All right. Very pleased to have with us as we continue to wear the tail end here of day two of the conference, Magna, third largest global auto parts supplier. Where are you in the rankings? Top five, top three. Yes, that's fair. Top five. Okay. Very pleased to have with us Tony Coppetti, a company's CEO, as well as Phil Fracassa, new to the CFO role. We are going to go through a series of questions, fireside chat style. Anyone who has questions, please feel free at the end. If you have questions through the webcast, you can email my colleague, joshua.cho@barkley.com, and you can ask them on your behalf. With that, Swamy, Phil, thank you so much. Thank you, Dave. Maybe we have to start on the very near term because I think folks have been wondering on what's happening as far as some of the supply chain disruptions. What are you seeing? Is there anything that we need to be watching for on a near-term basis? Besides the new fire today? You can comment on that one if you want to. No, I think given what we've seen about the disruptions to the extent that we could, and we have conversations with the customers and the information that we have based on releases and other stuff, I would say we have included the impact of that in the numbers that we've given about three weeks ago. The plant's supposed to be back online in December from the Novelli side and gathering speed for the next months into the next year. Let's see what today brings. From an expert perspective, working with, again, the market, we have a SWAT team going through the places to figure out how to gather inventory. That's very good place. Working with our customers there, again, very fluid situation, but we don't see any impact as we sit here today. Okay. Maybe just one more on the near term, the margins for the fourth quarter, large step up implied, roughly 7% versus year to date, you've been running at 5%. You talked to a number of things, commercial recoveries, some tariff benefit, lower engineering. Still a line of sight on those benefits materializing in that margin ramp? Yeah, maybe I'll take that one down. The short answer is yes, you've identified the drivers perfectly. It's mainly commercial recoveries and tariff recoveries that are driving those margins up sequentially and year on year, despite revenue being kind of flattish sequentially in the fourth quarter per the guide, actually down a little bit year on year. The main drivers would be the recoveries, which, again, at this point, feel like we have good line of sight to getting what we included in the guide. The engineering spend, I think we talked about being lower by $100 million or so compared to the last previous year. We are on track for that. Going into the next year, we see that continuing optimization on the engineering side. Okay. As we look into next year, maybe we could just frame the broader environment because I think this is a question that's coming up quite a bit that we're looking at the setup right now, LVP on the third-party estimates is flat to down. I think there's questions on customer mix. There's questions on sort of programs. Is it broadly fair to say just from a macro setup, we're looking at another, call it, flattish environment? The onus is going to be on you and your sort of own internal initiatives to drive profit growth? Yeah, it's a fair assumption. If you look at the last four years, we've been doing about 35-40 basis points year over year starting 2022. So we've done about 150 basis points, including this year. We have a clear path for an additional 35-40 basis points going into 2026, assuming flattish 2026 compared to 2025, right? When we did the February outlook 2026, North America was 15.4 million units. Right now, it looks to be nowhere near that. On the self-help side, if you look at five and a half as the midpoint coming out of this year and an additional 35-40 basis points with production being flattish, it's a good setup going into next year. I would say that's how you frame 2026 going forward. I know you'll disclose what you disclose in February. From a backlog new business perspective, I think one of the themes we've seen here, S&P was saying yesterday that you're seeing a lot of ICE extensions, a lot of the new programs, especially in North America, were EVs, which obviously have been either heavily delayed or the volumes are lower or maybe even outright canceled. Is there a backlog or launch air pocket when you combine that also with maybe some changes on the reshoring side, at least for the next 12 months? Yeah, a few points here. If you look at 2025, we came in a little lower than what we had expected in EV, but it was offset by the ICE side of things, right? If you look at the general mix, I think we would be aligned in our revenue ICE to EV compared to what we see in North America today. A lot of the investments from a platform bigger perspective for our BES segment or our PNV segment, either in engineering or capital are behind us. When the EV comes, it's going to be a tailwind. In terms of winning programs with our customers, we have not seen a difference in cadence. As a point, two years out, 2027, we are +90% booked business, right? Obviously, the variable is going to be the volumes going forward. That's in place. If you see the AV take rates increase because of the CPV, we would see an uptick because the content for us is higher in EVs than it's on ICE just because, for example, in our BES segment, we would have battery enclosures as an additional content per vehicle. If you look at our driveline, $500-$600 for a transfer case. In an EV side, a primary or secondary drive, $1,000 plus in content. As this transition happens, the content is higher in EVs. On our driveline business, which is more directly involved with the EV stuff, it's a great transition for us. That's what we see in both content. If you look at the booked business going up to 2028, on the outsourced content, we would be the biggest EDR supplier, right? We feel we're in a good place. Reshoring, we do not see anything significant now, but with our given footprint that we have, we see that as a possible tailwind. Okay. I think that's actually a pretty good summary of maybe some of the programs and the pipelines. Maybe on the margins, and you talked about that net performance, just maybe help us unpack that 35-40 basis points that you're on track for, you guided to for next year. This year, you've seen that benefit as well. What is that? How much more runway is there on that? What's the low-hanging fruit versus maybe initiatives that are going to take a little more effort? Right. The first part is the simple block and tackling, which has been part of the DNA of Magna, and we continue to do that. We have been working on the cost structure since 2018, 2019. Remember, North America had 17.5 million units. Europe was about 21.5 or so. Today, we are building our cost structure for North America to be around 15 million units, Europe to be about 17-17.5, China about 30, right? That is one part of it. The normal course that we do in terms of material savings, in terms of the regular block and tackling, productivity improvements, that is the second bucket. The third one is automation. We have been talking about it. I would say automated material movements, collaborative cobots working in regions outside the fence, stamping, assembly, molding, all of that stuff was already automated. We believe just blind automation is not the right thing. You have to think automation, plus maintain flexibility where possible. The one last bucket is digitization, knowing preventive maintenance ahead of time, not just schedule maintenance, knowing where is the health of the equipment, what should you do, knowing the state of assembly lines, what should you do to take bottlenecks out. That is operational visibility. I would say that we are still very much in the early innings. When I talk of 35-40 basis points in 2026, that's not the end of the road. That's just the beginning. It's not a one-time lift. This is a continuing path of operational excellence. Okay. I want to unpack that comment in two ways. A lot here. Yes. By the way, I appreciate these forums because they're like Magna's like four separate companies rolled into one. There is a lot to discuss here. Maybe help me understand on that idea how this is because I think we're all well aware that Magna is a very unique structure, that the businesses themselves have the ability to run themselves, what you call an entrepreneurial structure. When you're talking about the 35 - 40 basis points and some of these initiatives on material cost and productivity, is that coming from initiatives within each segment and then all aggregated? Or is there still sort of a debate or a dialogue between the sort of the senior management team, the central office down to the business segments themselves? Help us explain how this is forming. Yeah. Maybe I'll try to break down the word decentralized or entrepreneurial. When we say that, it doesn't mean everybody's doing what they want. We have a framework in terms of capital structure, in terms of compliance, in terms of governance, in terms of strategy, and so on and so forth. Entrepreneurial decentralization really means non-bureaucratic ability to make decisions without having a bunch of layers, right? If you win a program, how do we win a program? Which customer at what metrics is a standardized process? But the outlook is given by the business unit because they know it best. How do you put it together? How do you code this? Where do they stand in the market segment? And so on and so forth. Now, you asked about communication. There is no central library tower, by the way. I visit. I've seen about 35 plants this year. I've met every general manager of Magna this year, 350 general managers, right? There is nothing centralized here. When we say that, it's trying to coordinate communication and get standardization. I'll give you an example. We talk about material flow in plants. We talk about having a digital twin in a plant. That is not done by every plant by themselves. We have the set tools. We say, "This is how we look at material flow. Get the material flow right." Here are the chances of automation that can be done by putting AMRs or whatever you want to call it. Here are the four AMRs that work by region. Let's go implement it. There is one-time implementation done in one place, all debugged. Everybody's watching it. The proliferation starts to happen. The proliferation is done by each of the divisions on their own. You don't need a central place. Do I put the data in a cloud? Yes. Everybody's not going to put their own server. They don't have that decentralized ability, right? That's what we mean by taking away the layers, taking away the bureaucracy. That's the entrepreneurial spirit. The block and tackling, if I'm making a part in a stamping process, I look at my blank operation and I want to optimize material. That's not done by Magna. That's done by the division there because the structural division knows that, the molding division knows that, the machining division knows that. There are centers of competence where this information is shared. If somebody else wants to do it, you don't need to reinvent the wheel. Long answer, but I could go on for a few more hours. Yeah, maybe I would just add, Dan, as the new person to the company coming in, that I've been really impressed so far with the level of ideation in the company, both at the group level or segment level as well as at the company level and the knowledge sharing. When something's working in one part of the company, there is the ability to extend it across other parts of the company where it makes sense. I agree with Swamy. I think this is embedded in our culture. I would expect that to continue even after 2026. Okay. Great. I want to pick away at some of the other initiatives here. You talked about improved economics on recent launches. There's an opportunity to reprice some of your programs. Maybe just give us a sense of how much runway there is. Broadly, I think you're generally top three in most product lines that you play in. Does this strong position give you maybe extra leverage when you're redoing some of your agreements to make sure that inflation realities are being properly priced in and you're getting the proper economics that you need? Maybe the first point, Dan, is if you look at the repricing, call it the new economics, we started putting that into play when inflation began in 2022. The programs that were won at that time are just starting to launch. That is the 2026 we are talking about. By the time all of the stuff rolls over, we are just in the early innings. As the new programs keep continuing to come with the new economics, we are just in the beginning, early innings of that. There is a lot of tailwind there. The second part of it, what you said, the OEMs run a very competitive process by each product, and we have to win that. Given our ability to bring value either by putting things together or having the footprint that we have, I believe it's an advantage when we talk about these new terms, whether it's capital sharing, whether it's resetting labor economics at startup production versus when you won the job. I think we have a little bit of an edge there when we have those discussions. Okay. Another area, warranty. Can you just unpack this? It's been a headwind this year. What's going on and what's the path to reversal? About $9 million or so warranty year over year. It was a one-time on a seating that happened in the first quarter. Generally, I would say this year is no different than the others. Been very good in launching with quality, with our customers working very collaboratively with them. Other than that one topic, I don't see a significant cadence change from year to year in terms of warranty. Okay. Maybe the last one is MegaTrend Engineering. Help us understand how much, when you add it all up, was the benefit this year. What's the opportunity in 2026? Maybe just more broadly, tie that into, given how sharply the North America EV environment has changed, is changing, how much more does this change the trajectory of your resource allocation, MegaTrend spend, etc.? Maybe start off, if you go a couple of years back, we said MegaTrend spend was roughly $1.2 billion two years ago. Per year. Per year. That included recoverable expense as well as expense that we spend on, call it R&D, non-program-related. We are developing a platform or a technology that is going to be launched. That is what we call the core, right? We have program-related expense, which is either reimbursable one-time or through piece price. That is the $1.2 billion. As of this year, I think that $1.2 billion is more towards the $900 million or so. Last year, I think we said $100 million or so reduction. We are on track doing that. Going forward, the big spend in terms of the core technology development or platform development is behind us. That will vary now on how you win the programs, right? It is fair to assume that it is going to be flat around the $800 million. We will continue to optimize that. We were ahead of what we thought this year in terms of optimizing it. Going into 2026, fair to assume it'll be in the ballpark of 800 or so. Okay. Before I jump into the segments, I want to talk about China, which obviously has been very topical for suppliers. Now, it's a smaller piece of your revenue. I think it's like 12%. But you're more heavily exposed to the domestics. I think it's roughly two-thirds of the mix. A, how much more are you leaning on China as a source of growth? B, if there's more heavy domestic mix here, and I think this has been coming up that some suppliers that are winning programs, it's diluted, the economics are tougher, the pricing is tougher. Is this a potential you're trading maybe some margin for revenue? How do we look at the margin impact? Your stats are pretty good. I think 65% of our business in China is with Chinese OEMs. We've been growing over 10, 15 years, roughly in the low teens year over year. If you take the year-by-year out, I think we still see the +10% growth in China, right? One important fact, our China business is accretive to the Magna average. We're not doing it at the expense of margins or returns. We have been able to do that. We started off mainly supplying to Western OEMs, but like I said, we have migrated now to Chinese OEMs. Like you said, two-thirds roughly Chinese OEMs, big ones, Geely, Chery, BYD, Changan, and so on and so forth. We are integral to their ecosystem there. We have been very deliberate on focusing on complex technology or an asset-based differentiation, not every product. That is what has helped us in the last 10, 15 years to maintain our competitiveness, but also market share and profitability. As they come to different areas, like we did in the past when Europeans came to North America, we continue to gain share with them. We believe that is what we are going to do as they make more there and export or come into Europe or other parts of the world. Chinese export, that's actually going to be my next question. Chinese exports to Europe or localized production of Chinese in Europe is an incremental opportunity for you, not a risk. That's correct. Okay. Okay. Why don't we just unpack some of the segments? First, actually, let me go into the technology. Look, I think that the industry has faced a dilemma on capital efficiency, right? I think there is this dilemma of wanting to spend on new technologies, but at the same time trying to be capital efficient. I think where everyone has been burnt is just the uptake curve that we all expected had been wrong on EV, on ADAS, etc. How does that balancing act maybe impact the way that you're looking at technology development, the types of returns you need, etc.? Has it changed today versus the 2021 approach when you obviously were very MegaTrend-focused, but others were as well, understandably, and that environment is very different today? Right. When we say MegaTrend-focused, again, I think it's worth looking at Magna over the last 20, 30 years, right? There have been periods where sales-to-capex ratio has peaked, and one of those peaks was in 2022, 2023. We've been talking about MegaTrends, but part of that really is protecting our content per vehicle and our design space in the vehicle for BES segment. We made frames, truck frames for 30 years now. If you go back into the mid-1990s, there was an investment peak where we were just getting into the frame business. And we have been doing that for four, five generations now. The battery enclosure sits right where the frame sits. It's based on the same capabilities that we have. And we believe it's a specialized capability that we have. It's a high content per vehicle. Part of the investment was that, about $1.5 billion in two to three years. That was a peak you saw behind us now. Would we go back to it again? Yes, because it was a defensive move, setting ourselves up for the future. Now that that investment, you got to look at investment two ways, right? One, dedicated investment like assembly lines, which the customer pays. Non-dedicated investment like presses, casting machines, molding machines, and so on and so forth, which are non-dedicated. As the EV tech rates changed, we were able to flex by bringing in sourcing some of the stuff that we had outside. We never build everything to 100% capacity, right? 80% or so, things changed. We brought that back in. Is it ideal? No, but we have done that. That is how we are getting the margin expansion. That's part of the operational excellence journey and path. When the EVs come back, the big lift is behind us. We can still flex back again, go outsource, get the stuff back in. We will see that as a tailwind. Yeah. On On the ADAS side, I would say a little bit more cautionary with the change in college geopolitics and policy. We have seen China and the Western world in software interchangeability and perception and chips and so on. We are a little bit more cautious in how much we do in China for the time being unless we understand the landscape a little bit better. It is a little bit dampened. 85% of our business is really agnostic to propulsion. We just have to think through which of them is EV platform, which of them is non-EV platform. I would say our revenue mix is pretty aligned today in terms of EV to non-EV in North America. If the EV comes, which we believe is a secular trend in the long term, the haziness is what's the slope of that line, but it's going to be a tailwind. Okay. Maybe related, I think tying to the earlier discussion on the macro setup, sort of flattish growth. This has been the environment really like the last three years. Given this more muted growth outlook, how does this impact the way you're looking at the portfolio mix? Really specifically, how is this changing maybe the ROIC or return threshold that you need to justify staying in certain product lines? The risk profile adjustment, Dan, depends on the customer's region and the product, right? In terms of the take rates, what we assume it's going to be. In some cases, we are talking about the capital share. Sometimes we are talking about volume banding of pricing, which we have talked about in the past. That's our way of thinking through the winning new business and how do we rationalize. I don't think we would change our returns or profitability metrics. We have to risk adjust it by weighing that and putting terms like we talked about this near economics. I think given we feel pretty good with our portfolio where we stand today. With our operational journey, the traction has been there for 35-40 basis points year over year. We want to stay focused on that unless there is a little bit more stability and clarity in the market. Focus is on just free cash flow generation right now. Some segment questions. BES, should we generally look at this, continue to look at this as Magna's free cash flow machine? I would tell you all four segments are really strong free cash generators. Now, BES is our biggest segment. This year is running the highest margins of the four segments. It is a strong cash generator. To Swamy's point, the focus of the company has been on free cash flow. It will continue to be on free cash flow. It is up to us to deploy that cash to its highest and best use between organic growth, capital return, what have you. Power and Vision, I think you were talking about this before. Where does your ADAS business currently stand? What is maybe the path to unlock growth? Are you at the, I think, Veoneer or the purchase was meant to give you better scale. Do you feel like you have the scale you need now? We're about $2.5 billion in revenue. Louis, correct me if I'm wrong. That's right. Yeah, $2.5 billion. If you just look at we talked about it, $70 million or so in synergies. We got that. It's behind us. Like I said, the one factor that is different than what we had assumed three years ago was the China growth, right? In terms of policies and all, we're not the same. That's a little bit dampened, but we feel pretty good about it in the mid to long term. Exceeding, which has been through some challenge margins over the last few years. I know some of that is a lot of product mix dependent on certain programs. If we actually look at 2Q to 4Q margins, the run rate is actually closer to 4%. It's improved. Is that the right run rate? What is there maybe opportunity to get further? I think we know that the seating business as a whole for everyone is just a tougher area where the automakers know the bomb and the returns are trickier. Help us understand the path forward on seating margins. Yeah. I think you mentioned one of them is a mix. We've had a challenging mix for the last couple of years. That's always going to play a role. We had a program that I always talked about that was challenging, had a lot of challenges. It's going to be behind us, third quarter, 2026. The new program life going into 2026 and 2027, that'll help quite a bit. There is a lot of blocking and tackling in terms of automation and what the team's doing there. I see no reason in the mid to long term for that segment to be 5% and normalized seating profile. There is a lot of good work being done by the team, and we'll see that continue going into next year. Stevie, Starr, what are the opportunities to bring on more Chinese OEMs into Graz? I would imagine you have XPeng. I would imagine there's more discussions to be had given they need capacity and you can offer 150,000 units of capacity. Yeah. I think the key is we can not only offer just the capacity, but more than the flexibility of being able to do different models in the same lines, right? We have launched two models of SKD, one other with XPeng and one other with a different Chinese OEM. There are more conversations there in terms of being able to do that with other OEMs. I don't think this gets enough airtime. I think it deserves more. What is your collaboration with Waymo? Interesting. It's a lot of building or upfitting the vehicles with their driver module, let's say, right? Great relationship. We are doing it with various models, right? I want to be careful how much I go. The relationship is good, and there are more opportunities with them as a partner. Okay. Lastly, before we just go into some of the questions more on free cash, can you just give us an overview of your non-consolidated business? Because I know there's a few things going on there. That was where the JV with LG is. I know you have a seating JV that's actually done okay. Help walk us through the non-consolidated piece of the business. Yeah. It's been a really good year for our non-consolidated JVs. They're more than just EV-based businesses, as you pointed out, Dan. We have a powertrain ICE JV that had seen improved results this year. The LG JV, which is more targeted to EVs, was a little bit down, but we did have some commercial recoveries there that kind of propped it up this year. Seating, as you said, has been a strong contributor. It's been kind of across the board. Again, with the LG JV, with some of the recoveries being more probably unique to 2025. No, I mean, really good performance by those JVs this year. Okay. One last one before I open it up. What's it going to take to start buying back some stock? We have done a really good job delevering as we have been talking about for some time now. We ended the quarter below 1.9. As we calculate it, we expect to be below 1.7 by the end of the year. We do have a 1.5 target out there. I do feel like with the new NCIB we announced a couple of weeks ago, 2026 is setting up nicely for us to lean in a little bit on buybacks with the free cash generation as well as some of the margin expansion that Swamy talked about. All we need is a path to 1.5. We don't have to get to 1.5. Exactly. Even last year with delevering being the focus, we still under the old NCIB, which just expired, bought back close to 6 million shares even in that kind of environment. Buybacks always played an important role for us in terms of shareholder value creation. I think 2026 is setting up well. Let's leave it there. [Questions?] brackets Good to see you again. Two follow-up questions on Dan's. The economics on the contracts that you really kind of took a hard look at back in 2022, 2023, and you mentioned that's going to start kicking in. Besides some of the contractual changes that you put in, were the targeted returns on capital kind of similar to what you were looking at before? Were you building in a little bit more cushion? How do we think about the profitability? Because you walked us through some of the programs, EVs, maybe strong, ICE better, what have you. The contracts themselves, as your business evolves over the next three, four years and captures those contracts, are they higher return on capital contracts? Yeah. High return on return depends on what you put in as a risk factor, right? If the OEMs are putting in a certain part of the capital or all the capital, if there is volume banding versus not having a volume banding. In automotive, you typically do not have volume banding. When we get both of those, the way you look at returns is different than when you are taking the risk, right? The way you take the risk is if I know of the program that I produced for the last 20 years, we kind of have a view of how this platform performs in general. When it is a new vehicle, then yes, our returns profile is different. It is risk-adjusted to higher returns unless we have some guarantees on pricing based on volume or they put in the capital. It's pretty subtle stuff. There's no big numbers that you're kind of saying, "This is changing over the next three years," as our business shifts as we get the new business that started in 2022. No big. There's a couple of big things though, right? When you win a job, you used to have labor fixed at the time of the win. You do not start producing two or three years after. Now there is a reset of labor economics at the start of production. That is significant. This other one might not be as related to customer, but energy was a surprise in 2022. In Europe, energy went 10 times, 12 times. We have a hedging strategy. If you'd ask me that time, "Why would you hedge energy?" Maybe not, but we are now. We have that in place. There is a bunch of these things that make us feel comfortable. Going comfortable is maybe not right. There's a follow-up then on that. 35-45 basis points, all that hard work that you're putting in to get that. Yes. That then builds on the five and a half outside of volume, which is incremental to incrementals. That's the nature of these contracts. Are there still a couple of big variables that could be a headwind that could eat into that 35-45 basis points? Unless there is a black swan of some kind that I cannot, there is no recognized headwind. Volumes is the key, right? We all know that. Other than that, we feel pretty good. You're saying you need flat. Flat is what we're assuming right now. What I gave you is coming out of this year at five and a half, midpoint of the range, everything remains flattish. We have a way for another 35-40 basis points. Got it. Yeah. More to come in February when we finish our business plan and have a better sense for what we're actually planning on for 2026. Are you in the camp that China could be down 5% next year? Because some of the Chinese analysts now are saying China's falling down, incentives, fees, they take a step down, etc., etc. Any thoughts on China or stay tuned till Fed? I would say that the projection, I would leave it to experts like Dan, but it's more like we go through releases, we go through the customer parts, and then we'll come back in February based on that triangulation. Perfect. Great. Thanks, Phil. Thank you so much. Appreciate it. Thanks so much.