Q3 2024 Borgwarner Inc Earnings Call
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Good morning, my name is Connie and I will be your conference facilitator.
At this time, I would like to welcome everyone to the board, Warner 2024, 3rd quarter results conference call.
have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during that time, simply press star and the number one on your telephone keypad. If you would like to remove yourself or withdraw your question, please press the star and the number two.
Speaker Change: If you're using a speaker phone, please pick up the handset before asking your question. I would now like to turn the call over to Patrick Nolan, Vice President, President of Investor Relations. Mr. Nolan, you may begin your conference.
Thank you, Connie. And good morning everyone. Thank you for joining us today. We should have earnings release earlier this morning. It's both on our website, boardgornard.com, both on our homepage, and on our Investor Relations homepage.
With regard to our investor relations calendar, we will be attending multiple conferences between now and our next earnings release. Please see the events section of our investor relations homepage for full less.
Before we begin, I need to inform you that during this call we may make forward-looking statements, which involve risks and uncertainties as details on our 10K.
Our actual results may differ significantly from the matters discussed today.
During today's presentation, we will highlight certain non-gap measures in order to provide a clearer picture of how the core business performs and for comparison purposes with prior periods.
When you hear us say on a comparable basis, that means excluding the impact of FX, Net M&I, another non-comparable items.
When you hear us say it just that means excluding non-comparable items.
When he hears a organic, that means excluding the impact of FX and NetMNA.
We will also refer to our incremental march performance.
Our incremental margin is defined as the organic change in our adjusted operating income, divided by the organic change in ourselves.
Speaker Change: Our all incremental includes our planned investment in ERND, any impact from net inflationary items and other cost items.
Lastly, we refer to our growth compared to our market. When you hear a statement market, that means the change in light and commercial vehicle production waited for our geographic exposure.
Please note that we've posted today's earnings call presentation to the IRPADRA website. We're encouraging a follow along with these slides during our discussion.
With that, I'm happy to start on the call of the threat.
Speaker Change: Thank you, Pat and good day everyone.
and very please do share our results for the third quarter and provide an overall company of date starting on Slate 5.
At more than $3.4 billion, our Q3 organic sales were down about 5% year over year, modestly outperforming a 6% decline in our market.
here today we have our grown-up market by about 270 basis points.
This demonstrates the resiliency of our technology focus portfolio that we believe is positioned to outgrow the market production.
We say that you will multiple new product awards for both Foundation and E products which we believe further support our long-term profitable growth.
Turning to our bottom line for the quarter. We delivered a very strong 10.1% margin, which was 50 basis points higher than last year. We also delivered earnings per share of $1.9.
which was 11th since higher than prior year.
This strong and allowing operational performance was primarily driven by our focus on custom controls across the business.
Our strong year today at Mount Jean and Cash Performance enabled us once again to increase our foody of Mount Jean and earning his guidance as Craig will detail later.
Lastly, we remained focused on the efficient deployment of our capital and completed our planned 2024 repurchase of $400 million of 4-1 a stock.
Now, let's look at some new product awards on Flight 6.
First, Boer was furthered its business with a major North American OEM by securing the extensions on two transfer cases for full-size pickups.
Well, one of the two types of transfer cases to the OEM for use on three platforms.
Speaker Change: Science of Production for two of the platforms are slated for 2027 with the third expected to get in 28.
We have supplied this OEM with transfer cases for over 40 years. We believe this extension solidify our team's reputation and the proven architecture, the field performance and quality of our products.
Next.
Speaker Change: For Gunnar I've secured three high voltage cooling heater business winds in Asia. Expanding our technological reach in the Asian electric vehicle markets.
In China, our high voltage cooler heater will be used in a leading domestic OEM's fully electric SUV with production expected to start in the second quarter of 2025.
The Spartan ship marks a significant step forward, you know, our continued expansion in China's rapidly growing electric vehicle industry.
In Korea, the product will be used in an electric pickup vehicle with production estimated to begin in March 2025.
The heater will be critical in managing cabin temperatures, improving energy efficiency, and enhancing the driving experience.
In Japan, our high voltage cooler heater has been chosen by Japanese OEM for its small battery electric vehicle.
with production expected to start in 2028. This marks the company's first hit the program in the country.
The compact ETA design offers a perfect fit for smaller vehicle platforms that brings superior performance and efficiency.
Speaker Change: These three important business wins demonstrate the strength of ballgoander in this growing field and further solidify our presence in the Asia Pacific region.
Lastly, for one I will deliver its turbochargers for use on GM's COVID-ZR1 sportscar platform, marking the largest passenger car twin turbochargers to be released and produced today.
We proud to secure this contract and support channel motors in making the most powerful COVID ever built.
Speaker Change: The technology has been in the works for some time now and to see it come to fruition is both exciting and fulfilling for our passionate teams.
Paul Garner and General Motors have a long story of producing market leading application across a wide range of segments. We look forward to continuing to develop new technologies with them and push industry boundaries.
Speaker Change: Now, let's turn to slate 7 where I would like to share our net sales breakdown, following our business unit realignment that was effective July 1st.
Our business units are now aligned with our externally-reported segment.
Speaker Change: On the left side of the slide, you see that our turbos and thermal technologies and drive train and more system segments each represent approximately 40 percent of our net sales.
The segments generate most of their net sales from our foundational products.
The both enjoy a number one or number two positions in the different product market segments they serve.
These are mature businesses with strong margin and cash flow profiles that we expect we continue to strive as the world looks for more efficient combustion and hybrid
The remaining 20% of our net sales is comprised of our Power Drive System Business Unit, which was previously reported as E-Propulsion, and our battery and charging system is business unit.
Except for engine control products.
All of these sales generated from these two segments are E-product for hybrid and battery delivery vehicles.
Speaker Change: These segments are expected to be significant drivers of our future growth.
As this business is continued to scale, we expect to capitalize on their growth by converting at meetings, which is what we are saying this year.
I also want to highlight our regional and customer diversity shown on the right side of the slide. Regionally, America's Europe and Asia rest of the world, each represents approximately a third of Bourgorn's net sales.
Speaker Change: We are also strongly positioned in terms of exposure to various customer groups, for example.
Our sales to the Chinese local Louis M's represents roughly 15% of our overall net sales so far this year. This is comparable to our net sales to the German Louis M's in Europe and our North American sales to the Detroit 3.
Speaker Change: I think this chart clearly shows for one of the sales resiliency and highlights the benefits of strong diversification across products, customers and regions.
To summarize, let's take a wait from today.
Paul Wallace, third quarter results were strong.
Sales performance was slightly better than market production, or adjusted operating margin was over 10%.
Speaker Change: and our gas generation was very strong.
This allowed us to accelerate our second half 300 million share repurchase plan, taking our fully repurchases to $400 million.
We secured new foundational and e-product business world in the quarter.
which we believe once again.
Demonstrate our product leadership on both sides of our portfolio, further supporting our focus on profitable growth over market production.
As we look forward, our formula for success is unchanged.
Speaker Change: We expect to continue to seek your business opportunities that will allow us to continue to grow faster than market production.
As I mentioned before, for one of the NA's to focus on propulsion efficiency.
which includes both combustion fuel efficiency and electron efficiency for hybrids or beds.
I expect efficiency to remain an industry trend for years to come and a strong driver of Portland's growth, regardless.
Speaker Change: of Propulsion Architecture.
Speaker Change: We continue to seek to appropriately manage our cost structure as industry volumes and propulsion mixed outlooks change while continuing to preserve our long-term profitable growth and product leadership edge.
We believe these focus will allow for one or to continue to deliver sales performance through organic growth of market, convert that growth into higher earnings and create long-term value for our shareholders.
With that, let me turn the call over to Craig.
Craig: Thank you, Fred and good morning everyone.
Before I dive into the financials, I'd like to provide a quick overview of our third quarter results.
First, we reported just over 3.4 billion in sales, which was down approximately 5% versus prior year excluding FX and MNA.
Craig: This was slightly above marker production in the quarter, which was down approximately 6%.
Craig: So we saw modus sales outgrowth in the quarter of approximately 50 basis points, which was primarily driven by European battery growth.
Duckin, we had strong margin performance in the quarter at 10.1%.
Craig: This was driven by solid operational performance that continued benefit of restructuring actions we announced in July. A continued focus on cost controls across the business, the end customer recovery.
Thanks for watching!
3rd, we had strong free cash flow in the quarter of 201 million, which allowed us to accelerate our second half 300 million share-reported plan.
Portland, we deliver this result while also continuing to organically invest in our business to support our focus on long-term profitable growth.
Now, let's turn this slide eight for a look at our U over year sales walk for Q3.
Last year's Q3 sales from continuing operations were just over 3.6 billion.
Craig: You can see that the weakening US dollar drove a year over your increase in sales of $4 million.
Then, you can see a decrease in organic sales of approximately 5%. With 50 basis points above market production, primarily due to strong European battery growth.
And finally, the acquisition of Eldor at a 9 million a sales year over year.
The sum of all this was just over 3.4 billion of sales in Q3.
Turning to fly 9, you can see our earnings and cash flow performance for the quarter.
3rd quarter adjusted operating income was 350 million of quitting to a strong 10.1% margin.
That compares to adjusted operating income from continuing operations of 349 million or a 9.6% margin from a year ago.
On a comparable basis, adjusted operating income increased 15 million on 186 million of lower sales.
This is a great result and reflects our ability to deliver profitability despite a declining production environment.
Craig: This performance was partially helped by 24 million of favorable items related to customer recoveries for e-product program, volume shortfalls, and the benefit of our power drive systems restructuring that we announced in July.
The net impact of Eldor was a $14 million drag and operating income year over year.
Craig: are adjusted EPS from continuing operations was up 11 cents compared to a year ago as a result of strong adjusted operating income at the client and our effective tax rate and the impact of 300 million in share repurchases during the quarter.
Craig: And finally, pre-cast flow from continuing operations was 201 million during the third quarter, which was up a 165 million from a year ago as a result of strong working capital and capital expenditure performance.
Craig: Now, let's take a look at our full year outlook on 5-10.
We are projecting total 2024 sales in the range of 14.0 to 14.2 billion, which is a reduction from our prior guidance of 14.1 to 14.4 billion.
This reduction is due to a lower market production outlook and modestly lower e-product sales.
Fights at sales reduction. We expect the company to outgrow market production by 200 to 300 basis points.
Craig: which once again demonstrates the resiliency of our technology focus portfolio that we believe is positioned to outgrow market production.
Craig: Starting with foreign currencies, our guidance now assumes an expected full-year sales headwind from the figure for our currencies of 20 million compared to 2023.
Within this guidance, our full-year on market assumption has been reduced to down 3 to 3.5% versus down 2 to 3% previously.
Craig: Finally, the Lador and SSC acquisitions are expected to add approximately 30 million to 2024 sales.
Based on our updated outlook, we expect our organic sales change to be flat to down 1.5% year over year or outgrowth above industry production of 200 to 300 basis points.
Now, let's switch to Martin.
You are increasing our full-year margin outlook to 9.8 to 10.0% from our prior guidance of 9.6 to 9.8%.
This is based on our year-to-date performance and continued benefits of our power drive systems restructuring that we announced in July.
This expected margin increase demonstrates the resiliency of our technology focus portfolio and our ability to drive profitability in very challenging and markets.
Aaron Clyde for a Corps Outlook.
Craig: As soon as our boat business delivers a mid-team's decriminal conversion, compares to our average year-to-date result, excluding the benefits of third-quarter volume-related e-product customer recoveries, and second-quarter stock forefatures related to a senior executive retirement.
We view this midchains-decormental conversion as strong underlying performance given the anticipated five to seven percent year over year decline in market production during the fourth quarter of 2024.
Based on the sales, in marginal look, we're expecting four-year-old Jeff DPS in the range of four dollars and 15 cents to four dollars and 30 cents per-deluted share.
This 4% EPS increase compared to our prior outlook is being driven by the impact of our strong third quarter results, a lower share count due to the third quarter execution of our share free purchase plan and a reduction in our full-year effective tax rate.
Craig: We can tend you to expect, full your free cash flow to be in the range of 475 to 575 million.
Our ability to increase our margin and EPS guidance during a challenging production environment demonstrates our focus on managing costs in order to hold our prior guidance, absolute income dollars and we're doing this despite a significant reduction in global industry volumes.
Craig: Now, let's turn this flight 11 and take a look at how we will deploy our expected 475 to 575 million in 2024 free cash flow.
And I just highlighted, we expect another strong year of free cash flow generation.
At the midpoint of our guidance, we expect to generate 525 million in free cash flow.
It is important to note that 475 million of this cash flow has already been deployed to shareholders with 4 million of shares repurchased and 75 million of dividends already paid for the end of the third quarter.
Craig: If we assume that we will declare and pay our consistent quarterly dividend in the fourth quarter.
Worms all of our expected free cask flow will be deployed to shareholders in 2024.
We believe our ability to return capital as shareholders while also investing in the business demonstrates the underlying strength of the company and the importance of maintaining a strong balance sheet that allows us to invest in our long-term profitable growth and follow a balance capital allocation approach that rewards shareholders.
The one made summarize my financial remarks.
Overall, we delivered a strong third quarter, but sales outperformance compared to industry production.
We delivered a very strong 10.1% margin, which was 50 basis points higher than 2023, and the second quarter in a row with a margin above 10%.
Additionally, we generated 201 million pre-cashflow, which allowed us to accelerate our second half 300 million share-re-purchase plan.
and we did this despite challenging market production in the quarter.
This once again shows the resiliency of our technology focus portfolio that we believe is positioned to outgrow industry production and deliver strong profitability and free cash flow.
We are proud to be increasing our margin and EPS outlook for the second time this year despite a declining industry volume.
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Speaker Change: Hi Paul, guys, so the audio and corruption, Connie, if you can hear us, we can open up a call up for questions.
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Speaker Change: Thank you for standing by.
Speaker Change: Can you please open the call for question? Thank you. If you would like to ask a question.
Press star one on your telephone keypad. If you're using a speaker phone, please pick up the handset before asking your questions.
In the interest of time, please limit yourself to one question and one follow-up question. We'll pause for a moment to compile the Q&A roster.
and we'll take our first question from Colin Lingon Wells Fargo.
Colin Lingon: Oh great thanks for taking my questions and I can't get on it on a good quarter and a pretty tough market What I'm gonna ask if we go back to the investor day and June of last year you actually talked about a 10% margin in 2027
Now I get the high under your guidance. You could be there this year which is pretty impressive.
and the world has actually been a bit worse over the last year and a half. How should we think about margins from here? Is there anything that might prevent you from getting above that 10% that sounds like you expect to convert EV rights at the same contribution so that would imply if we have growth. We could kind of beat that 27 target already.
Yeah, thank you, Alan for the question. Can you hear me okay?
Craig: Yeah.
Okay, great. Let's start with the quarter, overall, the quarter really strong operational performance, as I mentioned in my script, we've been a citizen from restructuring accurate actions, real focus on cost controls across the business. And I mentioned that we also had a bit of a tailwind from PDF styling related customer recovery. So really we used with our performance in the quarter.
As you look to the fourth quarter, I think how you should look at our performance really two ways to look at it.
Craig: First, again, our average performance full year. If you look at that at the midpoint of our guy, we're expecting revenue to be down, let's just call it roughly 3%.
and when you remove the one-time items in the second quarter and the third quarter that I mentioned in my script, we're decrementing in the mid-teens, which is what you would expect. That's one way to look at our fourth quarter performance. That gives us to 9.6 per second for the guide.
Craig: If you look at our year over year performance for the fourth quarter, again, revenue down about 2% year over year and we're actually holding income to us.
We got back at us to 9.6% at the midpoint. So either way you look at it from our perspective, good operational performance in the fourth quarter and I think we're focused on delivering that guidance at the midpoint again right around 9.6%.
John: and John.
John: I think it's far about on the long term 10% target you're pretty close to anything that we should be thinking about as we think about 25-26 that would prevent getting above that target because seems like you're pretty awful close.
I don't know if it's not the time to talk about long term, we're focusing on 24.
We're focusing on controlling our incremental or incremental for that matter and I think you can see it in our gaze and we've talked about 25 in the Q4 Pro.
God, all right thanks for taking my questions.
Speaker Change: Thank you, John.
and your next question comes from Dan Lovey, Car Clay's.
Good morning, thank you. I wanted to just double click on a margin in three cue.
Based on the revenue decline at a 20% decremental that would have been.
Call it, you know, a $37 million, you know, eBay hit, but it's dead you were.
Plus 15 on the year of the year, so you know, $50 million plus weighing, it's even more of you adjusting for L-dore.
Maybe you can just decompose that. I know you mentioned there was the $20 million dollar.
Speaker Change: Benific for E-populsion, you know, but there's still another gap and then maybe on the 24 million, how much of that is sort of recurring, you know, sort of the ongoing restructuring benefit versus maybe a one-time benefit.
Speaker Change: Yeah, overall when you look at the quarter, like you said, it was just really strong operational performance. We're benefiting from the PDFs, we're structuring that we announced in July, we're benefiting from our focus, cost and tools.
Speaker Change: Roda Timedy, Restructuring and Claiming, etc. Dancer your question to the 24 million of following related PDFs customer recovery. That's one time item in the quarter. You should not expect that to repeat the quarter after quarter.
Speaker Change: and what's the ongoing restructuring benefit?
The PDF's restructuring is at 20 to 30 million for the full year.
Speaker Change: Okay, got it.
Thank you. Second, appreciate with the new segment structure we can now better see the battery business.
If you did maybe just double click on the growth there, how much of that is, you know, just strong demand versus.
Speaker Change: You know getting new supply online I think it's a lot of it is new supply. You know what type of growth profile leads you to get expect for this business.
Speaker Change: And then interesting to see that it's near break even, should we just assume that this is going to increment that you're mid to high teams and you'll work your way up as you continue to grow to, you know, way to think about sort of the margin profile of that business over time.
Then I start, yeah on the battery and charging for the quarter, who is a good incremental of about 36%.
A strong sales, especially in Europe.
Speaker Change: And I think for when you look at the segments too, on the other segment there was a very, very efficient decrement all the way down, right? So we're really focused on controlling what we can control adjusting to the volatility of the market.
Speaker Change: and driving mountain performers and I think you can see that in the game. I don't see a reason why this business should not carry on incrementing at the meeting.
Speaker Change: And the survivors is the man that I know and the collection is just sort of new supply hitting.
I would say the supply versus demand dynamic is not a dynamic where we are. Let's say shows of supply we now have a nine capacity to demand in both regions, North America and Europe, so this is behind us.
Speaker Change: Thank you.
And we'll take our next question from Joe's back UBS.
Speaker Change: [inaudible]
Speaker Change: Thank you.
Maybe just a sort of follow on Thames questioner with some of the...
Speaker Change: Some of the new segmentation, like we've had a scene pretty steady.
Speaker Change: [inaudible]
is getting to positive margins just sort of remaining, filling out that sort of remaining capacity or their other actions. And that's like, man.
Speaker Change: Yeah, if it's really a scale, we got to continue to scale the business. So you saw Rosney on the quarter coming in right around 200 million as we continued to scale that business and increment in the mid-teams, then we'll get to break even in a book. That's what we're focused on doing.
and the build out is effectively done this quarter. It's complete.
Alright, and then, you know, just...
Craig, you sort of stressed a couple of times right all the.
All the cash generation was redeployed to shareholders this year between the buyback and the dividend.
You know, I appreciate what sort of not talking about 25, yeah, but I mean, is that a sort of similar paradigm that we should expect.
You know, got going forward here over the coming years.
Yeah, we'll come in 25 when we get to 25. Really happy with the way that we've deployed cash this year. Again, as you mentioned, we have line of site to 525 million at the midpoint of our guide. We'll effectively apply all of that to shareholders. Really pleased with the way that we've allocated cash.
This is a cheer. Again, what we'll give you inside in the 25th week.
Speaker Change: Get into February.
And your next question comes from Adam Jonas with Morgan Stanley.
Speaker Change: Thanks everybody.
Joe just asked my question on them.
Speaker Change: [inaudible]
It does seem like the narrative from your customers is pushed out, written off, canceled, you know, at the margin.
He programs in some of them are quite sizable including the likes of Ford and some others.
We suspect that it will continue. I didn't know if that was, again, not calling out in the specific quarter or, you know, the one current of one time items, but is.
and my right that if I'm looking ahead 12 months there is a possibility for more recovery from OEMs given what has been announced and what you're seeing in your discussion so far of cancelations of e-product.
and Evee related products that you spent money on and may not be made anywhere near the volumes to expect it or at all. Thanks.
Thanks. And I'm here each case specific. I would say that this case is a little exceptional.
What we were focusing on at Bob Oneau is also bringing flexibility from the modular design standpoint.
Speaker Change: Exhibility from a production standpoint.
We're using the full world and transforming our plants from combustion into electrification in a measured way.
So we are with our customers for the long run and I would say that each case is very specific and we're going to manage the business going forward depending on what's happening.
Speaker Change: And your next question comes from John Murphy from Bank of America.
John Murphy: Good morning guys. Frdric Lissalde, as going on slide six, when you look at something like the transfer case, extension, how much new capital needs to go into investing in sort of that next gen product?
John Murphy: The minimum and as we see these extensions on the eyesight, the profits and returns be significantly or margins and returns to be significantly better than they have been historically, or even just a bit better.
Speaker Change: I won't comment specifically on this transfer case program but what we see from the combustion standpoint is here three elements happening at the market place. First is program extension like the transfer case.
Speaker Change: where some capital may be asked to be put in place to cope with the extension and sometimes let's do that the first case. Second case is...
Program Program Program Gations, where...
The combustion engine is going to be run for longer. And the third case is hybrid carrying over combustion gas at engines for an abridactification and that's what's driving also the outgrowth of the combustion market in that specific case.
Speaker Change: Okay, that's helpful. And then just a second question, you know, a lot of other suppliers are kind of alluding to the bidding process or the other program.
Speaker Change: and the process of putting out quite dramatically. Once again, on slide six, you're showing some pretty good wins. I just wonder if you could characterize your quoting activity right now. If you think it's very different than history or disrupted by EVs, what's your current take?
on that and is there anything that's really shifted, maybe in absolute terms and maybe just timing terms.
Johnson, what we're seeing is that in the western world there is a bit of a slow down in new quoting activities for the Chris White Pop Times.
I think one of the key reasons is that we all focus on launching, including at board Warner, there are many, many, and they're crusade, I've written, there have launches in in the European North America.
Speaker Change: And again, that opens out our opportunities for us on the combustion with what I alluded to before extensions that the transfer case prolongations or, and or, um, carrying over combustion engines into hybrid power train. So that's the dynamic that we see in the marketplace.
But would it be fair to say that does not have a significant impact on your mid to long-term growth of a market prospects?
We expect to have a portfolio that is resilient and the various propulsion, architecture, mixed scenario and regional mix scenario and we expect to carry on outgoing our respective markets.
And your next question comes from Luke Young from Bared.
Good morning for this question, Fred, just hoping you could, building on the last response they're just coming on your hybrid pipelines specifically.
would just be interested if you're seeing any evolution more on a bigger picture standpoint. I guess relative to the regulatory backdrop and how you solve for that both in Europe and US from a power train standpoint. And the real hybrid's going to plan that. Thank you.
Speaker Change: For us it's fairly simple. Our combustion holds for you fully functional into hybrid power trains. The most advanced and modern hybrid power trains carry most of our combustion products.
Speaker Change: and on an e-product standpoint, I, as we mentioned in the past.
Speaker Change: and inverter for a bad-vis same as an inverter for hybrid so I'm always simplifying but...
The gut's all the same.
Speaker Change: The motor is actually pretty much the same.
and a P4 for hybrid can be a giant IDM for a baby, it's the same types of products.
Speaker Change: So we are in a position to serve our customers globally into wherever they want to go from a power train architecture standpoint going forward. So for us.
I would say that it doesn't really matter but this is the way we think we can carry on, I'll go into the market.
or the market and convert on that outdoor.
and then from my fall of Craig, you know, just wanting if we could get some flavor for incremental cost controls, productivity just help us understand some of the areas that you're leaning into and what my care you're going to 2025 for the back-hats issue.
I think we're leaning into all of those things. We'll focus across the business and cost controls.
Luke's items that you mentioned were helped us in the court, whether it's restructuring actions, whether it's continuing focus on savings, whether it's applying to your productivity, we're leaning into all that across the business and I think you can see that in our segment performance.
Speaker Change: is the first nine months. We'll continue to have that focus, especially as the top line stays very vol.
Anderson: Anderson, thank you.
And your next question comes from James Pickle-Relo from BMP Parabus.
James Pickle-Relo: Hi guys.
Just on the LVP assumption for this year you're signaling down to to 2.5% and there are other suppliers out there that are calling for down for now, right, which implies.
The fourth quarter, you know, precipitous and down, you know, something close to 10%. Just carry on on your thoughts there in the visibility and your own gold schedules and your own customer mix on that point.
The James Harvey, who is the market, will be down 3-3 and a half percent year over year.
Bigger through Doctions, Northern America, Europe, are down, five to five and a half year over year with a Slating Chris and China.
Speaker Change: That's what we see and we are going to carry on managing our cost effectively.
Speaker Change: and adjust to potential production and diamond changes and I think this is evidence in our dated guide too.
Okay, yeah, I was referring to just the light vehicle component, but yeah, still just looking at his eyes as it goes.
My follow-up is just as we think about your foundational products, sweet and the potential for hybrids to run much stronger in demand.
Between your turbo and thermal segment, verse the drive train and more systems, how do you hybrid demand between those two segments? Again, on the foundational side is one.
and the other if there's some kind of raking that you could share. Thanks.
Speaker Change: I don't think we've broken down that potential, I would say that it would touch both segments, the most advanced hybrid scary.
Engine components that we have in more than turbos and other subsystems.
It would also carry everything related to shifting mechanism between the E drive and the combustion driver hybrid. So I would say that
Advanced Hybrid Power Train will draw products from those two essential foundational segments.
Speaker Change: Thanks.
Speaker Change: And your next question comes from Mark Delaney with Goldman Sachs.
Mark Delaney: Yes, good morning and thanks for taking my questions. First, I believe you are now assuming growth of a market of 2 to 300 basis points and I think it had been 350 to 450, assumed for 2024 previously, so maybe you can have a spend to understand what's changing in the growth of our market outlook for this year.
Speaker Change: So our our growth is drunk.
of about $200,000, half of it is coming from e-product portfolio. The other half is coming from our foundational business, which is about $100,000,000 out of $2,000, I would say, it is not extremely material.
I, and from a quarter of a quarter hour growth I would not really look at it. We are here today at 270 basis points and I think you know it's not always smooth for the quarter.
Speaker Change: Okay, that's a couple. My other question was following up on John's question around the pace of bookings and understanding.
Speaker Change: The Western OEM Booking's Activity has slowed. I'm curious if you think post US election results if there's the potential for award activity from Western OEMs to accelerate once they have a better sense on the likely path of CO2 requirements in the coming years.
I am not sure I can comment on this. Let's wait and see at least at board who are ready wherever the customers want to go.
Speaker Change: Anderson, thank you.
Speaker Change: Thank you.
We have time for one final question and that question comes from a manual, Rosner with Wolf Research.
Great, thank you so much.
I was hoping you can help us put a finer point on the cross-actions and how to think about them.
How should we think about the amount of structural costs or reduction that you're taking out this year?
Speaker Change: How do they analyze, like in into next year, like how much of this leftover from more recent action, and generally speaking, the programs you've announced or you have in place, how much cost is left to take out.
Yeah, thanks for the question. So I'll point to the PDF's restructuring, to those are structural changes that we're making.
Speaker Change: Well, we indicated this year is 20 to 30 million. We announced that in July. So if you analyze that 40 to 60 million next year, with a target of a hundred million by 2026.
Joseph Strucks, for all changes.
Speaker Change: That we're making.
As you think about our businesses we move forward, are even with these restructuring actions, what's our goal?
Our goals are to grow over the market from a self-respective turn that growth into income In the mid teens, regardless of the growth is on the foundational e-products out of the force folio and to generate cash. So I think ultimately how you should think about our growth is incrementing in the mid teens. That's a great way to model it.
Thank you for the color and there was hoping to hone it a little bit more again on the commercial vehicle battery business. Can you maybe talk to us about...
Well Warner's competitive advantages in that business and then also the operating leverage on this business specifically. I'll be very strong.
Speaker Change: Incommentals that we just saw.
and I think you earlier comment spoke about, you know, no reason why you shouldn't think the meeting, that's obviously quite a big difference between 40% and the meeting. So maybe the longer term question is, okay, or above owners, competitors, empires, just maybe shorter term as Patrick's saying about the operating leverage, please.
Speaker Change: So from the product perspective, as you know, we are focused on the commercial vehicle traction buses.
We are pretty agnostic from a self-form perspective, we're in production with an NMC and preparing production with an FB in the light of our association with pandraimus.
We have capacity in stolen both sides of the pond in U.S. and Europe.
and we are in charge of software, cybersecurity as somebody of the pack, as thing of the pack and everything that goes around the pack which...
I think it's pretty differentiated.
And we are one of the only ones in the Western world building very flexible commercial vehicle trucks and buses in the as an independent supplier.
and I'll comment on the margin profile. I'd actually really happy with the performance of that business.
Speaker Change: Crew, quite significantly in the quarter, converted at a really high level, like you mentioned, about 35 cents on the dollar. You know, as we move forward, I wouldn't say one quarter makes a trend. So we're focused on that this, in permitting in the mid-teens, like all of our other businesses, that's how we'll measure success for the battery business.
and the charging distance.
Speaker Change: Thank you.
Speaker Change: Thank you. Thank you.
With that, I'd like to apologize for the audio issues that we had today. And thank you all for your great questions. If you have any additional follow-ups, feel free to reach out to me or my team. With that, County, you can go ahead and clue today's call.
Speaker Change: This does conclude the board Wagner 2024-3rd quarter results conference call. You may now disconnect.
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