Dan Levy

Dan Levy inquired about Aptiv's memory exposure, including its percentage of COGS for RemainCo, the expected impact of contract resets in 2027, and the company's strategy for recovering higher costs.

Answer

Kevin Clark, Aptiv's CEO, explained that the purchase value for memory is roughly $175 million in 2026, primarily DRAM 3 and 4. He noted 2026 price increases are in the low double digits due to supply chain management and longer-term contracts. For 2027, negotiations are underway, and the company is confident price increases will be below the 100-120% figures currently discussed. Clark expressed high confidence in passing these cost increases to OEM customers, citing success in recovering 'a little less than 100%' of semi-inflation from the 2021 chip crisis. Levy also asked about the 2026 growth guidance for new Aptiv being at the low end of the 4-7% Investor Day range. Varun Laroyia, Aptiv's CFO, clarified that the 4-7% growth target through 2028 remains intact, with 2026 reflecting a revised global vehicle production outlook (down 1% vs. previous 1% up). He highlighted strong non-auto revenue growth (8% in 2025) and mid-teens growth in software and services.

Dan Levy inquired about Aptiv's memory exposure, specifically the percentage of COGS, the anticipated impact of 2027 contract resets, and the strategy for recovering higher costs from OEMs. He also asked for clarification on the recovery rate from the 2021 chip crisis and the drivers behind New Aptiv's 2026 growth guidance.

Answer

CEO Kevin Clark detailed that memory purchase value is approximately $175 million for 2026, primarily DRAM 3 and 4, with low double-digit price increases due to supply chain management. He noted 2027 negotiations are underway, expecting higher but not extreme price increases, and expressed high confidence in passing these costs to OEMs, citing "a little less than 100%" recovery from the 2021 chip crisis. CFO Varun Laroyia and CEO Kevin Clark then addressed the New Aptiv 2026 growth guidance, confirming the 4-7% target through 2028 remains intact, with auto business comprising three-quarters, strong non-auto growth (8% in 2025), and mid-teens software/services growth. Kevin Clark attributed the lower 2026 guidance midpoint to a shift in IHS global vehicle production outlook from +1% to -1%.

Dan Levy sought to understand the decomposition of Q3 regional growth dynamics, specifically how launch activity, customer issues, and other factors influenced North America's strong performance, Europe's underperformance, and China's flat revenue. He also asked about Aptiv's M&A framework for inorganic growth in adjacent areas, particularly regarding willingness to pursue deals with higher multiples that might appear dilutive.

Answer

Kevin Clark (Chair and CEO, Aptiv) stated that program launch push-outs are minimal, but volumes at launch are sometimes lower. Bigger impacts in Europe and China are tied to specific OEM volume issues, including a large German OEM and a French global OEM in Europe, and three program cancellations in China. Varun Laroyia (EVP and CFO, Aptiv) added that North America benefited from stronger-than-expected vehicle production. Regarding M&A, Mr. Clark emphasized that meaningful synergies would be crucial for deals with higher multiples to diversify revenue, confirming commitment to M&A for growth in other markets.

Dan Levy of Barclays questioned the key drivers for the implied acceleration in growth over market in the second half and asked for an update on the capital allocation framework after the planned EDS spin-off.

Answer

CEO Kevin P. Clark attributed the second-half growth acceleration to numerous program launches within the ASUX and EDS segments. He clarified the EDS spin remains on track for the end of 2026 and stated that future capital allocation priorities include M&A in the Engineered Components and ASUX segments, with a focus on assets outside the automotive market.

Dan Levy inquired about real-time trends in advanced content bidding, asking if there have been delays due to macro uncertainty. He also asked for an update on the planned spin-off of the Electrical Distribution Systems (EDS) business and whether current market dynamics have caused any reconsideration of the plan.

Answer

CEO Kevin P. Clark responded that while bidding activity remains robust, the timeline for converting bids into firm customer awards has lengthened, a trend similar to the previous year. Regarding the EDS spin-off, Clark stated that the plan is unchanged by macro uncertainty, as the separation is seen as the best way to accelerate the business's growth, standardization, and automation efforts.

Dan Levy asked for color on the expected performance in China relative to the market and inquired about the progress and nature of cost-saving actions previously discussed.

Answer

CEO Kevin P. Clark explained that while they expect local Chinese OEMs to continue gaining significant share, the net effect for Aptiv is a closing of the growth gap, with the company projected to reach market parity in 2026. On costs, he highlighted ongoing overhead reduction, accelerated manufacturing footprint rotation, and material cost savings driven by enhanced supply chain visibility and value engineering, noting these require significant effort and OEM collaboration.

Dan Levy asked about the drivers behind the strong margin performance in the ASUX segment, if it represents a new baseline, and inquired about the process for recovering investments from programs with lower-than-expected volumes.

Answer

CFO Joe Massaro attributed the ASUX margin strength to ongoing operational initiatives aimed at restoring historical profitability, not a one-time event, and confirmed it's on track for low-teen margins. CEO Kevin P. Clark explained that for underperforming programs, they negotiate to recoup investments and secure replacement business to be made whole.

Dan Levy from Barclays asked about potential near-term constraints in procuring memory given the tight supply, following Elon Musk's comments on memory limitations. He also questioned if Tesla might modify vehicle functionality, similar to 2021 MCU shortages, and how the company plans to bridge memory supply gaps over the next few years.

Answer

CEO Elon Musk emphasized Tesla AI's high intelligence and memory efficiency, stating it's an order of magnitude better than other large models. He confirmed a solution for logic and memory for the next three years but expressed concern about supplier limitations and geopolitical risks beyond that, highlighting the existential need for chips for Optimus. VP of AI Software Ashok Elluswamy reiterated the three-year solution and the need for more US fab capacity to mitigate future supply chain and geopolitical risks.

Dan Levy from Barclays asked about potential near-term constraints on procuring memory given tight supply, inquiring if Tesla might need to modify vehicle functionality as it did during 2021 MCU shortages, and how the company plans to bridge memory supply gaps over the next few years.

Answer

CEO Elon Musk highlighted Tesla's AI as highly compute and memory efficient, possessing significantly higher 'intelligence per gigabyte' compared to other models, which aids scaling. He confirmed a viable solution for logic and memory for approximately the next three years but warned of supplier limitations thereafter, necessitating the development of a Tesla Terafab in the U.S. to integrate logic, memory, and packaging, thereby addressing geopolitical risks and ensuring long-term supply, particularly given the absence of advanced memory fabs in the U.S. Director of Autopilot Software Ashok Elluswamy also contributed.

Dan Levy followed up by asking about the relationship between Tesla's AI efforts and xAI, specifically whether they are complementary or distinct forms of AI, and requested clarification for the audience.

Answer

Elon Musk, CEO, explained that Tesla's AI and xAI (Grok) are different forms of AI. Grok is a massive model for artificial general intelligence, too large for a car, competing with models like Google Gemini and OpenAI ChatGPT. Tesla's models are significantly smaller (5-10% the size of Grok) and focused on real-world applications in cars and robots. He noted some complementary aspects, such as Grok being used for Optimus voice recognition and generation.

Dan Levy asked Tesla to define the boundaries of its core competencies regarding AI efforts and new market entries, seeking clarity on which AI applications are considered within Tesla's strategic focus versus those outside it. He followed up by asking about the complementary nature or distinctions between Tesla's AI efforts and xAI.

Answer

Elon Musk, CEO, explained that Tesla started with "zero core competencies" and has built many "startups in one company," including battery packs, Supercharging, chip design, and AI software. He described Optimus at scale as an "infinite money glitch" due to its potential 5x productivity increase over humans, leading to "sustainable abundance." Vaibhav Taneja, CFO, added that Tesla's Autopilot efforts began 10 years ago, and the Optimus team leverages vehicle engineering expertise, making Tesla uniquely capable of scaling. Musk further clarified that xAI's Grok is a massive general AI model (e.g., Grok 5 requiring GV300) designed to compete with Google Gemini and OpenAI ChatGPT, while Tesla's models are much smaller (5-10% the size) and focused on real-world AI for cars and robots. He noted some complementarity, such as Grok providing voice recognition/generation for Optimus and in-car interaction.

Dan Levy asked about the primary gating factors and expected timeline for allowing personally-owned vehicles to join the robotaxi network, and inquired about how Tesla plans to fund the scaling of the robotaxi business.

Answer

CEO Elon Musk stated that while safety is the top priority, he is confident that owners will be able to add their cars to the Tesla fleet sometime next year. CFO Vaibhav Taneja added that a vehicle validation process would be required. For funding, Musk explained that the business could be debt-financed once it generates clear cash flow, with Taneja confirming the company's balance sheet would be used in the interim.

Dan Levy of Barclays asked for Tesla's view on U.S. EV policy and how the company balances its desire to increase vehicle volume for FSD monetization with its willingness to potentially sell cars at zero margin.

Answer

CEO Elon Musk stated that the transition to sustainable transport is 'inevitable' regardless of policy, as the core problem of EV range has been solved. Regarding volume, Musk and CFO Vaibhav Taneja clarified that the current production constraint is battery supply, not vehicle demand. The immediate focus is on increasing total gigawatt-hours of battery production to support output.

Dan Levy asked about GM's 2026 pricing assumptions, particularly in a demand-constrained environment, and the alignment of GM's fixed cost base and product portfolio (including potential hybrids) with the likely higher near-term ICE mix.

Answer

Paul Jacobson, EVP and CFO, stated that 2026 pricing assumptions only reflect the annualization of 2025 model year increases, with no new increases modeled. Mary Barra, Chair and CEO, affirmed confidence in GM's strong ICE portfolio and dedicated EV platform, noting investments in EV cost reduction and planned hybrids in key segments. Paul Jacobson added that restructuring preserved capacity for future transitions to LMR and LFP batteries, balancing short-term decisions with long-term EV goals.

Dan Levy asked about General Motors' 2026 pricing assumptions, particularly in a demand-constrained environment, and the dynamics of their product portfolio, including fixed cost alignment with a higher near-term ICE mix and the potential for hybrids.

Answer

Paul Jacobson, EVP and CFO, clarified that 2026 pricing assumes annualization of 2025 model year 2026 increases, with no new increases modeled. Mary Barra, Chair and CEO, discussed the strong ICE portfolio, dedicated EV platform, and future cost reduction focus, confirming plans for hybrids in key segments. Paul Jacobson added that battery capacity is preserved for future transitions like LMR and LFP.

Dan Levy asked about the stronger benefits from tariff mitigation, specifically regarding the runway for cost and footprint actions into 2026, and whether the 2025 tariff guidance includes any easing of Korea tariffs. He also inquired about GM's strategy for improving EV profitability, managing the EV lineup in a slower demand environment, and the need to sell EVs without prior regulatory requirements.

Answer

Paul Jacobson, GM's Executive Vice President and CFO, detailed tariff mitigation through go-to-market (pricing), manufacturing footprint (Fort Wayne line rate, future investments), and fixed cost discipline, expecting these to continue into 2026. He confirmed no Korean tariff changes are in the current guidance. Mary Barra, GM's Chair and CEO, reiterated EVs as the 'North Star,' focusing on cost reduction through complexity reduction, commonizing parts, and new battery technologies, while maintaining production and incentive discipline based on consumer demand. Paul Jacobson added that a more stable EV market, post-incentive phase-out, will benefit GM's quality vehicles.

Dan Levy asked for details on GM's tariff mitigation strategies, including go-to-market, footprint, and fixed cost actions, and their runway into 2026. He also sought clarification on whether 2025 tariff guidance included any easing of Korea tariffs. Additionally, he inquired about the impact of recent EV capacity adjustments on structural costs and the strategy for the EV lineup given evolving regulatory requirements.

Answer

Paul Jacobson, GM's Executive Vice President and CFO, outlined tariff mitigation through pricing discipline, manufacturing footprint changes (with bulk savings expected late 2026/early 2027), and fixed cost discipline, confirming no Korea tariff changes in current guidance. Mary Barra, GM's Chair and CEO, reiterated EVs as a 'North Star,' focusing on cost reduction through complexity reduction, common parts, and new battery technologies like LMR, while maintaining build-to-demand and incentive discipline. Mr. Jacobson added that a more stable EV market, post-consumer incentives, would benefit GM's disciplined approach.

Dan Levy from Barclays questioned the negative pricing impact in North America despite strong retail data and asked how GM's EV strategy will adapt to the loss of tax credits and profitability pressures, particularly for affordable models.

Answer

EVP & CFO Paul Jacobson attributed the negative pricing to tougher year-over-year fleet comparisons but reiterated confidence in the full-year pricing outlook. Chairman & CEO Mary Barra stated that GM remains focused on improving EV profitability through battery tech (LMR, LFP), lighter architectures, and leveraging its strategic portfolio. She believes a market for EVs will persist and grow, and GM is positioned to offer consumer choice while driving toward strong margins.

Dan Levy of Barclays questioned the outlook for a 16 million SAAR and asked how GM plans to manage the volume of its imported vehicles, particularly affordable models from Korea. He also asked why the CapEx outlook remains unchanged despite policy pressures to increase U.S. assembly and what the timing and cost of such moves would be.

Answer

EVP and CFO Paul Jacobson explained the SAAR forecast reverts to their original business plan, viewing the recent strength as a pull-forward. Chair and CEO Mary Barra addressed the import question by highlighting GM's existing excess capacity in U.S. plants, which allows for faster and lower-cost production adjustments compared to greenfield projects. Jacobson added that while priorities may shift, they will manage capital responsibly within the stated $10-11 billion range, optimizing for the best returns and product cycles.

Dan Levy asked for details on the 2025 guidance, specifically the underlying volume, SAAR, and market share assumptions, and questioned the sustainability of the strong Q4 share performance. He also inquired about how a potential change in administration and EV policy could impact GM's resource allocation strategy.

Answer

EVP and CFO Paul Jacobson stated that GM expects the 2025 SAAR to be similar to 2024 and noted the company's market share is at its highest since 2018, excluding the pandemic. Chair and CEO Mary Barra added that regarding policy shifts, GM will remain agile, allocating capital to both ICE and EV portfolios based on consumer demand, as it has done in the past.

Dan Levy of Barclays asked for more color on GM's resilient pricing, which was a $900 million positive contributor, and questioned the drivers behind the significant increase in the full-year free cash flow guidance.

Answer

EVP and CFO Paul Jacobson attributed strong pricing to a desirable product portfolio, disciplined incentive spending, and lapping prior price increases. He explained the higher free cash flow guidance resulted from earnings outperformance driven by non-cash expenses, such as warranty accruals, which don't impact current year cash outlays.

Dan Levy asked for an update on tariffs, their impact on Q3 results, and how recent policy changes (e.g., IRA credits no longer a consideration) affect R2's battery sourcing strategy, particularly regarding cheaper LFP batteries from overseas. He also questioned how Rivian mitigates against regulatory changes impacting the R2 Bill of Materials (BOM) and unit economics, given the BOM's stickiness and the goal of positive gross margin by late 2026.

Answer

CFO Claire McDonough detailed the administration's extension of the 3.75% MSRP offset for Section 232 automotive tariffs to 2030 and expanded eligible parts. She noted a Q3 impact of just under $2,000 per vehicle, expected to reduce to a few hundred dollars for new builds. CEO RJ Scaringe confirmed R2 will launch with 4695 cylindrical cells produced by LG in Arizona from late 2026, with sourcing decisions prioritizing USMCA compliance. RJ Scaringe and COO Javier Varela expressed confidence in achieving cost targets due to contractual BOM agreements and lean transformation efforts, with tariffs now having a significantly reduced impact.

Dan Levy asked for an update on tariffs, including their impact on Q3 results and the broader battery sourcing strategy for R2, particularly regarding cheaper LFP batteries from overseas. He also inquired about mitigants to ensure appropriate unit economics for R2, given potential shifts in IRA credits and tariffs against initial BOM assumptions, and Rivian's plan to cut BOM in half versus R1.

Answer

Claire McDonough, CFO, noted that the administration extended the 3.75% MSRP offset for Section 232 automotive tariffs to 2030 and expanded eligible parts, reducing Q3 impact to just under $2,000 per vehicle, with future new builds expected to be a few hundred dollars. RJ Scaringe, CEO, confirmed R2 will launch with 4695 cylindrical cells produced in the U.S. (Arizona) by LG from late 2026, with sourcing decisions prioritizing USMCA-compliant BOM. He added that contractual BOM agreements and the expanded 232 framework provide confidence in achieving R2's positive unit economics by the end of 2026. Javier Varela, COO, reiterated confidence in meeting the target of halving costs through landed basis sourcing and lean transformation in the Normal plant.

Dan Levy asked for details on the cost reduction strategy for the R2 platform, seeking conviction on the 50% cost cut versus R1, and questioned how Rivian would pivot to maintain its 2027 EBITDA breakeven target amid policy headwinds like tariffs and reduced credits.

Answer

CEO RJ Scaringe and COO Javier Varela confirmed the R2's bill of materials is contractually about half of R1's, driven by design simplification and part consolidation. Varela stated R2 is 100% sourced. CFO Claire McDonough and Scaringe addressed the EBITDA target, acknowledging headwinds but emphasizing cost efficiencies, the structural profitability of R2, and future growth from software, services, and potential technology licensing beyond the Volkswagen Group partnership.

Dan Levy inquired about Rivian's battery strategy, particularly for LFP cells, in the context of new tariffs and asked for clarification on the applicable tariff rates. He also questioned how tariffs and other factors would impact the cost of goods sold (COGS) for the upcoming R2 model.

Answer

CEO Robert Scaringe explained that for 2026 and beyond, Rivian is working on its cell sourcing strategy for R1, while R2 will use cells from Korea initially, transitioning to a U.S. facility in Arizona by 2027. CFO Claire McDonough stated the direct tariff impact is expected to be a "couple of thousand dollars" per unit in 2025, which the company is working to offset. COO Javier Varela added that Rivian is building a resilient supply chain with a focus on U.S. and USMCA sourcing, with time to adjust flows for R2.

Dan Levy asked for clarification on the policy assumptions (tariffs, credits) embedded in the 2025 guidance and inquired about the cost of goods sold (COGS) trajectory for the R1 platform, seeking to understand the line of sight for R2's cost targets.

Answer

CFO Claire McDonough stated that while the policy environment is fluid, the guidance incorporates hundreds of millions of dollars in negative impact to EBITDA from potential policy shifts. CEO RJ Scaringe and COO Javier Varela detailed the cost reduction strategy, noting R1's Gen 2 update drove substantial savings and that R2's bill of materials is projected to be half of R1's. Varela added that operational efficiencies in automation, logistics, and employee engagement are key drivers.

Dan Levy requested a cleaner view of Q3 COGS per unit, excluding inefficiencies, and asked about the drivers and cadence of cost improvements into 2025, as well as an update on the Volkswagen collaboration.

Answer

CEO RJ Scaringe highlighted a projected 20% material cost reduction from Q1 to Q4 2024 despite Q3 noise. COO Javier Varela discussed implementing lean manufacturing principles. CFO Claire McDonough added that 2025 will benefit from a full year of Gen 2 production, though a plant shutdown is planned in 2H 2025 for R2 preparations. Regarding the VW JV, RJ Scaringe mentioned a successful drivable demonstrator has been built using Rivian's technology.

Dan Levy from Barclays PLC asked how to bridge the fourth-quarter margin into 2026, seeking clarity on whether any unusual Q4 factors might prevent a larger margin step-up next year. He also inquired about the impact of key platform volumes holding steady and potential benefits from powertrain changes towards richer mix or off-road performance trims due to regulatory environments.

Answer

Timothy Kraus (Senior Vice President and CFO, Dana Incorporated) clarified that the 2026 margin targets are based on the full-year 2025 continuing operations, not just Q4. He explained that the full run rate of $310 million in cost savings (an incremental $65-$75 million over 2025) and the removal of stranded costs would drive significant margin improvement in 2026. He emphasized that the Q4 run rate strongly supports achieving the 10-10.5% margin target. Regarding platform mix, Kraus noted that a richer mix towards Rubicon for Wrangler or higher content Super Duty trucks would be beneficial due to Dana's increased content on these vehicles.

Dan Levy of Barclays asked for a bridge to understand the free cash flow improvement from 2025 to the 2026 target for the remaining company and inquired if a potential richer OEM product mix from easing emission standards could provide an upside.

Answer

Senior VP & CFO Timothy Kraus explained that bridging 2025 to 2026 free cash flow is complex but highlighted key drivers: higher EBITDA, significantly lower one-time costs, and continued working capital efficiencies. Both Kraus and Chairman & CEO Bruce McDonald acknowledged that a richer truck mix from OEMs would be beneficial for Dana, noting that volume uplift on key programs like the Ford Super Duty is already factored into their backlog.

Dan Levy from Barclays requested details on the noncore asset sales expected to generate cash proceeds in Q2 and the second half of the year. He also asked if potential EV program delays from OEMs could unlock further cost-saving opportunities for Dana.

Answer

SVP and CFO Timothy Kraus provided an example of a noncore asset sale, citing the divestiture of a 48% stake in an Indian joint venture for over $40 million. Chairman and CEO R. McDonald clarified that current cost savings are driven by Dana's own strategic shift in EV investment, not OEM actions. He noted that future OEM program delays could favorably impact capital spending in 2026-2027 but would not be a significant factor in 2025.

Dan Levy from Barclays asked about the composition of the light vehicle backlog, specifically regarding ICE program extensions, and inquired about the company's historical approach to passing on steel and aluminum tariffs to customers.

Answer

CFO Timothy Kraus clarified that Dana's backlog only includes truly incremental business, not volume increases on existing programs. Regarding tariffs, CEO R. McDonald noted the company is more indexed now than in 2018. Kraus reiterated that Dana has formally notified customers of its intention to pass through 100% of any new tariff costs, not just the portion covered by existing agreements.

Dan Levy asked about the remaining runway for efficiency and cost-saving actions and at what point the lower EV demand environment would lead to a materially reduced outlook for CapEx and R&D.

Answer

James Kamsickas, Chairman & CEO, stated that Dana's system-driven approach provides continuous opportunities for incremental improvements in material cost, conversion cost, and pricing. Timothy Kraus, SVP & CFO, added that the flexing of spending is already happening, as evidenced by the materially lower CapEx outlook for the year. He confirmed that period costs like engineering are also being flexed to align with delayed customer program timelines.

Dan Levy, Senior Equity Research Analyst at Barclays, asked about the underlying trends in Avis Budget Group's International segment, including the runway for increasing RPD and the impact of recent restructuring efforts. He also inquired about DPU (Depreciation Per Unit) trends, the extent to which recalls weighed on total DPU in the quarter, early reads on model year 2026 capital costs, and whether the model year 2025 fleet refresh would be the primary driver of DPU and broader residuals next year.

Answer

CEO Brian Choi highlighted the International leadership team's success in shifting business mix towards higher RPD leisure demand and exiting unprofitable local market monthly business, driving a nearly 40% year-over-year EBITDA increase. He emphasized increased focus and investment in the International business going forward. Regarding DPU, Brian Choi noted that the used car market showed a bump in April and remained stable, with typical sequential decline expected in Q4. He confirmed substantial disposal of older model year vehicles and a shift to newer 2025 models, which should be the primary DPU driver next year. He expects model year 2026 capital costs to be similar to 2025. CFO Daniel Cunha added that recalls, particularly for larger vehicles, had a roughly $20 per unit impact on DPU in Q3, expected to continue in Q4.

Dan Levy asked about the underlying trends and transformation in Avis Budget Group's International segment, including the runway for increasing RPD. He also inquired about DPU trends, the impact of recalls on total DPU, early reads on model year 2026 capital costs, and whether the 2025 fleet refresh would be the primary driver for DPU next year.

Answer

CEO Brian Choi highlighted the International leadership team's success in shifting business mix towards higher RPD leisure demand and exiting unprofitable monthly business, driving a nearly 40% year-over-year EBITDA increase. He emphasized Avis's global reach and increased focus on the International business. Regarding DPU, Brian Choi noted the impact of tariffs on the used car market and the planned shift to newer model year 2025 vehicles, expecting model year 2026 to be similar. CFO Daniel Cunha added that larger recall vehicles, with higher DPU, had a roughly $20 per unit impact in Q3, expected to continue in Q4.

Dan Levy of Barclays requested details on the puts and takes for the second-half guidance, focusing on the interplay between fleet costs (DPU) and pricing (RPD). He also asked for clarity on the revenue model for the autonomous vehicle strategy with Waymo.

Answer

CEO Brian Choi attributed second-half headwinds to two main issues: auto tariff uncertainty delaying new vehicle deliveries and slowing fleet rotation, and a massive vehicle recall impacting 4% of the Americas fleet during the peak summer season. On the AV revenue model, Choi stated that while financial details are confidential, it is a multi-year partnership with fully aligned incentives for profitability, designed to be more integrated than a simple fee-for-service arrangement.

Dan Levy from Barclays requested details on the puts and takes for the implied second-half guidance, particularly the interplay between DPU and RPD, and asked for clarification on the revenue model for the AV partnership with Waymo.

Answer

CEO Brian Choi explained that second-half performance is being impacted by two major headwinds: auto tariff uncertainty delaying new vehicle deliveries and a massive vehicle recall affecting 4% of the Americas fleet. These issues are constraining fleet rotation and the ability to sell older cars, negatively impacting DPU. Regarding the AV strategy, Choi stated that while financial details are confidential, it is a multi-year agreement with fully aligned incentives, structured as a true partnership built to scale to more cities, with the potential for the asset ownership model to evolve over time.

Dan Levy sought to understand the key drivers behind the first quarter's per-unit fleet costs (DPU) and the assumptions for residual values in the forward guidance. He also asked about the operational playbook for the summer peak season, particularly regarding fleet flexibility.

Answer

CFO Izilda Martins clarified that the primary driver for the improved DPU was the faster-than-expected execution of the fleet rotation strategy, not just strong residual values, and that forward guidance does not assume excessive residual value improvement. CEO Joseph Ferraro added that the key to the summer playbook is flexibility; the company is positioned to quickly scale its fleet up or down to match demand, allowing it to capitalize on strong rental demand or a favorable used car market.

Dan Levy from Barclays sought to understand the primary rationale for the fleet rotation—whether it was cost normalization or a competitive reaction. He also asked for expectations on the 'vehicle programs' line in the cash flow statement for 2025.

Answer

CEO Joseph Ferraro emphasized the decision was driven by the opportunity to secure favorable costs on 2025 models, which enables the company to achieve its $1B+ EBITDA target and gain operational benefits, rather than being a purely competitive reaction. CFO Izilda Martins clarified that the 'vehicle programs' line is discretionary and then provided key guidance that the company expects to generate no less than $500 million in free cash flow by year-end 2025.

Dan Levy inquired about potentially aggressive pricing from inventory-heavy automakers and the competitive landscape regarding fleet discipline and tightness.

Answer

CEO Joseph Ferraro stated that he expects the overall volume of cars sold to the rental industry to be stable year-over-year, with OEMs maintaining discipline. He believes the entire industry is incentivized to rationalize fleets due to the more favorable economics of model year 2025 vehicles, and expressed confidence in Avis's ability to compete effectively through its strong brand portfolio and partnerships.

Dan Levy inquired about the progress on warranty cost reduction, asking when the improvements in initial quality and new testing regimens would materially impact the financial numbers, and questioned the comfort level with maintaining industry price discipline given incremental truck capacity.

Answer

Kumar Galhotra, COO, explained that warranty costs are made up of coverage and FSA costs, with initial quality improvements expected to offset potential FSA increases, projecting a total cost reduction next year. Jim Farley, President and CEO, highlighted Q3 warranty costs were down year-over-year by $450 million. Andrew Frick, President of Ford Blue and Model e, stated industry pricing is up 0.5% and expected to remain strong, especially in full-size pickups, supported by strong underlying segment drivers and Ford's fresh lineup.

Dan Levy asked for an update on Ford's progress in reducing warranty costs, specifically when material improvements would be reflected in financial results, given reported J.D. Power survey improvements. He also questioned the sustainability of industry price discipline amidst incremental capacity additions by Ford and competitors in the truck segment.

Answer

COO Kumar Galhotra explained that warranty costs, comprising coverage and FSA, are expected to decrease next year, with initial quality improvements offsetting potential FSA increases. President and CEO Jim Farley highlighted a significant $450 million year-over-year reduction in Q3 warranty costs. President of Ford Blue and Model e Andrew Frick stated that industry pricing is up 0.5% and expected to remain strong, particularly in full-size pickups. Jim Farley added that comfort stems from strong underlying segment drivers (fuel price, construction) and a fresh lineup for Ford and competitors, including new Expedition, Navigator, F-150, and Super Duty, plus Ford's unique hybrid lineup.

Dan Levy questioned Ford's confidence in improving recall costs, given that higher quality standards might uncover more legacy issues. He also asked about the sustainability of recent market share gains and the breakdown of the $1 billion tariff offset between market share and pricing.

Answer

COO Kumar Galhotra acknowledged that Field Service Action (FSA) costs have a long improvement arc but highlighted that warranty coverage costs (60% of total) are improving and that newer model years show substantially lower FSA costs. President Andrew Frick expressed confidence in sustaining market share in H2 2025, projecting flat full-year net pricing, supported by a fresh product portfolio in strong market segments.

Dan Levy inquired about the outlook for production volume and inventory strategy amid tariff dynamics, and asked about the company's software-defined vehicle strategy, referencing reports on its FNV architecture.

Answer

President of Ford Blue and Model e, Andrew Frick, stated that inventory levels provide flexibility and they anticipate a lower industry SAAR in the second half. CEO James Farley clarified that Ford's software strategy is unchanged; they merged two electrical architectures into one, FNV3, which improves capital efficiency and lowers future product costs.

Dan Levy asked about the drivers behind the Q1 2025 breakeven guidance, the confidence in a recovery in subsequent quarters, and how Ford's EV strategy might be adjusted based on potential changes in U.S. environmental policy.

Answer

CFO Sherry House attributed the Q1 forecast to lower wholesales, the non-recurrence of a prior stock build, and adverse foreign exchange. CEO Jim Farley added that a nearly 20% quarter-over-quarter wholesale reduction is due to major product launches and that inventory levels will be lean. On EV strategy, Farley expressed confidence, stating that affordability becomes more critical if regulations change, making their 'skunkworks' platform even more important for developing profitable, high-volume EVs.

Dan Levy asked about Ford's progress in closing its previously identified $7 billion cost gap versus competitors and sought details on the 'skunkworks' EV's bill of materials that are enabling structurally lower costs.

Answer

CFO John Lawler stated the cost gap has not closed because competitors have also reduced costs, noting progress in materials was offset by setbacks in warranty. CEO Jim Farley explained the skunkworks EV's cost advantage comes from radical simplification, earlier supplier engagement, a competitive LFP battery, and new manufacturing strategies like unit casting.

Dan Levy inquired about Visteon's Q3 margins, specifically asking for clarification on the impact and magnitude of one-time items for the full year 2025 and the appropriate baseline for 2026. He also asked about potential OEM recovery payments for delayed or canceled EV programs. In his follow-up, he questioned Visteon's Toyota exposure, seeking details on the launch cadence and confidence in achieving 10% of revenue by 2027/2028, and its ability to offset mixed headwinds.

Answer

CFO Jerome Rouquet attributed strong margins to product costing, vertical integration, and productivity, noting $30 million in full-year one-time recoveries ($5 million in Q3) from lower program volumes and excess inventory. CEO Sachin Lawande clarified Visteon's smaller EV investment exposure. For Toyota, CFO Jerome Rouquet outlined a launch cadence of 2 programs in 2025, 5 in 2026, and 7 in 2027, projecting 10% of sales by 2028. CEO Sachin Lawande highlighted further growth opportunities within existing product lines and new engagements in electronics and AI.

Dan Levy asked about any observed impacts on production schedules, such as volume pull-forwards ahead of tariffs, and whether Visteon's supply chain is experiencing cost increases.

Answer

CEO Sachin Lawande reported that customer orders were "remarkably stable" throughout Q1 with no meaningful pull-ahead of volume, and the Q2 order book also appears stable. He confirmed that Visteon has not seen any meaningful supplier-driven cost increases, noting the company has diversified its supply base since the chip crisis, putting it in a much stronger position to handle disruptions.

Dan Levy of Barclays PLC inquired about Visteon's revenue outlook, focusing on the growth potential with Asian OEMs and the specific dynamics behind customer mix headwinds and the projected turnaround in China.

Answer

President and CEO Sachin Lawande explained that Asian OEMs outside of China are a significant 'white space' opportunity, with their revenue share expected to nearly double by 2027. He clarified that the negative customer mix in 2025 is driven by S&P Global's production forecasts for key customers like Ford and GM. Regarding China, Lawande stated that sales are expected to hit a low point in 2025 before recovering in 2026, thanks to new launches with both domestic and international OEMs, which will moderate the recent underperformance.

Dan Levy followed up on the U.S. driver-out programs, asking about the specific technical gating factors required to confidently remove the driver and the expected timing. He also asked for Mobileye's perspective on Tesla's AI5 chip efforts, comparing the strength of Mobileye's SoC design (IQ6, IQ7) and its role in customer engagements versus SoC-agnostic approaches.

Answer

Amnon Shashua, CEO and President, reiterated that driver-out in one U.S. city is expected in H1 2026, based on an elaborated safety program (PGF) and tracking MTBF KPIs for different accident types. Regarding chips, Amnon differentiated Mobileye's redundancy-based approach (cameras, imaging radars, front-facing LIDAR) from Tesla's camera-only strategy, which requires significantly more compute to reduce variance. He explained that IQ7 and IQ8 are designed for the future transition from eyes-off to minds-off autonomy (driver can sleep, no teleoperators), which requires stronger scene understanding, rather than replacing IQ6 for eyes-off systems, as validation for eyes-off is extensive and chip replacement would necessitate re-validation.

Dan Levy asked about the technical gating factors required to remove the safety driver in U.S. robotaxi programs and the expected timing for this milestone. He also inquired about Mobileye's SoC design (EyeQ6, EyeQ7) in comparison to Tesla's AI chip efforts, and the extent to which customers are leaning into Mobileye's solution due to its SoC strength.

Answer

Amnon Shashua, CEO and President, reiterated the target of H1 2026 for removing the safety driver in one U.S. city. He detailed technical milestones including vehicle readiness and tracking MTBF KPIs (agreed with ADMT), with current trajectory providing confidence. Regarding SoC design, Amnon Shashua contrasted Mobileye's redundancy-based approach (cameras, imaging radars, LiDAR) with Tesla's camera-only approach, which demands significantly more compute. He explained that EyeQ6 High is cost-optimized for eyes-off systems, while EyeQ7 and EyeQ8 are designed for minds-off autonomy (2029 and beyond), focusing on advanced scene understanding rather than replacing EyeQ6 for eyes-off due to the extensive validation required.

Dan Levy requested more color on the near-term strength in IQ shipments, particularly the trend in China, and asked about the resource allocation for the DRIVE (Robotaxi) program and its potential impact on future operating expenses.

Answer

CCO Dan Galves noted that Q2 IQ volume grew 13% year-over-year after adjusting for inventory, outperforming the market. He highlighted that China volumes were stronger than expected at 1.5 million units in the first half. CEO Amnon Shashua stated that the necessary OpEx growth to support DRIVE and Chauffeur has already occurred, and he expects operating expenses to be "more or less flattish" in the coming year.

Dan Levy of Barclays asked about the factors behind the 2025 EyeQ shipment guidance, particularly the role of new launches, and requested an update on Mobileye's business and resource allocation in China.

Answer

CEO Amnon Shashua emphasized the 2025 guidance is conservative and below customer indications. EVP Nimrod Nehushtan and Executive Daniel Galves detailed the China business, noting EyeQ volumes with domestic OEMs are growing towards 2 million units annually, supported by their export strategies. The forecast conservatively assumes a decline in volumes from global OEMs in China and a slight deterioration from the H2 2024 run-rate for domestic OEMs to account for low visibility.

Dan Levy inquired about the potential risk of Xperia headlines causing supply issues for Q4 European production, and sought further explanation on China's negative overall performance despite strong outperformance with domestic OEMs.

Answer

Mikael Bratt, President and CEO, stated it was too early to comment on Xperia's impact, noting the supply chain team is prepared. Regarding China, he explained that while COEM outperformance was strong, global OEMs still represent a larger portion of sales, and negative mix impacts from some key global customers led to the overall negative performance, but this is seen as a quarter-to-quarter effect, not a major trend shift.

Dan Levy of Barclays asked about current pricing dynamics and the impact of tariff negotiations. He also inquired about the extent to which growth over market in the Americas is driven by EVs and the potential impact of an EV slowdown.

Answer

CEO Mikael Bratt explained that pricing dynamics remain consistent, with ongoing tariff negotiations alongside the historical 2-4% annual price downs on running programs. He clarified that the EV component in the Americas is 'very minor' and does not significantly impact the company's position, noting that general market uncertainty is delaying new model launches for both ICE and EV.

Dan Levy asked about Autoliv's exposure in Europe and Asia to vehicles that are ultimately exported to North America. He also asked for specifics on what components are not USMCA compliant and the split between OEM-directed parts versus Autoliv's own sourcing.

Answer

CFO Fredrik Westin noted that exports are typically in the premium vehicle segment where Autoliv is well-represented but did not have a specific number and offered to follow up. CEO Mikael Bratt declined to break down the non-compliant components, stating it was too detailed and fluid. He reiterated that non-compliance is mostly due to a lack of available supply in the region, and OEM-directed parts require customer collaboration to find alternatives.

Dan Levy asked for the company's exposure in Europe and Asia to vehicles that are exported to North America and requested specifics on what makes certain products non-USMCA compliant, particularly the split between OEM-directed content and Autoliv's own sourcing.

Answer

CFO Fredrik Westin stated he did not have the specific export exposure number available but noted it typically involves premium vehicles where Autoliv may be overweighted. CEO Mikael Bratt declined to provide a detailed breakdown of non-USMCA compliant content, citing the fluidity of the situation, but reiterated that non-compliance is generally due to the unavailability of certain materials or components within the region.

Dan Levy of Barclays questioned the specific timing dynamics that led to the Q2 revenue shortfall, the company's confidence in preventing future delays, the feasibility of the aggressive second-half revenue ramp, and the overall liquidity position.

Answer

CEO Eyal Peso attributed the revenue timing shifts to the aeronautics segment and a temporary production halt in June due to regional conflict, emphasizing these were timing issues, not a loss of demand. He expressed confidence in the full-year guidance, supported by a record $43 million backlog. Peso stated Gauzy is operationally prepared for $45-50 million quarters in H2. Regarding liquidity, he highlighted the undrawn $35 million credit line and additional favorable debt financing as sufficient to reach cash flow positivity.

Dan Levy of Barclays inquired about the specific timing dynamics that led to the Q2 revenue shortfall, the company's confidence in preventing future delays, the feasibility of the aggressive second-half revenue ramp, and the overall liquidity position.

Answer

CEO Eyal Peso explained that revenue shifts from H1 to H2 were primarily due to timing in the aeronautics segment and a brief production halt, not a change in demand. He expressed high confidence in the full-year guidance, supported by a record $43 million backlog and operational readiness for $45-50 million quarters. Regarding liquidity, he highlighted an available $35 million credit line and recent debt financing as sufficient to fund operations until the company reaches cash flow positivity.

Dan Levy inquired about the revenue cadence for the second quarter, the visibility on converting the strong order backlog into revenue, the drivers of the significant free cash flow improvement relative to EBITDA, and the timeline for securing the additional $10 million in debt financing.

Answer

Eyal Peso, an executive, confirmed expectations for a strong Q2, stating that the March shipment delays were temporary and did not result in any cancellations. He and fellow executive Meir Peleg attributed the improved free cash flow to better working capital management, including extending supplier payment terms and utilizing invoice financing. Eyal Peso also noted the first $10 million of the new debt facility is a 'done deal' and expects the second $10 million to be signed in early Q3.

Dan Levy from Barclays questioned the certainty of the new backlog, asking about potential variables that could prevent it from materializing. He also sought details on the 2025 cash and liquidity outlook, including free cash flow, CapEx, and plans to address any cash shortfall. Finally, he asked about the key profit drivers for the 2025 positive adjusted EBITDA target.

Answer

Executive Eyal Peso asserted that the $409 million backlog is 100% committed and represents a 'must ship' minimum take rate from contracts. Regarding liquidity, executive Meir Peleg mentioned a planned $10 million debt financing, while Eyal Peso highlighted the company's $40.6 million in total liquidity, which should be sufficient to reach cash flow positivity in 2026. For profitability, Eyal Peso pointed to significant operating leverage, with revenue expected to grow much faster than OpEx, leading to a low single-digit positive adjusted EBITDA.

Dan Levy from Barclays asked for details on free cash flow dynamics, working capital, and the company's liquidity position. He also sought more color on the commercial pipeline beyond currently disclosed bookings to build confidence in future revenue acceleration.

Answer

CFO Meir Peleg detailed the Q3 free cash flow, attributing the negative result to interest on a repaid facility, IPO-related expenses, and CapEx. He noted the company expects to add more lending capacity. CEO Eyal Peso added that the company has an undrawn $35 million credit line and that some Q3 CapEx was pulled forward from 2025. Regarding the pipeline, Eyal Peso explained that the reported backlog understates the true order book, as it doesn't include the full value of multi-year committed contracts with partners like Ferrari (8 years) and Ford Trucks (10 years), which represent a much larger, committed revenue stream.

Dan Levy from Barclays inquired about the future fleet size and the strategy for achieving the Direct Operating Expense (DOE) target with a smaller fleet. He also asked about the plan for equity issuance via the ATM program and the broader strategy to deleverage non-fleet debt.

Answer

CEO Gil West explained that the fleet was shrunk strategically to improve asset quality and that the company intends to grow again profitably as it diversifies revenue channels. EVP & CFO Scott Haralson addressed the balance sheet, stating that deleveraging is a long-term plan that will be driven by positive free cash flow and the strategic, opportunistic use of equity, like the ATM program, to reduce non-fleet corporate debt over time.

Dan Levy asked for the company's line of sight to improved RPD in Q2 to achieve its breakeven EBITDA target, given early-quarter softness. He also asked how Hertz approaches recognizing gains from stronger residual values in its depreciation accounting.

Answer

CCO Sandeep Dube acknowledged April's softness but noted he has seen stabilization in rates and demand more recently, with progressive improvement expected into the summer. CFO Scott Haralson explained that depreciation is adjusted based on mark-to-market fleet valuations, albeit with a slight lag, and that gains are also recognized upon the sale of vehicles.

Dan Levy questioned the specific reasons for the Q4 DPU miss related to losses on sale, the potential impact of competitor fleet actions, and the company's cash flow outlook and liquidity management strategy amid its costly fleet rotation.

Answer

CEO Wayne West attributed the DPU miss to the high volume and timing of older vehicle sales. CFO Scott Haralson added that the company misjudged the Q4 drop in Manheim Market Report (MMR) values but sees stabilization now. Regarding liquidity, Haralson noted a strong starting position of $1.8 billion, expects a cash burn in H1 2025 with a low point in Q2, but feels confident in managing all upcoming obligations.

Dan Levy inquired if liquidity constraints impacted the fleet refresh strategy and asked for details on the systems and resource outlay needed to achieve the low-$30s DOE per day target.

Answer

CEO Wayne West and CFO Scott Haralson confirmed that liquidity has not restricted their ability to optimize the fleet. Regarding DOE, Haralson and West explained the improvement is driven by process engineering and a cultural shift towards unit cost management, not large capital investments in IT. They highlighted progress in maintenance, supply chain, and productivity, enabled by new management operating systems.

Dan Levy of Barclays requested more detail on the path to achieving mid-single-digit EBITDA margins in Europe and asked how the reshoring trend intersects with the theme of vertical integration among automakers.

Answer

Mark Oswald, EVP & CFO, outlined a multi-year path for Europe to reach mid-single-digit margins, driven by executing on announced restructuring, stabilizing production, and the roll-on of new, better-margin business. Jerome Dorlak, President, CEO & Director, noted that onshoring is leading to more value chain disaggregation by automakers, which plays to Adient's strength in its core, agile offerings of JIT, trim, and foam, rather than pushing for full vertical integration.

Dan Levy of Barclays inquired about the feasibility and timeline for rotating sourcing away from China to mitigate tariffs and asked for an update on the European restructuring, including the potential for acceleration.

Answer

President and CEO Jerome Dorlack stated that resourcing plans for key Chinese parts are in progress over a 6-9 month window. EVP and CFO Mark Oswald added that while they are exploring accelerating European restructuring, only about a third of the savings are accretive to EBITDA, with the rest needed to offset lower regional volumes.

Dan Levy of Barclays inquired about Adient's end-market assumptions for China and EMEA, the impact of customer mix on guidance, and the key drivers of the company's 'business performance' improvements in Q1.

Answer

EVP and CFO Mark Oswald confirmed that the outlook aligns with S&P forecasts and noted that negative mix in China stems from lower-margin EVs. President and CEO Jerome Dorlack added that Q2 guidance is based on direct customer EDI data. Regarding business performance, Oswald cited lower launch costs, reduced waste, and better net material margin as key drivers. Dorlack emphasized that these operational improvements, including automation, allowed Adient to contain decremental margins to 12% versus the typical 18%, demonstrating the resilience of its operating model against macro headwinds.

Dan Levy from Barclays asked for details on the visibility of drivers for the second-half margin step-up, whether the H2 margin serves as a good baseline for 2026, the reasons for the significant implied margin ramp in the Seating segment, and if the Seating business continues to meet Magna's return on invested capital (ROIC) targets.

Answer

CEO Seetarama Swamy Kotagiri stated there is good visibility on H2 drivers, including launch cadence, tariff recoveries, and operational excellence initiatives, and affirmed confidence in the 2026 outlook if volumes hold. CFO Patrick McCann specified that the Seating segment's H1 margin was negatively impacted by tariffs (60 bps) and warranty costs (110 bps), explaining the expected H2 recovery. Swamy added that Seating has historically been a good business from an ROIC perspective and clears the bar for returns.

Dan Levy of Barclays asked about changes in advanced program launch activity, the drivers of outperformance in the Complete Vehicle segment, and which specific product areas are not USMCA compliant.

Answer

CEO Seetarama Kotagiri stated that overall launch planning is unchanged, though sourcing discussions are more deliberate. He and CFO Patrick McCann attributed the Complete Vehicle outperformance to contractual commercial recoveries and cost restructuring. Regarding USMCA compliance, Kotagiri noted that non-compliant parts are spread across all business segments rather than being concentrated in one area.

Dan Levy questioned the nearly $1 billion year-over-year sales decline projected for the Power & Vision segment from 2024 to 2025. He also asked for details on the drivers of the free cash flow improvement into 2026, specifically regarding working capital and capital expenditures.

Answer

CEO Seetarama Kotagiri attributed the Power & Vision sales decline to a significant FX headwind of approximately $460-500 million, softness in the China ADAS market, and normal course price-downs. Regarding free cash flow, he highlighted that CapEx is normalizing after a peak investment cycle in battery enclosures and that engineering spend is also decreasing. CFO Patrick McCann added that working capital saw a pull-ahead benefit in Q4 2024, but cash outflows for restructuring will be a headwind in 2025-2026.

Dan Levy from Barclays questioned the production schedule assumptions for the Detroit 3 embedded in the 2024 outlook and asked about the competitive threat posed by globalizing Chinese automakers and their supplier ecosystems.

Answer

CFO Patrick McCann stated that for H2 2024, Magna assumes flattish D3 production year-over-year, which is against a strike-impacted 2023, with declines from H1 driven by Stellantis. CEO Seetarama Kotagiri addressed the China threat, positioning Magna's Steyr facility as a potential asset for Chinese OEMs localizing in Europe and highlighting Magna's value proposition in providing local regulatory and homologation expertise.

Dan Levy from Barclays Corporate & Investment Bank questioned the strong EBIT performance in Q2 despite a year-over-year sales decline. He also asked about the path for the two foundational (combustion) segments to return to positive organic growth.

Answer

CFO Craig Aaron attributed the strong Q2 performance to excellent conversion on higher-than-expected revenue, continued cost controls, productivity gains, and a 20% reduction in the cost of poor quality. CEO Joseph Fadool stated the goal for foundational businesses is to outperform the C&H (combustion and hybrid) market, noting strong RFQ activity for hybrids and combustion extensions gives him confidence in future outgrowth.

Dan Levy asked about the performance of past acquisitions like AKASOL and Central, and sought an update on the margin progression and path to breakeven for the PowerDrive Systems and Battery Systems segments.

Answer

CEO Joseph Fadool declined to comment on specific past deals but reiterated that the portfolio is continuously reviewed against market outlook and ROIC targets. Executive Craig Aaron provided segment performance details: PowerDrive Systems grew 30% with a strong conversion of 15%, while the Battery Systems business declined 15% (due to cell prices) with a decrement of 26%, prompting the North American restructuring actions.

Dan Levy asked about the reasons for the soft 2024 performance in the PowerDrive segment and the drivers for its turnaround, and also questioned why 2025 margin benefits aren't higher given restructuring savings.

Answer

Former CEO Fred Lissalde attributed the 2024 PowerDrive sales decline to its foundational portfolio, while the e-mobility side was flat. CEO Joseph Fadool stated that new product launches will drive growth in 2025. He explained the 2025 EBIT guide maintains a strong 10.1% margin on flat sales, reflecting the full benefit of restructuring and continued cost controls.

Dan Levy asked for a detailed breakdown of the Q3 margin outperformance beyond the cited $24 million benefit and inquired about the growth drivers, profile, and margin trajectory for the newly segmented battery business.

Answer

Executive Craig Aaron confirmed the $24 million recovery was a one-time item and attributed the remaining margin strength to broad operational performance and cost controls, noting the PDS restructuring should yield $20-30 million in savings for the full year. Executive Frederic Lissalde added that the battery business saw a strong 36% incremental margin and is expected to continue converting growth in the mid-teens as it scales.

Dan Levy from Barclays asked about the drivers behind the expected margin deceleration in the second half of 2025, questioning the impact of weaker volume and net performance. He also inquired if the second-half exit rate is still a valid baseline for 2026 projections. Additionally, he sought details on new Seating awards with Ford, asking if they were for components or just-in-time (JIT) assembly and how the modularity strategy is affected by reshoring trends.

Answer

CFO Jason Cardew explained that the second-half margin profile is impacted by the pull-forward of approximately 40 basis points of commercial settlements into the first half, making the full-year margin a better launching point for 2026 models. CEO Ray Scott clarified the Ford award is for next-generation F-150 and F-250 structures, with the JIT business still being quoted. He highlighted that Lear's automation and modularity strategy, supported by a new facility in Michigan, positions them well to capitalize on onshoring trends.

Dan Levy from Barclays asked for a breakdown of the original 2025 outlook's assumptions, including regional production and non-tariff factors. He also questioned how tariff pressures and Lear's strategic actions are impacting its competitive position and ability to win new business, especially in E-Systems.

Answer

CFO Jason Cardew noted the original guidance assumed a 2% decline in Lear-weighted production and that FX would now be a tailwind. He reiterated that while the production outlook is uncertain, the company is on track with its internal cost-saving initiatives. CEO Raymond Scott highlighted that operational excellence and innovation in automation are key differentiators, allowing Lear to win business like the historic E-Systems awards while still earning returns above its cost of capital.

Dan Levy of Barclays questioned Lear's approach to commercial recoveries for canceled or delayed programs and asked about the competitive landscape and long-term margin targets for the E-Systems business, especially in light of potential industry consolidation.

Answer

CEO Raymond Scott confirmed Lear is successfully negotiating commercial recoveries for lost volume and is more conservative in deploying capital for uncertain programs. On E-Systems, Scott acknowledged that industry consolidation is likely, and Lear remains open to value-creating opportunities. CFO Jason Cardew reaffirmed that the 8% long-term operating margin target for E-Systems remains appropriate, driven by restructuring, automation, and operational improvements.

Dan Levy asked for the Q1 model mix between the Polestar 2, 3, and 4, and inquired about the potential to further shift sales towards more profitable models. He also questioned if there were any developments on how Polestar plans to navigate the potential 2027 U.S. ban on China-connected cars.

Answer

CEO Michael Lohscheller provided the Q1 sales mix: Polestar 4 at 49%, Polestar 2 at 31%, and Polestar 3 at 19%. He emphasized that this successful shift to higher-margin SUVs is a key driver of improved profitability. Regarding the 2027 U.S. regulations, he confirmed that Polestar is actively working on solutions to ensure full compliance and maintain its growth trajectory in the U.S. market.

Dan Levy of Barclays PLC requested a conceptual bridge for the volume trajectory required to reach cash flow breakeven, given the gap between H1 2024 performance and the previous 155,000-unit target for 2025. He also asked about the costs associated with market expansion and the resource allocation for future products like the Polestar 5.

Answer

CEO Thomas Ingenlath emphasized that the primary goal is profitability, not chasing specific volume targets, and pointed to Q4 2024 as the key indicator of 2025's potential with all three models selling. CFO Per Ansgar added that growth drivers include cost-efficient entry into new importer markets and expanding the sales network. Thomas Ingenlath noted that OpEx is planned to remain flat despite expansion. Per Ansgar explained that investment levels will decrease post-Polestar 4 launch, with the focus shifting to Polestar 5 and future models developed collaboratively to limit capital needs.

Dan Levy inquired about the capital expenditure considerations related to potential manufacturing footprint changes driven by tariffs, and whether AAM could expect reimbursement from customers for such investments.

Answer

Chairman and CEO David Dauch stated that it is too early to quantify potential CapEx changes without clarity on customers' final production plans. He reiterated AAM's disciplined approach of targeting CapEx at approximately 5% of sales, noting this does not account for major footprint moves. He emphasized that any significant new investments would be a 'partnership' with customers, implying a shared financial responsibility.

Dan Levy asked for a breakdown of the $28 million positive performance in the Q3 EBITDA bridge, beyond the warranty benefit, and inquired about remaining inflation recovery opportunities. He also questioned how an extended ICE production cycle might affect AAM's R&D and CapEx spending.

Answer

CFO Chris May attributed the performance to operational improvements and cost controls, particularly in the metal forming unit, and noted that inflation recovery negotiations are mostly complete for the year. Regarding an extended ICE cycle, May explained it would allow AAM to leverage existing capacity, minimizing CapEx, and would also permit R&D spending to moderate as development shifts to a more balanced powertrain portfolio.