James Picariello

James Picariello from BNP Paribas S.A. asked about quantifying the next phase of cost savings beyond the current $310 million program, including opportunities from plant closures and overall stronger execution. He also inquired about the expected CapEx run rate as a percentage of sales for next year and the assumed stranded costs.

Answer

Bruce McDonald (Chairman and CEO, Dana Incorporated) stated that significant margin expansion opportunities remain, with another $50-$75 million in cost savings from standardization and systems work over the next few years. He highlighted footprint opportunities, product line rationalization, and improving EV business profitability as future levers. Timothy Kraus (Senior Vice President and CFO, Dana Incorporated) indicated CapEx would be around 4% of sales next year, with stranded costs estimated at $30-$40 million, which they expect to remove by the end of 2026, partially offset by transitional service payments. McDonald added that next year's CapEx includes a significant step-up in basic automation for factories.

James Picariello asked about quantifying the next slate of cost savings beyond the current $310 million program, including opportunities from plant closures and stronger execution. He also inquired about the expected CapEx run rate as a percentage of sales for next year and the assumed stranded costs for 2026.

Answer

Chairman and CEO Bruce McDonald stated that significant margin expansion opportunities remain, including $50-75 million from standardization and systems work over the next few years, footprint rationalization, and increased automation in core operations. He expects the EV business to become accretive in 6-12 months. Senior Vice President and CFO Timothy Kraus projected CapEx at about 4% of sales for next year and estimated stranded costs at $30-40 million, which they expect to largely eliminate by the end of 2026, with some offset by transitional service payments from Allison.

James Picariello of BNP Paribas questioned the capital return strategy, asking if the remaining $400 million commitment would be buybacks or a special dividend, and sought to clarify the relationship between stranded costs and the main cost savings program.

Answer

Chairman & CEO Bruce McDonald and Senior VP & CFO Timothy Kraus stated that with shares considered 'extremely undervalued,' share repurchases are the preferred method for capital return. Kraus clarified that the $310 million cost savings program is separate from the efforts to eliminate the $40 million in true stranded costs, which they expect to fully mitigate by 2027.

James Picariello from BNP Paribas sought confirmation on the tariff exposure for the off-highway business and its North American import flows. He also requested an update on the off-highway sale timing and the non-tariff related guidance changes for foreign exchange and commodities.

Answer

SVP and CFO Timothy Kraus confirmed the off-highway business has minimal U.S. tariff exposure, which is considered 100% recoverable, with the main risk being broader macroeconomic volume impacts. He reiterated that the sale process is now expected to conclude later in Q2. He declined to provide specific FX and commodity guidance figures to prevent a back-calculation of the company's tariff assumptions.

Representing James Picariello of BNP Paribas, an analyst asked for an update on the timing and potential payment size related to the Hydro-Quebec TM4 put option. He also inquired when the company would implement its planned business re-segmentation.

Answer

CFO Timothy Kraus declined to give specifics on the Hydro-Quebec payment but expressed confidence that a resolution would be reached sometime in 2025. He confirmed the re-segmentation, which folds Power Technologies into other units, will be completed during Q1 and reflected in the first quarter's report.

James Picariello asked for context on why the sale of the European hydraulics business fell through and for color on the end-market weakness and potential duration of the downturn in the Off-Highway segment.

Answer

Timothy Kraus, SVP & CFO, stated the hydraulics business sale did not close because the buyer's financing fell through. Regarding the Off-Highway market, Kraus confirmed weakness across agriculture, construction, and material handling. He noted that while these markets move quickly, the team is performing well, citing that a $100 million sales decline in Q3 resulted in a less than 10% decremental margin due to effective cost flexing.

James Picariello of BNP Paribas asked for clarification on the full-year impact of commodities and tariffs compared to initial guidance and inquired about the top-line outlook for the Asia Pacific region and its JVs into the next fiscal year.

Answer

Mark Oswald, EVP & CFO, clarified that commodity impacts are reported net of recoveries and that improved business performance is now offsetting a net tariff headwind that wasn't in the original plan. Jerome Dorlak, President, CEO & Director, explained that the 2026 outlook for China's top line is dependent on the launch cadence of local OEMs, which has faced some delays, potentially leading to growth that might still slightly contract versus the market.

James Picariello of BNP Paribas questioned the foreign exchange assumptions embedded in the company's guidance and asked for an update on Adient's capital allocation mindset regarding share buybacks or M&A amidst macro uncertainty.

Answer

EVP and CFO Mark Oswald stated that FX assumptions were kept consistent with the prior guide due to volatility. Both Oswald and CEO Jerome Dorlack affirmed that the capital allocation strategy is unchanged: a measured approach prioritizing business investment and shareholder returns, with the timing of buybacks dependent on macro clarity and second-half cash generation.

Representing James Picariello of BNP Paribas, an analyst asked about the potential impact of new North American tariffs on Adient's business, particularly its Mexico operations, and inquired about the outlook for incremental and decremental margins for the remainder of the year.

Answer

President and CEO Jerome Dorlack stated that Adient has action plans with customers and has communicated that the company cannot absorb a 10-25% tariff burden, necessitating pass-throughs to the value chain. On margins, EVP and CFO Mark Oswald explained that the strong 12% decremental margin in Q1 was achieved due to having advance notice of production changes. He noted that the full-year guidance assumes continued success in managing costs to keep decrementals below the typical 17-18% level.

James Picariello of BNP Paribas asked for more detail on the expected magnitude of the EMEA margin trough in fiscal 2025 and questioned the confidence in the Asia-Pacific sales outgrowth forecast, given that a similar forecast was not met last year.

Answer

Mark Oswald, EVP and CFO, stated that while positive business performance will help, the primary driver of EMEA's results will be the negative impact from a 5% reduction in regional production volume. Jerome Dorlack, President and CEO, explained that last year's China forecast was impacted by an unforeseen shift to export production, where Adient had less exposure. He expressed confidence in this year's 6% outgrowth forecast, noting it is based on 100% booked business and incorporates improved market intelligence on the domestic vs. export production mix.

James Picariello from BNP Paribas inquired about the visibility into the North American production outlook for the second half of the year. He also asked about the potential for share buybacks and the implications of the reduced 2025 CapEx on the 2026 target.

Answer

CEO Seetarama Swamy Kotagiri stated that while H2 production looks slightly softer than H1, they don't see a precipitous fall and are comfortable with their outlook, which aligns with IHS. Regarding capital, he reiterated that the focus remains on capital discipline and free cash flow. While the conditions for resuming buybacks haven't changed, they can act on the existing NCIB if visibility improves. He also confirmed the long-term goal of a low-4% CapEx-to-sales ratio remains intact for 2026.

James Picariello of BNP Paribas asked for confirmation of the expected 40/60 first-half/second-half earnings split for the year and sought clarity on the strategy for share buybacks under the current authorization.

Answer

CEO Seetarama Kotagiri affirmed that the 40/60 earnings cadence remains a good assumption based on current visibility. Regarding buybacks, he reiterated the program is paused due to uncertainty. While the intent is to utilize the NCIB authorization when conditions permit, he did not commit to a specific target, emphasizing the priority of maintaining balance sheet strength.

James Picariello asked why the Seating segment's 2026 targets appear structurally weaker than other segments and inquired about the future pipeline for the Complete Vehicles business, particularly with Chinese OEMs, and the status of the LG powertrain JV.

Answer

CEO Seetarama Kotagiri attributed the Seating performance to input costs, program volume drops, and negative EV mix, noting an underperforming program ends in late 2026, which will be a positive catalyst. For Complete Vehicles, he said the cost structure has been right-sized and discussions are ongoing with various OEMs. He stated the LG JV is performing well from a product and business-win perspective, though currently pressured by the EV market slowdown.

James Picariello of BNP Paribas asked for clarification on the drivers of the high implied incremental margin in the revised 2026 targets and sought details on the expected commercial recoveries in the second half of 2024.

Answer

CFO Patrick McCann explained that the strong 2026 incremental margin is significantly influenced by the removal of ~$2.2 billion in low-margin Complete Vehicle sales, which is accretive to the consolidated margin. This is supplemented by savings from reduced engineering spend, lower D&A, and restructuring. Both McCann and CEO Seetarama Kotagiri confirmed that H2 2024 commercial recoveries are factored into the outlook and are expected to follow a similar back-half weighted cadence as in 2023.

James Picariello from BNP Paribas requested a progress update on the restructuring savings from the battery business consolidation. He also asked if the strong first-half revenue momentum in the PowerDrive segment is sustainable into the second half of the year.

Answer

CEO Joseph Fadool stated that the team acted quickly on the battery business, which was slightly EBITDA positive and cash flow breakeven in Q2, positioning it for profitable growth. CFO Craig Aaron noted that second-half PowerDrive performance depends on production levels, but the focus remains on outgrowing the hybrid and EV market and converting that growth at mid-teens margins. Fadool also confirmed a definite increase in RFQ flow for advanced hybrids.

James Picariello sought more detail on the rationale behind the conservative North American light vehicle production forecast of down 7% to 12% and asked for clarification on the foreign exchange and tariff recovery assumptions in the updated guidance.

Answer

CEO Joseph Fadool stated that while current orders look good, the guidance prudently anticipates potential market changes from tariffs and macro uncertainty. Executive Craig Aaron clarified that FX is now a $250 million tailwind compared to prior guidance. He also confirmed that the guidance assumes 100% recovery of tariff costs from customers, though timing of these recoveries could impact results at the lower end of the range.

James Picariello questioned BorgWarner's 2024 light vehicle production outlook, which appeared more optimistic than some peers. He also asked how the 'Turbos and Thermal' and 'Drivetrain and Morse Systems' segments are positioned to benefit from a potential rise in hybrid demand.

Answer

Executive Frederic Lissalde detailed the company's market view (down 3-3.5%), noting regional differences. Regarding hybrids, he explained that advanced hybrid powertrains draw products from both foundational segments, including engine components and shifting mechanisms, making both integral to hybrid growth without ranking one over the other.

James Picariello from BNP Paribas inquired about the E-Systems business wind-down, asking for the updated full-year assumption and whether this headwind would neutralize in 2026. He also asked for any updated thoughts on the multi-year backlog, particularly for 2027.

Answer

CFO Jason Cardew stated the E-Systems wind-down is now forecasted at $146 million for 2025 and will remain a headwind, projecting approximately $150 million in 2026 and $200 million in 2027. Regarding the backlog, he noted they will provide a full update later, mentioning a new headwind from Stellantis's Ram EV delays but also an offset from strong Chinese OEM business. CEO Ray Scott added that the Seating quoting pipeline is at a near-record high, signaling future opportunities.

James Picariello from BNP Paribas asked for the consolidated versus joint venture revenue breakout for the 2027 China target and the margin profile of its domestic OEM business. He also questioned the share buyback plans for the remainder of the year.

Answer

CFO Jason Cardew explained that the 2027 China revenue split is a 'moving target' due to ongoing discussions that could lead to the consolidation of some current JVs. CEO Raymond Scott added that growth with Chinese domestics is driven by strong relationships and technology, which is also opening doors with Japanese OEMs. On buybacks, Cardew stated that after achieving the $325 million target, a reasonable expectation for Q4 would be an additional $10 million.

James Picariello inquired about the drivers behind the significant increase in the full-year Supervision unit guidance to 40,000, the status of the relationship with Zeekr, the launch timing for Porsche and Audi programs, and Intel's future intentions regarding its majority stake in Mobileye.

Answer

CCO Dan Galves explained the guidance increase was due to stronger-than-expected sales from Zeekr (for export markets) and the Polestar 4. CEO Amnon Shashua confirmed the Porsche/Audi start of production is late 2026, with revenue impact in 2027, which he termed an "inflection year." Regarding Intel, Galves noted their patience and continued ownership of over 80% but stated he could not comment on their future plans.

James Picariello of BNP Paribas Exane asked for clarification on the Q3 and Q4 price/mix guidance, inquired about competitive pricing actions in response to tariffs, and requested a breakdown of the tariff costs within the inflation bucket.

Answer

CFO Christina Zamarro confirmed the price/mix guidance of $150 million for both Q3 and Q4. She noted that competitors are also implementing significant price increases due to higher tariff exposure, stating Goodyear's exposure is about one-fourth of the industry average. Zamarro detailed that the annualized tariff cost is $300 million, with about $50 million hitting in Q2, and this is included within the broader inflation and other costs bucket.

James Picariello inquired about Goodyear's price/mix and raw material outlook for 2025, asking about peer pricing actions. He also questioned the company's volume performance expectations versus the industry and the drivers behind the Q4 upside in Goodyear Forward savings.

Answer

CFO Christina Zamarro stated that price/mix should grow into Q2 and Q3, while raw material headwinds could be $100M-$150M in the second half. CEO Mark Stewart confirmed that multiple global pricing actions have been implemented since Q3 2024. Stewart also detailed plans to launch five new premium product lines to address volume challenges. Zamarro attributed the Q4 Goodyear Forward upside to these pricing actions, particularly at the premium end of the market.

James Picariello from BNP Paribas inquired about the persistent decline in North American replacement volumes over the last nine quarters, the drivers for the significant Q4 price/mix headwind, and the rationale behind updated guidance for lower CapEx and higher working capital use.

Answer

CEO and President Mark Stewart attributed volume weakness to an influx of Tier 4 imports and a deliberate exit from low-margin business, while emphasizing the focus on expanding premium SKU coverage. Executive Vice President and CFO Christina Zamarro explained the Q4 price/mix headwind is driven by higher OE volume. She noted the lower 2025 CapEx reflects a disciplined capital allocation process, and the 2024 working capital use is a timing issue related to production cuts and inventory builds that will be recovered next year.

James Picariello asked for the key drivers of the Q1 EBIT beat versus expectations and for details on Model e's record performance, including how Ford is managing Mach-E production amid tariffs.

Answer

CFO Sherry House attributed the Q1 beat to better-than-expected costs, particularly on warranty. She noted Model e's strong quarter was driven by pricing and material cost pull-aheads but expects it to be the segment's best quarter of the year. COO Kumar Galhotra stated Mach-E production is 'business as usual' with no plans for adjustments.

James Picariello asked about the implications of GM moving truck production from Mexico to its Fort Wayne plant for AAM's content and supply. He also requested clarification on a business sale that appeared in the Q1 cash flow statement.

Answer

Chairman and CEO David Dauch explained that AAM already supplies the Fort Wayne plant and will work with GM to manage the volume shift, expecting contractual obligations to be honored. EVP and CFO Chris May clarified that the Q1 cash flow reflects the sale of two joint ventures in China for approximately $30 million, which is separate from the pending sale of its India commercial vehicle business expected in Q2.

James Picariello asked about the drivers of the positive FX and commodity impact in Q3, its sustainability into Q4, and AAM's North American manufacturing flexibility under a potential tariff scenario. He also requested the EBITDA impact from the India divestiture.

Answer

CFO Chris May confirmed the Q3 benefit was from both commodities and FX, with the latter driven by the Mexican peso, but noted that extensive hedging would limit future spot rate impact. CEO David Dauch stated AAM has built-in flexibility between its U.S. and Mexico plants and would leverage existing capacity to manage production shifts. CFO Chris May provided the financial impact of the divestiture as approximately $10 million in LTM adjusted EBITDA on roughly $156 million in sales.

James Picariello asked for clarification on the China sales guidance, questioning if it assumes sales in Q2 before a full halt. He also asked if any units have shipped to China since the tariff trigger date and requested a breakdown of the China revenue mix between interior mirrors, exterior mirrors, and FDM.

Answer

President and CEO Steve Downing clarified that while no new shipments have been actively sent since the tariffs, the guidance accounts for inventory already in the China warehouse or in transit, plus an assumption of some minimal demand from OEMs needing parts for short-term production. He estimated the historical China mix was roughly 50/50 between interior and exterior mirrors, with virtually no FDM shipments to the region.

James Picariello asked how to bridge the Q4 underperformance to the 6% outgrowth guided for 2025, given the recent headwinds. He also inquired about 2025 seasonality, the VOXX acquisition closing, and the timing of its planned cost synergies.

Answer

CEO Steve Downing stated the 2025 outgrowth relies on continued FDM growth, new DMS launches, and a recovery in outside mirror sales. He noted Q1 seasonality could be affected by trade/tariff discussions. CFO Kevin Nash detailed the VOXX synergy plan, with some immediate savings and longer-term manufacturing consolidation over 18-24 months.

James Picariello questioned the updated growth-over-market forecast for 2025 and sought clarity on the timeline for achieving the 35-36% gross margin target. He also asked about the recent volatility in investment income.

Answer

President and CEO Steve Downing stated the lower growth-over-market forecast reflects a more pessimistic internal view of vehicle production than published S&P numbers. He anticipates achieving the gross margin target in the second half of 2025. Downing also noted that the recent volatility in 'Other Income' was due to a specific security and expects more stability going forward.

James Picariello of BNP Paribas asked for confirmation on an estimated 2,100 units shipped to Saudi Arabia in 2024 and the outlook for 2025. He also questioned whether the upcoming Midsize vehicle would be produced exclusively in Saudi Arabia or also in Arizona.

Answer

SVP of Finance Gagan Dhingra did not confirm the 2024 shipment number but stated that as production scales in 2025, the proportion of vehicles going to Saudi Arabia is expected to decrease relative to North America. Interim CEO Marc Winterhoff confirmed that the Midsize platform will be produced at both the AMP-2 plant in Saudi Arabia and the AMP-1 plant in Arizona to serve the North American market.

James Picariello of BNP Paribas asked for specifics on the Q4 working capital benefit, its influence on the 2025 cash flow outlook, the M&A pipeline versus buybacks, and the quarter's inorganic revenue contribution.

Answer

SVP and CFO Jerome Rouquet explained the strong Q4 working capital inflow was due to several one-time benefits, including the timing of customer payments, engineering recoveries, and inventory reductions, which will not recur in 2025. He reaffirmed a 40% EBITDA-to-cash conversion target for 2025. Rouquet also stated Visteon maintains a balanced capital allocation approach with an extensive M&A pipeline, continued investment in vertical integration, and opportunistic share repurchases, noting the recent acquisition was not material to revenue.

James Picariello asked about the competitive landscape for SmartCore cockpit domain controllers and whether it's a zero-sum game with digital clusters. He also requested details on the recent German acquisition and if its completion implied a return to share buybacks.

Answer

CEO Sachin Lawande asserted it is not a zero-sum game, as the market is segmenting into high-end, mid-range, and mass-market solutions, with Visteon positioned for all three. He described the German acquisition as a strategic buy of a small tech firm with connectivity and e-mobility expertise to strengthen Visteon's R&D capabilities. CFO Jerome Roquet added that the company can pursue both M&A and share repurchases concurrently.

James Picariello requested more details on the strategic rationale for investing in Chinese vision software supplier Maxieye and asked about the potential competitive impact of Siemens' acquisition of Altair on Aptiv and Wind River.

Answer

CFO Joe Massaro explained the Maxieye investment provides a crucial local vision solution for Aptiv's ADAS platform to win business with Chinese OEMs. CEO Kevin P. Clark stated that Altair is not a direct competitor, as it focuses on the broader industrial engineering toolchain, which is only a small part of Wind River's automotive-focused offerings.

James Picariello of BNP Paribas requested a breakdown of the factors driving the expected sequential EBIT decline in Q4 and asked if intensified competitor actions were influencing GM's assumptions.

Answer

EVP and CFO Paul Jacobson attributed the Q4 EBIT step-down to several factors: a $400 million timing pull-forward from Q4 to Q3, eight fewer production days, and downtime for the full-size SUV model changeover. He asserted that GM remains disciplined on pricing and incentives, independent of competitor actions.