Q1 2024 Magna International Inc Earnings Call

Operator: Thank you for standing by, and welcome to the Magna International first quarter 2024 results. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Finally, a reminder that this conference is being recorded. I would now like to turn the conference over to Louis Tonelli, Vice President of Investor Relations. Please go ahead.

Thank you for standing by and welcome to the Magna International first quarter 2020 full results.

It's been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

If he would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question press the star one again.

Finally, a reminder, that this conference is being recorded.

I would now like to turn the conference over to Louis Tonelli, Vice President of Investor Relations. Please go ahead.

Louis Tonelli: Thank you, Operator. Hello, everyone, and welcome to our conference call covering our first quarter of 2024. Joining me today are Somi Kotagiri and Pat McCann. Yesterday, our board of directors met and approved our financial results for the first quarter of 2024. We issued a press release this morning outlining our results. You'll find the press release, as well as today's conference call web...

Louis Tonelli: Thank you operator, Hello, everyone and welcome to our conference call covering our first quarter 2024.

Louis Tonelli: Joining me today are so let me quota, Gary and Pat Mccann.

Louis Tonelli: Yesterday, our board of directors met and approved our financial results for the first quarter of 2024.

Speaker Change: We issued a press release this morning outlining our results Youll.

Speaker Change: You'll find the press release today's conference call webcast.

Louis Tonelli: Today's conference call webcast This slide presentation to go along with the call and our updated quarterly financial review, all in the investor relations section of our website at magna.com.

Speaker Change: Slide presentation to go along with the call and our updated quarterly financial review all in the Investor Relations section of our website at Magna Dot com.

Louis Tonelli: Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. Such statements involve certain risks, assumptions, and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our Safe Harbor disclaimer. Please also refer to our reminder slide included in our presentation that

Speaker Change: Before we get started just as a reminder, the discussion today may contain forward looking information or forward looking statements within the meaning of applicable securities legislation.

Speaker Change: Such statements involve certain risks assumptions and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements.

Speaker Change: Please refer to today's press release for a complete description of our safe Harbor disclaimer.

Speaker Change: Please also refer to a reminder, slides included in our presentation that relates to our commentary today with that I'll pass it over to Swamy.

Louis Tonelli: With that, I'll pass it over to Swami.

Swami: Thank you, Louis. Good morning, everyone.

Swamy: Thank you Louis good morning to everyone.

Swami: I appreciate you joining our call today; let's jump right in. There are some notable takeaways from the quarter that I would like to highlight before getting into some of the details. We are pleased that Q1 results for sales and earnings, excluding fiscal impairments, came in ahead of our expectations. This was in part due to our continued operational excellence activities, which are on track to collectively contribute about 75 basis points to margin expansion over the next two years.

Swamy: I appreciate you joining our call today, let's jump right.

Swamy: There are some notable takeaways from the quarter and I would like to highlight before getting into some of the details.

Swamy: We are pleased that our Q1 results for sales and earnings excluding fiscal impairment came in ahead of our expectations.

Swamy: This was in part due to our continued operational excellence activities, which are on track to collectively contribute about 75 basis points to margin expansion over the next two years.

Swami: We are maintaining our adjusted EBIT margin outlook for 2024 despite the negative impact of assuming no additional fiscal portion production and lower sales due to program delays in May. Our operational excellence activities, continuing efforts to contain costs, and Commercial Recoveries are all expected to contribute to this. And we issued $400 million of senior notes in Q1 to refinance debt coming due this quarter.

Swamy: We are maintaining our adjusted EBIT margin outlook for 2024, despite the negative impact of assuming no additional pritzker Ocean production and lower sales on program delays and mix.

Swamy: Our operational excellence activities, continuing efforts to contain costs and commercial recoveries are all expected to contribute to this.

Swamy: And reassured $400 million of senior notes in Q1 to refinance debt coming due this quarter.

Swami: We expect to be back into our target leverage range during 2025. So far this year, we have experienced more stable production schedules relative to what we experienced in recent years. This is contributing to improved operating results. We anticipate a relatively flat vehicle production environment over our outlook period, particularly in our key markets of North America and Europe. As a result, our continued content growth is contributing to our higher sales. As we said earlier this year, inflation continues, in particular for labor.

Swamy: We expect to be back into our target leverage range during 2025.

Swamy: So far this year, we have experienced more stable production schedules.

Swamy: Relative to what we experienced in recent years.

Swamy: This is contributing to improved operating results.

Swamy: We anticipate a relatively flat vehicle production environment over our outlook period, particularly in our key markets of North America and Europe.

Swamy: As a result, our continued content growth is contributing to our higher sales.

Swamy: As we said earlier this year inflation continues in particular for labor.

Swami: However, we have been working hard to mitigate cost increases, including ongoing discussions with customers for additional recovery. Lastly, our customers continue to evolve their electrification strategies, particularly in North America. We are assessing the potential impacts on our sales, earnings, capital, and free cash flow and are working with our customers to optimize investment and capacity plans. We'll continue to update you when we have more clarity on major impacts, if any, to our business.

Swamy: However, we have been working hard to mitigate cost increases, including ongoing discussions with customers for additional recoveries.

Swamy: Lastly, our customers continue to evolve the electrification strategies, particularly in North America.

Swamy: We're assessing the potential impacts on our sales earnings capital and free cash flow and are working with our customers to optimize investment and capacity plans.

Swamy: We will continue to update when we have more clarity on major impact if any to our business.

Swamy: Sure.

Swami: It is important that I provide an update on our current status for the FISCR Ocean Program. Production of the vehicle is currently idle. Our current outlook issue today assumes no further production. Consistent with disclosure we provided in our annual information form, this assumption reduces our 2024 sales by about $400 million and impacts our adjusted EBIT margin by about 25 basis points. We fully impaired our operating assets and warrants in the first quarter, totaling $294 million.

Swamy: It is important that I provide an update on our current status for the <unk> portion program.

Swamy: Production of the vehicle is currently idled.

Swamy: Our current outlook issued today assumes no further production.

Swamy: Consistent with disclosure we've provided in our annual information form this assumption reduces our 2024 sales by about $400 million.

Swamy: And impacts.

Swamy: Adjusted EBIT margin by about 25 basis points.

Swamy: We fully impaired our operating asset turn warrants in the first quarter totaling $294 million.

Swami: We have $195 million in deferred revenue associated with the fiscal contract that could offset the $294 million in asset impairment that cannot be recorded in Q1. This amount will be recognized in income as performance obligations are satisfied or upon termination of the fiscal contract manufacturing agreement. In order to mitigate the impact of the lower sales on this program, we recorded additional restructuring costs of $22 million in the quarter.

Swamy: We have $195 million and deferred revenue.

Located with the Fisker contract that could offset the $294 million and asset impairments.

Swamy: That cannot be recorded in Q1.

Swamy: This amount.

Swamy: It will be recognized in income.

Swamy: Performance obligations are satisfied or upon termination of the physical contract manufacturing agreement.

Swamy: In order to mitigate the impact of the lower sales on this program.

Swamy: Additional restructuring cost of $22 million in the quarter.

Swami: We continue to monitor the situation and will evaluate opportunities to further mitigate the impact on our business. Overall, we expect to offset the adjusted EBIT margin impact from this item through actions taken and strong execution across the company. I would like to comment on how we are proactively managing to address challenges and further improve our financial performance. Our operational excellence activities are on track to contribute about 75 basis points of improvement over the next two years.

Swamy: We continue to monitor the situation.

Swamy: And we'll evaluate opportunities to further mitigate the impact on our business.

Swamy: Overall, we expect to offset the adjusted EBIT margin impact from this item through actions taken and strong execution across the company.

I would like to comment on how we are proactively managing to address challenges and further improve our financial performance.

Swamy: Our operational excellence activities.

Swamy: Are on track to contribute about 75 basis points of improvement over the next two years.

Swami: In addition, input costs, which were expected to be a 30-basis point headwind to EBIT margin this year, have been reduced to about 25 basis points now. We are optimizing engineering spend, which is expected to be down about $50 million from our February outlook. We are lowering our capital spending outlook to the $2.4 to $2.5 billion range, and we are continuing restructuring activities to optimize our footprint.

Swamy: In addition.

Swamy: Input costs, which we would expect it to be a 30 basis point headwind to EBIT margin. This year have been reduced to about 25 basis points now.

Swamy: We are optimizing engineering spend which is expected to be down about $50 million from our February outlook.

Swamy: We are lowering our capital spending outlook to the two four to $2 $5 billion range and we are continuing restructuring activities to optimize our footprint.

Swami: As a result, our leverage ratio is on track to be back in our target range during 2025. We have a continuing focus across Magna on margin expansion and free cash flow generation. Electrification remains an important industry trend, although take rates are uncertain in the short and mid-term. Our EV strategy with respect to customers, programs, and regions in which we want to participate is both targeted and deliberate. And, as you have heard us say for many years, we code our business based on our volume assumptions, not our customers.

Swamy: As a result, our leverage ratio is on track to be back in our target range during 2025.

Swamy: We have a continuing focus across magna on margin expansion and free cash flow generation.

Swamy: Electrification remains an important industry trend, although that take rates are uncertain in the short and mid term.

Swamy: Our <unk> strategy with respect to customers programs that regions in which we want to participate.

Swamy: Both targeted and deliberate.

Swamy: And as you've heard us say for many years, we are quoting business based on our volume assumptions not our customers.

Swami: With all this in mind, we continue to win business and advance our position in electrification. We have been awarded a Specialized E-Drive Business to support one of our customers' high-end vehicle platforms. This primary rear drive system delivers over 700 kilowatts of power and exceptional performance, reflecting our expertise in electric powertrain system engineering and integration.

With all this in mind, we continue to win business and advance our position in electrification.

Swamy: We have been awarded specialized E drive business to support one of our customers high end raiko platform.

Swamy: This primary via drive system delivers over 700 kilowatts of power and exceptional performance, reflecting our expertise and electric powertrain system engineering and integration.

Swamy: Okay.

Swami: Lastly, before I pass the call over to Pat, I want to highlight recognitions received by Magna, which I am very proud of. Magna was named a 2024 Automotive News Pace Award winner, one of only 13 winners, for our integrated driver and occupant monitoring system. We also received PACE pilot recognition for seeding our ecosphere, 100% melt recyclable foam and trim.

Speaker Change: Lastly, before I pass the call over to Pat I want to highlight recognitions received by Magnox reached I am very proud of <unk>.

Speaker Change: <unk> was named a 2020 for automotive news pace, our printer one of only 13 winners for our integrated driver an occupant monitoring system.

Patrick W. D. McCann: We also received pace pilot recognitions.

Patrick W. D. McCann: In seating for our eco sphere.

Patrick W. D. McCann: Hundred percent Mount recyclable form and trim.

Pat: And in exteriors, for our Modular and Scalable Active Grill Shutter Assembly. Magna was the only company to receive both a PACE award and multiple recognitions for PACE pilot innovations to watch. And reflected in our ongoing commitment to operational excellence is the recognition we receive from our customers. Typically, Magna receives more than 100 launch and quality awards from various global automakers around the world each year. Most recently, General Motors recognized Magna with five awards across four product areas. This brings our total to 30 GM Supplier of the Year awards over the last five years. With that, I'll pass the call over to Pat.

Patrick W. D. McCann: And in exteriors.

Patrick W. D. McCann: Our modular and scalable active grille shutter assembly.

Patrick W. D. McCann: <unk> was the only company to receive both a pace award and multiple recognitions toward pace pilot innovations to watch.

Patrick W. D. McCann: And reflected in our ongoing commitment to operational excellence is the recognition we received from our customers.

Typically magna receives more than 100 launching quality awards from various global automakers around the world each year.

Most recently general Motors recognized Magnoperate five awards across four product areas.

Patrick W. D. McCann: This brings our total to 30 GM supplier of the year awards over the last five years with that I'll pass the call over to Pat.

Pat: Thanks, Swami, and good morning, everyone. As Swami indicated, we delivered solid first-quarter earnings ahead of our expectations, excluding the Fisker impairment. Recall that we indicated on our February call that we expected our 2024 earnings to be lowest in the first quarter of the year. Now, comparing the first quarter of 2024 to the first quarter of 2023.

Patrick W. D. McCann: Thanks, Swamy and good morning, everyone.

Patrick W. D. McCann: As <unk> indicated we delivered solid first quarter earnings ahead of our expectations, excluding the <unk> impairment.

Patrick W. D. McCann: Recall that we indicated on our February call that we expected our 2020 for earnings to be lowest in the first quarter of the year.

Patrick W. D. McCann: Now comparing the first quarter of 2024 to the first quarter of 2023.

Pat: Consolidated sales were $11 billion, up 3% compared to a 2% increase in global light vehicle production. Adjusted EBIT was $469 million, and adjusted EBIT margin was up 10 basis points to 4.3%. Adjusted EPS came in at 108, down 6% year-over-year, primarily due to interest costs but ahead of our expectations. And free cash flow used in the quarter was $270 million, compared to $279 million in the first quarter of 2023. During the quarter, we paid dividends of $134 million.

Patrick W. D. McCann: Consolidated sales were $11 billion up 3% compared to a 2% increase in global light vehicle production.

Patrick W. D. McCann: Adjusted EBIT was $469 million and adjusted EBIT margin was up 10 basis points to four 3%.

Patrick W. D. McCann: Adjusted EPS came in at 108 down 6% year over year, primarily due to interest costs, but ahead of our expectations.

Patrick W. D. McCann: And free cash flow used in the quarter was $270 million compared to $279 million in the first quarter of 2023.

Patrick W. D. McCann: During the quarter, we paid dividends of $134 million we.

Patrick W. D. McCann: We also raised 400 million to repay debt coming due later this quarter.

Pat: We also raised $400 million to repay debt coming due later this quarter. More importantly, with respect to our outlook, as Swami noted, we are maintaining our adjusted EBIT margin range and lowering our capital spending range. Let me take you through some of the details.

Patrick W. D. McCann: More importantly, with respect to our outlook has swamy noted we are maintaining our adjusted EBIT margin range and lowering our capital spending range.

Let me take you through some of the details.

North American light vehicle production was up 2% and China was up 11% while production in Europe declined 2% netted to a 2% increase in global production.

Pat: North American light vehicle production was up 2% and China was up 11%, while production in Europe declined 2%, netting to a 2% increase in global production. Breaking down North American production further, while overall production increased 2%, production by our Detroit-based customers declined 3% in the quarter. Our consolidated sales were $11 billion, up 3% over the first quarter of 2023. On an organic basis, our sales increased 1% year-over-year for a minus 1% growth over market in the first quarter, but plus 2% growth over market, excluding complete vehicles.

Patrick W. D. McCann: Breaking down North American production further.

Patrick W. D. McCann: While overall production increased 2% production by our Detroit based customers declined 3% in the quarter.

Patrick W. D. McCann: Our consolidated sales were $11 billion up 3% over the first quarter of 2023.

Patrick W. D. McCann: On an organic basis, our sales increased 1% year over year for a minus 1% growth over market in the first quarter, but plus 2% growth over market excluding complete vehicles.

Pat: Once again, negative production mix in North America unfavorably impacted our year-over-year sales growth in the quarter. However, our sales increase was primarily due to the launch of new programs, higher overall global vehicle production, the acquisition of B&ER active safety, and increases to recover certain higher input costs.

Patrick W. D. McCann: Once again negative production mix in North America, and favorably impacted our year over year sales growth in the quarter.

Pat: These were largely offset by lower complete vehicle assembly volumes, the impact of foreign currency translation, and normal course customer price giveback. Adjusted EBIT was $469 million, and adjusted EBIT margin was 4.3% compared to 4.2% in Q1 2023. The higher EBIT percent in the quarter reflects approximately 40 basis points of operational items, the most significant of which relates to our operational activities, including improved results at underperforming operations. 30 basis points of non-recurring items, the most significant of which are lower warranty and a gain on the sale of a non-core equity method investment. These items were partially offset by higher net input costs, in particular for labor, which approximated 20 basis points, volume, and other items, which collectively impacted us by about 40 basis points.

Patrick W. D. McCann: Our sales increase was primarily due to the launch of new programs higher overall global vehicle production the acquisition of <unk> active safety and increases to recover certain higher input costs.

Patrick W. D. McCann: These were largely offset by lower complete vehicle assembly volumes the impact of foreign currency translation and normal course customer price give backs.

Patrick W. D. McCann: Adjusted EBIT was $469 million and adjusted EBIT margin was four 3% compared to four 2% in Q1 2023.

Patrick W. D. McCann: The higher EBIT percent in the quarter reflects approximately 40 basis points of operational items, the most significant of which relates to our operational activities, including improved results at underperforming operations.

Patrick W. D. McCann: 30 basis points of nonrecurring items, the most significant of which are lower warranty and a gain on the sale of a noncore equity method investment.

Patrick W. D. McCann: These items were partially offset by higher net input costs in particular for labor, which.

Patrick W. D. McCann: Which approximated 20 basis points and volume and other items, which collectively impacted us by about 40 basis points. These include acquisitions, which came in at lower margins than the corporate average.

Pat: These include acquisitions which came in at lower margins than the corporate average, lower earnings on lower assembly sales, including as a result of the end of production of the BMW 5 Series, net of higher earnings on higher component and system sales, as well as transactional foreign exchange. Interest expense increased, reflecting net debt raised last year, as well as higher market rates on the new debt.

Patrick W. D. McCann: Lower earnings on lower Assembly sales, including as a result of the end of production of the BMW five series <unk>.

Patrick W. D. McCann: Net of higher earnings on higher component and system sales as well as transactional foreign exchange gains.

Patrick W. D. McCann: Interest expense increased reflecting net debt raised last year as well as higher market rates on the new debt.

Pat: Our adjusted effective income tax rate came in at 21.5%, essentially in line with Q1 of last year. Net income was $311 million compared to $329 million in Q1 2023, mainly reflecting higher adjusted EBIT offset by higher interest expense and minority interest. Adjusted diluted EPS was 108 cents compared to 115 last year. Now, turning to a review of our cash flows and investment activity. In the first quarter of 2024, we generated $591 million in cash from operations before changes in working capital and invested $330 million in working capital.

Patrick W. D. McCann: Our adjusted effective income tax rate came in at 21, 5% essentially in line with Q1 of last year.

Patrick W. D. McCann: Net income was $311 million compared to $329 million in Q1, 2023, mainly reflecting higher adjusted EBIT offset by higher interest expense and minority interest.

Patrick W. D. McCann: Adjusted diluted EPS was $1 eight compared to $1 15 last year.

Patrick W. D. McCann: Turning to a review of our cash flows and investment activities.

Pat: Investment activities in the quarter included $493 million for fixed assets and a $125 million increase in investments in other assets and intangibles. Overall, we used free cash flow of $270 million in Q1. We continue to return capital to shareholders. They paid $134 million in dividends in Q1. Our ballot sheet continues to be strong, with investment grade ratings from the major credit rating agencies.

Patrick W. D. McCann: In the first quarter of 2024, we generated $591 million in cash from operations before changes in working capital and invested $330 million in working capital.

Patrick W. D. McCann: Investment activities in the quarter included $493 million for fixed assets and a $125 million increase in investments other assets and intangibles.

Patrick W. D. McCann: Overall, we used free cash flow of $270 million in Q1.

Patrick W. D. McCann: We continue to return capital to shareholders, we paid $134 million in dividends in Q1.

Patrick W. D. McCann: Our balance sheet continues to be strong with investment grade ratings from the major credit rating agencies.

Pat: At the end of Q1, we had over $4 billion in liquidity, including about $1.5 billion in cash. Currently, our adjusted debt to adjusted EBITDA ratio is at 1.83, excluding excess cash held to pay down debt coming due this quarter. We anticipate a reduction in our leverage ratio, and we are on track to be within our targeted range during 2025. Next, I will cover our updated outlook, which incorporates slightly higher-than-expected veal production in China, while our assumptions for production in North America and Europe are unchanged from our previous outlook.

Patrick W. D. McCann: At the end of Q1, we had over 4 billion in liquidity, including about one $5 billion in cash.

Currently our adjusted debt to adjusted EBITDA ratio is up 183, excluding excess cash held to pay down debt coming due this quarter.

Patrick W. D. McCann: We anticipate a reduction of our leverage ratio and we are on track to be within our targeted range during 2025.

Patrick W. D. McCann: Okay.

Patrick W. D. McCann: Next I will cover our updated outlook, which incorporates slightly higher than expected vehicle production in China, while our assumptions for production in North America, and Europe are unchanged from our previous outlook.

Pat: We also assume exchange rates in our outlook will approximate recent rates. For example, we now expect a lower euro and Canadian dollar for 2024 and a slightly higher RMB, all relative to our previous outlook. And, as Swami mentioned earlier, we are assuming no more production of the Fisker Ocean.

Patrick W. D. McCann: We also assume exchange rates in our outlook will approximate recent rates.

We now expect a lower euro and Canadian dollar for 2024, and a slightly higher RMB all relative to our previous outlook.

Patrick W. D. McCann: And as Swamy mentioned earlier, we are assuming no more production of the Fisker Ocean.

Patrick W. D. McCann: We are reducing our expected sales range. Despite this we are maintaining our EBIT margin outlook, reflecting our operational excellence efforts to contain cost and obtained commercial recoveries.

Pat: We are reducing our expected sales range. Despite this, we are maintaining our EBIT margin outlook, reflecting our operational excellence efforts to contain costs and obtain commercial recovery. We have increased our expected tax rate for 2024 from 21% to 22%, largely reflecting a change in the mix of earnings towards higher tax jurisdictions.

Patrick W. D. McCann: We have increased our expected tax rate for 2024 from 21% to 22% largely reflecting a change in the mix of earnings towards higher tax jurisdictions.

Patrick W. D. McCann: As a result of reducing the range of our sales and the higher expected tax rate, we are reducing our range for net income.

Pat: As a result of reducing the range of our sales and the higher expected tax rate, we are reducing our range for net income. We now expect capital spending to be in the $2.4 to $2.5 billion range compared to approximately $2.5 billion in our February outlook. This mainly reflects revised program spending.

Patrick W. D. McCann: We now expect capital spending to be in the two four to $2 $5 billion range compared to approximately $2 5 billion and our February outlook.

Patrick W. D. McCann: This mainly reflects revised program spending.

Pat: And, our interest expense, equity income, and free cash flow expectations are all unchanged from our last outlook. Let me walk you through the change in our sales outlook from February to now. As we mentioned earlier, we have assumed no future production for the Fisker Ocean.

Patrick W. D. McCann: And our interest expense equity income and free cash flow expectations are all unchanged from our last outlook.

Patrick W. D. McCann: Okay.

Speaker Change: Let me walk me through the change in our sales outlook from February to now.

Speaker Change: As we mentioned earlier, we have assumed no future production for the Fisker Ocean.

Pat: Consistent with our previous communications of the 2024 impact, this reduced sales by about $400 million. We have received updated information on the amount of directed content on the new Mercedes G-Class assembly program, which has reduced sales by about $400 million. Recall from our February outlook that we expected no dollar impact related to this sales change. Our updated FX rates resulted in about $200 million of lower sales, and the remainder, including reduced active safety sales, partially offset by other amounts, netted to about $200 million of lower sales in our output.

Speaker Change: Consistent with our previous communications of the 2024 impact this reduced sales by about $400 million.

Speaker Change: We have received updated information on the amount of directed content on the new Mercedes G Class Assembly programs, which has reduced sales by about $400 million.

Speaker Change: Recall from our February outlook that we expected no dollar impact related to the sales change.

Speaker Change: Our updated FX rates resulted in about $200 million of lower sales and the remainder including reduced active safety sales, partially offset by other amounts netted to about $200 million and lower sales in our outlook.

Pat: In summary... We had solid financial performance in the first quarter, ahead of what we had expected, excluding the fiscal impairment. We are on track with our operational excellence activities and are taking further actions to mitigate impacts from lower expected sales. As a result, we are maintaining our adjusted EBIT margin outlook for 2024. We're also lowering our capital spending expectations for the year, and we are assessing the impacts of OEM electrification plans on our business in order to optimize investments and capacity plans. All in all, a solid start to 2024. Thanks for your attention, and we are more than happy to answer your questions, Operator.

Speaker Change: In summary, we had solid financial performance in the first quarter ahead of what we had expected excluding the fisker impairments.

Speaker Change: We are on track with our operational excellence activities and are taking further actions to mitigate impacts from lower expected sales.

Speaker Change: As a result, we are maintaining our adjusted EBIT margin outlook for 2024.

Speaker Change: We're also lowering our capital spending expectations for the year and we are assessing the impacts of OEM electrification plans on our business in order to optimize investments and capacity plans.

Speaker Change: All in all a solid start to 2024.

Speaker Change: Thanks for your attention and we are more than happy to answer your questions operator.

Operator: Thank you, and as mentioned, the floor is now open for questions. To ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute. Again, that's star number one to join the queue, and your first question comes from the line of John Murphy from Bank of America. Please go ahead.

Speaker Change: Thank you and as mentioned the floor is now open for questions to ask a question. Please press star one telephone keypad to raise your hand and joined the queue.

John Murphy: Good morning, guys. Just a couple of quick ones.

Speaker Change: I would like to withdraw your question simply press Star one again.

Speaker Change: If you are called upon to ask your question in a listening via loud speaker on your device. Please pickup your handset and ensure that Youll phone is not on mute again net style wanted to join the queue and your first question comes from the line of John Murphy from Bank of America. Please go ahead.

John Murphy: First, on power and vision, the margins dropped pretty dramatically sequentially. I guess they're flat, they're slightly down year over year. And I think we've kind of gotten comfortable as we're exiting last year, traveling maybe in this 5% to 6% range, and maybe some upside over time. Was there anything specific or unique that happened in the quarter there?

John Murphy: Good morning, guys. Just a couple of quick ones first of all on power and vision.

John Murphy: Margins drops pretty dramatically sequentially I guess there.

John Murphy: Flat to slightly down year over year.

John Murphy: And I think we've kind of gotten comfortable as we're exiting last year traveling maybe in this 5% to 6% range and maybe some upside over time.

John Murphy: Was there anything specific or unique.

John Murphy: And how should we think about those margins as we progress through the year and maybe even beyond? Because I think it was 2.6%. It's far lower than we were, at least modeling. Maybe we got something wrong.

John Murphy: Happened in the quarter, there and how should we think about those margins as you progress through the year and maybe even beyond that I think it was two 6% which is far lower than we were at least modeling maybe we get something wrong.

Swami: Hi, good morning, John. This is Swami.

Swamy: Hi, Good morning, John This is swamy.

Swami: From the P&V sector perspective, there are a couple of things to note. First of all, fundamentally and basically, everything is good. No surprises there other than what we talked about in terms of volumes a little bit here and there. There is one specific program which starts cadence in the second quarter and towards the second half of the year, which starts kicking in. The engineering spend decrease cadence also starts from the second quarter moving forward.

From the <unk> sector perspective, there are couple of things to note first of all.

Swamy: Fundamentally and basically everything good <unk>.

Speaker Change: No surprises there other than what we talked in terms of volume right here and there.

Swamy: There is one specific program, which starts cadence.

Swamy: In the second quarter and towards the second half of the year it starts to kick in.

The engineering spend decreased cadence Scotts also from the second quarters moving forward.

Swami: Some recoveries on tooling and engineering recoveries of the program's launch also come in the later part of the year. All said, just to give a little bit more color, the way you asked, and maybe help smartly, as you look at the numbers today that we are showing for PNV are about two and a half percent. It's definitely going to be more than double, as we see and we're expecting in the second quarter and going forward. So that's the step change that we have planned and we see going from this quarter into the second quarter and onward.

Swamy: Some recoveries on tooling and engineering recoveries as the programs launch also comes in the later part of the year.

Swamy: All said just to give a little bit more color. The way you asked and maybe help smartly.

Swamy: As you look at.

Swamy: Numbers today that we are showing for <unk> about two 5%.

Swamy: It's going to be definitely more than double.

Swamy: We see and we are expecting in the second quarter and going forward. So that's the step change that.

Swamy: We had planned NBC.

Swamy: Going from this quarter into second quarter and onwards.

John Murphy: Okay, that's very helpful. And then just another question about the battery structures business. Obviously, there's a pushing down and to the right and a lot of EV ramp launches and volumes. I'm just curious if you could talk about sort of the state of that business and if there's been any significant change in your expectations, potentially maybe even a slowdown in the capital deployed, to be more measured with what might actually be happening in the market.

Speaker Change: Okay. That's very helpful. And then just another question around the battery structures business.

Speaker Change: There is a pushing down into the right and a lot of EV.

Speaker Change: Ramp launches and volumes I'm, just curious if you could talk about sort of the state of that business.

Speaker Change: And if theres been any significant change in your expectations.

Speaker Change: Essentially maybe even a slowdown in the capital deployed.

Speaker Change: For that.

Speaker Change: Be more measured with what might actually be happening in the market.

John Murphy: That's a very good question, John. I think, as we've always said, wherever possible, we've always looked at Phasing in capital. That was one. Second thing, looking at volumes that are our own set of assumptions rather than just take what is given. The third thing we mentioned last time is, in some cases, customers partially or fully funding capital. As you know, tooling is a normal course of business, but in specific programs and some of these products and programs, we have, and we have been asking for, and in some cases, we have been successful in getting the customer to fund the capital partially or fully.

Speaker Change: That's a very good question, John I think as we've always said.

Wherever possible, we have always looked at.

Speaker Change: Raising in capital that was one.

Speaker Change: Second thing looking at volumes that are one set of assumptions rather than just take what you've given.

Speaker Change: The third thing we mentioned last time.

Speaker Change: In some cases customer.

Speaker Change: Partially or fully funded capital.

Speaker Change: As you know tooling as a normal course of business.

Speaker Change: Specific programs in some of these products and programs.

Speaker Change: We have and we have been asking and successful in some cases to get the customer to fund.

Speaker Change: The capital, partially or fully all of those things help us mitigate but on top of that as we said we're looking at just the overall.

John Murphy: All of those things help us mitigate, but on top of that, as we said, we are looking at just the overall, whether it's investment in capital or engineering spend. We continue to look at it, and that's the reason for the guide on saying that the 2.5 is more in the range of 2.4 to 2.5. And as you know, there is a lot of volatility in volumes and how they're looking.

Speaker Change: It is investment and capital R.

Speaker Change: On the engineering spend.

Speaker Change: We continue to look at it and Thats the reason for the.

Speaker Change: Guide on saying that the $2 five is more in the range of two four to two five and as you know there is a lot of volatility and volumes and how theyre looking so as we get to a little bit more clarity will continue to dose corrupt the capital number even further.

John Murphy: So as we get a little bit more clarity, we'll continue to scrub the capital number even further. The engineering guide, we are able to say that we are reducing 50 million now, and we see that path, and we continue to scrub that even further.

The Engineering guide, we are able to say that we are reducing 50 million now and we see that path and we continue to discuss that even further.

Swami: Okay, that's very helpful. Just one other follow-up. On the $195 million of deferred revenue that you're carrying that should flow through at some point in the future, Pat, are there costs that will come in with that deferred revenue? And how should we think about that potential benefit over time? And is that kind of it now that you've kind of taken these charges for fiscal erosion?

Okay. That's very helpful and just one other follow up on the $195 million of deferred revenue that youre carrying that should flow through at some point in the future pad is near <unk>.

Costs that will come in would that deferred revenue.

Speaker Change: How should we think about that potential benefit.

Over time is that kind of now that you've kind of taken these these charges.

Speaker Change: For OSB.

The fish corrosion.

Pat: Yeah, that's correct, John. So effectively, we've written off 100% of our FISCR assets. So what's left is the deferred revenue, and depending on how the future plays out, that deferred revenue will come through as income with no cost associated.

Speaker Change: Yes, that's correct John so effectively we have written off 100% of our pfister assets. So what's left is the deferred revenue and depending on.

Speaker Change: How the future plays out that deferred revenue will come through income with no no no cost associated.

John Murphy: Is there an expectation as to how that will be like over a couple quarters or will that hit in one quarter? I'm just curious how that will roll because that could obviously be pretty meaningful to EBIT.

Speaker Change: Is there an expectation is that would that be like over a couple of quarters will that hit in one quarter.

Speaker Change: I'm just I'm just curious how that will grow because thats, obviously can be pretty meaningful to EBIT.

Pat: It really depends on Fisker themselves, John, and how they move their business forward. It's really too early to tell that. That's why, under the accounting rules, we're not able to take it until we have clear clarity from Fisker themselves.

Speaker Change: It really depends on fisker themselves, John and how they move their business forward.

Speaker Change: Really too early to tell.

Speaker Change: That's why under the accounting rules, we're not able to take it until we have clear clarity from Mr themselves.

John Murphy: Okay. All right. Thank you very much. All right, great. Thanks, John.

Speaker Change: Okay, Alright, thank you very much.

Speaker Change: Alright, Thanks John.

Operator: Your next question comes from the line of Tamy Chen from BMO Capital Markets. Please go ahead.

Your next question comes from the line of <unk> Chen from BMO capital markets. Please go ahead.

Tamy Chen: Hi, good morning. Thanks for the question. Just wanted to go back on power and vision. So, sounds like this quarter, just some timing of those items. I'm just thinking, going forward, Swami. I know you said in Q2 that it should be at least double, probably more than Q1. But should we think of then going forward, we'll be kind of at that level, or the timing of things like recoveries from launches could still cause some quarter to quarter volatility on the margin for power and vision.

Tamy Chen: Hi, Good morning. Thanks for the question just wanted to go back on the power station. So it sounds like next quarter, just some timing of those items I'm just thinking.

Chen: Going forward for me I know you said in Q2 should be Leigh salvo, probably more than Q1, but should we think of think going forward will be kind of at that level or the timing of things like recovery model launches could still cause some quarter to quarter volatility on the margin.

Chen: Yes.

Swami: Good morning, Tamy. I think you have summarized it well. The significant step change happens from Q1 to Q2, and we expect improvement from there. But, you know, if the volumes change or, you know, there is launch deferment from customers and so on, that's an extraneous event, right? And that could create some problems. But as we see in our plan today, it's a smoother cadence from the second quarter with improvements into the third and fourth. And keep in mind our

Good morning.

Speaker Change: I think you summarized it.

Speaker Change: Significant step change happens from Q1 to Q2.

Speaker Change: And do we expect.

Speaker Change: Improvement from there, but the volumes change.

Speaker Change: It has launched a permit from the customers and so on that's an extreme extraneous events right.

Speaker Change: Could create some but as we see in our plan today.

Speaker Change: A more smoother cadence from second quarter with improvements into the third and fourth.

Pat: Yeah, I mean, keep in mind our outlook for power vision for the year is unchanged, right, 5-5 to 6-1. So, you know, you do the math, it implies that, you know, a pretty good second half as well as a good second quarter.

Speaker Change: Reminder, our outlook for power revision for the year is unchanged at 55% to six one so you do the math it implies that pretty pretty good second half as well.

Tamy Chen: Yeah, I got it. Okay.

Speaker Change: The second quarter.

Tamy Chen: And just wanted to go back to the holding of EBIT margin, even though you've got some of those other puts like Fisker coming out. I wanted to go back on that. So are you saying versus your last guide, you've found additional operating efficiency? Or is it that custom recoveries are coming in more than you had anticipated the last time you were talking about guidance?

Speaker Change: Yes got it okay.

Speaker Change: And I just wanted to go back to the holding an EBIT margin, even though you've got some windows out there Blake.

Speaker Change: Sure.

Speaker Change: I wanted to go back on that versus your guide.

Speaker Change: Hi.

Speaker Change: You found additional operating efficiency.

Speaker Change: Or is that the customer recoveries are coming in more than you had anticipated. The last time you were talking about guidance.

Pat: I think it's a combination of all of them. Tamy, when you look at a couple of the pieces, you're correct.

Speaker Change: I think it's a combination of all of them Tommy when you look at a couple of the pieces. So you are correct. We did when you go to the best of the 25 Decrementals on the margin holds the offsets when you go through a bunch of them. We have swamy mentioned, we're focusing on engineering.

Pat: So we did, when you go through the FISC or the 25 decrementals on the margin holds, the offsets, when you go through a bunch of them, we have Swami mentioned, you know, we're focusing on engineering, and that number is coming down in the range of about 50 million. That's part of it. We do have a benefit from inflationary headwinds net. We're seeing some relief on energy costs in Europe. It was a hotter summer.

Speaker Change: And that number is coming down in.

Speaker Change: In the range of about $50 million, that's part of it we do have a benefit on inflationary headwinds net.

We're seeing some relief on the energy costs in Europe was a hotter summer and we're also seeing some benefit on the semiconductors. So that's about it.

Pat: And we're also seeing some benefit on semiconductors. So that's about a 10 basis point benefit. And then when you have some of the other puts and takes, we have Swami also mentioned in the P&V, and part of driving that margin to the back half of the year, some of the commercial benefits we've negotiated, its PO reflected, and that benefit is going to flow through in the back part of the year as the programs launch.

Speaker Change: At 10 basis point benefit and then when you have some of the other puts and takes we have small me also mentioned in the PMT and part of driving that margin to the back half of the year. Some of the commercial benefits, we've negotiated peel reflected and that benefit is going to flow through in the back part of the year as the programs launch and then the last piece, which is a little bit.

Pat: And then the last piece, which is a little bit unusual, was the G-Wagon pricing at Steyr. We talked about a 10 basis point impact in February; the bill of materials that we see from Mercedes continues to change. And our sales reduction, with no even impact, is about 350 million. So that benefit on a basis point is five. And then just more broadly, our focus on CIs and improvements in underperformance has always been intense, but I would say it's even more intense with all the changes that we're seeing in the industry right now.

Speaker Change: Unusual was the G wagon pricing at Shire, we talked.

Speaker Change: So about a 10 basis point impact in February.

Speaker Change: Bill of materials that we see from Mercedes continues to change and our sales reduction with no EBIT impact is about $350 million. So that benefit on a basis point is five and then just more broadly our focus on <unk> and improvements that underperformance is.

Speaker Change: It has always been intense but I would say, it's even more intense with all the changes that we're seeing is industry right now.

Tamy Chen: Okay, and what should we think about with respect to CapEx? Like, do you think there's the possibility to further lower it, or is it difficult just given there's some commitment aspects that you can't change in this provision and kind of what we can expect for most of the year going forward? Thanks.

Okay, and how should we think about with respect to Capex. What do you think is possibility there lower ADR.

Speaker Change: Nicole just given there is some there is commitment.

Speaker Change: This revision is kind of what.

Speaker Change: What we can expect for most of the year going forward.

Swami: So what do you see, Tamy, lowering or bringing down the range? From a 2.5 approximately to 2.4 to 2.5 is based on the information that we have, and we continue to make efforts.

So what you see Tommy lowering our bringing the range.

Speaker Change: From a two one for approximately two 4% to five years based on the information that behalf.

Swami: There is, like you said, some capital that's already in place. And if there is a change in volumes, it becomes a commercial discussion; doesn't mean we stop. But on the other hand, on unlaunched programs, with the change in volumes, there would be an opportunity, obviously, to bring down capital.

Speaker Change: And we continue the efforts there is like you said.

Speaker Change: Some capital that's already in place.

Speaker Change: And if there is a change in volumes it becomes a commercial discussion doesn't mean, we stop.

Speaker Change: On the other hand on launched programs with the change in volumes, there would be opportunity, obviously to bring down capital.

Speaker Change: Thank you.

Operator: Your next question comes from the line of Mark Delaney from Goldman Sachs. Please go ahead.

Speaker Change: Your next question comes from the line of Mark Delaney from Goldman Sachs. Please go ahead.

Mark Delaney: Yes, good morning. Thanks very much for taking the questions.

Mark Delaney: Yes. Good morning, Thanks, very much for taking the questions I guess first of all I'd like to better understand what you are seeing in terms of customer production schedules regionally I saw you left North America and Europe unchanged, you took up China.

Mark Delaney: I guess first I'd like to better understand what you're seeing in terms of customer production schedules regionally. I saw you left North America and Europe unchanged, but you took up China.

Swami: But some of the other Tier 1s have talked about recent volatility in Europe. We've heard from some of the European OEMs about some more difficult one-key results. So we'd love to better understand what you may be seeing regionally, especially in Europe.

Mark Delaney: But some of the other tier ones have talked about recent volatility and Europe. We've program some of the European Oems about some more difficult <unk> results. So we'd love to better understand what you may be seeing.

Mark Delaney: Regionally, especially in Europe.

Swami: Mark, I think as you saw, there's not a significant change in our set of presumptions and volumes we talked about. We see a change in the mix, maybe from one platform to the other, but the overall units, we don't see a significant change. I mean, you know, one program to the other, there is a little bit of ups and downs, but we don't see anything significantly different than what we are

Speaker Change: Mark I think as you saw there is not a significant change in our setup the zone.

Speaker Change: <unk>.

Speaker Change: The boats.

Speaker Change: We see a change in the mix.

Speaker Change: Maybe from one platform to the other.

But the overall units, we don't see a significant change.

Speaker Change: One program to the other there is a little bit ups and downs, but we don't see anything significantly different than what we are projecting.

Mark Delaney: Thanks for that. And another question for you, Swami. I'm hoping to better understand how Magna wants to support and sell the new market entrance in the future. You know, the last couple of years, there was a lot of focus on, you know, maybe selling them for an Apple car. Of course, you had your experience with Fisker, but now we've also seen in China, right? We've got, you know, Xiaomi and Huawei. So what lessons has Magna learned with the Fisker business? And can you help us better understand how Magna may try to partner and support those types of new market entry, wherever they may be globally going forward, you know, be it China, the U.S., Europe, etc.? Thanks.

Okay. Thanks for that and then a question for you Swamy I am going to better understand how magna wants to support and sell to new market entrants in the future.

Swamy: Last couple of years Theres, a lot of focus on maybe selling them for an Apple car of course, you had your experience with fisker, but but now we've also seen in China right.

Swamy: Rami and Huawei, so what lessons as Magna learned with the <unk> business and can you help us better understand how magna may try to partner and support those types of new market entrants wherever they may be globally going forward, we would be a China U S Europe et cetera. Thanks.

Swamy: Yes.

Swami: As we sit and look back, right, even in the past, the process of how we look at the business when we take it is the same. We look at the viability of the product, you know, the financial strength at that point when we are looking at the customer, and just the overall acceptance, possibly, you know, to the best we can in terms of the product. It's no different than that.

Swamy: As we sit and look back even in the past.

Swamy: Process of how we look at the business. When we take is the same we look at the viability of the product.

Rami: The financial strength at that point, when we are looking at big customer.

Rami: And just the overall acceptance possibly.

Rami: To the best we can in terms of the product.

Swami: We look at all of those things and assess the risk factors. We still believe. As we look at starting and complete vehicle assembly, with maybe just not the new entrance, I would rather say it's as market consolidation happens as the transition from ICE to EV happens in a long process. Some of the Williams are looking at niche vehicles.

Rami: It's no different than that we look at all of those things and assess the risk factors.

Speaker Change: I believe.

As we look at is tired of complete vehicle Assembly.

Speaker Change: Great.

Speaker Change: Maybe just not the new entrants I would rather say it's.

Speaker Change: As the market consolidation happens as the transition from ice to EV happens in a long process.

Speaker Change: Some of the Oems are looking at niche ratio some of the regions are looking to enter into new regions. All of this playing to.

Swami: Some of the regions are looking to enter into new regions. All of this plays into putting the pieces of the puzzle together. That's how we look at it. It's no different than how we go about with every, single program. And we kind of looked at some of the terms and conditions, which are very important. I think we talked about some cases. [inaudible] If it's an offshoot, do we have guarantees from the parent company?

Speaker Change: Putting the pieces to the puzzle together.

That's how we look at it it's no different.

Speaker Change: And then how we go about with every.

Speaker Change: Every program.

Speaker Change: And so we kind of look at some of the terms and conditions, which are very important.

Speaker Change: I think we talked in some cases.

Speaker Change: Sure.

Swami: And you know, what are the payment terms like all up-front payment of capital, you know, number of days for payment, and so on? It has been in place, I think it's, We kind of give a more focused look at some of these companies that might be new.

Speaker Change: If it's an offshoot do we have the guarantees from the parent company and what are the payment terms like all upfront payment of capital.

Speaker Change: Number of days for payment and so on.

Speaker Change: It has been in place I think.

Speaker Change: We kind of give a more focused look on some of these companies that might be new.

Mark Delaney: Thanks for that, Swami; I'll pass it along.

Speaker Change: Understood. Thanks for that for me I'll pass it on.

Operator: Your next question comes from the line of Itay Michaeli from City. Please go ahead.

attainment KLA: Your next question comes from the line of attainment KLA from Citi. Please go ahead.

Itay Michaeli: Great, thank you. Good morning, everyone. Just on the first question, kind of going back to margins for the rest of the year, I was hoping you could give a little bit more color on how you expect total company margin cadence the rest of the year. And maybe, just as a point of clarification, is deferred revenue assumed to be released in India this year in the guidance?

attainment KLA: Great. Thank you. Good morning, everyone. Just a first question kind of going back to margins for the rest of the year was hoping you can give a little bit more color. How you expect total company margin cadence the rest of the year and maybe just as a point of clarification is the deferred revenue I assume to be released.

attainment KLA: In India this year and the guidance.

Pat: Morning Itay, it's Pat. I'll cover the deferred revenue one first, so our guidance does not include any impact of deferred revenue. So the way it's being reflected is it's on the balance sheet at December of 2024. As for the cadence of margins, I think the cadence is, I would say, fairly similar to last year. When you think about what's happening in the industry, SWAMI has gone through the P&B segment, but when you go by segment, I would say when you look at our BES segment, it's going to follow a similar pattern to what we'd seen last year. We're seeing it's fairly consistent first half to second half.

attainment KLA: Yes.

Speaker Change: Good morning to pay its patch.

Speaker Change: On the cover of the deferred revenue one first so our guidance does not include any impact of deferred revenue. So the way it's being reflected as it's on the balance sheet at December of 2024.

Speaker Change: On the cadence of margins I think.

Speaker Change: Even at the cadence I would say fairly similar to last year. When you think about what's happening in the industry Swamy has gone through.

Speaker Change: The PND segment, but when you go by segment I would say when you look at our <unk> segment is going to follow a similar pattern to what we had seen last year, we're seeing.

Speaker Change: It's fairly consistent first half the second half we have some improvements, but that's being driven primarily by.

Pat: We have some improvements, but that's being driven primarily by, you know, recoveries in inflation. They tend to be collected more in the back half of the year, and then also some of the CI activities, just as programs launch, you get that benefit. When you look at the P&B segment, I think SWAMI covered it in detail, but it's, again, inflation.

Recoveries of inflation they tend to be.

Speaker Change: Collected more in the back half of the year and then also some of the Ci activities just as programs launch you get that benefit when you look at the <unk> segment, I think swamy covered in detail, but it's again, it's the inflation they tend to come in the back part of the year that explains part of the Delta from Q4 of 2023 into Q1 of 2024.

Pat: They tend to come in the back part of the year, and that explains part of the delta from Q4 of 2023 into Q1 of 2024. And then, as Louis said, you can see the benefit as we come up in the back part of the year. The other part of it is, as SWAMI said, we do have some commercial pricing that kicks in at the back part of the year, and then we talked about the $50 million engineering spend reduction.

Speaker Change: And then as Louis said you can see the benefit has come up the bank per year. The other part of it is we the Swamy said, we do have some commercial pricing that kicks in the back part of the year.

Speaker Change: And then we talked about the $50 million engineering spend reduction that's primarily coming through the PND segment again it did.

Pat: That's primarily coming through the P&B segment. Again, it sequentially gets better quarter by quarter, and then, again, the operational benefits as programs launch. So, you see that benefit coming through in the back half of the year. Everything's pretty consistent, and I think on the complete vehicles, it's a BISCR issue that we've discussed.

Speaker Change: Sequentially gets better quarter by quarter, and then again the operational benefits as programs launch so you'll see that benefit coming through the back half of the year seating is pretty consistent and I think on the complete vehicles. It's a <unk> issue that we discussed.

Swami: And Pat, I think just to add a little bit more color like we did in P&V, if you look from Q1 to Q2, typically, we don't talk quarter by quarter, but just to give you a little bit of color, we see north of 5% going into Q2, and sequential going forward.

Speaker Change: And Pat I think just to add a little bit more color like we did in PNG.

Patrick W. D. McCann: If you look from Q1 to Q2, typically we don't talk quarter by quarter, but just to give you a little bit color.

Patrick W. D. McCann: See north of 5% going into Q2.

Patrick W. D. McCann: And sequential going forward.

Pat: And just a second question, and apologies if I missed it earlier, but can you talk a bit more about the active safety volume declines assumed in the guidance now and any, you know, changes in your thinking for active safety over the next couple of years? Thank you.

Patrick W. D. McCann: That's all very helpful. Thanks for that detail and just a second question and I apologize if I missed it earlier, but can you talk a bit more.

Patrick W. D. McCann: The active safety volume declines assumed in the guidance now and any changes.

Patrick W. D. McCann: For active safety over the next couple of years. Thank you.

Itay Michaeli: Yeah, if you just look at the overall, you know, going into 26 and 27, I would say it's not a material change. Yeah, that volume change or the revenue change that we talked about in the short term, in 24-25, is really related to the program ramp trajectory being a little bit slower. Significantly, that is one aspect. And some of the deferred launches, I would say, is the second aspect. And the third one is the insourcing of programs more specifically related to China.

Speaker Change: Yes, if you just looked at the overall.

Speaker Change: Going into 2000, and 627 I would say, it's not a material change.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Volume change of the revenue change that we've talked about in the short term.

Speaker Change: And in 'twenty four 'twenty five.

Speaker Change: It's really related to program.

Speaker Change: Brian trajectory.

Speaker Change: Slower.

Speaker Change: Significantly that is one and some of the deferred launches I would say is the second aspect and the third one is the in sourcing.

Programs more specific committed.

Speaker Change: Get it to China.

Itay Michaeli: And, you know, as we look at that, we are obviously looking at the Offset in terms of engineering and other spending on that, specifically in ADAS, but generally in PNV, to keep our focus on getting to, you know, microchip profitability going forward.

And as we look at that we are obviously looking at the.

Speaker Change: Offset in terms of.

Engineering and other spending in that specifically made asked but generally in <unk>.

Speaker Change: Keep our focus on getting too.

Speaker Change: Sure.

Speaker Change: The magazine and profitability going forward.

Swami: That's very helpful; thank you.

Speaker Change: That's very helpful. Thank you.

Operator: Your next question comes from the line of Joseph Spak from UBS Securities. Please go ahead.

Your next question comes from the line of Joseph Spak from UBS Securities. Please go ahead.

Joseph Spak: Thanks so much. I guess to start, Swami, you talked about some restructuring. We've seen, you know, a number of other suppliers also begin to really restructure, particularly more in Europe as the volumes there seem like they're going to be potentially structurally lower. So, I was wondering if you could just spend a couple of minutes talking a little bit more about how you feel about your footprint, maybe very specifically in Europe also, and how you're going to evaluate going forward restructuring opportunities.

Joseph Spak: Thanks, so much I guess to start swamy.

Joseph Spak: And then you talked about some <unk>.

Joseph Spak: Restructuring we've seen.

Joseph Spak: There are other suppliers also begins to really restructure, particularly more in Europe as the volumes there seem like theyre going to be potentially structurally lower so.

Joseph Spak: I was wondering if could just spend a couple of minutes talking a little bit more about.

Joseph Spak: How you feel about your footprint, maybe very specifically in Europe also in that and how you're going to evaluate.

Joseph Spak: Going forward restructuring opportunities.

Swami: Yeah, good morning. I think it's a good question. With what's happening in the industry, for us, it's, I would say, the normal course of business, right? Some of the reductions or optimization as you look at, we are not really focused on, you know, Just overall headcount reduction. I think the way to look at it is, what is the cost structure of the business to be able to hit the margins that we're talking about? Part of that obviously means flexing direct labor in various locations, and we have been doing that over the last six months.

Speaker Change: Yes, good morning.

Speaker Change: Sure.

Speaker Change: I think it's a good question what's happening in the industry for us. It's I would say normal course of business right some of the.

Speaker Change: Reductions sort of optimization as we look at we have not really focused on.

Speaker Change: Just overall head count reduction I think the way look at it as what is the cost structure of the business to be able to hit the margins that youre talking about.

Speaker Change: Part of that obviously means flexing direct labor.

Speaker Change: In various locations and we have been doing that over the last six months.

Swami: So it's not a one-step change discussion for us. More specifically, if you're looking at a program like FISCR that we talked about, that type of restructuring is a little bit different. We have talked about certain divisions being restructured over the last year and so, and that is a normal course, and we are continuing to look at that. And this is all part of the operational excellence activities that we generally look at, right, which is headcount reduction, you know, or has a GNA looking at, more focus on continuous improvements, looking at recoveries, and commercial discipline.

Speaker Change: So it's not a one step change a discussion for us.

Speaker Change: More specifically if you are looking at a program like Cisco that we've talked about that type of restructuring is a little bit different.

Speaker Change: We have talked about.

Speaker Change: Certain divisions grew being restructured over the last year and so and that is a normal course, and we're continuing to look at that.

Speaker Change: This is all part of the operational excellence activities that we jumped on you can look at right, which is head count reduction.

Speaker Change: Or has the SG&A.

Speaker Change: Looking at <unk>.

More focus on continuous improvements looking at recoveries commercial discipline. All of this is how we are able to say yes.

Swami: All of this is how we are able to say that we are offsetting the inflation headwinds, you know, by the 10 basis points that we talked about. [inaudible] We are talking about capital discipline, that's how we are able to reduce capital. We are looking at every engineering program and its relevance now and going forward. That's a reduction in engineering spend. So I think it's all-encompassing. I wouldn't say it's just focused on headcount. So again, this is all effort towards margin expansion, and that's one of the reasons why we are able to keep the margin outlook for 2024, and we feel comfortable looking forward into 2025 and 2026.

Speaker Change: Offsetting the inflation headwinds.

Speaker Change: The 10 basis points that can be talked about.

Speaker Change: We are talking about the capital discipline Thats, how we are able to reduce the capital. We are looking at it every engineering program.

Speaker Change: And its relevance now and going forward, that's a reduction of member trading spend.

Speaker Change: It's all encompassing I wouldn't say it's just.

Speaker Change: Focused on head count.

Speaker Change: So.

Speaker Change: Again. This is all efforts towards margin expansion and Thats one of the reason why we are able to keep.

Speaker Change: The margin outlook for 2004 and feel comfortable looking forward into 'twenty five 'twenty six.

Joseph Spak: And maybe just as a second question, you know, last quarter you talked about an EV win in the southern U.S. I was wondering if you could sort of provide an updated view from your perspective given that there's obviously been, you know, a lot of noise in the market around that potential program.

Speaker Change: Okay. Thank you.

And maybe just as a second question.

Last quarter.

Speaker Change: You talked about.

Speaker Change: When in the Southern U S.

Speaker Change: Maybe you can sort of provide an updated view from your perspective, given that theres, obviously been a lot of noise in the market around that potential program.

Joseph Spak: Yeah, difficult to comment without the customers talking, right? We don't comment specifically on the programs. But as we get a little bit more clarity, we'll start seeing, you know, what it means to CapEx and revenue going forward. We'll keep you posted.

Speaker Change: Difficult to comment without the cut.

Speaker Change: Customers talking Greg we don't comment specifically on the programs right as we get any more clarity you will start seeing.

Speaker Change: What it means to Capex and revenue going forward, we'll keep you posted.

Swami: Have you changed any of your internal plans yet?

Speaker Change: Have you changed any of your internal plans yet.

Speaker Change: Not at this point to comment.

Joseph Spak: Not at this point to comment. Thank you.

Pat: Okay, thank you. I think, sorry, Joe, just for perspective, we do an annual planning once per year on a three-year forward basis, and we're updating 24, so I think it's a little premature to say we've updated whether, you know, to 25, 26. We'll kick that off through the summer.

Speaker Change: Okay. Thank you.

Clearly Joe just for perspective, we do an annual planning once per year of a three year forward basis and were up 80 20 for us. So I think it's a little premature to say, we've updated whether to 'twenty five 'twenty six.

Speaker Change: Alright, well, thank you exit will kick that off through the summer.

Speaker Change: Thanks again.

Operator: Your next question comes from the line of Dan Levy from Barclays; please go ahead.

Speaker Change: Your next question comes from the line of Dan Levy from Barclays. Please go ahead.

Dan Levy: Hi, good morning. Thank you for taking the questions. I wanted to start first with a question on complete vehicles. Can you just give us a sense of the go-forward strategy at GROTS that, assuming the Fisker Ocean is no longer going to be in production and you now have spare capacity, what is the process to get that capacity allocated to other automakers? What's the cost? What's the confidence that other automakers will take up that capacity in time?

Dan Levy: Hi, Good morning, Thank you for taking the questions.

Dan Levy: I wanted to start first with a question on complete vehicles.

Dan Levy: Can you just give us a sense on the.

Go forward strategy at crops that assuming the Cisco Ocean is no longer going to be in production and.

Dan Levy: Spare capacity what is the process to get that capacity allocated to other automakers, what's the cost what's the confidence that.

Dan Levy: Other automakers will take up that capacity and the timing around that.

Swami: Good morning. I think as we look at the current status, we are still looking at In 2024, producing roughly 70,000 units or so. One of the key things that we have always talked about is the flexibility in the process to be able to handle multiple volumes in the same line, whether it's ICE or EV or different types of vehicle segments. So that gives the colleague the speed to be able to change over and address.

Speaker Change: Good morning.

I think as we look at the current status we are still looking at.

Speaker Change: In 2024, producing roughly about 70000 units or so.

One of the key things that we've always talked about is the flexibility in the process to be able to.

Speaker Change: And Ah handle multiple volumes in the same line, whether it's <unk> or different types of retail segments.

Speaker Change: So that gives the colleague to speed to be able to change or an address.

Swami: You know, as we get opportunities, but I think, as you rightly said, first, we have to be clear from an obligations perspective of what capacity needs to be kept versus when it's released and how we can use it. All of that comes into the equation. There are multiple conversations about different customers. I would say mature customers or new ideas. And we continue to look at that. So we've clearly indicated there is a, call it a lull in the 2026 time frame, and this business is typically lumpy, so it's not very unnatural to have a low point and then get back to what we need to get to.

Speaker Change: As we get opportunities, but I think as you rightly said, one we got to be clear from an obligation perspective, what capacity needs to be capped versus amendments from used and how we can use it all up that comes into the equation.

Speaker Change: There is multiple conversations on different <unk>.

Speaker Change: Customers.

Speaker Change: I would say mature customers or new ideas.

Speaker Change: And we continue to look at that so.

Speaker Change: Two you indicated there is a.

Speaker Change: Call. It a lull in the 2026 timeframe and this business is typically lumpy. So it is not very unnatural to have a low point and then get back to what we need to get to that is what we are going through but there's a lot of conversations on that topic too.

Swami: That's what we are going through, but there are a lot of conversations on that topic to see how we can address the existing capacity, and like the total capacity is in the range of 150-160, roughly right, and we are 70 there with a lot of conversations ongoing.

Speaker Change: See how we can address the existing capacity and like the total capacities in the range of 150 160, roughly right. Then we are 70% there.

Speaker Change: With a lot of conversations ongoing.

Dan Levy: Is GROT being looked at by other automakers as an opportunity to fill some of the EV volume where maybe they have a bit more of an uncertain outlook, so it's more of a stopgap for them rather than dedicating their own capacity to it?

Speaker Change: Okay.

Speaker Change: <unk> groth being looked at by other automakers as an opportunity to fill some of the EV volume where maybe.

Speaker Change: They have a bit more of an uncertain outlook. So.

It's a bit more of a stopgap to them rather than dedicating their own capacity to it.

Swami: Yeah, like I said, a lot of conversations with different customers, not just in terms of EV, but whether it's EV or ICE, sometimes it's volume leveling, sometimes it's a variant discussion. So it's a combination of the two. It's not specific to EV. It's, it's more open, again, going back to the ability that we have the flexibility to do different models off the same line and be able to do that quickly. There are a whole bunch of conversations on that topic, yes.

Speaker Change: Yes, like I said, a lot of conversations with different customers.

Speaker Change: Not just in terms of EV, but TV is sometimes it's volume leveling sometimes it's.

Speaker Change: <unk> discussion.

Speaker Change: So it's a combination of the two it's not specific to EV.

It's more open again going back.

Speaker Change: So the ability that we have the flexibility to do different models off the same line and be able to do that quickly.

Speaker Change: There is a whole bunch of conversations on that topic, yes.

Dan Levy: Okay, great, thanks. And then, as a follow-up, wondering if you could just talk about, within the revenue base, the ICE versus EV split. I believe in the past you made a comment that something like 20% of your revenue is on EV programs of some sort. You know, what is the trajectory of that? Are you seeing any softening in those schedules? Are there offsets from better ICE? And then maybe you could just provide a quick comment on your DCT, which presumably is benefiting from a better hybrid outlook.

Speaker Change: Okay, great. Thanks, and then I will.

Speaker Change: Follow up wondering if you could just talk to within the revenue base the ice versus EV split.

Speaker Change: Believe in the past you you made a comment that something like 20% of your <unk>.

Speaker Change: Revenue was on EV programs of some sort.

Speaker Change: What is the trajectory.

Speaker Change: Are you seeing any softening in that release schedules are there offsets from better ice and then maybe you could just provide a quick comment on your DCT, which presumably and benefiting from better hybrid outlook. Thank you.

Swami: Yeah, I think there are two parts to the question. Generally, I would say in the short term, if you look at 24, obviously different regions have different EV penetrations. And overall, as Magna, if you look at it, we would be aligned with the overall EV market in the global market in 2024. And as we go out into the future years.

Speaker Change: Yes.

Speaker Change: There is two parts to that question.

Speaker Change: Generally I would say in the short term if you look at 'twenty four obviously different regions have different EV penetrations.

Speaker Change: And overall as magma and to look at it.

Speaker Change: We would be at <unk>.

Speaker Change: <unk>.

Speaker Change: The overall.

Speaker Change: EV market to the global market in 2024.

Speaker Change: And as we go out into the future years.

Swami: We are more indexed in North America, as you know, 50% of our sales are in North America, roughly. So we might have a higher index of EV in North America. But if you look globally, I think, you know, further out is difficult to say as volumes are changing. And we, as Pat said, as we go through the planning process, we will come back and be able to give you a little bit more clarity on that. Yeah, that's one part of it.

Speaker Change: We are more indexed in North America as you know 50% of our sales in North America roughly.

Speaker Change: So we might have a.

Speaker Change: Higher index of EV, Okay.

In North America, but if you look globally I think.

Speaker Change: Further out is difficult to say as volumes are changing and be as Pat said as we go through the planning process, we will come back and be able to give you a little bit more clarity on that.

Dan Levy: So pretty aligned in the short term, but as we look out in the mid and long term, a little bit more indexed in North America, under indexed in China and Europe. But if you look at, You know, the DCT, I think the question you asked, there are certain programs where we have both sides of the equation, that means we are on the same platform, supplying the ICE version of the DCT, or the hybrid DCT, or the E-Drive.

Speaker Change: Yes, that's one part of it.

Speaker Change: So pretty aligned in the short term as we look out in the mid and long term a little bit more indexed in North America under indexed in China and Europe.

Speaker Change: If you look at.

Dan Levy: So if there are ups and downs on this, it'll be neutral to us, which is a good thing. But it doesn't apply to all programs, obviously. So we will see if the eyes, you know, continue to have volumes and have an uptick. We will see that in our DCT programs that we have. Great, thank you. Your next question is from the line of Krista Friesen from CIBC. Please go ahead. Hi, thanks for taking my question.

The <unk> the question you asked.

There are certain programs.

Speaker Change: We have both sides of the equation that means we are on.

The same platform.

Speaker Change: Applying.

Speaker Change: Ice version DCT or the hybrid DCT.

Speaker Change: E drive.

Speaker Change: If there is ups and downs on this it would be neutral to us, but it's a good thing, but it doesn't apply to all programs. Obviously, so we do see if the ice.

Speaker Change: Continuous.

Speaker Change: To have the volumes and have an uptick.

Speaker Change: You'll see that in our.

Speaker Change: DCT programs that we have.

Speaker Change: Great. Thank you.

Operator: Your next question is from the line of Krista Friesen from CIBC. Please go ahead.

Speaker Change: Your next question is from the line of Christopher <unk> from CIBC. Please go ahead.

Christopher: Hi, Thanks for taking my question.

I was wondering if you could just give us a little bit more detail on what the conversations are like with.

Christopher: With some of your customers who are maybe adjusting their third.

Christopher: Strategy.

If youre able to get any recoveries at all or if or if that's kind of out of the question and if that impacts how you structure.

Christopher: Kind of your contracts going forward.

Krista Friesen: Yeah, for sure, the discussions are on. And in some cases, we actually have the commercial recoveries already. Like I said at the beginning of my comments, in some cases, the OEMs are actually coming in with the capital up front, which reduces the risk. In some cases where we had a certain set of assumptions on volumes and we had the capital invested, we had recoveries, and those discussions continue going forward.

Speaker Change: Yeah for sure the discussions are on and in cases in some cases, we actually had good commercial recoveries already.

Like I said at the beginning of my comments.

Speaker Change: In some cases.

Speaker Change: Oems are actually coming in with the capital upfront, which reduces the risk in some cases, where we had a certain set of assumptions on volumes and we had the capital invested.

Speaker Change: We had recoveries and those discussed discussions continue going forward.

Krista Friesen: [inaudible] We are also looking, as I said before, how we look at these programs, whether it's volume banding, whether it's in our front payments, or at least have the framework to have a discussion about giving. All this said, more importantly also, we have our own view of looking at what we think the volumes could be on the project. Although we have to meet the customer requirements in the run rates and be ready to give the volumes, that's how we think in terms of flexibility and modularity and all of that stuff. So it's managing that. So that's where a lot of this, what I call, process knowledge and Continuous improvement as well as operational excellence planning comes into play. And I think

Speaker Change: We had also looking as I said before.

Speaker Change: How do we look at these programs, whether it's volume banding, whether it's payments or at least have the framework to have a discussion given all of this said.

Speaker Change: More importantly, you also we have.

Speaker Change: Our own view of looking at what we think the volumes could be on the project, although we have to meet.

Speaker Change: Meet the customer requirements in the run rates and be ready to give that Williams desk.

Speaker Change: That's fair.

Speaker Change: How do we think in terms of flexibility and modularity and all of that stuff.

Speaker Change: Managing that so that's where a lot of this.

Speaker Change: Process knowledge.

Speaker Change: Continuous improvement as well as the operational excellence planning comes into play.

Speaker Change: Okay.

Swami: I think, sorry, I'll just add to that Swami. I think Krista, if you think about when we think about EVs, we have a strategy depending on product group. So if you start thinking about, you know, higher capital-type programs, whether it's a battery tray or a frame, we're making decisions not for the next three years. We're making decisions on gen two, gen three, and that's the history we have had with these capital-intensive products or highly-engineered products.

Speaker Change: And I think I'll just add that's why we I think Chris if you think about when we think about EV strategy depending on product.

Speaker Change: So if you start thinking of both.

Speaker Change: Higher capital type programs, whether it's a battery tray or frame.

Speaker Change: We're making decisions not for the next three years, we're making decisions on Gen. Two gen three and Thats. The history. We've had on these capital intensive products are highly engineered products I think it's there's a lot of noise in the media right now about Evs, particularly in North America, but we're looking much longer than the next.

Swami: I think there's a lot of noise in the media right now about EVs, particularly in North America, but we're looking much longer than the next three-year time horizon, and we're making decisions based on our view of where the industry's gonna be long-term. And as Swami said, EVs are coming, and it's a matter of picking the right platforms and the right customers.

Speaker Change: Three year time horizon, and we're making decisions based on.

Speaker Change: Our view of where the industry is going to be long term and as Swamy said Evs are coming and it's a matter of picking the right platforms and the right customers.

Speaker Change: Okay, great. Thank you I'll jump back in the queue.

Pat: Your next question comes from the line of Colin Langan from Wells Fargo. Please go ahead.

Speaker Change: Your next question comes from the line of Colin Langan from Wells Fargo. Please go ahead.

Operator: Oh, great. Thanks for taking my questions.

Colin Langan: Oh, great. Thanks for taking my questions.

Colin Langan: Wanted to follow up make sure I fully capture all the changes in guidance. So on the sales side at the midpoint guidance of $1 2 billion. So Thats split 400 for <unk> 350 is the <unk>, which is just pass through with no margin and then there's 450 ish from launch delays.

Colin Langan: And then the the EBIT cut at the midpoint was like 135, so about 100 ish from the <unk> impact.

Speaker Change: Maybe if you have contributions on that 450 of loss sales Thats, maybe 90% contribution maybe $190 million.

Speaker Change: $90 million ish, maybe and then the <unk>.

Speaker Change: Offsets to that are going to be about $50 million and lower engineering, and then the input costs, which I guess, it's 10 basis points or maybe $40 million ish are those the main puts and takes that we should be thinking about.

Speaker Change: Sorry, Colin and so trying to keep a lot of numbers.

Colin Langan: I just wanted to follow up, make sure I fully captured all the changes in guidance. So on the sales side, at the midpoint, guidance is cut $1.2 billion. So that's split $400 for Fisker. $350 is the G-Wagon, which is just passed through with no margin. And then there's $450-ish from launch delays. And then the EBIT cut at the midpoint was like $135, so about $100-ish from the Fisker impact. Maybe if you had contributions on that 450 million lost sales, that's maybe 20% of the contribution, maybe $190 million.

Colin Langan: Let's just deal with the sales first call. It if that's okay. So fisker for 400 issues correct. The <unk> and just pure flow through is $3 50, you mentioned the one number I didn't hear was foreign exchange.

Colin Langan: Sorry, Colin, I'm trying to keep a lot of numbers there. Let's just deal with the sales first, if that's OK.

Pat: So Fisker 400-ish is correct. The GWEG and just pure flow-through is $350, as you mentioned. The one number that I didn't hear was foreign exchange, a headwind of about $200 million, which would have a corporate average type margin, most likely. And so those three numbers add up to the $950 of the $1.2. So your balance is $350 of delta, $250, sorry, thanks, Louis. And that's a combination of volumes and launches, offset in part by some of the delays we're seeing in the ADAS space, but at net. And then on the, on the.

Colin Langan: Headwind of about $200 million, which would have corporate average type margin most likely.

Colin Langan: And so that those those two numbers add up to the 950 of the one two so youre balance is $3 50 of ish.

Colin Langan: Delta $2 $52 50, Sir thanks Louis.

Colin Langan: And Thats a combination of volumes launches offset in part by some of the delays receipt in the Adas space, but net net.

Colin Langan: And then on the.

On the.

Pat: On the EBIT walk side, I think we talked about the G-Wagon Fisker. We talked about the 25 basis point headwind. We have the pickup then on G-Wagon is about 5 basis points. We then talk about the benefit of about 10 basis points on the inflationary pieces. Engineering spend is the 50 Swami had mentioned. And then we have some commercial pricing pickups in the back half that are going to flow through, which is in the range of about 20 basis points. So those are the big drivers. And then obviously, the offset is just the lower sales, the 250 net.

Colin Langan: On the EBIT walk side, I think we talked so the G wagon Pittsburgh.

Colin Langan: You talked about the 25 basis point headwind.

Colin Langan: The.

Colin Langan: Pickup then on GE wagon its about five basis points. We then talk about the benefit of about 10 basis points on.

Colin Langan: <unk>.

Colin Langan: Okay inflationary pieces engineering spend as the 50 Swamy had mentioned and then we have some commercial pricing.

Colin Langan: Pick up in the back half that are going to flow through which is in the range of about 20 basis points. So those are the big drivers.

Colin Langan: And then obviously the offset is just the lower sales of $2 59.

Colin Langan: And then just going back to the prior question about the EV programs because there was a very large paragraph in the release about those programs. Do you not have minimum contract commitments in some of these programs where if you don't hit certain volumes, you actually would be qualified to get some recovery? I don't know how common that is or if it's just hard to actually enforce those kinds of clauses.

Speaker Change: Got it that's very helpful to kind of help together okay.

Speaker Change: And then just going back to the prior question about the EV programs because there was a very large paragraph in the release on those.

Speaker Change: Those programs do not have minimum contract commitments and you're in some of these programs, where if you don't hit certain volumes you actually would be qualified to get some recovery I don't know how common that is or if that's just hard to actually enforce those kinds of classes.

Swami: So Colin, normally, you know, we don't have minimum volume guarantees or volume guarantees, right? These are all discussions, like I said, about figuring things out as we look at specific programs. But as is the normal course in the industry, we have a volume set, and we work through that. There is risk and opportunity, but no guarantees. There is some in terms of, like Pat talked about, big capital investments, which they... Discussion with the customer and more specific to those programs rather than a general rule. Yeah, and some changes going forward. Sorry, some changes going forward as we look at these big programs and have conversations, but those are more exceptions than rules.

Speaker Change: So collin normally.

Speaker Change: We don't have minimum volume guarantees so volume guarantees right. These are all discussions like I said.

Speaker Change: And figuring out.

Speaker Change: As we look at specific programs, but that's not included in the industry.

Speaker Change: We have a volume set and we worked through that there is an opportunity but no guarantees.

Speaker Change: There's some in term so.

Speaker Change: Pat talked about big capital investment.

Discussion with the customer and more specific to those programs rather than a general growth.

Speaker Change: Yes, some changes going forward some changes going forward as we look at this big programs and having conversations but those are more exceptions to enable.

Speaker Change: Yes.

Colin Langan: Got it. All right, thanks for taking my question.

Speaker Change: Got it alright, thank for taking my questions.

Speaker Change: Okay.

Operator: Your next question comes from the line of Michael Glen from Raymond James. Please go ahead.

Speaker Change: Your next question comes from the line of Michael Glen from Raymond James. Please go ahead.

Michael Glen: Hey, good morning. Swami, first, can you give an update on the V&Ear acquisition, how it's tracking, how sales are tracking, and your outlook for the programs there? Are they coming in as expected, in terms of volume?

Michael Glen: Hey, good morning.

Michael Glen: Swamy first can you give an update on the veneer acquisition, how it's tracking how sales are tracking.

And your outlook for the programs there are they are they coming in as expected the volumes.

Swami: Yeah, good morning, Michael. I think we talked about Vienna. I think, as we go forward, it's, I would say, an integrated business into our own electronics business. So we see that as one. But I understand your question.

Swamy: Yes, good morning, Michael I think we talked about.

Swamy: I've been here.

Swamy: I think as we go forward I would say an integrated business into our own electronics business. So we see that as one but I understand your question.

Swami: We talked about the 70 million plus in synergies on a run rate basis by the end of 2025. I can confirm that we are on track for it. It could be that

Swamy: <unk> talked about the $70 million plus in synergies on a run rate basis by end of 2025.

Speaker Change: I can confirm that we are on track.

Speaker Change: Alright.

Speaker Change: It could be that.

Swami: As we looked at your question about the sales, we talked about lower sales this year, but that's not specific to V&A. It is overall, you know, with the program. In sourcing and some delays and some wrap-up trajectory being different, going into 26, we still feel comfortable with the overall projections. There is no material difference between what we've been talking about. So overall, pretty comfortable with how we are looking at it. As I said, obviously. The sales drop that we see right now for various reasons, we are continuing to monitor and see what we can do in terms of investments and engineering spend and so on and so forth.

Speaker Change: As we look at the your question about the sales we talked about.

Speaker Change: The lower sales.

Speaker Change: This year, but it is not specific to <unk>. It is overall.

Speaker Change: With program.

Speaker Change: In sourcing and some delays and some ramp up trajectory being different.

Speaker Change: Going into 'twenty, six we still feel comfortable with the overall projections there is no material difference.

Speaker Change: What <unk> been talking about so overall.

Speaker Change: Pretty comfortable with how we're looking at it.

Speaker Change: Like I said, obviously.

Speaker Change: The sales drop that we see right now for various reasons.

Speaker Change: Continuing to monitor it and see what we can do in terms of investments and engineering spend and so on and so forth.

Michael Glen: Okay, and just to come back on the, I think you're referring to, you're referring to 50 million reduced engineers. So is that specific to the megatrend spending amounts that we think about? Is that applied to the 1.2 billion in megatrend spending?

Okay and.

Speaker Change: Just two.

Speaker Change: Come back on.

Speaker Change: I think you're referring to you're referring to $50 million of reduced engineering. So is that specific to the mega trend spending.

Speaker Change: Now that we think about that is that applied to the $1 2 billion of megatrend.

Swami: That's correct, Michael, and I would say it applies largely to the megacandidias, right? Significant, I would say. So, yes, it is applied over the long term.

Speaker Change: That's correct, Michael and I would say, it's largely to the Mega trend, maybe yes right.

Speaker Change: Significant I would say so yes, it is applied to the wrong okay.

Michael Glen: Okay, and then just on the balance of the megatrend spending, are you making an active assessment of that total amount? Is there potential that we think about further downward revisions on the megatrend spending in subsequent quarters? Yeah, it'd be a little off.

Speaker Change: Okay, and then just on the balance of the Mega trend spending are you, making in active assessment of that total amount should is there potential that we think about further downward revisions on the mega trend spending in subsequent quarters.

Speaker Change: Yes, it will be a little up and down as you seek to answer your question clearly, yes. We are constantly looking at it we have been able to quantify the $50 million, but we won't stop there we'll continue to look at it.

Swami: It will be a little up and down, as you see. To answer your question clearly, yes, we're constantly looking at it. We have been able to quantify the 50 million, but we won't stop there. We'll continue to look at it. The reason I'm saying it goes up and down a little is we have to look at the application that's being done on the programs that we have and continue to have and protect the future.

Speaker Change: The reason I am saying it goes up and down a little as we have to look at the application that's being done.

The programs that we have and continue to have and protect the future like Pat said, we are looking at this not for this year and next year, what does it mean for the long term with Magna that we have to keep an eye on for sure.

Swami: Like Pat said, we are looking at this not just for this year and next year. What does it mean for the long term for Magna? That we have to keep an eye on for sure, but we're continuing to look at everything that's in place and how we can optimize it. So that's going to be a key focus area for us.

Speaker Change: But we are continuing to look at everything thats in place and how we can optimize it so thats going to be a key focus area for us.

Speaker Change: Okay. Thank you.

Operator: And that concludes our Q&A session. I would like to turn the conference back over to Swami for his closing remarks.

Speaker Change: And that concludes our Q&A session I would like to turn the conference back over to Swamy for closing remarks.

Speaker Change: Yeah.

Swami: So thanks, everyone, for listening in today. As I said, we remain highly focused on flawless launches of new business, cost containment across the company, and obtaining commercial recoveries, all of which should contribute to a roadmap of margin expansion and free cash flow generation. Thanks for listening, and have a great day.

Swamy: So thanks, everyone for listening in today.

Swamy: As I said, we remain highly focused on flawless launches of new business.

Swamy: Cost containment across the company and obtaining commercial recoveries.

Swamy: All of which should contribute to our roadmap.

Swamy: Expansion and free cash flow generation, thanks for listening and have a great day.

Operator: This concludes today's conference call. Enjoy the rest of your day. You may now disconnect.

Speaker Change: This concludes today's conference call enjoy the rest of your day you may now disconnect.

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Speaker Change: Yes.

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Speaker Change: Okay.

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Okay.

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Speaker Change: Thank you.

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Speaker Change: Sure.