Good day, and thank you for standing by, and welcome to the Linamar Q1 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star, then zero. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Linamar's CEO, Linda Hasenfratz. Thank you. Please go ahead.
Thanks very much. Good afternoon, everyone, and welcome to our First Quarter Conference Call. Joining me this afternoon are members of my executive team, Jim Jarrell, Dale Schneider, Roger Fulton, Mark Stoddart, and some members of our corporate IR marketing, finance, and legal teams. Before I begin, I will draw your attention to the disclaimer currently being broadcast. I'll start off with a short update on the COVID-19 crisis and Linamar's current focus. Our approach to this last leg of the pandemic is the same as the first a year ago as we continue to focus on our employees, shareholders, communities, and customers in our Linamar Health First plan. In this stage of the pandemic, our focus is really in three key areas. First, ensuring we continue to have a safe workplace where we remain vigilant about following protocols and implementing regular testing and encouraging and enabling high vaccination rates.
We are big believers that regular testing is key to controlling community spread and the only way, along with vaccinations, that we get back to normal. We have also been very focused on communication with our people and communities about the importance of vaccination, which, along with testing again, is how we keep ourselves safe, our loved ones safe and healthy, and how we get back to normal. Given we're normally not seeing transmission of the virus in our plants, some may question why we've decided to implement this rapid testing in our Guelph, core plants of more than 9,000 people twice weekly. The answer is pretty simply, you are most contagious in the one to three days before you show your first symptoms. You may be positive, not yet feel sick, and be actively spreading the virus to others in your family or community.
If we can stop that, our community spread goes down, and everyone stays safer. Vaccination is the last key area of focus for us. We launched our vaccination clinic in early March after four weeks of focused work by our team. We have vaccinated 11,235 people already in our two months in operation and expect to ramp up more significantly this month as more vaccine becomes available. We actually have capacity to do 2,000 shots per day, given enough vaccine. To assist other companies interested in launching their own clinic, we have developed a playbook with all the information needed to enable an even quicker time to launch. The playbook is posted on our website, and we encourage the information to be shared and hopefully utilized.
With that, let's jump into some of the specifics about the quarter. We'll start off as usual with sales, earnings, and content. I should mention at the outset that we have renamed our transportation segment Mobility to better reflect the broader business focus of this side of our business. All of our reporting has been updated to reflect the new terminology. I will do my very best not to slip up and use the wrong words today. Sales for the quarter were CAD 1.78 billion, up 15% from last year. The auto sector continues to perform very well in North America and Asia. Launching programs are driving better volumes and margins. Global vehicle markets were up 14.7%, driving some great market rebounds.
The cloud on the horizon, of course, were customer plant shutdowns related to shortfall in the supply of semiconductor chips. MacDon also saw a very strong quarter, driving much of the industrial segment growth over the last year, although we are at last seeing Skyjack markets recovering. Market share growth in targeted regions in both industrial businesses also helped to boost sales. Normalized net earnings are up 133% to $158.3 million, driven by the strong sales growth, of course, as well as cost reductions that have been implemented and government support programs. The change in FX rates from last year also provided tailwinds this quarter. In North America, content per vehicle for the quarter was $196.05.
Another new record level, up 14.6% over last year, with customers we have a heavy weighting with also seeing the biggest market share gains. Vehicle production levels were down 3.9% compared to last year due to those chip shortages. Our automotive sales in North America grew 10.2%. It should be noted that powertrain plant closures do tend to lag vehicle plant closures typically. This is relevant, although we did feel an impact from the chip shortages in Q1, we expect to likely feel a bigger impact in Q2. This would also appear to enhance North American content per vehicle somewhat in Q1.
In Europe, content per vehicle dropped a little to $82.81 in a market that was slightly down due to our customer mix resulting in modest automotive sales declines in comparison to last year. The market in Europe continues to be difficult, with continued showroom shutdowns and the resultant impact on consumer demand, as well as complications from chip shortages. Production levels, and as a result, CPV, are likely to remain volatile until the region settles out once we move into the post-pandemic period. In Asia, content per vehicle increased significantly again to $13.51, up 25.4% over last year, with key customers seeing strong market share gains in certain products, as well as additional sales from launching programs in a market that was also up 32.4%.
Recall nearly all pandemic-related production hits in 2020 for Asia were actually concentrated in Q1. This gave us a 66.4% boost to automotive sales in the region to $147.4 million. Global automotive sales were up in the quarter, driven mainly by the strong growth in North America and Asia. Commercial and industrial sales were up 25.2% in the quarter, mainly due to strong MacDon performance, although Skyjack is now seeing some growth over prior year as well. Healthcare sales were also up over prior year as the final ventilator program units were delivered and Synaptive deliveries of robotic digital surgical microscopes began. Carefully managing CapEx continues to be a key theme for us in Q1. We were down significantly in CapEx from last year at $59.5 million of spend.
For the full year 2021, we expect to see an increase from last year, but still at the low end of our normal range of 6%-8% in order to continue to be somewhat conservative. Linamar's utilization of flexible programmable equipment is the key factor in allowing us flexibility in times of market softness to continue to tool up new business without requiring significant CapEx. This is a massive advantage that Linamar has in comparison with competitors who may invest in more dedicated equipment, which although cheaper and often requiring less labor, is not easy to reallocate to new programs or to scale the line to match actual capacity needs. We have continued our track record of generating free cash flow despite the pressures of working capital normally seen in the first quarter of the year.
We generated $166 million of free cash flow, and expect to see solidly positive free cash flow for the full year 2021. We have $1.6 billion of liquidity available to us as well, which is also standing. Our strong balance sheet and liquidity mean we have the ability to take on takeover work or acquisitions as they arise in an opportunistic market and drive even more growth for us. Solid cash flow has allowed us to reduce net debt levels. Net debt now sits at $309 million, which is down now over $1.85 billion from its peak in early 2018, despite the pressures of the pandemic. Leverage likewise improved dramatically to now 0.3 times last 12 months EBITDA. Turning to market outlook.
We are seeing markets sharply up across the board this year, which shouldn't come as a surprise after a tough 2020. Industry experts are predicting solid growth in light vehicle volumes globally this year to 15.7 million, 18.6 million, and 44.3 million vehicles in North America, Europe, and Asia, respectively. Next year, we'll see continued growth in the mid to high single digits. Heavy truck volumes are expected to be solidly up in North America and Europe this year, but down in Asia. Next year, we will see continued growth, moderating in North America, stronger in Europe, but again down in Asia.
Industry experts predict double-digit growth in the access market in North America and Europe this year and next year, coming off a very tough 2020, as construction projects start to ramp back up and consumer confidence builds post-pandemic. Asia will continue to grow, a little less strongly than what we saw last year. Backlog is meaningfully up from prior year at more than double the level we were at in Q1 2020. Lastly, industry is predicting solid growth in the combine draper header market this year in double digits in North America, Australia, and CIS, and mid-single digits in Europe and South America. The order book is up significantly from last year, with farmers feeling more confident with a rally in commodity prices, a good harvest last year, and a perception of a more stable international trade environment.
Looking at a little more detail, on the auto side, you can see a pattern of recovery in every region on vehicle sales in comparison to prior year. Notably, once we hit the months where declines were really starting to hit last year. China is quite consistently up in double digits. Europe's a little bit up and down based on lockdown, and North America consistently trending higher. In fact, vehicle sales in North America are nearing record levels. April 2021 SAR in North America was the second highest in recorded history. March 2021 was the third highest SAR in history. This while vehicle builds are constrained by chip shortages.
What this means is we should expect robust production levels once the chip issue is solved and a sustained period of strong performance while the industry catches up to demand and rebuilds vehicle inventories to normal levels. Looking at production levels compared to what was forecast at our last conference call at the beginning of March, you can see a slightly stronger Q1 than was forecast, really driving out of a stronger recovery in China. Q2 is now expected to be a little softer than we thought in March. This is because of the ongoing chip shortage issue, which is trimming another 1.1 million units out of production in Q2. There's a similar story for the full year, so that same really 1.1 million units are impacting the overall full year performance for 2021.
That said, production in Q1, Q2 and 2021 full year are all up significantly from 2020. Q1 was up 14%, Q2 58% is the forecast, and 2021 full year, 12%. Double digit growth across the board. The impact of the chip shortage and other supply chain issues seems to be changing day to day and is very difficult to predict. We will have a better sense for you as we see how things play out in the next six weeks and can provide an update with our mid-quarter market update that we'll provide in early July. Looking at the access market in more detail, you can see first that all three markets showed growth over prior year in the first quarter, which is very positive.
Further growth for the full year in core North American and European markets are expected to be even better, which is a great sign. Equipment utilization levels continue to look positive. In Q1 2021, utilization levels were between 95% and 100% of 2019 levels and well ahead of last year's levels, which is also a very good sign. In much of April, utilization was 98% to 102% of 2019 levels, continued improvement happening through the year. Double-digit growth is expected in core North American and European markets in 2021 and in 2022. The strong backlog already noted at Skyjack supports this and should drive double-digit sales growth at Skyjack this year and next year.
In the agricultural business, we're seeing a very optimistic outlook in North America, in particular for double-digit growth this year after a soft 2020. Q1 combine retails in North America were 17% up from prior year, with a stronger showing in Canada, which was up 21%, and US also showing strongly at up 16%. International markets are predicting high single digit or double-digit growth pretty much across the board. MacDon continues to build market share in international markets with strong growth and market share growth in all of Australia, South America, Europe and CIS over the last 12 months. Order intake is significantly ahead of last year at this time, indicating double-digit sales growth for MacDon this year as well, and an expectation of continued growth in 2022.
Turning to an update on growth as well as our outlook, you'll be pleased to know that we had another solid quarter in new business wins. I'm going to highlight some of our more strategic wins in a moment. First, electrified vehicles continue to provide great opportunities for us. In fact, more than a third of business wins in the quarter were for electrified vehicles, which likewise make up a substantial share of the books of business that we are currently pursuing. You can see a steady build here in our global content per vehicle for battery electric vehicles. That's the gray outline, which is getting very close to the internal combustion, blue line on this chart. The lines are converging, which, of course, is the goal.
Our content per vehicle in electric vehicles is predicted to surpass that of hybrids, as you can see within a couple of years as we see more and more battery electric vehicle wins. Our strategy for pursuing electrified vehicles is diverse in many aspects, which actually allows us to really maximize opportunities for growth. We tried to capture that on this slide. First, we have a diverse lineup of products in various areas of the vehicle from propulsion systems to structural and body parts to power system solutions and full chassis solutions. We are targeting cars as well as commercial vehicles, trucks of every class and off-road vehicles. We are targeting all types of electrified propulsion, battery, electric, hybrid and fuel cell electric vehicles. We're targeting traditional OEMs and new entrants to the vehicle field, to the electric vehicle field very successfully.
Finally, we're open to a variety of scalable solutions for our customers, from individual components to sub-assemblies to full systems. I think the last point is really important, as our customers are still developing their own manufacturing strategies in that regard. Being flexible means you get on the platform one way or another, and as the incumbent are in a much better place to take on more responsibility as the OEMs evolve their strategies. We believe being sourced onto as many new electrified platforms as possible in any way is absolutely key in this emerging market. The strategy paying off as we win business in all of these different areas and a variety of combinations as such. Once again, the flexibility of Linamar's strategy is key to our success. Equally important to success in an electrified future is the flexibility of our manufacturing assets.
Linamar has long believed in the importance of using flexible, programmable equipment in our production lines to allow us to maximize utilization of our investments and better scale and match line capacity to fluctuating demands. What that means is the same equipment can be used to make a variety of types of parts with minimal investment in new tooling and programming. That means that capital assets that are currently employed in Linamar's operations today can be adapted to manufacture electrified components at little incremental cost as volumes on internal combustion engine vehicles decline and volumes on electrified vehicles grow. For instance, the same gear grinding equipment can produce gears for electric vehicle e-axles and for internal combustion engine powertrains alike, as you can see illustrated on this slide. The same is true for our lathes, our machining centers, our heat treat equipment, straighteners, spline rolling equipment, et cetera.
The list goes on. There's some equipment, of course, which is more product specific, like assembly equipment, for instance, but even these lines can have some elements reused for a new program. The bottom line is we don't expect to see a significant amount of stranded assets over the next decade as we transition into electrified vehicles. We think this is very good news from a risk perspective. Our addressable market across a range of vehicle propulsion types continues to look excellent with our total addressable market for us today somewhere around $80 billion, growing to more than $300 billion in the future, an increase of more than 3 times. As you can see, the market potential for each type of vehicle, whether internal combustion, hybrid, battery, electric, fuel cell, electric, are all really starting to even up.
This is largely driving from the higher potential content per vehicle we have now in the battery, electric, fuel cell, electric, and hybrid vehicle areas, give thanks to the continued product development efforts for products like assembled battery trays, hydrogen fuel tanks, and others. Our potential content for all types of vehicles are roughly $3,200 per vehicle. With respect to launches, we are back to seeing ramping volumes on launching transmission, engine, and driveline platforms, which are predicted to reach 40%-50% of mature levels this year, which should generate incremental sales of $500 million-$600 million. These programs will peak at nearly $3.7 billion in sales. We saw a shift of more than $70 million of programs moving from launch to production last quarter, which was more than offset by solid business wins.
Next year, we should see growth of 30%-40% for launches to generate additional incremental sales of $600 million-$700 million. As usual, we are summarizing all of these expectations of market changes on our outlook slide that is now being displayed. With markets recovering as described, we're expecting to see double-digit growth on the top line and strong double-digit growth on the bottom line in 2021. We will see continued growth in 2022. This drives from double-digit growth at both Skyjack and MacDon this year, as well as significant market growth in auto and continued ramping of launching business in that segment. Next year should see continued growth of all three businesses based again on growing markets, growing market share, and launching business.
Margins will be back into our normal range of 7%-9% at the net level this year, driving from the Mobility segment margins being back into the mid normal range and industrial margins getting close to being back to normal levels. Next year should see normal margin ranges for both segments and overall. Leverage levels continue to improve based on continued positive free cash flow both years. Looking specifically at Q2, you should expect to see significant growth in the Mobility segment based on the much higher production levels forecast this year. I recommend being cautious about the impact of the plant shutdowns related to chip shortages. As noted earlier, the powertrain plants tend to lag the vehicle plants in terms of timing of shutdowns. The issue seems to be far from resolved and really is playing out on a week-to-week basis.
We'll know better the impact of the shutdowns as we get closer to the end of the quarter, but it is safe to assume that the impact to us in Q2 will be higher than what we saw from Q1. Agriculture and access will both see solid growth driving out of that strong backlog and again, a much stronger market than last year. I think it's important to mention also that both segments are feeling some cost pressures due to supply chain issues at the moment. We expect to see to feel some impact of that throughout the balance of the year. That means you won't see a repeat of the very strong Q1 Mobility segment margins. As noted, we still do expect to be up from last year and in a mid normal range for the full year.
Similarly, although industrial margins will grow as they normally do in Q2 and Q3, they will be tempered somewhat based on these cost issues. Hence my suggestion of getting close to a normal range of earnings in terms of margin performance in the industrial segment this year. We will also see continued dial backs on government support as our recovery continues. I will add, as the lawyers insist I do, that impacts from COVID-19 outbreak and subsequent supply chain challenges are currently not fully understood or determinable in terms of their impact to all segments at this point. Of course, risk remains. I now highlight a few of our more interesting business wins this quarter. First, we picked up another significant program for next generation battery electric vehicles.
We'll be manufacturing more than 70,000 units per year of this subframe assembly for one of our customers as of 2023. Although the volume doesn't sound substantial, the price point of this program is substantial, it is quite a complex assembly, making this quite a notable win for our team in North Carolina. Next is a major differential assembly win for a very high efficiency transmission for a Japanese automaker that we've been focused on for years. This is a notable win, given this automaker rarely strays from their in-house manufacturing or corrective partners for this particular type of product. Third, we had a very active quarter in lightweight cylinder head and block wins, over $100 million, in fact, in annualized business.
These wins are key as they are likely the last generation of internal combustion engines that will see us out the decade. There's a huge opportunity in these types of programs over the next 10 years. Careful equipment selection, as referenced earlier, will ensure any capital can be reallocated to new energy vehicles as they develop over that time frame and into the 2030s. Finally, a win in the off-highway market for some substantial sales as well. The commercial vehicle and off-highway vehicle markets are both picking up in terms of opportunities at the moment after a few dry years. Turning to an innovation review, I would like to highlight a few great technology developments that we launched this quarter. First, I'd like to share some new product offerings that our MacDon group has recently introduced.
The TM100 is a tractor-mounted draper header that can be used in crops where swathing is required prior to harvesting, but the total acreage doesn't justify the investment in a self-propelled windrower. The draper header can be mounted directly to a farmer's existing tractor. Next, a sunflower attachment option that can be assembled to the bottom front of our current Flex Draper header. This is another great example of the multi-crop versatility of our flex draper products. Lastly, MacDon is adding its own transport header trailer solution, which is really a must for markets like Europe, where field sizes are smaller and roadways are more narrow. All these features are great examples of MacDon's ability to adapt to the needs of the regional markets it serves, and a significant reason why we are growing so strongly our share in Europe and CIS.
Next, I'd like to highlight one of our innovation hub projects. As you know, the iHub, as we call it, is our incubation and development center for future diversification efforts aligned to our Linamar 2100 plan. ThermoLift is one of our early-stage startup partners who we are helping to scale up and commercialize by using our manufacturing expertise, design, test, and supply chain capabilities. Their residential heat pump system can replace a home furnace, water heater, and air conditioner, all from a single unit and at significantly less energy requirements and therefore, of course, emissions. We've been conducting validation tests at our McLaren Engineering Center, and the design is progressing well towards an important durability type of milestone. Early trial units will be going out into the field later this year. Lastly, our product development efforts for electrified Mobility continue by incorporating innovative new solutions into our e-axle offerings.
We're improving performance, safety, and EV range with features like electronic limited slip differentials, park locks, and disconnect. These features are both for our light vehicle and commercial vehicle e-axle applications, as you can see illustrated here on the slide. We also continue to make great progress on our digitization efforts across our operations, with notable increases in both levels of automation as well as data collection points across our connected equipment to optimize equipment performance and efficiency. Turning to a strategic update, we announced this week the establishment of a strategic alliance as a first step towards a possible joint venture with a Canadian leader in fuel cell technology, Ballard Power Systems.
Linamar and Ballard have entered into an agreement to jointly develop and market a fuel cell powertrain and chassis system for cars, SUVs, and trucks up to and including Class 2 for sale in North America and Europe. The partnership will have a flexible approach to customers, where some may be interested in the entire rolling chassis system, inclusive of the fuel cell powertrain and e-axle propulsion system, which is basically the gearbox electric motor and controller, and is mounted on a wheeled chassis. Others just might be interested in subsections as such. The partnership is really intended to leverage the expertise and skill sets of both companies. Obviously, Ballard's expertise in fuel cells and then our expertise in electric vehicle propulsion, the hydrogen tank, chassis systems, and manufacturing overall.
Together we think we're really bringing a couple of world-class companies together to lead fuel cell powertrains to the market. I think this schematic helps to clarify the roles of what each company is going to do. Linamar is basically responsible for four key areas: the hydrogen tank, the e-axle system, that's the gearbox electric motor and controller, the chassis system, that's things like the frame or unibody structure or sometimes called skateboard, the steering, wheel end, shocks, springs, brakes, hubs, et cetera. Fourth, the balance of plant requirements to kind of pull the system together, which essentially everything in a fuel cell that isn't in the stack, like air compressors or pumps, humidifiers, cooling systems, the enclosure or cradle, et cetera.
Ballard would be responsible for three key areas, the fuel cell stack, so the proton exchange membrane or PEM fuel cell stack, secondly, the fuel cell control system, finally, various fueling subsystems and components related to the sort of mechanical thermal noise vibration system. One of the concepts that we're exploring is to design the fuel cell and tank system into a package that will replicate the size and dimension of a typical battery pack. The benefits of this design would just be the ability of a customer to convert a battery electric vehicle into a fuel cell electric vehicle with minimal cost and minimal challenges around changeover by simply pulling out the battery pack and replacing it with the fuel cell and tank system. The balance of the chassis, including the e-axle propulsion system, would remain intact.
A battery electric vehicle and a fuel cell electric vehicle are actually quite similar in terms of operations. Both drive the vehicle off of an electric motor system, which is the e-axle. In the battery electric vehicle, the power source of that is a large battery pack, and in the fuel cell electric vehicle, the power source is the fuel cell system. That's what makes this plug and play concept work. We believe a hydrogen-based future utilizing fuel cell technology is the best solution for mobility, really for four key reasons. First, it's clean. It is truly zero emission. Hydrogen fuel mobility is truly green, generating zero emissions from the fuel source and generation right through to vehicle operations. In contrast to battery electric vehicles, which of course rely on the source of electricity to determine their carbon footprint.
Hydrogen can be made from water using wind or solar electricity to power the process of electrolysis of the water. When the fuel cell is operated, the hydrogen is reunited with oxygen to create energy with a by-product of water. In some ways, a fuel cell vehicle is really being powered on the wind or solar energy, which is being temporarily stored in the hydrogen. Secondly, fuel cells can be quickly refueled as we've become accustomed to in an internal combustion engine world. Thirdly, hydrogen has a very high density of energy, making it a very efficient source of fuel to power vehicles. Lastly, fuel cell electric vehicles don't rely on the regionally concentrated sources of certain minerals such as cobalt and lithium, which are currently largely controlled by the Republic of the Congo and China, which could create some concerns in the future.
We are very excited about this partnership, which we think levers off decades of experience and technology development of both companies to pursue a future of mobility that is truly green. With that, I'm gonna turn it over to our CFO, Dale Schneider, to lead us through a more in-depth financial review. Dale?
Thank you, Linda. Good afternoon, everyone. As Linda noted, Q1 was a strong quarter for sales and an exceptional quarter for earnings as a result of the recovery from COVID-19 shutdowns that occurred last year. It was also a great quarter for cash generation as we generated CAD 166.2 million in free cash flow. Additionally, we were able to maintain our strong levels of liquidity at CAD 1.6 billion. For the quarter, sales are CAD 1.8 billion, up CAD 232 million from CAD 1.5 billion in Q1 last year. Earnings are normalized for any FX gains or losses related to the evaluation of the balance sheets and any unusual items that may have occurred in the quarter. In Q1, earnings were normalized for FX losses related to the evaluation of the balance sheet, which impacted EPS by CAD 0.07.
Normalized earnings, operating earnings for the quarter were $221 million. This compares to earnings of $103.5 million in Q1 2020, an increase of $118 million or 114%. Normalized net earnings increased $90 million or 133% in the quarter to $158 million. Fully diluted normalized EPS increased by $1.37 or 132% to $2.41. Included in earnings for the quarter was a foreign exchange loss of $6.4 million, which is almost fully associated to the revaluation of financing balances. As I mentioned, the net FX loss impacted the quarter's EPS by $0.07.
From a business segment perspective, the Q1 loss of CAD 100,000 was a result of a CAD 10.2 million loss in Industrial and a CAD 10.1 million gain in Mobility. Looking at the segments, Industrial sales increased by 16.5% or CAD 49.3 million to CAD 348.3 million. The sales increase in the quarter was due to the strong demand and market share gains driving agricultural equipment. The strong demand and market share gains also driving North American access equipment sales, which were partially offset by declines in the European access equipment that is still being adversely affected by COVID-19 and the negative impact on sales from changes in FX rates since last year.
Normalized industrial operating in Q1 increased $14 and a half million or 46% over last year to $45.9 million. The primary drivers impacting industrial were the increased contribution from the strong agricultural volumes and the increased contribution from the net volume increase in access equipment, which was partially offset by the negative impact from the changes in FX rates. Turning to Mobility, sales increased by $183 million over Q1 last year to $1.4 billion. The sales in the first quarter was driven by the increasing volumes in certain programs in North America and Asia, the increasing volumes on launching programs, the impact of positive FX rates since last year, partially offset by the market impact of the semiconductor chip shortage, which is impacting our customers.
Q1 normalized earnings from Mobility were higher by CAD 103 million or 143% over last year. In the quarter, Mobility earnings were impacted primarily by the net increase in sales as I just described, the cost savings we were able to achieve in the quarter, the positive impact from FX rates since last year, and the utilization of government support programs. Returning to the overall Linamar results, the company's gross margin was CAD 313 million, an increase of CAD 112 million compared to last year due to the same factors that drove the segments. COGS amortization expense for the first quarter was CAD 118 million.
The COGS amortization as a percent of sales actually decreased to 6.6%, but on a dollar basis, it increased by CAD 9.5 million, primarily due to the impact of launching programs and products in the quarter. SG&A costs decreased in the quarter to CAD 91.5 million from CAD 97.5 million last year. The decrease is primarily the result of cost savings achieved since the pandemic started a year ago. Finance expenses increased by CAD 200,000 since last year due to a one-time foreign exchange impact because of the U.S. dollar repayment and the funding of the new EUR 320 million private placement notes in January and lower interest earned on declining long-term receivable balances.
These increases were also almost fully offset by the lower interest expense because of the debt reductions that we've been able to achieve in the last year and the lower effective interest rates, which improved by 55 basis points or 20% since last year. The consolidated effective interest rate for Q1 declined to 1.9% from 2.5% last year. Effective tax rate for the quarter increased to 26% compared to last year due to an increase in nondeductible expenses. As a result, we are expecting the 2021 full year tax rate to be in the range of 24%-26% and consistent with the 2020 full year rate. Linamar's cash position was CAD 672 million as of March 31st, an increase of CAD 258 million compared to March 2020.
The first quarter generated CAD 224 million in cash from operating activities, which was mainly used to fund CapEx and debt repayments. This also resulted in cash flow generation of CAD 166.2 million in the quarter. Net debt to EBITDA decreased significantly to 0.3 times in the quarter from 1.57 times a year ago and from a half a turn at the end of 2020. Based on the current estimates, we are expecting net debt to EBITDA to continue to improve by the end of 2021. The amount of available credit on our credit facilities was CAD 958 million at the end of the quarter.
Our available liquidity at the end of the quarter remained strong at $1.6 billion, as a result, we believe we currently have sufficient liquidity to satisfy our financial obligations during 2021. To recap, sales and earnings for the quarter was a story of exceptional performance driven by strong market recoveries from COVID-19 and market share growth, driving normalized net earnings up 133%. Despite this exceptional performance, the future is not known, as a result, Linamar remains focused on cash generation and strong liquidity. Linamar had a remarkable quarter of cash generation as we generated $166 million in free cash flow in the quarter while maintaining our strong liquidity at December 2020 levels of $1.6 billion. That concludes my commentary, I'd like to open up for questions.
Operator, if you're on the line, if you could open it up for questions, that would be great.
Hi, Sadie. You're there? Hello. Hi, Sadie. We're ready for questioning, Q&A session.
Yes, sir. Ladies and gentlemen, as a reminder, to ask a question, you need to press star one on your telephone. For our first question, we have Krista Friesen from CIBC. Krista, your line's open.
Thank you. Congrats on a great quarter. Just a few questions here. If you can remind me on the commodity front, what is your exposure like to steel? Do you participate in some of the resale programs with the OEMs? I guess, not just steel, but aluminum and resin as well.
Yeah. On the auto side of the business, we have contracts with our customers that allow for metal market price change passthroughs. On our aluminum contracts that we're fully covered with metal market adjustments. They're done on a quarterly basis on a predetermined metal market index. On steel-based products, I wouldn't say it's 100%. I would say it's probably more like 60% or 70% of contracts that would be covered by such metal market adjustment programs. At the same time, we are out in the market trying to protect ourselves in terms of our expected steel purchases, not just for the auto business, but also for our industrial businesses. Typically, we would have contracts out for at least, you know, the current year or the balance of the year.
We're in not bad shape, in that regard, but of course, we do have to come to an agreement for next year's prices in that regard.
Yeah. I would just say for the automotive side, again, you know, we on our supply base side, we definitely would have contracts on the base level. Then we also pass through the surcharge that Linda referenced to our suppliers that comes through the automotive. We do protect on a contract side. Of course, on the industrial side, Skyjack, MacDon, it's a little bit more open. It's up to us to, you know, have our contracts sort of laid out with our suppliers and also protect on that steel commodity, which we all know is, you know, jumped up quite a bit over the last, six, eight months, the last year. We're really, as Linda said, referencing for, like, the future.
Obviously that plays into your pricing models and that with your customer base too, 'cause we have that product pricing ability in that as well.
Perfect. Thank you. Just on the Skyjack side, utilization rates for the access equipment were great in the quarter, almost at 100% there. Was this what you were expecting at the beginning of the year, or has this maybe accelerated a bit quicker than you thought?
Yeah, I would say it's quite similar when we had our call at the beginning of March. We also cited actually very similar levels of utilization in comparison to 2019. Just to be clear, when I say 95 to 105, I'm comparing equipment utilization levels this year compared to what they were in the same week in 2019. 2020 obviously was quite skewed, so I think it's not a very meaningful comparison. We're running at the same kind of equipment utilization rate out there in the field as we would have two years ago, just to explain what that is.
Okay. That's great.
I would say that April has definitely taken a bit of a step up. Like we're closer to 98% and as much as 102% in comparison to 2019 equipment utilization for most of April.
That's great. Thanks. Just on the Skyjack side, is that being impacted very significantly by the chip shortage?
A little bit. Very minimal. It would really be through the powertrain side. Very minimal. It really would be not material at all for Skyjack.
Okay, great. Then the 1.1 million reduction in vehicle production, your outlook, are you just assuming that gets pushed out into 2022, or is some of that potentially lost?
Oh, I think it gets pushed out. I mean, as we were showing, the demand is very high. I mean, we're selling in North America at record rates, so the demand is 100% there. It's just how quick can we get the chips to build the vehicles, right? Whatever can't be made up this year, in my mind, will absolutely be made up next year.
I would say the messaging from the OEMs across the board, Europe and North America, is they plan to make this up. That's the messaging.
Perfect. Thank you so much. I'll jump back in the queue.
Okay.
For our next question, we have Peter Sklar from BMO Capital Markets. Peter, your line's open.
Okay, thank you. On your result in the Mobility segment, where you have this 12.2% margin, I was looking back through my spreadsheet. I don't think I've ever seen a margin that high. I was wondering if you could be a little bit more forthcoming on what happened. Like, if you look, your revenues in Q1 2021 versus Q4 2020, just looking at those two quarters. You know, Q1 really only had $44 million more revenue than Q4. Effectively, the revenues were the same. In Q4, your operating income margin in that segment was 9.8%, and then in Q1, it was 12.2%. Something happened.
I wonder if you could just explain a little bit more that what happened that really drove this high margin in one quarter?
Yeah. I mean, there were a few things as I mentioned. I mean, I guess in the year-over-year comparison, North America and Asia sales were up significantly. In addition, we had cost reductions, and we had the government subsidies, and we had some tailwind from exchange this quarter. You know, that sort of explains the year-over-year change. You know, your comparison in looking at Q4, I mean, sales were up from Q4 for sure. That definitely drives part of the change. Part of the impact is also the exchange piece. That one's obviously hard to predict and can't be counted on, right? To what's gonna happen one quarter to the next. There was some tailwind from exchange. You're absolutely right.
The 12.2% is an unusually high level for Mobility margins. We do not think it's sustainable. As I mentioned in my formal comments, we suggest that you dial back to somewhere around the midpoint of our normal range of 7%-10% for the balance of the year. That is a more realistic expectation, particularly given some of the pressures that we are expecting around some of the costs that we talked about, and also being a little bit conservative around what might happen in terms of shutdowns. Midpoint of 7%-10% for the full year.
Linda, could you or Dale quantify what the dollar amount of contribution to operating income was for that segment as a result of foreign exchange? Also, could you...
We-
quantify the amount of government support you received?
We don't quantify the FX piece that relates to, you know, transactional, translational exchange and hedging. That is not something that we typically quantify. I mean, we do quantify the revaluation on the balance sheet, but not the FX piece. With respect to subsidies, it was somewhere around CAD 16 million in the quarter, and I believe that's detailed out in the notes. Most of that did hit Mobility.
Did you say 16?
Correct.
Yeah. It's 15.9.
Okay. Just one last question. You said that a third of the orders that you won, contract wins during the quarter were battery electric vehicles. Can you, like, what is the annual dollar value of those wins? I don't know if that's a small number or a big number.
Yeah, I mean, it's a big number. We had a strong quarter in new business wins, but, you know, I don't have that figure handy. What I do know is we had a strong quarter in new business wins. We're on track for a strong year. 34% of the wins were related to electric vehicles.
Okay. Oh, sorry, one last thing. I mean, just, you know, on the big bogey here, which is what are Q2 production volumes are going to look like. I mean, you have some insight 'cause you're seeing the production schedules a few weeks out. Do you have any commentary on what you're seeing and what your sixth sense is on how Q2 is gonna fall out?
I mean, the problem is it is quite difficult to predict. It's not just us that are having difficulty predicting. It's the automakers as well. I mean, I'll let Jim comment further, but what I can tell you for sure is Q2 impact is gonna be higher than Q1 impact.
Yeah. It's a really interesting. You're chasing releases and in fact, I was on the call with a customer today, Peter. Really the key is they're chasing microchips, right? What the problem is, you know, they have their releases at a high rate right now. They keep the releases at a high rate. They find out they can't get microchips, they take the assembly plant down, shut it down, and then those releases don't immediately go back to the driveline or powertrain plants that we're servicing. Some of them keep the releases high, and then eventually it changes, right? This is like a constant back and forth.
Quite frankly, the comment is, "You know, we are struggling to schedule our plant, so it must be really difficult to schedule you guys." It is a constant back and forth day to day. It really is that, you know, changing.
Are your customers building inventory of completed engines and transmissions that, you know, they can't send to the assembly plants 'cause assembly plants are out?
Yeah, yeah. Yeah. Yeah, for sure, for sure they're doing that, but eventually that gets cut off too, right? Like, 'cause you do have chip issues there. You know, so I think what they're doing is keeping those inventories high. Then obviously the whole supply chain is backed up a little bit, so they wanna make sure suppliers, you know, are keeping up as well. When they turn it back on, right, they can outassemble typically, right? They could take a second shift and add a second and a half shift, right?
Right.
Make up the difference. When they say they're gonna make this up, I think that's their sort of planning to do that, is sort of the comment that I'm seeing. Mark,
Yeah. You know, Peter, as we were talking about, they're really concerned to keep the industry or keep the process moving in regards to the product and not have, you know, complete shutdowns. We know, it's coming back out of the shutdown. There's always lots of hiccups and, you know, all the OEMs, you know, when they get chips, they wanna be able to get vehicles. You know, you're seeing them, you know, park a lot of, you know, more or less finished vehicles in lots that they just need to stick the chips in so that they can get them to dealers. The thing is, we've been talking about it. It's very fluid day to day.
Definitely for the powertrain, for the engine and transmission plants, they wanna keep them running so that they can build some in-inventory because they are hand-to-mouth when it comes to normal production to the vehicle assembly plants.
Yeah. The new capacities on microchip, there's a lot of discussion on that too going on, Peter, and that's years away. That's a couple years away, right? Before any of that can have any impact. Predicting the future is never easy. This one's a tough one.
Yeah. I would think at some point, like, if the vehicle assembly volumes really are taken down in the second quarter because there's no chips, like, at some point, they have to stop building engines and transmissions, and finally you will see that.
Yes. That's, but that's already happening, Peter.
Yeah.
They're already shutting powertrains down at plants down.
Yeah.
Okay.
Like, we did feel an impact in Q1.
Okay.
We will feel an impact in Q2, and we think it's gonna be a bigger impact. Again, it's, you know, very dependent on how quickly the issue resolves and how quickly they ramp production back up. It feels right now like it's gonna be a bigger impact. If they get going quicker, they may start catching up already in Q2. It's hard to say.
Okay. Then with Ford specifically, like, obviously, you know Ford is saying that, you know, their production schedule in Q2 is gonna be half of what it would have otherwise been. Are you feeling the impact from Ford specifically yet?
Yeah, we're seeing it, definitely, from Ford and also other OEMs. Again, it's not one for one. Do you know what I mean? Again, powertrain driveline. You know, again, their perspective would also be, we're gonna make that up. You know, that's a strong message. I think what they're doing is keeping us and probably a lot of suppliers who have been under the gun probably for months, right? Running 6, 7 days a week. You keep those going because, you know, if you're gonna make that up, you can't get an extra day in a week, right?
Yeah. Yeah. Okay. Those were helpful.
I think the important thing to focus on is the fact that demand is staying very strong. Although it's distressing to see these shutdowns and it is disruptive, it will be made up. We can look forward to a strong surge back and a sustained period of higher production. What we're seeing right now is absolutely temporary.
Okay. Linda, thanks for all those comments. That was actually very helpful.
Great.
For our next question, we have Brian Morrison from TD Securities. Brian, your line's open.
Yes, thanks very much. I agree with you on the strong demand environment being positive going forward. Just in terms of Peter's question on the operating margin within Mobility, I'm not sure I fully understand it. If I look at your guidance going forward, your midpoint of 8.5, you basically revert back to a mid 7 or low 7 margin, operating margin in the back half of the year. If sales are sort of constant on average based on your guidance and cost reductions flow through, what's changed from Q1 for the remainder of the year to get to that 8.5% margin?
Yeah, I mean, part of what we're expecting is the cost impact from the supply chain issues. Admittedly, I'm being a bit conservative because we're a little concerned about, you know, where volumes are gonna go. I'm trying to be a little bit cautious on where margins are gonna land based on a conservative outlook on what's gonna happen with volumes.
Yeah. Maybe just to comment on the cost side of things, like, you know, as we talked about already, the commodity prices, you look at. Again, we got a lot of pass-throughs and contracts, but, you know, when you look at hot roll or cold roll material now up to like $1,300, $1,400 a ton versus a year ago, you know, $600, $700 a ton. You look at logistical side as well, Brian, where you have, you know, a 40-foot container coming out of China that was probably $4,000 a year ago, is now $7,800, $8,500. There's just a lot of these cost elements that are in there. We have stepped up. I mean, we have really stepped up our cost attack team efforts in here.
I mean, we in the pandemic, we talked about, you know, you know, keeping certain cost reductions in place, which we've done. Like, I think we use travel as a really good example. We use subscription, software sharing. Like, all those things we are really stepped on to try and mitigate any of that. There is some reality to some of these cost increases.
I'd just like to point out that notwithstanding all of that, we're expecting, you know, solid double-digit earnings growth in both segments, but most notably in the Mobility segment where normalized operating earnings are gonna be dramatically up from last year. Notwithstanding what's happening with on the cost side, we're obviously trying to offset that. We can. It's still gonna be a fantastic year for the Mobility segment, just so that you don't get too caught up in all that and what's happening over the next few quarters.
Yeah, no, I understand that. It's just the variance from one quarter to the next. That's all.
Yeah.
In terms of your guide, do you expect a full recovery in volumes? There's a full recovery in volumes baked into your guidance, or does your guidance extend the recovery into 2022?
Well, we're basing it on industry forecasts. you know, what volumes are forecast for the balance of the year and what we're hearing from customers and, you know, with a bit of conservatism built in there. As we talked earlier, there is an expectation that some of the missed production from this year will be made up in 2022. I think that's most likely to happen. We certainly do expect to see a bounce back in the back half of the year.
Okay. I think maybe overlooked, this is for either Dale or Linda. You know, overlooked here is just how strong your balance sheet has become. You're clearly in a, in an advantageous position here. I don't wanna ask you about M&A activity because we're not gonna go there. What are your plans with your buyback? Do you plan on getting active here?
I mean, it's for sure something we talk about with the board every quarter, including this one, both dividends and buyback. You know, with respect to both questions, I mean, we did just increase the dividend two quarters in a row. That didn't seem like something that made sense to do so quickly again. I will say that buybacks are definitely always an option and one that we would seriously consider based on share values and our expected need for cash. It's something that we've discussed. It's not something we're ready to make a move on at this moment, but it's something that would potentially be on the table.
All right. Thank you very much.
For our next question, we have Mark Neville from Scotiabank. Mark, your line is open.
Hey. Excuse me. Good evening. Great quarter. I think I'll leave the Mobility margin conversation alone.
Sure.
Just in industrial on the Industrial segments, a strong quarter. You know, comments are on backlog and order intakes, very supportive. Regarding the double-digit growth, I mean, that can mean a lot of things. Just curious if you can maybe try to help ballpark it for us on what maybe your expectations are for that business for the year.
Yeah, I mean, I hesitate to get any more specific, but I have given you know, what the market is looking to grow in more specific figures, and that, you know, we're looking to grow market share. I think that should give you some level of guidance as to what we think will happen in the Industrial segment.
Okay.
I mean, Q1's obviously a leading indicator for the year, and normally Q2 and Q3 are stronger quarters than Q1.
Yeah, no, that's helpful. You know, it looks very strong. Just trying to put a number on it. Again, maybe just to follow up on the balance sheet. You know, is there, you know, your sub, you're close to 0.3 times, I think it was, when reported? You're generating lots of cash. You know, is your expectation that sort of to ramp CapEx back up? Again, like I'm just sort of trying to understand, like, where you sort of want to sort of operate, sort of in the absence of M&A, because it does seem sort of maybe a little too low and, you know, maybe wondering why you might not want to get involved in the buyback a little sooner? Thanks.
Yeah. I think that CapEx is definitely going to ramp back up. I mean, we will be higher this year than last year. We'll be at the low end of our normal range, so that's a bounce back from last year for sure. That will continue to build based on the book of business that we are winning. We are trying to be conservative just given the current situation and, you know, just wanting to manage things conservatively. We're, you know, we have the ability to do that, so we're gonna do it. You can expect CapEx to ramp up. On the M&A side, there's lots of interesting opportunities out there. For sure that's something that we think would be interesting and we can explore where some opportunities around.
Then as just noted, buybacks and dividends are another obvious use of cash that we would discuss every quarter with our board.
For our next question, we have Kevin Chiang from CIBC. Kevin, your line is open.
Thanks for taking my question and congrats on a great start to the year here. I'd like just to ask about the Ballard joint venture. you know, I see it's focused on light-duty vehicles, and you have a slide here about, I guess, the advantages of fuel cell vehicles over, I guess, battery electric. I'm just wondering what you think the penetration rate here for fuel cells are. It just feels as though the momentum for battery electric and the first mover advantage seems pretty insurmountable now, you know, if I think of the ability for fuel cell vehicles to gain any real traction. Obviously I don't know that for sure.
Just wondering how you view...
Yeah. I mean, Kevin.
...technology over time.
Yeah, you're right. battery electric have a lot of momentum. For sure we're gonna see lots of growth over the next 10 years on the battery electric side. The fuel cell electric will sort of come in behind that. I'm not saying there won't be anything for 10 years, but I do see battery electric as a bridging technology to fuel cell electric. Because the technologies in a sense, are quite similar, as I was describing in my formal comments, they're both electric vehicles. They both run off of an electric motor with a gearbox and a controller. All of that is the same. It's really just the source of power. Switching out from a big battery pack to instead a fuel cell system and tank, is actually pretty realistic.
I, you know, I think the move to battery electric is great because it gets us a step closer to the fuel cell electric, and it is cleaner, and in some countries, depends on the country and the source of electricity. You know, it's starting to help. Fuel cell will make a much bigger difference once we can get to that point. I'm not suggesting that fuel cell electric vehicles are going to leap onto the scene in a dramatic way in the next year or two. Absolutely it'll take, you know, a few years for that to start to play out. I will say that there's a lot of interest, a lot of discussion. A lot of automakers are in active discussion and development around fuel cells.
This is clearly where the next generation is going. This is a really important building block for us.
Yeah. I think as well, I mean, as Linda said, this isn't like a short-term, you know, idea. This is a bit more of a longer-term play, of course, with things that will be developed. I think it's really already it works, right? I mean, let's look at that. It does work, and it's in buses, it's in commercial vehicles, you know, and you also have to look at the whole, you know, environmental side long-term and regional jurisdictions and governments who are really starting to endorse these type of plays. Then when you look at this, just to correct you right away, it's a strategic alliance to start, which eventually would become a JV.
Really what we're now doing is we're making a statement of work that Linda sort of described and you saw in the pictures. We've set up a commercial technical team to sort of work together on our expertise. What we're gonna do is define the technologies and now be taking this to the customers to show them this play that, you know, you could have this sort of plug and play interchangeability. To me, really another impact that we gotta like sort out is the cost factor, right? Because there is a cost impact, and then both of the companies are gonna work that because long term, putting this in a automotive vehicle that we're gonna drive around has to be cost effective. You know, the start is really good. The momentum's very good.
Really, I think government and support is very good globally for this. Kevin, you need to keep focused too on what we're looking at, which is, you know, mainly around the class 2. You know, that's your sort of, you know, entry into the heavy duty pickup truck, right? The F-250, the 2500 series. To put pure electric vehicle in those in the pickup trucks, you start to take away from payload and towing capacity. You know, those trucks are typically used, you know, in the, you know, trades, contractors, you know. They're towing, you know, equipment around, trailers around or, you know, for the personal person, he's got it for towing, you know, recreational product around.
Filling the truck up full of batteries, actually limits the amount of towing capacity, and that's where a fuel cell we think is a better option for that.
Actually, that answered my other question as to whether, you know, you saw this, you know, bleeding into, you know, your commercial vehicle offering, and it sounds like that's the case. If I could just ask one maybe, another high level question with this potential JV. You know, as you kind of think of it longer term, I get the sense, and I guess correct me if I'm wrong, I think in, you know, in the Asia Pacific region is where I think they view fuel cell electric vehicles as a solution, maybe more so than we think of in North America and Europe.
Just wondering, do you also view this as potentially, you know, if this JV, you know, ends up being as successful as you hope it will be, you know, could that accelerate your growth in Asia, in that market, in the Asia Pacific market, just given, I think that maybe the more readiness to adopt this form of technology?
I mean, absolutely. We think the Asian market is very interesting. It's not specifically part of the scope right now, we have discussed the idea of expanding the scope into that region. That's already something that's on the table under discussion.
Yeah. I think the key was we wanted to, you know, take on what we know today here and then really assess the customer side and, you know, with market and understand what it is and then apply that to, you know, a model in Asia as well.
Excellent. That's it for me. Congrats on a good quarter.
Thank you.
Presenters, we don't have any further questions at this time. I would like to turn the call over back to Linda Hasenfratz, the CEO of Linamar, for the closing remarks.
Thanks very much. To conclude this evening, I'd like to leave you with 3 key messages. First, we are thrilled with a solid start to the year financially with earnings more than double last year, sales up in double-digits and continued free cash flow. Secondly, I feel like we're making exciting new inroads towards a green Mobility future with our new partnership with Ballard and continued strong wins in the electrified sector. Finally, it's great to see all 3 of our core markets of auto, Ag, and Access expecting significant double-digit growth, top and bottom line in 2021 after a tough year last year. That, coupled with solid market share gains, means we are seeing all businesses intersect to paint a picture of solid growth for the full year 2021 after a strong first quarter. Thanks very much and have a great evening.
Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.