Greetings, welcome to the Q1 2023 Results Call. Due to presentation participants will be in listen-only mode. Afterwards, we'll conduct a question-and-answer session. At that time, if you have a question, please press one followed by four on your telephone. If at any time in the conference you need to reach an operator, you may press star followed by zero. As a reminder, today's call is being recorded Friday, May 5th, 2023. I would like to turn the call over now to Louis Tonelli, VP Investor Relations. Please go right ahead. Thanks, Tommy. Welcome to our conference call covering our first quarter of 2023. Joining me today are Swamy Kotagiri and Patrick McCann. Yesterday, our board of directors met and approved our financial results for the first quarter of 2023. We issued a press release this morning outlining our results. You'll find the press release, today's conference call webcast, the slide presentation to go along with the call, and our updated quarterly financial review all in the investor relations section of our website at magna.com. Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. Such statements involve certain risks, assumptions, and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our Safe Harbor disclaimer. Please also refer to the reminder slide included in our presentation that relates to our commentary today. With that, I'll pass the call over to Swamy. Thank you, Louis, good morning, everyone. I appreciate you joining our call today, let me jump right in. There are some notable takeaways to highlight before getting into some of the details. Organic sales grew by 15%, outperforming weighted production by 8%, driven by growth across our portfolio. Our strong Q1 operating performance reflects strong earnings on higher organic sales. We are raising the lower end of our adjusted EBIT outlook by 60 basis points based on the strength of these results and targeted actions to reduce expenses and optimize our cost structure. We are highly focused on executing our strategy and remain confident in our ability to meet our long-term growth and margin outlook. Given our sales growth of about $8 billion in the next three years, particularly on new program launches, we are investing in the business and expect CapEx to sales ratio to normalize by 2025. Our CapEx outlook is unchanged for 2023. In the quarter, we issued $1.6 billion of debt to finance our pending acquisition of Veoneer Active Safety, and we plan to be back in our target leverage range by the end of 2024. Our successful debt offering was done while maintaining our investment-grade rating and strong investor interest despite a challenging market environment for debt issuance in Q1. As you all know, our global economy continued to experience some interlocking challenges, including higher inflation, rising interest rates, geopolitical risks, and slowing economic growth, which continue to have an impact on our industry. We have remained focused on driving operational improvements, working with our customers to recover inflationary costs, and executing on our strategy to deliver long-term value. Let me share some of the specific operational improvements and where we have intensified our actions, giving us confidence in achieving not only this year's outlook but our plans beyond 2023. We have undertaken a number of actions to mitigate the short- and mid-term macroeconomic pressure we are facing, including the consolidation and restructuring of some corporate functions, manufacturing footprint optimization, and repricing of some programs that are underperforming our expectations. At the same time, we have and continue to intensify actions that are core to our daily business, including automation activities. In fact, about 15% additional productivity has been identified, including a possible 120 automation installations over and above the planned 70, all to be completed within the year. Additionally, our corporate enterprise-wide global purchasing initiative that started last year is helping reduce direct component pricing, freight optimization, and overall supplier management, among other things. We are starting to see traction here. Finally, smart factory initiatives with a digital ecosystem implementation, which include leading indicators, analytics, and higher levels of automation, all aimed at achieving higher productivity levels, are all well underway. We expect these initiatives to help us achieve our 2023 outlook and will be key to expanding long-term margins. Now, looking at our sales in megatrend areas that are increasing per our plan. Sales for these product areas were just under $1 billion combined last year. Are expected to roughly double to just under $2 billion this year, double again by 2025, and be up to $7 billion by 2027. These products have a sales CAGR of around 50% in the period from 2022 to 2027. The pending acquisition of B&R is expected to add meaningful growth on top of that. As the sales growth continues, our roughly $900 million of engineering spending in these areas is expected to be relatively flat over our outlook period. Given that these product areas are reaching an inflection point and we are beginning to leverage our engineering spend to the point where we expect these businesses to be profitable by 2025. We recently announced a few key product wins contributing to our growth in these areas, including ClearView Vision Systems on the Ram 2500 and 3500 Heavy Duty models, battery enclosures business on General Motors, EV pickups and SUVs, and eDrive systems for a Europe-based global premium OEM, just to name a few. We are expecting overall growth for Magna of around $8 billion from 2022 to 2025. This is partially driven by the record business awards we achieved in 2022, which were 30% above our five-year average. This high growth cycle is driving the near-term capital investment. Our CapEx to sales ratio is expected to decline to historical levels of low to mid 4% by 2025. Just as a reference point, we exceeded a 5% threshold during other periods of growth in 2016 and 2017. More than $1 billion of our expected capital investment over the next three years, including about $500 million this year alone, is to build on a strong position in battery enclosures, a market position that we believe we can maintain over the long term and generate strong returns from investments across multiple program life cycles. It's important to point out that we continue to win business across our core product areas as well, including seat complete assemblies on GM's EV pickup trucks at Orion Assembly, engineering and complete vehicle assembly for INEOS Automotive's off-road EV, and SmartAccess power door systems on a Ferrari program. Lastly, before I pass the call over to Pat, reflected in our ongoing commitment to operational excellence is the recognition we receive from our customers. Typically, Magna receives more than 100 launch and quality awards from various global automakers around the world each year. Most recently, General Motors recognized Magna with a total of eight awards, seven Supplier of the Year awards and one Overdrive award. We were one of only two suppliers to win both awards, and the only supplier to win six or more in a given year, and we have done it for three consecutive years. With that, I'll pass the call over to Pat. Thanks, Swamy, and good morning, everyone. As Swamy indicated, we delivered strong first quarter results coming in ahead of our expectations. Comparing the first quarter of 2023 to the first quarter of 2022, consolidated sales were $10.7 billion, up 11% compared to a 3% increase in global light vehicle production. EBIT was $437 million, while EBIT declined 120 basis points to 4.1%, it was up 40 basis points from the fourth quarter of 2022. Adjusted EPS came in at $1.11, down 13% year-over-year, in part due to a lower tax rate last year. Free cash flow used in the quarter was $279 million, compared to $99 million in the first quarter of 2022, in part reflecting higher capital spending to support our strong growth. During the quarter, we paid dividends of $132 million. We are raising our sales outlook as well as the low end of our EBIT margin range. Let me take you through some of the details. North American light vehicle production was up 8%, Europe was up 7%, while production in China declined 5%, netting a 3% increase in global production. Our consolidated sales were $10.7 billion, up 11% over the first quarter of 2022. On an organic basis, our sales increased 15% year-over-year from an 8% growth over market in the first quarter or 5% growth over market excluding complete vehicles. The increase was primarily due to higher global vehicle production and complete vehicle assembly volumes, the launch of new programs and price increases to recover certain higher input costs. These were partially offset by the impact of foreign currency translation, lower sales due to the substantial idling of our operations in Russia, net divestitures and normal course customer price givebacks. Adjusted EBIT was $437 million, and adjusted EBIT margin was 4.1% compared to 5.3% in Q1 2022. The lower EBIT percent in the quarter reflects about 80 basis points of nonrecurring items, the most significant of which relates to lower net favorable commercial items and a warranty accrual. About 70 basis points of operational items, including inefficiencies at a BES facility in Europe, which we highlighted beginning in Q2 of last year, which impacted us by about 40 basis points in Q1, and higher program-related engineering spend and launch costs, partially offset by productivity and efficiency improvements at certain facilities. Higher net input costs impacted us by about 60 basis points. These items were partially offset by earnings on higher sales and higher equity income. Interest expense declined slightly, reflecting a make-whole payment made last year to early redeem debt, as well as increased interest income earned due to higher current rates. Our adjusted income tax rate came in at 21.6%, largely in line with our 2023 expectations, but higher than Q1 of last year. Net income attributable to Magna was $319 million, compared to $383 million in Q1 2022, reflecting lower EBIT and higher tax rate, partially offset by lower interest expense and minority interest. Adjusted diluted EPS was $1.11 compared to $1.28 last year. The decrease is the result of lower net income, partially offset by fewer shares outstanding. The reduced number of shares outstanding primarily reflects the impact of share repurchases during or subsequent to Q1 of 2022. Turning to a review of our cash flows and investment activities. In the first quarter of 2023, we generated $568 million of cash from operations before changes in working capital, while we invested $341 million in working capital. Investment activities in the quarter included $424 million for fixed assets and a $101 million increase in investments, other assets, and intangibles. The $424 million in CapEx was higher than $238 million in Q1 of last year due to additional investments we are making in our business to support growth. Overall, we used free cash flow of $279 million in Q1. We also paid $132 million in dividends in the quarter. Our balance sheet continues to be strong. At the end of Q1, we had $5.9 billion in liquidity, including over $2.4 billion in cash. We completed several debt transactions this past quarter. This debt will be used primarily to fund the acquisition of Veoneer Active Safety, our capital spending program, including in megatrend areas, and to refinance our euro debt set to mature this year. Currently, our adjusted debt to Adjusted EBITDA is 2.19x. Excluding cash we're holding to pay down our euro debt, our ratio is 2 x. As Swamy said earlier, we anticipate a return to our target leverage ratio of 1x-1.5 x by the end of next year. Next, I will cover our updated outlook, which incorporates slightly higher than expected vehicle production in both North America and Europe as a result of better production in Q1. Our assumption for production in China is unchanged from our previous outlook. We also assume exchange rates in our outlook will approximate recent rates. We now expect a stronger euro and slightly lower Canadian dollar for 2023 relative to our previous outlook. We are increasing our expected sales range, largely reflecting the higher North American and European production in Q1, as well as the higher euro. We're increasing the bottom end of our Adjusted EBIT margin range. We are now at 4.7%-5.1%. As Swamy indicated, the increase reflects our better than expected Q1 and actions undertaken to reduce expenses and optimize our cost structure, partially offset by an increase in launch-related spending for 2023. As a result of increasing the ranges for our sales and the low end of Adjusted EBIT margin, we're also raising our range for net income attributable to Magna. Our interest expense, equity income, tax rate, capital spending, and free cash flow expectations are all unchanged from our last outlook. In summary, we had a strong operating performance in the first quarter. Once again, we outgrew our end markets by 8% on a consolidated basis and 5% excluding complete vehicles. We're taking additional steps to reduce our expenses, optimize our cost structure, and improve margins. As a result of our strong Q1 and incremental cost optimization actions, we are raising the low end of our EBIT margin outlook expectations for the year. We are determined to deliver on our outlook, but recognize there's plenty of work ahead, particularly with respect to input cost recoveries from our customers. We are laser-focused on execution. Finally, we expect to close the Veoneer Active Safety transaction in the second quarter and remain highly focused on the integration of this business. Thank you for your attention, and we'll be happy to answer your questions. Thank you very much. Once again, if you would like to register a question, please press the one by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered or to draw your registration, press the one followed by the three. One moment please for our first question. We'll get to our first question on the line from John Murphy with Bank of America. Please go right ahead. Good, good morning, guys. I just wanted to touch on slide 10, and battery enclosures, specifically. You know, as we look at this, you're talking about, you know, having the battery enclosures for all of GM's EV trucks. I'm just curious, you know, could that go beyond trucks to the Ultium platform more broadly? Also, should we be thinking about this battery enclosure business on the truck specifically or maybe even more widely similar to what you did on the hydroformed frames for GM back in, you know, 98, 99 changeover, and that may being a somewhat of a similar opportunity to be sole source and have a very large, you know, profitable business with great returns. Good morning, John, this is Swamy. I think you kinda hit on some of the key points. The battery enclosures business is a product line that is not restricted to SUVs and trucks. That's where we have a lot of the attraction right now, but should be an applicable product to any BEV that has different versions of the battery enclosures, right, and any material. The key that we're excited about in this product line is the existing product process and asset base that we have and the capabilities of different materials, different processing technology that we're able to bring and do what's right for the product. We actually see proliferation of this product line, you know, across any BEV. To your second point, if you just look at the investment that we're making like we did in the frame business in the mid to late 1990s, we see this as multiple program lives. You know, once we have the investment in place, incremental returns and margins, because we actually see this as a multi-life cycle awards going forward, with the expertise that we have. Well, that's helpful. A second question on the short term here on schedules. It sounds like things normalized quite a bit in the first quarter and continue to do so in the second quarter and hopefully for the remainder of the year. How much of an impact did that have in the quarter, you know, in improving the margin sequentially? It seems like a lot changed here from the fourth quarter and, you know, fourth quarter was still plagued with a lot of uncertainty and volatility in schedules. I mean, how big a deal did that play in the quarter sequentially, and how should we think about that going forward? Yeah. Hey, good morning, John. It's Pat. When you look at the schedule volatility, you know, we've been guiding that we expect improvements as we progress throughout the year. We're still experiencing some volatility as we come through from Q4 to Q1. The improvements weren't where we hoped they would be, so we're still seeing some volatility in our schedules. You know, what we've seen more recently in April, we're starting to see some settling. I think, Pat, maybe to add, as you said, we continue to see the volatility, we've taken a lot of initiatives internally and also some collaborative discussions with the customers to have a little bit more visibility, you know, beyond the normal time. Even looking into February and March, we saw a lot of start stops. Better communication, as an example, with some customers, we did not run on weekends, working together, and figuring out how to minimize some of the inefficiency that were caused by start stops. Moving from March to April, we are starting to see a little bit of improvement, but, you know, looking forward to that stability, John. Okay. Just lastly, higher input costs on the raw side, labor, energy and logistics. I'm just curious, Pat, as you think about as we work through the year, you're talking about, you know, recoveries and commercial settlements to get some of these costs back. I mean, how should we think about the buckets of raws, particularly on steel, labor, energy, and logistics, and how successful do you think you're gonna be on a sort of a gross and maybe net basis? What we've seen right now, what we're projecting for the year, John, related to the various buckets, from when we started the year, we've seen energy curves on a go forward basis come off. We've had strong success on energy recovery, so the pull-through into our margin improvements isn't 100% just on the reductions. We've also, we've talked in the past as well as we do have some hedging programs related to energy to secure supply and partial hedges. When you look at the steel piece, steel is up relative to our expectations in February. A lot of the steel when you get to this point of the year, John, is already purchased and locked in for, you know, for the full year. A lot of the hit on that's not flowing through. The flip side is we actually see a benefit on scrap steel, which is repriced month to month. We do have, when you look at our outlook, we do have a benefit of about $20 million from our previous 50 of scrap headwinds, we're down to 30. On the labor, we haven't really seen much of a change on labor assumptions because those rates are locked in at the beginning of the year. The ability to get recovery on labor, at this point, I mean, with the automaker customers, I mean, how are you seeing there? Are you able to go to them and say, "Listen, you know, we're getting more labor inflation, potentially logistics inflation, and can you get recoveries?" Or do you feel like sort of you're at the level of steel right now where it's locked in for the year and it's a 2024 discussion? It's not locked in, John. The discussions continue not just even for 2023 and 2024, but back into 2022. As you know, we always offset the normal inflation with the productivity improvement and so on. With the, call it the abnormal inflation that we had either in Mexico or in Europe, where based on the regular contractuals, we were looking at 7.5%-9% in some areas, wage inflation. We are in discussions with the customers on, call it, above normal. It's not as discrete as to say, this is labor, this is commodity. We are holistically looking at it to say, you know, this is the normal world, this is where we are, including some of the inefficiencies that are caused by the customers on this start-stop. A lot of tough discussions, but I would say constructive. Making progress in the first quarter and hope to make more and record some of the ongoing recoveries in beyond the first quarter. Okay. That's helpful. Thank you, guys. Thanks, John. Thank you. I'll proceed with our next question on the line. It is from Adam Jonas with Morgan Stanley. Go right ahead. Hey, Swamy. Hey, Pat. I just wanted you to comment on the changing environment. It just seems like from the end of last year to now, there's been a really pretty sharp change in supply and demand in EVs, like really narrative changing. I mean, you've got Tesla who seems to be willing to run the business at a loss, potentially, and kind of a really signs of an oversaturated market in China. I just wondering from your lens, do you think that, you know, business as usual, and expected, or do you think that the narrative shift is significant enough for something to change in your strategy over the next two or three years? How nimble are you staying? I have a follow-up. Good morning, Adam. We have to stay nimble or we don't survive in this industry. We always talked in our product strategy of how do you get as modular and as scalable as possible, even in the perspective of manufacturing processes, the same thing applies, right? How do you have scalable modules? How do you plan lines in such a way that you can have some amount of flexes? Obviously, it does not have a infinite amount of flexibility to volumes. Some of it is the terms that you have with the customers in terms of volume take rates and what you put in fixed assets and dedicated assets versus, you know, being able to move from one to the other. You know, just generally in terms of the products, we are very focused on what we think we can address and how do we address even whether it's EV or not, in our EV eDrive platform. We look at, let's say, here is the low, here is the mid, here is the mid plus. Do we address the entire market in all segments? Not really. We are looking at the platforms before we take the business and risk adjust it to the volumes that are being assumed. In some cases, there are platforms where you have both versions, right? As an example, in our transmission in DCTs, we have the DCTs and the hybrid and the eDrive. There is some amount of hedge there. Doesn't work through in all platforms, all products. Yes, it's a lot of moving pieces, but we continue to look at that. I wouldn't say we are perfect and there is no risk. Okay. My follow-up is just specifically on the Chinese OEMs, particularly the more aggressive ones in the export market, BYD and Geely. It seems there's a directive from Beijing for the Chinese domestics to go forth, right? I seem to remember you recommended a book about, you know, 12th or t13th century events that also kind of maybe seemed relevant in terms of just how the industry is evolving, Swamy. So tell us what your exposure is. Are you adequately, proportionally contented on those more aggressively expanding EV Chinese names? Or does that represent a potential global CPV atrophy for you? Thanks. I don't think there is an atrophy at this point as I look at the business. I would say we are more indexed in North America and Europe as the primary market, Adam. We do have presence with the global OEMs in China, but also, you know, the Chinese OEMs in China, as example, the ones that you mentioned, BYD, Geely, and others. I could not comment with full conviction whether I would say it's a normal content growing with them. I don't know whether it would be equal to the average that we have in Europe or North America. I think First thing, right? We are very focused on manufacturing for the OEMs locally and not just moving things from one region to the other, producing in one, going to the other. Second one, I think we just look at the region. Look at the platform and the OEM and the program itself in terms of risk adjustment to put hurdles on our financials before we go through it. That framework is pretty much applies to all programs that we look at. Thanks, Swamy. Thank you very much. We'll get to our next question on the line. It's from Peter Sklar with BMO Capital Markets. Go right ahead. Good morning. Looking at the vehicle assembly segment, Steyr, it seemed to perform well during the quarter, both in terms of revenues, you know, and margins and the profits you generated there. Can you just talk a little bit about the context of what's going on? I believe the BMW X5 was ramping down, and the Fisker Ocean was ramping up, and there was the possibility you might have had quite a bit of disruption at the facility during the quarter, which would negatively impacted results. Can you just talk a little bit how things are unfolding at Steyr? Yeah. Morning, Peter. I think we were really satisfied with our Steyr performance in Q1. What we did see was volumes come in above expectations for the quarter, the mix on those volume increases were positive. Just one point of clarification. The vehicle that is ending in Steyr is the BMW 5 Series, not the X5. Okay. That's ramping down in the Q3, Q4 of this year, so it's still running at this point in time. We did have sales outperformance in Steyr in the quarter, but also we're still seeing some strength in the back half of the year. They did have some engineering margins come through as they settled some contracts related to the accounting. Those were the big factors driving that. They're still focused on turning over the plant and ramping hard as they come up in the back half of the year. When is the Fisker Ocean ramping up? Correct. Sorry. when, Pat, in the second half as the 5 Series ramps down? Correct. That's when you- Okay. When you go through the launch, see a heavy ramp as we move on forward from this point, but it'll be that timing. Pat, on another question on, as I recall, on the fourth quarter conference call, management indicated that you expected Q1 results to be weaker than Q4, but we got the opposite, where Q1 results were actually stronger than Q4. Can you talk about, like, what changed in the business since you initially provided that viewpoint for a weaker Q1? I think foremost, it was volume. If you look at volume expectations, our expectations were relatively in line with IHS. When you look at that, you're approximately 330,000 units up from those expectations. Our sales were higher than we had expected. We had strong pull-through on those sales. We say strong pull-through, it's a lot of things, and it's easy to say you just have pull-through, but there's a whole bunch of operational excellence you need to have those pull-throughs coming at a strong margin. We really executed that in the first quarter. That was really the big driver. When you look at the big drop from Q4 to Q1, the expectation was, and it did exist, was the customer recoveries are gonna be back half of the year incurred. If you look last year, Q4, we had strong recoveries. In Q1, we're tracking, we're pushing hard. We've had really good traction and agreements already, but it's definitely below the Q4 level, but in line... Okay. with the expectations performed. Okay. Then just lastly, on the, you know, the body and exteriors plant in Europe where you've been having the difficulties. I believe its financial performance has gotten worse quarter-over-quarter. I think you said on this call, negatively impacted margins by 40 basis points. Correct me if I'm wrong, but I think you said for Q4, had a negative impact of 25 basis points. Can you just kind of summarize what's going on at that plant and what the outlook is for improvement? Hi. Hi. Good morning, Peter. This is Swamy. The last time I communicated, the plant performance is going to be eliminating all losses by end of 2024. We are on track for that. Just a little bit of clarification. When we talked about the performance, what Pat was doing is comparing to Q1 2022 to this quarter 2023 comparison. As I said, the real issue started in the second quarter of 2022, so therefore it looks worse in comparison to that quarter. If you look at the progress, as we have indicated, there is a little bit of puts and takes here and there, but we are on track for 2023 and getting to eliminating losses by 2024. I would say we are in good shape. Okay, good. Good to hear. That's all I have. Thank you. Thanks, Peter. Thank you very much. Thank you. We'll get to our next question on the line. It's from Tom Narayan with RBC. Go right ahead. Yeah, thanks, guys. I had a follow-up actually on the last question on complete vehicle. Yeah, I understand the strength in the quarter, but curious, I guess, why you were guiding for the margins to come down, I guess, for the remainder of the year. Were there specific things or maybe in that segment that benefited that are isolated in Q1? No, when we look at the guide from as we exited 2022 coming into 2023, Peter touched on a couple of them, Tom. Number one was we are expecting a big change over that facility. What you're seeing is the X, I'm saying the X. The BMW 5 Series is coming to an end, then we're in the middle of launching or ramping up the Fisker. A couple things what's happening as you get closer to a launch of a vehicle, your launch cost and your cost incurred increase significantly. Disproportionately, I would say, as you get closer to SOP, that's 1. 2 is you're just missing contribution margin while that BMW 5 Series... and there's a gap in production. Three, when you had 2022, we had some licensing income related to platform sales or licensings on certain technology we had. That amortization is an accounting issue is coming to an end. Finally, we had some strong engineering margins in 2022. Finally, we have energy headwinds and labor headwinds in the business for 2023. Those are the five or six big buckets driving the, the guide down for 2023. Okay, thanks. Maybe, kind of similar to that, Power & Vision, you're guiding for that to upshift in the remainder of the year. Just curious as to maybe what's behind that? Yeah. When you look at the. Really what's happening in that is we're seeing some sales growth in the back half of the year related to. Year-over-year. Sorry, not back half of the year. Year-over-year, we're seeing strength in it. What we're seeing in this product, particularly as we uptick it, is some of the. Sorry, lost my train of thought there. We're seeing strong pull-through on some of the sales. The flip side to that is the down as we came into 2023 was we do have engineering spend in that product area related to those, some new technologies that we're launching. That's a drive. This group is really benefiting from a lot of the operational excellence activities that Swamy was talking about previously. We expect to execute those as we go into, they're in plan now. They're being executed. We're gonna benefit from those. The other thing, Tom, to be aware of, we did have the warranty item in Q1 of this 2023, and those tend to be lumpy. When you look at our history, we're gonna run warranty between 1%-1.25%. You know, lumpy, it's probably gonna normalize for the full year in that traditional historical range. That warranty drops off. Operational execution drives margins for the rest of the year. I see. Okay. Lastly, on the disclosures on Veoneer. Just curious, what kind of information we'll get on that, on, you know, profitability, et cetera. Are we gonna get that at on earnings, or how should we think about that? It's something that a lot of folks are eagerly anticipating. Hi, Tom. Good morning. As Pat mentioned, we are in track to be able to close mid-year as we get close. Our intent is to be able to give a revised 2023 outlook, including Veoneer when we come to our next earnings call in August. We are even contemplating a couple of weeks out after the earnings call to have a investor update where we can give a little bit more color. That's where I think we can talk through... You know, we've been talking about our ADAS growth, and programs and so on and so forth. We can give some more color on that once the closing is done. First in the earnings call, followed, you know, a couple of weeks later where we can talk in general overall. That's great. I think that'll be really appreciated. Thank you. Thank you. Thank you very much. We'll proceed with our next question on the line is from, Itay Michaeli from Citi. Please go right ahead. Great. Thank you. Good morning, everyone. Just two questions for me. First, for Pat, maybe just talk through how we should think about the cadence of total company margins the rest of the year, as well as complete vehicle segment. Second, for Swamy, maybe back to ADAS. I was hoping you could just provide an update on kind of the overall booking environment, the competitive environment, and then any progress both on the Imaging Radar side and Driver Monitoring as well. Thank you. Morning, Itay. Just as far as the margin profile as we go through the year, our expectation from our outlook from February really hasn't changed. Our expectations is that as we progress through the year, we expect to have margin expansion driven by, you know, we have sales, we have launches getting behind us and then the customer recoveries. As well, what we have is you start to get scale on a lot of these automation and other optimization projects. Our view, we don't give quarterly guidance, but we expect, you know, positive margin improvement as we go quarter to quarter. In the case of Steyr, you're gonna have a lull, and I don't wanna get into too much detail, but just as we go through the quarter, you have a lull again because of missing the contribution on sales and then launch costs as we get closer to fully ramping that vehicle. Itay, on the question of the ADAS, I think, we talked about the CAGRs over the business plan period. We continue to track that as we go through. You know, from a portfolio perspective, you know, the digital radar has been launched or is launching in one of the programs. We continue to have conversations with other customers, two or three actively going through that, you know, that technology coming into production or into more programs. As we sit here and look at it, we continue to track the plan that we put in place for the plan period. We, we, we track the market. We continue to make progress to hit the plan that we have in place. Terrific. That's very helpful. Thank you. Thank you. We'll get to our next question on the line. It is from Colin Langan with Wells Fargo. Go right ahead. Great. Thanks for taking my questions. If I recall the original guidance, I think it had about $150 of input headwinds, which sounds like that's modestly improved to about $130. You had the $70 million of the non-recurrence of some warranty and provisions. I believe there's, like, $170 million of sort of non-recurrence of favorable commercial settlements in the initial guide. Can you just sort of provide color on what are those settlements? What's sort of normal? How are they trending in Q1? Are you still expecting sort of that year-over-year drag this year? I think, just to hit one by one, the $150 that you're talking about was the inflation headwinds that we talked about. $50 of that was scrap related, and as Pat mentioned, we're looking that $50 to be $30, so it's a pickup of $20. The other $100 was related to the incremental inflation headwinds in 2023. You know, as I talked, we are looking at offsetting that or, you know, continuing to look at ways to mitigate that with operational improvements, customer recoveries, and hopefully the trend of the energy and commodities and other things if they go in the right direction, it helps us reduce the risk of recovery, and that's the reason for our increase in the lower end of margin. You talked about the commercial settlements. They're really not inflation related. For example, when an OEM changes the program's scope or shuts down a plant, those are the type of discussions we have to get those recoveries, and they cannot be linearly predicted as you can imagine, right? We had some of those in the last year, and we obviously cannot plan for such things this year. For the visibility that we had, we said we don't see the same magnitude of commercial settlements this year. Therefore, the variance is going to be, you know, compared to last year to this year, the settlements will be lesser and therefore has a negative impact overall. Got it. I mean, is sort of the 170 the right range of the help last year that you're not expecting to reoccur? It seemed kind of large when I was sort of looking at the numbers. Yeah. It hasn't changed that much versus our outlook. Okay. Got it. I just wanna follow up. In the disclosures, it says there's $450 of balance sheet exposure related to EV startups like Fisker in Q1. It's actually up from about $400 in the annual report. You know, how should we think about this exposure over time, and how are you thinking about counterparty risk with these sort of newer EV startups, particularly as I believe you're exploring adding capacity in North America? Morning, Colin. When we think about that, you know, we're tracking new entrants, right? With that exposure you talked about, I shouldn't call it exposure, our balance sheet amounts related to programs that we're launching with new entrants. It's a combination of working capital, fixed assets, other assets. That number grew in the first quarter, and it's primarily as you're investing for program launches, that number will increase, whether it's for tooling and engineering, and a big portion of that is paid prior to launch. That number's gonna bounce up and down just as we go throughout the year. As far as when we think about EVs and doing work with them, I think, you know, Swamy spoke earlier on Adam's question regarding Chinese new entrants. When we look at them, we think of a, appropriate risk returned investment returns for these programs. You know, we have to have a business case. We have to have it on appropriate commercial terms. At that point, we make an decision whether we invest or not, but we're always cautious more so than with our traditional customers. That being said, we have a 450 on our balance sheet out of a $20 billion asset base, right? We're still close to 90% with eight customers, so that just for a little perspective as well. Just to clarify even further, Pat, on the topic of our plans for North America, it's not really plans. It is, you know, from a roadmap to say that we are open to look at footprint in North America, but we always said it has to be multi-life programs and, you know, risk-adjusted and so on. It's just more openness rather than a say that we have a definite plan. Got it. All right, thanks for taking my question. Thank you. We'll proceed with our next question on the line. It's from Dan Levy with Barclays. Go right ahead. Hi. Good morning. Thank you for taking questions. I know you discussed that some of the pace of disruptions is lightening. Maybe you can give us a sense of what type of incremental margins we should be expecting as the pace of disruptions continues to dissipate? Dan, you said disruptions in what? Sorry, I didn't catch the word. Production disruptions. Okay. Yeah, the production disruptions, you know, are start-stop, where we have a release and then it changes either on volumes, right, or the dates and so on. As you can imagine, that leads to a lot of inefficiency of planning, trapped labor, and so on and so forth. We've been working with the customers very collaboratively, and they come back and starting to give us longer visibility or finding a way to redo the production schedules. As an example, with one of our customers, we figured out a way not to work on weekends so that there is no premium cost. A lot of that is internal initiatives for us to figure out how to address that inefficiencies, and we've been able to do that. Still, the customers are coming to the table to figure out, like I said, give us better visibility, figure out a way to hit the volumes the way we can do it without too much cost. With that said, we looked at the downtime hours in February was not a whole lot better than what we saw in Q4. If you go in from March to April, we are starting to see a little bit of an improvement, and that's cost due to semiconductors or, you know, some other supply chain constraints, and customers managing their product lines and so on. The type of incremental margins we might expect as some of these pressures dissipate? Morning, Dan. When you think about the margins, it's obviously gonna vary by segment, we usually do a more of a bottoms-up type margin analysis. I think when you go through those, the historical pull-throughs or incrementals should be what we've seen historically. The one caveat I would have, though, is when you look at a lot of this growth that's coming and where you do require new facilities, you're not getting a full pull-through, where you're going from two shifts to three and you're absorbing fixed costs. You do have on some of the new facilities a lower, more, you know, Not necessarily contribution margin, more of an EBIT margin pull-through. Again. Thank you. Hold. Okay, thank you. I just wanna follow up on the prior commentary you gave on cost actions and maybe repricing the contracts. What type of visibility you have, you know, what the magnitude of those benefits might be and just general tone and tenor of, you know, how much low-hanging fruit there is to improve? Dan, I wouldn't be able to categorize how much specifically on the program repricing. This is a hygiene issue, as I would say, going through operations and looking at every little detail. You know, we kind of looked at the management SG&A engineering consolidation restructuring of plans. We looked at, accelerating some of the restructuring activities that we already had in the plan and the outlook and how do we pull forward some of those things. As part of this process where the terms were there, we looked at some of the Or not some, pretty much across to see which are the programs where we had contractually, ways to look at repricing, right? Or programs that were not meeting our expectations in terms of profitability margins and returns. We looked at, as I said, automation and a whole bunch of productivity improvements that we're going through, that was the reason for us to talk about incremental margins going from 23%-25%. We've been able to pull forward some of those things. Talked about the purchasing initiative. We are looking at freight optimization, looked at some analytics data. We're working with our tier two suppliers. It's a whole bunch of activities that are adding. It's bits and bytes, but that's how you chip away. There is not one big magic wand that, you know, is contributing to a lump sum here. It's just grinding away at every detail. It's not a footprint issue, correct? It's not an issue of, say, in a place like Europe, where the LVP is lower than capacity. It's. We're not talking about footprint actions necessarily, correct? No, it's not a foundational footprint issue. It's just, you know, optimizing every little thing that we have, and rebalancing. It's not a foundational footprint issue, no. Thank you. Thank you very much. We'll get to our next question on the line. It's from Michael Glen with Raymond James. Go right ahead. Hey, good morning. I wanna circle back to something talked about earlier. As we think about these OEMs launching these EVs, and they seem to be fairly aggressively targeting a path to breakeven on these EV programs, like, to what degree and you're putting up capital to participate on these programs. Like, to what degree are they gonna be able to come back on you and put additional pressure on you to help them in their motivations to reach breakeven? Is there any pricing risk? Like, how do you characterize the pricing risk in the EV programs? It's a normal course of action, Michael. We have already, you know, pricing discussions on productivity and give backs and so on and so forth. If you have the product, and, you know, being able to bring value to them, that's how we get the products. I mean, there is always going to be conversations. We are looking for what we have in our framework to meet our margin and returns profile. Just like they do, we have our shareholders. So I think it's gonna be an ongoing discussion. We have to look at bringing value with the product and process and innovations that we have. We don't see anything beyond that, and we wouldn't know how to entertain that. I mean, we have to do the business we have to. Right. Michael, just for perspective, these are long-term contracts. They're not subject to annual repricing. It cuts both ways. We're entering to with significant investments under long-term contracts. Most of our customers, we have strategic relationships. It's not just a, you know, tactical, discussion. It's a long-term, and it spreads across so many product areas, so I think we do have an advantage there. Okay. Then on the other side of this, you have all of these legacy platforms that are facing some degree of volume decline, structural volume decline over time. How do you view what happens with margins in those programs as we think out beyond 2025? I think we have to look overall, right? When you talk about programs, there is a certain aspect which is of the asset that is not dedicated to the program, like a press or an extrusion and so on and so forth, or a machine center, or a motor. If you look at the assembly line that might be dedicated to a specific program, and that's where we have to think and make judgments on how do you put the flexibility in so that we can use certain parts of the assets in one versus the other. We've always talked about, as an example, a large part of the assets and capital that we have in our transmission and all-wheel drive, four-wheel drive business also applies to do the product in the eDrive business. Not all of it, but a significant part. We have to have the discipline to figure where we put capital and how relevant is it going forward for the products or the car of the future. It's a very thorough exercise that we go through. Okay. Just one more for me. Can you just... In Power & Vision, there was the majority of the other charges were in that segment. Can you provide a better description of what the action was taken there on the restructuring? I think the two charges that you might have seen, one was the warranty reserve that Pat talked about, and the other one was the engineering spend that we had on a couple of programs. Right? Pat, anything to add? Yeah. I agree. I think, Michael, if you're referring to the actions taken regarding restructurings, those were in the MML space. I would call it two buckets. One is pruning. If you look at the restructurings we took in the quarter, some of it was, you know, we have some consolidations. We're adapting. We're not static. We're looking at our portfolio. We're looking out far, way further than our outlook period, and we're taking actions to consolidate our footprint, become more efficient. The other piece that came through was we did have internal restructuring that drove costs related to a management reorg, and that's driving further cost optimization. That's the one we had talked about earlier. the payback With a strong payback. Okay. Thank you. Thank you very much. Mr. Kotagiri, there are no further questions at this time. I'll now turn the call back to you for any closing remarks. Thanks, Tom. Thanks everyone for listening in today. I'm happy with our progress in the first quarter. A lot of work ahead of us. This is just the beginning. We feel confident with our progress and in our long-term strategy. Thanks. Have a great day. Thank you very much. That does conclude the conference call for today. We thank you for your participation. As we disconnect your lines, have a good day, everyone.