Joseph Spak

Joseph Spak from UBS inquired about Sensata's data center opportunities, specifically whether growth is expected to be mostly organic (leveraging existing tech or new R&D) or if inorganic opportunities might arise. He also asked if Dynapower asset write-downs could lead to significant margin accretion if its technology is leveraged.

Answer

CEO Stephan von Schuckmann clarified that Sensata's products are already in existing data centers (electrical protection, sensing, leak detection) and designed into future concepts with hyperscalers, indicating strong organic growth potential. He mentioned leveraging sensing capabilities for new products like flow sensors and focusing on liquid cooling. CFO Andrew Lynch explained that the Dynapower charge was a goodwill impairment, so it won't directly lead to margin lift from lower amortization/depreciation, but the company is focused on real margin expansion through volume leverage and productivity.

Joseph Spak asked about the nature of data center opportunities (organic vs. inorganic, leveraging existing tech, new R&D), and whether the recent DynaPower write-downs were asset-based, potentially leading to margin accretion if the tech is leveraged.

Answer

Stephan von Schuckmann, CEO, clarified that data center opportunities are primarily organic, leveraging existing products (electrical protection, sensing, power/peak management) already designed into current and future hyperscaler concepts, with some new product development like flow sensors through R&D. Andrew Lynch, CFO, clarified that the DynaPower charge was a goodwill impairment, not an asset write-down, so no direct margin lift from lower amortization/depreciation, but the focus remains on real margin expansion through volume leverage and productivity.

Joseph Spak questioned the outlook for free cash flow and CapEx in the second half of the year, and asked for clarification on the company's deleveraging strategy, including leverage targets and plans for gross debt reduction.

Answer

CEO Stephan von Schuckmann reiterated the goal of 80%+ free cash flow conversion. CFO Andrew Lynch explained that while CapEx was low in Q2, it will tick up but remain manageable, with 80% conversion being a floor. He added that near-term deleveraging will focus on accumulating cash, with a target of getting below 3.0x leverage and moving towards 2.5x.

Joseph Spak asked about the potential margin upside if conservative auto forecasts prove wrong, the status of tariff cost negotiations with customers, and for an update on the company's portfolio review.

Answer

CEO Stephan Von Schuckmann and CFO Brian Roberts stated that 95% of the tariff risk has been mitigated through customer negotiations. Regarding the portfolio, Mr. Von Schuckmann noted that his focus has been on the three strategic pillars and that while he is reviewing the portfolio, there are no changes to announce at this time.

An analyst on behalf of Joseph Spak asked about Sensata's positioning for Europe's 2025 CO2 regulations and the potential impact from shifts between BEV and ICE vehicle production.

Answer

Executive Martha Sullivan stated that Sensata is well-positioned due to its content on both ICE engines and its growing content on BEVs. She noted that because current content is slightly lower on a full BEV in Europe, a recent slowdown in BEV adoption has been a net positive in some cases. Future projections depend heavily on consumer demand.

Joseph Spak sought clarification on whether Magna's organic growth is purely volume and content-driven, without pricing benefits. He also questioned the seating segment's margin management amid a 6% decline, cost actions, and the long-term strategy regarding business changes. Finally, he asked about the sustainability of Magna's strong free cash flow and future CapEx needs.

Answer

CFO Philip D. Fracassa confirmed organic growth is primarily volume and content-driven. CEO Seetarama Swamy Kotagiri clarified Magna has not lost incumbent seating programs, explaining customer pivots rather than competitive losses, and affirmed seating remains a core, profitable business. CFO Philip D. Fracassa added that the Ford Escape program impacts 2026 seating sales. CFO Philip D. Fracassa stated that the $1.6 billion-$1.8 billion free cash flow is sustainable, targeting 100% net income conversion, with CapEx remaining below 4% of sales.

Joseph Spak followed up on the commercial benefits being neutral year-over-year, asking if organic growth is purely driven by program and content wins without pricing benefits. He also questioned the Seating segment's margin management amidst a 6% decline and Magna's long-term strategy for seating facilities.

Answer

CFO Philip D. Fracassa confirmed that organic growth is primarily driven by volume and new programs with higher content. CEO Seetarama Swamy Kotagiri clarified that Magna Seating has not lost incumbent programs, remains a core and profitable business, and current revenue dips are due to specific program end-of-productions. VP of Investor Relations Louis Tonelli noted the Ford Escape retooling significantly impacts 2026 Seating numbers. Fracassa also stated that the guided free cash flow of $1.6 billion-$1.8 billion is sustainable, with CapEx below 4% of sales.

Joseph Spak first asked for clarification on a change in the reported conditional cash inflows from PowerCo, noting a reduction from $261 million to $150 million. He then inquired if Volkswagen's reported funding cuts impacted QuantumScape's business or increased the urgency to diversify customers. Finally, he questioned how QuantumScape plans to scale different form factors for new end markets (robotics, aviation) given their capital-light licensing model, which typically relies on partners for industrialization.

Answer

CFO Kevin Hettrich initially stated he would revert on the cash inflow discrepancy, then later clarified that the change was a different 'cut' at the same numbers, focusing on billings to date plus the $130 million prepay, rather than including the 'up to $131 million' development payments. CEO Siva Sivaram affirmed that work with PowerCo continues unchanged, and their commitment is strong, while also noting the addition of two new global auto OEMs. Siva explained that the capital-light licensing model is flexible, allowing for various approaches like contract manufacturing or customer-provided manufacturing, even for bespoke use cases in new markets, ensuring they avoid capital expenditure.

Joseph Spak sought clarification on the reported conditional cash inflows from PowerCo, noting a change from $261 million to $150 million. He also asked if reported Volkswagen funding cuts impacted their partnership and how QuantumScape plans to scale in new non-automotive markets using a capital-light model.

Answer

CFO Kevin Hettrich clarified that the change in the reported conditional cash inflows figure was due to a different reporting cut (bird-in-hand vs. bird-in-bush), not a contractual change. CEO Dr. Siva Sivaram confirmed the PowerCo partnership remains strong and unchanged, while QuantumScape has also added two new global automotive OEMs. Dr. Sivaram explained that the capital-light licensing business model is flexible and adaptable for new markets, exploring variations like contract manufacturing or customer-provided manufacturing to avoid capital expenditure.

Joseph Spak pressed on the competitive environment, asking why an OEM wouldn't choose an evolving LFP technology if it meets performance needs, questioning the ultimate advantage of solid-state. He also asked for insight into Tesla's potential anode-less development and requested an updated timeline for providing financial details on the licensing model.

Answer

CEO Dr. Siva Sivaram responded that competing technologies often present incomplete data and require compromises on safety, cycle life, or range, whereas QuantumScape offers a superior solution on all dimensions. He declined to comment on specific potential customers like Tesla but noted it was good to see others adopting their way of thinking on anode-free design. CFO Kevin Hettrich reiterated the general framework of the licensing model (royalties, prepays, NRE) and Dr. Sivaram added that full financial details would be provided at an appropriate future time.

Joseph Spak sought clarification on the data center opportunity, specifically the correlation between the $300 million initial revenue and the 2 gigawatts of capacity, and the potential revenue at full capacity. He also asked for BorgWarner's outlook on the turbocharger business, competitive dynamics, and customer trends, such as the return of V8 engines by some OEMs.

Answer

CEO Joseph F. Fadool clarified that the $300 million is for the initial ramp-up year and does not directly correlate to the 2 gigawatts of capacity, which is being installed. He stated that the full revenue opportunity at capacity would be disclosed closer to 2027, expressing optimism for the product's market potential due to its fuel flexibility, fast transient response, and modularity. For turbochargers, Joseph F. Fadool affirmed continued growth, BorgWarner's position as a top-two market leader, increasing penetration, and the adoption of more efficient variable turbine geometry turbos. He expects to conquest business from weaker players and is prepared for future technology generations.

Joseph Spak from UBS Group inquired about the drivers behind the full-year organic growth guidance, particularly the impact of battery sales, and questioned the company's capital allocation strategy regarding its high cash balance and the pace of deployment.

Answer

CEO Joseph Fadool explained that lower battery sales in the BCF segment created a headwind for full-year outgrowth. CFO Craig Aaron addressed capital allocation, stating the company is focused on a disciplined and consistent return of cash, targeting a similar level of share repurchases in Q3 and Q4 as seen in Q2, while maintaining a liquidity target of 20% of sales.

Joseph Spak asked for a breakdown of the over $200 million tariff impact, which seemed high relative to previous disclosures, and inquired about the company's plans for deploying its cash balance, particularly regarding share buybacks.

Answer

CEO Joseph Fadool explained that the guidance includes all known tariffs and is considered manageable. He noted that the impact includes both direct tariffs on imports and indirect costs passed on from suppliers. Executive Craig Aaron stated that with a strong balance sheet and expected free cash flow of $700 million, the company will continue to evaluate all capital allocation levers, including opportunistic share repurchases, to create shareholder value.

Joseph Spak asked for clarity on the North American market outlook, the 2025 eProducts forecast, and the new CEO's perspective on inorganic growth and M&A.

Answer

CFO Craig Aaron confirmed the market outlook includes headwinds from potential tariffs. CEO Joseph Fadool stated that while organic investment is the top priority, the company will continue to evaluate acquisitions thoughtfully, viewing current industry turbulence as a unique opportunity. A specific 2025 eProducts outlook was not provided, but it will be disclosed in future 10-Q filings.

Joseph Spak inquired about the path to profitability for the battery and charging segment, asking if it was primarily dependent on filling its newly completed capacity. He also asked if returning nearly all free cash flow to shareholders represents a new capital allocation strategy.

Answer

Executive Craig Aaron explained that profitability for the battery business hinges on scaling revenue, which will lead to breakeven and beyond as it grows from its current ~$200 million quarterly run-rate. He confirmed the capacity build-out is complete. Regarding capital allocation, he expressed satisfaction with the 2024 deployment but deferred specific commentary on 2025 until the next earnings call.

Joseph Spak sought clarification on the 2026 Novelis impact, specifically if the underlying EBIT improvement would be higher without temporary sourcing costs, and asked about the reliability of aluminum supply. He also questioned the market impact of competitors regaining share in North American trucks and European LCVs, and requested more granularity on Ford-specific market mix factors aiding profitability.

Answer

Sherry House (CFO, Ford Motor Company) confirmed the understanding of the Novelis impact and potential tailwinds for 2027. Jim Farley (CEO, Ford Motor Company) and Kumar Galhotra (Chief Operating Officer) provided an update on the Novelis mill restart timeline and contingency plans for supply. Andrew Frick (President of Ford Blue and Model E) addressed the competitive truck segment, Ford's leadership, and mix optimization efforts. Sherry House (CFO, Ford Motor Company) added insights on Ford Pro's strong demand and competitive pricing in Europe.

Joseph Spak inquired about the limited $1 billion recovery from the Novelis fire impact and sought confirmation on the plant's expected operational timeline by year-end. He also asked for an update on potential disruptions from chip supply issues and Ford's mitigation strategies.

Answer

COO Kumar Galhotra confirmed Novelis' hot mill would be operational by late November/early December, leading to a loss of 90,000-100,000 units in Q4, with plans to recover 50,000 units in 2026 by adding a third shift at Dearborn Truck Plant and increasing line speed at Kentucky Truck. President and CEO Jim Farley emphasized that makeup capacity depends on Ford's own upside, not Novelis' restrictions. Regarding chip impact, Jim Farley stated it's a political issue, with U.S. and Chinese administrations working to resolve it, and Ford is maximizing component buys, noting that a quick breakthrough is needed to avoid Q4 production losses for the industry.

Joseph Spak asked for clarification on the $1 billion Novelis recovery, aligning it with the reported plant restart by year-end, and sought an update on potential disruptions from Sivers Semiconductors chip impact, including supply and alternative sources.

Answer

Kumar Galhotra, COO, confirmed Novelis' Hot Mill would be operational by late November/early December, leading to a loss of 90,000-100,000 units in Q4, with plans to recover 50,000 units in 2026 by adding a third shift at Dearborn Truck Plant and increasing line speed at Kentucky Truck. Jim Farley, President and CEO, emphasized that makeup capacity depends on Ford's own upside, not Novelis' restrictions, and addressed the Sivers Semiconductors issue as a political matter, with Ford maximizing common parts buy and working with administrations to avoid industry-wide Q4 production losses.

Joseph Spak asked about Ford's lobbying position and desired outcomes from the USMCA tariff negotiations, particularly given the potential relative disadvantage. He also sought clarification on the scale of reduced compliance credit purchases and the potential profit tailwind.

Answer

CEO James Farley stated Ford is advocating for simplified tariffs to reduce its $2 billion net liability and sees the new tariffs on competitors as an opportunity. CFO Sherry House clarified that compliance credit expenses are running at about $200 million per quarter. Farley emphasized the most significant financial impact will come from optimizing the vehicle mix, which he described as a multi-billion dollar opportunity.

Joseph Spak asked what Ford needs to see to reinstate guidance and how the broader regulatory environment beyond tariffs impacts powertrain investment and the Model e strategy.

Answer

CFO Sherry House clarified they will provide an update, not necessarily reinstate guidance, in Q2, pending clarity on policy, customer reactions, and competitive dynamics. CEO James Farley emphasized the critical importance of the Production Tax Credit (PTC) for its U.S. investments and believes Ford is well-positioned due to its government engagement.

Joseph Spak asked for clarification on the 2025 free cash flow guidance drivers and the assumed distribution from Ford Credit. He also inquired about how Ford plans to market Extended Range Electric Vehicles (EREVs) to create consumer pull.

Answer

CFO Sherry House explained the free cash flow reduction is due to lower EBIT and increased working capital, with the guidance remaining in the target 50-60% conversion range. She expects the Ford Credit distribution to be 'equal or greater' than the past year. CEO Jim Farley described the EREV strategy as offering customers an affordable EV experience in larger vehicles without range anxiety, noting that users of similar products consider them EVs, not hybrids.

Joseph Spak questioned the 40-50% free cash flow payout ratio, asking how prospective risks like warranty uncertainty and pricing downturns are factored in. He also asked if Ford expects to be compliant with European CO2 regulations next year.

Answer

CFO John Lawler defended the payout ratio, confirming Ford considers prospective risks but sees no reason to change the policy, citing the prudence of holding cash. CEO Jim Farley added that maintaining strategic optionality for Ford Pro services is also a key consideration. Farley affirmed that Ford expects to be compliant with European CO2 regulations.

Joseph Spak asked if commercial recoveries from automakers for canceled programs or lower volumes are factored into Aptiv's 2026 outlook.

Answer

Kevin Clark, Aptiv's CEO, confirmed that discussions regarding commercial recoveries, particularly for larger EV programs in North America, are ongoing and their resolution is factored into the 2026 outlook, not as an upside. He noted a strong agreement from OEMs to support the supply base. Spak also inquired about copper's impact on VersaGen's top-line growth, FX for each company, and sensitivity to the Mexican Peso. Varun Laroyia, Aptiv's CFO, stated that copper is budgeted at $5.50 per pound for VersaGen in 2026 (vs. $4.51 in 2025), contributing close to $200 million to top-line revenue, though adjusted growth excludes this. Kevin Clark added that roughly 70% of copper sales are indexed, with price increases passed on to customers typically with a three-month delay. Laroyia explained that the weakening US dollar and lack of an operational hedge, primarily for VersaGen, negatively impact the peso. He noted that while 2025 saw significant volatility (from 21 to sub-18 to the US dollar), Aptiv is 95% hedged below 18 for 2026, which lessens the impact.

Joseph Spak from UBS sought clarification on the nature of the Q2 demand pull-forward, the reason for the significant margin step-up from Q3 to Q4, and the dynamics of winning business with local Chinese OEMs.

Answer

CEO Kevin P. Clark explained the demand pull-forward was likely a mix of both consumer vehicle purchases and OEM production scheduling. He attributed the Q4 margin improvement to the timing of cost-saving benefits and traditional back-end loaded engineering recoveries. Regarding China, he noted the rapid 6-9 month award-to-launch cycle and the strength of Aptiv's localized operations.

Joseph Spak asked for clarification on the full-year outlook, questioning if the second-half uncertainty is purely volume-related rather than tariff impact, and what markers Aptiv is watching. He also inquired about the potential relocation of high-value production to the U.S., asking what product types this might involve and the potential capital costs.

Answer

CEO Kevin P. Clark confirmed that the company has a handle on the direct impact of tariffs, which they consider manageable and will pass on to customers. He stated the second-half uncertainty is entirely about vehicle production volumes, which hinge on consumer demand and OEM pricing. Regarding U.S. production, Clark noted it is early but would involve highly automatable products from the ASUX or ECG segments, not wire harnesses, likely leveraging existing U.S. footprint initially.

Joseph Spak asked about other areas of conservatism in the 2025 outlook beyond North American production and questioned the company's contingency planning for potential tariffs and its coordination with OEMs.

Answer

CEO Kevin P. Clark identified a more conservative outlook for EV growth (guiding 10%+ revenue vs. a 20% market forecast) as another area of caution. He stated that North American growth over market is driven by new program launches and schedule normalization. On tariffs, he confirmed strong coordination with OEMs, including near-term plans for inventory deployment and leveraging duplicate manufacturing capabilities to mitigate potential disruption.

Joseph Spak asked for clarification on the Signal and Power Solutions (SPS) segment's sequential margin decline, attributing it to labor intensity, and questioned the reasons behind the lowered full-year bookings forecast.

Answer

CEO Kevin P. Clark explained the margin pressure was due to idle labor from sudden and severe customer production cuts, stating they have now proactively reduced capacity. Regarding bookings, he noted that while the pipeline is strong, some large program award decisions in North America and Europe have been prudently delayed into early 2025.

Joseph Spak questioned the expected annualized growth rate for the Vox business and how that translates to core Gentex growth, asking if it would be flattish or slightly down. He also inquired about the drivers behind the year-over-year increase in operating expenses, beyond the additional quarter of Vox. Lastly, Spak requested an update on the European decontenting trends observed in previous quarters.

Answer

Kevin Nash, VP of Finance and CFO, stated that Vox is expected to grow about 5% on a full run-rate annualized basis for 2026. He clarified that core Gentex is projected to be up about 2-3%, outperforming the primary markets which are expected to be down 2%. Nash also explained that the OpEx increase is primarily due to the additional quarter of Vox, with core Gentex operating expenses remaining largely flat year-over-year. Steve Downing, President and CEO, noted that while some European decontenting (primarily passenger side auto-dimming mirror elimination) continues, the revenue in Q4 actually reversed previous trends, suggesting some anomaly in Q3 shutdowns.

Joseph Spak asked about the expected annualized growth for the Vox business beyond the additional quarter of consolidation. He also sought clarification on whether core Gentex growth is projected to be flat or slightly down, and inquired about other factors contributing to the year-over-year increase in operating expenses besides the Vox acquisition. Finally, he requested an update on the European decontenting trends observed among customers.

Answer

Kevin Nash, VP of Finance and CFO, stated that Vox is expected to be about a 5% grower on a full run rate basis for 2026. He clarified that core Gentex is projected to be up about 2-3% against a 2% decline in primary market production. For operating expenses, Kevin Nash confirmed that the increase is primarily due to the additional quarter of Vox, with core Gentex operating expenses remaining largely flat year-over-year. Regarding European decontenting, he noted that while some decontenting (primarily passenger side auto-dimming mirror elimination) continues, the revenue in the quarter actually reversed, suggesting some anomaly in Q3 shutdowns.

Joseph Spak inquired about the European market pressures, specifically if decontenting on higher-end vehicles to lower costs is occurring alongside the shift to smaller segments. He also asked for clarification on the implied fourth-quarter gross margin step-down, considering seasonal factors and potential tariff impacts. Additionally, he sought an update on Full Display Mirror (FDM) sales, particularly in light of lower EV demand, and preliminary views for 2026.

Answer

President and CEO Steve Downing confirmed that both decontenting on higher-end vehicles and a shift in vehicle mix are contributing to European market pressures. Regarding Q4 gross margin, he attributed the step-down primarily to a higher percentage of VOXX revenue and seasonally lower sales levels around the holidays, not structural cost changes. COO and CTO Neil Boehm reported strong FDM growth in Q3 and Q4, with 2025 unit sales expected to exceed 2024 by 200,000 to 300,000 units, and anticipated continued growth into 2026, with formal guidance to follow Q4 results. Director of Investor Relations Josh O'Berski reiterated that formal guidance for next year would be provided after the fourth quarter.

Joseph Spak of UBS Group AG inquired about the future operating expense run rate for the newly acquired VOXX business, plans for its audio product sourcing amid tariff changes, and whether Q2 results for the core business included any pull-forward of production from the second half of the year.

Answer

President & CEO Steve Downing stated that VOXX's OpEx as a percentage of sales should move closer to Gentex's levels over the next couple of years through synergies and ERP integration. He noted that the VOXX audio teams have already been proactively moving manufacturing out of China, with most transitions expected within 12 months. He also clarified that while there was some production pull-forward in Q2, it was not significant.

Joseph Spak sought more clarity on the specific tariffs assumed in the guidance, requesting the dollar figure for the COGS impact. He also asked about the operating expenses and demand elasticity for VOXX products facing price increases, and whether Gentex's internal production forecasts differ from the S&P outlook.

Answer

President and CEO Steve Downing estimated the incremental COGS impact from tariffs to be around $50 million for the year, which is assumed to be reimbursed by customers, leading to the 50 basis point margin decline. CFO Kevin Nash noted that VOXX's public company operating expenses will see synergies and that competitors face similar supply chain issues, potentially mitigating demand elasticity issues from price hikes. Downing added that Gentex is slightly more negative than the latest S&P forecast, particularly regarding the impact of vehicle price increases on content and trim packages.

Joseph Spak questioned the assumptions behind the 2025-2026 guidance, particularly the slowing content growth, and asked for the forecasted Full Display Mirror (FDM) unit growth. He also sought clarification on the math behind the 7% revenue outgrowth guidance for 2025.

Answer

CEO Steve Downing explained that headwinds in base mirror shipments are being offset by growth in advanced features, and he forecasted approximately 300,000 units of FDM growth in 2025. CFO Kevin Nash clarified the 7% outgrowth is relative to Gentex's primary markets (NA, Europe, Japan/Korea), which are forecast to decline by over 2%.

Joseph Spak sought to confirm that Gentex's Q4 and 2025 forecasts include a conservative adjustment to official S&P production numbers. He also asked for the drivers behind the implied sequential gross margin improvement in Q4 on potentially flat sales.

Answer

President and CEO Steve Downing confirmed that the company's forecast for Q4 is more conservative than published data, reflecting risks seen in Q3. He explained the expected Q4 margin improvement is due to an anticipated easing of the unfavorable product mix issues that were a headwind in Q3, though he cautioned it would not reach the level of Q4 last year.

Joseph Spak inquired about the impact of memory supply issues (pricing, availability) on Mobileye's customers and potential risks to volume or decontenting, and then asked about the effect of the Israeli shekel's appreciation on the cost base, given Mobileye's hedging strategy.

Answer

Nimrod Nehushtan (EVP of Business Development and Strategy, Mobileye) stated that Mobileye's exposure to memory issues is indirect, but they are actively working with multiple vendors to maximize supply and mitigate cost impacts, with conservative forecasts baking in some volatility. Moran Shemesh (CFO, Mobileye) explained that while hedging plans met 2025 OpEx expectations, the continued 10-12% shekel appreciation in 2026 means that although over 50% of payroll is hedged at favorable rates, further hedging will be less favorable, resulting in a significant year-on-year impact factored into guidance.

Joseph Spak inquired about the impact of memory supply chain issues on Mobileye's customers, specifically regarding pricing, availability, volume risk, and decontenting. He also asked for an update on Mobileye's hedging strategy given the appreciation of the Israeli shekel and why it's a greater concern now than a year ago.

Answer

Nimrod Nehushtan, EVP of Business Development and Strategy, stated that Mobileye's exposure to memory issues is indirect through Tier 1 customers. He noted active efforts to maximize supply and work with multiple vendors to mitigate cost impacts, and that the current forecast is conservative, with no direct evidence of imminent volume changes. Moran Shemesh, CFO, explained that while 2025 OpEx expectations were met due to hedging, the continued 10-12% appreciation of the shekel in the last year means that despite being over 50% hedged for 2026 payroll at favorable rates, the risk is heavier over longer durations, impacting the current guidance.

Joseph Spak requested more details on the DRIVE Robotaxi commercial deployment plan, including the first city and the nature of the partner relationship, and asked if Mobileye would consider making a strategic investment in a partner's autonomous vehicle unit.

Answer

CEO Amnon Shashua revealed the first driver-out deployment is planned for a US city in mid-2026, leveraging a unique, scalable teleoperations design. He described the cooperation with Volkswagen's ADMT division as very tight. On strategic investments, he called a potential partner stake offering a "very good development" and confirmed Mobileye would "seriously consider also participating as an investor."

Joseph Spak inquired about the business model for the new Volkswagen-Uber robotaxi partnership and questioned whether the strong Q2 unit outlook was due to customers ordering ahead of potential uncertainty.

Answer

CEO Amnon Shashua detailed the robotaxi model, which includes a one-time payment per vehicle for the self-driving system and a recurring license fee based on fleet utilization. CFO Moran Rojansky addressed the Q2 outlook, stating that order levels have been stable since February and are consistent with recent quarters, indicating no significant inventory build-up by customers.

Joseph Spak of UBS questioned whether price is a point of pushback in OEM negotiations and if recent AI developments cause Mobileye to re-evaluate its technology strategy or lower the barrier to entry for competitors.

Answer

CEO Amnon Shashua and EVP Nimrod Nehushtan asserted that price is not a significant impediment and they have not lost programs due to it. On AI, Shashua explained that recent developments align with Mobileye's long-standing focus on purpose-built efficiency, highlighting their own advanced transformer architectures and silicon design. He does not believe open-source models significantly lower the entry barrier for the complexities of autonomous driving.

Joseph Spak asked if Rivian would consider offering an eRev (extended-range electric vehicle) for the U.S. or global market, citing demand for such products from competitors like Scout Motors and BYD, and inquired about the ease of platform adjustment. He also sought clarification on Mind Robotics' spend, specifically if it's ring-fenced in the external company.

Answer

RJ Scaringe, CEO, stated that Rivian is not planning to offer an eRev or series hybrid, remaining focused on a pure EV approach. He believes the midsize SUV segment (R2, R3) works well with a fully electric architecture, offering comparable performance and price to ICE or hybrid alternatives. He clarified that Mind Robotics is a separate company, with Rivian as a shareholder, and its $110 million seed financing is from outside Rivian, confirming the spend is ring-fenced.

Joseph Spak asked if Rivian would consider offering an eRev (series hybrid) variant for the U.S. or global market, given market demand and potential benefits for trucks, and how easily the platform could be adjusted. He also sought clarification on Mind Robotics' spend, specifically if there was past spend, future spend, or if it's entirely ring-fenced.

Answer

CEO RJ Scaringe stated Rivian is not planning to offer an eRev or series hybrid, remaining focused on a pure EV approach. He believes the midsize SUV segment (R2, R3) is well-suited for a fully electric architecture. RJ Scaringe clarified that Mind Robotics is a separate company, with Rivian as a shareholder, and the $110 million seed financing is from outside Rivian, with its focus on AI-enabled robotics for industrial applications.

Joseph Spak sought clarification on policy-related headwinds, asking what specifically worsened on tariffs and how much regulatory credit revenue was baked into the 2027 EBITDA target. He also asked at what utilization level the Normal, IL plant needs to be before commissioning the Georgia plant.

Answer

CFO Claire McDonough clarified that the tariff impact outlook has not changed from the prior quarter; the new headwind is entirely from a reduced regulatory credit forecast. She declined to quantify the original 2027 credit assumption. CEO RJ Scaringe stated that construction on the Georgia facility is planned to begin in early 2026, positioning it to support R2 platform variants and overall capacity expansion.

Joseph Spak asked for an explanation of the significant quarter-over-quarter decline in depreciation and amortization within COGS and how to forecast it. He also questioned if Q1's overproduction would minimize the full-year tariff impact and how the current tariff estimate compares to the previously guided "several hundred million" policy impact.

Answer

CFO Claire McDonough explained that the lower COGS depreciation was due to producing more vehicles than delivered, causing more depreciation to be absorbed into inventory on the balance sheet. She noted depreciation will pick up with the R2 launch. She also clarified that the "several hundred million" impact was a broader basket including tariffs, consumer benefits, and credits, and that the Q1 inventory build will help offset some tariff impacts in later quarters.

Joseph Spak sought clarity on the 2025 positive gross profit target, the timing of regulatory credit revenue recognition, and the rationale for increasing van production in Q4.

Answer

CFO Claire McDonough clarified the target is for a positive gross profit for the full-year 2025, not every quarter, and confirmed credit revenue is recognized upon transfer to the counterparty. She explained that van and Tri-Motor production is increasing in Q4 to maximize output, as these variants only require one Enduro motor, thus mitigating the ongoing supply constraint.

Joseph Spak followed up on the investment required for automation and the timeline for realizing savings. He also asked for clarification on EV charges taken in Q3 2025 and whether their recovery is included in Q4 guidance.

Answer

Senior Vice President and CFO Timothy Kraus explained that capital previously spent on EV will be redeployed to basic automation in ICE plants, with a deliberate and accelerated focus on efficiency improvements. Chairman and CEO Bruce McDonald added that these are short-payback investments. Mr. Kraus confirmed that approximately $8-10 million in charges related to EV program cancellations were booked in Q3 2025 and are expected to be recovered in Q4, with the recovery included in the adjusted EBITDA number.

Joseph Spak of UBS Group AG inquired about the 2025 guidance, asking if the initial assumptions for 'New Dana' versus the off-highway business have materially changed given tariff impacts, cost savings, and market shifts. He also questioned if market uncertainty has affected the off-highway divestiture process.

Answer

SVP and CFO Timothy Kraus explained that lower commercial vehicle forecasts are being offset by strength in light vehicle, some pre-buy in off-highway, and anticipated tariff recoveries. Chairman and CEO R. McDonald added that 'New Dana' margins are up year-over-year, keeping the company on track for its 2026 targets. Regarding the divestiture, McDonald noted that tariff uncertainty has extended bidder due diligence, likely pushing a resolution to late in the second quarter.

Representing Joseph Spak of UBS, an analyst asked for a more detailed split of the non-off-highway backlog between the Light Vehicle and Commercial Vehicle segments. He also requested more color on the expected market weakness in Q2.

Answer

CEO R. McDonald explained that the Commercial Vehicle business has very little backlog as it is primarily a catalog-based business, meaning the vast majority of the non-off-highway backlog is in Light Vehicle. He added that while Q2 weakness won't be as severe as Q1, some softness will persist across end markets before a recovery begins in the second half of the year.

Joseph Spak asked for more detailed commentary on the implied Q4 2025 guidance, noting it appeared softer than expectations, and sought clarification on the organic end market. He also questioned the lower Q4 contribution from the SEM acquisition compared to Q3, asking if it reflected seasonality or softer demand, and if $7-8 million is a good run rate for 2026. Additionally, Spak inquired about the low flow-through to EBIT from the fuel systems segment's volume mix and the growing opportunity in the power generation business.

Answer

CEO Brady Ericson attributed the Q4 outlook to a return to normal seasonality, with Q1 and Q4 typically being lighter, and current market uncertainties. He noted SEM's second half seasonality is lighter, compounded by CV market softness and initial integration costs, but expressed confidence in SEM's recovery in 2026. CFO Chris Gropp added that units are being cautious due to various market issues. Gropp explained the low EBIT flow-through in fuel systems was partly due to zero-margin ECU sales from BorgWarner and improved productivity offsetting lower contribution margins. Ericson confirmed that power generation, including linear generators for hydrogen and EV range extenders, is a growing industrial adjacency, with plans for more detailed disclosure next year.

Joseph Spak of UBS Group sought clarification on the tariff figures, asking to reconcile tariff recoveries with the net tariff cost mentioned in the presentation. He also pressed for more details on the Ford fuel pump issue, inquiring about any changes to financial accruals or disclosures and the status of discussions with Ford.

Answer

CFO Chris Gropp clarified the tariff impact, stating there was a $9 million recovery against $11 million in costs, resulting in a net negative impact of $2 million for the quarter. She also distinguished this from the separate $6 million in supplier cost savings. President & CEO Brady Ericson added that regarding the Ford issue, there have been no changes to PHINIA's disclosures or accruals and that discussions with Ford are ongoing as a final solution has not yet been announced.

Joseph Spak requested quantification of the moving parts within the reaffirmed guidance, such as FX benefits versus softer end markets, and asked where the company is trending within its guidance range. He also inquired how market uncertainty is affecting the M&A strategy.

Answer

CEO Brady Ericson quantified that the FX headwind in the original guide was reduced from approximately $80 million to around $20 million, which is offset by an expected $50 million in tariff pass-through pricing and softer CV volumes. He stated the company is still trending solidly in the midrange of its guide. CFO Chris Gropp added that Q1 is seasonally the weakest quarter, with performance expected to improve. Regarding M&A, Brady Ericson affirmed the company's strong cash position and focus on smaller, cash-flowing, tuck-in acquisitions, which are always evaluated against share repurchases.

Representing Joseph Spak of UBS, an analyst asked about PHINIA's capital allocation plans for its excess cash, the M&A outlook, current GDi market penetration, and the content uplift associated with new 500-bar systems.

Answer

CEO Brady Ericson stated that the strong cash position prompted increased share buybacks and that the company remains disciplined in its M&A search for accretive assets in CV, industrial, and aftermarket. He noted GDi penetration is around 60-65% and PHINIA's mid-teens market share is growing, aided by 500-bar systems that offer significant customer value with minimal content increase, as they are a drop-in replacement.

Joseph Spak followed up on BMS, asking for clarification on its expected impact as a revenue headwind in 2026 and whether Visteon anticipates receiving recovery payments for BMS shortfalls. He then asked CEO Sachin Lawande about customer perspectives on AI adoption by region, Visteon's strategic positioning in the 'intelligence era,' and the expected timeframe for these technology changes, especially given some OEMs' historical slowness.

Answer

CEO Sachin Lawande confirmed anticipated recoveries for BMS shortfalls, with some already reflected in pricing, and estimated a conservative 20% decline in BMS revenue for 2026 compared to 2025. Regarding AI, CEO Sachin Lawande explained that China is leading with end-to-end ADAS and AI-driven smart assistants (e.g., Zeekr, Chery SmartCore HPC launches next year using Cognito AI and DeepSeek models), while Europe views AI as an accelerator for existing cockpit systems. Visteon is developing solutions for both Qualcomm and NVIDIA architectures to capitalize on this trend.

Joseph Spak of UBS Group followed up on the BMS discussion, asking if the current sales run-rate represents a floor and about the potential for restructuring the business. He also inquired if increased OEM investment in U.S. manufacturing could accelerate or expand Visteon's opportunities with newly won customers like Toyota.

Answer

President and CEO Sachin Lawande stated that Visteon is expanding its electrification offering beyond BMS to include more power electronics to increase content per vehicle. He suggested the current BMS sales level could be a floor, as more affordable EV models launch. Regarding U.S. manufacturing, he confirmed that the trend of regionalizing supply chains is a significant benefit for Visteon, especially given its investments in vertical integration in North America, which enhances its position with customers increasing their U.S. footprint.

Joseph Spak requested clarification on the financial assumptions in a scenario where Visteon hits the low end of its guidance, particularly regarding tariff cost recovery. He also asked about the export destinations for products made in China.

Answer

CFO Jerome Rouquet confirmed the scenario's math, which assumes a further 3% decline in customer production, a 25% decremental margin, and 100% recovery of direct tariff costs. CEO Sachin Lawande added that very little of what Visteon produces in China is exported to the U.S., with some content for Nissan vehicles being a minor example.

Joseph Spak inquired about Visteon's Q4 customer production outlook, contrasting it with more negative forecasts from other suppliers, and asked how the accelerating pace of hardware innovation, such as new AI-capable chips, is impacting customer conversations and future sourcing decisions.

Answer

CEO Sachin Lawande stated that Visteon's Q4 outlook is based on diligently checked direct customer orders and is bolstered by numerous new product launches, which drive market outperformance despite softness in Europe. Regarding hardware, he explained that high-cost AI-capable silicon is segmenting the market, creating distinct opportunities in both premium and mass-market vehicles, which Visteon is positioned to serve with its broad, vertically-integrated product portfolio.

Joseph Spak inquired about potential structural differences between Amphenol's segments that might impact incremental margins, noting that the Communications Solutions and Harsh Environment Solutions segments had similar incrementals despite vastly different growth rates. He also asked if anything prevents the Interconnect and Sensor Systems segment from achieving 30%+ incrementals with faster growth.

Answer

CFO Craig Lampo stated there are no structural limitations preventing any segment from expanding margins. He acknowledged that the significant growth in the Communications Solutions (ACS) segment might require some cost additions, but these are modest. He highlighted the Interconnect and Sensor Systems (AISS) segment's strong performance, achieving 20% operating margins and approximately 30% sequential conversion margin, confirming its potential for continued margin expansion and contribution to the company's long-term 30% conversion target.

Joseph Spak from UBS Group sought to clarify the dynamic in AI, asking why outperforming customer demand would lead to sequential softness in Q3 if customers are willing to take all available supply, suggesting it might be a period of digestion.

Answer

President & CEO R. Adam Norwitt reiterated that Q3 is not an 'air pocket' and underlying demand remains robust. He explained the moderation is a timing issue, as customers need to align all necessary components for their system builds, and Amphenol's outperformance in Q2 simply got them 'a little bit ahead' in certain product areas.

Joseph Spak of UBS asked for an update on the Industrial business, specifically seeking signs of "green shoots" in the lagging European market and any changes in order patterns in North America or Asia due to new tariff policies.

Answer

CEO Adam Norwitt noted that while the Industrial segment's 6% organic growth was still driven by North America and Asia, Europe's rate of decline has lessened significantly and showed sequential growth. He described this as a potential "green shoot" or a "daffodil or two." He also confirmed a positive book-to-bill in Industrial, suggesting strengthening demand.

Joseph Spak asked about the significant margin expansion in the Communication Solutions segment, questioning its sustainability and whether the growing AI mix would continue to drive margins higher or if investments would temper them.

Answer

CEO R. Norwitt attributed the segment's strong profitability to excellent operational execution and strong conversion on high sales growth, rather than the AI mix specifically. He explained that the division's ability to control fixed costs while growing significantly drove strong operating leverage, resulting in a conversion margin in the low 30s, which is not abnormal for that level of growth and is typical of Amphenol's disciplined approach.

Joseph Spak asked two questions: whether the aerospace guidance accounted for recent labor strikes, and for an update on the 'industrial green shoots' mentioned last quarter, including any impact from China's stimulus.

Answer

CEO R. Norwitt confirmed that aerospace guidance incorporates all available customer information. On the industrial market, he noted that while North America and Asia saw organic growth, the outlook for Europe has become more muted than a quarter ago, partially tied to weakness in the European automotive market.

Joseph Spak asked about the updated tariff disclosure, specifically the MSRP offsets and expanded parts eligibility, inquiring how this impacts the 2026 tailwind. He also asked for preliminary high-level industry and macro factors for 2026, including consumer and credit concerns, and competitive dynamics in the pickup segment.

Answer

Paul Jacobson, GM's Executive Vice President and CFO, clarified that the President's announcement expanded the MSRP tariff offset and eligible parts, driving savings. He stated that while 2026 guidance isn't specific, net tariff exposure is expected to be lower. He deferred on 2026 macro factors, noting it's too early to speculate but highlighted internal levers for better performance.

Joseph Spak asked for clarification on the updated tariff disclosure, specifically regarding the MSRP offsets, expanded parts eligibility, and how these changes would impact the flow-through of savings. He also inquired about preliminary high-level industry and macro factors for 2026, including consumer and credit concerns, and competitive dynamics in the pickup segment.

Answer

Paul Jacobson, GM's Executive Vice President and CFO, explained that the President's announcement included lengthening the MSRP tariff offset and expanding the pool of eligible parts, which drives savings for parts imported for U.S. production. He noted that while no specific 2026 guidance was available, net tariff exposure could be lower. Regarding 2026 macro factors, Mr. Jacobson stated it was too early to speculate but highlighted GM's internal tools for cost reduction and performance improvement.

Joseph Spak from UBS Group asked for clarification on why the largest tariff headwind shifted from Q2 to Q3 and inquired about the expected expense for regulatory credits in 2025 and beyond.

Answer

EVP & CFO Paul Jacobson explained the shift was due to the timing of certain indirect tariff costs hitting later than initially estimated, though the full-year impact remains on track. Regarding regulatory credits, he stated that changes from recent legislation will result in a wash for 2025 with no material adjustments, but he expects a lower compliance expense rate in the future. Chairman & CEO Mary Barra added this allows GM to sell profitable ICE vehicles for longer.

Joseph Spak of UBS sought clarification on the updated guidance, asking for a breakdown of the tariff impact versus self-help mitigations and whether the improved pricing outlook was included in the offset calculation. He also questioned GM's strategy on future pricing actions given potential competitor moves.

Answer

EVP and CFO Paul Jacobson clarified that the $4-5 billion tariff impact is the gross figure, which is then reduced by the 30% self-help initiatives to arrive at the new guidance range. He stated that the improved pricing outlook seen year-to-date has been offset by other pressures like warranty and FX, and the company is not banking on further price increases. Jacobson reiterated that GM's disciplined go-to-market strategy has successfully grown market share without chasing volume through heavy incentives, and they plan to maintain this approach.

Joseph Spak asked about Q4 pricing dynamics, noting the slight year-over-year headwind despite strong ATPs, and inquired if the 2025 pricing decline assumption includes EVs. He also questioned the flexibility of GM's manufacturing footprint to mitigate potential tariffs by shifting production, particularly for full-size trucks.

Answer

EVP and CFO Paul Jacobson clarified that the 1-1.5% pricing decline for 2025 is a prudent planning assumption, not what GM is currently observing. Chair and CEO Mary Barra stated that GM has studied multiple tariff scenarios and has the capacity in the U.S. to shift some truck production from Mexico and Canada, along with other levers to minimize impact.

Joseph Spak of UBS Group AG asked for clarification on the Q3 warranty cost adjustment, questioning if it was a one-time reserve or an ongoing rate change, and inquired about the unwinding of EV-related inventory costs.

Answer

EVP and CFO Paul Jacobson explained the $700 million warranty adjustment was driven by both inflationary pressures on parts and labor and specific prior-year quality issues that have since been fixed in production. Regarding the EV inventory unwind, he noted the lower of cost or market adjustment is a function of inventory levels and improving profitability, expecting it to slow but potentially be a tailwind next year.

Joseph Spak of UBS Group AG inquired about the production cadence for GM's T1 platform in the second half of the year, considering announced downtime, and the potential impact of GM onshoring T1 capacity for AAM, including opportunities from the Dolly acquisition.

Answer

EVP & CFO Christopher May confirmed the full-year T1 production assumption of 1.3 to 1.4 million units, noting a strong first half and that the second half would follow normal seasonality with some minor Q3 downtime. Chairman & CEO David Dauch added that AAM has the flexibility to support GM's production shifts to the U.S. and expects the Dolly acquisition to provide even more flexibility and potential content gains on the T1XX programs.

Joseph Spak of UBS Group AG inquired about the production cadence for GM's T1 platform in the second half of 2025 and the potential impact of GM onshoring T1 capacity to the U.S., including content opportunities for AAM post-Dallee acquisition.

Answer

CFO Christopher May confirmed the full-year T1 production forecast of 1.3 to 1.4 million units, noting a normal second-half cadence despite minor Q3 downtime. CEO David Dauch affirmed AAM's flexibility to support GM's U.S. production shift and stated the Dallee acquisition will enhance this flexibility and create opportunities for content gains on the T1XX platform.

Joseph Spak inquired about American Axle's strategy for future contingencies, including its excess capacity in the U.S., plant utilization rates, potential labor challenges, and the tariff exposure for its pending acquisition target, Dowlais.

Answer

Chairman and CEO David Dauch confirmed AAM has open capacity in its Three Rivers facility and others, with a general goal of 85% utilization but maintaining flexibility. He noted the labor situation has improved but may require more automation if jobs return to the U.S. EVP and CFO Chris May added that Dowlais has a similar manufacturing footprint to AAM, and the combined entity would have greater scale to navigate tariff issues, though he could not comment on Dowlais' specific stand-alone exposure.

Joseph Spak inquired about the new business backlog, asking how the dynamic of fewer large awards but more program extensions might affect net business attrition compared to prior years. He also asked for a reminder of how steel tariffs impacted AAM in the past and what mitigations are in place.

Answer

CEO David Dauch stated that annual attrition is expected to be on the lower end of the typical $100M-$200M range and that program extensions, while positive, are not included in the new business backlog but would reduce attrition. CFO Chris May explained that AAM's 'buy and source local' strategy, combined with contractual commodity pass-throughs covering 80-90% of changes, largely mitigates tariff impacts.

Joseph Spak from UBS Group sought clarification on the financial details of the CarOffer wind-down, including the breakdown of cash versus non-cash charges and the nature of the $1 million in quarterly costs being absorbed. He also asked for an updated perspective on Amazon's competitive threat following its expansion into used cars.

Answer

CEO Jason Trevisan detailed the $14-19 million in wind-down charges, breaking them into one-time restructuring costs, near-term operational burn, and non-cash charges, confirming the absorbed $1 million quarterly expense is recurring. Regarding Amazon, both Trevisan and President and COO Sam Zales reiterated their confidence in CarGurus' competitive moats, such as dealer trust, data advantages, and a superior user experience for a complex, emotional purchase. Zales added that dealer feedback on Amazon's initiative indicates low volume so far.

Zachary Walljasper, on behalf of Joseph Spak, asked about the mechanics of CarGurus' pricing model, particularly with longer-term contracts, and requested an assessment of consumer health and dealer activity versus 90 days prior.

Answer

President and COO Sam Zales explained that pricing is based on value delivered (lead volume and quality), not seasonality, giving them leverage due to their #1 ROI ranking. He noted QARSD grows via new dealer pricing and annual reviews of existing accounts. Zales described the Q3 used car market as stronger than typical but noted that dealers rely on CarGurus most in weaker periods, like a typical Q4.

Joseph Spak of UBS Group asked for clarity on the revenue cadence for the second half of the year, sought details on whether OEM growth is a near-term or long-term tailwind, and requested management's view on Amazon's increasing presence in the used car market.

Answer

CFO Sonia Jain clarified that revenue growth will accelerate into Q4, as the benefits of repackaging and new dealer additions fully accumulate. She also confirmed OEM revenue is expected to be a tailwind in the second half of 2025, not just a 2026 story. CEO Alex Vetter acknowledged Amazon as a potential threat but emphasized Cars.com's deep vertical integration and strong brand as durable advantages, noting that dealer feedback suggests Amazon has gained little traction so far.

Joseph Spak questioned the company's near-term visibility and decision to suspend guidance, given that the majority of revenue is subscription-based. He also asked if it was plausible for OEM and National revenue to decline for the full year and requested a reminder of the revenue split between new versus used cars.

Answer

CFO Sonia Jain explained that while the subscription business is stable, discrete shifts in the more volatile media and OEM revenue can significantly impact overall results, reducing certainty for a specific guidance range. She affirmed confidence in achieving year-over-year growth in both dealer and OEM revenue. CEO Alex Vetter stated that while not broken out, revenue mix mirrors the market, with 15-20% tied to new cars. Jain added that independent dealers constitute about one-third of the marketplace mix.

Joseph Spak questioned the cadence of the 2025 margin guidance, asking why Q1 margins are guided to be significantly lower before ramping up through the year. He also requested an update on dealer adoption of AI solutions beyond chatbots and the company's annual investment in AI.

Answer

CFO Sonia Jain attributed the lower Q1 margin guidance to the Q4 dealer revenue exit rate and significant investment in the DealerClub integration, with margins expected to ramp seasonally as back-half weighted growth initiatives take hold. CEO Alex Vetter discussed AI pilots that have lifted dealer appointment rates by 20% by handling lead volume, but stated it was difficult to quantify a dedicated AI investment as the goal is to embed AI pervasively across the business.

Joseph Spak's office asked about the business impact from recent hurricanes, AccuTrade adoption trends, and any changes in dealer sentiment toward adding services amid higher inventories.

Answer

CEO Alex Vetter stated that while hurricanes caused a temporary regional dip in traffic, it was followed by a record rebound in demand. He noted a durable trend of dealers prioritizing sourcing cars from private sellers for higher profitability, which is driving strong interest and adoption of AccuTrade regardless of overall inventory levels.

Joseph Spak of UBS Group AG inquired about the specifics of Adient's onshoring business wins, the net opportunity from the potential 600,000 units returning to the U.S., and whether the company's strong business performance would continue as a tailwind into fiscal year 2026.

Answer

Jerome Dorlak, President, CEO & Director, confirmed that the recent Nissan and other Asian OEM onshoring wins represent net new incremental revenue of $150-200 million. He clarified the 600,000-unit opportunity is business Adient does not currently have, positioning the company as a net beneficiary. Mark Oswald, EVP & CFO, added that positive business performance is expected to be a tailwind into 2026, with overall production volumes being the primary variable.

Joseph Spak of UBS Group AG inquired about Adient's tariff mitigation efforts, seeking clarity on the difference between the 75% 'resolved' and 25% 'roadmap' portions, and asked about the drivers of EMEA's strong quarterly performance.

Answer

President and CEO Jerome Dorlack explained that the 'roadmap' for tariff mitigation involves a mix of ongoing price negotiations and component resourcing actions. EVP and CFO Mark Oswald noted that EMEA's strong Q2 performance was lumpy and not indicative of a new trend, with the region's profitability expected to remain similar to last year until a significant inflection in fiscal 2026.

Joseph Spak of UBS sought clarification on the timing and savings of European restructuring charges and asked about the strategic plan for unconsolidated joint ventures in China, particularly as Chinese OEMs expand globally.

Answer

Mark Oswald, EVP and CFO, clarified that the potential $145 million in restructuring is a multi-year possibility, not a fiscal 2025 charge. Jerome Dorlack, President and CEO, stated that future growth in China and with localizing Chinese OEMs will be driven by Adient's wholly-owned and consolidated entities, not the unconsolidated JVs. He affirmed that the unconsolidated JVs remain valuable assets that provide significant equity income and strategic insights into key customers like BYD.

Joseph Spak of UBS sought clarification on the net performance contribution, asking to confirm the first-half dollar amount and whether the $25 million guidance increase was already realized or slated for the second half. He also asked if the new Ford F-150 award was a mid-cycle change or for the next generation, and requested a timeline for an updated backlog outlook, noting recent sourcing delays.

Answer

CFO Jason Cardew confirmed the first-half performance and stated the increased guidance is primarily driven by restructuring savings expected in the second half. CEO Ray Scott specified the Ford award is for the next-generation truck. He noted that while some sourcing decisions are delayed, E-Systems has already secured nearly $1 billion in new business this year, and a comprehensive backlog update is likely in the third or fourth quarter.

Joseph Spak from UBS inquired about recent changes to OEM production schedules and the rationale behind Lear's decision to withdraw its full-year guidance. He also asked about mitigating the direct tariff impact, particularly concerning the significant exposure from wire harnesses produced in Honduras.

Answer

CFO Jason Cardew explained the guidance withdrawal was due to significant uncertainty around consumer response to price hikes, OEM reactions regarding market share vs. margins, and evolving trade policies, which created too wide a range to be useful for investors. CEO Raymond Scott and CFO Jason Cardew addressed the Honduras tariff exposure, noting they are pursuing 100% cost recovery from customers and exploring options like changing the importer of record. Cardew estimated the gross tariff cost at ~$200 million, with half from Honduras, but expects the 25% tariff rate on wire harnesses to be adjusted lower.

Joseph Spak from UBS sought clarification on several items in the financial walk, including the 'wind-down' of certain product lines, a recent divestiture, and the 'other' category. He also asked about cash allocation for potential China JV consolidation and automation investments.

Answer

CFO Jason Cardew explained the 'wind-down' refers to exited electronics businesses like lighting and audio, the divestiture is a small non-automotive fabric business, and 'other' is mainly inflation pass-throughs. CEO Raymond Scott stated that automation investments will continue due to strong paybacks. Cardew added that consolidating China JVs is not expected to be a significant use of cash.

Joseph Spak from UBS inquired about the seemingly conservative fourth-quarter guidance, early indications for 2025 given slower EV uptake and delayed sourcing, and the assumptions behind the company's China growth forecast.

Answer

CFO Jason Cardew explained that the Q4 production outlook is based on specific customer schedules, noting a significant deterioration, particularly in Europe. He acknowledged that while the 2025 sourcing environment has slowed as customers rethink powertrain strategies, Lear's win rates remain consistent and its conquest pipeline is at a record level. CEO Raymond Scott added that the current environment involves more 'requests for information' (RFIs) as OEMs model different scenarios. Regarding China, Cardew stated the forecast assumes a continued, but more moderate, pace of market share shift to domestic OEMs.

Joseph Spak from UBS Group AG followed up on the sustainability of performance by asking if TE Connectivity has a new aspirational margin target for the company, given the recent strong results.

Answer

CFO Heath Mitts responded that while the company focuses on total company margin, success is measured by achieving incremental flow-through of 30% or better on organic revenue growth at the business unit level. He explained this approach will naturally lead to a gradual increase in the overall company margin over the cycle, without setting a new specific target.

Joseph Spak sought clarification on the strong Industrial segment orders, asking if the growth included the Richards acquisition and what the underlying core organic order trends were.

Answer

CEO Terrence Curtin clarified that the strong Industrial order growth was entirely organic and did not include any contribution from the Richards acquisition, which closed after the quarter ended. He emphasized that the growth was broad-based, occurring across all business units, including automation and appliances, and across all geographies.

Joseph Spak posed two margin-related questions: whether Q1 auto margins were boosted by engineering recoveries, and if the rapid growth in AI could lead to margin variability due to investment pacing.

Answer

CEO Terrence Curtin clarified that strong Q1 auto margins were not due to engineering recoveries but were a typical seasonal result of high production volumes in Asia. On the second point, he confirmed that the company has been investing ahead of AI ramps, and the lumpiness of these large programs will indeed cause some variability in the segment's margin.

Joseph Spak of UBS inquired about fiscal 2025 CapEx plans, whether free cash flow conversion could remain high, and if the company would distribute 100% of free cash flow if M&A opportunities don't materialize.

Answer

CFO Heath Mitts guided for CapEx to be roughly 5% of revenue, expecting an approximate $100 million increase in FY25 versus FY24, primarily for AI program growth. He anticipates free cash flow conversion will remain above 100%, though likely not at the 120% level of FY24 due to working capital needs in a growth environment. He implicitly confirmed a commitment to returning capital if M&A is not pursued, consistent with the company's strategy to not accumulate cash.

Joseph Spak of UBS requested clarification on the math behind the $250 million tariff impact, whether recoveries are included in revenue guidance, and why margin revisions were concentrated in the BES and Seating segments.

Answer

CEO Seetarama Kotagiri and CFO Patrick McCann explained the tariff math includes government remissions and varying tariff rates. McCann stated the outlook assumes a zero EBIT impact from tariffs, with recoveries treated as cost offsets, not revenue. He specified that margin revisions were driven by volume declines from announced OEM shutdowns, which disproportionately affect the BES and Seating segments.

Joseph Spak asked for clarification on 2025 free cash flow components and tariff assumptions. His main question focused on Magna's portfolio strategy, asking if the company is a net buyer or seller of assets and if it would exit businesses to rebalance customer exposure.

Answer

CFO Patrick McCann confirmed the 2025 free cash flow walk includes headwinds from cash restructuring and working capital normalization, and that the outlook includes no tariff impacts. CEO Seetarama Kotagiri emphasized a focus on execution post-Veoneer acquisition, stating that while small tuck-ins are possible, divestitures are "not off the table." He highlighted the successful shift in China to 60% of business with domestic OEMs as an example of actively managing customer mix.

Joseph Spak from UBS asked for the specific dollar amount of the expected engineering spend reduction in the second half of 2024 and questioned whether recoveries for EV program cancellations are embedded in the 2026 forecast.

Answer

Executive Louis Tonelli declined to quantify the H2 engineering spend reduction. CEO Seetarama Kotagiri explained that recoveries for EV program changes are part of broader commercial discussions with OEMs. He noted that while some level of recovery is embedded in the outlook, these are more substantially reflected in the 2024 forecast than in the 2026 numbers.