Drew Estes

Drew Estes questioned PHINIA's 2026 volume assumptions, specifically regarding the projected low single-digit decline in light vehicle volumes in the Americas despite a perceived OEM refocus on ICE and hybrid vehicles. He asked what factors would be necessary for light vehicle volumes to turn positive for PHINIA in the Americas. Estes also inquired if competitors were changing their behavior by refocusing on GDI platforms and ICE-related programs, or if their strategies remained unchanged.

Answer

CEO Brady Ericson explained that the market numbers for the Americas (flat to slightly down) include EV penetration, but PHINIA expects to see growth due to market share gains and increasing GDI penetration rates, which benefit from hybrid and plug-in hybrid applications. He noted that PHINIA is outgrowing the market by 400-500 basis points. Regarding competitors, Ericson stated that there hasn't been a significant change in their behavior; the two other major players continue, while smaller ones have wound down. He emphasized PHINIA's advantage as a focused company, being first to market with 500-bar systems and active in alternative fuels.

Drew Estes questioned PHINIA's 2026 assumption of declining light vehicle volumes in the Americas despite a perceived OEM refocus on ICE and hybrid vehicles, asking what would be needed for volumes to turn positive. He also inquired about any observed changes in competitor behavior regarding GDI platforms and ICE-related programs.

Answer

CEO Brady Ericson clarified that market numbers for the Americas, including BEVs, are expected to be flat to slightly down, but PHINIA anticipates outgrowing the market by 400-500 basis points due to market share gains and increasing GDI penetration, which benefits from hybrid applications. He stated that no significant change in competitor behavior has been observed, noting PHINIA continues to gain share against major players, highlighting its first-to-market 500-bar system, alternative fuels work, and strategic advantage as a focused company.

Drew Estes from Banyan Capital Management followed up on the tax issue, asking for clarification on the 'structurally difficult' regions, and also inquired about the company's maintenance capital expenditure level in a steady-state scenario.

Answer

CFO Chris Gropp and CEO Brady Ericson clarified the tax issue stems from inefficient legal and holding company structures inherited from the spin-off, not the manufacturing footprint. Unwinding these requires complex legal and IP moves. Ericson estimated maintenance CapEx would be around 1% of sales but emphasized that continuous investment is required to refresh programs and maintain revenue, making a pure maintenance scenario unrealistic.