eProduct Restructuring and Europe
Q: Why is eProduct restructuring only in North America and China?
A: The eProduct business unit is mainly in North America and China, so restructuring focuses there, but it also affects parts of Europe. The restructuring aims to ensure mid-teens conversion as PowerDrive Systems launch products globally.

Margin Outlook Amid Sales Declines
Q: How are you maintaining margins despite lower sales?
A: Despite second-half sales declining by about $200 million due to market factors and $75 million from foreign exchange, operating income at the midpoint remains unchanged. Strong first-half performance and restructuring benefits are offsetting the sales decline.

Capital Allocation and M&A Plans
Q: Will you focus on M&A or shareholder returns ahead?
A: While acquisitions were crucial in building our portfolio, we are now more stringent and prudent with M&A. We don't anticipate significant M&A in the next 2–3 quarters, thus we plan to repurchase $300 million of stock, effectively returning 100% of cash generation to shareholders.

eR&D Spending Reduction
Q: Is eR&D spending increasing less than planned?
A: Yes, initial eR&D increase was $40–50 million, but after restructuring, it's reduced to $20–30 million year-over-year. This supports future launches as our eProduct portfolio grows 25% year-over-year, adding $0.5 billion in revenue.

Battery Ramp and Performance
Q: Is the battery ramp still on track?
A: Yes, the battery business is on track. Seneca is now in production, and we're also on schedule in Europe. Battery performance contributes positively to incremental margins delivered in the first half and is significant in our full-year guidance.

End Market Outlook
Q: What's your view on end markets and production cuts?
A: We expect the market to be down 2–3% year-over-year, with the largest reductions in China, followed by North America and Europe. In China, weaker consumer demand is impacting production rates; in North America, customers are adjusting inventory levels; in Europe, there's weaker demand and backlog depletion. This is all reflected in our guidance.

Growth Over Market Slowed by EV Delays
Q: Why did growth over market come down slightly?
A: Outgrowth for Q2 was 120 basis points, impacted by eProduct revenue at the low end of our guide and a BEV program in North America that's underperforming. However, we expect full-year outgrowth around 400 basis points, which is our target.

Drivetrain and Battery Systems Margins
Q: What's driving strong margins in Drivetrain and Battery Systems?
A: Margin strength comes from both the Battery business and the foundational business, with strong growth in the quarter. We're converting extra sales and focusing on cost reductions, productivity actions, supplier savings, and restructuring.

eProduct Performance in China
Q: How is eProduct performing in China amid tariffs?
A: In China, eProducts for hybrids and BEVs are performing well, especially hybrids which are the fastest-growing segment. We are launching many new products, with 95% of our eProducts in China made with major Chinese carmakers. Impact of tariffs is too early to anticipate.

ICE Margins Amid Volume Declines
Q: Will margins decline on ICE products as volumes drop?
A: Many of our combustion products go into hybrids, making them efficient. Our products are versatile across combustion, hybrid, and BEV. We have the portfolio to outgrow and convert across all segments, so isolating ICE margins isn't representative.

Eldor Losses and Restructuring
Q: How will Eldor losses trend this year?
A: Eldor's outlook is unchanged; we are targeting $100 million in cost savings by 2026 across the total business.

Logic of Announcing Share Buybacks
Q: Why announce share buybacks ahead of buying?
A: We aim for transparency with shareholders. After being blacked out for most of Q2, we wanted to clarify our intention to allocate all free cash flow to shareholders, especially given our comments on M&A.

R&D and Capital Investment in eProducts
Q: How will R&D and capital investment in eProducts evolve?
A: We'll continue to support these programs with R&D, focusing on a 15% return on invested capital for all new programs.

Battery Systems Impact from Commercial Vehicle BEV Softening
Q: Is softening in commercial vehicle BEV affecting Battery Systems?
A: Our commercial vehicle numbers were adjusted slightly in the prior quarter. Currently, eProduct impact is mainly linked to light vehicles. We're growing eProducts 25% year-over-year from $2 billion to about $2.5 billion.

eProduct Sales in Q2
Q: What were eProduct sales in Q2?
A: Q2 eProduct sales were $576 million, up from $500 million in Q1.