Douglas Dethy's questions to Commercial Vehicle Group Inc (CVGI) leadership • Q4 2024
Question
Douglas Dethy from DC Capital Partners expressed significant concern over poor financial results, questioning the sense of urgency and the plan for recovery. He specifically highlighted the increase in SG&A as a percentage of sales and asked how the company could mathematically achieve a reasonable EBIT margin, probing the gross margin profile of new business.
Answer
Executive Andy Cheung acknowledged the challenging results and stated the immediate urgency is on generating positive free cash flow through working capital improvements. President and CEO James Ray added that the primary focus for 2025 is expanding gross margin by eliminating the one-time operational inefficiencies from 2024. Mr. Cheung conceded that reaching their target 9% EBITDA margin requires achieving a ~15% gross margin, which is above historical levels but is considered the business's entitlement. He noted new business is won at higher margins, but the near-term focus is on fixing internal inefficiencies.