclassification of net loss to net income            (1)     --

    Balance, March 31                                     35     24

    Reclassification of net (loss) gain to net income     (1)      1

    Balance, June 30                                    $  34  $  25

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

14. FINANCIAL INSTRUMENTS

[a] The Company’s financial assets and financial liabilities consist of
the following:


                                                     June 30,  December 31,

                                                         2013          2012

    Held for trading                                                       

      Cash and cash equivalents                      $  1,279  $      1,522

      Investment in asset-backed commercial paper          91            90

                                                     $  1,370  $      1,612

    Held to maturity investments                                           

      Severance investments                          $      5  $          8

    Available-for-sale                                                     

      Equity investments                             $      4  $          9

    Loans and receivables                                                  

      Accounts receivable                            $  5,552  $      4,774

      Long-term receivables included in other             115            95
      assets 

                                                     $  5,667  $      4,869

    Other financial liabilities                                            

      Bank indebtedness                              $     54  $         71

      Long-term debt (including portion due within        310           361
      one year)

      Accounts payable                                  4,885         4,450

                                                     $  5,249  $      4,882

                                                  June 30,  December 31,

                                                      2013          2012

    Derivatives designated as effective hedges,
    measured at fair value

      Foreign currency contracts                                        

        Prepaid expenses                        $       33  $         37

        Other assets                                    21            32

        Other accrued liabilities                     (29)          (11)

        Other long-term liabilities                   (27)           (9)

                                                       (2)            49

      Natural gas contracts                                             

        Prepaid expenses                           --            2 

        Other accrued liabilities                      (2)           (3)

        Other long-term liabilities                    (1)           (1)

                                                       (3)           (2)

                                                $      (5)  $         47

[b] Fair value

The Company determined the estimated fair values of its financial
instruments based on valuation methodologies it believes are
appropriate; however, considerable judgment is required to develop
these estimates. Accordingly, these estimated fair values are not
necessarily indicative of the amounts the Company could realize in a
current market exchange. The estimated fair value amounts can be
materially affected by the use of different assumptions or
methodologies. The methods and assumptions used to estimate the fair
value of financial instruments are described below:

Cash and cash equivalents, accounts receivable, bank indebtedness and
accounts payable.

Due to the short period to maturity of the instruments, the carrying
values as presented in the interim consolidated balance sheets are
reasonable estimates of fair values.

Investments

At June 30, 2013, the Company held Canadian third party asset-backed
commercial paper ["ABCP"] with a face value of Cdn$107 million
[December 31, 2012 - Cdn$107 million]. The carrying value and estimated
fair value of this investment was Cdn$95 million [December 31, 2012 -
Cdn$90 million]. As fair value information is not readily determinable
for the Company’s investment in ABCP, the fair value was based on a
valuation technique estimating the fair value from the perspective of a
market participant.

At June 30, 2013, the Company held available-for-sale investments in
publicly traded companies. The carrying value and fair value of these
investments was $4 million, which was based on the closing share price
of the investments on June 30, 2013.

Term debt

The Company’s term debt includes $211 million due within one year. Due
to the short period to maturity of this debt, the carrying value as
presented in the interim consolidated balance sheets is a reasonable
estimate of its fair value.

[c] Credit risk

The Company’s financial assets that are exposed to credit risk consist
primarily of cash and cash equivalents, accounts receivable, held to
maturity investments, and foreign exchange forward contracts with
positive fair values.

The Company’s held for trading investments include an investment in
ABCP. Given the continuing uncertainties regarding the value of the
underlying assets, the amount and timing over cash flows and the risk
of collateral calls in the event that spreads widened considerably, the
Company could be exposed to further losses on its investment.

Cash and cash equivalents, which consists of short-term investments, are
only invested in governments, bank term deposits and bank commercial
paper with an investment grade credit rating. Credit risk is further
reduced by limiting the amount which is invested in certain governments
or any major financial institution.

The Company is also exposed to credit risk from the potential default by
any of its counterparties on its foreign exchange forward contracts.
The Company mitigates this credit risk by dealing with counterparties
who are major financial institutions that the Company anticipates will
satisfy their obligations under the contracts.

In the normal course of business, the Company is exposed to credit risk
from its customers, substantially all of which are in the automotive
industry and are subject to credit risks associated with the automotive
industry. For both the three and six-month periods ended June 30, 2013,
sales to the Company’s six largest customers represented 83% of the
Company’s total sales, and substantially all of the Company’s sales are
to customers in which it has ongoing contractual relationships.

[d] Interest rate risk

The Company is not exposed to significant interest rate risk due to the
short-term maturity of its monetary current assets and current
liabilities. In particular, the amount of interest income earned on the
Company’s cash and cash equivalents is impacted more by the investment
decisions made and the demands to have available cash on hand, than by
movements in the interest rates over a given period.

In addition, the Company is not exposed to interest rate risk on its
term debt instruments as the interest rates on these instruments are
fixed.

[e] Currency risk and foreign exchange contracts

The Company operates globally, which gives rise to a risk that its
earnings and cash flows may be adversely impacted by fluctuations in
foreign exchange rates. The Company is exposed to fluctuations in
foreign exchange rates when manufacturing facilities have committed to
the delivery of products for which the selling price has been quoted in
currencies other than the facilities’ functional currency, or when
materials and equipment are purchased in currencies other than the
facilities’ functional currency.

In an effort to manage this net foreign exchange exposure, the Company
uses foreign exchange forward contracts for the sole purpose of hedging
certain of the Company’s future committed Canadian dollar, U.S. dollar
and euro outflows and inflows. All derivative instruments, including
foreign exchange contracts, are recorded on the interim consolidated
balance sheet at fair value. To the extent that cash flow hedges are
effective, the change in their fair value is recorded in other
comprehensive income; any ineffective portion is recorded in net
income. Amounts accumulated in other comprehensive income are
reclassified to net income in the period in which the hedged item
affects net income.

At June 30, 2013, the Company had outstanding foreign exchange forward
contracts representing commitments to buy and sell various foreign
currencies. Significant commitments are as follows:


                                     Buys    Sells

    For Canadian dollars                          

      U.S. amount                     224    1,036

      euro amount                      56        7

    For U.S. dollars                              

      Peso amount                   5,023      521

    For euros                                     

      U.S. amount                      59      198

      GBP amount                       66       47

      Czech Koruna amount           4,444  --

      Polish Zlotys amount            232  --

Forward contracts mature at various dates through 2018. Foreign currency
exposures are reviewed quarterly.

As a result of the hedging programs employed, foreign currency
transactions in any given period may not be fully impacted by movements
in exchange rates. As at June 30, 2013, the net foreign exchange
exposure was not material.

15. CONTINGENCIES

[a] In the ordinary course of business activities, the Company may be
contingently liable for litigation and claims with customers,
suppliers, former employees and other parties. In addition, the Company
may be, or could become, liable to incur environmental remediation
costs to bring environmental contamination levels back within
acceptable legal limits. On an ongoing basis, the Company assesses the
likelihood of any adverse judgments or outcomes to these matters as
well as potential ranges of probable costs and losses.

A determination of the provision required, if any, for these
contingencies is made after analysis of each individual issue. The
required provision may change in the future due to new developments in
each matter or changes in approach such as a change in settlement
strategy in dealing with these matters.

In November 1997, the Company and two of its subsidiaries were sued by
KS Centoco Ltd., an Ontario-based steering wheel manufacturer in which
the Company has a 23% equity interest, and by Centoco Holdings Limited,
the owner of the remaining 77% equity interest in KS Centoco Ltd. In
March 1999, the plaintiffs were granted leave to make substantial
amendments to the original statement of claim in order to add several
new defendants and claim additional remedies, and in February 2006, the
plaintiffs further amended their claim to add an additional remedy. The
amended statement of claim alleges, among other things:

        --  breach of fiduciary duty by the Company and two of its
            subsidiaries;

        --  breach by the Company of its binding letter of intent with KS
            Centoco Ltd., including its covenant not to have any interest,
            directly or indirectly, in any entity that carries on the
            airbag business in North America, other than through MST
            Automotive Inc., a company to be 77% owned by Magna and 23%
            owned by Centoco Holdings Limited;

        --  the plaintiff's exclusive entitlement to certain airbag
            technologies in North America pursuant to an exclusive licence
            agreement, together with an accounting of all revenues and
            profits resulting from the alleged use by the Company, TRW Inc.
            ["TRW"] and other unrelated third party automotive supplier
            defendants of such technology in North America;

        --  a conspiracy by the Company, TRW and others to deprive KS
            Centoco Ltd. of the benefits of such airbag technology in North
            America and to cause Centoco Holdings Limited to sell to TRW
            its interest in KS Centoco Ltd. in conjunction with the
            Company's sale to TRW of its interest in MST Automotive GmbH
            and TEMIC Bayern-Chemie Airbag GmbH; and

        --  oppression by the defendants.

The plaintiffs are seeking, amongst other things, damages of
approximately Cdn$3.5 billion. Document production, completion of
undertakings and examinations for discovery are substantially complete,
although limited additional examinations for discovery may occur. A
trial is not expected to commence until late 2014, at the earliest. The
Company believes it has valid defences to the plaintiffs’ claims and
therefore intends to continue to vigorously defend this case.
Notwithstanding the amount of time which has transpired since the claim
was filed, these legal proceedings remain at an early stage and,
accordingly, it is not possible to predict their outcome.

[b] A putative class action lawsuit alleging violations of the United
States Securities Exchange Act of 1934 was filed in May 2012 in the
United States District Court, Southern District of New York, against
the Company, as well as its Chief Executive Officer and Chief Financial
Officer, as well as its founder. Boilermaker-Blacksmith National
Pension Trust ["BBNPT"] was appointed the lead plaintiff on an
uncontested motion in July 2012. BBNPT subsequently filed an amended
complaint in October 2012, following which the defendants filed a
motion seeking dismissal of the lawsuit. By March 12, 2013, the motion
was fully briefed and submitted to the Court and the parties are now
awaiting the Court’s decision. The defendants believe the lawsuit is
without merit and therefore intend to vigorously defend the case. Given
the early stages of the legal proceedings, it is not possible to
predict the outcome of the claim.

[c] In certain circumstances, the Company is at risk for warranty costs
including product liability and recall costs. Due to the nature of the
costs, the Company makes its best estimate of the expected future costs
[note 7]; however, the ultimate amount of such costs could be materially
different. The Company continues to experience increased customer
pressure to assume greater warranty responsibility. Currently, under
most customer agreements, the Company only accounts for existing or
probable claims. Under certain complete vehicle engineering and
assembly contracts, the Company records an estimate of future
warranty-related costs based on the terms of the specific customer
agreements, and the specific customer’s warranty experience.

16. SEGMENTED INFORMATION

Given the differences between the regions in which the Company operates,
Magna’s operations are segmented on a geographic basis between North
America, Europe and Rest of World. Consistent with the above, the
Company’s internal financial reporting separately segments key internal
operating performance measures between North America, Europe and Rest
of World for purposes of presentation to the chief operating decision
maker to assist in the assessment of operating performance, the
allocation of resources, and the long-term strategic direction and
future global growth of the Company.

The Company’s chief operating decision maker uses Adjusted EBIT as the
measure of segment profit or loss, since management believes Adjusted
EBIT is the most appropriate measure of operational profitability or
loss for its reporting segments. Adjusted EBIT represents income from
operations before income taxes; interest expense, net; and other
expense, net.

The accounting policies of each segment are the same as those set out
under “Significant Accounting Policies” [note 1] and intersegment sales and transfers are accounted for at fair market
value.

The following tables show segment information for the Company’s
reporting segments and a reconciliation of Adjusted EBIT to the
Company’s consolidated income from operations before income taxes:


                                           Three months ended                                   Three months ended 

                                               June 30, 2013                                       June 30, 2012 

                                                                Fixed                                                Fixed
                        Total    External  Adjusted           assets,        Total    External  Adjusted           assets,
                        sales       sales      EBIT               net        sales       sales      EBIT               net

    North America                                                                                                         

      Canada         $  1,742  $    1,614                 $       608    $   1,642  $    1,540                 $       565

      United States     2,164       2,040                       1,020        1,907       1,784                         824

      Mexico            1,013         935                         573          842         787                         530

      Eliminations      (300)     --                     --        (258)     --                     --

                        4,619       4,589    $  422             2,201        4,133       4,111  $    415             1,919

    Europe                                                                                                                

      Western Europe                                                                                                      

        (excluding      3,006       2,936                       1,411        2,545       2,501                       1,207
      Great
      Britain)  

      Great               277         275                          57          244         243                          53
      Britain  

      Eastern             619         544                         569          463         422                         518
      Europe  

      Eliminations       (96)     --                     --         (50)     --                     --

                        3,806       3,755       120             2,037        3,202       3,166        65             1,778

    Rest of World         645         609         2               680          469         444      (16)               549

    Corporate and       (108)           9         3               225         (77)           6        11               254
    Other (i) 

    Total reportable    8,962       8,962       547             5,143        7,727       7,727       475             4,500
    segments  

    Interest                                    (4)                                                  (5)
    expense,
    net     

                     $  8,962  $    8,962    $  543             5,143    $   7,727  $    7,727  $    470             4,500

    Current                                                     9,918                                                9,241
    assets      

    Investments,
    goodwill,
      deferred tax
    assets, and
      other
    assets                                                      2,633                                                2,247

    Consolidated                                          $    17,694                                          $    15,988
    total assets    

    (i)     For the three months ended June 30, 2012, Corporate and Other
            includes $10 million equity loss related to the Company's
            investment in E-Car.

                                             Six months ended                                           Six months ended 

                                               June 30, 2013                                              June 30, 2012 

                                                                Fixed                                                         Fixed

                         Total    External   Adjusted         assets,           Total    External           Adjusted        assets,

                         sales       sales       EBIT             net           sales       sales               EBIT            net

    North America                                                                                                                  

      Canada         $   3,423  $    3,167                 $      608       $   3,249  $    3,038                      $        565

      United States      4,118       3,883                      1,020           3,827       3,582                               824

      Mexico             1,978       1,827                        573           1,676       1,570                               530

      Eliminations       (588)     --                    --           (517)     --                           --

                         8,931       8,877   $    803           2,201           8,235       8,190  $             820          1,919

    Europe                                                                                                                         

      Western Europe                                                                                                               

        (excluding       5,908       5,771                      1,411           5,045       4,960                             1,207
      Great
      Britain)  

      Great                495         491                         57             511         508                                53
      Britain  

      Eastern            1,146         998                        569             932         851                               518
      Europe  

      Eliminations       (191)     --                    --            (98)     --                           --

                         7,358       7,260        192           2,037           6,390       6,319                128          1,778

    Rest of World        1,239       1,174          2             680             922         872               (25)            549

    Corporate and        (205)          12         17             225           (154)          12                (4)            254
    Other (i) 

    Total reportable    17,323      17,323      1,014           5,143          15,393      15,393                919          4,500
    segments  

    Other expense,                                (6)                                                        --
    net    

    Interest                                      (8)                                                           (10)
    expense,
    net     

                     $  17,323  $   17,323   $  1,000           5,143       $  15,393  $   15,393  $             909          4,500

    Current                                                     9,918                                                         9,241
    assets    

    Investments,
    goodwill
      deferred tax
    assets and
      other
    assets                                                      2,633                                                         2,247

    Consolidated                                           $   17,694                                                  $     15,988
    total assets   

        For the six months ended June 30, 2012, Corporate and Other
    (i) includes $22 million equity loss related to the Company's
        investment in E-Car.

17. COMPARATIVE FIGURES

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

SOURCE Magna International Inc.


Source: PR Newswire