Good. Close the doors. Thank you. All right. Thank you, everyone, as we continue day two of the Barclays Global Autos Mobility Tech Conference. I'm Dan Levy. I lead U.S. Autos Research coverage at Barclays, and very pleased to have with us Dana, a leader, a leader in power conveyance. Is that, is that the way that you- That's the way to say it. Power conveyance. Power conveyance. Okay. Doesn't matter if we're moving the vehicle or, with, in motion or a work circuit on, on, say, a piece of construction equipment. There we go. Very pleased to have with us Tim Kraus, the company's CFO. We're gonna go through a series of questions, fireside chat style. Anyone in the room that has questions, please feel free to raise your hands. Anyone that's on the webcast and has questions, please feel free to email my colleagues, Joshua Cho or Daniel Lai, first name.last name@barclays.com, and they can ask questions anonymously. But with that, thank you so much, Tim. Sure. Pleasure to be here. Thanks. So why don't we just start with a little bit of an around the world and an end market overview? And if we can just start with the light vehicle side of the business. And I think the obvious story for you in 3Q and especially in 4Q is the UAW strike. You said, you know, roughly $250 million of revenue at the midpoint was the number. There was a more draconian scenario as well. Maybe you can give us a sense of how this is playing out now that the strike is over. Has there been any recovery, et cetera? Sure. Yeah, so the numbers are right. So we had given a, you know, a high point and a low point. Basically, the high point was the strikes ended the end of October, and low point would've been that they ran through the end of the year. We got it reasonably close, you know, with the strikes being settled. Obviously, ramp was, there was some ramp up in November. So, obviously, for us, some significant programs were affected: Super Duty, Jeep Wrangler, Bronco, and Ranger were all impacted. So restart's been, you know, I think, a bright spot. The OEs are all back up and running. I would say they're, you know, north of 90% today versus where they were pre-strike, so that's very helpful. You know, some of the programs were a little slower than others, but, but all in all, I, I think we're in, in pretty good shape. They continue to run. I, I don't believe they're gonna make up really, you know, much of that production. Many of these, programs were already running, you know, relatively strong, given that they're, they're light truck programs, and so the, the opportunity is probably limited to make up a lot of it, here throughout the, the end of the, the production. Maybe a few days here and there, but, I think we're, we're kind of where we're at. How much were the inefficiencies associated with the strike, and just how quickly are those recovering? It's been pleasantly surprised me is not the right one, but it's been better than I think it could've been, given sort of, you know, what's happened over the last few years. The customers were able to get back up and running relatively efficiently and pretty quickly. Right now, we're not quite back to where we were pre-strike, but it's pretty close. Okay, great. Another key or central theme that we've seen in the light vehicle side is obviously a lot of instability in production schedules, a lot of volatility. You know, I think back, there was once a time when your light vehicle margins were much higher. You know, at the trough, I think at one point you had, like, 3%, or there was- Yeah, don't remind me of those things. Okay, all right. Those were, those were rough days. They were rough days. All right, so we've seen a lot of recovery. So maybe you could just give us an update of where we are on recovered production stability, you know, health of the supply chain, and what is the opportunity for light vehicle driveline segment margins to see further recovery as we get greater stability ahead? Yeah, so I think if you look through the first three quarters of this year, we saw, you know, improvement in both schedules and stability in terms of product mix. You know, really beginning in the back half of the first quarter, and then continued improvement through second and third quarter on most of our programs. And of course, I think there's been a little bit of retrenchment, given that they took six weeks off on some of the programs. But, you know, like I said, I think they're back up, you know, really close to where they were. I still think there's more. They don't run nearly the way, even close to where they Close, but they still have room to grow and get back to sort of a pre-COVID level in terms of their stability and scheduling. So I do believe that as we continue to see that improvement, we'll continue to see the ability for us to convert at better margins, and you saw that in the first couple of quarters. Our ICE conversion, especially in light vehicle, was good, and a lot of that was by the fact that we had more stability in those structures. And a lot of the improvements and the efficiencies that we need to get back out of our plants, you know, we can do when the customer runs much more stably. Great. Commercial vehicles. So just end market outlook, there's a number of third parties that are forecasting some declines in commercial vehicle volumes for next year. You know, if you look at Europe, North America, especially Class 8, you know, different estimates, but it's forecast to be down. How do we think about, you know, in a weaker environment for Class 8, what the impact is to you? To what extent is there offset from aftermarket, which I believe is a significant portion of the commercial vehicle segment? Yeah. So, yeah, I mean, I think, you know, the CV segment's been, you know, especially in North America, where it's the largest portion of that segment for us, has been strong. You know, we're—you can't look at—for us, anyways, you can't look at the market overall. You know, we skew towards Navistar and PACCAR, so you really need to look at, "Hey, what does PACCAR's production look like for next year versus, you know, what perhaps some of the services are saying?" But yeah, I think the that we're probably weighted to a bit of a downturn or some headwinds on volume in North America on CV. For us, you know, we also have a pretty sizable CV business in South America. That was pretty heavily impacted this year, with volume. We do see recovery starting to build in, in South America, and we think that continues into next year and should be a bit of an offset for, for maybe some of the weakness that might show up, from a, from a North American perspective. If I recall correctly, and correct me if I'm wrong, when you have downtime, or if you have weaker volumes in commercial vehicle, the decremental margins are not as bad because there's a better ability to flex. Is that correct? Yeah. No, I think that's right. You know, we typically don't see the same decrementals in CV. And right now, where the volume is and the mix, it does even a slight volume downtrend, we should be able to manage pretty efficiently. Great. Off-highway, it's been a relatively outperforming segment. And I think the question that's arising is: Are the end markets within off-highway at or near peak? How do we think about the overall end market exposure in off-highway and the relative strength, and you know, what your view is on the go forward? Yeah, obviously, it's a market that's been, you know, up for quite some time now. You know, those cycles tend to be a little narrower than they might be in, say, a light vehicle. So, you know, the idea that next year we might be starting to see some weakness wouldn't surprise me. I think you do have to look at it by segment. I think Ag's probably one that's been a pretty decent performer over the last few years. It probably is one that's more exposed to a bit of weakness next year. You know, construction for us, which is a big part of it, it still, you know, seems to be holding on relatively well. We'll see as infrastructure projects come on. If construction stays strong, then I think we're likely to continue to see maybe not strength, but not really a whole lot of weakness in that. And then you've got mining and some of the other ones that are really tied to commodities and so on. So So we'll have to see where those end up. But yeah, I wouldn't be surprised if there you see a little bit of weakness in the end markets in off-highway as we move through this year and into next. Can you talk about the mix considerations? Because generally, construction is a richer mix for you versus Ag. So from a mix perspective, slightly weaker Ag is, you know- Yeah, if there's one that has to be down, Ag probably is the one you pick. It tends to be, you know, the portion of off-highway with the lowest margin impact. So a little bit weaker Ag's not necessarily on a mix perspective that bad. You know, we're also gaining market share in a number of different categories, you know, across our off-highway segment. So even if volume might be down a little bit next year, we do have backlog and new program growth that we think helps to offset some of that as we go through. So there's a lot going on in the segment, both from a traditional ICE perspective and from an EV perspective, as many of our lower, or our low-voltage products, you know, start to gain acceptance and the more of the, I'll take an example, a compact. The compact construction equipment that usually is used inside of a city starts to be required, and more customers start to deploy that in city centers where emissions are being regulated and restricted, so. To the extent that you have some slight weakness in volume, again, just, you know, commercial vehicle, you said, you know, there is a better ability to flex. And in the past, this is sort of the Dana system flexing. This is part of your operating DNA. We think about off-highway again, what's the ability to flex if you have some slight end market weakness? So the best position for Dana relative to off-highway is to have our customers tell us, you know, a little bit further in advance. We are able to flex well in off-highway generally. The problem when we're not able to flex effectively is when customers drop orders out, you know, overnight, right? It's very short notice. We tend to have long supply lines. You know, we tend to operate in places where, you know, short-term layoffs can be done, but you need to plan for them. So that's really the key for us. You know, so we're, you know, obviously staying in contact really closely with the customers, making sure we understand what their scheduling is, and as we start to see any weakness, we'll start making the proper changes to our scheduling to flex for it. Right. We've seen within off-highway very, very solid margins, mid-teen margins. I mean, just give us an appreciation. I mean, obviously, the M&A that you've done is now a handful of years ago, but what's been sustaining these, these premium margins in off-highway in ways that we just haven't seen in some of the other segments? Well, you know, first, we've had pretty sizable growth, so that helps, right? You're filling up the plants, you continue to get that good flow-through and conversion on higher sales, obviously helping. The other is, you know, it's a mix of customers, a lot of different customers. And, you know, we've been-- A lot of them are based in Europe and have been subject to the same inflationary pressures that we have, especially around, you know, labor and energy, freight. We have been very effective in being able to go back and get recoveries from customers there that are in those segments versus you know say light vehicle, where you know we have a handful of customers, very large programs, and those tend to be more difficult conversations. The other part there that continues to help is you know there's aftermarket within the off-highway segment that we're able to make sure we get pricing to recover those increased costs in that as well, so. Maybe just a quick comment on power technologies? Sure. We have it. So power tech, you know, you know, we're—that's a business that's been going through a lot of changes over the last few years. You know, historically, it's been two businesses. It's been sealing, so think of, you know, engine gaskets and the like, and thermal management, so oil coolers and transmission oil coolers. The transition in that business, you know, we're now a major battery and electronics cooling supplier. So GM BEV3, we're the supplier to GM on their Ultium battery platform across all their vehicles. And that's a big growth area and an opportunity to really take technologies that are really core ICE technologies and make them applicable into an EV environment. On the sealing side, this one's a little bit harder to grasp but, you know, about 20+ years ago, we started doing a lot of work in fuel cells, and so we're in the process of launching our first high-volume bipolar metallic plate plant to supply fuel cell plates for Robert Bosch. And that's a technology that came out of our sealing business. So you think gaskets, you think, you know, fuel cells, it doesn't come to mind, but the forming, coating, and sealing technologies that you use for a gasket are the same, you know, basic processes that you use for making bipolar metallic plates for fuel cells. So both of those are really exciting new programs and new products for us on a business that's really thought of as probably a real ICE-centric business. Right. This is a helpful overview of the end markets. If we can maybe just get some directional comments on 2024 and 2025 on some of the different factors. Maybe I actually just want to start on 2025. Earlier this year, you gave us a target of $11 billion-$12 billion in revenue, $1 billion plus of EBITDA. Just the EBITDA side, this year, pre-strike, you were on track for $800 million-$900 million. Mm-hmm. You know, what are the broad considerations in bridging to this $1 billion EBITDA? Is it just simply the function of the contribution margin on the higher revenue, which I think is, you know, once you, y ou know, it's an incremental $1 billion from here, and that gets you to, you know, at 20%, you know, that's gonna get you to that. Yeah, I think if you, if you look at where we started the year, and if you, you come up pre-strike, we're well ahead of where we thought we would be for this year, and that should carry through. Obviously, the strike, you know, haircut that a bit. But I agree. You know, if you just look at sales growth, both ICE and contribution margin on EV, even considering, you know, higher EV spending that we will continue to spend, or at least when we came out in February with that, we knew we were going to be, you know, continuing to increase investments. You know, it's the path from, you know, sort of where we're at now to a $1 billion plus in 2025 is still right in front of us. And again, some of that also includes, you know, what we've seen and what we talked about earlier, which is, you know, our customers continuing to get healthy with their production schedules and being able to get more of that efficiency forced through and drop through to the bottom line. But I think that's still, you know, firmly in front of us. Great. If we could just talk about some of the directional puts and takes. Inflation, this year, actually, it's coming in—I think you mentioned below, you had guided to a $50 million headwind. It's coming in actually a bit better. You know, what are the underlying currents within inflation? And then, when we think about, you know, you're probably going to have higher labor costs next year, is, is this are you getting some recoveries from this year, or is it new costs coming online? How do we net everything out? Yeah, I mean, obviously, this year, you know, inflation's been on a net basis better than we thought. You know, obviously, we have—those are gross and net of recoveries. You know, next year, you know, obviously, we're still putting together the plan and trying to understand where we think inflation's going to be is a big part of it. But yes, labor will still be a big consideration. You know, certainly outside of North America, many of the countries in which we operate have statutory cost of living adjustments, which are driven off of the ambient level of consumer price indexes or, you know, base inflation. So those will come through. You know, the rest of them, you know, we continue to see those same costs flowing through our supply base. So we think there's, you know. We don't see a return to, you know, where we were historically over the last 10 or 15 years, where inflation's, you know, 2% or 3%. We still think it's probably elevated from those levels going into 2024 and perhaps beyond, but we'll see. I know I saw that, I think European inflation was, like, 2.5%, so it's starting to get back into a manageable level, so. FX, obviously, that's been a drag this year. How are you thinking about transactional effects? You know, our biggest impact on transactional FX is really in places where, you know, we manufacture and we have a cost base in one currency, and we sell in another. You know, we tend to manage a lot of that through hedging that comes through versus the translational, which we kind of just, you know, have as a matter of course. The other is, you know, a number of the highly inflationary countries where we operate, which is Argentina and South Africa. Those continue to be a place we have pretty robust agreements with our customers to recover those, but those tend to be the places where we see the biggest impact from transactional FX. Translational, I mean, we'll, you know, right now, as we look at where a lot of the rates are, you know, probably isn't a major headwind or tailwind for us next year, but we'll see where we end the year. Thank you. And you know, just wrap on EVs, which, and then I'll transition broadly to EVs. It's really tracked at a positive this year, and I think the commentary is that because of timing spend, this is how you had these tailwinds. To what extent is there a catch-up on spend next year? Yeah, so I mean, I think there's a couple things driving this, right? We, you know, we've managed the spend, I think, pretty well. One of the things is, you know, we've been bringing on a lot of costs, especially from an engineering perspective. One of the items driving the lower spend this year is, you know, we're just getting better at bringing on these resources and getting them to be efficient, more efficient, faster. So that, that's not, that's going to help us as we move forward. In terms of the timing, yes, I think, you know, we will have, we will see some of that catch up next year. But I do think it does, what we're seeing in the walks this year on the EV side is, you know, the EV business that we have is contribution margin positive, right? And that's what we're seeing come through. So, and that's really the positive, I think, to think about. You know, as we move forward and we continue to grow this business, while we're still going to be investing a lot and there'll be some catch-up, we'll continue to have, you know, good, positive contribution margin from these programs to help offset some of that and move us into I mean, remember, we're going to do about $700-ish million in EV sales. In 2016, we didn't do any. So I mean, it's a, you know, seven years, you take a business from basically zero to, you know, $750 million, it's a, it's a- it's, there's a lot of investment that has to be made. Great. Let's talk about the transition broadly. I think the theme that we've seen this year, the focus has been this slowdown from a period of EV euphoria. Now, admittedly, our focus is more so on the passenger vehicle side, right? Your efforts, yes, you do have some efforts on the passenger vehicle side. We'll get to that, but the primary efforts have been within the commercial vehicle segment. So to what extent are we seeing this slowdown play out also on the commercial vehicle side? So I mean, from our perspective, when we started down this journey, you know, six or seven years ago, our primary focus was on commercial vehicle. We thought that the use case, the duty cycle for commercial vehicle, if you think of city buses, school buses, last mile delivery, you know, those made the most sense in terms of where the drive for electrification would come from. We continue to see that, and we don't really see much slowdown at all in the adoption rates with our customers in that. They want last mile delivery. You know, think about an Amazon truck, right? It starts and ends at the same place every day as a known duty cycle, knows what mass is going to be on the truck, right? You know, you don't have an infrastructure issue with charging because ostensibly that's already been taken care of at the distribution center. So many of the things that are sort of, you know, headwinds to adoption from a light vehicle, passenger car perspective, you don't see in CV. So we continue to see that business growing. You know, and we've been surprised throughout the journey, like, you know, how well it's progressed, and we think that it'll continue. Is the bidding activity the same, the quoting activity? Is that, is that holding in? Any shift in, in quoting activity on the commercial vehicle side? No, we continue to. Yeah, I mean, the vast majority of our RFQs from customers are around, are all electrification. You know, earlier this year, we had a backlog where 65% of the backlog was EV. I don't see that changing. I see the backlog continuing to shift towards EV as we move through. Especially since when we think about backlog, we don't, replacement programs don't count for us when we talk about backlog. So it's really net new business, and net net new business is primarily EV, and we don't see that changing. So- And the shape of ramps? You know, they're I you know I mean we've never gotten the ramp curve correct yet. So I mean I think that it's it's par for the course as you as you go through and have a a brand-new business or industry that you know there's there's all kinds of changes that happen. You know there's a difference I think you got to remember there's the the public's perception as to what the how many of these vehicles were going to be sold and then there's the OEs and our own perceptions. So our own you know work. So those don't always line up and I think we're we continue to to be on track for what we how we were thinking about the market over the last few years and and how we've capacitized and invested for it. Right. Let's talk about light vehicle, which is a focus. You know, you don't have much in the way of what we'd call these Gen 1 EV programs. And these seem to be the primary programs that are getting hit in these EV slowdowns. To what extent are you seeing development, bidding, RFQs for next gen programs shifted at all on the light vehicle side? So, you know, if you think about light vehicle for Dana, we're not a primary passenger car supplier, at least not in driveline, right? You know, we do supply on the power tech side. Our view was always that our light vehicle programs would be the last to electrify- Mm. -because they typically are large, heavy-duty trucks, rear-wheel drive, four-wheel drive vehicles, that were, you know, going to be, you know, next gen, right? And I think that's still, that's still our view. The slowdowns are Gen 1, and, you know, from our perspective, we're still seeing the same level of RFQ activity. It's all EV related, as we had seen, you know, over the past year. So, I think the interest from the light vehicle OEMs is that these products are going to, are going to electrify. And, you know, our view has been that, you know, even some of the wins that we've already announced, those were still, you know, a ways in the future. We didn't give any timing, but it's not like these were going to go into production next year anyway. So, it's a long road to get from sort of, you know, a dead stop to producing the highly effective EV vehicles for, you know, large trucks and SUVs, and I think we continue to support that, and we don't see any slowdown in the quoting activity from the OEMs. What about the scope of the programs? Because the Dana value add is that, you have capabilities across a wide set of products within the eDrive, right? It's both, if I recall correctly, it's both the mechanical and the software side of it, right? You've done some M&A to enhance your capabilities to have power electronics suite. So to what extent are you seeing a wider scope of, you know, product engagements, with OEMs willing to maybe give you more of the system or, you know, outsource more to you? And you can answer that both for light vehicle and commercial. So, I mean, it's the answer is yes. I mean, if you look at our. You know, originally, when you look at the, I'll take a CV, right? The original, like, CV conversions were all, "Hey, I'll take a ICE truck, and I'll put a direct drive motor, inverter, and some battery packs on it." You know, that's certainly been driving a lot of the products. Now, that's really shifting to integrated e-axles, where the motor and the inverter are right on the mechanical axle. It's a far more efficient system. You know, when you think about the light vehicle side, right, we do. We make, we're fully integrated. So we make motors, inverters, and the mechanical. So you think about a three-in-one. We like to think of it as a four-in-one, 'cause I think the other part of this system that's really important, and the OEs across the spectrum are obviously really starting to understand this, is that the thermal management of these systems is really, really important in order to drive efficiency, especially when you think about range and stuff, those types of things within the vehicle. So I think our ability to design a fully integrated four-in-one thermal optimized e-Axle is an extreme advantage when we're going in and working with customers to develop the next generation integrated eDrive programs. I think the other thing to think about is, you know, when you think about the large end of the light vehicle truck market and the lower ends of the commercial vehicle, the motor architectures and size and power densities, those are pretty much the same motor size for us, right? So we have the ability to take a motor we're developing in a CV and use it in an LV customer and help that LV customer, even if his volumes might be a little bit lower than he has in passenger car, and still gain scale on those motor and inverter and electrodynamic components that other driveline suppliers on the light vehicle side don't get the advantage of, 'cause they're not selling product into all these end markets. So, fair to say, I think at the EV Investor Day a couple of years ago, it's like a 4x CPV increase, potential for as is. Was it 4x? Three. Okay. That's still very much that opportunity is still on track? Oh, yeah. I I mean, if you just imagine the vehicle, right? You got, like, a rear-wheel drive truck. You know, you got an engine, a transmission, a driveshaft, and an axle. The engine and the transmission go away. I mean, if you make pistons, your product's gone away. For us, we lose the driveshaft, which is $200, but the power source and the controls, the motor and the inverter, they move up onto the axle. So we're selling a fully integrated axle. That's about 3X content for us, when you build in the motor and the inverter, and we make those, right? So we're vertically integrated. We pick up all that content. Thank you. Maybe you could give us some color on the spend trends within EV. Just give us a sense of how significant the spend is today. You know, is, are you keeping it in line? It sounds like from what we're hearing, what we're seeing in light vehicle is a bit unique. You're really not seeing this as much on your end. So is it fair to say your spend plans are still very much on, on track on the EV side? Yeah. I mean, I think we continue to spend. You know, I think we've gone to this, you know, we don't have 25% margins, so we've always had to be, I think, very deliberate in how we were going to spend those dollars, and we continue to be, I think, deliberate and efficient. And we, we're always looking for and evaluating where we should spend those dollars, and how we can get the best returns on them. And, you know, what-- it's a very dynamic market. Always has been, right? It's-- This is not a new thing, right? If you go back three or four years, the market was changing pretty fast. We continue to, as we move through and make our plans and develop, you know, our next long-range plan, we'll make decisions, and then, you know, it's kind of like going into battle, right? You know, the battle plan's great until till the war starts, and then you, you know, you got to throw it away and deal with, you know, what's changing in the environment. And that's really what we do every day, and we'll continue to do it in order to make sure that we—you want to have the products capabilities that our customers are demanding, and that we can do it in a way that we can deliver, you know, financial results for the shareholder. You had previously guided that you would be EV breaking even this year. Earlier this year, you said that that target was going to be delayed to something in the 2023-2025 timeframe. Yeah. So maybe give us a sense of what the timing is that you're looking at and the key drivers. Is this just scaling or, you know, is there something about, okay, you still have to spend, but there's maybe some opportunities where you could be a little more judicious on the spend? Yeah, you know, I think right now we're we still see that as where that break even ends up. You know, a lot—like, when you think about what the quoting activity is and the timing of the programs, and how much more efficient we can get in terms of how we spend the dollars, I think there's a lot of moving parts. But principally speaking, yeah, you know, 2025, around breakeven, I think is still an achievable goal for the business. It obviously is predicated on continuing to have the sales growth and the contribution margin off of those sales. As long as we continue to see the level of growth that we had previously planned for, then I think that's still a goal that's within reach for us. Folks, questions? Okay, I will continue. And I know we're running tight on time, but maybe you could just provide some comments on capital allocation. You ended third quarter at roughly 2.5 turns of net leverage. You know, what are you targeting? I assume it's sub 2x. And then, you know, how does the capital allocation playbook change as you further deleverage? Yeah, so, you know, we're comfortable below 2. I'd like to see us, you know, 1 to 1.5 times on leverage. So when you think about capital allocation, you know, the first place we'll continue to spend capital is on supporting the growth in the business. That'll continue to be our number one priority as we continue to build out and grow the business, both the ICE and the EV business. And then, to the extent we—you know, there's still capital available, we'll support the dividend and then delever. I mean, we talked about this earlier, right? The growth in EBITDA by itself is going to help delever the business from a metrics perspective. A lot of that'll just come through, you know, natural growth in the business. Because, quite frankly, our debt really hasn't been driven up a lot. It's the EBITDA that's been hamstrung or a bit lower, that's really been driving up the leverage ratio that we have over the last few years. Is there an opportunity on the M&-- I mean, you've done bolt-on M&A to, to boost your, your EV capabilities. Is there an opportunity to tack on more capabilities, you know, do some, some consolidation? Yeah, I think. Well, from an EV perspective, we have all of the end capabilities we have. We believe we need to be successful across all the end markets today. Are there bolt-on opportunities? Sure, there could be. I think they'd be small, and they'd have to be very targeted to something that's very customer, you know, we have a customer that needs something that we don't currently have. But I think that's unlikely, in the near term. We'll continue to build out our capabilities, mostly, you know, organically versus inorganically from an EV perspective. Okay. You know what? We're at time. We'll leave it there. Great. Great. Thank you so much, Dan. Thanks, Dan. Appreciate it.