Linamar s Earnings Improvement Accelerating with Continued Cash Generation and Dividends Restored to $0.06 per Share

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1 Page 1 of 46 Linamar s Earnings Improvement Accelerating with Continued Cash Generation and Dividends Restored to $0.06 per Share Sales increase 7.3% over the third quarter of 2009 ( Q ); Reported adjusted net earnings of $10.7 million or $0.17 per share; Powertrain/Driveline segment adjusted operating earnings increased $11.7 million from the third quarter of 2009 and $17.5 million from the fourth quarter of 2008 ( Q ); New business wins YTD with start of production by the end of 2010 now more than $375 million; Annual North American content per vehicle up 28.8% in 2009 from 2008; and Debt net of cash reduced by a further $46.1 million from September 30, 2009 for a total annual reduction of $161.7 million in Three Months Ended Dec 31 Sep 30 Dec (in millions of dollars, except earnings per share figures) $ $ $ Sales $ $ $ Operating Earnings (Loss) Powertrain/Driveline (6.9 ) Industrial (21.0 ) (8.5 ) 1.0 Operating Earnings (Loss) $ 7.8 $ 3.5 $ (5.9 ) Unusual Items Operating Earnings (Loss) Adjusted $ 13.2 $ 5.8 $ 10.0 Net Earnings (Loss) $ 14.6 $ (0.5 ) $ (2.6 ) Unusual Items (3.9 ) Net Earnings (Loss) Adjusted Extraordinary Items Net Earnings (Loss) Adjusted before Extraordinary Items Earnings (Loss) per Share 0.22 (0.01) (0.04) Earnings (Loss) per Share - Adjusted Extraordinary Items 0.17 Earnings (Loss) per Share - Adjusted before Extraordinary Items Unusual Items Taxable Items before Tax 1) Closure announcement of Invar $ 6.4 $ - $ - 2) Inventory provision related to the global economic slow down ) Capital asset impairments due to market conditions ) Access equipment contract converted from previous period sale to a rental contract ) Change in key accounting estimates (12.3) - - 6) Severance related to the global economic slow down Tax Impact (1.6) (0.7 ) (1.6 ) Non-Taxable Items 7) Rate changes on future income taxes in Canada $ (3.7) - - 8) Utilization of previously unrecognized tax losses $ (4.0) - - 9) Goodwill impairments Total Unusual Items after Tax $ (3.9) $ 1.6 $ 19.4

2 Page 2 of 46 Operating Highlights Sales for the fourth quarter of 2009 ( Q ) were $451.9 million, up $30.8 million from $421.1 million from Q3 2009: Sales for the Powertrain/Driveline segment increased by $58.4 million, or 15.4% in the fourth quarter to $437.6 million compared to $379.2 million in Q The increase was a result of improved Powertrain volumes driven from Ford, General Motors and Chrysler; Industrial segment sales decreased 65.9% or $27.6 million for the quarter from $41.9 million in Q to $14.3 million in Q Taking in account, a one time contract change from a sale to rental, sales would have been $23.8 million or a 43.2% reduction from Q The sales decrease in Q was due to the seasonality of the Consumer Products, the Industrial Fabrication and the Access Equipment Divisions and continued weaker demand as a result of the economic slow down in The company s operating earnings for Q were $13.2 million after adjusting for unusual items in the quarter. This compares to $5.8 million adjusted operating earnings for Q3 2009, an increase of $7.4 million: The increase was driven by the better absorption of fixed costs due to the improved volume in global markets in Powertrain/Driveline and by the continued overhead and fixed cost reduction program executed in the quarter in both segments; Fourth quarter adjusted operating earnings of $25.4 million for the Powertrain/Driveline segment were higher by $11.7 million from $13.7 million in Q3 2009; The adjusted operating losses for the Industrial segment were $12.2 million in Q4 2009, an increase of $4.3 million over Q Taking into account the unusual items in the respective quarters, adjusted net earnings for Q was $10.7 million or $0.17 net earnings per share versus $1.1 million or $0.02 per share in Q The company generated $72.5 million in operational cash flow, $12.5 million of which was from reductions in non-cash working capital in Q The company generated $40.2 million in Free Cashflow 1 in Q and $159.7 million for the full year At December 31, 2009 the amount available under the company s syndicated revolving credit facility was $263.1 million, up $55.7 million from September 30, Q4 ends a very challenging year for Linamar and the industries in which we operate. But we have ended it on a very positive note with a strong fourth quarter and another excellent quarter of cash generation. This allows us to enter the new year with a strong balance sheet, poised to take advantage of opportunities as they arise." said Linamar CEO Linda Hasenfratz. Dividends The Board of Directors today declared an eligible dividend in respect to the year ended December 31, 2009 of CDN$0.06 per share on the common shares of the company, payable on or after April 15, 2010 to shareholders of record on April 1, Free Cashflow is defined as Cash from Operating Activities, Payments for purchase of property, plant and equipment and Dividends to shareholders as present on the company s Consolidated Statements of Cash Flows

3 Page 3 of 46 Risk and Uncertainties (forward looking statements) Linamar no longer provides a financial outlook. Certain information provided by Linamar in these unaudited interim financial statements, MD&A and other documents published throughout the year that are not recitation of historical facts may constitute forwardlooking statements. The words estimate, believe, expect and similar expressions are intended to identify forward-looking statements. Persons reading this report are cautioned that such statements are only predictions and the actual events or results may differ materially. In evaluating such forward-looking statements, readers should specifically consider the various factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements. Such forward-looking information may involve important risks and uncertainties that could materially alter results in the future from those expressed or implied in any forward-looking statements made by, or on behalf of, Linamar. Some risks and uncertainties may cause results to differ from current expectations. The factors which are expected to have the greatest impact on Linamar include but are not limited to (in the various economies in which Linamar operates): the extent of OEM outsourcing, industry cyclicality, trade and labour disruptions, pricing concessions and cost absorptions, delays in program launches, the company s dependence on certain engine and transmission programs and major OEM customers, currency exposure, and technological developments by Linamar s competitors. A large proportion of the company s cash flows are denominated in foreign currencies. The movement of foreign currency exchange rates against the Canadian dollar has the potential to have a negative impact on financial results. The company has employed a hedging strategy as appropriate to attempt to mitigate the impact but cannot be completely assured that the entire exchange effect has been offset. Other factors and risks and uncertainties that could cause results to differ from current expectations are discussed in the MD&A and include, but are not limited to: fluctuations in interest rates, environmental emission and safety regulations, governmental, environmental and regulatory policies, and changes in the competitive environment in which Linamar operates. Linamar assumes no obligation to update the forwardlooking statements, or to update the reasons why actual results could differ from those reflected in the forward-looking statements. Conference Call Information Q4 Conference Call Information Linamar will hold a conference call on March 4, 2010 at 5:00 p.m. EST to discuss its fourth quarter results. The numbers for this call are (647) (local/overseas) or (888) (North America) confirmation number , with a call-in required 10 minutes prior to the start of the conference call. The conference call will be chaired by Linda Hasenfratz, Linamar s Chief Executive Officer. A copy of the company s full quarterly financial statements, including the Management s Discussion & Analysis will be available on the company s website after 4 p.m. EST on March 4, 2010 and at by the start of business on March 5, A taped replay of the conference call will also be made available starting at 11:00 p.m. on March 4, 2010 for seven days. The number for replay is (800) , Conference ID The conference call can also be accessed by web cast at by accessing the investor relations/events menu, and will be available for a 7 day period.

4 Page 4 of 46 Q1 Conference Call Information Linamar will hold a conference call on May 5, 2010 at 5:00 p.m. EST to discuss its first quarter results. The numbers for this call are (647) (local/overseas) or (888) (North America) confirmation number , with a call-in required 10 minutes prior to the start of the conference call. The conference call will be chaired by Linda Hasenfratz, Linamar s Chief Executive Officer. A copy of the company s full quarterly financial statements, including the Management s Discussion & Analysis will be available on the company s website after 4 p.m. EST on May 5, 2010 and at by the start of business on May 6, A taped replay of the conference call will also be made available starting at 11:00 p.m. on May 5, 2010 for seven days. The number for replay is (800) , Conference ID The conference call can also be accessed by web cast at by accessing the investor relations/events menu, and will be available for a 7 day period. Linamar Corporation (TSX:LNR) is a diversified global manufacturing company of highly engineered products powering vehicles, motion, work and lives. The company s Powertrain and Driveline focused divisions are world leaders in the collaborative design, development and manufacture of precision metallic components, modules and systems for global vehicle and power generation markets. The company s Industrial division is a world leader in the design and production of innovative mobile industrial equipment, notably its class-leading aerial work platforms and telehandlers. With more than 9,400 employees in 37 manufacturing locations, 5 R&D centers and 11 sales offices in Canada, the US, Mexico, Germany, Hungary, the UK, China, Korea and Japan, Linamar generated sales of close to $1.7 Billion in For more information about Linamar Corporation and its industry leading products and services, visit * * * * * * * * * * * * * For further information regarding this release please contact Linda Hasenfratz at (519) Frank Hasenfratz Chairman of the Board Linda Hasenfratz Chief Executive Officer Guelph, Ontario March 4, 2010

5 Page 5 of 46 LINAMAR CORPORATION Consolidated Balance Sheets As at December 31, 2009 with comparatives as at December 31, 2008 (Unaudited) (in thousands of dollars) December 31 December $ $ Assets Current Assets Cash 98,015 89,535 Accounts receivable 294, ,515 Inventories (Note 2) 258, ,988 Prepaid expenses 6,338 7,627 Income taxes recoverable 17,711 28,928 Current portion of long-term receivables 1, Future income taxes 9,758 8,787 Derivative financial instruments 2, , ,251 Deferred Charges 870 1,996 Long-Term Receivables 4,492 2,369 Goodwill and Other Intangibles (Note 3) 42,371 61,564 Property, Plant and Equipment (Note 4) 792, ,264 Future Income Taxes 43,063 43,159 1,572,365 1,841,603 Liabilities Current Liabilities Unpresented cheques 16,719 6,039 Short-term bank borrowings 96,011 81,090 Accounts payable and accrued liabilities 337, ,903 Derivative financial instruments - 15,167 Current portion of long-term debt 4, , , ,523 Long-Term Debt 219, ,126 Derivative Financial Instruments 4,820 25,765 Future Income Taxes 51,607 66,944 Non-Controlling Interests 33,501 37, , ,281 Shareholders' Equity Capital Stock (Note 5) 108, ,215 Retained Earnings 793, ,300 Contributed Surplus 4,939 3,026 Accumulated Other Comprehensive Loss (Note 6) (99,149) (81,219) 807, ,322 1,572,365 1,841,603 On behalf of the Board of Directors: Frank Hasenfratz Director Linda Hasenfratz Director Linamar 2009, Fourth Quarter Interim Report Page 1 of 13

6 Page 6 of 46 LINAMAR CORPORATION Consolidated Statements of Earnings For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) (in thousands of dollars, except per share figures) Three Months Ended Twelve Months Ended December 31 December $ $ $ $ Sales 451, ,686 1,675,910 2,257,000 Cost of Sales (Notes 2, 4 and 7) 372, ,848 1,449,938 1,850,479 Amortization 48,184 44, , ,879 Gross Margin 31,521 22,585 47, ,642 Selling, general and administrative (Note 3) 23,671 28,475 98, ,027 Earnings (Loss) Before the Following: 7,850 (5,890) (50,511) 103,615 Other Income (Expense) Interest on long-term debt (3,705) (4,329) (17,375) (16,455) Other interest expense (588) (1,427) (2,060) (5,379) Interest earned 1, ,123 2,274 Other income 1, ,072 2,169 6,319 (10,735) (64,751) 86,224 Provision for (Recovery of) Income Taxes Current 273 (10,378) (3,361) 13,803 Future (8,145) 9,342 (26,872) 14,584 (7,872) (1,036) (30,233) 28,387 14,191 (9,699) (34,518) 57,837 Non-Controlling Interests (366) (933) 692 1,797 Goodwill Impairment (Note 3) - (5,127) (11,718) (5,127) Earnings (Loss) from Continuing Operations 14,557 (13,893) (46,928) 50,913 Discontinued Operations (Note 10) Earnings (Loss) before Extraordinary Items 14,557 (13,477) (46,928) 51,329 Extraordinary Items (Note 11) - 10,882-19,021 Net Earnings (Loss) for the Period 14,557 (2,595) (46,928) 70,350 Earnings (Loss) per Share (Note 12) From Continuing Operations Basic 0.22 (0.21) (0.73) 0.76 Diluted 0.22 (0.21) (0.73) 0.76 From Net Earnings (Loss) Basic 0.22 (0.04) (0.73) 1.05 Diluted 0.22 (0.04) (0.73) 1.05 Linamar 2009, Fourth Quarter Interim Report Page 2 of 13

7 Page 7 of 46 LINAMAR CORPORATION Consolidated Statements of Retained Earnings For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) (in thousands of dollars) Three Months Ended Twelve Months Ended December 31 December $ $ $ $ Balance Beginning of Period 780, , , ,515 Net Earnings (Loss) for the Period 14,557 (2,595) (46,928) 70,350 Dividends (1,941) (3,882) (7,764) (15,959) Excess over assigned value of common shares purchased and cancelled (Note 5) - (3,188) - (57,606) Balance End of Period 793, , , ,300 LINAMAR CORPORATION Consolidated Statements of Comprehensive Earnings For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) (in thousands of dollars) Three Months Ended Twelve Months Ended December 31 December $ $ $ $ Net Earnings (Loss) for the Period 14,557 (2,595) (46,928) 70,350 Other Comprehensive Loss Unrealized (losses) gains on translating financial statements of self-sustaining foreign operations (7,029) 3,813 (44,451) 28,657 Change in unrealized gains (losses) of derivative instruments designated as cash flow hedges (net of income taxes of $1,156 and $12,969 year to date, recovery of $7,911 and $12,252 year to date) 2,962 (16,918) 27,331 (26,112) Reclassification to earnings of gains (losses) on cash flow hedges (net of taxes of $167 and $404 year to date, $2,395 and $1,819 year to date) 462 (4,975) (810) (3,779) (3,605) (18,080) (17,930) (1,234) Comprehensive Earnings (Loss) for the Period (Note 6) 10,952 (20,675) (64,858) 69,116 Linamar 2009, Fourth Quarter Interim Report Page 3 of 13

8 Page 8 of 46 LINAMAR CORPORATION Consolidated Statements of Cash Flows For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) (in thousands of dollars) Three Months Ended Twelve Months Ended December 31 December $ $ $ $ Cash Provided By (Used In) Operating Activities (Loss) earnings from continuing operations 14,557 (13,893) (46,928) 50,913 Non-cash charges (credits) to earnings: Amortization of property, plant and equipment 46,920 42, , ,530 Amortization of other intangible assets 1,264 1,316 5,034 5,349 Future income taxes (8,145) 9,342 (26,872) 14,584 Non-controlling interests (366) (933) 692 1,797 Unrealized exchange (gain) loss on debt 63 1,590 (3,644) 1,785 Net loss (gain) on disposal of property, plant and equipment 1,262 (12) 958 1,408 Asset impairment (Notes 3 and 4) 3,226 6,684 51,075 11,423 Goodwill impairment (Note 3) - 5,127 11,718 5,127 Stock-based compensation 358 (1,814) 1, Other 810 1,582 3,359 2,372 59,949 51, , ,068 Changes in non-cash working capital: Decrease in accounts receivable 36,885 98,503 26,049 89,010 (Increase) decrease in inventories (23,616) (5,865) 52,006 (12,508) Decrease (increase) in prepaid expenses 1,050 3,790 (108) (254) (Decrease) increase in income taxes payable (2,944) 831 8,055 (35,032) Increase (decrease) in accounts payable and accrued liabilities 1,146 (43,930) 41,595 (50,669) Cash flow continuing operations 72, , , ,615 Cash flow discontinued operations - 1,732-1,221 72, , , ,836 Financing Activities Proceeds from (repayments of) short-term bank borrowings 4,173 (69,834) 15,347 (63,987) Proceeds from long-term debt - 59,571-62,134 Repayment of long-term debt (60,949) (1,216) (170,730) (5,405) Repurchase of shares (Note 5) - (3,859) - (66,173) Increase in long-term receivables (3,169) (2,171) (2,811) (992) Dividends to shareholders (1,941) (3,882) (7,764) (15,959) (61,886) (21,391) (165,958) (90,382) Investing Activities Payments for purchase of property, plant and equipment (30,384) (45,847) (130,677) (181,820) Proceeds of disposal of property, plant and equipment 181 1,397 1,294 4,733 Business acquisitions (Note 11) - - (1,227) (11,823) Extraordinary item (Note 11) - (85) - (1,756) (30,203) (44,535) (130,610) (190,666) (19,619) 41,061 1,582 (22,212) Effect of Translation Adjustment (826) (26) (3,782) 1,963 Increase (Decrease) in Cash Position (20,445) 41,035 (2,200) (20,249) Cash Position - Beginning of Period 101,741 42,461 83, ,745 Cash Position - End of Period 81,296 83,496 81,296 83,496 Comprised of: Cash 98,015 89,535 98,015 89,535 Unpresented cheques (16,719) (6,039) (16,719) (6,039) 81,296 83,496 81,296 83,496 Linamar 2009, Fourth Quarter Interim Report Page 4 of 13

9 Page 9 of 46 LINAMAR CORPORATION Notes to Consolidated Financial Statements For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) 1 Significant Accounting Policies Management prepared these interim consolidated financial statements in accordance with Canadian Generally Accepted Accounting Principles ( GAAP ) using the same accounting policies and methods of their application as the most recent annual consolidated financial statements, except as noted below. These interim consolidated financial statements do not include all the information and footnotes as required in the annual consolidated financial statements and as such should be read in conjunction with the company's most recent audited annual consolidated financial statements. These interim consolidated financial statements and the notes thereto have not been reviewed by the company s external auditors pursuant to a review engagement applying review standards set out in the Canadian Institute of Chartered Accountants ( CICA ) Handbook. Changes in accounting policies Effective January 1, 2009, the company adopted the CICA Handbook Section Goodwill and Intangible Assets ( CICA 3064 ). CICA 3064 replaces Section 3062 Goodwill and Other Intangible Assets and Section 3450 Research and Development Costs. CICA 3064 section applies to fiscal periods beginning on or after October 1, 2008 and establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. In January 2009 the Emerging Issues Committee issued EIC-173 Credit Risk and the Fair Value of Financial Assets and Financial Liabilities. The Committee concluded that the company s own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities as under CICA Handbook Section 3855 Financial Instruments-Recognition and Measurement. The application of the EIC is for interim and annual financial statements for periods ending on or after the date of issuance of the EIC. The adoption of these new accounting standards did not impact the company s net earnings or financial position. The following accounting pronouncements will be adopted by the company effective for the annual financial statements, December 31, 2009 and for subsequent periods Effective for the annual financial statements, December 31, 2009, the company will adopt the amended CICA Handbook Section 3862 Financial Instruments-disclosures ( CICA 3862 ). CICA 3862 has been amended to include additional disclosure requirements about fair value measurements of financial instruments and to enhance liquidity risk disclosure requirements. The adoption of this amended accounting standard did not impact the company s net earnings or financial position. Effective for interim and annual financial statements relating to fiscal years beginning on July 1, 2009, the company will adopt the amended CICA Handbook Section 1506 Accounting Changes ( CICA 1506 ). CICA 1506 was amended to exclude from its scope changes in accounting policies upon the complete replacement of the company s primary basis of accounting. This Section will be applicable to the company which will change standards beginning on January 1, 2011 when Canadian GAAP for publicly accountable enterprises will be converged with International Financial Reporting Standards (IFRS). Effective for interim and annual financial statements beginning on January 1, 2011, the company will adopt the amended CICA Handbook Section 3855 Financial Instruments recognition and measurement ( CICA 3855 ). CICA 3855 has been amended to clarify the effective interest method after a debt instrument has been impaired and to clarify when an embedded prepayment option is separated from its host debt instrument for accounting purposes. The company is currently evaluating the impact of the amended Section on the consolidated financial statements. Linamar 2009, Fourth Quarter Interim Report Page 5 of 13

10 Page 10 of 46 LINAMAR CORPORATION Notes to Consolidated Financial Statements For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) 2 Inventories (in thousands of dollars) December 31, 2009 December 31, 2008 $ $ General stores 39,759 31,000 Raw materials 106, ,319 Work-in-process 62,299 57,089 Finished goods 50,647 84, , ,998 In the quarter ending December 31, 2009 the company recognized write-downs of slow moving and obsolete material of $16,645 in comparison to $5,427 in write-downs in the same quarter last year. Lower of cost or net realizable value adjustments are made on a regular basis and resulted in a charge of $3,522 during the quarter compared to a recovery of $1,276 in the same quarterly last year. During the quarter, the company reviewed its approach to estimating the value of general stores inventories and as a result of the review, the valuation of general stores inventory increased by $18,455. The effect of this change is an increase to general stores inventories and reduction of cost of sales. The effect of the change in estimate on future periods is impracticable to determine as it is dependent on future production levels and the rate at which general stores inventories are replenished. 3 Goodwill and Other Intangible Asset Impairment (in thousands of dollars) In the fourth quarter of 2008, the company determined that goodwill was potentially impaired with respect to two of its reporting units, namely the Hungary and McLaren reporting units. The reporting units of the company have been defined as the component of an operating segment level based on the level at which discrete financial information is available and for which segment management regularly reviews the operating results of that component. In certain cases the components are aggregated when they have similar economic characteristics. With respect to Hungary, the company made a reasonable estimate of the goodwill impairment by determining the implied fair value of goodwill in the same manner as if the company had acquired the reporting unit at year end. Based on this analysis it was determined that the goodwill attributable to this reporting unit was fully impaired and as a result a charge of $5,127 was recorded against the goodwill in With respect to the McLaren reporting unit, while it was determined that the carrying amount of this reporting unit exceeded its fair value, the impairment test was not completed and a reasonable estimate of the impairment, if any, could not be determined in the fourth quarter of The company completed the impairment test of the McLaren reporting unit during the first quarter of 2009 and it was determined that the goodwill and other intangible assets attributable to this reporting unit were fully impaired. As a result, goodwill and other intangible asset impairment charges of $11,718 and $1,502, respectively, were recorded in Management performed the annual goodwill impairment analysis during the fourth quarter of 2009 and found that goodwill and intangible assets were not impaired as of the end of the year. Linamar 2009, Fourth Quarter Interim Report Page 6 of 13

11 Page 11 of 46 LINAMAR CORPORATION Notes to Consolidated Financial Statements For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) 4 Property Plant and Equipment (in thousands of dollars) In response to the bankruptcy induced production disruptions at Chrysler and GM during the second quarter of the year, the company performed an impairment test on the capital assets related to Chrysler and GM programs. These asset groups are part of the Powertrain/Driveline segment. For any asset group that failed the cash flow recoverability test, the fair value of the asset group was determined using the current appraisal value of similar equipment. As a result of this impairment test, management estimated the carrying value of its machinery and equipment exceeded its fair value by $46,347 as at June 30, 2009, which is included in costs of sales. During the second half of the year, the company assessed the recoverability of the carrying cost of its property, plant and equipment based on the existing production volumes and the expectation that volumes will continue to remain suppressed in As a result, the company identified assets, on specific Powertrain/Driveline programs, where the carrying value was impaired and an additional write-down of $3,226 was recorded in the fourth quarter in costs of sales. Also during the fourth quarter, the company reviewed the estimated economic useful life of its assets. As a result, the expected useful life of certain assets has been revised downwards. The increase of these changes on depreciation expense, recognized in amortization, was $6, Capital Stock (in thousands of dollars except for share figures) In January 2007, the company renewed its normal course issuer bid which entitled the company to acquire for cancellation up to 5,083,839 of its common shares before January 30, The purchases are made on the open market at the market price. Under this bid, in January 2008, the company repurchased for cancellation 37,800 shares with an assigned value of $63 for total consideration of $640. In January 2008, the company renewed its normal course issuer bid which entitled the company to acquire for cancellation up to 5,084,699 of its common shares before January 30, The purchases are made on the open market at the market price. Under this bid, during 2008, the company purchased for cancellation, 5,084,600 common shares with an assigned value of $8,504 for $65,533 cash. On February 5, 2009, the company renewed its normal course issuer bid. The current bid permits the company to acquire up to 3,791,858 of its outstanding common shares and expires on February 8, As of December 31, 2009 the company has not repurchased any shares under this bid. On August 26, 2009, 999,999 options were granted with an average exercise price of $12.89 per option. 666,666 options vested 10% on the date of grant with additional 10% vesting on each of the next nine consecutive anniversary dates of the grant. The remaining 333,333 of the options vested 50% on the grant date with the remaining vesting one year from the date of the grant. Linamar 2009, Fourth Quarter Interim Report Page 7 of 13

12 Page 12 of 46 LINAMAR CORPORATION Notes to Consolidated Financial Statements For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) The weighted average fair value of share options granted, and the weighted average assumptions used in the fair value estimation at the time of grant, using the Black-Scholes model, are as follows: Share option fair value (per share) $6.15 Risk free interest rate 3.39% Expected life (years) 10.0 Expected volatility 52.71% Dividend yield 2.49% The risk free interest rate used in determining the fair value of the options granted is based on a Government of Canada 10 year zero coupon yield that was current at the time of the grant. The expected life is the maximum term of the share options. The expected volatility considers the historical volatility of company s shares. The dividend yield is the annualized dividend at the date of grant divided by the average exercise price. 6 Accumulated Other Comprehensive (Loss) (in thousands of dollars) Three Months Ended Twelve Months Ended December 31 December $ $ $ $ Balance Beginning of Period (95,544) (63,139) (81,219) (79,985) Other comprehensive loss for the period (3,605) (18,080) (17,930) (1,234) Balance End of Period (99,149) (81,219) (99,149) (81,219) 7 Exit Activity (in thousands of dollars) On December 3, 2009, Linamar announced the closure of Invar Manufacturing Corporation ( Invar ), located in Batawa Ontario. Invar will work through an orderly wind down of operations in 2010 and accordingly, has recognized charges in the fourth quarter of 2009 mainly related to severance and special termination benefits. Total costs expected to be incurred related to the closure is $7,565, of which $1,855 of severance and $4,188 of special termination benefits have been recorded in costs of sales during the quarter. The remaining costs are related to removing the machines and closing the building. Invar is included in the company s Powertrain/Driveline segment. Linamar 2009, Fourth Quarter Interim Report Page 8 of 13

13 Page 13 of 46 LINAMAR CORPORATION Notes to Consolidated Financial Statements For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) 8 Pension Costs (in thousands of dollars) The company has various contributory and non-contributory defined contribution pension plans which cover most employees. Current service pension costs are charged to earnings as they accrue. The following was expensed during the quarter and year to date periods: Three Months Ended Twelve Months Ended December 31 December $ $ $ $ Government sponsored 3,554 3,501 15,280 20,082 Company sponsored 3,592 2,364 10,935 11,710 9 Foreign Exchange (in thousands of dollars) Included as part of selling, general and administrative expenses are gains and (losses) resulting from foreign exchange as follows: Three Months Ended Twelve Months Ended December 31 December $ $ $ $ Foreign Exchange Gain (Loss) 867 (361) 481 1, Discontinued Operations In the fourth quarter of 2008, management reviewed the original estimates made with respect to the windup and closure of the company s in-house casting operation. The company completed the windup of these discontinued operations in the quarter, which resulted in a small recovery. The results from discontinued operations have been reported separately within these interim financial statements. 11 Business Acquisitions (in thousands of dollars) The following acquisitions were accounted for using the purchase method with the results of operations included in these interim financial statements from the effective date of acquisition: a) Eagle Manufacturing II, LLC On January 30, 2009, the company acquired the remaining 40% interest in Eagle Manufacturing II, LLC (Eagle Mfg), a machining facility in Florence, Kentucky, USA. The joint venture was established in September 1998, with the original ownership interest of 60% owned by Linamar and 40% owned by Navistar. The company accounted for its interest in the joint venture using the proportionate consolidation method until the date of acquisition. After the date of acquisition, Eagle Mfg s Linamar 2009, Fourth Quarter Interim Report Page 9 of 13

14 Page 14 of 46 LINAMAR CORPORATION Notes to Consolidated Financial Statements For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) results were fully consolidated in the accounts of the company. Total consideration for the acquisition of the remaining 40% interest was $1,227. b) Volvo Material Handling Equipment On April 25, 2008, the company purchased the assets of Volvo s Material Handling Equipment ( MHE ) Business based in Shippensburg, Pennsylvania, USA. Volvo s MHE business compliments the acquisition of Carelift Equipment, completed in August of Total consideration for the acquisition was $11,541. c) Visteon Swansea Limited On July 7, 2008, the company acquired 100% of the issued and outstanding shares of Visteon Swansea Limited, subsequently named Linamar Automotive Systems Swansea Company Limited ( LASSCo ), an automotive manufacturing facility based in Wales, United Kingdom. LASSCo is the sister plant of the company s recently acquired Power Transfer Units business in Nuevo Laredo, Mexico. The net purchase price of $1,756 was allocated based on the fair value of the net identifiable assets acquired. This allocation resulted in an excess of the fair value of the net identifiable assets over the cost of the purchase, which is sometimes referred to as negative goodwill. The negative goodwill was allocated to the fair value of the long-term assets acquired and the remaining excess of $19,021 was recognized as an extraordinary gain. The LASSCo total equity investment is not sufficient to finance its operations without additional support and as such the operations are classified as a variable interest entity. Management determined that the company is the primary beneficiary of the variable interest entity and consolidates the accounts of LASSCo Eagle Mfg $ Accounts receivable 5,745 Inventory 2,450 Prepaid expenses 34 Income taxes recoverable 55 Property, plant and equipment 6,240 Future income tax asset 632 Total assets acquired 15,156 Accounts payable 6,320 Long-term debt 7,609 Total liabilities assumed 13,929 Net assets acquired 1,227 Total cash consideration 1,227 Linamar 2009, Fourth Quarter Interim Report Page 10 of 13

15 Page 15 of 46 LINAMAR CORPORATION Notes to Consolidated Financial Statements For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) Volvo MHE $ Swansea $ Inventory 8,949 11,312 20,261 Property, plant and equipment 1,822 6,272 8,094 Intangible assets 1,414 23,396 24,810 Future tax asset - 9,465 9,465 Total assets acquired 12,185 50,445 62,630 Total liabilities assumed (644) - (644) 2008 Total $ Net assets acquired 11,541 50,445 61,986 Total cash consideration 11,541 1,756 13,297 Negative goodwill - 48,689 48,689 Negative goodwill assigned to property, plant and equipment and intangible assets - 29,668 29,668 Remaining negative goodwill classified as extraordinary item - 19,021 19, Earnings Per Share (in thousands of dollars except for per share figures) Three Months Ended Twelve Months Ended December 31 December $ $ $ $ Earnings (loss) from continuing operations 14,557 (13,893) (46,928) 50,913 Net earnings (loss) for the year 14,557 (2,595) (46,928) 70,350 Weighted average common shares 64,701,876 64,701,876 64,701,876 66,808,774 Earnings (loss) per share from continuing operations Basic 0.22 (0.21) (0.73) 0.76 Diluted 0.22 (0.21) (0.73) 0.76 Earnings (loss) per share from net earnings (loss) Basic 0.22 (0.04) (0.73) 1.05 Diluted 0.22 (0.04) (0.73) 1.05 Earnings per share are calculated using the weighted daily average number of shares outstanding during the period. 13 Segmented Sales and Earnings Information (from Continuing Operations in thousands of dollars) The company has two operational segments Powertrain/Driveline and Industrial. Corporate headquarters and other small operating entities are allocated to the Powertrain/Driveline and Industrial operational segments accordingly. The company operates in five geographic segments Canada, United States, Mexico, Europe and Asia Pacific. Linamar 2009, Fourth Quarter Interim Report Page 11 of 13

16 Page 16 of 46 LINAMAR CORPORATION Notes to Consolidated Financial Statements For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) The company accounts for inter-segment sales and transfers at current market rates. The company ensures that the measurement and policies are consistently followed among the company s reportable segments for operating earnings from continuing operations, net earnings and assets. The company s three largest customers account for 27.2%, 14.9% and 7.2% ( %, 12.3% and 9.5%) of total segmented sales and are all part of the Powertrain/Driveline segment. Geographic Three Months Ended Twelve Months Ended December 31 December Sales to external customers $ $ $ $ Canada 287, ,143 1,041,733 1,436,041 United States 39,144 34, , ,976 Asia Pacific 18,094 7,074 51,548 32,802 Mexico 46,702 49, , ,933 Europe 60,450 87, , ,248 Total 451, ,686 1,675,910 2,257,000 Operational Three Months Ended December 31, 2009 Twelve Months Ended December 31, 2009 Sales to external customers Inter-segment sales Operating earnings (loss) Sales to external customers Intersegment sales Operating earnings (loss) Assets from Continuing Operations $ $ $ $ $ $ $ Powertrain/Driveline 437,577 3,846 28,843 1,514,633 11,364 (10,055) 1,277,447 Industrial 14,303 - (20,993) 161, (40,456) 294,918 Total 451,880 7,850 1,675,910 (50,511) 1,572,365 Three Months Ended December 31, 2008 Twelve Months Ended December 31, 2008 Sales to external customers Inter-segment sales Operating earnings (loss) Sales to external customers Intersegment sales Operating earnings (loss) Assets from Continuing Operations $ $ $ $ $ $ $ Powertrain/Driveline 422,050 4,712 (6,898) 1,813,388 28,518 67,300 1,491,288 Industrial 54, , ,612 1,037 36, ,315 Total 476,686 (5,890) 2,257, ,615 1,841, Contingent Liabilities and Commitments (in thousands of dollars) The company is involved in certain lawsuits and claims. Management believes that adequate provisions have been recorded in the accounts. Although it is not possible to estimate the potential costs and losses, if any, management is of the opinion that there will not be any significant additional liability other than amounts already provided for in these financial statements. As at December 31, 2009, outstanding commitments for capital expenditures under purchase orders and contracts amounted to approximately $102,741. Of this amount, $102,562 relates to the purchase of manufacturing equipment and $179 relates to general contracting and construction costs in respect of plant construction. The majority of these commitments are due within the next twelve months. Linamar 2009, Fourth Quarter Interim Report Page 12 of 13

17 Page 17 of 46 LINAMAR CORPORATION Notes to Consolidated Financial Statements For the twelve months ended December 31, 2009 and December 31, 2008 (Unaudited) 15 Guarantees (in thousands of dollars) The company has various guarantees for a maximum potential future payment of $19,366 over various terms of 4 to 5 years. The company has estimated recourse, in the form of equipment, in the amount of $12, Related Party Transactions (in thousands of dollars) Included in the costs of property, plant and equipment is the construction of buildings, building additions and building improvements in the aggregate amount of $918 paid to a company owned by the spouse of an officer and director. Included in sales is $46 related to equipment and services sold to the same company. Included in cost of sales is maintenance costs of $320 paid to the same company. The maintenance and construction costs represent general contracting and construction activities related to plant construction, improvements, additions and maintenance for a number of facilities. The company has designed an independent process to ensure building construction and improvements are transacted at fair value. Other transactions have been recorded at the exchange amount. 17 Capital Disclosures (in thousands of dollars) The company s capital management objectives are to ensure the stability of its capital so as to support continued operations, provide an adequate return to shareholders and generate benefits for other stakeholders. The company s capital is composed of shareholders equity, and is not subject to any capital requirements imposed by a regulator. The company s private placement note holders require the company to maintain a minimum book value of shareholders equity of $450,000. Linamar is in compliance with this covenant. Book value of shareholders equity as at December 31, 2009 was $807,613 (December 31, $878,322). The company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the company may attempt to issue or re-acquire shares, acquire or dispose of assets, and adjust the amount of cash and cash equivalents balances. There were no changes in the company s capital risk management strategy during the period. 18 Comparative Figures Certain comparative figures have been reclassified in accordance with the current quarter s presentation. Linamar 2009, Fourth Quarter Interim Report Page 13 of 13

18 Page 18 of 46 LINAMAR CORPORATION MANAGEMENT S DISCUSSION AND ANALYSIS For the Year Ended December 31, 2009 This Management s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") of Linamar Corporation ( Linamar or the company ) should be read in conjunction with its consolidated financial statements for the quarter ended December 31, 2009 and related notes thereto. This MD&A has been prepared as at March 4, Additional information regarding Linamar, including copies of its continuous disclosure materials such as its annual information form, is available on its website at or through the SEDAR website at OVERALL CORPORATE PERFORMANCE Overview of the Business Linamar Corporation (TSX:LNR) is a diversified global manufacturing company of highly engineered products powering vehicles, motion, work and lives. The company s Powertrain and Driveline focused divisions are world leaders in the collaborative design, development and manufacture of precision metallic components, modules and systems for global vehicle and power generation markets. The company s Industrial division is a world leader in the design and production of innovative mobile industrial equipment, notably its class-leading aerial work platforms and telehandlers. With more than 9,400 employees in 37 manufacturing locations, 5 R&D centers and 11 sales offices in Canada, the US, Mexico, Germany, Hungary, the UK, China, Korea and Japan, Linamar generated sales of close to $1.7 Billion in For more information about Linamar Corporation and its industry leading products and services, visit Overall Corporate Results The following table sets out certain highlights of the company s performance in 2009 and 2008: Three Months Ended Year Ended December 31 December 31 (in millions of dollars, except content per vehicle numbers) /- % /- % Sales $ $ $ (24.8) (5.2%) $ 1,675.9 $ 2,257.0 $ (581.1) (25.7%) Gross Margin % (181.9) (79.2%) Operating Earnings (Loss) 7.8 (5.9) % (50.5) (154.1) (148.7%) Earnings (Loss) from Continuing Operations 14.6 (13.9) % (46.9) 51.0 (97.9) (192.0%) Net Earnings (Loss) $ 14.6 $ (2.6) $ % $ (46.9) $ 70.4 $ (117.3) (166.6%) Unusual Items (3.9) 19.4 (23.3) Net Earnings (Loss) - Adjusted $ 10.7 $ 16.8 $ (6.1) (36.3%) $ 1.1 $ 90.7 $ (89.6) (98.8%) Content per Vehicle North America (1) $ $ $ % $ $ $ % Content per Vehicle Europe (1) $ 6.37 $8.10 $ (1.73) (21.4%) $ 6.81 $ 7.03 $ (0.22) (3.1%) Content per Vehicle Asia Pacific (1) $ 2.37 $2.09 $ % $ 2.07 $ 1.62 $ % Note: (1) Content per Vehicle calculations reflect updated allocations of automotive sales in certain quarters of 2007, 2008, These allocations have no effect on the company s financial statements for those periods. See the Automotive Sales and Content per Vehicle section of this analysis for more information. The changes in these financial highlights are discussed in detail in the following sections of this analysis.

19 Page 19 of 46 Certain unusual items affected earnings in both 2009 and 2008 as noted in the table below: Three Months Ended Year Ended December 31 December 31 (in millions of dollars, except per share figures) Net Earnings (Loss) $ 14.6 $ (2.6) $ (46.9) $ 70.4 Adjustments due to unusual items Taxable Items before Tax 1) Capital asset impairments due to market conditions ) Severance related to the global economic slow down ) Closure announcement of Invar ) Inventory provision related to the global economic slow down ) Access equipment contract converted from previous period sale to a rental contract ) Change in key accounting estimates (12.3) - (12.3) - 7) Program specific asset write down ) Ontario Capital Tax - eliminated retroactively to Jan 1, (4.4) Tax Impact (1.6) (1.6) (21.3) (2.9) Non-Taxable Items 9) Goodwill impairments ) Intangible asset impairments ) Rate changes on future income taxes in Canada (3.7) - (3.7) - 12) Utilization of previously unrecognized tax losses (4.0) - (4.0) - 13) Foreign exchange loss (gain) on Hungarian Forints held in escrow (2.0) Adjusted Net Earnings (Loss) $ 10.7 $ 16.8 $ 1.1 $ 90.7 As a percentage of Sales 2.4% 3.5% 0.1% 4.0% Change over Prior Year (36.3%) (98.8%) Adjusted Earnings (Loss) per Share $ 0.17 $ 0.26 $ 0.02 $ ) In the second quarter of 2009 ( Q ), the company assessed the recoverability of the carrying cost of its property, plant and equipment based largely on the bankruptcy filings of General Motors and Chrysler, the reduced production volumes that existed in the quarter and the expectation that volumes will remain suppressed in As a result, the company identified asset groups, on specific programs, where the carrying value was impaired and the appropriate write down was taken in the quarter. This assessment was reviewed again in the fourth quarter of 2009 ( Q ) which resulted in an additional impairment charge of $2.8 million being recorded. In the fourth quarter of 2008 ( Q ), the company assessed the recoverability of the carrying cost of its property, plant and equipment based the the product volumes and the expectation that volumes would remain suppressed in 2009 and as a result, an impairment charge was recognized 2) During both 2009 and 2008, the company incurred certain expenses related to the release of employees as the company adjusted to new sales volumes. 3) On December 3, 2009, Linamar announced the closure of Invar Manufacturing Corporation ( Invar ), located in Batawa Ontario. Invar will work through an orderly wind down of operations in 2010 and accordingly, has recognized charges in Q mainly related to severance and termination benefits. 4) During Q4 2009, the company re-assessed the level of the inventory in the Industrial segment as a result of the continued low activity in the industrial markets served by Linamar. This resulted in an increased inventory provision being recorded in the quarter for slow moving inventory and for products where the cost was in excess of the net realizable value of the product. 5) In Q4 2009, the company reassessed a previous sale at Skyjack Inc., and changed the accounting to reflect a rental contract. This has the effect of reducing sales by $9.5 million and operating earnings by $2.5 million in the period. 6) Upon reviewing Linamar s key accounting estimates in Q4 2009, it was determined that two key estimates needed modification: the estimation of general stores inventory was understated by $18.5 million; and the estimated useful life of certain capital assets was no longer appropriate based on the expected future usage of the assets in question and as a result, additional amortization of $6.2 million was charged in the quarter. 7) In the first quarter of 2008 ( Q ), the company re-assessed the fair value of a specific asset that was not meeting performance requirements as committed to by the vendor. The company s attempts to correct the performance issues have had limited success. The company was required to invest in additional equipment to ensure that customer delivery and quality was not compromised. Accordingly, the original equipment was written down to its fair value.