TORONTO - After a horrendous 2008 that all but scrapped its profitability, Magna International Inc. (TSX:MG:A) is braced for a crash in 2009, including the possibility that the wheels might come off one or more of its biggest customers.

The 74,000-employee auto parts maker suffered a fourth-quarter loss of US$148 million, paring its full-year earnings to a bare $71 million, down 89 per cent from $663 million in 2007.

Magna, headquartered north of Toronto but with 240 factories in 25 countries and its accounts kept in American dollars, said annual sales declined nine per cent to $23.7 billion from $26.1 billion.

"While 2008 was a difficult year for the industry, 2009 is expected to be worse," co-CEO Donald Walker told a conference call Tuesday.

"Most industry observers expect light vehicle sales and production in most large automotive markets to be considerably weaker in 2009 than last year. The first half of 2009 is expected to be particularly challenging, as many OEMs (original equipment makers) struggle to reduce dealer inventories."

Magna's fourth-quarter sales sagged 29 per cent to $4.8 billion from $6.8 billion. The three-month net loss of $148 million was worth $1.33 per share, compared with year-ago earnings of $28 million or 24 cents per share.

Walker observed that "2009 is expected to include massive industry restructuring, including a number of OEMs and auto suppliers," but "our solid financial condition and net cash position of $1.5 billion with strong cash flow generation should allow us to benefit in the medium term from potential industry changes, including supplier consolidation."

He added: "At some point beyond 2009, we expect the global auto industry to return to growth, and we anticipate that with the actions we are taking in our traditional markets, together with our planned growth in new markets, we will remain a key supplier to the automotive industry."

However, Magna's long and dreary year-end report also noted that "the continuation of current economic conditions for an extended period of time could have a material adverse effect on our profitability and financial condition," and "in response to current industry conditions, it is likely that we may further rationalize some of our production facilities."

Management recently announced the closure of the New Process Gear plant in Syracuse, N.Y., eliminating 1,400 jobs, after workers refused to accept further rollbacks in wages and working conditions. Walker said the financial impact of this closure has not been finalized.

Camada's largest auto parts maker has also recently closed factories in Ontario and Atlantic Canada to cope with a slumping business.

Magna noted that total vehicle production in 2008 fell 16 per cent in North America to 12.6 million units and eight per cent in Europe to 14.6 million, with much of the pain concentrated on the Detroit Three automakers -- GM, Ford and Chrysler -- which are the company's biggest customers.

Partly offsetting this were increases in Magna's average content per vehicle, by one per cent to $867 in North America and 12 per cent to $486 in Europe. But fourth-quarter content per vehicle fell four per cent in North America and nine per cent in Europe, while carmakers on both continents cut production by one-quarter compared with a year earlier.

With General Motors and Chrysler dependent on billions of dollars of taxpayer support to avoid collapse, the Magna statement observed that "the bankruptcy of one or more of our major customers remains a significant negative risk ... although the extent of risk is difficult to estimate."

However, Walker said the massive government support to those and other automakers is "encouraging."

Magna's parts sales in 2008 fell 16 per cent in North America to $10.8 billion, but rose two per cent in Europe to $7.1 billion and 25 per cent in the rest of the world, primarily Asia, to $515 million. The company's vehicle-assembly operation, centred in Austria, fell 18 per cent to $3.3 billion, but engineering and other revenue grew seven per cent to $1.9 billion.

"In general, everybody's trying to reduce costs," Walker said, but "the supply base right now is so weak, I don't think you can have across-the-board price reductions."

Annual operating profit fell 72 per cent to $328 million as Magna's effective income tax rate bulged to 83 per cent from 43 per cent, primarily because of U.S. losses that didn't quality for tax writeoffs.

The year also included $283 million in asset writedowns, mainly in the United States and Canada. Of this, $189 million was at powertrain operations, particularly the Syracuse plant, which suffered from the dramatic market shift away from four-wheel-drive pickup trucks and SUVs.

Restructuring and rationalization costs for the year were $84 million in North America, with $40 million to $60 million more to come this year from cutbacks initiated in 2008.

The company cautioned: "We cannot predict when the recession will end or what our prospects will be once the recession has ended and markets resume to more normal conditions."

Despite the gloomy outlook, Magna's fourth-quarter sales were more than $100 million higher than analysts had expected and the company maintained its dividend. Magna stock rose $1.07 to C$33.22 on the TSX, with a 52-week high and low of $81.66 and $29.13.