Q4 2023 Lear Corp Earnings Call

Okay.

Operator: Hmm. Good morning, and welcome to the Lear Corporation fourth quarter and full year 2023 earnings conference. All participants will be in a listen-only mode.

Hum.

Speaker Change: Good morning, and welcome to the Lear Corporation fourth quarter and full year 2023 earnings conference call.

Speaker Change: All participants will be in a listen only mode should you need assistance.

Operator: If you need assistance, please contact a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Ed Lohenfeld, Vice President, Investor Relations. Mr. Lohenfeld, please go ahead.

Speaker Change: Specialists by pressing the star key followed by zero.

Speaker Change: After todays presentation, there will be an opportunity to ask questions.

Speaker Change: Please also note today's event is being recorded.

Lowell: At this time I'd like to turn the floor over to you at low and felt Vice President Investor Relations. Sir. Please go ahead.

Ed Lohenfeld: Thanks, Jamie. Good morning, everyone, and thank you for joining us for Lear's fourth quarter and full year 2023 earnings call. Presenting today are Ray Scott, Lear President and CEO, and Jason Cardew, Senior Vice President and CFO.

Speaker Change: Thanks, Jamie Good morning, everyone and thank you for joining us for Lear's fourth quarter and full year 2023 earnings call.

Speaker Change: Turning to payout rate, Scott Mair, President and CEO.

Speaker Change: Jason Carter Senior Vice President and CFO other.

Ed Lohenfeld: Other members of Lear's senior management team have also joined us on the call. Following prepared remarks, we will open the call for Q&A. You can find a copy of the presentation that accompanies these remarks at ir.lear.com.

Speaker Change: Other members of Lear's Senior management team have also joined us on the call.

Speaker Change: Following prepared remarks, we will open the call for Q&A.

Speaker Change: You can find a copy of a presentation that accompanies these remarks at IR.

Speaker Change: <unk> Dot com.

Ed Lohenfeld: Before we begin, I'd like to take this opportunity to remind you that as we conduct this call, we will be making forward-looking statements to assist you in understanding LEAR's expectations for the future. However, as detailed in our Safe Harbor Statement on slide 2, our actual results could differ materially from these forward-looking statements due to many factors discussed in our latest 10-Q and other periodic reports. I also want to remind you that during today's presentation, we will refer to non-GAAP infometrics. You are directed to the slides in the appendix of our presentation for the reconciliation of non-GAAP items to the most directly comparable GAAP measures.

Speaker Change: Before we begin I'd like to take this opportunity to remind you that as we conduct this call we will be making forward looking statements to assist you in understanding lear's expectations for the future.

Speaker Change: Details and our Safe Harbor statement on slide two our actual results could differ materially from these forward looking statements due to many factors discussed in our latest 10-Q and other periodic reports.

Speaker Change: I also want to remind you that during today's presentation, we will refer to non-GAAP financial measures.

Speaker Change: You are directed to the slides in the appendix of our presentation for a reconciliation of non-GAAP items to the most directly comparable GAAP measure.

Ed Lohenfeld: The agenda for today's call is on slide three. First, Ray will review highlights from the year and provide a business update. Jason will then review our fourth quarter financial results and our full year 2024 outlook. Finally, Ray will offer some concluding remarks. Following the formal presentation, we would be happy to take your questions. Now, I'd like to invite Ray to begin.

Speaker Change: The agenda for today's call is on slide three first Ray will review highlights from the year and provide a business update.

Tim will then review our fourth quarter financial results and our full year 2020 core outlook.

Speaker Change: Ray will offer some concluding remarks.

Following the formal presentation, we would be happy to take your questions now I'd like to invite ray to begin.

Raymond Scott: Thanks, Ed. Please turn to slide five, which highlights key financial metrics for the fourth quarter and full year 2023. They generated record revenue in 2023 of $23.5 billion, an increase of 12% from 2022. Core operating earnings grew by 29% to $1.1 billion. Adjusted earnings per share was $12.02, an increase of 38%.

Ray: Thanks, Ed.

Ray: Please turn to slide five which highlights key financial metrics for the fourth quarter and full year 2023.

Ray: They're generated record revenue in 2023 or $23 $5 billion, an increase of 12% from 2022.

Core operating earnings grew by 29% to $1 $1 billion.

Ray: Adjusted earnings per share was $12.02, an increase of 38% operating cash flow improved by 22%.

Raymond Scott: Operating cash flow improved by 22% to over $1.2 billion, and we've exceeded our free cash flow conversion target of 80%. Slide six illustrates key business and financial highlights for 2023. The acquisition of IGB increased our thermal comfort capabilities and allowed us to accelerate the development of our modular seating solution.

Ray: To over $1 $2 billion.

Ray: We exceeded our free cash flow conversion target of 80%.

Ray: Slide six illustrates key business and financial highlights from 2023.

Ray: The acquisition of <unk> G. B increased our thermal comfort capabilities allowed us to accelerate development of our modular modular seating solutions.

Raymond Scott: Customer interest continues to grow. We have 15 projects in process with 11 customers to replace individual components with modular solutions. Additionally, 12 of our customers have agreed to allow Lear to source the thermal comfort components for 18 different complete seat programs.

Ray: Customer interest continues to grow.

Ray: We have 15 projects in process with 11 customers to replace individual components with modular solutions.

Ray: 12 of our customers have agreed to allow lear to source the thermal comfort components for 18 different complete seat programs.

Raymond Scott: This control allows us to grow the sales of our thermal comfort products and continues to differentiate our complete seat systems from competitors, supporting further market share gains. We successfully launched production of the complete seats for the Wagoneer and the Grand Wagon, an unprecedented conquest award that we took over mid-program. In these systems, we won over $1 billion in new business awards for the third consecutive year and are making progress on diversifying our customer base. We've won significant awards with General Motors and Solana. We won our first wiring program with BMW.

Ray: This control allows us to grow the sales of our thermal comfort products.

Ray: And continues to differentiate our complete seat systems from competitors supporting further market share gains.

Ray: We successfully launched production.

Ray: Oh, the complete seats for the Wagoneer and Grand Wagoneer and unprecedented conquest award that we took over mid program.

Ray: In E systems, we won over $1 billion of New business Awards for the third consecutive year, and we're making progress on diversifying our customer base.

Ray: One significant awards with general Motors in salons, we want our first wiring program with BMW.

Raymond Scott: And we received additional awards from a large global EVOEM, as well as Renault and Geely. Total company sales were a record, while our core operating earnings improved year over year for the fourth consecutive quarter, driven by continued improvement in each system's margins. Our strong performance in cash conversion allowed us to accelerate the pace of share repurchase. Through the second half of the year, we repurchased over $175 million worth of stock in the fourth quarter for a total of $313 million in 2023. Industry publications continue to recognize Lear for excellence in quality and culture, including our most recent award last week when Fortune Magazine named Lear as one of the most admired companies for the eighth consecutive year.

Ray: We received additional awards from a large global E D OEM as well as Renault and Gili.

Ray: Total company sales were a record while our core operating earnings improved year over year for the fourth consecutive quarter driven by continued improvement in E systems margins.

Ray: Our strong performance in cash conversion allowed us to accelerate the pace of share repurchases through the second half of the year.

Ray: We repurchased over $175 million worth of stock in the fourth quarter.

Ray: Total of $313 million in 2023.

Ray: Industry publications continue to recognize layer for our excellence in quality and culture.

Ray: Clothing, our most recent award last week when Fortune magazine named Lear is one of the most admired companies for the eighth consecutive year.

Raymond Scott: Flight seven highlights some of our upcoming key launches in seating. We have launches in all of our key regions with a wide range of customers. In 2020, the 2024 launches include a combination of next-generation vehicles, replacing outgoing models where we are the current supplier, as well as several brand new vehicles. In addition to assembling the complete seat, we provide a variety of vertically integrated components such as foam, trim, and thermal comfort products. The Hyundai Santa Fe is the first vehicle with a production application for our Flex Air, a fully recyclable foam alternative.

Ray: Slide seven highlights some of our upcoming key launches in seating we have launches in all of our key regions with a wide range of customers.

Ray: In 2000 22024 launches include a combination of next generation vehicles, replacing outgoing models, where we.

Ray: Where we are the current supplier as well as several brand new vehicles.

Ray: In addition to assembling the complete seat would provide a variety of vertically integrated components, such as foam trim and thermal comfort products.

Ray: Hyundai Santa Fe is the first vehicle with a production application for our flex air.

Ray: Fully recyclable form alternative.

Raymond Scott: Flex Air will be utilized in the Santa Fe's third row seat. We have a longstanding relationship with Honda and are their largest independent seat supplier with about 40% of their external business. We have several launches for BYD this year, including the Sea Lion, as we continue to expand with this fast-growing Chinese automaker. Turning to slide 8, I will touch on key product launches in each system. Several programs are launching with Lear's high-voltage and low-voltage wiring and connections, as well as key electronic components across all of our key regions.

Ray: Flex are where you it will.

Ray: We will be utilized in the Santa Fe's third roll cap rest.

Ray: We have a long standing relationship with Honda.

Ray: And are the largest independent seat supplier with about 40% of their external business.

Ray: We have several launches for BYD this year, including the C line as we continue to expand with SaaS growing Chinese automaker.

Ray: Turning to slide eight I will touch on key product launches in each systems. Several programs are launching with lear's high voltage and low voltage wiring and connection systems as well as key electronic components across all of our key regions. We continue to grow with mobile we supply wiring in electronics.

Raymond Scott: We continue to grow with Volvo. We supply wiring and electronics on several nameplates across their CMA and their SPA2 platform. Electronic sets of the high power junction box are leveraged across both hybrid and fully electric vehicles, providing a balanced exposure across these growing powertrains.

Ray: Several nameplates across their CMA and their spa two platforms.

Ray: Electronics, such as the high power junction box are leveraged across both hybrid and fully electric vehicles, providing a balanced exposure across these growing powertrains.

Raymond Scott: Later this year, our BDU will launch on the RAM 1500 REV, solidifying our position as a leader in high-performance BDUs. 2023 was our third straight year with over $1 billion of business awards in these systems. Approximately 80% of those awards are programs that are new to Lear, which will further grow and diversify our business over the coming years. Turning to slide nine, I will illustrate key Lear innovations we are bringing to market this year. Late last year, we began delivering production parts for the InterCell Connect board to support GM's launch of the Altium platform.

Ray: Later, this year or be Btu will launch on the on the Ram 1500, Rep solidifying our position as a leader in high performance beat us.

Ray: 2023 was our third straight year with over $1 billion of business Awards in these systems.

Ray: Approximately 80% of those awards and programs that are new to Lear, which will further grow and diversify our business over the coming years.

Ray: Turning to slide nine illustrates key Lear devote the adult developed innovations we are bringing to market this year.

Ray: Late last year, we began delivering production parts for the Intercell connect board to support Gm's launch of the Alteon platform.

Raymond Scott: Volumes for the ICB will grow with the launch and ramp of additional Altium-based vehicles. We're leveraging our engineering expertise along with our molding and stamping capabilities to pursue opportunities to supply ICBs at lower costs. We anticipate these programs will be awarded later this year. Meanwhile, we are launching two new sustainable products in 2024, FlexAir and RenewNit. The first commercial application of our FlexAir material will be for the calf rest in the all-new Hyundai Santa Fe. The 29 development projects we have with 13 OEMs for the application of FlexAir throughout the vehicle seating system is evidence of the tremendous customer demand for this very innovative new product. FlexAir is a 100% recyclable alternative to molded urethane cushions.

Ray: Volumes for the ICB B will grow with the launch and ramp of additional Altium based vehicles.

Ray: We're leveraging our engineering expertise, along with our molding and stamping capabilities to pursue opportunities to supply icb's to additional customers.

Ray: We anticipate these programs would be awarded later this year.

Ray: Proceeding we are watching two new sustainable products in 2020 for flex there.

Ray: Reunion.

The first commercial application of our flex their material will be for the cat risks and the all new Honda is Santa Fe.

Ray: 29 development projects, we have with 13 Oems for application of flex there throughout the vehicle seating system is evidence of the tremendous customer demand for this very innovative new product.

Ray: <unk> is 100% recyclable alternative to molded urethane cushion it provides up to 20% reduction in weight and up to 50% reduction in carbon dioxide emissions.

Raymond Scott: It provides up to 20% reduction in weight and up to 50% reduction in carbon dioxide emissions. Additionally, its open air structure has better cooling and ventilation characteristics than urethane, further improving the performance of our thermal comfort modules. FlexAir is an attractive, sustainable alternative for the roughly $4.5 billion foam market, which we believe will support continued growth of our component business. Our exclusive license for automotive applications, along with 190 patents we have filed, creates a competitive moat around this very innovative technology. We're also starting production for RenewNet, which is launching with three different OEMs this year. Our suede alternative is the first-to-market automotive textile that is fully recyclable at the end of its life.

Ray: It's open here structure has better cooling and ventilation characteristics than urethane further improving the performance of our thermal comfort modules.

Ray: <unk> is an attractive sustainable alternative for the roughly $4 $5 billion phone market, which we believe will support continued growth of our component business.

Ray: There is an exclusive license for automotive application along with 190 patents, we have filed creates a competitive moat around this very innovative technology.

Ray: We're also starting production for renew net which is launching with three different Oems this year.

Ray: Our suede alternative is the first to market automotive textile that is fully recyclable at the end of its life, we're seeing tremendous interest from our customers for sustainable alternative fabrice.

Raymond Scott: We are seeing tremendous interest from our customers for sustainable, alternative fabrics. Renewing It is also a finalist for the Automotive News Pace Award. Once again, demonstrating our ability to develop and bring innovative products to market and add value for our customers. These innovative products, combined with Lear's competitive positioning as a leader in seeding, will allow us to achieve our revenue growth targets while continuing to increase operating margins and Financial Returns. Now please turn to slide 10, which shows our 2024 to 2026 sales backlog of approximately $2.8 billion. As a reminder, our course sales backlog only includes awarded programs.

Ray: Renewing it is also a finalist for the automotive news pace Award.

Ray: Once again, demonstrating our ability to develop and bring innovative products to market and add value for our customers.

Ray: These innovative products combined with <unk> competitive positioning is a leader in seating will allow us to achieve our revenue growth targets, while continuing to increase operating margins.

Ray: And financial returns.

Ray: Now please turn to slide 10, which shows our 2024 to 2026 sales backlog of approximately $2 $8 billion.

Ray: As a reminder, our core sales backlog includes only awarded programs net.

Raymond Scott: Net of any lost business and programs rolling off. It excludes pursued business, net new business in our non-consolidated joint ventures, and the roll-off of discontinued product lines in each system. Due to the slower pace of the industry transition to electrification, we now anticipate lower volumes on several of our key customers' new programs as compared to what we assumed last year. By continuing to win new business, we have maintained a three-year backlog that is a similar size to that of did last year, despite the significant changes in volume assumptions. The $2.8 billion backlog is roughly in line with last year's backlog and is well balanced across the three years. However, 2025 is impacted by the assumed roll-off of several ICE vehicles that may or may not come to fruition, depending on the pace of the EV transition. At $800 million, the third year of our backlog is higher than a typical third year.

Ray: Net of any loss business and programs rolling off it excludes pursued business net new business in our non consolidated joint ventures, and the roll off of the discontinued product lines in each systems.

Ray: Due to the slower pace of the industry transition to electrification, we now anticipate lower volumes on several of our key customers' new programs new programs.

Ray: As compared to what we assumed last year by continuing to win new business. We have maintained a three year backlog that is a similar size to that of.

Ray: To that last year, despite the significant changes in volume assumptions.

Ray: The $2 $8 billion backlog is roughly in line with last year's backlog and is well balanced across the three years two.

Ray: 2025 is impacted by the assumed roll off of several ice vehicles that may or may not come to fruition depend.

Ray: Depending on the pace of the E V transition.

Ray: At $800 million the third year of our backlog is higher than a typical third year, we expect that to increase further as customers continue to source new programs launching in 2026.

Raymond Scott: We expect that to increase further as customers continue to source new programs launching in 2026. In addition to the consolidated backlog, the 2024 through 2026 sales backlog at our non-consolidated joint ventures continues to grow. Our three-year backlog at our non-consolidated joint ventures increased approximately 70% from last year to about $650 million.

Ray: In addition to the consulted.

Ray: Consolidated backlog the 2024 through 2026 sales backlog at our non consolidated joint ventures continues to grow.

Ray: Our three year backlog at our non consolidated joint ventures increased approximately 70% from last year to about $650 million. The growth was largely driven by the continued business wins would be wide, which represents more than 50% of our non consolidated backlog.

Raymond Scott: The growth is largely driven by the continued business wins with BYD, which represents more than 50% of our non-consolidated backlog. We continue to win new business with a diverse set of customers. And the appendix of the presentation is a breakdown of our total sales by customer for 2023 and our expected distribution in 2027. It illustrates the continued diversification and growth we have with key customers such as BYD, Global EV, OEM, and so on. Now, I'd like to turn the call over to Jason for a financial review. Thanks, Ray.

Ray: We continue to win new business with a diverse set of customers in the appendix of the presentation is a breakdown of our total sales by customer for 2023.

Ray: Our expected distributions in 2027 illustrates the continued diversification and growth we have with key customers such as BYD, a global E E V OEM install honest.

Ray: Now I'd like to turn the call over to Jason for a financial review.

Jason Carter: Thanks right.

Jason Cardew: Slide 12 shows vehicle production and key exchange rates for the fourth floor. Global production increased 9% compared to the same period last year and was up 7% on a Lear sales-weighted basis. Production volumes increased by 5% in North America, 7% in Europe, and 18% in China. From a currency standpoint, the U.S. dollar weakened against the Euro but strengthened against the RMB compared to 2022.

Jason Carter: Slide 12 shows vehicle production in key exchange rates for the fourth quarter.

Jason Carter: Global production increased 9% compared to the same period last year and was up 7% on alere sales weighted basis.

Jason Carter: Production volumes increased by 5% in North America, 7% in Europe, and 18% in China.

Jason Carter: From a currency standpoint U S dollar weakened against the euro strengthened against the RMB compared to 2022.

Jason Cardew: Slide 13 highlights Lear's growth compared to the market for the full year, as well as for the fourth quarter, and summarizes our growth relative to the market over the past four years. For the full year, total company growth was one percentage point, with seeding flat, and each system growing four points above the mark. This is largely in line with expectations as we anticipated the strong mixed experience over the last several years to normalize, as well as the negative impact of the UAW strike. Looking at our full year growth by region in 2023, Europe's growth over market was six points, with both business segments benefiting from higher volumes on the Land Rover, Range Rover, and Range Rover Sport. New Conquest programs, such as the BMW 5 Series in seating, as well as new business with the global EVOEM, BMW, Renault, and Mercedes in these systems contributed to the strong growth in the region. North America revenue growth underperformed the market by four percentage points, driven by an unfavorable platform mix and the impact of the UAW strike. In China, revenue growth underperformed the market by 3 percentage points, driven by an unfavorable platform mix.

Jason Carter: Slide 13 highlights lear's growth compared to the market for the full year as well as for the fourth quarter and summarizes our growth relative to the market over the past four years.

Jason Carter: For the full year total company growth over market was one percentage point, what seeding flat any systems growing four points above market.

This was largely in line with expectations as we anticipated the strongbox experience over the last several years to normalize as well as the negative impact of the UAW strike.

Jason Carter: Looking at our full year growth by region in 2023, Europe growth over market was six points with both business segments benefiting from higher volumes on the land Rover range Rover and range Rover sport.

Jason Carter: Conquest programs, such as the BMW five series and seeding.

Jason Carter: As well as new business with the global E V O E M BMW Renault and Mercedes in E systems contributed to the strong growth in the region.

Jason Carter: North America revenue growth underperformed the market by four percentage points, driven by unfavorable platform mix and the impact from the UAW strike.

Jason Carter: In China revenue growth underperformed the market by three percentage points driven by unfavorable platform mix.

Jason Cardew: The next shift to domestic Chinese automakers accelerated in 2023. We continue to win new business with domestic automakers such as BYD, Geely, Chang'an, Great Wall, and others, which will further improve our customer mix in China going forward. For the fourth quarter, total company growth flagged the market by two percentage points. However, excluding the impact of the UAW strike, total company sales growth would have been in line with the overall market.

Jason Carter: Mix shifts to domestic Chinese automakers accelerated in 2023.

Jason Carter: We continue to win new business with domestic automakers, such as BYD Geely Chang on great wall, and others, which will further improve our customer mix in China going forward.

Jason Carter: For the fourth quarter total company growth lagged the market by two percentage points.

Jason Carter: However, excluding the impact of the UAW strike total company sales growth would've been in line with the overall market.

Jason Cardew: Looking at our growth over the market over the last several years, our average annual growth in each segment has been in line with our long-term targets, receding that four percentage points, any system at six. Turning to slide 14, I'll highlight our financial results for the fourth quarter of 2020. Sales increased 9% year over year to $5.8 billion, excluding the impact of foreign exchange, commodities, and acquisitions.

Jason Carter: Looking at our growth over market over the last several years, our average annual growth in each segment has been in line with our long term targets with C. D. Net four percentage points any systems at six percentage points.

Jason Carter: Turning to slide 14, I will highlight our financial results for the fourth quarter of 2023.

Jason Carter: Sales increased 9% year over year to $5 8 billion, excluding the impact of foreign exchange commodities and acquisitions.

Jason Cardew: Sales were up 5%, reflecting the addition of new business in both. We're operating earnings were $288 million compared to $265 million last year. The increase in earnings resulted primarily from the addition of U.S. Adjusted earnings per share improved to $3.03 as compared to $2.81 a year ago, primarily reflecting higher earnings and the benefit of our share repurchase formula. Operating cash flow generated in the quarter was $570 million compared to $537 million in 2020. The increase in operating cash flow was due to higher earnings and an improvement in working capital, partially offset by higher cash. Slide 15 explains the variance in sales and adjusted operating margins in the seating segment. Sales for the fourth quarter were $4.3 billion, an increase of 306 million, or 8% from 2022, driven primarily by our strong backlog. Excluding the impact of commodities for exchange and acquisition, sales were up 4%.

Jason Carter: We're up 5%, reflecting the addition of new business in both segments.

Jason Carter: Core operating earnings were $288 million compared to $265 million last year.

Jason Carter: The increase in earnings resulted primarily from the addition of new business.

Jason Carter: Adjusted earnings per share improved to $3.03 as compared to $2 81, a year ago.

Jason Carter: Primarily reflecting higher earnings and the benefit of our share repurchase program.

Jason Carter: Operating cash flow generated in the quarter was $570 million compared to $537 million in 2022.

Jason Carter: The increase in operating cash flow was due to higher earnings and an improvement in working capital, partially offset by higher cash taxes.

Jason Carter: Slide 15 explains the variance in sales and adjusted operating margins in the seating segment.

Sales for the fourth quarter were $4 $3 billion, an increase of 306 million or 8% from 2022, driven primarily by our strong backlog.

Jason Carter: Excluding the impact of commodities foreign exchange and acquisitions sales were up 4%.

Jason Cardew: The estimated impact of the UAW strike in the fourth quarter and seeding was $129 million, or approximately 3%. Key backlog programs include the BMW 5 Series and i5 and the Dodge Hornet in Europe, the Wagoneer and Mercedes EQE SUV in North America, as well as the Geely Zeker 009 in China. Corp Operating Earnings improved to $294 million, or up $19 million or 7% from 2022, with adjusted operating margins of 6.8%. However, operating margins were flat compared to last year as the benefit of our margin-accreted backlog was offset by the impact of acquisitions and foreign exchange.

Speaker Change: Yes, we had an impact of the UAW strike in the fourth quarter, and sitting with $129 million or approximately 3%.

Speaker Change: Keep backlog programs include the BMW five series and <unk> five in the dashboard it in Europe.

Speaker Change: The wagoneer and Mercedes EQ, we should be in North America, as well as the Chile, Zika or 009 in China.

Speaker Change: Core operating earnings improved to $294 million or up $19 million or 7% from 2022 with adjusted operating margins of six 8%.

Speaker Change: Operating margins were flat compared to last year as the benefit of our margin accretive backlog was offset by the impact of acquisitions and foreign exchange.

Jason Cardew: Slide 16 explains the variance in sales and adjusted operating margins in these system sets. Sales for the fourth quarter were $1.5 billion, an increase of 164 million, or 12% from 2022. Excluding the impact of foreign exchange and commodities, sales were up 11%, driven primarily by our strong background.

Speaker Change: Slide 16 explains the variance in sales and adjusted operating margins in E systems segment sales.

Speaker Change: Sales for the fourth quarter were $1 $5 billion, an increase of $164 million or 12% from 2022.

Speaker Change: Excluding the impact of foreign exchange and commodities sales were up 11% driven primarily by our strong backlog.

Jason Cardew: The estimated impact of the UAW strike in the fourth quarter on each system was $44 million, or approximately $3 billion. Key backlog programs include the Chevrolet Seeker and Buick and Vista SUVs in Asia, an electric vehicle with a global EV OEM in Europe and North America, Renault-Mitsubishi plug-in hybrid electric vehicles in Europe, as well as the Chevrolet Blazer EV and Ford Super Duty truck in North America. Core operating earnings improved to $84 million, or 5.6% of sales, compared to $64 million and 4.8% of sales in 2022. The improvement in margins reflected our margin-accretive backlog and strong net operating performance, including resolution of key commercial negotiations with customers, facilitating cost recovery, and the benefit of restructuring savings. Moving to slide 17, we highlight our history of deploying capital to drive shareholder value.

Speaker Change: We estimated impact of the UAW strike in the fourth quarter in E systems was $44 million or approximately 3%.

Speaker Change: He backlog programs include the Chevrolet Seeker, and Buick and Vista, Suvs and Asia Electric vehicle with a global EV Oems in Europe, and North America Renault Mitsubishi plug in hybrid electric vehicles in Europe, as well as the Chevrolet Blazer E B and Ford Super duty truck in North America core.

Speaker Change: Operating earnings improved to $84 million or five 6% of sales compared to $64 million and four 8% of sales in 2022.

Speaker Change: The improvement in margins reflected a margin accretive backlog and strong net operating performance, including resolution of key commercial negotiations with customers facilitating cost recovery and the benefit of restructuring savings.

Speaker Change: Moving to slide 17, we highlight our history of deploying capital to drive shareholder value over.

Jason Cardew: Over the last few years, we've made strategic investments to expand our vertical integration capabilities to support growth and accelerate operations. We will continue to focus on organic and modest inorganic investments that drive improvements in automation and plant efficiency. In the fourth quarter of 2023, S&P upgraded Lear to a BBB rating with a stable outlook. We also extended the maturity of our $2 billion credit agreement by one year to 2027.

Speaker Change: Over the last few years, we've made strategic investments to expand our vertical integration capabilities to support growth and accelerate operational excellence. We will continue to focus on organic and modest inorganic investments to drive improvements in automation in plant efficiencies.

Speaker Change: In the fourth quarter of 2023, S&P upgraded layer to a triple b rating with a stable outlook.

Speaker Change: We also extended the maturity of our $2 billion credit agreement by one year to two.

Speaker Change: 2027.

Jason Cardew: These actions further solidify our already strong balance sheet. A renewed focus on generating cash flow is driving immediate results. In 2023, we significantly exceeded our target of 80% free cash flow conversion, which enabled us to accelerate our share repurchases in the second half of the year. We remain committed to returning excess cash to our shareholders. During the year, we repurchased $313 million worth of stock.

Speaker Change: These actions further solidify our already strong balance sheet.

Speaker Change: Our renewed focus on generating cash flow driving immediate results in 2023, we significantly exceeded our target of 80% free cash flow conversion, which enabled us to accelerate our share repurchases in the second half of the year.

Speaker Change: We remain committed to returning excess cash to our shareholders during the year, we repurchased $313 million worth of stock, reducing our shares outstanding by 4%.

Jason Cardew: Producing our shares outstanding by 4%. Including dividends, we returned approximately half a billion dollars to shareholders in 2023. $175 million of shares were repurchased in the fourth quarter, more than the first three quarters combined.

Speaker Change: Including dividends, we returned approximately half a billion dollars to shareholders in 2023.

Speaker Change: $175 million of shares were repurchased in the fourth quarter more than the first three quarters combined this share count reduction will help accelerate EPS growth in 2024.

Jason Cardew: This share count reduction will help accelerate EPS growth in 2024. With our current share repurchase authorization, we have approximately $900 million dollars remaining, which allows us to repurchase shares through the end of this year...

Speaker Change: Our current share repurchase authorization had approximately $900 million remaining which allows us to repurchase shares through the end of this year.

Jason Cardew: Please turn to slide 18. Last year, we introduced the Lear Forward Plan. The plan is focused on driving efficiencies in our plants and across our sector. We executed several programs through the course of the year that improved efficiency and increased the long-term flexibility in our manufacturing facility. To optimize our low-cost footprint, we continue to expand our North African operations. We recently opened a facility to expand our connection systems capabilities to support our European operations and started initial production of thermal comfort products at a second facility. Building on the progress we made in 2023, this year, we will continue to focus on increasing the level of automation in our plants to drive further efficiency to help offset global wages. The acquisitions of Thegora and InTouch have resulted in increased efficiency, reduced waste, and improved quality.

Speaker Change: Yeah.

Speaker Change: Please turn to slide 18.

Speaker Change: Last year, we introduced the Leer forward plan. The plan is focused on driving efficiencies in our plants and across our segments. We executed several programs through the course of the year that improve efficiency and increase the long term flexibility at our manufacturing facilities.

Speaker Change: To optimize our low cost footprint, we continue to expand our North African operations. We recently opened a facility to expand our connection systems capabilities to support our European operations and started initial production of thermal comfort products at a second facility.

Speaker Change: Building on the progress we made in 2023. This year, we will continue to focus on increasing the level of automation in our plants to drive further efficiencies to help offset global wage inflation.

Speaker Change: The acquisitions of the Gora and Intouch have resulted in increased efficiency reduced waste and improved quality.

Jason Cardew: We have a pipeline of organic and inorganic initiatives that our team is focused on executing in 2024. The Lear Forward Plan generated cost savings of more than $50 million in 2020. We estimate the opportunities we are pursuing in 2024 can generate an incremental $50 million in annual savings, with larger savings anticipated in 2025 and beyond. These initiatives, combined with commercial recoveries, are critical to helping offset the impact of global waves and climate change.

Speaker Change: We have a pipeline of organic and inorganic initiatives that our team is focused on executing in 2024.

Speaker Change: The Alere forward plan generated cost savings of more than $50 million in 2023.

Speaker Change: We estimate the opportunities we are pursuing in 2024 can generate an incremental $50 million in annual savings with larger savings anticipated in 2025 and beyond.

Speaker Change: These initiatives combined with commercial recoveries are critical to helping to offset the impact of global wage inflation.

Jason Cardew: Actions taken through the Lear Corp plan also help maximize cash flow generation. By realigning our capacity, we can adjust to changes in production schedules and reduce the capital intensity of our business. This was evident in our 2023 results, and their capital expenditures were 2.7% of sales, well below our average over the last five years of roughly 3% of sales. Projects we implemented in 2023 helped us achieve free cash flow conversion of 90% while in excess of our 80% target.

Speaker Change: Actions taken through the Leer forward plan also help maximize cash flow generation.

Speaker Change: Realigning our capacity, we can adjust to change changes in production schedules and reduced capital intensity of our business.

Speaker Change: This was evident in our 2023 results as our capital expenditures were two 7% of sales well below our average over the last five years of roughly 3% of sales.

Speaker Change: Projects, we implemented in 2023 helped us achieve free cash flow conversion of 90% well in excess of our 80% target.

Jason Cardew: Slide 20 provides detail on our outlook for 2020. Now shifting to our 2024 outlook, slide 19 provides global vehicle production times and currency assumptions that form the basis of our four-year outlook. We base our production assumptions on several sources, including internal estimates, customer production schedules, and S&P forecasting. At the midpoint of our guidance range, we assume that global industry production will be 1% lower than in 2023, or flat on a Lear sales-weighted basis. Our global production assumptions are generally aligned with the latest S&P forecast.

Speaker Change: Slide 20 provides detail on our outlook for 2024.

Speaker Change: Okay.

Speaker Change: [laughter].

Speaker Change: Now shifting to our 2024 outlook Slide 19 provides global vehicle production times, the currency assumptions that form the basis of our full year outlook, we base our production assumptions on several sources, including internal estimates customer production schedules and S&P forecast.

At the midpoint of our guidance range, we assume that global industry production will be 1% lower than in 2023 or flat on alere sales weighted basis.

Speaker Change: Our global production assumptions are generally aligned with the latest S&P forecast from a currency perspective, our 2024 outlook assumes an average euro exchange rate of $1 nine per euro and an average Chinese RMB exchange rate of 715 RMB to the dollar now.

Jason Cardew: From a currency perspective, our 2024 outlook assumes an average euro exchange rate of $1.09 per euro and an average Chinese RMB exchange rate of 7.15 RMB to the dollar. Now turning to... Slide 20 provides detail on our outlook for 2024. Despite our expectations for flat industry volumes, we're expecting our fourth consecutive year of higher sales, operating earnings, and earnings per share. Our revenue is expected to be in the range of $24 to $24.6 billion. At the midpoint, this would be an increase of $833 million, or 4% over 2023. This translates to growth over market of 4% for the total company, with e-systems growing 5% and seeding growing 3% over market, respectively. Operating earnings are expected to be in the range of $1.155 to $1.305 billion. At the midpoint, this would imply an increase of 10% over 2020. Adjusted net income is expected to be in the range of $730 million to $840 million. Restructuring costs are expected to be approximately $125 million.

Speaker Change: Now turning to slide 20.

Speaker Change: Slide 20 provides detail on our outlook for 2024, despite our expectations for flat industry volumes, we're expecting our fourth consecutive year of higher sales operating earnings and earnings per share.

Our revenue is expected to be in the range of 24 to $24 $6 billion at the midpoint. This would be an increase of $833 million or 4% over 2023.

Speaker Change: This translates to growth over market of 4% to the total company with E systems, growing 5% and seeding growing 3% over market respectively.

Speaker Change: Core operating earnings are expected to be in the range of 1.155 to $1 $305 billion.

Speaker Change: At the midpoint this would imply an increase of 10% over 2023.

Speaker Change: Adjusted net income is expected to be in the range of $730 million to $840 million restructuring costs are expected to be approximately $125 million.

Jason Cardew: Our outlook for operating cash flow for the year is expected to be in the range of $1.275 to $1.425 billion, and our free cash flow guidance at the midpoint is expected to increase to $675 million. At the midpoint of our outlook, free cash flow conversion would be approximately 86%, a second consecutive year in excess of our 80% target. Lear's strong focus on generating cash allows us to maintain a strong balance sheet while making organic and inorganic investments to strengthen our business, as well as to fund share repurchases to significantly reduce outstanding shares and drive growth and earnings per share. Slide 21 walks our 2023 actual results to the midpoint of our 2024 outlook. Year over year, revenue is expected to grow by more than $800 million, and adjusted margins are expected to improve by 30 basis points, due primarily to our margin-accretive backlog and strong net operating performance.

Speaker Change: Our outlook for operating cash flow for the year is expected to be in the range of 1.2 dollars 75 to $1 $45 billion and our free cash flow guidance at the midpoint is expected to increase to $675 million at.

At the midpoint of our outlook free cash flow conversion will be approximately 86% our second consecutive year in excess of our 80% target.

Speaker Change: Their strong focus on generating cash allows us to maintain a strong balance sheet, while making organic and inorganic investments to strengthen our business as well as to fund share repurchases to significantly reduce our outstanding shares and drive growth in earnings per share.

Speaker Change: Slide 21 walks, our 2023 actual results to the midpoint of our 2020 for outlook.

Speaker Change: Year over year revenue is expected to grow by more than $800 million and adjusted margins are expected to improve by 30 basis points due primarily to our margin accretive backlog and strong net operating performance.

Jason Cardew: The positive net operating performance reflects the benefit from our Lear Forward Plan and other performance improvements, partially offset by elevated wage inflation and the negative impact of transactional foreign exchange. Wage inflation is expected to be approximately $90 million greater than what we experienced in 2023. And transactional FX is expected to be a headwind of approximately $70 million, primarily as a result of the strengthening of the Mexican peso.

Speaker Change: That's a net operating performance reflects the benefit from our Leer forward plan and other performance improvements, partially offset by elevated wage inflation and the negative impact of transactional foreign exchange.

Speaker Change: Wage inflation is expected to be approximately $90 million greater than what we experienced in 2023 and transactional FX is expected to be a headwind of approximately approximately $70 million, primarily as a result of the strengthening of the Mexican peso.

Jason Cardew: The eSystems segment is expected to continue its recent performance improvement trend, with operating margins expected to increase by approximately 100 basis points in 2024. Seating operating margins are expected to increase modestly, reflecting the continuing benefit of our margin-accretive backlog, as well as the execution of our thermal comfort strategy, partially offset by the impact of lower volumes on existing platforms. We've included detailed walks to the midpoint of our guidance for seating, and any systems in the appendix. Now I'll turn it back to Ray for some closing. Thanks, Jason. Please turn to slide 23.

Speaker Change: E systems segment is expected to continue its recent performance improvement trend with the operating margin is expected to increase by approximately 100 basis points in 2024.

Speaker Change: Operating margins are expected to increase modestly, reflecting the continuing benefit of our margin accretive backlog as well as the execution of our thermal comfort strategy, partially offset by the impact of lower volumes on existing platforms.

Speaker Change: These include a detailed walks to the midpoint of our guidance proceeding many systems in the appendix now I'll turn it back to Ray for some closing thoughts. Thanks, Jason. Please turn to slide 23, 2023 was a key year of strategic execution.

Raymond Scott: 2023 was a key year for strategic execution. In seating, we closed the IGB acquisition, providing additional capabilities to our thermal comfort portfolio, which further strengthens our industry-leading competitive position. We are in validation with 11 customers for a thermal comfort modular solution. Bringing these solutions to market will accelerate the adoption of thermal comfort features more broadly to higher volume vehicles and into second and third row seating.

Speaker Change: You're seeding we closed the <unk> acquisition, providing additional capabilities to our thermal comfort portfolio, which further strengthens our industry leading competitive position.

Ray: Wherein the validate we are in validation with 11 customers for our thermal comfort modular solutions.

Ray: Bringing these solutions to market will accelerate the adoption of thermal comfort features more broadly to a higher volume vehicles and into second and third row seating.

Raymond Scott: In these systems, our execution and focus on efficiencies drove margin improvement throughout the year. We continue to focus on our core products aligned with industry trends to further improve our margin. We expect both business segments to improve growth over market performance in 2024, and we are confident in our long-term growth targets for both seeding and e-systems. We implemented Lear Forward initiatives that yielded savings in excess of our initial targets.

Ray: These systems are execution and focus on efficiencies drove margin improvement throughout the year, we continue to focus on our core products aligned with industry trends to further improve our margins.

Ray: Expect both business segments to improve growth over market performance in 2024.

Ray: And we are confident in our long term growth of our market targets in both seating and E systems.

Ray: We implemented therefore, it initiatives, which yielded savings in excess of our initial targets. Our focus this year is on accelerating automation to address wage inflation improve efficiencies in our plants.

Raymond Scott: Our focus this year is on accelerating automation to address wage inflation and improve efficiencies in our plan for 2024. Bringing innovative products to market and executing our strategy will allow us to continue to return capital to shareholders and position Lear for long-term success. And now, we'd be happy to take your questions. Ladies and gentlemen, we'll now begin that question and answer session. To ask a question, you may press the star and then one on your touch-tone telephone.

Ray: In 2024.

Ray: Bringing innovative products to market in executing our strategy will allow us to continue to return capital to shareholders and position Lear for long term success now we'd be happy to take your questions.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session to ask a question you May Press Star and then one on your Touchtone telephone you are using a speaker phone we do as you. Please pick up your handset before pressing the keys.

Operator: If you are using a speakerphone, we do ask that you please pick up your handset before pressing start. To withdraw your questions, you may press stop. Once again, that is star and then one to join the question queue. This time we'll pause momentarily to assemble the roster. Our first question today comes from Rod Lache from Wolfe Research. Please go ahead with your question. Good morning, everybody.

Speaker Change: Draw your questions you May press star into once again that is star and then one to join the question queue.

Speaker Change: I will pause momentarily to assemble the roster.

Speaker Change: Our first question today comes from Rod Lache from Wolfe Research. Please go ahead with your question.

Rod Lache: Good morning, everybody.

Rod Lache: Two questions on the guide. First of all, versus the second half of 2023 run rate and looking out to 2024. You've got about a billion dollars of revenue growth at the midpoint, and your segments are expected to deliver about 120 million of additional EBIT. Is that roughly the conversion rate that we should be expecting now that more of the growth is coming from backlog, maybe 10 or 11%. And can you maybe just, Jason, in the past you've given us a pretty helpful bridge on how you get to the targets, the 7% total company, 8% segments? Can you just refresh us as we look out beyond 2024 on how that sort of looks?

Rod Lache: Got it.

Two questions on the guide I'm, just first first of all versus the second half of 2023 run rate and looking out to 2024 <unk>.

Rod Lache: <unk> got about 1 billion one of revenue growth at the midpoint and your segments are expected to deliver about $120 million of additional EBIT is that roughly the conversion rate that we should be expecting.

Rod Lache: Now it's more of the growth is coming from backlog, maybe 10 or 11% and can you maybe just Jason in the past you've given us a pretty helpful Bridge on how you get to that.

Rod Lache: Targets of 7% total company, 8% segments can you just refresh us as we look out beyond.

Rod Lache: 'twenty 'twenty four how that that sort of looks.

Jason Cardew: Yeah, Rod, as the backlog is the primary near-term driver of growth and revenue, we would expect that to convert sort of 10, 10 to 12%. I think we're right, right in line with that. With our guidance for this year, we do believe that there is room for volume increases on existing platforms, and those will continue to convert at our typical variable margin in both segments, 15 to 20% in feeding and 25% roughly in other systems. As we look at this year, we're not anticipating volume increases on existing platforms. In fact, we have included volume reductions on a number of existing platforms in our guidance, largely aligned with the S&P forecast. So, you know, there's definitely room for that to improve even this year and certainly beyond this year. In terms of your question on 2025, Rod, I really want to stay focused on 2024 at this stage. You know, the last time we talked about 2025 was in the middle of last year when we were seeding.

Yeah, Ryan as the backlog is the primary near term driver.

Jason Carter: Our growth in revenue, we would expect that to convert sort of 10, 10% to 12% I think we're right right in line with that with.

Jason Carter: With our guidance for this year, we do believe that there is room for volume increases on existing platforms and those will continue to convert at our typical variable margin in both segments, 15% to 20% in seating and 25% roughly.

Jason Carter: Any systems as we look at this year, we're not anticipating volume increases on existing platforms and facts we have.

Jason Carter: Included volume reductions on a number of our existing platforms in our guidance largely aligned with the S&P forecast so.

Jason Carter: There is definitely room for for that to improve even this year and certainly beyond this year.

Jason Carter: In terms of your question on 2025, right I really wanted to stay focused on 2024.

Jason Carter: At this stage you know the last time, we talked about 2025.

Jason Carter: Middle of last year in seating, we've talked about 8% of our sitting at Investor day, and there's two things that are two or three things that have changed since then one wage inflation and a transactional FX a little bit more of a headwind.

Jason Cardew: We talked about 8% in our seeding investor day, and there are, you know, two things, two or three things that have changed since then. One, you know, wage inflation and transactional effects have been a little bit more of a headwind than we had anticipated at that point. EV volumes and the transition to EVs are a little bit slower than we had anticipated. However, we're also moving faster on automation and efficiencies in our plants and active negotiations with our customers. So it's a little bit difficult to try and call, you know, 25 with pinpoint accuracy at this stage.

Jason Carter: Then what we had anticipated that point.

Jason Carter: Volumes in the transition to Evs are a little bit slower than what we had anticipated, but we're also moving faster on automation.

Jason Carter: And our efficiencies in our plants and in active negotiations with our customers. So it's a little bit difficult to try and call 25 with pinpoint accuracy.

Jason Cardew: We're super focused on delivering or exceeding our 2024 guidance in both those areas. Okay, thanks for that. And just aside from production, maybe you can just give us a little bit of color as you look out to 2024. What are the biggest potential sources of upside or downside versus the midpoint of your plan? Yeah, so if we look at our guidance for this year, I think, you know, one of the biggest challenges we have is with regard to wage inflation. So maybe we should just spend a minute on that.

Jason Carter: This stage, we're super focused on delivering or exceeding our 2024 guidance in both businesses.

Jason Carter: Okay.

Speaker Change: Thanks for that and just aside from production maybe you can just give us a little bit of color. As you look out to 2024, what are the biggest potential sources of upside or downside versus the midpoint of your plan.

Speaker Change: Yeah. So if we look at our guidance for this year I think you know one of the biggest challenges. We have is in regards to wage inflation. So maybe just spend a minute on that.

Jason Cardew: You know, as we've talked about in the past, three or 4% annual wage inflation is sort of normal. We offset that through our efficiency programs in our plants, and it's certainly running considerably beyond that. At this stage, roughly 2x what we've experienced historically. And if you look at our businesses, just kind of taking a step back, you know, the impact ranges from negligible in a business like electronics, which has almost no labor, it's very automated, JIT seating, it's a relatively modest impact, but our more labor-intensive businesses like cut and sew trim, which is 35% of the seating headcount, wire You know, those are where we're seeing the greatest impact.

Speaker Change: You know as we've talked about in the past.

Speaker Change: Sort of three or 4% annual wage inflation is sort of normal we offset that through our efficiency programs.

Speaker Change: In our plants and it's it's certainly running.

Speaker Change: Considerably beyond that at this stage roughly two X what we've experienced historically and if you look at our businesses just kind of take a step back you know the impact rages from negligible on a business like electronics, which has almost no labor very automated gip seating.

Speaker Change: Relatively modest impact, but our more labor intensive businesses like cotton, so trim, which is 35% of the seating head count wire Assembly, it's 90% of the assistance head count.

Speaker Change: Those are where we're seeing the greatest impact those also tend to be businesses that have modeled pricing with our customers with explicit assumptions around labor rates, which gives us a path to eventually recovering that either directly this year or is this program's turnover certainly we would expect footwear.

Jason Cardew: Those also tend to be businesses that have model pricing with our customers with explicit assumptions around labor rates, which gives us a path to eventually recovering that either directly this year or, you know, as these programs turn over. Certainly, we would expect full recovery. And we really think that 24 represents the peak in terms of the impact of wage inflation because, globally, inflation peaked last year, and now you're seeing the full effect of that.

Speaker Change: Recovery and we really think that it's 44 represents the peak in terms of the the impact of wage inflation because globally inflation peaked last year and now you're seeing the full effect of that.

Jason Cardew: In our labor costs. And so we would expect that to moderate next year. You know, we did see higher labor inflation last year as well, just kind of look at from 22 to 23, we had a step up of roughly $60 million. But we managed to offset that largely through four initiatives. In addition to our normal efficiency programs, we had an aggressive restructuring program, moving work to, you know, from Eastern Europe to North Africa, from the border of Mexico, further inland, through automation. You have acquisitions of ASI, Intouch, and Tagora really aggressively deploying automation.

Speaker Change: In our labor costs, and so we would expect that to moderate next year.

Speaker Change: We did see higher labor inflation last year as well just kind of look at from 'twenty two to 'twenty. Three we had a step up of roughly $60 million, we managed to offset that largely through four initiatives. In addition to our normal efficiency programs. We had an aggressive restructuring program moving work to from Eastern Europe to North Africa.

Speaker Change: And from the border Mexico further inland through automation, the other acquisitions of ASI and touching the GOR I really aggressively deploying automation, therefore plan, which is improving capacity utilization in North Africa, and Mexico, and then customer recoveries, you know passing that through to our customers. So I think there maybe.

Jason Cardew: The LearForward plan, which is improving capacity utilization in North Africa and Mexico, and then customer recoveries, you know, passing that through to our customers. So I think there may be some upside to the assumption we've made around economics, either in terms of the absolute cost or the recovery. And in addition to that, you know what we're doing in terms of our automation programs, and Ray can talk a little bit more about that. I mean, there's no one more focused and passionate about this topic, I think, in the industry than Ray. Yeah, Rob, I'll share some stories with you too next week, in public, but I couldn't.

Speaker Change: Some upside to the assumption we've made around academics either in terms of the absolute cost or the recovery and in addition to that what we're doing in terms of our automation programs and Ray can talk a little bit more about that I mean theres no one more.

Speaker Change: Focused and passionate about this topic I think in the industry that right yeah.

Ray: I'll share some stories with you to next week publicly but I couldn't have been in our facilities I think the technology innovations and things that we put in place you know when you talk about upside I think that is a potential accelerator.

Raymond Scott: I've been to our facilities. I think the technology, the innovations, the things that we put in place, you know, when you talk about upside, I think that's a potential accelerator. What I'm seeing with the pilot lines we put in place around the areas Jason mentioned, our labor focus priorities are around trim and wiring. And what I saw in our wiring facilities, we're automating and doing a great job with some of the efficiencies that we're getting in our plants.

Ray: What im seeing with the pilot lines, we put in place around the areas. Jason mentioned, you know our labor focus priorities are around trim and wiring and what I saw in our wiring facilities, we're automating in and doing a great job with some of the.

Ray: The efficiencies that we're getting are playing Tonight and dimension I think what's important to the capital that we're looking at a significantly lower cost. So it is not only improving from an efficiency within our plants. The capital that's coming online is significantly lower than what we're seeing from traditional capital. So we're getting to I think really good benefits you saw that last year.

Raymond Scott: And to mention, I think what's important too, the capital that we're looking at is significantly lower cost. So it's not only improving efficiency within our plants, but the capital that's coming online is significantly lower than what we're seeing from traditional capital. So we're getting two, I think, really good benefits.

Raymond Scott: You saw that last year in our capital spend. I think that's going to continue to accelerate. I think the negotiations with our customers, you know, we take a very balanced approach to the year, starting off in January. We're in heavy discussions with our customers on all kinds of different issues relative to the pause in EVs and what we're seeing with labor economics. You know, I think we're balanced.

Ray: And our capital spend and I think that's going to continue to accelerate I think the negotiations with our customers. We take a very balanced approach to the year starting off in January we're in heavy discussions with our customers on all kinds of different issues relative to the pause in evs to what we're seeing.

Ray: You know labor economics.

Raymond Scott: I think some of those we're going to be very aggressive on. Those, I think, could help significantly quicker than maybe the second half of this year, when we do take a balanced approach in the beginning. I think volume.

Ray: I I think we're balanced I think some of those we're going to be very aggressive on those I think could help significantly.

Ray: Quicker than maybe maybe the yield in the second half of this year that when we do take a balanced approach in that in the beginning I think volume I think we looked at volume.

Raymond Scott: I think we've looked at volume very conservatively. I think, you know, right now, our customers are retrenching a little bit with this pause in EV. We're hearing a lot from our inside customers about how they're going to look at their powertrains, what that might impact as far as ICE vehicles. We've gotten some feedback that they'll formalize it here in the near future.

Ray: Very conservatively I think right now our customers are retrenching, a little bit with this pause in E. D. We're hearing a lot from our inside the customers of how theyre going to look at.

Ray: They're they're powertrains, what that might impact as far as ice vehicles. So we've gotten some feedback that they'll formalize it here in the near future. If ice continues to accelerate in some of our platforms that we've been a little bit more bearish on because that's the information we have that as a nice little tailwind for us So I think.

Raymond Scott: If ICE continues to accelerate and some of our platforms that we've been a little bit more bearish on because that's the information we have, that's a nice little tailwind for us. So I think we have some opportunities here. But we are pushing very aggressively, but we do have a very balanced approach, especially coming out in January, Rodney. We've been absorbing a lot of EV changes quickly and then really giving a little bit more of a bearish look to what the alternatives will be. And so that could be a nice, nice boost for us. Great, thanks for the insight. Our next question comes from Dan Levy from Barclays. Please go ahead with your question.

Ray: We have some opportunities here.

Ray: But we are pushing very aggressively but we do have a very balanced approach, especially coming out in January rod you know we've been absorbing a lot of these EV changes quickly and then really getting a little bit more bearish look to what the alternatives will be and so that could be a nice nice boost for us.

Speaker Change: Thanks for the insights.

Ray: Yep.

Ray: Our next question comes from Dan Levy from Barclays. Please go ahead with your question.

Dan Levy: Hi, good morning, thanks for taking the question. I wanted to go back and continue the line of questions on the guide, and maybe you could just comment a bit on two components there. One is, I think you said, $70 million of FX and, Um, is that just purely transactional, uh, you know, does that just reflect hedges on unwinding? And maybe you could talk about, I think you mentioned it, on the commercial recoveries piece, but what are you assuming as far as pricing within each of the segments? Is this returning to the typical, call it, you know, 1.5% price downs in seeding, and 2-ish percent in e-systems, so maybe just some commentary on the pricing environment. Sure, yeah, let me start with FX, and it may be helpful just to kind of take a step back and explain our transactional FX exposures overall and our strategy. So the Mexican peso is our most significant exposure by far. We have a little more than 1 billion, I think 1.1 billion of the exposure last year that grows to 1.2 billion or so in 2024.

Hi.

Dan Levy: Good morning, Thanks for taking the question I don't know Dan wanted to Hey morning.

Dan Levy: I wanted to go back to continue to the line of questions.

Dan Levy: On the guide and maybe you could just comment a bit.

Dan Levy: Two components in there one is I think you said $70 million of FX in there.

Dan Levy: Is that just purely transactional.

Dan Levy: Does that just reflect hedges unwinding and maybe you could talk about I think you mentioned it briefly.

Dan Levy: On the commercial recoveries piece, but what are you assuming as far as.

Dan Levy: Pricing within each of the segments and just returning to the typical call. It one 5% price downs in seating two ish percent in E.

Dan Levy: E systems maybe.

Dan Levy: Some commentary on the pricing environment as well.

Sure Yeah, let me start with FX and it may be helpful. Just to kind of take a step back and explain our transactional FX exposures overall in our strategy to the Mexican peso is our most significant exposure by far we have had a little more than 1 billion I think $1 1 billion exposure last year that.

Dan Levy: Rose to $1 2 billion or so.

Dan Levy: 2024, and we have a very effective hedging program, which really protected us last year and it also helps us again this year.

Jason Cardew: And we have a very effective hedging program which really protected us last year, and it also helps us again this year. I'm not going to go through all the details of the program for competitive reasons, but I will say generally that we lay around hedges on a multi-year basis. And at the beginning of last year and again at the beginning of this year, we had hedges in place for roughly 85% of our exposure, including the peso. And again, that served us very well last year, in particular. Transactional FX on the Mexican peso negatively impacted operating margins and earnings last year by 10 basis points and $20 million, respectively.

Dan Levy: And that goes through all the details of the program for competitive reasons, but I will say generally we layer on hedges on a multiyear basis and at the beginning of last year and again the beginning of this year.

Dan Levy: Had hedges in place for roughly 85% of our exposure, including the peso.

Dan Levy: Again that served us very well last year in particular.

Dan Levy: Transactional FX on the Mexican peso negatively impacted.

Operating margins in earnings last year by 10 basis points with $1 million, respectively. So it was fairly insignificant.

Jason Cardew: So it was fairly insignificant in terms of the operating margin impact. There was another $10 million of exposure on balance sheet related FX expense that hit on the other line, which impacted EBIT by another $10 million. So the Mexican peso overall, between operating earnings and other expenses, impacted EBIT by $30 million last year.

Dan Levy: In terms of the operating margin impact there was another $10 million.

Dan Levy: Our exposure on balance sheet.

Dan Levy: Related.

Dan Levy: Tax expense of it.

Dan Levy: On the other line, which impacted EBIT.

Dan Levy: By another $10 million so the Mexican peso overall between operating earnings and other expense impacted EBIT by $30 million last year.

Jason Cardew: And the balance sheet portion that was really loaded, got back unloaded in the fourth quarter when there was a lot of volatility with the peso, and that really weighed on earnings per share. It's about a ten percent impact, overall effects of a ten percent impact on earnings per share in the fourth quarter. As we look out at this year overall, our guidance, as we talked about in the prepared remarks, includes $70 million impact in operating earnings, or just under 30 basis points, 31 basis points in seeding, a little over 20 basis points in e-systems. 60 of that 70 is driven by the peso, which we've assumed will average about $17.25.

Dan Levy: And the balance sheet portion of that was really loaded backend loaded into the fourth quarter, where there's a lot of volatility with the peso and that really weighed on earnings per share is about a 10 cent impact overall effects of the 10 cent impact on earnings per share in the fourth quarter as we look out at this year overall, our guidance as we talked about it.

Dan Levy: In the prepared remarks includes $70 million $70 million impact on operating earnings of just under 30 basis points 31 basis points in seating a little over 20 basis points in E systems 60 of that 70 is driven by the peso, which we've assumed will average about 17 25, so the exposed portion the 15.

Jason Cardew: So the exposed portion, the 15%, we've assumed a rate of $17.25. That's pretty much where it has been trading over the last several months. And then we've assumed a further $30 million of impact on our balance sheet exposure. So the guidance includes $100 million total transactional FX impact, of which 60 million or 60% of that is peso related. You know, lastly, I think it's important to highlight that the peso appreciation is also embedded in our labor inflation.

Dan Levy: Percent, we've assumed a rate of 17 25, that's pretty much where it's been trading.

Dan Levy: Over the last several months and then we've assumed a further $30 million of impacts on our balance sheet exposure. So the guidance.

Dan Levy: <unk> $100 million total transactional FX impact of <unk>.

Dan Levy: 60 million or 60% of that is peso related.

Dan Levy: Now lastly, I think it's important to highlight that the peso appreciation is also embedded in our labor inflation.

Jason Cardew: And so as we're talking to our customers about the recovery of this kind of excess wage economics, there's an FX component to that as well. And ultimately, as those models are reset to reflect current exchange rates and current labor rates, we would expect the full recovery of that to take place. So some of that this year and then some of it beyond this year. And that's a little bit of what's weighing on CD margins and really margins in both segments in 2024. So you're not seeing the full benefit of all the operating improvements because it's being diluted by both wage inflation and transactional effects. In terms of our customer price drops, we're expecting a similar environment in 2024 than what we experienced in 2023. Your math is pretty close.

Dan Levy: And so as we're talking to our customers about recovery of this kind of access.

Dan Levy: Age economics there.

Dan Levy: FX component to that as well and ultimately as those models are reset to reflect current exchange rates current labor rates, we would expect the full recovery of that to take place. So some of that this year and then and then some of it beyond this year.

Dan Levy: And that's a little bit of what's weighing on the.

Dan Levy: Margins and it really margins in both segments.

Dan Levy: And in 2024, so you're not seeing the full benefit of all the the operating improvements because its being diluted by both wage inflation and transactional FX.

Dan Levy: In terms of our customer price downs, we're expecting a similar environment in 'twenty for that what we experienced in 'twenty three.

Jason Cardew: They're in terms of one and a half percent, maybe a little bit less than that. But it's important to note that it's a basket of issues that you're negotiating. And so there may be some direct reduction of that as a result of our labor inflation discussions, FX discussions, low volume discussions, EV program delay discussions, and even lingering commodities that have not been recovered from the prior year. So all of that is in play as we negotiate with our customers. But as we see this year playing out, you know, you have that contractual price down that's baked into your first quarter outlook. You had the effects of wage inflation largely hitting at the beginning of the year.

Dan Levy: Mass is pretty close there in terms of one 5%, maybe a little bit less than that but it's important to note that that it's a there's a basket of issues that you're negotiating and so there maybe some direct reduction of of that as a result of our labor inflation discussions FX discussions low volume discussion.

Dan Levy: <unk> EV program delay discussions and even lingering commodities that has not been recovered from the prior year. So all of that is in play as we negotiated with our customers, but as we see this year playing out you know you have that contractual price down that's baked into your your first quarter outlook you have.

The effects of wage inflation largely hitting it at the beginning of the year and that will weigh on margins at the start of the year and then throughout the year, we look to claw that back through those negotiations and through the execution of our operating improvement plans.

Jason Cardew: And that'll weigh on margins at the start of the year. And then throughout the year, we look to claw that back through those negotiations and through the execution of our operating improvement plan. Great. Thank you.

Speaker Change: Great. Thank you.

Dan Levy: As a follow-up, I wanted to ask about the EV strategy. And I see on your slide that it talks about the strategic initiative. There's a comment here about realigning resources under eSystems, realigning resources due to changes in EV volumes.

Speaker Change: Follow up I wanted to ask about.

Speaker Change: E <unk> strategy and I see on your on your slide that talks about you know the strategic initiatives.

Speaker Change: Common here realigning resources under E systems realigning resources due to changes in EV volumes, maybe you can just talk about what specific when you are dealing within E systems to align to this new environment. You know how much was weaker evs a weight on on the backlog and.

Jason Cardew: Maybe you can just talk about what specifically you are doing within eSystems to align to this new environment. How much weight do weaker EVs have on the backlog? You know, you issued this 8% target for eSystems margin. But how much does a lower EV environment limit your ability to get to that 8% target in 2020? Yeah, it's certainly the biggest factor that led to a lower 2024 backlog, and to a certain extent, the 2025 backlog is our assumptions around electric vehicle volumes and the timing of launches. So, in 2024, in particular, you know, we had got it to a billion and a half dollar backlog. It's now 1.2 billion people.

Speaker Change: You issued the 8% target on E systems margin.

Speaker Change: How much does.

Speaker Change: Lower EV environment limit your ability to get to that 8% 2025 targets and margin. Thank you.

Speaker Change: Yeah. It's certainly the biggest factor that led to a lower 2024 backlog add and to a certain extent for 2025 backlog.

Speaker Change: Is our assumptions around electric vehicle volumes and the timing of launches so in 2024 in particular.

Speaker Change: We had guided to a 1 billion and a half dollar backlog is now $1 2 billion I would say within our guidance range that could be anywhere from one one to $1 3 billion just depending on how closely our customers achieve their their ramp up schedules and their volumes, which are still in flux.

Jason Cardew: I would say within our guidance range, that could be anywhere from 1.1 to 1.3 billion, just depending on how closely the customers achieve their ramp-up schedules and their volumes, which are still in flux. And so yes, that is weighing on the backlog a little bit here in 2024, and it's weighing on operating margins a bit in these systems, probably more so than in seeding. And similar to the question Rod asked earlier in terms of 2025, I don't want to get into a pinpoint margin discussion about 2025.

Speaker Change: And so that yes that is weighing on the backlog.

Speaker Change: A little bit here in 'twenty, four and its weighing on operating margins a bit in E systems, probably more so.

Speaker Change: And then in seating and similar to the question Rod asked earlier in terms of 2025, I don't want to get into a pinpoint margin discussion on 2025, what we've talked about publicly.

Jason Cardew: You know, what we've talked about publicly of late with these systems is, you know, an 8% target. I think at a recent investor conference, I talked about 25, 26, maybe pushing that out a little bit just because of the lower EV volumes in the near term. And so, you know, as the year progresses, we'll provide more color in 2025, but, you know, certainly that lower volume will have an impact on these systems' margins there. In terms of what we're doing in response to the lower volumes, it's a combination of operating actions and commercial actions. And you see what happened with capital spending at the end of last year. We guided it to $675 million. We spent $50 million less than that.

Speaker Change: Of late with the systems as you know an 8% target I think.

Speaker Change: A recent Investor Conference I talked about 'twenty, five 'twenty, six maybe pushing that out a little bit just because of the lower <unk> volumes in the near term and so you know as the year progresses, we will provide more color on 25, but.

Speaker Change: Certainly that lower volumes will have an impact on E systems margins there in terms of what we're doing.

Speaker Change: In response to the lower lower volumes.

Speaker Change: It's a combination of operating actions and commercial actions and we've you see what happened with capital spending at the end of last year, we had guided to $675 million, we spent $50 million less than that we went back through every single program not just in the system, but in seating and and reevaluated.

Jason Cardew: We went back through every single program, not just in these systems, but in seeding, and reevaluated the deployment of additional capacity and found tremendous opportunity to pause a lot of that spending. So that would really help near-term returns in both segments and, I think, better position us for a slower ramp-up. And we're doing that in collaboration with our customers. Our customers are being very open about changes to their plans, and they're working with us to try and slow down that capital deployment so that they don't have that excess capital in the supply base to worry about as well. And so there's a commercial negotiation element to it.

Speaker Change: The deployment of additional capacity and found tremendous opportunity to pause a lot of that spending so that would really help kind of near term.

Speaker Change: Near term returns in both segments and I.

I think better positioned us for a slower ramp up and we're doing that in collaboration with our customers. Our customers have been very open about changes to their plans and they're working with us to try and slow down their capital deployments. So that they don't have that excess capital in the supply base to worry about as well and so and then there's a commercial negotiation Ellen.

Raymond Scott: As volumes are lower, certainly, we're having discussions with all of our customers about the impact on fixed overhead and investments that have been made previously that will result in higher prices until those volumes come back. I also think what was important, and we talked about this with these systems, was simplifying the product portfolio and seeing a little bit of this even before it occurred. I mean, obviously, it was a much more dramatic pullback or pause since it's become common with EVs, but we were ahead in some respects of really limiting what capital we would deploy. And, I think, equally as important, where we're investing our capital, our dollars, and then also scaling certain products. When we talk about a BDU, it can be a very scalable program across multiple customers. The same thing with an ICB.

Speaker Change: Two it is volumes are lower certainly, we're having discussions with all of our customers about the.

Speaker Change: The impact on fixed overhead and investments that had been made previously.

Speaker Change: Will result in higher prices until those volumes come back I also think what is important and we've talked about this with E systems is simplifying the product portfolio and seeing a little bit this even before it occurred I mean, obviously it was a much more dramatic pullback or pause as it's being called with Evs, but we were we were ahead in some.

Speaker Change: Next of really limiting what capital, we'll be deploying I think equally as important where we're investing our capital dollars and then also scaling certain products. When we talk about a btu it can be a very scalable.

Program across multiple customers same thing with nice to be and so I say it all the time not trying to be everything to everybody investing in all kinds of different solutions, but being very very disciplined and selective about where we will deploy capital and being very good at it and then I think you know that that has helped US I mean, we still have more work to do like Jason said.

Raymond Scott: And so I say it all the time, not trying to be everything to everybody, investing in all kinds of different solutions but being very, very disciplined and selective about where we will deploy capital and being very good at it. And I think that's helped us. I mean, we still have more work to do, like Jason said, on the commercial negotiation of some of these more dramatic changes within EVs, but we have that type of relationship with our customers that we are seen as an expert. And we didn't deploy capital at the request of a particular volume to hit a run rate. It was very, very selective and intentional.

On.

Speaker Change: The the commercial negotiation with some of these.

Speaker Change: More dramatic changes within <unk>, but we have that type of relationship with our customers that we are seen as an expert and we do.

Speaker Change: It Didnt deploy capital at the request of a particular volume to hit a run rate. It was very very selective intentional and so.

Raymond Scott: And so I think that helped, but simplifying that product portfolio and these systems has really helped us as this pause has come at us over the last, really, three months. Great, thank you. Our next question comes from John Murphy from Bank of America. Please go ahead with your question.

Speaker Change: That helped but simple buying that product portfolio in E systems has really helped US is this pause is come at us over the last really three months.

Speaker Change: Great. Thank you.

Our next question comes from John Murphy from Bank of America. Please go ahead with your question.

John Murphy: Good morning, guys I've got three quick ones first.

John Murphy: You know, first, if I said that global light vehicle production was going to be up roughly 2% this year as opposed to down 1% and took the midpoint of your range, you know, it would probably add about 700 million, maybe just a little bit more to the revenue outlook. If you think about that incremental 700 million and, you know, assume all else equal, what kind of contribution margin would you ascribe to that? I mean, because when you look at the low end and the high end of the range, it's indicating a 25% contribution margin. But Jason, just trying to understand what you would think of something like that.

John Murphy: First if I said that global light vehicle production that can be up roughly 2%. This year as opposed to down 1% and took the midpoint of your range.

John Murphy: It would probably add about $700 million, maybe just a little bit more to do.

John Murphy: The revenue.

John Murphy: The revenue outlook.

John Murphy: Do you think about that incremental 700 million and assume all else equal what kind of contribution margin would you.

John Murphy: Ascribe to that I mean cause them when you look at the low end and the high end the range, it's indicating a 25% contribution margin with Jason just trying to understand what you would think of or something like that and I'm, assuming a lot of this is coming in existing programs that do better than you.

Jason Cardew: And assuming a lot of this is coming in, you know, existing programs that do better than you, you're forecasting right now, or the industry is expecting. Yeah, so we would expect if volumes on existing platforms come in, you know, 700 million better, we would convert it at 15 to 20% in seeding and 25% or so in any other systems, depending on the underlying profitability of the platforms that come back, and the level of vertical integration that we have in the platforms as well. I would say that some of that volume would be on backlog programs, though, John, so that may convert at a little bit lower rate, you know, in that first year of production, sort of 10 to 15% probably, and that's where some of that guidance range is earmarked for, so to speak, some of the uncertainty around these new EB platforms.

John Murphy: You are forecasting right now in the industry is expecting.

Speaker Change: Yeah. So we would expect if volumes at existing platforms come in.

Speaker Change: You know $700 million matter, we would convert it at 15% to 20% in seating and 25% or so in any systems, depending on the underlying profitability of the platforms that come back the level of vertical integration that we have in our platforms.

Speaker Change: As well.

Speaker Change: I would say that some of that volume would be on backlog programs, though John so that may convert at a little bit lower right now.

Speaker Change: That first year of production sort of 10% to 15% probably.

Speaker Change: And that's where some of that.

Speaker Change: The guidance ranges is earmarked for so to speak as some of the uncertainty around these new EV platforms. The other factor and the reason for a little bit higher conversion on the on the range.

Jason Cardew: The other factor and the reason for a little bit higher conversion on the range is, you know, the commercial negotiations around inflation and the pace at which we can deploy our automation projects to offset wage inflation, so we've got a little wider range than we normally would have. It's fairly tight in seeding, sort of 6, 7 to 7%, but in these systems, you know, it's a little bit wider range, you know, 6% at the top and let's say 5 to 6 or 5.1 to 6% in these systems to sort of account for the impact of those commercial negotiations and the pace of the deployment of automation. That's very helpful.

Speaker Change: Is the.

Speaker Change: The commercial negotiations around inflation.

Speaker Change: The pace at which we can deploy our automation projects to offset wage inflation. So we've got a little wider range than we normally would have it's fairly tight and seeding sort of six 7% to 7%, but any systems, it's a little bit wider range, 6% at the top.

Speaker Change: Well I'd say five to six 5% to 6%.

Speaker Change: Any systems to sort of account for the impact.

Speaker Change: Impact of those commercial negotiations and the pace of deployment of automation.

Jason Cardew: And then, second quick one here on the backlog, you know, it seems like you guys have dinged and hit the backlog reasonably hard for EV push down and out but have not taken the liberty, and have not seen this necessarily from your customers, of backfilling that lost volume with ICE programs. Is that a fair statement in the way you've approached the recalculation of the backlog and there's not a backfill or a significant backfill of these ICE vehicles actually transacting and being sold and taking the place of those? Yeah, that's effectively what we did because, you know, it's a fairly conservative approach.

Speaker Change: That's very helpful. And then second quick one here on the backlog. It seems like you guys are deemed and hit the backlog reasonably hard for EV pushed down in and out but have not taken the deliberate EDI and have not seen is necessarily from your customers of back filling that that loss volume with ice programs.

Speaker Change: Is that a fair statement in the way you've approached the reach out of the backlog in and Theres, not a backfill or a significant backfill of these ice vehicles.

Speaker Change: Actually transacting and being sold in taking the place of those.

Speaker Change: Yeah, that's effectively what we've done because.

Speaker Change: It's a fairly conservative approach, but we've taken our customers guidance in terms of their plans to balance out some of their ice platforms as they ramp up their EV platforms, and then we've taken a bit of a conservative view on the volumes that some of the <unk> platform. So we may have sort of double dipped a little bit there I just gave.

Jason Cardew: But we've taken our customers' guidance in terms of their plans to balance out some of their ice platforms as they ramp up their EV platforms, and then we've taken a bit of a conservative view on the volumes of some of the new EV platforms. So we may have sort of double-dipped a little bit there. I'll just give you a couple of examples.

Speaker Change: A couple of examples we have the blazer ice a ceiling, but we don't have the blazer in D. C. D. So gms plan is as it is.

Jason Cardew: You know, we have the Blazer ice seating, but we don't have the Blazer EV seating. So GM's plan, as it sits right now, has the Blazer building out next year. So that's a backlog hit in seating that may get pushed out. And there are several programs like that, Ford with the Aviator, you know, that is assumed to build out on the ice side, and then it launches as an EV in a different plant where we don't have the production contract.

Speaker Change: That's right now has the blazer building out next year, so that that's our backlog hit in seating that's that you know me.

Speaker Change: It may get pushed out.

Speaker Change: And there are several programs like that forward with the aviator.

Speaker Change: You know that is assumed to build out on the ice side, and then launches as need be and a different plant that we where we don't have the production contract.

Jason Cardew: So I think that is sort of maybe a hidden upside to the 2025 backlog because of our sort of mechanical approach that we follow when we establish the backlog. If the customer tells us the program's building out, then we take it out of the backlog. Another example on the system side, you know, with Ford, the focus is assumed to begin winding down in 25, and it's gone in 26. There isn't a replacement for that at this stage.

Speaker Change: So I think that is sort of a maybe a hidden upside to the 2025 backlog because of our sort of mechanical approach that we follow when we established the backlog at the cost of our tells US programs building out then we take it out of the backlog. Another example on the system side for the focus is assumed.

Speaker Change: To begin.

Speaker Change: Winding down in 'twenty, five and its gone in 'twenty six there isn't a replacement for that at this stage. So that's a negative to the backlog. So theres a handful of programs like that that could lead to some kind of underlying upside in the backlog would be post.

Jason Cardew: So that's a negative to the backlog. So there are a handful of programs like that that could lead to some kind of underlying upside in the backlog. Would we post that number, you know, 12 months from now? Yeah, I think our customers, too, in probably the first two quarters will start clarifying the specifics around those types of situations. And, you know, we did take, like Jason said, a more balanced, conservative approach, given the information we have. And if there is movement, and that said, not formally, but informally, we've gotten some feedback that they are internally, across the board, looking at how they're going to position themselves between hybrids, electric vehicles, and the continuation, in some cases, of ice vehicles. And what's nice about the continuation of ice vehicles, those are usually longer in the tooth; we're usually doing a really nice job efficiently. And so, and we're with you, we hope they keep running those things.

Speaker Change: Post that number you know 12 months from today I think our customers too over the probably the first two quarters to start clarifying the specifics around those type of situations.

Speaker Change: We did take a like Jason said, a more balanced conservative approach given the information we have and if there is movement in that said.

Speaker Change: Not formally but informally we've gotten some feedback that they are internally across the board looking at how they got position between hybrid and electric vehicles and the continuation of some cases of ice vehicles and what's nice about the continuation of ice vehicles. Those are usually longer in the tooth, we're usually doing a really nice job efficiently and so.

Speaker Change: And one way that we hope they keep running those things so we will.

Raymond Scott: So, but we will, I think we'll get more clarity over the next couple of quarters as they start to kind of rebalance their own internal strategies. John, just to add one comment to that, and with both businesses sort of being power trade agnostic, if that happens, I think it's generally positive for us. To raise the last point, just to reinforce that, you know, running that capital for a year, two years, three years longer than we initially planned is good for operating margins, good for ROIC, and, on balance, good for leaner overall. I definitely agree with you. Then, just lastly, on the buyback, Jason, what was the average price you paid for the shares when you bought them back? I apologize; in the fourth quarter, I missed that.

Speaker Change: I think we'll get more clarity over the next couple of quarters here as they start to kind of rebalance their own internal strategies.

Speaker Change: John I'll, just add one comment to that and with both businesses soybean powertrain agnostic if that happens I think it's it's.

Speaker Change: Generally positive for us.

Speaker Change: Raised last point just to reinforce that we are running that capital for a year or two years three years longer than we initially planned it's good for operating margins good for ROIC and on balance good for for litter overall.

Speaker Change: Definitely agree with you and then just lastly on the on the buyback.

Speaker Change: What was the average price you bought back the shares I apologize and in the fourth quarter I missed that and as they look at the operation operating cash flow expectation for this year and just apply that 22%.

John Murphy: And as I look at the operating cash flow expectation for this year and just apply that 22% cap allocation that you did last year, it looks like there'd be $300 million, maybe a little bit more, in buybacks that might be earmarked. I mean, I know you're not doing it that directly, but it seems like that would be the number. So what was the average price in the fourth quarter and the buyback number you would think of for 2014? Yeah, I'll start with the second part. The guys in the room scramble to find that number four, I think is in the mid 130s.

Speaker Change: Cap allocation that you did last year when you it looks like there'll be $300 million, maybe a little bit more in buybacks than it might be earmarked I mean, I know you're not doing it that directly but it seems like that would be the number. So what was the what was the.

Speaker Change: The average price in the fourth quarter and the buyback number you would think of for for 2004.

Speaker Change: Yeah, I'll start with the second part is the guys in the room scramble to find that that number four I think it was in the Midland 30. So.

Jason Cardew: So, you know, we fully expect to continue to be aggressive in buying back stock and to be opportunistic as there's sort of this dislocation of value in the near term. And if you look at the free cash flow we're going to generate in 24, which is greater than 23. Yeah, there's no near-term M&A of any significance on the horizon; we do have a term loan we could take a look at that's, you know, tied to the IGB acquisition, but we're not in a rush to pay that down.

Speaker Change: We would we fully expect to continue to be aggressive in buying back stock and to be opportunistic there hasn't there's sort of a dislocation in value in the.

Speaker Change: In the near term and if you look at the free cash flow, we're going to generate and 24, which is greater than 23 years, there's no near term M&A of any significance on the horizon. We do have a term loan or we could take a look at that's you know tied to the IGT acquisition, but no no rush to pay that down.

Speaker Change: So I think.

Jason Cardew: So I think share repurchases, you know, sort of in that 4% of shares outstanding again range is a reasonable target. Of course, we're meeting with our board next week at the board decision, and we're certainly advocating for that. And the board's been very supportive of that, you know, in our recent meeting.

Speaker Change: Share repurchases.

Speaker Change: Sort of in that 4% of shares outstanding again range.

Speaker Change: As a reasonable target of course, where we're meeting with our board next week that the board the decision.

Speaker Change: Decision and we're certainly advocating for that and and the board has been very supportive of that and in a recent meeting so I'd expect that to continue.

Raymond Scott: So I'd expect that portfolio, they are our focus on driving free cash flow, and we're going to convert it at our target or higher, and we're going to return it to the shareholders. I mean, what's nice is right now, we talked about innovation technology on the plant floors; we acquired some small tokens with the Gora as I was in touch, and boy, they made a dramatic difference. And it's not extremely costly.

Speaker Change: Our focus is driving free cash flow and we're going to convert at our charter hire and we're going to return it to the shareholders. I mean, we're gonna Whats Nice is right now we talk about innovation technology.

Speaker Change: On the plant floors, we acquired some small tuck ins with the Gora ASI in touch and boy they made a dramatic difference and its not extremely.

Raymond Scott: When we talk about this capital deployment, we're doing it at a lower cost. And we're seeing that capital come in significantly lower, and we're deploying it in life or renewal launches. So we're gonna be very, very, you know, focused on our working capital, how we're converting our cash flow. And we're in a really good position. We've been doing this for several years, you know, so when I go out to the plant and see this, what's really nice is this WS launch we just went through, unprecedented, never done before in the history of seeding. We had our capital, we wouldn't even take the capital from our competitor because it was that bad, from a throughput standpoint, and how it was working within their facility. We launched that plant with our technological innovation, low And what was great about it?

Speaker Change: Costly when we talked about this capital deployment, we're doing at a lower cost and we're seeing that capital come in significantly lower and we're deploying it in a life or with new launches. So it could be very very.

Speaker Change: <unk> focused on our working capital how we're how we're converting our cash flow and wanted to really good position. We've been doing this for several years, so when I'm going out the plant and seeing this what's really nice is swf's launch. We just went through unprecedented never done before in the history of seating we had our capital we wouldn't even take the capital from our competitor because it was that bad.

Speaker Change: Bad from a from a throughput standpoint, and how it was working within their facility, we launched that plan with our technology and innovation low capital cost much more efficient we produce more output than they can produce ever produced in there three years of trying to hit their daily volumes and what was great about it and Frank here the team did a rumor.

Raymond Scott: And Frank's here, the team did a remarkable job; our quality from our customers said it was superior to our competitor that had been producing those parts for years. And so that gives me excitement, because I'm looking at this technology in the plants, and we're a manufacturing company, we produce parts. That acceleration of innovation technology that we've been driving for multiple years is starting to really take hold. And it's about we don't need anything, we've made some nice acquisitions, there's nothing on the horizon, like Jason said, and we'll walk out of this meeting. We're gonna go to how we're gonna drive more cash flow. So that's what we're gonna stay focused on. And John, your first question there 135 67 was the average price in the quarter.

Speaker Change: Artful job was our quality from our customer set it was superior to.

Speaker Change: Our competitor that was producing those parts for years and so that's that gives me a site excitement because I'm looking at this technology in the plants and more manufacturing company, we produce parts that acceleration of innovation technology that we've been driving for multiple years is starting to really take hold and it's about we don't need anything.

Speaker Change: We've made some nice acquisitions, there's nothing on horizon like Jason said will walk out of this meeting where it would go to how we can drive more cash flow. So that's what we're going to stay focused on and John on your first question. The $135 67 was the average price in the quarter.

Jason Cardew: Ray, just that WS program, that's the Grand Wagoneer, and the Wagoneer is what you mentioned in that takeover. That's what you were just discussing. Awesome, thanks guys, I appreciate it. Our next question comes from James Picariello from BNP Paribas. Please go ahead with your question. Good morning, everybody.

Speaker Change: And it really just that Doug that's a program that's a grand wagoneer and the wagon here. This is what you mentioned and I take them I mean, that's what you were just discussing.

Speaker Change: Yeah much guys I appreciate it thanks John.

Speaker Change: Our next question comes from James Picariello from BNP Paribas. Please go ahead with your question.

James Albert Picariello: Yeah, Hi, good morning, everybody.

James Albert Picariello: Just to focus on this year's volume mix assumption. Relative to a flat global production outlook, seedings volume mix is guided to be down almost two points, and e-systems down almost four points.

James Albert Picariello: Just to focus on this year's volume mix assumptions.

James Albert Picariello: Relative to a flat global production outlook, you're seeding volume mix is going to be down almost two points.

James Albert Picariello: Systems down almost four points.

Jason Cardew: Can you just help unpack a little more the key drivers here for both segments that inform the underperformance first part? Yeah, James. I can give you maybe just some highlights of some of the key platforms that are driving that. And some of it is temporary. For example, in seating, the Audi Q5 is lower year over year, but it's going through a changeover this year, and we would expect that volume to eventually come back. With Stellantis, the compass volumes are lower, you know; they're launching that Wagoneer S in the same facility.

James Albert Picariello: Can you just help unpack a little more of the key drivers here for both segments that informs the underperformance first market.

Speaker Change: Yeah, James I can give you maybe just some highlights some of the key platforms that are driving that and some of it is temporary for example, and seeding the Audi Q five.

Speaker Change: Lower year over year, it's going through a changeover. This year, we would expect that volume to eventually come back.

Speaker Change: What's the lightest accomplice volumes are lower you know, they're launching that wagoneer.

Jason Cardew: And so that's offsetting some of that volume. And that sits in our backlog. It's got Mercedes SUVs in our Tuscaloosa plant, but both the ICE and EV volumes are soon to be lower. And in Europe, the Audi A6, and then some of the local programs that we're on are lower. In China, there's a changeover of the Mercedes E-Class, so that's an important program for us, so volumes are lower this year and soon to be lower.

Speaker Change: Yes.

Speaker Change: Same facility and so that's that's offsetting some of that volume that sits in our backlog, it's got Mercedes Suvs.

Speaker Change: And our Tuscaloosa plant both the ICD. These bonds are seem to be lower.

Speaker Change: And then Europe Audi eight six.

Speaker Change: Some of these local programs that we're on.

Speaker Change: Lower.

Speaker Change: In China, there's a changeover of the Mercedes E class, that's an important program for us the volumes are lower this year seem to be lower.

Jason Cardew: And some of this is, again, just kind of aligning with S&P, you know, making adjustments where necessary for customer insights, but those are the big drivers on the seating side. And these systems. We've got kind of a mixed bag. So with Ford, you have some that are up, like the Maverick, the Bronco Sport, and Escape, that helps.

Speaker Change: And some of this is again, just a point of aligning with with the SMT.

Speaker Change:

Speaker Change: Making adjustments where necessary for customer insights, but.

Speaker Change: The big drivers on the seating side in E systems.

Speaker Change: It's that kind of a mixed bag. So with forward you have some that are up like the magnet.

Speaker Change: I'm, sorry, the Broncos, Florida and escape.

Jason Cardew: The Mach-E, however, is down pretty significantly. I think we had it down 33%. That's a pretty significant program in these systems, so that's weighing on the number. Focus is lower in Europe. Audi volumes are lower in Europe and China.

Speaker Change: That helps.

Speaker Change: The marquee however, it was down pretty significantly I think we have it down 33%.

Speaker Change: Pretty good a significant program any system. So that's weighing on the number focus is lower in Europe.

Speaker Change: The volumes are lower in Europe.

And in China, SAIC volumes in China.

Jason Cardew: SAIC volumes in China. Some of the Volvo Geely volumes are a little bit lower on certain platforms. Polestar 2 is down.

Speaker Change: Some of the Volvo Geely volumes.

Speaker Change: A little bit low on certain platforms Pollstar twos down.

Jason Cardew: Lincoln comes down. Those are the big, kind of big drivers as we look at our volume assumptions in each of the segments. That's super, super helpful. And then just to follow on from that point, you know, thinking about 2025, obviously, you're not going to,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, My question is, can we think of four points growth over market for seeding as an achievable rate for next year, or not necessarily? Just any thoughts on that.

Speaker Change: <unk> closed down those are the big kind of big drivers as we look at our volume assumptions in each of the segments.

Speaker Change: Alright, well that's it.

Speaker Change: Super Helpful. And then just a follow on on that point.

Speaker Change: Thinking about 2025, obviously, you're not going to make.

Speaker Change: 25 guidance, but just for the seating business Youre, calling for 500 million contribution new business backlog for 2025, right that would be just under three points growth over market awesome for 'twenty 'twenty four guide. It sounds just you know you just went through the seating platforms that are influencing 2020 for my question is.

Jason Cardew: Yeah, the growth of the market is difficult, you know, it's choppy, it's volatile. And we saw a perfect example of that even just kind of within 23, started out decent and got worse as the year progressed since there were some mixed shifts with certain customers. So I think it's important to kind of take a step back and look at the business over a longer time horizon. And in the last four years, we did deliver, as we highlighted in the prepared remarks, four points of growth in the market and seeding six points in these systems. As I look out over the next five years, I do see uncertainty around the transition to EVs weighing on the growth of the market a little bit.

Speaker Change: Can we think of four points growth over market for seating as an achievable.

Speaker Change: Great for for next year.

Speaker Change: Or not necessarily just just any thoughts on that thanks.

Yeah, and then goes over market as desktop it's choppy.

Speaker Change: Volatile and we saw a perfect example of that even just kind of within 23.

Speaker Change: He said I haven't got worse as the year progressed as there were some mix shift with certain customers.

Speaker Change: It's important to kind of take a step back and look at the business over a longer time horizon.

Speaker Change: Over the last four years, we did deliver as we highlighted in the prepared remarks four points of growth over market in seating six points of these systems as I look out over the next five years and I do see this maybe uncertainty around the transition to evs.

Speaker Change: Weighing on growth of the market a little bit.

Jason Cardew: I do see, you know, any systems as we wind down some of our non-core products that will temper growth in the kind of near to medium term. But if I look out five years, I think, you know, four points of growth of the market and seeding six points of growth of the market in these systems are, in the long run, very achievable. And in seeding the catalyst for it now, you know, in the past, it was conquest winds primarily, and we do have some benefit from that in the future. But a lot of it is from modularity, what we're doing with thermal comfort, what we're doing with new innovative products that we highlighted, like flex air and renew nets. So just take flex air, for example; now, foam is a four and a half billion dollar market.

Speaker Change: I do see it.

Speaker Change: These systems as we wind down some of our non core products.

Speaker Change: That will temper growth and the kind of near to medium term, but if I look out five years I think.

Four points of growth over market and see the six points of growth over market in E systems in the long run is very achievable and then feeding the catalyst for it now you know in the past it was conquest wins, primarily and we do have some benefit from that.

Speaker Change: In the future, but a lot of it is from modularity.

Speaker Change: What we're doing with thermal comfort, while we're doing with new innovative products that we highlighted like flex there and renew nits. So just take flex Air for example, foam is a $4 $5 billion market.

Jason Cardew: We have a relatively small share of that today; less than 10% of that market. We see flex air potentially displacing polyurethane foam, you know, at least in second and third row applications and maybe in all seatback applications over a period of time. We're going to dominate that market. That could be a $500 million business for us, five years out to be a billion dollar business for us. Long term, we continue to look for those kind of billion dollar component businesses. We started back in 2015 with weather. That' Now we have thermal comfort, you know. The $600 million business that we acquired will be a billion dollar business in 2027.

Speaker Change: We have a relatively small share of that today less than 10% of that market.

Speaker Change: We see Fox are potentially displacing polyurethane film at least in second and third row applications and maybe in all seatback applications over a period of time, we're going to we're going to dominate that market that could be a $500 million.

Speaker Change: Business for US five years out to be a billion dollar business for us long term. We continue to look for those kind of billion dollar component businesses. As you know we started back in 2015 with whether that's a great business for US now we have thermal comfort you know $600 million business that we acquired over $1 billion business in 2027, where water away there.

Jason Cardew: We're well on our way there. You know, flex air may be something that meets those levels of growth, as well, based on initial customer interest in all the environmental benefits associated with it and performance benefits associated with it. So I think that structurally, you know, the underlying drivers of growth in feeding are stronger today than they've ever been. Our path to getting more jet market share is very clear. And we're confident in the long-term growth prospects of that. Our next question comes from Emmanuel Rosner from Deutsche Bank. Thank you very much.

Speaker Change: Flex there may be something that that's meets those those levels of growth as well based on initial customer interest in all of the environmental benefits associated with it and performance benefits associated with it so I think that structurally the others.

Speaker Change: Main drivers of growth.

Speaker Change: In seating are stronger today than they've ever been our path to getting more jet market share.

Speaker Change: Very clear and we're confident in the long term growth prospects of that business.

Speaker Change: Distribution.

Speaker Change: Our next question comes from Emmanuel Rosner from Deutsche Bank. Please go ahead with your question.

Emmanuel Rosner: Hi, Thank you very much my first question is about the.

Emmanuel Rosner: My first question is about the..., the Evie backlog. Just so we get a little bit of a better understanding of, I guess, to what extent this was. Yeah, even after those adjustments, you know, electric vehicles are still the most prominent new vehicles launching over the next three years. And so it's heating up, it's about 57% of the backlog of new, you know, the new programs going on, and any systems at 75%. And that's not just electrification revenue as we define it, which would be high-voltage wiring or, you know, electronics products that are unique to electric vehicles. It would also include low-voltage wiring on electric vehicles.

Emmanuel Rosner: The E V backlog.

Emmanuel Rosner: Just so we get a little bit of a better understanding of I guess to what extent this was.

Emmanuel Rosner: You know derisked with like E V volume assumption.

To quantify for us how much of the backlog is currently I too.

Emmanuel Rosner: Platforms in the systems as well as in C. D overall magnitude and should reduce these volume assumption.

Emmanuel Rosner: What percentage of your backlog is you'd be at this point.

Emmanuel Rosner: Yeah, even after those adjustments electric vehicles are still the most prominent new vehicles launching.

Emmanuel Rosner: Over the next three years and so in theory, and that's about 57% of the backlog.

Emmanuel Rosner: The new programs rolling on in any systems at 75% and that's not just electrification revenue as we define it which would be high voltage wiring or.

Emmanuel Rosner: Electronics products that are unique to electric vehicles that would include low voltage wiring.

Jason Cardew: So it's still, despite the fact that we have significantly reduced the volume assumptions and the timing of the launches, it's still a prominent and significant part of the backlog. And so our belief is still that the transition to electric vehicles is happening. It may happen more slowly than what was previously anticipated, but there's still a significant shift that's taking place. It may ultimately end up being, you know, a lower percentage of the market than many had expected, but it's still a significant part of the market. And it still dominates our customers' new program launches in the near term. Now, if you say, you know, you don't believe that that level of penetration is going to happen with EVs, I think the flip side to that, as a few of the questions earlier highlighted, is that some of these ICE programs that we've assumed are going to balance out are not going to balance out, or they're going to run at a higher volume than what we've assumed for a longer period of time.

Emmanuel Rosner: Electric vehicles, so it's still despite the fact that we have.

Emmanuel Rosner: Significantly reduce the volume assumptions and the timing of the launches it's still.

Emmanuel Rosner: Prominent significant part of the backlog in and so our belief is still that the transition to electric vehicles is happening and it may happen more slowly than what was previously anticipated, but there's still a.

Emmanuel Rosner: Significant shift that's taken place it may ultimately end up being a lower percentage of the market than many had expected, but it's still a significant part of the market and it's still dominates our customers' new program launches in the near term now.

Emmanuel Rosner: If you say you don't believe that that level of penetration is going to happen with the vs. I think the flip side of that as you.

Emmanuel Rosner: A few of the questions earlier highlighted is that some of these ice programs that we've assumed or within a balance out or not going to balance out where they're going to.

Emmanuel Rosner: Run at a higher volume than what we've assumed for a longer period of time. So yeah. We're definitely in a transition period, it's difficult to project, what's going to happen we've tried to be balanced in our assumptions at this stage.

Jason Cardew: So, you know, we're definitely in a transition period, and it's difficult to project what's going to happen. We've tried to be balanced in our assumptions at this stage and clear in our guidance, but it's difficult to predict. Yeah, that's helpful. And then one quick follow-up or point of clarification around some of the cost headwinds, especially labor cost inflation. I guess, on a broader basis, do you assume that you do recover these from customers? Or is that, would there be a lag?

Emmanuel Rosner: And clearer in our in our guidance.

Emmanuel Rosner: But it's it's difficult to predict.

Speaker Change: Yeah. That's helpful. And then one quick follow up on a point of clarification on some of the cost headwinds, especially labor cost inflation I guess on a full year basis do you assume that you do recoveries from customers or would that would there be a lag or is there like a portion of that you expect that you will be responsible for I guess.

Jason Cardew: Or is there like a portion that you expect that you will be responsible for? I guess I am. I understand that it takes time, and there's a process and negotiations, etc. But I guess net net net, does that remain sort of like a headwind? Yeah, I think that, you know, going back to what we talked about earlier, you know, historically, wage inflation was 3-4%. And our efficiency programs in the plant would offset that, as well as, in some cases, a little bit more than that. And that would contribute to offset our customer price reductions each year. That was kind of the old model.

Speaker Change: I understand that he takes time and there's a process of negotiation, but I guess net net net it doesn't have to remain sort of like a headwind.

Speaker Change: Yeah, I think that's you know going back to what we talked about earlier historically wage inflation was three 4%.

Speaker Change: And our efficiency programs and the plant would.

Speaker Change: Would offset that.

As well as in <unk>.

Speaker Change: Some cases, a little bit more than that and that would contribute to offset our customer price reductions each year that was kind of the old model.

Jason Cardew: You know, that 3-4% is now twice that, and I don't think that necessarily continues, you know, as I look up 25, 26, 27, but in 24, it is. And so what we're, what we believe we should recover, either this year or this year or next year, is that kind of excess labor inflation beyond that historical, normal level that we have seen the economy experienced, you know, for decades. And so that's, that's sort of the philosophy. And so, you know, I don't want to make it as simple as this, but roughly half of it, we've got to offset through our cost reduction programs, automation, restructuring, shifting the footprint, better utilization of our facilities. And then the other half has got to come through some form of recovery, either this year or next year, in order to preserve the margin trajectory, the margin growth that we expect to achieve this year or next. I guess in this year' Yeah, I think, yes, it would be a net headwind for this year in the guidance. You know, we've talked in the past about generating 50 to 100 basis points from that performance. We've got it for less than that.

Speaker Change: You know that three 4% is now twice that.

Speaker Change: And I don't think that necessarily continues you know as I look out to 'twenty five six or seven but then in 'twenty four it is and so what we're.

Speaker Change: Well, we believe we should recover them either this year or this year or next year is that kind of excess labor inflation beyond.

Speaker Change: That historical normal level that we have seen in the economy has experienced poor for decades.

Speaker Change: And so that's that's sort of the philosophy and so.

Speaker Change: I don't want to make it as simple as us, but roughly half of that we've got to offset through our cost reduction programs automation restructuring shifting the footprint better utilization of our facilities and then the other half has got to come through some form of recovery either this year or next year in order to preserve that.

Speaker Change: Margin trajectory of the margin growth that.

Speaker Change: We expect to achieve this year and next year.

Speaker Change: But I guess in this year's guidance do you assume in that headwind from labor cost inflation, unrecovered or do you assume that.

Speaker Change: The piece that you need to recover.

Speaker Change: Some of your customers is being recovered.

Speaker Change: Yeah, I think yes, it would be a net headwind for this year and the guidance.

Speaker Change: We've talked in the past about generating 50 to 100 basis points and that performance you've guided to lessen that and I think you could certainly attribute the shortfall to a combination of the transactional FX impact as well as unrecovered wage inflation. It's.

Jason Cardew: And I think you could certainly attribute the shortfall to a combination of the transactional effects impact as well as unrecovered wage inflation. It's, you know, it's not quite that precise, but I think that's a fair perspective. And I think the way I categorize it and discuss it, too, is that even though we have past practice in some of these negotiations and historical understanding or baseline of how we get recovery, you know, we base our guidance on that. Now, we're in for a much different number as far as getting settled within the year and that there's timing elements to that. You know, obviously, we're pulling on productivity, we're pulling on volume, all these other things. And so, you know, we're going in above what the net difference would be for negotiations based on past practice. Some of them are models, or some of them are discussed in other settlements.

Speaker Change: Not quite that precise, but I think that's a fair perspective, and I think the way I would categorize it and discuss it too is that even though we have past practice in some of these negotiations and historical understand your baseline of how can we get recovery.

Speaker Change: We base our guidance on that now we're in for a much.

Speaker Change: Different number as far as getting settled within the year and that Theres timing elements to that you obviously, you're pulling on productivity are borne in volume all these other things and so we're going in above what the net difference would be for negotiations based on past practice and some of them are models or some of them are.

Raymond Scott: And I think, in addition to that, we have a lot more control around the automation within our facilities, like Jason mentioned earlier. Thirty-five percent of our labor is in our plants. And we're just at one of our facilities and in our own control. We've been able to automate, which has always been something that, because of their ability within the trim covers, we've done a nice job of bringing in very sophisticated innovation to automate that equipment that's in ours. Now, accelerating that faster is another nice opportunity for us, and so we've been somewhat conservative on how we roll that out. But those are opportunities that I think would improve the overall number as we look at it today. And as we talked about earlier, you know, that's one of the factors that could drive us into a different spot in the range.

Speaker Change: Just another settlements.

Speaker Change: And I think in addition to that we have a lot more control around the automation within our facilities like Jason mentioned earlier, 35% of our labor is in our trim and we were just down in one of our facilities and in our own control, we've been able to automate which has always been something that because of the variability within the trim covers.

Speaker Change: We've done a nice job of bringing in very sophisticated innovation too.

Speaker Change: To automate that I'd put it that's an hours now accelerating that faster is another nice opportunity for us and so we've been somewhat conservative in how we roll that out but those are those are opportunities that I think would improve the overall number as we look at it today and as we talked about earlier, that's one of the factors that could drive us into a different spot in the rain.

Jason Cardew: So at the high end of the guidance range, if we do better than anticipated, certainly that would be a contributing factor to getting, you know, seating to seven percent in each system to six percent this year. They were helpful. Thank you. And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to management for any closing... Yeah, thanks. I'm sure everyone on the call now is just the Lear team.

Speaker Change: <unk> so at the high end of our guidance range.

Speaker Change: Do better than anticipated certainly that would be a contributing factor to getting cedar.

Speaker Change: <unk> to 7% of new systems to 6%.

Speaker Change: You know this year.

Speaker Change: Very helpful. Thank you.

Speaker Change: You're welcome.

Speaker Change: Okay.

Speaker Change: And ladies and gentlemen, with that we will be concluding today's question and answer session I'd like to turn the floor back over to management for any closing remarks, yes. Thanks, Seth I'm sure everyone on the call knows.

Raymond Scott: I just want to again thank everyone for their outstanding job in 2023. And, like we always discuss, we have some challenges ahead of us this year, but we know what we need to do. And I appreciate all the great work we're going to do this year to hit our targets and achieve them. So thank you everybody for all your hard work. Ladies and gentlemen, that does end today's conference call. We do thank you for joining us. You may now disconnect.

Speaker Change: Lear team I just want to again, thank everyone for their outstanding job in 2023.

Speaker Change: We always discuss so what now what we got some challenges ahead of us this year, but we know what we need to do and I. Appreciate all the great work, we're going to do this year to hit our targets and achieve them. So thank you for every everybody familiar hard work.

Speaker Change: Ladies and gentlemen that does end today's conference call. We do thank you for joining you may now disconnect your lines.