Chris McNally

Chris McNally asked for insights into the data center revenue opportunity beyond the initial $300 million in 2027, seeking a sense of its long-term runway. He also questioned the company's growth over market, which is currently negative, and when the other three divisions might return to low single-digit outgrowth, excluding the battery drag.

Answer

CEO Joseph F. Fadool stated that the $300 million represents the initial ramp-up year, with the data center market expected to grow mid-teens annually for the next decade, applicable to over 90% of data centers. He indicated that the broader revenue opportunity would be sized closer to 2027. Regarding outgrowth, Joseph F. Fadool acknowledged dissatisfaction with current performance, attributing it to lower-than-expected EV volumes in the Western world, a dynamic continuing into 2026. He expressed optimism that recent bookings would support midterm objectives for foundational and e-product businesses to outgrow their markets, with benefits expected from 2027 and beyond.

Chris McNally followed up on the turbine business, seeking insight into the revenue opportunity beyond the initial $300 million in 2027 and the long-term runway. He also questioned BorgWarner's auto side growth over market, particularly how other divisions would return to low single-digit growth given the 150 basis point battery drag.

Answer

Joseph F. Fadool (CEO, BorgWarner) stated the $300 million is for the initial production year, with the data center market growing mid-teens annually for the next decade and the product applicable to over 90% of the market. Craig D. Aaron (CFO, BorgWarner) acknowledged dissatisfaction with current outgrowth due to lower-than-expected EV volumes but expects recent bookings to support outgrowing markets starting in 2027 and beyond.

Chris McNally of Evercore asked which business segment absorbed the $15 million tariff timing headwind in Q2, noting the reported margins for the ICE divisions were very strong. He also inquired if it's fair to assume foundational business margins could remain flat if revenues stabilize.

Answer

CFO Craig Aaron confirmed the majority of the tariff costs were in the combustion business units (DMS and TTT), but strong cost controls offset much of the impact. CEO Joseph Fadool reiterated the focus on leveraging the entire portfolio to drive growth and expand margins across the company, rather than just holding them flat.

Chris McNally asked about the breakdown of Q4 headwinds, specifically the $80 million known impact, and whether the Oswego facility issue was included. He also inquired about Aptiv's understanding and framing of the Nexperia political issue and its potential impact on the supply chain, particularly in Europe.

Answer

Kevin Clark (Chair and CEO, Aptiv) confirmed the $80 million headwind includes the Oswego facility issue and other customer-specific situations in Europe, with additional conservatism for Europe and North America due to geopolitics. Regarding Nexperia, Mr. Clark stated product is flowing in China without impact, and the industry generally has alternative sources, with Aptiv having validated solutions. He noted the issue appears more significant in Europe and is resolvable, with Aptiv having three months of inventory to avoid Q4 OEM impact.

Chris McNally from Evercore asked for Aptiv's high-level perspective on the auto industry's position regarding the USMCA review and whether the conservative Q4 guidance assumes a negative SAAR impact from potential tariffs.

Answer

CEO Kevin P. Clark responded that Aptiv is well-positioned for any USMCA recalibration, as 99% of its Mexico-to-US product is compliant. He confirmed the conservative guidance reflects an assumption of weaker consumer demand in the back half, potentially driven by tariff-related price increases or other economic pressures, combined with a difficult year-over-year comparison.

Chris McNally sought more detail on the conservatism in the Q1 guidance, particularly regarding top customer production schedules, and asked about the potential margin tailwind from the Mexican peso in 2025.

Answer

CEO Kevin P. Clark confirmed that their internal production forecasts are haircut more than usual compared to customer schedules, a deliberate move to account for market volatility and potential tariff impacts. CFO Varun Laroyia added that the company does not expect a material tailwind from the peso in 2025, as the currency risk has been managed through hedging strategies.

Chris McNally asked about Aptiv's ability to maintain its strong margin execution into 2025, questioning if the current 11.5%-12% margin could be a baseline, and inquired about specific cost-saving actions being taken to counteract market volatility.

Answer

CFO Joe Massaro expressed caution about providing a 2025 forecast due to extreme customer production volatility, citing a 35% schedule drop from one large OEM. CEO Kevin P. Clark elaborated on cost actions, including further salaried headcount reductions, manufacturing facility consolidation in China and North America, and sourcing lower-cost Chinese SoCs to improve profitability.

Chris McNally asked about Surround ADAS as a technology gateway, its necessity for OEMs to meet 2029 regulations, and if it represents a logical step up for existing Level 2 customers. He also sought clarification on whether this implies a shift from SuperVision as the primary path to higher autonomy.

Answer

Nimrod Nehushtan, EVP of Business Development and Strategy, highlighted Surround ADAS's importance for both new user experiences and adhering to emerging regulations, emphasizing its cost-optimized design for high-volume vehicles. He noted that Mobileye's efficient chip and software integration offer a competitive price point, making it a safe choice for OEMs. Amnon Shashua, CEO and President, added that execution of eyes-off systems, like the planned launch with Audi in 2027, will be a significant inflection point. Nimrod Nehushtan confirmed that the recent nomination is an upgrade from EyeQ6 Lite to EyeQ6 High for an existing ADAS customer, aligning with the idea of Surround ADAS as a logical step up.

Chris McNally asked about the strategic importance of surround ADAS, questioning if it's becoming a necessary technology gateway for OEMs to meet 2029 regulations and a logical upgrade path for existing Level 2 customers, given the slower adoption of higher-level autonomy.

Answer

Nimrod Nehushtan, EVP of Business Development and Strategy, explained that surround ADAS is crucial for OEMs due to emerging regulations and its cost-optimized design for high-volume vehicles. He highlighted Mobileye's efficient chip and software as providing a competitive price point, making it a safe choice for OEMs. Amnon Shashua, CEO and President, added that successful execution and regulatory approval of eyes-off systems, like with Audi in 2027, will be a significant inflection point. Nimrod confirmed that the second surround ADAS win is an upgrade from IQ6 Light to IQ6 High for an existing ADAS customer.

Chris McNally asked about the shifting momentum from Mobileye's Supervision product to its Chauffeur system, questioning if this was driven by OEMs' concerns over pricing power for L2+ features and whether recent slowdowns represent a temporary implementation delay.

Answer

CEO Amnon Shashua attributed the dynamic to a lack of competitive pressure in Europe and the US, but noted encouraging Tesla FSD take-rates. He emphasized that OEMs are in a broad planning phase across the entire product portfolio. EVP of Business Development Nimrod Nehushtan added that demos of Mobileye's Gen 2 Supervision system are generating significant OEM excitement and that some OEMs are considering moving directly to Chauffeur for 2028 models.

Chris McNally of Evercore ISI asked about the potential reasons Mobileye might lose design win opportunities, categorizing the risks as OEM timing/indecision, OEM inaction, or losing to an in-house solution.

Answer

CEO Amnon Shashua stated that the primary risks are OEM indecision or inaction, often linked to shifting powertrain strategies, rather than competition from in-house development for advanced products in the West. EVP Nimrod Nehushtan added that while they are aware of in-house attempts, the key factors for current opportunities are OEM readiness and vehicle lineup considerations. He also noted that the sales model for future SuperVision launches (standard vs. optional) is still under discussion with partners.

Chris McNally asked for clarification on the discrepancy between the reported average wholesale unit price (up 5% in Q3, 2.5% YTD) and the WOC (Wholesale Operating Contribution) guide (up 0.5%-1%), considering fleet drag. He also inquired about the impact of lower EV losses from reduced EV incentives on year-over-year EBIT WOC for both ICE and EVs.

Answer

Paul Jacobson, GM's Executive Vice President and CFO, attributed the pricing performance to disciplined incentives and maintaining pricing despite industry step-ups, emphasizing the balance with customer affordability. He noted that while competitors increased EV incentives for liquidation, GM's EV incentives are significantly lower than the industry average. Mr. Jacobson expressed expectation for a more stable supply-demand balance and improving EV profitability, acknowledging it would require patience.

Chris McNally asked Paul Jacobson to reconcile the reported average wholesale unit price (up almost 5% Q3, 2.5% YTD) with the full-year wholesale pricing guidance of 0.5%-1%, considering fleet drag. He also followed up on how lower EV incentives, due to a stabilizing competitive environment, would contribute to improved year-over-year EBIT.

Answer

Paul Jacobson, GM's Executive Vice President and CFO, attributed the pricing performance to disciplined incentives and inventory management, noting that being up 0.5%-1% on pricing is positive. He emphasized balancing performance with customer affordability. Regarding EV incentives, he noted competitors' increased incentives for liquidation, leading to lower inventories and a more stable supply-demand balance. He highlighted GM's significantly lower EV incentives compared to the industry, expecting this discipline to lead to improved profitability as the market stabilizes.

Chris McNally asked for the specific drivers behind the 2025 EV profitability improvement being at the low end of the $2B-$4B target range, assuming status quo policy. He also sought to reconcile the 2025 wholesale forecast, which implies lower ICE volumes to offset higher EV volumes.

Answer

EVP and CFO Paul Jacobson explained that the volume trajectory and related scale benefits are materializing slower than initially anticipated, leading to the low-end of the EV profit improvement range. He also clarified that the lower wholesale assumption for 2025 is due to a smaller inventory build opportunity compared to 2024, but noted there is upside to ICE volume if demand remains strong.

Chris McNally of Evercore ISI asked for a prioritization of 2025 headwinds between costs and pricing. He also questioned if the $2B to $4B EV profit improvement target could be met if EV sales were flat or down year-over-year.

Answer

EVP and CFO Paul Jacobson declined to prioritize headwinds but noted they budget conservatively on price. He explained that while volume is a key component of EV profitability, significant savings also come from production efficiencies, mix improvements with new models like the Escalade IQ, and other cost reductions, making the target achievable even without maximum scale benefits.

Chris McNally of Evercore ISI questioned the drivers behind the implied second-half margin ramp in the Power & Vision (P&V) segment, given that volumes are expected to be lower, and sought to understand if the full-year margin provides a better base for forecasting 2026 performance.

Answer

CEO Seetarama Swamy Kotagiri confirmed that the tariff recovery dynamic significantly impacts the P&V segment's H2 performance. He agreed with the assessment that using the full-year margin as a base for 2026 is a fair approach, which would then be influenced by operational actions, better contracts, and incremental volumes.

Chris McNally sought confirmation that the 2025 revenue headwind is primarily driven by negative mix from its most profitable programs with Detroit 3 and German 3 customers. He then questioned the drivers behind the Body, Exteriors & Structures segment's record-high margin target for 2026.

Answer

CEO Seetarama Kotagiri confirmed that a disproportionate production reduction from D3 and G3 customers is a significant impact, which the company is mitigating through commercial discussions and in-sourcing. CFO Patrick McCann explained the 2026 Body & Exteriors margin expansion is driven almost entirely by a projected $1.3 billion sales increase flowing through at low-20s incrementals, supplemented by continuous operational improvements.

Chris McNally questioned the next steps for Aurora's hybrid AI approach, its relation to ODD expansion, and the strategy for scaling with customers like Uber Freight, asking about the ideal customer mix.

Answer

CEO Chris Urmson clarified that their AI approach already incorporates advanced concepts and that ODD expansion into night and weather is more about validation than fundamental redevelopment. CFO David Maday explained the customer scaling strategy is mixed; while it's simpler to start with large carriers who think in large volumes, the Uber Freight partnership is key for accessing the fragmented middle market of smaller fleets.

Chris McNally asked about EVgo's strategic response to potential negative regulatory changes, such as the revocation of the IRA or EPA mandates, and how this might alter its geographic rollout strategy, particularly regarding the value of states like California versus expansion states.

Answer

CEO Badar Khan emphasized that EVgo's business model is resilient as it sells kilowatt-hours, not cars. He explained that even in conservative forecasts that account for policy shifts, the ratio of EVs to chargers is expected to nearly double, which drives throughput. Khan stated that EVgo's network plan is continuously updated with the flexibility to shift deployment based on demand, with 30,000 pre-identified sites nationwide. He also noted that some of the highest-utilization states, like Texas and Florida, are not part of California's clean car program, demonstrating broad-based demand.

Chris McNally asked if customer call-offs in early April reflected the anticipated production shutdowns in Mexico and Canada due to tariffs, expressing surprise that order levels appeared stable.

Answer

CEO Mikael Bratt stated that, based on the visibility from customer call-offs, the order book is holding up well moving into the second quarter. He declined to speculate on specific customer plans but reiterated that the total global order perspective for Autoliv remains healthy.

Chris McNally inquired if recent customer call-offs align with Q2 projections, particularly given the market expectation of imminent production shutdowns in Mexico and Canada due to tariffs, and sought to reconcile the strong call-offs with this expectation.

Answer

CEO Mikael Bratt stated that customer call-offs are 'holding up well' for the visible horizon into Q2. He declined to speculate on specific customer plans but confirmed that from a global perspective, Autoliv's order book remains healthy. He acknowledged the live nature of the situation and avoided giving specific details on Canadian or Mexican facilities.

Chris McNally from Evercore ISI requested a regional ranking from strongest to weakest organic growth to understand the drivers of the 2% organic growth forecast for 2025. He also questioned whether the anticipated weakness in North America and Europe was due to unfavorable OEM mix or broader secular growth challenges.

Answer

CEO Mikael Bratt identified Asia, particularly China and India, as the region with the strongest growth opportunities, while Europe and North America face more challenging conditions due to weaker LVP growth. He clarified that the weakness in North America and Europe is primarily related to the overall economic situation and LVP production levels, driven by consumer uncertainty and affordability, rather than a specific negative OEM mix.