Q1 2025 Dana Inc Earnings Call
Good morning, and while she gave me incorporated first quarter 'twenty 25 financial webcast and conference call. My name is Regina and I will be your conference facilitator. Please be advised that our meeting today, both the Speakers' remarks, and Q&A session will be recorded for replay purposes for those participants who would like to access the call.
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To ensure that everyone has an opportunity to participate in today's Q&A, we ask that callers limit themselves to one question at a time.
Would like to ask any additional questions. Please return to the queue.
At this time I would like to begin the presentation by turning the call over to Dana Senior director of Investor relation and corporate communication Craig Barber. Please go ahead Mr. Barber.
Good morning, and welcome to Dana Incorporated's first quarter 2025 years.
Presentation includes forward looking statements about our expectations.
Actual results could differ from what we discuss here today for more details about the factors that could affect future results. Please refer to our safe Harbor statement found in our pulp.
The filings and reports.
I encourage you to visit our Investor website, where you'll find this morning's press release and presentation.
Speaker Change: And as <unk> said that the call today is being recorded and supporting materials are the property of Dean.
They may not be recorded copied or rebroadcast without our written.
Craig Barber: With me. This morning is Bruce Mcdonald, Chairman, and Chief Executive Officer, and Timothy Crouse, Senior Vice President and Chief Financial Officer, Bruce and I will turn the call over to you to either start alright. Thank you Craig and good morning, everybody.
Craig Barber: On slide four here in terms of some highlights from the fourth quarter.
Craig Barber: I know, there's a lot of interest in the off highway divestiture process and were really not in a position where you can say a lot.
Craig Barber: What I would tell you as the process continues to be underway.
Craig Barber: We're pleased with the progress that we've made it's been competitive and we have multiple bidders.
Craig Barber: If you look at the quarter I would say I'm pleased with Q1, our results came in generally speaking in line with expectations.
Craig Barber: I would note that.
Craig Barber: We did have a little bit of a headwind on tariffs was $6 million in the quarter.
Craig Barber: Absent that we would had had comparable margins to last Q1, despite a pretty big reduction on the topline. So so good result, there and we see that $6 million coming back. It's just we just couldn't get the.
Craig Barber: Paperwork into our customers to get the recoveries in the quarter.
Craig Barber: Real importantly for us and we talked about this on our last earnings call is we said we're going to look at our cost reduction plans and see what we can do to bring those forward.
Craig Barber: I'm pleased to announce that we are accelerating the realization of the.
Craig Barber: Our cost program here in 'twenty in 2025 from what was 175 million to $225 million, we completed the integration of our former power technologies segment into our assets.
Craig Barber: Aftermarket business into light vehicle in CV, respectively.
Craig Barber: That's gone real well.
Craig Barber: The of the 300 million in cost reduction. This this integration is worth.
Craig Barber: 30% to $35 million of that.
Craig Barber: Think we're going to see further benefits not sort of SG&A related benefits as we leverage best practices across our our aftermarket businesses and I think as we bring some of the.
Craig Barber: Operational rigor and processes that we have in light vehicle the power technologies.
Craig Barber: I see operational improvements flowing through.
Craig Barber: The back half of this year, so more to come on that and then lastly on free cash flow.
Craig Barber: One is always a seasonal outflow, but we had a good start.
Craig Barber: Despite lower revenues and profitability on an absolute basis. We are Q1 cash outflow was an improvement year over year of $67 million, we continue to focus on opportunities to reduce our capex.
Craig Barber: And I'm, hoping that we can we can squeeze some money out of that in the back half of the year.
Craig Barber: And then not to defend that free cash flow we are focused on.
Craig Barber: Our portfolio of non core non strategic assets and things like that we.
Craig Barber: We expect to deliver 50 million here in the second quarter and you could see our way maybe to another $50 million in the back half of the year.
Craig Barber: Generally a good start to the year.
Craig Barber: Terms of the outlook and what we're seeing I.
Craig Barber: I guess I would start with a very dynamic situation.
Craig Barber: Especially on the tariff front changes significantly on a daily basis, but based on what we see right now I guess I would just say our tariff situation is manageable, we can get into a lot more detail and then some of the questions, but it's a manageable issue for four for Dana.
Craig Barber: We have several mitigation actions have been completed.
Craig Barber: <unk> got recoveries into our customers with the right level of detail to support.
Craig Barber: That would be in our claims being processed and I guess the other thing I would note. If you look at the steel and aluminum tariffs.
We've seen North America indices move up.
Craig Barber: That we expect we substantially recover the steel and aluminum through already negotiated the mechanisms that we have in place with our customers.
Craig Barber: Could be some timing issues because those tend to work in a little bit of a lag, but I would say the impact of steel and aluminum tariffs with the way the indices as move would be kind of a non issue for us as we see things right now.
Craig Barber: In terms of what we're seeing in the market.
Craig Barber: The first.
Craig Barber: The thing what we are seeing is a reduction.
Craig Barber: Schedule for our North American.
Craig Barber: Commercial vehicle customers and you see that in some of the calls that have come out before us with people taken their assumptions for North America down.
Craig Barber: And we've reflected that in our outlook, so that that's sort of been a bit of a headwind for us.
Craig Barber: And off highway we're.
Craig Barber: We're seeing a little bit of pre buy interest here in the second quarter, nothing significant but but it's.
Craig Barber: Nice to see we're getting a little bit a lot and we are starting to see outside of North America. Some green shoots in terms of improvement in orders in the second half of the year.
Craig Barber: In North America, we arent seeing anything on in terms of Lv schedules any deterioration at this point in time.
Craig Barber: You look at the mix of vehicles that we're exposed to.
Craig Barber: You guys all know where we've got.
Craig Barber: Our money is made.
Craig Barber: We feel pretty good about gaining our customers gaining share in our space and.
Craig Barber: While we acknowledge there is some risk in the back half of the year, which we're just being cautious right now we don't we don't see it reflected up in our schedules.
Craig Barber: We talked earlier about the $50 million of incremental cost reduction and then I guess I would just say if you absent tariffs we'd be sitting here. This morning, raising our guidance by about $50 million to reflect the acceleration on the cost reduction side.
Craig Barber: It's holding back until we get a little bit more clarity on what happens in Lv, particularly in the second half.
Craig Barber: And lastly, just a little bit of a.
Craig Barber: Something to brag about here, but we want our 10th Pace Award quite an honor in the industry. This for us is a.
Craig Barber: This hybrid transmission.
Craig Barber: It's kind of a niche product spoke.
Craig Barber: $25 million of sales this year.
Craig Barber: Product that we were.
Craig Barber: We've rolled out across.
Craig Barber: The highest end of the automotive spectrum, so customers like Aston Martin Lamborghini Mclaren.
Craig Barber: We see this as a.
Craig Barber: It is a business opportunity to grow to 200, 250, maybe even up to $300 million over the next few years at a highly accretive EBITDA margin of this product pushes 20% so not a huge item, but it's important I think margin expansion arrow in our quiver and I can assure adulate attack.
Craig Barber: Oh team for winning the award.
Tim: Tim I'll turn it over to you.
Tim: You Bruce and good morning to everyone. If you. Please turn to slide eight for a review of our first quarter results.
Speaker Change: Those were $2 $4 billion $383 million lower than last year, driven by lower demand across all of our end markets. Adjusted EBITDA was $188 million for a profit margin of 8% just 20 basis points lower than last year on lower sales as the benefits of our cost improvement actions begin to take hold.
Tim: <unk>.
Tim: Net income attributable to Dana was $25 million in the first quarter of 2025, compared with $3 million last year.
Tim: The difference was primarily due to the proposed divestiture of our non carb, our noncore hydraulics business in 2024 of $29 million loss was recorded to adjust the carrying value of net assets to fair value in last year's first quarter.
Tim: Income taxes for the first quarter of 2025 were $29 million lower due to jurisdictional mix of profits and timing of payments. Finally operating cash flow was a use as is normally the case in the first quarter of $37 million. This was an improvement of $65 million over the first quarter of last year due to <unk>.
Tim: Lower working capital requirements. Please turn with me now to slide nine for the drivers of the sales and profit change.
Tim: Beginning this quarter, we've revised our walk presentation to better detail the impact of volume mix and performance of the operations previously these two drivers where combined.
Tim: We continue to show the benefit of our cost saving initiative and we have added the actual impact of tariffs as part of our work.
Tim: Beginning with volume and mix on the left we saw $345 million lower sales driven by lower demand in all of our end markets, specifically when compared to Q1 of last year when light vehicle production increased dramatically coming off of the UAW strike at the end of 2023. This.
Tim: This year, we are seeing a slowdown in production as vehicle inventories remain high we did not see any distinct change in order patterns from our key customers on key programs related to tariffs during the quarter.
Tim: Adjusted EBITDA from sales volume and mix was lower by $90 million. This was a decremental margin of about 25%.
Tim: We are breaking out performance, which includes efficiency gains in our manufacturing separately.
Tim: Performance increased sales by $27 million, mostly through commercial actions, while profit increased by $35 million due to efficiency improvements across the company.
Tim: For the first quarter of 2025 cost savings added $41 million in profit to the various actions we have taken as Bruce mentioned, we have accelerated some actions. We now expect to realize about $50 million more of our $300 million in total cost savings this year.
Tim: To the left of the slide we included a breakdown of where the permanent cost savings are coming from you can see it's well distributed across the cost structure.
Tim: The tariff impact in the quarter was just $6 million since our tariff recoveries will have a lag associated with them. We did not immediately recover the tariffs in the quarter, but we expect to receive recoveries throughout the year.
Tim: Foreign currency translation decreased sales by $53 million.
Tim: Primarily driven by the lower value of the euro real and rupee compared to the U S. Dollar profit was lower by $4 million with no impact to margin finally commodity cost recoveries in the first quarter was $10 million lower than last year due to the timing of cost mechanisms within the commodity recovery agreements with our customers profit was <unk>.
Tim: $7 million lower as the prices fall through to profit.
Tim: Next I will turn to slide 10, the details of the first quarter adjusted free cash flow adjust.
Tim: Adjusted free cash flow in the first quarter of 2025 was a use of $101 million, which is $67 million higher than the first quarter of last year.
Tim: Lower adjusted EBITDA and higher one time costs related to the cost saving actions and the sale of the off highway business were offset by lower working capital requirements. Finally capital spending net of proceeds of sales of fixed assets was about the same as last year.
Tim: Please turn with me now to slide 11 for our guidance for 2025.
Tim: Our 2025 full year guidance ranges remain unchanged as a reminder, our guidance includes the off highway business for the full year and includes the estimated impact of disclosed tariffs.
Tim: First thing you will note is that we're expecting sales to be up above the midpoint of our range, but higher sales expectations are taken into account some of the softening in commercial vehicle end markets offset by the recovery of expected tariffs that will flow through sales and the improved outlook on currency translation to date, we have not seen a change in the volume.
Tim: Expectations of our major light vehicle programs. Our initial expectations were for slightly weaker end market demand for light trucks that market weakens further we will adjust our outlook adjusted.
Tim: Adjusted EBITDA is still expected to be $975 million at the midpoint of the range. This is approximately $90 million higher than 2024 and implies a profit margin of about 10% of 140 basis points increase over 2020 for full.
Tim: Full year adjusted free cash flow is expected to be $225 million at the midpoint of the range for the year. This is approximately a $155 million higher than last year.
Tim: Our adjusted EPS guidance is expected to be $1 40 per share at the midpoint of the range.
Tim: This is down from our previous estimate solely due to the change in expected tax spend is driven by our expected regional mix of profits.
Tim: Lastly, please turn with me to slide 12 for an outlook of our adjusted free cash flow for 2025.
Tim: We anticipate full year 2025, adjusted free cash flow to be about $225 million at the midpoint of the guidance range, we expect about $90 million of higher free cash flow from increased adjusted EBITDA onetime cost will be about $20 million higher as we invest in our cost savings program and we work to finalize the off highway divestiture work.
Tim: <unk> capital requirements will be about $50 million lower than capital spending net is expected to be about $325 million. This year, which is $45 million lower than 2024.
Tim: Thank you and I'll now ask Regina, let's open the call for questions.
Regina: At this time, if you would like to ask a question Press Star then the number one on your telephone keypad to ensure that everyone has an opportunity to participate in today's Q&A, we ask that callers limit themselves to one question at a time, if you'd like to ask an additional question. Please return to the queue.
Speaker Change: Our first question comes from the line of Joe Spak with UBS. Please go ahead.
Joe Spak: Thanks, Good morning, everyone.
Regina: Maybe just to start on the guidance.
Regina: I know you listed a number of things.
Regina: Now some tariff headwinds and some negative market assumptions.
Regina: And what is I guess going to be new Dana, but then offset by cost savings and then.
Regina: Off Highway business, you mentioned some of that pre buy commentary I guess the question is back in the beginning of the year you provided some guidance for new data versus the off highway and.
Regina: With all those factors you listed is there any meaningful change to those assumptions we should consider.
Regina: Yes, so commercial vehicle is going to be a bit lower than what we had.
Regina: <unk> seen just a couple of months ago, thats largely being offset by.
Regina: Amounts in light vehicle and in a little bit in.
Regina: In off highway and then obviously the balance of that is coming from what we believe will be additional.
Regina: Revenue from tariff offsets.
Regina: And I guess, maybe just a couple of other things like obviously that with three incremental cost reduction target.
Regina: All relates to corporate.
Regina: You don't get sort of premier based on sales.
Regina: I would say.
Regina: And off.
Regina: If highway.
Regina: We are benefiting in our outlook, we are picking up some from translation on the euro.
Regina: So that would be disproportionate to to off highway correct.
Regina: And.
Regina: But I mean generally speaking if you're sort of at the $50 million in cost reductions a pull forward, but if you think about when we gave sort of guidance around new Dana post off highway sale in 2026, I think the message is look Q1.
Regina: All new Dana is up year over year margins.
Regina: Yes.
Regina: And off highway this on a year over year basis down so so.
Regina: The path to get.
Regina: New data in 2026.
Regina: To that type of number that we committed to the 10 10 and half is thoroughly on track.
Regina: Okay, and then just for 25 again I know you provided some some ranges and it seems like some moving parts, but generally those ranges are still valid.
Regina: Generally valid I mean, the sales are going to move around as Bruce mentioned right between tariffs and.
Regina: Translation, we're gonna have have some some some tailwind on the topline and that's largely going to offset.
Regina: The headwinds that we're seeing in commercial vehicle from a from a volume perspective, and I guess, if you think about tariffs overall.
Regina: We don't we don't bring in an awful lot of product.
Regina: From Europe into North America.
Regina: When we talk about our tariff headwind.
Regina: Commercial.
Regina: Im sorry, the off highway impact is relatively small.
Speaker Change: Okay that businesses is primarily European we do have.
Regina: <unk> been a business here in North America.
Speaker Change: But.
Speaker Change: That's relatively small portion of the overall business.
Speaker Change: Okay, and then Bruce I appreciate Youre limited in what you can say about about the process.
Speaker Change: I think you had some relatively encouraging commentary but.
Speaker Change: Maybe you could just sort of.
Speaker Change: Indicate to us if sort of any of this market uncertainty has has has had any impact on the process. Even in terms of sort of potential management distraction referred to potential buyers or anything narrower or are things sort of mostly on track with what you thought yes, I mean, I guess I would say obvious.
Speaker Change: Lee.
Speaker Change: If we look at.
Speaker Change: In the last 90 days.
Speaker Change: I think the tariff situation is becoming clear.
Speaker Change: Swinging around hurting wildly.
Speaker Change: When some of that stuff was coming up in the China thing was escalating and things like that I think I think now with some of the rules.
Speaker Change: Had a little bit of stability were getting clarification in terms of what's in and out how we handle Usmc non usmc.
Speaker Change: I would say, we definitely had maximum uncertainty and in that environment. Yeah people are nervous and want to understand things.
Speaker Change: Spending a little bit more time with our with our teams.
Speaker Change: So I would say I really can't say a lot but.
Speaker Change: Work a few weeks I guess, we had sort of talked about being in a position to say something come to a resolution here in early in the.
Speaker Change: The second quarter now I guess I would just say that that's probably <unk> more like late in the quarter.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: I wish I could say more but the.
Speaker Change: The Guy is probably one of the other room already.
Speaker Change: Our next question comes from the line of Edison <unk> with Deutsche Bank. Please go ahead.
Edison: Hi, Thank you for taking our questions just want to come back on the on the tariffs can you share I guess what is the exposure at the moment and in terms of the timing of recovery.
Edison: How long do you think that will take on average.
Edison: I don't want to get into the overall exposure, mostly because I don't really want to negotiate with with my customers in public, but what I can say is from a from a from a recovery perspective, we expected, it's probably going to be less than a quarter on a lag.
Edison: And of course that depends on the customer and the end market.
Edison: We're dealing with but.
Edison: Most of our largest customers have setup.
Edison: A regimented process, so and as.
Edison: As Bruce mentioned, we've already we've already started to.
Edison: Provide invoices and.
Edison: And the detailed backup that's required by our customers in order to obtain recovery. So that process is well underway and we see it working working well given the level of detail that we're providing the customer, but I'm guessing, it's probably when they get through it and obviously the customers are going to be pretty inundated. It's we're look.
Edison: King at.
Edison: Somewhere probably not longer than a quarter, but I think it will end up being a little bit less given given the impact that this will have across the supply base.
Edison: I would expect us to be a cash flow timing issue in the quarter I think by the time. We were here three months time, we will now lead our recoveries and have that process nailed down.
Edison: Gently so we'll be accruing <unk>.
Edison: Pat.
Edison: But the cash associated with it like we have to pay that out much sooner than we're going to get it back.
Edison: I don't think thats going to be a major bridge item for us but.
Edison: I feel pretty comfortable that it's not going to be a problem for us.
Edison: Sure.
Edison: And in terms of the.
Edison: The amount is it your is it baked in that you would recover essentially 100% or is there some wiggle room or haircut to the to the recovery.
Edison: Our view is that we're going to be recovering a 100% of the tariffs.
Yes.
Speaker Change: I think I think you may be testing.
And I'll, let her that helped there.
Speaker Change: First of all.
Speaker Change: If you think about our commercial or.
Speaker Change: Our commercial vehicle business and our off highway business, we have very little risk of a 100% recovery so that part of that.
Speaker Change: Or not worried about at all.
Speaker Change: I mentioned that the aluminum and steel will be recovered through normal indices that we already have in place. So once you sort of back out those three things and some mitigation actions that we've taken where we worthy in quarter of record us finished goods.
Speaker Change: So likely bring some axles up from Mexico.
Speaker Change: North America, and they're picked up at a warehouse in Laredo.
Speaker Change: We've renegotiated those exposures away. So now you are left with a fairly minor amount in the scheme of the $10 billion company.
Speaker Change: Have all the documentation is submitted.
Speaker Change: Our light vehicle customers and.
Speaker Change: They have they.
Speaker Change: Brought in external resource to process, our claims and in one case, we know R. R.
Speaker Change: Claim has been processed and approved.
But I haven't seen the check yet so.
Speaker Change: We'll see where we end up.
Speaker Change: Understood and just one last thing to clarify so is the I really quantifying the exposure, but in terms of the.
Speaker Change: The mechanics is it basically the the non U S MCA part.
Speaker Change: Youre assuming for the.
Speaker Change: Exempt or are you assuming that that.
Speaker Change: There's more there's more than that or the Usmc actually.
Speaker Change: It goes away.
Speaker Change: So what are the what we have.
Speaker Change: We've put out in terms of our guidance now is based on what we.
Speaker Change: What we see coming out of Washington as of today that will change tomorrow I have no doubt it changed last night, so but.
Speaker Change: Well the way that the the mechanisms are working with our with our customers are that we need to be able to prove the actual amount of tariffs that we've incurred and be able.
Speaker Change: To trace them back by part number and that's the documentation that we're providing and our expectation is that level of detail, we'll allow us tone.
Speaker Change: Recover the tariffs from our customers and Thats, a little bit more nuance than your question.
Speaker Change: At least given example, social everything that we're talking to our S. Four.
Speaker Change: As for auto parts.
Speaker Change: It does not include our part the way the definition in the HTS.
Speaker Change: <unk> HTS codes are written it does not include things like our off highway and commercial vehicle products, nor does it even include some of our super duty.
Speaker Change: Business. So they arent in this whole $2 30 to switch that happened yesterday, they're still into the other buckets I E Pas reciprocals.
Speaker Change: Things like that.
Speaker Change: <unk>.
Speaker Change: Gotcha.
Speaker Change: Very much appreciate it thank you.
Colin Langan: Our next question comes from the line of Colin Langan with Wells Fargo. Please go ahead.
Colin Langan: Oh, great. Thanks for taking my questions.
Colin Langan: Any way to frame what are you assuming for light vehicle production isn't very in line with the recent S&P forecast.
Colin Langan: And the only way to frame lessons.
Colin Langan: Obviously, a lot of uncertainty with tariffs sure, yes, I think the way.
Colin Langan: Obviously, when you think about the light vehicle outlook, we tried to steer everybody back to the light truck production.
Colin Langan: We currently arent seeing any substantial change from where we were when we.
Colin Langan: Came out in February so that's that's what's currently baked into our forecast for North American light truck.
Colin Langan: And if that changes in any material way, we'll have to revisit.
Colin Langan: Our our outlook, but right now we haven't seen anything and don't don't have anything from our customers on the horizon that doesn't mean, it won't change but at this point.
Colin Langan: Currently we're looking at largely the same as we did two months ago.
Speaker Change: The only thing I'd add to that Collyn is.
Speaker Change: We acknowledge there is a risk there and thats why we did not guide.
Got it.
Speaker Change: On the S&P side, I mean is it consistent with what S&P, just provided or more optimistic less optimistic I would say the latest S&P data, which which we.
Speaker Change: We don't think is accurate, especially here in the short term and some of it but if you looked at the latest.
Speaker Change: SMP information in and we weren't a factor that and we'd have more than enough coverage and the extra cost saves to hold our guide.
Speaker Change: Got it Thats helpful.
Speaker Change: And then if I look at I think you said early.
Speaker Change: To provide a.
Speaker Change: Number on the tariff impact but.
Speaker Change: In the EBIT walk at 6 million I mean is that not a run rate we should think about.
Speaker Change: So you have to I mean the.
Speaker Change: The tariffs were were not for the entire quarter. They were they were staged Dan.
Speaker Change: You can't use the first quarter as sort of a viewpoint for the tariffs they've also changed.
Speaker Change: Week to week, and so depending on when we imported the material and how it was classified determines what we what we ended up what the impact was in the quarter, that's going to be different going forward. So.
Speaker Change: You cannot use the the.
Speaker Change: First quarter and try to do some sort of extrapolation the the rules.
Speaker Change: How these things are classified have changed dramatically from week to week.
Speaker Change: $4 million of the 6 million Collyn is rate related to where Dana was the import of record. The example, I gave in the previous color and we've already remediate that and build it and we will not at all worried about getting that 4 million back.
Speaker Change: But yes, like Tim said there.
Speaker Change: There is things that have come on and come off.
Speaker Change: There's marketing issues.
Speaker Change: Except there is H T escalona issues et cetera, et cetera, et cetera, you have to remember right. There's a lot of this stuff is coming out in either an executive order or in.
In our press release or a <unk>.
Speaker Change: Press Conference and then gets published in the commercial.
Speaker Change: <unk> and then that then translated by the by the Commerce Department.
Speaker Change: And at the customs and border to determine how and what HTS codes are going to collect what tariffs on which so it is it is exceedingly.
Speaker Change: Complex and is changing as both the rules get more clarification and the rules change.
Speaker Change: Maybe just like.
Speaker Change: A few soda.
Speaker Change: <unk> seen centers on it.
Speaker Change: Can I get you.
Speaker Change: Get your understanding a bit better.
Speaker Change: Overall, our flow of goods from Mexico back up here to United States is $7 million to $800 million and our Canada flow of goods is like 100 and.
Speaker Change: So.
Speaker Change: That split.
Speaker Change: 55 ish percent as U S. MCA compliance some of that is also it doesn't have anything to do with is $2 32, because it relies on scale our commercial vehicle business.
Speaker Change: Our other exposure that we have is reciprocal tariffs on on castings and things like that that us like everybody else buys from Korea, and particularly India. So those are those are the.
Speaker Change: The headlines of where our exposures come from and kind of magnitude.
Speaker Change: Yeah, and also point out that some of the material that's coming in Thats non U S. MCA compliant is directed sourced by the customer. So we don't have a choice on on where we're bringing in.
Speaker Change: Some of the parts based on based on their customer requirement. So again that is recut.
Speaker Change: Recover dollar one right away because.
Speaker Change: The choice.
Speaker Change: And you said 700 800 million, Mexico $100 million, Canada any number on.
Speaker Change: On the rest of the world broadens the United States.
Speaker Change: Yes, we're talking.
Speaker Change: Few hundred millions more I mean, it obviously depends on.
Speaker Change: On on production and where were at but.
Speaker Change: Largely.
Speaker Change: Those sorts of numbers.
Speaker Change: Got it alright. Thank you very much thanks, taking my question.
James Picariello: Our next question comes from the line of James Picariello with BNP Paribas. Please go ahead.
James Picariello: Okay. Good morning, everybody.
James Picariello: Just as we think about the off highway sale and if we just consider.
James Picariello: Tariff exposure to tariffs exposure for the off highway business. We know off highway as was mentioned it does not fall under the section 232 all of those tariffs.
James Picariello: Would be subject to the broader liberation day tariffs.
James Picariello: That's the question.
James Picariello: Just to just to confirm and then just regarding off highways regional sales mix, we know about 65% of total sales get produced in Europe can you just size up what portion of that or what portion proper.
James Picariello: Properly constitutes North America U S sales for off highway and what portion gets its important to understand the trade flow there. Thanks.
James Picariello: Yes, North Americans.
James Picariello: A few hundred million dollars.
James Picariello: That a portion of that gets imported its.
James Picariello: I'd have to I'd have to go look at the specifics and we can get you that but the tariffs overall U S. Tariff exposure for off highway is is very small and is 100% recoverable from customers.
James Picariello: We've already.
James Picariello: Proactively action to those with those customers to get to get recovery. So.
James Picariello: <unk>.
James Picariello: The tariff impact is.
James Picariello: Is not the.
James Picariello: The issue around off highway I think.
James Picariello: The broader issue and this is true for tariff generally is hey, how does this affect the macroeconomic environment and how might it affect <unk>.
James Picariello: Volume.
James Picariello: In all the end markets at the end of the day that that and especially for off highway that's probably the bigger issue right.
James Picariello: In the past these things through how is it going to affect the various end markets within off highway.
James Picariello: To date, we're not seeing anything and you've seen a little bit of pre buy in.
James Picariello: When you look out at the back half of the year.
James Picariello: Starting to see the green shoots we were expecting so right now things are holding up.
James Picariello: Pretty well, but.
James Picariello: It's a pretty fluid situation.
James Picariello: We're monitoring it pretty closely.
James Picariello: And then that's really helpful. And then just my follow up.
James Picariello: I know it was.
James Picariello: There is a sensitive question sensitive answer.
James Picariello: Previous timing of the off highway sales did point to like something around the second quarter.
James Picariello: Just curious if you if you have if you could.
James Picariello: Could share any thoughts there and then just within the revenue guidance.
James Picariello: Two things that are not tied to tariffs FX and commodities in your revenue can you just confirm what those guidance assumptions those guidance updates are thanks.
James Picariello: So.
James Picariello: I'm not going to provide the update because then you can sort of back into what our what the tariff assumptions are there.
James Picariello: In terms of <unk>.
James Picariello: Commodities, we would expect to be up a little bit and obviously the.
James Picariello: The.
James Picariello: FX is going to be an additional tailwind, but I don't want to get into into specifics and we'll obviously be able to show that to you when you bring out second quarter on the on.
James Picariello: The off highway sales as Bruce Bruce mentioned earlier.
James Picariello: Earlier.
James Picariello: We were expecting.
James Picariello: Our early to mid second quarter given.
James Picariello: The amount of work that's being done by the by the bidders we would expect that.
James Picariello: To move a little bit and probably be later in the in the second quarter.
James Picariello: Thank you.
James Picariello: Okay.
Speaker Change: Our next question comes from the line of Ryan Brinkman with J P. Morgan. Please go ahead.
Ryan Brinkman: Alright, Thanks for taking my question, which is in regards to the cost savings, including after following the acceleration this quarter. The $225 million you are looking for this year, it's now up to 25% of last year's EBITDA. So thats really just a huge step change in cost. So I wanted to check in again on the source of those savings, including the incremental savings I think I heard you say.
Ryan Brinkman: Largely corporate and nature are also your confidence in the ability to achieve the savings last quarter. You were very confident and then finally just like what are the costs are sustainable or don't have any associated drawbacks. So for example are you mostly cutting through corporate bureaucracy or layers of management to scrap.
Ryan Brinkman: Scenario, but it not R&D I'm asking only because the magnitude of savings is still impressive but it sort of begs the question like if there really was all this back to cotton why have maybe not been targeted before.
Ryan Brinkman: Yeah. Thanks, Ryan that's a lot I'll try to unpack it and some reasonable manner, but so I'll take the one that I that I like the most in terms of our confidence we are absolutely confident that we will one deliver the $2 25 and to deliver the $300 million on a run rate basis.
Ryan Brinkman: Just look at the first quarter rate is $41 million of incremental saying, we had $10 million of savings in the fourth quarter. So if you just take that that's $51 million multiply that by four Thats 200 of the 225, when you think about it right on a run rate basis already.
Ryan Brinkman: And we took cost out all through the first quarter. So our run rate action number is is already trending to where we need to be to deliver the 225, we've got additional actions that happened throughout the year, but we are in very very good shape to deliver the 225, we wouldn't be here, telling you we're going to deliver the 225, if we werent apps.
Ryan Brinkman: Dilutive positive we're in a deliberate to give you some idea and we broke out a little bit on the slide the percentages, but the really big buckets that if you want to think about the $300 million, 70% of that number is coming from head count and engineering.
Ryan Brinkman: Alone and then an additional about 10% is related to the consolidation actions around the segments. So if you just get through that.
Ryan Brinkman: 80% of the number in those buckets, we look at the head count we've action.
Ryan Brinkman: Over 70% of the of the head count that we have slated to reduce within the organization has already been action the <unk>.
Ryan Brinkman: Balance of that will.
Ryan Brinkman: Be done through the rest of the year with a large chunk of that coming out.
Ryan Brinkman: In the second quarter, so we have <unk>.
Ryan Brinkman: Visibility to where these costs are coming out and what are driving and our ability to deliver them. When you think about it.
Ryan Brinkman: What's really get your question he was there a lot of fat.
Ryan Brinkman: Think about engineering.
Ryan Brinkman: And even some of the head count a lot of that's related to.
Ryan Brinkman: So the change in how we're addressing the EV business and where we think we need to be sized for where the business is today and where it's likely to go. So it's a big big Big part of that cost reduction is coming from the shift in strategy and expectation around our EV business.
Ryan Brinkman: The balances yes.
Ryan Brinkman: We took a really hard look at what we need to run the business and how we can get better at how we're running the business.
Ryan Brinkman: Actually around the corporate and overhead functions, whether they be physically here at corporate or in the in the business units themselves.
Ryan Brinkman: Yes.
Speaker Change: Very helpful. Thank you and then just maybe on the segmentation changes. He also power technology is being absorbed into the various different driveline motion segments.
Ryan Brinkman: Previously you would explore.
Not explored but contemplated I think <unk> been moving away from that already because of the growing importance of power technologies.
Ryan Brinkman: Thermal regulation for electrification et cetera, but does this kind of definitively kind of close the door on that end.
Ryan Brinkman: Or is it sort of reflects how you go to market with some of the thought process behind that.
Ryan Brinkman: It definitely closed the door on at power technology is not for sale.
Ryan Brinkman: It's a it's a good business and.
Ryan Brinkman: It was really just a reflection of.
Ryan Brinkman: We think we can run leaner by having one less segment.
Ryan Brinkman: Like I mentioned earlier.
Ryan Brinkman: That alone is worth 30% $35 million in terms of doing the consolidation and I expect that we will get further improvement not not SG&A. So we wouldnt be counting it in our $300 million, but I do expect we're going to see significant opportunities to drive our margins.
Ryan Brinkman: As we leverage best practices across aftermarket.
Ryan Brinkman: And we bring in some of the.
Ryan Brinkman: Rigor that we have in light vehicle that was not as strong in power technologies operations.
Ryan Brinkman: Very helpful. Thank you.
Ryan Brinkman: Alright, thanks, Thanks, Brian.
Speaker Change: Our next question comes from the line of Dan Levy with Barclays. Please go ahead.
Ryan Brinkman: Yes.
Dan Levy: Hi, good morning, Thanks for taking the questions.
Speaker Change: Bruce in your prepared remarks, you mentioned some actions around non core assets and getting some proceeds in the second quarter another $50 million in the back half of the year could you maybe just talk about what.
Dan Levy: Some of those assets are and maybe.
Dan Levy: How deep is the set of assets out there that.
Dan Levy: You view to be noncore at Dana yes.
Speaker Change: Yes, I'll, let I'll, let Tim Tim take it on but I mean.
Dan Levy: This is really.
Let me comment in San a wonder what are some bits and pieces of non core minority JV is et cetera, et cetera, et cetera surplus assets land those types of things and there is not a lot of.
Dan Levy: Say, there are hundreds of millions, but theres.
Dan Levy: There is lots of things.
Dan Levy: <unk> 5 million that we can action a couple in the $30 million to $40 million range, but.
Dan Levy: Yeah, I'll just give you the best.
Dan Levy: We had a.
Dan Levy: We had a non consolidated joint venture in India that debt that was.
Dan Levy: In the commercial vehicle space, we own 48% of the business.
Dan Levy: It was it's noncore.
Dan Levy: Applied both to us and to.
Dan Levy: To others.
Dan Levy: We sold that in the quarter four for.
Dan Levy: For over 40 or in the second quarter for over $40 million that that is a asset that is sitting on the books at a far lower value than that and it doesn't change anything related to how we run the business. So.
Dan Levy: I think.
Dan Levy: Those types of assets and we have a handful of those types of things where when we if you go back over and over time, we felt it was important to have equity interest in some of these these types of operations. We don't think that that's true anymore and some of that is just because of the hail.
These joint ventures have grown and matured and we don't we don't need to be that close to him and values.
Dan Levy: Valuations in some of these places are pretty high and so we're using the opportunity to to.
Dan Levy: To divest them and.
Dan Levy: To the extent there are supplier for the supply agreement and that gives us preferential.
Supply and <unk>.
Dan Levy: And then take the capital and redeploy it into something that has a far better return from our perspective just like.
Dan Levy: Our dividends from that joint venture less than $1 million a year.
Dan Levy: Like Tim said, Hey.
Dan Levy: We've got I think just in the low 40% pretax.
Dan Levy: Earlier this week so.
Dan Levy: And then just looking at things like that.
Dan Levy: Okay. Thank you.
Speaker Change: As a follow up can you had mentioned that obviously a piece of the cost savings relate to.
Speaker Change: These and maybe changes in the program schedules, but we actually haven't even seen yet any.
Speaker Change: Through modifications to Oems plan, so understanding that some of this may be proactive, but wondering if the cancellations or delays of ships start to come in is there may be further opportunity to pull back on yes.
Speaker Change: I'm not going to be the small thank you yeah I'll take that one.
Speaker Change: Here is.
Speaker Change: It's not really what you just said is when when we chase.
Speaker Change: Changed our strategy, what we said was for.
Speaker Change: We have ice business and EV.
Speaker Change: We want to be.
Speaker Change: Our partners technology of choice and therefore, we're willing to invest our capital in our engineering.
Speaker Change: <unk>.
Speaker Change: To chase that type of business and.
Speaker Change: But making sure we get the right level of risk sharing.
Speaker Change: Where we don't have any ice business and we are chasing incremental volumes or we're dealing with customers where we are in the next generation investment and the first generation that has volumes are five or 10% of what we thought we are sand it need.
100% funded otherwise, we're just not willing to bear the risk so.
Speaker Change: It's more a question of us.
Speaker Change: Lowering our pursuit of new electric electric business to reflect.
Speaker Change: The massive increase in risk.
Speaker Change: Yes.
Speaker Change: That and then.
Speaker Change: Engineering has always shown net right, we and so to the extent programs are continuing so they haven't been cancelled, but now instead of us outflow in the engineering dollars. The customer's responsible that on a pay as you go basis. So that's some of it and then there is.
Speaker Change: A big chunk of where we had a lot of.
Speaker Change: Development plans, where we were developing products.
Speaker Change: And technologies that given the slowdown in the market, we don't need to create the second third or third generation.
Speaker Change: Our product and today, we are where our customers are more than happy to continue to use the.
Speaker Change: The first or the second generation of those products for a much longer period of time and Thats allowed us to reduce the amount of engineering dollars, we have to spend on those nextgen programs and I guess, the kind of your question of where you're going is it.
Speaker Change: As our customers.
Speaker Change: Look at that.
Speaker Change: Their product plans, because im sure Theyre, leaving no stone unturned in terms of what actions they can take to mitigate the impact of tariffs.
Speaker Change: I'm sure looking at some of their easy pipeline is going to be on the table and to the extent.
Speaker Change: They decide to push some programs.
Speaker Change: I would say there is one or two that could if they were pushed out would have a.
Speaker Change: Favorable impact on mainly our capital, but it wouldn't be at 2025 savings it would be two.
Speaker Change: <unk> 26, and seven type number.
Speaker Change: Would come down.
Speaker Change: Great. Thank you very helpful.
Speaker Change: Our next question comes from the line of annual Rosner with Wolfe Research. Please go ahead.
Speaker Change: Alright, Thank you and good morning.
Annual Rosner: I was hoping you can help us with how to think about the cadence of.
Annual Rosner: Revenue and earnings for the rest of the of what's assumed in your reiterated guidance.
And in particular sort of.
Back half versus first half yes.
Annual Rosner: Yes, I mean, largely the same as we as we talked about.
Annual Rosner: A couple of couple of months ago, we do expect the first half to be to.
Annual Rosner: To be weaker.
Annual Rosner: First quarter to be the weakest and then we would expect to see again under our current volume assumptions to see a recovery in the back half of the year than that and Thats still our expectation.
Annual Rosner: Four.
Annual Rosner: For revenue I guess as we go out.
Annual Rosner: Sort of headwind that we saw in revenue starts to decline sequentially.
Annual Rosner: Correct.
Annual Rosner: Okay, and sorry, so thats.
Annual Rosner: Volume assumption around around the back half and.
Annual Rosner: I guess in terms of the headwind youre, describing you're talking about some of the destocking.
Annual Rosner: Yes, it's not so much it's not so much of our volume assumption.
Annual Rosner: We're going against.
Annual Rosner: Easier comps.
Annual Rosner: About Q1 of last year, we volumes were up because customers were rebuilding from the strike.
Annual Rosner: We had off highway hadn't sort of started to slow down so as we go through get into the second quarter.
Annual Rosner: Less of a year over year headwind on.
Annual Rosner: Highway.
Annual Rosner: And we'll end on that same thing on <unk>. So.
Annual Rosner: This quarter, we're down 300 million that delta drops sequentially.
Annual Rosner: Sequentially quarter on quarter here, yes exactly.
Annual Rosner: That's.
Annual Rosner: And then the big the Big drivers when we were we were having this conversation a couple of months ago were really around light vehicle and off highway.
We're seeing a little bit a little bit additional weakness from a CD perspective, but that's more than being offset by from a top line away from from tariffs and.
Annual Rosner: And our expected gains on the FX, assuming that FX stays kind of where it's where we're seeing today, especially around the euro.
Annual Rosner: Yeah.
Annual Rosner: Got it.
Annual Rosner: And then so on the tire side, it's obviously encouraging to see that.
Annual Rosner: You expect to recover.
Speaker Change: Everything from your customers have there been some discussions with them around.
Speaker Change: Longer term moves that will be needed to.
Speaker Change: Address some of where the capacity is will there be need for re shoring do you need to move anything yeah. It's a good question and what I would tell you is.
Speaker Change: There's been so much volatility and what the rules are that as an industry. We have not had enough time to.
Speaker Change: To know what the rule is to start that do exactly what you just said.
Speaker Change: And I think right now some of the information that came out last night.
Speaker Change: The snorkel through that.
Speaker Change: But we'll definitely now in a position and we are.
Speaker Change: Having early discussions about okay. What are the types of things that we can do to mitigate the.
Speaker Change: The issue from that either re shoring of changing some suppliers flippin things that arent MSC U S. MCA compliant of compliance et.
Speaker Change: Et cetera, et cetera et cetera.
Speaker Change: But what is 100% clear, though is there are some things that if you take a two year window are not going to be addressed so adcs castings as an example, everybody buys castings.
Speaker Change: India and in the next two years, we're not going to be in a position, where we can reassure that so so.
Speaker Change: They are subject to the 10% reciprocals right now.
Speaker Change: Before it was there's a higher list of additional reciprocal tariffs. So we're just going to have to wait and see how those play out as the administration negotiate some of these trade deals.
Speaker Change: Hey, where rather than against our time, so I'm going to have to.
Speaker Change: Wrap it up right now do we have one more question I'm sorry.
Speaker Change: We'll take our final question from the line of Doug Karson with Bank of America. Please go ahead.
Doug Karson: Great guys. Thanks for letting me in the last question here I really appreciate it.
Speaker Change: Bondholders have been pretty excited about.
Doug Karson: The future of debt reduction.
Doug Karson: And leverage coming down I know, we can't talk about the sale of off highway can you just refresh us or just reconfirm that back.
Doug Karson: Balance sheet Delevering is still a focus and we could see a meaningful reduction in debt.
Doug Karson: Is that still the game plan.
Doug Karson: That is absolutely.
Doug Karson: Alright thats it.
Doug Karson: That's helpful for Us and I think the last target we had was leverage being in like the 1% to two turn kind of range through the cycle.
Speaker Change: Pin you down on that but is that still kind of directionally.
Speaker Change: Yes, we have been talking about sort of one one times through through the cycle on a net basis net base okay.
Speaker Change: That's good though again again through the through the cycle so different points it might be a little lower different points that might be higher but on a net basis, one turn and again.
Speaker Change: Again, just to help you out.
Speaker Change: We believe.
Speaker Change: That upon the sale of off highway will be required to tender or bonds.
Speaker Change: Okay.
Speaker Change: Okay. That's helpful. Thank you, Okay, alright, maybe with that I'll just.
Speaker Change: First of all obviously, a big thank you to them.
Speaker Change: Dana Global team I mean, we have a lot going on.
Tariffs it was something that we certainly werent, saying it was going to add thrown at us three months ago, and so I just couldn't be prouder of the results. Our team has delivered in in the environment that we're in here.
Speaker Change: We feel really good about the things that we have control on for 100% certain on our cost reduction savings that we can bring those forward.
Speaker Change: I think from a from an overall point of view the things that we can control and manage our teams are doing a great job and.
Speaker Change: We look forward to sharing further progress on things.
Speaker Change: In 90 days. Thank you everybody. Thanks, guys.
Speaker Change: And this will conclude today's meeting. Thank you all for joining you may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
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Speaker Change: Okay.
Speaker Change: Sure.