Ladies and gentlemen, thank you for standing by. Welcome to Axalta's fourth quarter and full year 2021 earnings conference call. All participants will be in listen-only mode. Question answer session will follow the presentation by management. Today's call is being re corded and a replay will be available through February 8. Those listening after today's call should please note that the information provided in the recording will not be updated and therefore may no longer be current. I will now turn the call over to Chris Mecray. Please go ahead, sir. Thank you and good morning. This is Chris Mecray, VP of Investor Relations and Treasury. We appreciate your continued interest in Axalta and welcome you to our fourth quarter and full year 2021 financial results conference call. Joining me today are Robert Bryant, CEO, and Sean Lannon, CFO. Yesterday afternoon, we released our quarterly and annual financial results and posted a slide presentation along with a commentary to the investor relations section of our website at axalta.com, which we'll be referencing during this call. Also on January 25th, we published a set of best-in-class ESG goals, including 10 commitments for 2030, which you can also reference on our investor relations website for more details. Both our prepared remarks and discussion today may contain forward-looking statements reflecting the company's current view of future events and their potential effect on Axalta's operating and financial performance. These statements involve uncertainties and risks, and actual results may differ materially from those forward-looking statements. Please note that the company is under no obligation to provide updates to those forward-looking statements. This presentation also contains various non-GAAP financial measures. In the appendix, we've included reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information regarding forward-looking statements and non-GAAP financial measures, please refer to our filings with the SEC. I'll now turn the call over to Robert. Good morning, everyone. I'd like to welcome you to our fourth quarter and full year 2021 earnings call. Our quarter and full year were marked by ongoing strong demand conditions and solid execution by our team, but also by ongoing challenges in the supply chain and input cost inflation. Despite these factors, we executed very well against this climate, generating year-over-year sales growth, substantial incremental pricing to offset inflation, and strong free cash flow. We further demonstrated ongoing solid capital allocation with continued share buybacks, as well as completing two acquisitions during the year, while still ending the year with a very strong balance sheet. I would like to thank all Axalta employees for their continued efforts in the quarter, and also wish everybody continued health and well-being as the pandemic continues to impact our lives in a variety of ways. Turning to operating performance in the fourth quarter, Axalta reported strong year-over-year net sales growth from three of our four end markets, while customer production constraints continued to negatively light vehicle. fourth quarter net sales increased 7% year-over-year ex-FX, including a contribution of 4% from acquisitions. Volume growth was a clear highlight in our Performance Coatings segment, increasing by 5%, with both end markets contributing meaningfully. This marks our fifth consecutive quarter of year-over-year growth within Industrial and fourth consecutive quarter for Refinish. Within Mobility Coatings, our Commercial Vehicle end market also showed volume growth of over light vehicle was an outlier given the known semiconductor challenges. Price was positive in all four end markets, despite some headwinds we saw within product mix in the quarter. Business demand in the quarter remained strong and stable across all of Axalta businesses, but raw material inflation and supply chain constraints significantly impacted both sales volumes and our cost structure. Refinish saw stable overall demand in the quarter, with net sales up 12.8% year-over-year, or 6.6% before currency and acquisition contribution, which was up sequentially versus third quarter before acquisitions and FX impacts. We also ended the quarter with substantial unfilled order backlogs due to supply constraints. Industrial net sales increased an impressive 16.3% or 13.9% ex-FX before acquisitions, continuing similarly strong growth throughout 2021 and reflecting strong overall global industrial goods demand. Light vehicle net sales declined 13.7% ex- FX in the quarter versus the prior year, with volume still constrained by chip shortages at our customers and only moderately improved from the third quarter. This was reflected in sequential global automotive production growth, with fewer shutdowns occurring in the period. Commercial vehicle net sales increased 8.4% ex-FX in the fourth quarter, driven by ongoing strong production rates and some share gain from non-truck customers, including recreational vehicles and sporting equipment OEMs. Adjusted EBIT for the fourth quarter was $121 million versus $205.4 million in the year ago quarter, as the business was impacted by significantly higher variable cost inflation, approximately 24% year-over-year in the fourth quarter. Supply chain shortages company-wide and headwinds from the absence of temporary cost savings through 2020, partly offset by growth and strong execution across both Performance Coatings end markets and in commercial vehicle within Mobility Coatings. Refinish ended the year with substantial price pass-through to offset inflation and margins and absolute adjusted EBITDA contribution at all-time highs, despite a notable impact on volumes given the lasting impacts of COVID. Fourth quarter business conditions across the company remained stable and generally strong despite supply chain challenges. Refinish, although modest, saw continued demand improvement, including both traffic and body shop activity with some variability by country. Part shortages, body shop technician shortages, and some impact from Omicron in traffic and body shop staffing created challenges for our customers in the quarter. Though business volumes increased sequentially from the third quarter, organic volumes remained down approximately high single digits below 2019 levels, suggesting continued meaningful room for improvement looking ahead. This included some quarter-end backlog that was unfilled due to supply and operating constraints. Axalta's industrial end market remained robust globally and net sales increased 17% ex-FX and 13.9% on an organic basis against a strong prior year comparison, indicating underlying demand strength as well as demonstrating success in our organic growth execution. The top line was still constrained by supply chain headwinds in the period and to a greater degree than during the third quarter, inclusive of both raw material supply dynamics as well as logistics and labor challenges. Top line growth was strongest in North America, followed by EMEA, and was led by the building products and general industrial businesses. Light vehicle saw continued constraints at the customer and end consumer level. Global vehicle production for 2021 increased only 2.5% from the prior year, which of course, was dramatically impacted by the pandemic, principally during the second quarter of 2020. Due to supply shortages, some 9.6 million vehicles were deferred during 2021 against original industry production estimates. Although the quarterly vehicle deferral amount decreased from 3.5 million vehicles in Q3 to 2.1 million vehicles in Q4 as chip availability improved slightly toward year-end. The fourth quarter impact was also 1.4 million vehicles below the high end of the forecasted range of potential production impacts from October 2021. Commercial vehicle demand remained robust through year-end, with notable strength in North America retail sales. Current North America backlog remains near all-time highs, and we expect strong production rates to be sustained throughout 2022. Axalta saw intensified cost inflation during the fourth quarter, coming from a broad set of raw materials due to supply dynamics and continued high feedstock prices, but also from packaging, freight, logistics, and labor costs. We ended the fourth quarter with 24% raw material cost inflation, higher than our 20% expectation from October and about 15% for the full year. We were and continue to be successful in our actions to offset this inflation through incremental pricing during the fourth quarter. We implemented price increases on all businesses during Q4 and price mix increased 3.6% in the period, while pure price increased by mid-single digits versus the prior year, given the negative mix effect seen in both segments. Axalta also continues to offset inflation via structural cost control, and we continue to benefit somewhat from the persistence of lower selling expense and functional savings that were implemented during 2020. We realized slightly over $50 million in Axalta Way savings this past year, including a benefit from the previously announced restructuring actions. The integration of the U-POL business, acquired in September 2021, is progressing well and our commercial synergies are quickly coming to fruition. The business closed the year on plan from a net sales perspective, though it was modestly impacted by incremental inflation at the adjusted EBIT level, similar to the rest of Refinish. Pricing actions are being executed to fully offset this inflation in early 2022 to put us comfortably on the original business case. We're very pleased with the progress on the U-POL business integration and recent months have confirmed our bullish view of the future growth opportunity for this business. Turning to ESG, Axalta has made significant headway with our program since its inception in 2013. We published our first sustainability report in 2013 and set initial ESG goals in 2017. I'm thrilled that last week we published a set of long-term ESG and sustainability goals, each of which have a substantial impact in their respective categories. To set these 2030 goals, we conducted a comprehensive ESG materiality assessment last year with a broad set of internal and external stakeholders. We also worked to align with the United Nations Sustainable Development Goals in developing our ESG framework, structured under three key pillars. Planet Solutions, focused on ensuring a more sustainable future for our planet, with goals aimed at maximizing our environmental performance and reducing the impact of our operations. Business Solutions, which concentrates on how Axalta's products, services, and technologies can help customers accelerate their own sustainability initiatives and achievements. Third, People Solutions, which is rooted in inclusivity, integrity, safety, and engagement to ensure that Axalta continues operating and fostering an environment where all our people can thrive. Axalta's published targets include 10 new sustainability commitments for 2030. Key among these is the commitment to produce sustainable benefits from 80% of Axalta's new technology and innovation developments. We're also committing to an absolute reduction of 50% of Scope 1 and Scope 2 greenhouse gas emissions by 2030 on our way to becoming carbon neutral in our operations by 2040. This would be a decade ahead of the deadline set by the Paris Agreement on climate change. That said, each of our individual targets are of critical importance and represent a step forward for Axalta in achieving long-term goals to build a more sustainable future. Axalta seeks to lead the coatings industry by example, as well as to inspire our customers and other stakeholders by jointly ensuring the long-term well-being of the planet, our business partners, and our business. I'll now turn the call over to Sean for some additional remarks. Thanks, Robert, and good morning. As you've heard, fourth quarter saw both stable and broadly positive demand conditions, but also continued challenges from cost inflation and supply chain constraints. Net sales of $1.1 billion increased 5.8% year-over-year for the fourth quarter, while constant currency net sales increased 3.1% on an organic basis, driven by demand strength across most of our businesses. This constant currency organic net sales growth included a 9.6% increase from Performance Coatings, offset by a 9.3% decrease from Mobility Coatings, light vehicle down 13.7%, while commercial vehicle was up an impressive 8.4%. Fourth quarter volume declined 0.5%, with mid-single-digit increases from three of our four end markets, more than offset by a single mid-teen percentage pullback light vehicle volumes due to the semiconductor constraints impacting customer production. Price mix contribution increased 3.6% in the aggregate, driven by improvement in both segments and all four end markets, however stronger in Performance Coatings versus Mobility Coatings. Mix was a moderate headwind following on a similar dynamic from the third quarter. Excluding product mix effects, overall pricing improved mid-single digits for the quarter. FX translation was a headwind of 1.2% for the fourth quarter, driven by the euro and the Turkish lira, offset partially by the strength in the Chinese renminbi. Fourth quarter adjusted EBIT was $121 million versus $205 million in the prior year quarter, reflecting strong demand and volume trends in Performance Coatings as well as the commercial vehicle end market, which was more than offset light vehicle volume headwinds, substantially increased variable input cost inflation, and lower temporary cost savings realized versus the fourth quarter of 2020. Performance Coatings' fourth quarter net sales increased 14.2% year-over-year, and 15.6% ex-FX, driven by 5% higher volumes, a 4.6% increase in average price mix, and a 6% increase from acquisition contribution. Refinish reported a 12.8% net sales increase, or 14.7% ex-FX, driven by improved global volume versus the prior year and by a high single-digit contribution from the U-POL acquisition, which closed in September. Refinish volumes also increased moderately on a sequential basis, along with body shop activity in the period, though growth was impeded somewhat by supply chain and logistics constraints in the fourth quarter, with significant open orders remaining at year-end. Refinish price mix increased low single digits during the fourth quarter, inclusive of product mix headwinds from mainstream and economy product growth. Net pricing was up mid-single digits before mix effects. Industrial Q4 net sales increased 16.3%, or 17% ex-FX, driven by mid-single-digit improvement in both volume and average price mix, as well as low single-digit acquisition contribution to net sales. Demand trends in most of the industrial end businesses we serve remained healthy during the period, with the exception of automotive and wind energy, and with particular ongoing strength from North American housing and remodeling. Similar to Refinish, supply chain constraints also impeded further growth within Industrial in the period. Performance Coatings reported Q4 adjusted EBIT of $99.7 million versus $129.5 million in the fourth quarter of 2020, driven by ongoing volume growth and drop-through benefits of stronger average price mix, more than offset by significant headwinds from higher variable costs and lack of temporary cost savings which benefited the prior year quarter. The adjusted EBIT margin for the segment decreased to 12.4% from 18.4% in the prior year record-setting quarterly rate, given the drivers noted before. Mobility Coatings net sales decreased 9.3% in Q4 ex-FX, including an 11% decrease in volume partially offset by a 1.7% improvement in average price light vehicle net sales decreased 13.7% ex-FX in the quarter, including a mid-teen volume decrease largely in line with global auto production rates. Price mix increased low single digits in the quarter versus the prior year, which included a component of negative mix in the period. Commercial Vehicle Q4 net sales increased 8.4% ex-FX, driven by strong truck production globally, excluding China. Price mix increased low single digits inclusive of modest negative mix differences from the prior year. Mobility Coatings reported a Q4 adjusted EBIT loss of $3.5 million versus income of $47.9 million in the prior year quarter. Adjusted EBIT and associated margins in Q4 were impacted by the severe volume drop and further impacted by increased cost inflation, with only modest offsets and positive pricing which began to accrue during the third quarter and continued during the fourth quarter. We are confident that expected demand recovery, price increases, and cost control will return the Mobility business to operating profitability, though it remains cash flow positive today in adjusted EBITDA terms. Axalta's Q4 balance sheet and liquidity profile remained solid. We ended the quarter with approximately $1.4 billion in total liquidity, including approximately $841 million of cash and cash equivalents on the balance sheet and approximately $528 million of available capacity in our undrawn revolver. During Q4, we also completed several asset sales for net proceeds of $25.4 million, illustrating ongoing focus on asset efficiency and cash flow. Our net leverage ratio ended the quarter at 3.5 x, even with Q3 levels, driven by increased cash at the period ends, offset by lower latest 12-month adjusted EBITDA. Net leverage remains somewhat elevated due to the U-POL acquisition that was funded from our balance sheet in September, while the adjusted EBITDA contribution only reflects a partial year from the acquisition. The company also repurchased $30 million in total shares in the fourth quarter for a full year 2021 total of $243.7 million. Free cash flow for the quarter totaled $249.4 million versus $256 million in the fourth quarter of 2020. A very strong result considering somewhat lower operating profit year-over-year. For the full year, free cash flow totaled $455 million versus $441.7 million in 2020. Again, demonstrating Axalta's focus on cash flow and finishing the year with a strong total liquidity position to continue to enable effective capital allocation. Regarding our financial outlook, we have outlined key expectations for the first quarter as follows. For Q1 net sales, we expect approximately 5% year-over-year growth, including a 3% FX headwind and a 4% positive M&A contribution. This assumes Performance Coatings growth of mid- to high-teens, offset by Mobility Coatings contraction of mid-single-digits. The top-line guide also reflects pricing of mid- to high-single-digits. We expect to generate adjusted EBIT of $100 million-$120 million in the first quarter, with D&A of $81 million, inclusive of $24 million of step-up D&A. Interest expense for the quarter is anticipated to be approximately $32 million. For adjusted earnings per share, we anticipate a range of $0.22-$0.29 for the first quarter, inclusive of an FX headwind of $0.02 per share and a slight step-up in anticipated income taxes. Within our first quarter forecast, we further assume raw material inflation of approximately 25%-27% versus the first quarter of 2021, which is a growth rate slightly higher than the fourth quarter of 2021. We expect to see net sales growth continue, driven by solid Performance Coatings growth from both refinish recovery and market share gain, coupled with ongoing Industrial Coatings organic growth. For Mobility, we expect net sales growth slightly ahead of global production for light vehicle and commercial vehicle, given specific customer exposures and organic growth expectations for 2022. Further, we do expect to see an uptick in global production builds based off of industry forecasters. Net sales growth are also expected to be somewhat offset by modest FX translation headwinds, driven largely by the euro, Turkish lira, and Brazilian real. Regarding cost factors, our current assessment is that the rates of overall raw material and other cost inflation will continue at high levels near term, but may stabilize during the first half of the year based on current expectations for feedstock pricing. For 2022, given current baseline expectations and assuming Brent crude around the mid-80s, we expect raw material inflation in the low double digits, with peak inflation occurring during the first quarter. That said, substantial uncertainty around all aspects of cost inflation, coupled with lack of clear visibility around timing for supply chain shortages to ease, informs our decision to limit full-year earnings guidance at this time. With continued plans and expected pricing actions during 2022, however, we also expect to fully offset anticipated inflation within the year. While we're not providing full year guidance at this time, we do anticipate stronger profit performance this year versus 2021, and we'll hope to refine our views of specific guidance elements as the year progresses. Thank you, Sean. I'd like to close out by simply noting that we at Axalta remain committed to creating value for our shareholders. We believe the path to substantially higher levels of earnings per share remains very much in view despite the near-term challenges associated with inflation headwinds and supply constraints. This starts with the anticipated recovery in automotive volumes back to prior peak levels over the course of several years, including some anticipated relief in chip supply to enable growth in 2022. It is furthered by ongoing solid organic growth in Industrial and backed by expected net sales growth from Refinish, from both market share gains and modest further recovery from cyclical lows, which bottomed during 2020. Ongoing top-line growth, coupled with expected abatement of raw material inputs and calmer overall cost inflation over time, should clear a path to margin recovery and perhaps enable new margin highs over time. Axalta has already proven an ability to navigate challenging environments, and we're confident in the team that we have in place to execute our growth plans while continuing to respond to operating and cost challenges. I'd like to express my sincere thanks to our entire global team for all the hard work that was completed during 2021, and we look forward to demonstrating what our team can accomplish during 2022. With that, we'll be pleased to answer any questions. Operator, you can open the lines for Q&A. Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question today, please press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Steve Byrne with Bank of America. Please proceed with your question. Yes. Thank you. Robert, it's been a little over a year since you ripped out the legacy matrix structure and brought in some new leadership. Just curious, what metrics do you look at to assess whether there have been benefits from either, you know, cross-selling or regional expansions or maybe even some technology transfers to different products? Anything you can see there, or is it too challenging given the level of disruption? We're very pleased with the organizational pivot and what it's enabled in terms of accountability, decision-making, and cross-business unit collaboration. Just as one example, if we think about our electrification platform and how that market is evolving very quickly in terms of, you know, whether the purchase decision around our Energy Solutions coatings and the products they go on is in the automotive tiers in an industrial customer or actually at an OEM customer, it's actually now at all three. We have a lot of cross-selling and cross-collaboration going on across the business units, and that's been quite beneficial. Again, overall, we're very happy. With regard to the metrics, we look at all the typical metrics in terms of sales, profitability, free cash flow, and return on invested capital, not only at a total company level, but also at an individual business unit level. Thank you for that. Just curious light vehicle. you got 11%, or maybe this is mobility broadly, but 11% reduction in volume in the quarter, and presumably, you have your customers are not running flat out. Do you have the ability to flex your staffing as a result of that, or is that fixed cost drag just remain in place and thus, you know, it's not until you see volumes recover that you see that absorption improve? Or is there something you're doing that might lead to, you know, an expansion in margins when the business returns to more normal operating rates? During the mobility business, we're principally focused on three actions, the most important of which are our pricing actions, followed by cost management and then flexibility within our cost structure. We're working to offset the majority of the inflation that we're encountering through pricing actions. Our cost structure, we continue to manage it quite tightly until volumes come back. We're really only making targeted investment that's related specifically to wins to support our customer launches and our sales activities. We've also been working with the operations organization to ensure that we've got flexibility in our cost structure, and that we can vary those costs depending upon volume levels. We've also been looking at different models for our sales technical resources and support, and we're working to flexibilize those costs as well. Thank you. Our next question comes from the line of Ghansham Panjabi with Baird. Please proceed with your question. Thanks. Good morning, everybody. Just as a follow-up to Steve's question, you know, specific to the fourth quarter, it sounds light vehicle was a little bit better than you forecasted just based on production. You know, commercial was also relatively healthy. The EBIT loss was pretty much comparable to the third quarter. Just curious as to why it wasn't better than you initially forecasted. Yeah. I mean, the main driver just globally for Axalta, why we missed initial guidance for the fourth quarter was really raw mat erials related. You know, we saw an uptick, you know, up to 24%, light vehicle, you know, is bearing some of that, and that's why you saw a little bit more margin contraction in the fourth quarter. In your prepared comments, you called out a $200 million type raw material cost inflation number for 2021. You know, you have low double-digit inflation for 2022 as well. Is that $200 million roughly comparable to inflation for 2022? Will inflation for 2022 be roughly comparable to that $200 million? Is that the right way to think about it? Specific to 2021, how far behind were you on price cost? Yeah. Ghansham, your math is roughly correct. We are expecting about $200 million in 2022. You saw we got about $150 million in price, you know, roughly 4%, that we stated in our consolidated results. You're looking at a little better than $50 million of a gap, you know, price versus cost. Very helpful. Thank you. Our next question is coming from the line of John McNulty with BMO Capital. Please proceed with your questions. Yeah, good morning. Thanks for taking my question. I guess, admittedly, we were a little bit surprised on the momentum behind pricing or maybe the lack of it. It seems like it was roughly in line with the type of pricing that you saw in the third quarter, despite a higher raw material kind of headwind. I guess, how should we be thinking about that going forward, and if we can see some incremental momentum as we kind of push through 2022? What you saw in the fourth quarter, we were a little bit more impacted with mix. You know, excluding mix, you know, we're mid-single digits, largely in line with the third quarter. I would call out on the mobility side, you know, we've talked a bit about our indices that are in place. With those indices, you know, the raw material inflation is really being priced off the average of the first six months of 2021 that were in place through December. That will reset again on January 1st. We've characterized 25%-30% of our contracts or on indexes. That's probably closer to 35% now. With inflation that we saw at third quarter and the fourth quarter, with those going into effect January 1st, you will see an uplift. Just as far as our guidance for the first quarter, we are expecting, you know, mid to high pricing, which you're gonna see that obviously a little better than the fourth quarter. Got it. That's helpful. With regard to your outlook for autos or light vehicle segment, it sounds like you're gonna have at least a little bit of lift relative to kind of overall industry build rates. Can you help to quantify that a little bit? I know you've won some business that should come in toward the end of the year. I guess, you know, if the forecasts are right that the industry grows at 8.5%, give or take, I guess, what does that mean for Axalta with some of the new business wins, the share gains, that kind of thing? How should we be thinking about that? Let me provide, I guess, some additional context in particular around the phase one. I think the quarterly phasing there, you know, is important. If we look at 2021, total auto builds were 76 million units per IHS. IHS' full year 2022 base case build number is about 83 light vehicle units and a downside case of 76 million units. Our 2022 full year base case is 79 million units based on the historical forecast error that we've seen from IHS as well as input from our customers. For Q1, in particular, as we think about phasing and new business coming on, for Q1, the IHS build number is down about 2.2%, first quarter 2022 versus first quarter 2021, which is based on essentially flatlining the 83 million builds across the year for roughly 20 million-21 million builds per quarter. Now, Q4 2021 builds were actually 20.4 million units. We then took that number and adjusted that number down for expected later than normal plant startups and Chinese New Year to arrive at approximately a 17 million light vehicle build rate for our estimate for Q1. Now, it may be the case that we're taking a little bit more of a conservative view on the first quarter, but we believe that this is a solid base case assumption given historical data variation, market conditions, and then the potential ramp up of builds during the year just as more semiconductor chips become available. Of the $130 million in new business that we've won in 2021 that will come online in 2022 and 2023, that's pretty heavily back-end loaded to the second half of the year, as well as the first quarter of 2023. Got it. That's helpful color. Thanks very much. Our next question is coming from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question. Thank you and good morning. Could you talk a bit more about the mix issues? You know, I know in Refinish it was a continuation of the migration to economy type products. Is that gonna reverse at some point in 2022 and become a tailwind for you folks? In Mobility, what is it that's exactly happening there versus it sounds like in commercial vehicle you're getting a benefit. If you could just unpack what's going on and then give us a sense of whether it's gonna move for you or against you as we move through 2022. With regard to mix on the Performance Coatings side, you correctly point out that it's the growth of mainstream and economy. We saw quite a bit of that in the fourth quarter just given some of the commercial initiatives that we've had. You've also had the impact of slightly lower Refinish activity overall, in particular with some of the larger MSO customers, in the fourth quarter as they experienced labor and part shortages in particular. The buy of that richer premium mix paint was lower in Q4 than you might have typically seen. That exacerbated certainly what we saw in Performance Coatings. Then in Mobility Coatings, the unfavorable mix was, you know, really one due to product mix. We sold a little bit more of slightly lower margin products. We also had some growth in our LV business in Asia Pacific, which is at a lower average selling price, some of which gets captured in pure price and some of which gets captured in mix. I think if we look at overall kind of mobility tracking, you can see that in, you know, we've seen pure price increase from 2% in Q3 to 2.8% in Q4. As Sean mentioned, with the indexation coming into place, we'll see that number tick up here as we go sequentially forward Q1, Q2, et cetera. Vincent, just to add, I'd just note there's nothing structurally that's changed as far as mix issues, and we're not forecasting any sort of major mix aspects for the first quarter or for the full year for 2022. Presumably it'll be an easier comp in the fourth quarter of 2022 for Refinish in particular. We saw about a 3% negative mix come through in the fourth quarter of 2021. Okay. Thank you. Maybe just as a follow-up, could you talk a little bit about where you sit on the temporary cost reductions coming back versus your plan? Yeah. Hard to say exactly. We're limiting guidance just because, you know, the world is constantly changing on us here. We've continued to see, you know, roughly $10 million-$15 million each quarter in temporary savings. At least for the first quarter, you know, we expect that to show up in the results. Okay. Thanks very much. Our next question comes from the line of David Begleiter with Deutsche Bank. Please proceed with your questions. Thank you. Good morning. Robert, Sean, do you expect any permanent Axalta Way savings, cost savings in 2022 versus 2021? Yeah. Again, we're limiting guidance, but the plan is to, at a minimum, offset fixed cost inflation. There's clearly structural savings that we've previously announced that will amount to about $10 million. The difference will be, you know, continued productivity projects. We'll give more updates when we give guidance at the end of the first quarter, Dave. Got it. Just looking at uses of free cash flow, how do you look at buybacks versus debt reduction in 2022? Given our cost of debt still sitting below 3.1%, it doesn't necessarily have attractive returns. I think we'll continue to deploy the majority of the excess free cash flow for share repurchases as well as M&A. We'll look to continue to build, you know, cash on the balance sheet beyond that. Thank you. Our next question comes from the line of Kevin McCarthy with Vertical Research. Please proceed with your questions. Good morning. Robert, I was wondering if you could talk through some of the labor challenges in more detail. For example, on an internal basis, you know, what impact did that have on your ability to produce and deliver? And then externally, you know, how significant is that issue becoming among body shops and perhaps other customers? And do you think it's getting any better or worse, you know, looking into the first quarter? It's a great question. At Axalta, we've seen some labor constraints hit us certainly across the fourth quarter and specifically due to the surge in Omicron. Although I don't think we characterize the impact as equivalent to the impact we saw from material supply or logistics headwinds, but it certainly was an impact. Our overall maximum kind of absenteeism in December was around 15%. But we think about labor challenges with our customers, COVID-related absenteeism is definitely having an impact. The broader challenges impacting, in particular in the Refinish business, the larger body shops continue to be technician availability, which is related to labor and parts availability. Some of our largest customers reported an increase in wait related to labor and paint shortages. In fact, if you look at the average number of rental car days, for people who had their vehicle fixed, you know, in December, that number of days went up by four days. It's taking longer for people to get their cars fixed, and that has a lot to do with labor shortages. Secondly, I think you mentioned that in the U.S. or North America, body shop activity remained about 12% below 2019, if I got that right. Is that the new normal? What are you planning for in terms of body shop activity in 2022 relative to 2019? We don't think that's normal. We still do not have normal traffic patterns in terms of people even getting back to a hybrid work environment. You know, the school, certainly we've seen some of that traffic come back, but there are spots in the country where it's a little bit start and stop. We haven't seen office occupancy rates come back yet either. I think what we're hoping is that once we get on the other side of Omicron, that we're gonna start to see people return to the office in more of a hybrid, you know, much greater hybrid percentage in terms of time spent in the office versus time spent at home. I think overall, we're optimistic, but, you know, as we've said, it all hinges upon recovery from Omicron. Thanks very much. Our next question comes from the line of Chris Parkinson with Mizuho. Please proceed with your questions. Great. Thank you very much. The industry has been citing several key raw material shortages across additives and in some cases, intermediates and, you know, other inputs. Yet global force majeure activity appears as if major suppliers are, you know, improving supply at least heading into the year, although some others are still taking maintenance. As it pertains to your portfolio and just Axalta, you know, what inputs are still missing? Are there differences by region? Just any color on how you believe this evolves, would be greatly appreciated. Thank you. Thanks, Chris. We continued to see supply disruptions in the fourth quarter. There were roughly about 20 force majeures in the coatings value chain. We also saw deepening energy challenges in Europe. In China, with the dual control policies on, you know, carbon emissions as well as carbon intensity, and continued impact from limited global logistics. Without overall shortages, we've seen tightness in several materials due to supply chain disruptions as well as kind of alternative value chain demand. It's acrylic emulsions, certain polyester resins. Those have really been the most challenging during the second half of 2021. If we think about the overall situation, we have secured supply and largely been able to keep pace with strong demand for our products. There have been some impacts on sales volumes as well as impacts at the customer level, which has constrained potential volumes. Just a super quick follow-up on that. You know, based on that last comment, are you confident that, you know, just given this is affecting, you know, all of your primary peers in most obviously geographies, is it safe to say that this is not a case of, you know, any lost business and, you know, this is factoring into pent-up demand for 2022? Yes. I mean, certainly there are spots where we may be short on a given product and a customer may need to source it from a competitor. Likewise, we've had situations where one of our competitors hasn't been able to supply, and that customer's come to us and asked us to supply, and we've been able to do that. I don't think that there have been major market change shifts or market share shifts between competitors, but there have certainly been spot particular moments, days or weeks where we've had to step in or where one of our competitors have had to step in where it's a dual supply scenario, for example. Very helpful. Thank you. The next question comes from the line of Aleksey Yefremov with KeyBanc. Please proceed with your question. Thanks. Good morning, everyone. The midpoint of your EBIT guidance for first quarter is roughly $10 million lower sequentially. I'm just trying to understand the sequential bridge at a high level. Are costs rising faster than price or volume's lower or is something else going on? Yeah, it's really raw materials are really accounting for the vast majority. You know, we saw 24% year-over-year headwinds in the fourth quarter. We're seeing 25%-27% with it really peaking in the first quarter. That amounts to about $10 million-$15 million. Then we're seeing some marginal headwinds in freight and logistics and labor pressure, which is, you know, being largely offset by the uptick in sales. You'll see our guidance for the first quarter versus the fourth quarter is up about 2%, which correlates to about $20 million. The only other Right. You know, one item to mention of less effect, of course, is just the incremental FX impact we're seeing. There is some small return of OpEx related to some of the product launches and developments we have. Okay. Thank you. Very, very helpful. Light vehicle, you will have your indices, price indices reset on January 1st. Would those generally reset to an average cost for the second half of 2021 or exit costs from December 2021? Will you be fully caught up on those index resets or still kind of underwater for some time, maybe first half of 2022? I mean, all the contracts are a little bit different, but generally the way to think about it is the average six-month procurement spend, that'll be reflected. But given we're expecting raw materials to continue to inflate in the first quarter, they're still gonna be slightly behind. Thank you. Our next question's from the line of Jeff Zekauskas at JPMorgan. Please proceed with your question. Thanks very much. In the quarter, where did you stand with recovery of raw material inflation in Refinish? We're caught up in Refinish, Jeff. In the auto OEM business, when you look at your customer base, are there wide differences in your ability to recover raw material inflation? That is, with some of your large customers, are you doing very well, and with other customers, are you doing much less well, or is it pretty even across the customer base? I think, Jeff, it varies somewhat by customer, and it varies somewhat by region, as well as regional mix of competition. I think as Sean said that, you know, certainly the indexing and we're pushing toward more indexing just to make this, you know, automatic and easier. I think overall, as we think about price capture in our business, I think that we don't believe that we're behind the market in price capture. If you look at like-for-like businesses, I mean, in OEM, some of our peers include, for example, business volumes light vehicle exterior body coatings, which of course are our products. They'll include some businesses that we include within Industrial, including certain tier suppliers that serve automotive. Although we acknowledge that we're not where we wanna be, we don't believe that we're behind our competition, especially given continued inflationary cost headwinds. We're very focused on offsetting cost inflation in our business during 2022. As Sean highlighted, we've seen that number go from 25% of indexes in 2020 to a little bit more than 30% at the end of 2021. We expect that to continue to increase. Great. Thanks so much. The next question is coming from the line of P.J. Juvekar, Citi. Please proceed with your questions. Yes, good morning. Robert, you mentioned a couple of times negative mix impact in both of your segments. I was wondering if you could talk about what kind of mix impact you're seeing in each of the segments? Sure. I think in terms of the segments, we answered that question earlier, but I'd be happy to provide a little bit more color. In the Refinish business, we've continued to see the growth of mainstream and economy products. That's really taken off, especially with some of the new product developments that you probably read about in our press releases over the past six months. In Asia, in certain parts of Eastern Europe, as well as in Latin America, those are sold at lower price points. Still attractive margins, but lower price points. That's certainly one impact. In the Mobility side, it's really a function of customer mix as well as regional mix that has created that mix differential. Okay. You know, many companies have different views on this chip shortage is gonna be resolved. You talk to auto companies, they tend to be more optimistic. Chip companies are saying it won't be resolved fully till 2023. Some are even saying 2024. Not sure exactly which chips they were referring to, but where do you stand on when do you think you could begin to see some positive comps in auto OEM? We'll give you our view from obviously speaking with chip forecasters and our customer base. I mean, I think the market forecasts assume improvement in inventory and overall chip supply beginning in the first half of 2022, with a little bit more stabilization in the second half of 2022. We think that the broader kind of one-off supply chain issues, unless something happens, you know, could subside in the first half, but we still do expect longer lead times for chips in the second half versus what they were pre-pandemic. We think that there's gonna be some improvement this year and perhaps normalization in 2023 as we start to see additional chip capacity come online, and then that should free up capacity for specifically automotive end markets. Great. Thank you. I'd just add, you know, one additional thought there, which is, the auto industry, you know, they haven't been standing still. They've been, you know, obviously have recognized this as an issue and are aggressively taking action. I mean, we've seen our OEM customers adapt pretty quickly to the situations. I mean, they're ordering chips with, you know, longer lead times. They're prioritizing vehicles with the highest profit margins like trucks and SUVs. They're removing features from certain vehicles to many people's dismay, but is necessary. They're reducing the number of unique chips that are being used and consolidating down to fewer, more easily available chips. Then lastly, they're redesigning systems with more standardized chips as well as different architecture to really reduce the level of chip intensity. I think the first actions that I mentioned there can actually have a benefit in 2022, and some of the redesign of the chip architecture, that's more of a 2023, 2024 impact. The next question comes from the line of Mike Sison with Wells Fargo. Listeners, you may ask your question. Hey, guys. Good morning. Just curious, when you think about Mobility Coatings, you know, margins have been kind of bumping to breakeven for the last couple quarters. What build rate sort of gets you know, firmly above, you know, breakeven? Are you gonna get there with the 83 million this year? Then is there a certain build rate you need to get to get back to double digits, you know, sort of that 11% or so that you did in the first quarter of 2021? Mike, I wanna point out because the EBIT is still, you know, impacted by the step-up depreciation and amortization from the initial carve-out from DuPont. Yeah. I did wanna call out EBITDA itself. I mean, we're gonna have slightly over 10% EBITDA margins for the full year. We still are cash flow positive in that business, and I think it's an important highlight. If we get to the 79 million builds, we'll certainly be EBIT positive for Mobility for the year. You know, a slight uplift versus where we are today for the full year 2021 will put us in a profitable stage. I think everything we've done on the cost structure as well as with the pricing, you know, coupled with the fact that, you know, as volumes pick up, there's gonna be much better absorption. You're gonna see this business, you know, quickly get back to profitability. Yeah. And then- I would just reiterate what Sean said there is that if you look at what we've done in costs in the mobility business, we have taken significant, you know, done significant cost reductions in that business. At this point, it's all about the drop through effect of volume as well as price increases. Those are really the two key levers. Understood. For 2022, it sounds like you're, you know, signaling that adjusted EBIT will be up in 2022 versus 2021. I understand hesitancy to give specific guidance, but when you think about the range of possibilities, you know, what are you most worried about in terms of being able to do to grow this year? If there was surprises to the upside, where do you think you can see that potentially? The key variables, you know, both to the upside as well as to the downside would certainly be macroeconomic changes, geopolitical events and the impact that that could have on growth, cost inflation and the price of oil, and changes in assumed auto builds. Lastly, of course, I think we'd have to mention COVID. I think our hope is that, you know, we're kind of coming down the backside here with Omicron, and hopeful that there's nothing beyond that, and that we start to see overall business and global conditions get back on track to normal. Thank you. Our next question is from the line of Arun Viswanathan with RBC Capital Markets. Please go ahead with your question. Morning. Thanks for taking my question. I guess just two questions. First off, light vehicle, i guess I've heard that, you know, maybe February, March, you know, we're already in February, but I guess maybe March, you guys would get a better picture. Some of the auto suppliers have been saying that they'd get a better picture on full year production. Would you agree with that assessment? I guess, you know, would you be able to see if you'd get closer to that 83 number, instead of your 79 forecast, you know, maybe in March? I think it's difficult to say. There's still a fair amount of variability around the forecasts. It's possible. Obviously, we'll have more visibility in March, but I don't think there's anything magical or any particular specific information that's gonna come out in March that's gonna illuminate that. I think it would just be the benefit of having a first quarter under our belt. We recognize, so, you know, that we have taken a more conservative approach there to the first quarter, but we think it's prudent to do so. Great. Just a quick one on free cash flow. 2021, I think you got a little bit of the working capital benefit that helped you preserve free cash flow guidance. How are you thinking about that for 2022? Is there gonna be a drag on working capital? Thanks. Yeah, we ended working capital percentage of sales at, you know, roughly 8%. Given potentially, you know, continued inflationary pressures as well as sales upticking, you know, you could see a marginal uptick in working capital use. Thanks. Thank you. Our next question is coming from the line of Laurent Favre with BNP Paribas. Please just state your question. Yes, good morning, all. Robert, I've got a question on your ESG targets announced last week. In particular, I recognize all the efforts, but on the CO2 emission side, you seem to be very focused on Scope 1 and 2. I was wondering what prevented you from also tackling Scope 3, given that this is probably the majority of your total emissions. Thank you. I think with regard to Scope 3, it's walk before you run, and we're gonna focus on Scope 1 and 2 first. We're embarking on that, and then we'll begin scoping out our Scope 3 emissions as we go forward. In terms of the work that we've done, in particular over the last year, it would've been too ambitious to put out a Scope 1, 2, and 3 target. That just requires you know, a lot of coordination with you know, all of the partners with whom you do business. You know, obviously for Scope 1, just coming from company operations and Scope 2 from purchased energies, that's a little bit more quantifiable. Thank you. As you size the incremental costs, that you could incur, for instance, for renewable power supply, et cetera, are those things part of your 2024 targets? When we think about incremental CapEx related to get to some of the emissions goals specifically that we have, in particular of air as well as waste, but I think here we're talking specifically air as it relates to greenhouse gases, that would be part of our normal CapEx spend. Then in terms of the actual use of energy, what our plan there is to use renewable energy, and we'll continue to purchase renewable electricity when it's cost effective. We're also gonna explore the use of on-site renewable energy generation unless the capital costs you know were prohibitive. I think it's important to just highlight, though, that depending on the evolution of the global energy markets, it's possible that we might need to purchase some carbon offsets to reach the carbon neutrality goal by 2040. That would really only be after all of those other options have been fully explored and implemented. I think we expect the size of the global renewable energy market to continue to increase and the sophistication of that market to continue to increase over the next many years. Laurent, just to put some quantifiable numbers. Our total energy spend is $30 million-$40 million on an annual basis. Electricity is a fraction of that. That'll be absorbed in our 2024 targets. No concerns as far as, you know, major impacts there. Thank you. Thank you. At this time, we've reached the end of the question and answer session, and I'll turn the call over to Chris Mecray for closing remarks. Thank you all for joining us this morning. Appreciate your participation. We'll be available through the course of the day and beyond to answer any follow-up questions you have. Have a great day. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.