Q1 2022 Dana Inc Earnings Call
We help original equipment manufacturers and end market customers achieve the best weight performance and efficiency as well as the lowest cost of ownership no matter the powertrain configurations.
Dana is off highway drive and motion systems business unit provides mobile drivetrain and motion solutions for construction agriculture material handling and mining equipment as well as motion systems for a wide variety of mobile and stationary industrial application.
These customized solutions support vehicles, the machines with both conventional and electrified power sources and are designed to deliver innovative technologies that meet customer demands and goals worldwide.
Dana's power technologies business unit provides advanced sealing and thermal management solutions to all end market in support of both conventional and electrified platforms leveraging the most cutting edge technology and manufacturing processes.
Yeah.
Good morning, and welcome to Dana Incorporated's first quarter financial webcast and conference call. My name is Duane and I will be your conference facilitator.
We advised that our meeting today, both the Speakers' remarks, and Q&A session will be recorded for replay purposes.
It will be a question answered paragon after the Speakers' remarks, and we will take questions from the telephone only.
If you would like to ask a question. During this time press Star then the number one on your telephone keypad.
To ensure that everyone has an opportunity to participate in today's Q&A, we ask that callers to limit themselves to one question at a day.
He would like to ask a question please return to the queue.
At this time I would like to begin the presentation may turning to call over to Dean as senior director.
Okay, Investor Relations and strategic planning Craig Barber. Please go ahead.
Thank you Ryan and good morning, everyone on the call. Thank you for joining us for our 2022 first quarter earnings call. You'll find this morning's press release and presentation are now posted on our Investor website. Today's call is being recorded and the supporting materials are the property of Dana incorporated they may not be recorded copied or rebroadcast without our written consent.
I'd like to remind you today that the presentation includes forward looking statements about our expectations for dana's future performance actual results could differ from those suggested by our comments today additional information about the factors that could affect future results are summarized in our safe Harbor statement found in our public filings, including our reports with the SEC.
On the call. This morning are Jim <unk>, Chairman, and Chief Executive Officer, and Timothy Crouse, Senior Vice President and Chief Financial Officer, Jim will start US off this morning, with a little bit different a little flip back to our cover page there Christy Jim takeaway.
Good morning, and thank you for joining us today.
Before we begin this morning, I'd like to draw attention to the front cover of our presentation, where we recognize that a 100 years ago. This month, Dana then known as Spicer manufacturing company.
Listed on the New York Stock exchange as a publicly traded company.
When we joined the New York Stock Exchange on April 19th 1922, we had approximately 1000 employees in two facilities, primarily making automotive universal joints, which were invented and patented by our company's founder clearance Spicer.
At that time, our sales were about $4 $5 million today. The Dana family is 40000 strong spread across 139 facilities in 31 countries with more than 10000 patents granted granted and sales nearing $10 billion.
He may find it interesting that only 27 other companies currently listed on the New York Stock Exchange have a longer tenure. The company has always persevered through our longstanding commitment to providing industry, leading product engineering and innovation B, our spicer branded suite of mechanical products and systems.
A century later Dana continues to technologically differentiate not only in mechanical solutions, but now also through our full suite of Spicer electrified electrodynamic and E propulsion systems across all mobility markets.
Moving on to slide four.
And our update for the quarter Dana has significantly higher sales in the first quarter totaling about $2 $5 billion or 270 million $217 million increase over last year, representing strong customer demand in our heavy vehicle markets and the recovery of some commodity cost.
This strong sales performance against a backdrop of some of the most challenging market conditions any of us have experienced on our professional careers, including major global supply chain disruptions severe input cost inflation and erratic customer production schedules that are impacting the entire mobility industry.
Our profit conversion on higher sales was tempered by these increased input costs and operational inefficiencies driven by erratic customer demand.
As is normally the case in our business free cash flow was a use in the quarter and as we discussed in our last call. We have higher working capital requirements driven by higher sales short notice supply chain disruptions and elevated capital investment and support of our significant new business backlog and launches and finally.
Diluted adjusted earnings per share were <unk> 16 per share Tim will walk you through the details of our financial performance in greater detail later in the presentation.
Moving to the right side of the page some of the key areas. We will discuss today include the impact of rising cost inflation and volatile customer demand patterns. We will also highlight that despite operating within this challenging environment and it continues to be recognized across the industry are outstanding innovation quality and customer satisfaction.
We are also excited to share several new business awards and how we are leveraging our <unk> capabilities to positively impact the lives of people in developing markets. Please.
Please turn to page five where I will provide an update on the market conditions.
The first quarter saw ongoing commodity price increases record cost inflation and global supply chain constraints that continue to disrupt our customers production patterns negatively impact our operational efficiency and drive up on hand inventories. It's unclear if the supply chain, we will see some stable.
<unk> later this year. However, we do expect commodity prices and cost inflation to continue to rise when our customer supply change do recover we expect improvements in OEM production across all of our end markets, resulting in higher sales.
Let's walk through each of our markets beginning in the light vehicle on the left of the page and market demand remains strong as vehicle and inventories continue to be low as a result of disruptions in the OEM production due to ongoing supply chain constraints.
As the year progresses, we anticipate that the global auto production output will increase somewhat through the balance of the year.
This bodes well for Dana as we have been preparing for significant quantity of launches of refreshed OEM vehicles, such as the G. L. A range Rover range Rover sport Toyota Sequoia in Tacoma, and the Ford Super duty just to name a few.
Moving to the middle of this line the heavy vehicle markets are also experiencing similarly high demand with fewer OEM production disruptions than we are experiencing in light vehicle and.
In commercial vehicle Dana is not only well positioned to support pent up current demand, but we're also intensely preparing for previously announced new business growth.
In North America, we're expecting volume improvement for class eight truck builds in the second half of the year combined with significant medium duty EV launch activity at our customers.
Globally demand remained strong for electric drive systems.
Especially for transit buses in Asia, and we expect EBIT demand to continue to accelerate this year.
Moving to the far right market demand in off highway remained strong as backlogs have reached pre pandemic levels and finished vehicle inventory for construction and agriculture equipment are at the lowest levels in the past several years. Additionally, we have seen minimal customer disruption as a result of the conflict in Ukraine.
While all end markets are poised to see market growth simultaneously. This year, we expect inflation in commodity costs to continue to increase during the period of volatile demand turning to slide six I'd like to share with you how dana's passion for customer satisfaction continues to be noticed across our industry.
During these challenging.
<unk> times, it's especially important to remain focused on our customers, which in turn helped to drive our success to this point I am pleased to share with you that Dana earned major customer recognition across all three of our end markets in the first quarter.
Starting on the left side of the page Dana was named an Overdrive Award winner as part of Gms, 30th annual supplier of the year awards, marking the fifth consecutive year, we have been honored as a top GM supplier. This year were recognized for our leadership in advanced battery cooling technology, which is extremely critical for EV performance and reliability.
This award is reserved for suppliers, who display outstanding achievement across the global purchasing and supply chain organizations key priorities, including sustainability innovation relationships total enterprise cost launch excellence and safety.
To be a recipient once again of the procedures award while persevering through one of the most challenging years history has ever faced is a testament to our team's resilience and commitment to pursuing sustainability and innovation.
Moving to the middle of the page Dana was also recognized by Pecker with their covered in North America supplier performance Management Achiever Award for 2021 with numerous Dana facility is receiving the 10 parts per million quality award considering the ongoing disruptions and uncertainty facing our industry. These awards truly highlight the tremendous focus and dedication of our team.
Has delivering quality products no matter the business environment in which we operate.
Lastly, Dana was honored for the fifth consecutive year by John Deere for supplier Excellence best quality innovation and best process alignment. The best process alignment award as a result of all Dana functions engaging with the customer to create value and improve customer satisfaction throughout the entire product cycle.
Dana's passion for customers <unk> is core to who we are and how we run the business being recognized by some of our most important customers is a true honor and it further illustrates the commitment we have to providing our customers the world class innovation quality and customer service.
Turning to slide seven I am excited to share how dana's secured our leading position across the automotive news pace and pace pilot award programs.
Earlier this year, we announced that Dana leads leads this year's automotive news pace and paste pilot Awards program with five innovative electrification technology as being named as finalist the pace awards represents our highest level of recognition in our industry. These prestigious awards distinguished suppliers for their game change.
<unk> technologies to deliver superior innovation.
Logical advancement and business performance.
For this year Dana was named a pace finalist for a complete E propulsion E power systems Dana team for high performance Inverters.
And metallic bipolar plates for fuel cell stacks. In addition, our electric rigid beam axle and composite battery enclosure with integrated thermal management were both selected as finalists for the paste pilot award, which recognized as pre commercial post pilot innovations in automotive or future mobility space, including products processed.
As software and systems.
Over the last decade, Dana is one three pace awards to partnership awards and has been named finalists 12 times, whether its individual components fully integrated systems or complete vehicle E. Propulsion, we are leveraging our expertise in design engineering manufacturing and integration to meet electrification needs of our customers across all mobility segments.
Slide eight highlights the depth of our industry, leading driveline solutions as well as the steadfast commitment to partnering with our customers to meet their unique vehicle platform needs. We're very excited to share with you that dana's Spicer driveline technologies, including our drive axles front steer axles and drive shafts are featured on the work truck magazine.
2022 medium duty truck of the year winter, the port Fs, $6 50, and $7 50.
And our award winning Technology was also featured on all five of this year's finalist in fact, Dana to provide the complete driveline and 13 of the 15 winning vehicles beginning in 2008 the truck of the year Winter is chosen by the real life professional fleet managers, who are asked to select the truck that best fits their fleet requirements as it relates to <unk>.
Our ability quality servicing maintenance and lifecycle cost.
It's tremendous honor to be able to partner with our customers as they provide vehicles to the marketplace that impact real people, who are running businesses and providing services.
Turning to slide nine I'll provide you an update regarding exciting new electrification win for Dana in our light vehicle segment.
Dana has been at the forefront of developing and manufacturing electrified vehicle powertrains for some of the world's most recognized brands in the heavy vehicle markets. If you recall last fall at our capital markets day, we shared with you how electrification adoption is rapidly accelerating the light vehicle segment and that there are a number of new programs.
Dana is working on with major customers today I'm pleased to announce that Dana has been selected as the electrification partner for a major light vehicle OEM for multiple all new EV programs, while we're not able to name the customer at this point I can share with you that as significant multi year relationship, which we expect to be worth over.
$1 billion in sales for us. The first models are slated for production in the next few years and will include our integrated complete E propulsion systems, providing greater than three times the vehicle content versus your traditional ICD draglines.
Consistent with our commercial vehicle and off highway customers, our light vehicle customers recognize and are capitalizing on dana's complete in house E propulsion capability, including but not limited to Inverters ether more software motors controls and of course E mechanical capabilities to differentiate their vehicles in the future.
Moving to slide number 10.
Speaking of electrification off highway is one of the fastest growing segments in the mobility industry and as you would expect Dana is at the forefront partnering with our customers to meet their unique electrification needs and construction underground mining material handling and agricultural applications.
Again during our Investor day in September we outlined the new opportunities that are emerging and showcased how we are working with new and existing customers to further penetrate this market.
Slide nine highlights we continue to build on that momentum by winning new EV programs with a number of important customers, including our kimono Hyster Yale GCB Polaris Scania.
<unk> and Toro among others to provide our advanced electrified solutions for a broad range of applications. This includes many excavators boom lifts port equipment electric loaders access equipment motorsport and recreational vehicles and lawn and turf equipment as we continue to see the expansion in our addressable markets. We are.
To support a wide range of vehicles by leveraging our capabilities across many different applications to achieve maximum efficiency productivity and performance for each vehicle.
A great example, our mini excavators, which are rapidly transfer transitioning to electric power. This is one of the fastest growing segments in the construction market with a five year growth rate of about 30%. It's a market that Dana did not historically participated in but our multi market E mobility capabilities and scale are positioning us to secure <unk>.
New business wins for electric versions of this equipment.
Whether we're providing electric drive systems.
Or low voltage motors and Inverters. The key takeaway is that we are working in lockstep with our customers to ensure that we are in the forefront of the transformational EV growth in these new markets and the result is increased content per vehicle for Dana.
With me now to slide 11, where I would like to illustrate how electrification is not only about protecting the environment, but it's about impacting people's ways of life.
Sustainability directly aligns with our leadership in vehicle electrification and is critical to supporting our customers as they work to achieve their goals.
But sustainability is more than just efficiency and protecting the environment. It's about helping people to live better lives that is why I'm. So excited to be sharing with you that Dana is leading efforts to provide the powertrain for the world's first flat pack utility vehicle destined for emerging markets in Africa from ox delivers a U K based zero.
Admissions are smart logistics company.
To support these efforts, we have been able to leverage current capabilities and designs to supply the ox truck with our electric motor inverter ear box and software, which are engineered to tackle the toughest terrain. The systems will be shipped as a flat pack and assembled in the destination country, providing efficiency and ease of use for <unk>.
In helping to advance prosperous trade and rural emerging markets, while driving sustainability.
We are proud to be partnering with <unk> on this important initiative it illustrates how dana's guiding vision towards zero emissions future is focused on what is most important people.
Thank you for your time today now I would like to turn it over to Dana CFO , Tim Crouch, who will walk us through the financials. Please go ahead, Tim. Thank you Jim Please turn to slide 13 for our first quarter 2022 results compared to last year sales were up $2 $5 billion driven by stronger demand in our heavy vehicle markets.
Recovery of commodity costs, partially offset by currency impacts adjusted.
Adjusted EBITDA was $170 million profit margins in the quarter were 340 basis points lower than the same period last year, despite higher sales due to margin compression from inflationary costs, including higher cost for labor energy transportation.
Raw materials as well as operational inefficiencies, resulting from customer supply chain challenges and customer schedule Volatilities.
Net income attributable to Dana was $17 million in this year's first quarter compared to $71 million last year. The difference was primarily due to lower adjusted EBITDA.
Diluted adjusted EPS was <unk> 16.
50 cents lower than the prior year due to lower adjusted EBITDA and lower earnings from equity method affiliates.
Free cash flow was a use of $237 million compared with a use of $26 million in the first quarter of 2021, the higher free cash flow use in this year's first quarter was driven by lower earnings higher working capital requirements and elevated capital investment and support of awarded new business as we discussed last quarter, we continue to.
Worked through higher inventory levels, driven by customer supply chain challenges and customer schedule volatility. Please.
Please turn with me now to slide 14 for a closer look at the drivers of sales and profit change for the first quarter.
First.
Organic sales growth of 82 million was driven by higher demand primarily in heavy vehicle segments and to a lesser extent recovery of some cost inflation from customers.
Adjusted EBITDA on higher sales was a loss of $35 million for a margin headwind of 170 basis points. This loss was driven by input cost inflation and continued operational inefficiencies brought about by volatile volatile customer production schedules, primarily in our light vehicle markets.
The inflationary impact in the quarter was significant totaling about $45 million inorganic profit reduction.
Second as we began in our 2022 outlook in February .
We are detailing the impact of EV sales on our results for the first quarter EV product sales grew $68 million from the same period last year the profit impact from the required investment in engineering to develop and commercialize these new tech technologies drove a $7 million loss in Q1, a margin headwind of 50.
The basis points.
Third foreign currency translation reduced sales by about $55 million as dark as the dollar increased in value against foreign currencies, we transact in principally the euro.
This drove a slight profit margin impact as our largest euro exposure is in our higher margin off highway businesses.
Finally commodity cost primarily steel continue to rise in the quarter gross material costs were 3100 $38 million higher in this years first quarter compared to 2021.
So our commodity inflation recovery mechanisms, we recovered approximately 88% of our commodity cost increases from our customers through higher pricing.
The net impact of rising costs and higher recoveries resulted in a $16 million profit headwind and a 115 basis points of margin deterioration due to the lag in timing of customer recoveries. Please.
Please turn with me to slide 15 to look at our free cash flow for the first quarter of 2022.
While it is normal for our business to use cash in the first quarter. This year, our use of cash was $237 million, which was $211 million higher than the previous year due to lower adjusted EBITDA.
Working capital requirements and higher capital spending each of these contributing about a third of the change.
Higher working capital requirements in this year's first quarter is primarily due to increased accounts receivable due to higher year over year sales.
Elevated capital spending is due to the timing of investment in support of new business and program launches.
Please turn with me now to slide 16 for an update and the market dynamics that are impacting our business.
We continue to track the main factors challenging our end markets and our operations while production disruptions continued in the first quarter. We are expecting some easing of OEM production volatility caused by shortages of semiconductors and other key components.
In the latter part of the year. This assumes China returns to normalized port operations during the second quarter.
We do not expect the issues driving higher transportation costs to abate this year issues such as the conflict in Ukraine, while not directly impacting our operations have caused an already stressed global global transportation network to adapt and has increased cost to reroute shipping lines. We will continue to actively manage our supply chain.
To mitigate the impact where possible.
The most acute concern has been the rapid rise in inflation of input costs and continued rising commodity costs.
Higher prices for energy transportation, and labor or a $45 million headwind for us in the first quarter of this year alone. We expect these inflationary pressures to continue throughout the year as we work with our customers and supplier partners to mitigate these impacts.
When we guided last quarter, we anticipated some modest easing of commodity costs, primarily steel products. Later this year glidden, given global events and tight supply market. We now anticipate steel and other commodity prices will remain at elevated levels. This year.
To highlight the scale of the swings price forecast for scrapped steel a key input to many of our steel products has increased over 80% since February alone.
The combination of rebounding volume and increase cost recoveries are driving up sales, while higher input costs and lag and associated recoveries continued to pressure margins. Please.
Please turn with me now to slide 17 for a look at our revised full year guidance for 2022.
Sure.
We are updating our full year financial guidance to account for the cost inflation pressures that we are now we now expect to continue for the remainder of the year.
We now expect 2022 sales to be approximately $10 1 billion at the midpoint of our guidance range, an increase of about $225 million above our previous expectation.
Driven by stronger end market demand and cost recoveries adjusted.
Adjusted EBITDA is now expected to be about $820 million at the midpoint of the range of our guidance.
Which is lower by about $130 million from our prior guidance due to the continuation of elevated commodity and input costs.
Increased sales and lower profits will generate margin that is expected to be approximately 7.8 to eight 4%.
Free cash flow margin is expected to be approximately $1 nine to two 3% of sales.
Diluted adjusted EPS is now expected to be $1 30 per share at the midpoint of the range with the change due to lower earnings higher.
Higher expected income taxes, and lower equity income.
Please turn with me now to slide 18, where I'll highlight the drivers.
Of the full year expected sales and profit changes from last year.
Beginning with organic growth, we expect to add about $685 million in sales from traditional products through a combination of new business market growth and recovery of cost inflation.
Adjusted EBITDA in these higher sales is expected to be about $75 million.
Included in the organic element is the impact of inflationary costs, including labor energy and transportation. We are estimating that these incremental costs will.
Total about $120 million net of recoveries.
Adjusting for inflation or conversion on total organic sales growth is expected to be about 27%.
We expect $200 million of added EV product sales. This year. This is a combination of market demand and our strong backlog.
Due to the required investment for development and commercialization, we expect incremental EBITDA to be a modest loss.
Next we now anticipate the impact of foreign currency translation to be a headwind of approximately $200 million to sales primarily driven.
By the euro with minimal impact to margin.
Finally, we expect commodity cost remained elevated through the year, we anticipate recovering about $470 million from our customers in the form of higher selling prices, while higher prices for steel and other commodities will result in a net profit headwind of about $20 million.
Please turn with me to slide 19 for an outlook on free cash flow for 2022.
We anticipate full year free cash flow to be about $215 million at the midpoint of our guidance range. This is an improvement of about $425 million compared to last year.
The benefit is being driven by lower working capital requirements, specifically lower inventory, we've been operating with higher than normal inventory levels as a hedge against both an unreliable global supply chain and unpredictable customer demand and build patterns. As these two factors stabilize we should be able to drive our inventory levels as we move throughout the <unk>.
Our inventory levels down as we move throughout the year.
Page 20 provides an updated summary of our outlook for the remainder of the year, which highlights unexpected outcome of higher sales growth muted by cost inflation, we remain committed to capitalizing on the strong drivers of growth, including the accelerating EV market and our growing backlog as we continue.
To work to offset the inflationary pressures that are plaguing every corner of our industry.
Our core business remains strong and we are not wavering from our commitment to future technology, we have a rock solid balance sheet and the right assets in place to push through yet another challenging year.
Thank you all for listening. This morning, I will now turn the call back over to <unk>. So we can take your questions. Thank you.
Thank you.
At this time, we would like to begin the Q&A session.
If you would like to ask a question. Please press star followed by the number one on your telephone keypad.
Your first question comes from Colin Langan from Wells Fargo. Your line is open.
Oh, great. Thanks for taking my questions.
Can we go back to slide <unk>.
<unk>, where you talk about the work.
Just wanted to understand that the 685 that was up from your original guidance.
Is that related to the inflation or some other markets coming in better.
But I wasn't sure where it.
Those buckets kind of go because I would assume the inflation hit your margin.
And if so what markets are actually coming in better.
Hi, Colin this is Tim so it's a combination of both higher end market demand as well as recovery of inflationary costs. So we continue to continue to see.
Positive end market demand, while across across all of our markets, but but the heavy duty markets or the heavy vehicle markets continue to to sort of lead the way.
Okay. So heavy duty is better and of the 120 is that that's different than the raw materials or is that 120 headwind that youre expecting also include raw materials.
The 120 is solely.
Non commodity inflation related costs.
Got it okay.
And then just going to slide nine the 1 billion I think you said it was over the life of 1 billion light vehicle E pulp Charleston when is.
Is that your first win in light vehicle market, because I mean, most of the headlines I recall it being more of a medium and off highway and then any color on the kind of product is this more like a light truck like most of your core business.
Gearbox E motor inverter or what is actually included.
Hey, Colin Thanks for the question. This is Jim I would say, it's our largest full.
<unk> E propulsion system win when you're talking about.
<unk> gearbox et cetera, and other I can't go a lot deeper than that's what's the largest in that but as you recall, we've talked about multiple other wins, let me just think back the last couple of US meeting we tried to give you a little bit each month or excuse me each quarter I think last quarter, we talked about Aston Martin and so on and so forth, but from a scale standpoint. This is the large.
Just with the full E propulsion system, if you want to call it vertically integrated by Dana.
Got it alright, thanks for taking my questions.
Your next question comes from Aileen Smith with Bank of America.
Good morning, everyone.
Wanted to ask the first question around compensation and on the one hand, you have the commodity cost recoveries with your customers that are contractual and you're making good progress on that Brian .
But the contemplation is everywhere and you pointed out in your comments a couple of times a day $120 million net expected impact in your outlook.
Clearly I've said automakers have been successful in passing on incremental costs whatever form it may take to their customers in the form of price. So based on your experience with inflation and discussions with your customers over the past few months, our automakers more receptive to maybe taking on some of the incremental cost burden beyond commodities.
And do those or can those come in the form of recoveries or rather just help from a pricing or booking perspective for new business.
Thanks, Ali and I will take that one this is Jim.
The key question is just to have a little bit of tongue in cheek with you as defined receptive.
From the standpoint of are there more are there discussions now in the playbook between suppliers and Oems on the key the new buckets, if you want to call it that energy freight labor cost absolutely.
Are they going to get on a fast horse to be.
Closed loop like the commodity programs, we've all collectively put in an in between customers and suppliers over the last 2025 years now, they're not there yet or whatever.
Depending on how things go here. We also it's not as if the supply base doesn't know how to adapt to that and we don't know how to provide the information and if you take the hyper inflation countries such as I'll make one.
That use one such as Argentina, we operate in that type of environment everyday and we have for years with monthly true ups and all the other things that go along with it I can tell you that theres plenty of discussion about what to do with the other three pillars because at the end of the day as I've said on every I think almost every quarterly earnings call I've had with all of you is just that the OE.
Yes.
Definitely.
Adjusted to be much more flexible and to work with suppliers more since the 2008 2009 crisis, because without a stable and healthy supply base. There is no promotional vehicle production. So there are a lot more receptive to the conversation, but because it's really much newer especially in markets such as North America and Europe that it's taken.
Some work and Theres, some wood to chop for all the suppliers to get that done.
Got it that's helpful commentary.
And then second question I wanted to get some clarity around the EDI business. You cited I think on slide 14 that investment in the growing EV businesses offsetting profit contribution from early low volume programs and I think got to mention that in total the incremental EDI business is expected to be a modest EBIT loss for this year.
On the volume programs being profitable outside of investment in the business would you say, that's better than expectations and and what confidence does that give you in terms of some of the targets you provided at your capital markets day last year, specifically, what I think was adjusted EBITDA breakeven around 2003, and then adjusted EBITDA accretive by the end of it.
Okay.
Yes, I'm not not trying to be direct with this is Jim again, I'm not trying to not be direct with the answer but I would just call. It I would almost tell you. It's a little bit too early to tell to give you any direct answer unprofitability on new programs versus other more traditional programs.
Mitch just because most of our programs as I said in my prepared remarks, we're starting to see a lot of the medium duty programs start to roll in towards the end of this year, we'll have a lot of new business electrification.
Both mechanical mechanical as well as full three and one four and one five and one six and one program starting into next year. So there is a lot of moving parts here, especially with everything going on that I would rather not comment on where that profitability is I am comfortable that theyre going to our programs are going to meet our hurdle rates of which we invested in them. So I feel good about that but other than that I can't really.
To give you any other commentary at this time.
Okay understood. Thanks for taking the question.
Your next question comes from Brian Johnson from Barclays.
Yes, good morning.
Looking at page 22, and continuing that theme.
Looking where customers or reimbursement for non index costs. It looks like just as I look at the.
Waterfall that the off highway and commercial vehicle customers either are more receptive or perhaps you have less rigid.
More flexible pricing arrangements with those then light vehicles. I think first question is is that a fair assessment of the difference between <unk> and Lv light vehicle in CV and off highway.
Yes.
Yes, traditionally hey, Brian Thanks for the thanks for the question. This is Jim again.
Traditionally that's the nature of the business for a multiple of different reasons Thats. The case and that's kind of what I was alluding to back to when I was talking about.
And more sulfur light vehicle traditionally commodity programs.
As you know you and I have talked about it directly before commodity programs have been instilled over the course of the years, but there hasn't really been a spec.
Significant reason to do it.
Until now in the more established.
<unk> markets, such as America, Canada, Western Europe et cetera.
So the answer is yes, there is better programs for more detailed programs and some of those markets and there is in the light vehicle, but we're working on it and I think also players are working on it.
And do you see just kind of broadly for the industry light vehicle industry.
Either way to amend the existing procurement agreements to put it in.
These are all buzzwords from the seventies coal as inflationary adjustments.
Or is it something that's gonna be AD hoc on the existing book of business and which then gets a second question, which we did hear from some Saudi yesterday, new contracts will get signed with the 70 style inflationary protections or Brazilian or Argentina, Argentina Argentine style inflationary concern.
<unk> terms.
I think youll see some of that may be but I would say, it's going to be on a customer a customer by customer basis.
And I'll use a different set of words will there be potentially indexes put in for freight in the future index has put in for labor in the future or energy in the future I think youre going to see some of that on a customer by customer basis. There is actually some customers no matter. What the end market are very bullish on getting that in they'd rather have it be a transparent activity.
US between the supply base and the customer so it takes it kind of takes the noise away from the rest of it theres others that are not so there's going to be a case by case basis. It just feels a little bit Brian like Deja Vu with where we were 2025 years ago, putting programs and for copper and for resin and for steel and for everything else, but so we're working on that and again every.
Customers are little bit different.
I remember when John Devine switched from fighting off those requests with G. M. Two.
Actively pursuing them at Dana so good luck.
Your next question comes from James Picariello from BNP Paribas Exane.
Hey, good morning, guys.
Good morning can you hear me.
Yes.
Congrats on the light vehicle.
<unk> program, just wondering can you confirm what was mentioned over $1 billion in revenue over the life of the program, but the question I really wanted to ask.
Are you, providing the complete rear axle for those two vehicles shown on slide nine I mean, I assume your actuals included but.
I mean.
I suppose given dana's complete portfolio that you could just be providing the mt.
Did you draw.
Thanks for the question.
For the audience I would say like it usually is with those are representative pictures.
In this case that was a shelf shelf photo I guess, we would call. It around here. So we definitely do not get out in front of our customers to say exactly what the propulsion system is going to be what I would as I said in my prepared comments and I'll just reinforce it is definitely.
Full.
System inverter motor gearbox software et cetera that are.
That we're providing to the customer, but that's the extent I can give you today.
Okay fair enough.
And then light vehicle seems to be getting hit the hardest by current cost pressures just wondering if you kind of split out what what.
Given that the last two quarters and light vehicle I mean, what attributes to the erratic stop starts by your key customers right. I mean, we understand the inflation in the commodity pressure, but what it really is tied to that those inefficiencies just from the customer.
The lack of visibility which are.
Your key customers.
Yeah, I don't want to get in front of I don't want to get in front of the customer I think they're going to provide you plenty of color or already have relative to the challenges that they have I can only represent that let's say.
We're all in manufacturing, let's put it that way, we're all in a vertical or a <unk> and.
In our global integrated supply chain, so I'm sure. They're they are challenged with exactly what we're challenged with is that there is a it's a tier one tier two tier three tier four you name it all the way through the pipeline and Theres just starts and stops of what that would be again based on public information on ethane at school Microchips is certainly going to be the biggest challenge out there.
It does create it creates some havoc in what has become a bit of a new normal in a way it doesn't necessarily eliminate the production inefficiency. We've had I can tell you I'm speaking on behalf of Dana we've adapted our business to be much better at adjusting to kind of like immediate term change on schedules and output from our customers, but it.
Still a real issue and a real challenge that until things calm down out there, we're going to have to deal with it.
Got it and if I could just squeeze one more just back to profitability around electrification and now that you have.
Light vehicle program, obviously, you haven't started to ship it yet but.
As you think about commercial vehicle off highway light vehicle.
Is there going to be.
<unk> difference in the profitability for the EV programs that you have one in.
We will win in the future.
The margin differential be similar to what it is today in combustion.
Hi, This is Tim.
So I think it's.
A little early to break down.
The new program or some of them. Obviously, we we see just set up a pretty sizable uplift in in content per vehicle and as Jim mentioned.
The programs are all coming in above our hurdle rate and we expect as we laid out last year during the Investor day.
<unk> breakeven and then and then positive.
Contribution to EBITDA after that point.
Understood. Thanks.
Your next question comes from Emmanuel Rosner from Deutsche Bank.
Thank you good morning.
First question is on the commodities inflation can you give us a little bit more detail around.
How you expect this to play out for the rest of the year, the push and pull between commodities hip and recovery. So it looks like the growth that you expect enough of the year, it's probably twice as high.
What you saw three months or so ago, but then the net is really only.
$50 million or so and then also these $20 million net headwind for the year is pretty much what you saw in the first quarter. So does that mean for the next three quarters Kumar.
Commodities will be neutral.
Factor.
Yes.
Tim Yes, you're seeing it right, obviously, we've seen a very dramatic uptick in commodities over the first quarter you can see it in in <unk>.
<unk> scrap nickel aluminum they are all at significantly elevated.
Levels than from where we started the year and from where we were expecting them. So that's why you're seeing the increase in in that recoveries on the topline.
Yes, we don't expect Cigna.
Significant further increases there is some in there, but we do think that.
They will start to moderate as we get into the back half of the year really late in the year, which is why youre seeing the recoveries for us come in at around 96%, reflecting a little bit of that catch up and the lag.
In terms of I guess walk for the next three quarters or so.
Is it fair to say based on what youre showing that through essentially expecting.
<unk> to catch up to do.
Basically.
Offsetting the complete hit.
Yeah, I mean, there'll be some variability by quarter because the.
The decrease we're we're seeing are the slight decrease we're seeing and based commodity costs won't be until later in the year. So it's not like Youll see it next quarter.
So there'll be some variability in there by quarter.
Okay. Thanks, and then I guess looking ahead in this sector as well.
Our business with other mechanisms play out as you move into next year like would there be still more like assuming commodities stay at these higher level with this there'll be more.
Catch up in terms of additional recoveries.
Which would then become a tailwind and I guess sort of.
Rather picture, obviously I assume thats your previous 2023 targets are going to be difficult to achieve at this point, but I guess what would be.
What would be required for you to eventually achieve that like is there going to be a period of time, where you could sort of like recover some of these.
Headwind assuming prices stay stable.
Yeah, I mean, I think obviously.
On a more stable commodity environment would actually would be very helpful. In terms of of stabilizing the changes in profitability.
But obviously, if if if commodities stay at the higher levels that they're at today.
Ultimately the lag will be caught up but if they stay elevated then the margin pressure, we've seen while will be abating, a little bit we'll still be there because we typically arent arent recovering 100% of those those commodities.
Okay.
And then on the non material inflation expectation of net $120 million.
Are there. Some are you expect are you embedding some recoveries in there.
There is some discussions going on and then potential for.
Better outcomes in the back half of the year and then how does this.
Compared with that.
His previous got.
Where was previously embedded in guidance.
So I'll take the last piece.
The current 120 is obviously higher than the headwind that we had assumed.
In our guidance in.
In the first quarter.
That's obviously a reflection of what's going on from a macro perspective.
Across all of our end markets yes.
Yes, the 120 is a net number.
And as Jim mentioned that we're in.
It really on a daily basis talking with all of our customers across all of the end markets.
About recovering these higher costs and we'll continue to do that and the teams continue to make really good progress with all of the all of the Oems across the end markets.
But this already assumed some recoveries yes.
Yes, it does.
Okay. Thank you.
Your next question comes from Dan Devine from Credit Suisse. Your line is open.
Hi, good morning, and thank you for taking my questions.
Hum.
Wanted to just follow up on that last question from Emmanuel maybe you can just elaborate a little more on the non commodity inflation headwinds I think in your prepared remarks, you mentioned yet <unk>.
Energy labor its transport and any one of these dominant factor and just how should we consider these.
Should we consider either temporary or permanent but we're just not going to come out and maybe you can have discussions with.
With your customers, but for now we should just assume this is permanent in the cost structure.
Yeah, I think obviously as you look across there, they're all a little bit different I.
I would say labor tends to be a little more permanent than than freight obviously.
Freights contingent on many things some of them very macro based in terms of the economy and then obviously for a micro base to be in terms of the availability of sea containers and port congestion and the like so I.
I think and the same is true for energy right. We saw dramatic increases in energy, especially in Europe . As a result of what's going on in Ukraine, and the issues around supplies of natural gas and other energy products into into Europe . So.
It's <unk>.
Very hard for us to make a call on are they truly permanent or are they going to be here for a while I think our view is we're going to continue to monitor them and and work with our both our customers and our suppliers to try to mitigate what we can all around.
These impacts but.
It looks like Theyre going to be with us at least at least in the near term and probably into into the future just to some extent.
The amount of if you just put a final point on that a little bit and again as it relates to it it all depends on end market and all depends on customer and it all depends on your rollout what I like to call as you roll on roll off business right. So if you have programs that are long in the tooth that are ready to build out and new programs are rolling in those are obviously going to get <unk>.
<unk> and reestablish your points of cost and if you were in end markets, where it's appropriate.
Worked through it with the customers that are really keen on ensuring that theres, a reasonable profitability coming out of the program, so everybody's healthy et cetera.
It's going to be different on a case by case basis. So tim's right. We don't know exactly what's going to happen on sea container costs. These days or energy costs. These days and so on and so forth, but we do have a playbook either on their pure recovery for programs that will stay in production or new programs that are rolling on and we as I think I mentioned earlier in my prepared remarks, we have a cigna.
Kind of a new rollout business coming our way this year and really in the next 18 months. Thank you.
Okay, Great and then just.
Couple of follow up.
And you mentioned, it's going to depend on marketing customer.
When we look at the first quarter results, we see just very Stark contrast between.
Light vehicle and off highway. So maybe you can just give us.
A bit more color on how inflation and the operating inefficiencies.
Are hitting.
Hitting the segments differently because it is interesting to see that off highway is doing still really well pretty good conversion inter.
Interesting actually that all of your or a lot of your Europe exposure is in off highway and yet really no no impacts from what's going on in Ukraine, but auto light vehicle seems to be hit much harder. So maybe you can just give some color on how the inflation and inefficiencies and seeing your segments differently.
Yes, I feel almost like a macro economically economic economist I guess, because I got to talk about all the end markets, but it's no. It's good because it actually helps us as a company because we see different trends in different inputs to help us manage through the other markets, but anyway. The point in a matter is that I can without going on for hours. The two big picture things.
To think about it and that is rough recovery percentages across just not commodities, but the other input cost is the biggest difference on that and the second one is volume matters and what do I mean by volume matters. If you have a customer in one market that has a low volume high complexity market and they end up having.
Different interruption short notice stoppages, so on and so forth obviously your bill of your ability to control cost and the impact on having for example, a full plant or full plants are full of people on site already or whatever example, you want to use it's going to it's going to multiply faster than the larger plants large volume. So therefore, you can see.
The impact when you have customers in the light vehicle segment that are going to be more sporadic thats going to have just pure statistics.
And Matt you just going to have a bigger impact on the business than it would on low complexity lower our high complexity lower volume facilities, such as in off highway and to a lesser degree in commercial vehicle.
Great Tim if I could just squeeze in one more this is a weaker earnings profile for you and questioning whether the 2023 guidance holds or not but we know that alongside this you have this longer term push towards electrification, so very simply because of weaker earnings profile impact how you think about spending toward electrification.
Assuming new electrification wins I assume the answer is no.
No definitely not.
The enterprise strategy, which we outlined originally in 2016 and then.
Updated in 2018.
Uh huh.
The picture's worth a thousand words in every earnings deck, we show you, including todays. It can plan continues to come together that is the future of mobility, it doesn't matter, which market you're in and.
We're spending quite a bit of money now and will continue to have roll on programs.
Without a topline I don't think you have a bottom line and all the things that go along with it. So we're going to continue invest as we have and but it's not just that <unk> products are going to be around for a long period of time and we have very very healthy I mentioned, a couple of programs and customers earlier in the prepared remarks, we are very very.
Very strong backlog on IC. So we're going to continue to have a nice pivot table of strong backlog on the IC products for the next whatever number of years are going to begin production 510, 15 20, but we also have a really strong stream of electrification products at the same time I don't know any other way to run a business, but in terms of other than to make sure you have the option.
<unk> and that you get your fair share of the market and I think we've positioned the company to do that we just have you can't be at more trough than we.
Many other suppliers for that matter because of this tsunami of inbound.
Inbound costs that are coming at us like nobody's ever saw before but we'll work our way through it and.
Just saying that I'm very excited about 2023 and beyond for sure.
Great. Thank you.
Your next question comes from Rod Lache Wolfe Research your line is open.
Hi, everybody.
I think like a lot of other people just trying to interpret your comments about adapting to the higher inflation environment ex commodities. So.
Can you just maybe give us a little color about.
A realistic timeframe for this.
You mentioned that it it.
Depends on the customer.
Does it look like maybe half of your customers or are working with you to help recover it in and have.
Could take a couple of years.
To feather that into pricing on contracts.
And.
It also by the way it looks like your conversion on volume <unk>.
Include something that is temporary.
It looks like it was weak even adjusted for inflation in Q1, but much more normal adjusted for inflation for the year. So maybe you could just comment on what inefficiencies are the magnitude of of temporary factors in there.
I'll, let Tim give any color let me take the second one good morning Raj Jim.
The inefficiencies of Tim has some color you can add it but I will tell you at least for our production schedules, particularly in January and February they couldnt have been more erratic. They couldnt have been more kind of all over the place. So there is a real cost of that so I'll, let Tim kind of put some color to that in a second and then back to your question really on <unk>.
<unk> cost outside of commodities I'd like to give you a more direct answer but it's just it's just it's a complicated puzzle, but I'd take you back into it depends on the end market recoveries for the reasons I've already mentioned less.
Less so on the customers I'm not saying it is in a customer by customer basis, but if you take them on kind of a kind.
Layered effect, we had stronger recoveries in our off highway side of the business for the reasons I've already mentioned, we've got strong recoveries, but not quite as solid recoveries in our commercial vehicle and we're still working a lot more on the light vehicle then it gets into a customer by customer.
Discussion.
And depending on that customer the timing again, it all depends some of it I expect more and more of it to come in the non commodity cost in Q2 and Q3, some maybe not as much because they have they maybe they may have a different strategy on different things as it relates to those recovery. So that's a lot of words to say that it all depends but it's usually comes back to the end market.
More so than it does the customer itself. So I didn't want to over overcooked. It. It was a customer piece. Tim did you have something that I think the when you think about variability in terms of schedule and production.
You are seeing in the segments is.
Is what's showing up in our light vehicle customers, which they have been.
More erratic.
And then the other segments. So that's part of what Youre seeing when you kind of compare light vehicle to say off highway.
I think the other thing to look at when you look at power Tech.
That's a.
That conversion is also impacted by by aftermarket and the situation in Europe with Ukraine. So it's a lot of different factors that come in.
That.
That Jim mentioned, and obviously all of them need to be.
Brought about and then obviously manage.
Thank you and just secondly, Jim since.
You are willing to put your economist hat on here for US obviously, a lot of a lot of discussion about the macro environment and.
Maybe you could just give us your thoughts on how you are you are reading those tea.
T leads.
If you look beyond this year.
Do you have more cyclical concerns about commercial vehicle or off highway or do you see yourselves as kind of insulated because of the pent up demand and on the off highway side, we're looking at high commodities relatively high AG prices. There's some infrastructure spending it seems like there are a few things that they'd actually looked pretty good.
Yeah. Thanks for the question Rod.
I mean, theres a lot of moving parts out there and I won't play economist, but.
Allow me to have a little fun here.
But I will say this the way I look at it is is that let's go to the starting point, which is to me. It is demand and we have strong demand. This isn't this isn't a dana advertisement is the fact is we have strong demand across all of our end markets. So that secondary question will be are our customers' ability to get the supply that they need to be able to.
Used vehicle, because there's plenty of pent up demand across all so I don't see that getting back to the broader picture on all the causal factors everybody on this call is probably studies at more than than I do for her degree, but there's still plenty of concern out there for everybody. We didn't talk too much about it Tim had a little bit of an in his prepared remarks is how much of an impact as shang.
At ports have.
Not so much us, but maybe our Oems across all end markets ability to get product. We have all the mobility markets have incredible tenacity and abilities to get things done we've seen that for decades. So do I think they are going to overcome I think they will but we just don't know and then when you have those constraints is that going to be a bigger constraint on this end market versus other markets can be a bigger <unk>.
Trained on this customer versus that customer using that as an example, and so that's a lot of words to say that I'm not exactly sure. All I know is we have a <unk>.
<unk> demand and we're prepared for that demand and we have a lot of <unk> business, that's coming at us that we're preparing for at the same time both in <unk>.
Internal combustion engine products that are going to go for a good decade as well.
Electrified product, which we all know is going to be the.
Propulsion solutions of the future.
Great. Thank you.
Thank you.
Your next question comes from Noah Kaye from Oppenheimer.
Good morning, so thanks for breaking out the EV business there've been a couple of questions. This morning around profitability. There. So if it's possible to clarify.
If we look at the $5 million expected EBITDA loss for the year, how much of that is just pure investment spending.
How much of the $5 million losses as per the investment.
The programs from a from a.
Individual contribution margin perspective are generally profitable.
And then what you're what's showing up there is the.
Is the investment costs related to commercialization engineering all of that goes into helping to continue to develop and drive what is it.
Very large and growing pipeline of.
Of EV wins, and so that's what's offsetting the contribution margin that is coming from the individual products. If you looked at our Investor day last year right. We show that kind of getting the size of the EV business needs to grow to its critical mass in order to have enough contribution margin to cover that.
That investment and we see that sort of happening in in late 2023.
Yes.
Fair to say I mean, if youre frontloading EV investment for future growth.
So it's.
I'm, just picking numbers out of the hat here, but whatever the investment spending is that's in this year's number you strip that out and the existing programs are profitable.
<unk> corporate average or better is that fair.
That's fair.
Okay great.
To clarify the production inefficiencies.
With respect to the choppy customer scheduling did that increase in the last few months.
Particularly post.
Rest of Ukraine.
Is it is it does.
AME is it better.
What's the incremental inefficiency that you've embedded.
Yeah, I would tell you that's.
Good question, but almost an impossible question to answer it's been it's been rough for a good six to nine months whatever the case may be I will tell you. It was very severe for us at least in the first couple months of the year, but a lot. It started to calm down quite a bit in March and so we're hopeful that it will continue to calm throughout.
The balance of the year, especially for Q2, which is obviously right right up in front of us. So I wish I could give you a more direct answer but that would be trying to speak for them.
Multiple customers across all end markets and everything is a little bit different.
Okay great.
Then.
Jim you talked about.
The enterprise strategy that you formulated many years ago.
And leverage the core and I think it's clear that.
The resiliency of the company and you know.
Frankly, the industry is much better now than it was decades ago, but you know.
Last three years, we've had and if you don't want to throw China tariffs in there, but then obviously the Covid then the chip Crunch and now, Russia, Ukraine, and the commodities inflation I guess.
How do you when you take a step back think about strategic priorities to keep pushing the quality at the resiliency of the business or where are the areas that we should be looking for.
Yeah.
Let me start with don't let your CAGR up to be a CEO .
And also curious just the way I the way I look.
It is for all of SME all of our jobs are tough just trying to put a little light on a tough situation for all of us right.
How do I think about the resiliency I think the most important thing is when I look at it I ask myself. The question are you creating value for your customers. They call you first or when the door closes. They say we have to work with that company to create value for them to sell more vehicles that are going to be more reliable so on and so forth.
I can tell you on behalf of Dana when we've leveraged the core that's a set of words that means a lot of things, but it's mostly it was to leverage.
All resources across the company people resources in particular equipment and resources as well to make sure that we get all the best practices utilized and we are the best the best of what everything we've done and that's working in the spirit of creating value for our customers that our customers are saying to themselves as they move in to this as they're moving into this disruptive work.
<unk> of electrification, who are they going to bet on to make sure that they are there to create value for them. So they can sell more vehicles that are more reliable I can tell you across all of our end markets. We positioned ourselves in my view I'm, not saying, it's not with any ego or it's not with anything that we are feel any entitlement I'm, just saying I think we've positioned the company with all of our end markets too.
<unk>.
To ensure that we're in that position and our continued backlog I mean customers just don't decided to pick somebody for the sake of picking somebody they pick them up because they believe in them and I think we put ourselves in a position to do that so the resiliency, having a strong top line, having a lot of deep technology behind it and most importantly have the people that can execute it and if you think about how we've tried to build the company.
<unk> or transform the company by doing a lot of acquisitions.
Kind of before maybe other people, we're looking in electrification or didn't believe in it has been incredibly instrumental in terms of developing our people training our people and making sure that we were not faking it when it comes down to electrification and supporting our customers that to me is how I define resiliency and being in a position to win for decades to come.
I appreciate the thoughts thank you.
Thank you.
Your next question comes from Ryan Brinkman from JP Morgan.
Alright, Thanks for taking my question, which is another one on the light vehicle electrification win on slide nine I think to date your electrification wins have been disproportionately on the commercial vehicle side and I think you.
You had suggested maybe your light vehicle electrification wins could be weighted more towards like higher torque applications. So just curious to what extent you see yourself as a competitor to others such as Borgwarner American axle Magna in the so-called electronic drive unit or integrated drive module market for light vehicles.
Understand you're limited what you can say about this particular program behind those.
Blue sheets switch.
That might be sort of a template picture.
Here to be an STB in our passenger car so I'm just.
The extent to which you see yourself competing and electronic drive unit market, even for like light duty passenger cars and just sort of trying to size up what you see as your addressable market on the light with electrification side for drive units and your appetite for pursuing programs for vehicles of different size.
<unk> drive configurations and torque ranges on like.
Light vehicle electrification side.
Well you can make me work for a living today, Ryan that's a lot.
Try to dimension it for you here.
Let me start with us as it relates to wins and timing and all that stuff I call. It two words I call. It the inflection point right, which we knew each each one of our end markets even products within the inflection points had hit different points. When they were going to come. So we knew back two two and a half years ago. The bus market was coming first we had to be ready then we knew last mile.
Every medium duty, we needed to be ready and I could go on underground mining et cetera, we were ready as each of those came as our product portfolio needed to be ready in the light vehicle side of the business. We told you that inflection point would be likely around 2022, and that's essentially what we're talking about here today. So it kids came together in that regard how do I feel about the competitive set.
I never underestimate any competitor I respect all competitors those are all really good companies that you referred to only thing I can tell you is we're going to stick to our competitive advantage, which is we have the full I'll call. It three in one E propulsion is actually much more complicated than that.
Does it also talks about software and cyber and all the other things that go with it you can't fake it and I feel very good that all of the lessons learned and product that we have on the road in the field already over the last couple of years continues to grow our talent and depth to be able to support our customers in any end market that goes goes forward. So I think we have plenty of opera.
<unk> moving forward and that's how I kind of look at the World I Hope that answers your question.
Yes, it's very helpful. Thank you.
Yeah.
Your next question comes from Joseph Spak from RBC capital markets.
Thank you.
Maybe just one clarification first on.
Your EBITDA guidance, the commodity impact, you're saying is now a $20 million year over year headwind previously.
Previously you thought was going to be positive, but then it was it was there any sort of minus 16 in the first quarter. So the implications it's pretty limited for the rest of the year and I just want to better understand I guess, what your underlying assumptions of inputs are there is it sort of current levels and further inflation or maybe just some clarification.
Yeah, Hey, Joe This is Tim.
So yes.
Yes, obviously 16 in the first quarter 'twenty overall, what Youre seeing and I think I mentioned this earlier.
Elevated levels of commodities. So we will probably continue to see some headwinds in.
Over the next couple of quarters and then late in the year, we start to see some of those come down, albeit modestly and then we'll start to get a get a little of it back which is why you sort of see the 'twenty overall in 16 in the first quarter and maybe having a hard time sort of boxing it but thats.
That's kind of the way it goes higher and then maybe some recovery yet.
Exactly.
Okay, and then obviously.
A ton of questions here on on light vehicle I mean.
I'd be curious if.
If you'd be willing to sort of help us out and help investors out a little bit maybe it's a proper.
Expectations in terms of.
Like.
What what is the level of profitability you're expecting there for this year because we can all look at production schedules you guys have been doing like call. It 900 to a $1 billion per quarter. It seems like that's probably mostly reasonable for the rest of the year, but used to be doing.
Double digit margins and now youre down to 3%. So how does how does that sort of progress through the year I understand there is both scheduled volatility in inflation.
Right.
At least it sounds like you're hopeful that schedule volatility can start to get better so some.
Was wondering if you just.
Set the record straight here for us.
Yes, so I won't get into sort of margins by our projected margins bye bye bye.
By segment for the year, but yes, we continue to see volume demand and that's impacting it.
Schedules for for customers in light vehicle that are continuing to to.
To impact margins in the near term.
Obviously, we're continuing to work we as Jim mentioned, we're starting to see a little bit of that.
Starting to lighten up and get some some good runs out of the customer that certainly should help on conversion costs for us and then obviously, we're continuing to.
To work with the customer for the recoveries on all of the inflationary costs that are.
That are continuing to impact the business, especially not just light vehicle, but all the businesses, but obviously with light vehicle I think Jim mentioned, something I need a little bit earlier than I think is really important we've got a great number of our light vehicle programs that are that are going to be rolling off right. We've got global Ranger launching now.
Now we're going to have.
Super duty launching near the end of the year. These are all opportunities where the programs will get re priced for a lot of the impacts we've seen over the last few years and so those those should help generate and start moving the margins in the business back to to where we are we know they should be.
Okay. Thank you.
Okay.
Okay, just before I close real quick I did Miss the second half of one of the questions. One of the questions was on the light vehicle Award.
Pass car versus truck versus this and the other one I just wanted to apologize for missing it just to be clear. So theres no ambiguity and Dana strategy. It wasn't by has not been by accident over the years that we've evolved the strategy to be focused on truck SUV and more recently.
Tied in with an acquisition that we did we didn't get into passenger car, but we did get into the high performance vehicle market as we've talked about the different examples of Aston Martin for Ari So on and so forth. So to answer your question back to that because there is a lot of product similarity and synergy between high torque high performance truck SUV.
And the high performance vehicle segment, that's why that bridges with our strategy. So there's not I don't want there to be any ambiguity in that we're not diverting back trying to be everything for everybody trying to be in the passenger car business itself. So I wanted to answer that first coming back to the guidance as summary comments of the day.
I said, a little bit earlier I believe the enterprise strategy is still continues to fall in line exactly the way we would've hoped it would I mean this is just a very rocky road out there as it relates to I can't use the word hyperinflation, they tell me, but I'll call it super inflation.
Out there I do have a lot of confidence in our customers. Our customers are really working with us quite well, it's painful to go through it.
As I think Brian mentioned, a little bit earlier today, but that's what we get paid to do so we will continue to charge.
Charters to the Hill and we'll provide you more color commentary around it as we proceed throughout the balance of the year. Thank you all for your time and attention today.
This concludes today's conference call. Thank you all for joining you may now disconnect.
Okay.
Okay.
Okay.
Okay.
Okay.
Employing more than 38000 people in 33 countries Dana as the World leader in the design and manufacture of highly efficient propulsion and energy management solutions for all mobility markets across the globe, the company's conventional and clean energy solutions support nearly every vehicle manufacturer would drive and motion systems.