Welcome to Meritor's 2021 Strategy Day. My name is Krista Sohm. I am the Vice President and Chief Marketing and Communication Officer at Meritor. We have an exciting multimedia program planned for you today that will last just over an hour. Slides to accompany today's presentation are available on the investor page at meritor.com. Now, let me introduce you to today's presenters. Chris Villavarayan is our CEO and President. Carl Anderson is Meritor's Senior Vice President and Chief Financial Officer. John Bennett is our Vice President and Chief Technology Officer. After the prepared remarks, we will take a short break, followed by live Q&A right here from our studio in Troy, Michigan. With that, it is my pleasure to introduce Chris Villavarayan. Welcome, everybody. I look forward to walking you through why Meritor has its brightest days ahead. Meritor is the leading supplier of mobility and electric powertrain solutions for the commercial and industrial markets. Our revenue was $3.8 billion in FY 2021. Our products include axles, brakes, and ePowertrains. We're headquartered in Troy, Michigan, and we have 9,600 diverse team members working in 19 countries. Today, we will give you a perspective of what inspires us and show you what's next as we transition from our core products towards electrification. We will demonstrate this with the wins we're announcing in this presentation. Our business segments include Commercial Truck, which represents 75% of our sales, and Aftermarket and Industrial. As the largest independent supplier of commercial drivetrains, we supply seven out of 10 rear axles for the trucks in North America. We also have strong market share in South America and Europe. We have a global, diverse customer base, and we see large opportunities to grow in the medium duty segment as well as outside the traditional markets of North America and Europe. Since the introduction of the M plans in 2013, we have driven exceptional returns for our investors. We have consistently delivered solid operating results with the current leadership team. As you can see, we've returned 300% for our investors with significant outperformance to our peers and indices. Let me share with you why we're so excited about our future. We recently conducted an investor perception study. You told us you strongly believe in management's credibility and the execution of our M plans. That's great. You also raised some questions. Let me respond to each. With regard to cyclicality driving down demand, what I see is the long cycle ahead through 2025 with North American backlogs near industry records. In terms of vertical integration and competition limiting electrification growth, we expect $1.5 billion in revenue by 2030. You mentioned scale required for investment in electrification. We expect to generate $600 million of free cash flow through the M2025 timeframe. Finally, you said electrification transition is a risk. We see the technology moving into Meritor's real estate, and we're positioned to win in this space. As we look down the road, there is a confluence of factors driving Meritor's future. We have a 110-year history and strong brand reputation. Add to that, the industry is transitioning to zero emissions. We're also seeing an increase in societal focus toward sustainability, and technology is moving into our real estate. Also, the pandemic is changing the culture of work. Meritor is uniquely positioned to benefit from these shifts, and together they inform the new purpose at the center of our growth strategy. Powering life forward defines who we are and what we do. It's the single unifying statement that every Meritor team member can relate to. We move people, deliver the next generation safe and sound, keep supply chains linked, and turn the wheels of commerce. We're making tomorrow not only brighter but cleaner through our zero emissions technology. We're moving the industry forward, and we're moving the world forward. We power life forward. This is our M 2025 plan. While purpose sits at the core of continued positive transformation, our true north is our financial performance. We have three financial metrics. We expect to outperform the market by $500 million, with up to half the growth coming from electrification. We also anticipate $1.5 billion in electrification revenue by 2030. We will deliver improved margin while investing in electrification, and we will generate $600 million of free cash flow. Following the graphic clockwise, we are on path to zero emissions, and we expect half our revenue growth from electrification. We will develop a suite of electrification products to optimize performance and cost. We're well-positioned to capitalize on growing EV adoption, particularly in markets where we have much growth opportunity, like medium-duty. More on that later. With this plan, we're introducing our first-ever sustainability goals with near-term and long-term targets. Our near-term goal is to reduce carbon emission by 25% in 2025, with a longer-term target of 50% reduction by 2030 and carbon neutrality by 2050. We're committed to making tomorrow brighter and cleaner. Meritor is focused on our customers, and this is a clear winning strategy for us because we have one share in most of our businesses. Putting customers first means world-class delivery and quality, so we've set targets of 99% delivery and 20% PPM or better through the M2025 cycle. 75% of our organic growth will be outside our core markets of North America and Europe. As we grow, we will become less dependent on the North American truck cycles. Efficiency remains important, as with our previous three M plans. We're targeting an additional 1.5% savings of material, labor, and burden. We will also grow adoption of our high-efficiency portfolio. Customers are already seeing the benefit of these. Navistar will be making our 14X high efficiency axle standard position next year. In every M plan, we talk about culture. Our success has largely been due to the talented and committed Meritor team. Safety and quality remain top priorities, and we're taking additional steps to diversify our team. More on that later. Meritor is well-positioned to lead the EV transition. We plan to deliver $1.5 billion of electrification revenue by 2030. 50% of e-powertrain content is derived from existing legacy products. We have 3x-4x content opportunity with full integration of motor and transmissions into our e-powertrains. We're poised to expand in medium duty where our penetrations are low. In our core business, we will benefit from an elongated truck cycle as recovery continues from the pandemic. We see growth opportunities outside our core markets of North America and Europe. We will deliver significant free cash flow of over $600 million in the three-year plan. Our stable core business will enable investments into electrification. Let's now take a deeper dive into electrification. The road ahead is blue, and Meritor Blue Horizon will power the future. There are varying factors that will drive or delay adoption. OEMs and large fleets will influence the move to electrification with CO2 targets in addition to government mandates being established. Strategic industry collaborations will also fuel innovation at lower costs. On the other side, however, charging infrastructure needs to be built. Battery costs remain at a premium. The industry needs to drive innovation here so that the TCO begins to make sense. No matter what the pace of adoption, fast or slow, Meritor has opportunity for growth here. Let me walk you through this. Meritor's opportunity is significant considering a $7 billion addressable market. In heavy duty, we will leverage our core strength and market leading position. We have the 14Xe electric powertrain production ready. We expect an 18% adoption rate in this space by 2030. We believe transit will be the fastest segment to convert. We will build and leverage partnerships and collaborations, which I will talk to in a moment. We expect a 41% adoption rate in this market by 2030. The medium duty segment has already begun to adopt. This is an opportunity for Meritor to grow, share, and contend, and we expect an adoption rate of 35% by 2030 here. Meritor will lead the transition with fully integrated ePowertrains. Our traditional products serve today's markets, which are primarily based on remote mount solutions, which use our traditional axles. By 2025, we estimate transition will be underway, and 1/3 of the market will be adopting electric powertrains. The eOptimized products and 14Xe ePowertrain will support this transition. In 2030, a significant portion of the market will be ePowertrain, which gives Meritor an excellent growth opportunity. In 2030, we expect to deliver $1.5 billion of electrification revenue. Meritor will lead the opportunity across heavy, transit, and medium duty. Now, let's talk about some of the wins that build confidence on our path. This year, we will be in production and delivering fully electrified trucks to PACCAR. Meritor is their launch partner and primary supplier of battery electric systems for Peterbilt and Kenworth's refuse and heavy duty chassis. Customers are giving these trucks rave reviews. Now, let's hear from Darrin Siver, president of PACCAR. This program is very important to PACCAR. In fact, it's the most important electrification program we have going on anywhere in the world right now. It was the first program we started. It's got the most potential for early adoption and potential for volume. This program with Meritor is very important to PACCAR. As we thought about partners, of course, we were looking for someone that could provide some co-development experience, engineering support, and those kind of things. You know, a real partner. You know, we have a very long and established relationship with Meritor. I mean, something like 70% of our axles on our Class 8 trucks come from Meritor. The e-axle system and the packaging that Meritor's put together really is very attractive for a Class 8 product. The ability for the e-axle and the componentry to drop inside the same wheelbase or allowing customers that want more range to be able to add batteries without lengthening the frame rail. The system really is gonna work well for our customers. I'm excited to announce a new business win with Hexagon Purus. We will supply the 14Xe on two new programs. First is a development program on hydrogen fuel cell drayage trucks. Test units are being built in the fourth quarter of 2022. The second program is a hydrogen fuel cell electric yard truck with start of production also in the fourth quarter of 2022. We're also announcing today a strategic collaboration with BAE Systems. BAE is a global leader in heavy duty transit, electrification, propulsion, and power management. They have strong system integration capabilities and battery and fuel cell know-how. This collaboration combines complementary technologies and capabilities. We're leveraging our strengths to deliver full system solutions for the industrial market. Medium duty is our largest opportunity. First, because it is a market that will be first to adopt based on e-commerce and the change in market dynamics. Second, Meritor has low share in medium duty, so this represents a great opportunity to grow. There are multiple paths for expansion here. We will sell ePowertrains directly to OEMs and leverage success with startups and larger OEMs. We will collaborate on new systems like our strategic investment with SEA Electric, supplying OEMs and tier one suppliers. With this investment, we have an opportunity to license remote mount technology in India, providing us a path to grow in a large untapped market. Another electrification award we want to share today is with Thomas Built Buses. This is our first production award with DTNA for the use on Thomas Built Buses's next generation school buses. Thomas Built Buses represents 1/3 of the school bus market and will be using Meritor's 14Xe ePowertrain. This is a five-year agreement starting in January 2024. We see this as a great growth opportunity with the infrastructure plan. This is an excellent example of our opportunities in the medium duty space. Now let's hear from the CEO of Volta, who's using Meritor's 14Xe in its urban delivery vehicle. Essa, I think of Volta, it's just been an amazing story so far. Could you tell us a little bit about your journey and your vision for the future? Thank you, Ken. It's great to be here with you. Volta Trucks is an electric truck company for sustainable cities with people at the heart of everything we do. All of that has been driving us towards building the safest and most reliable truck to market. Sustainable growth is an important element for Meritor's future as well. We have it as one of our critical metrics in the M2025 plan. Essa, you think of Meritor. How do we best support your vision going forward? As you look at our truck design from the ground up, we were only able to do that with the partnership that we had with Meritor. With the ePowertrain innovation and design allowed us to package the battery and the ePowertrain towards the rear of the truck, eliminating the shaft, which enabled us to lower the truck cab in a manner that allowed us to increase safety factors around the driver and the pedestrians. No, it's great to hear because as you know, in the past, as we were looking to the future, we felt that an OEM such as yourself was going to need space to package batteries, which drove our decision to integrate all of the components, you know, into our ePowertrain. As you think of the Meritor ePowertrain and the choices you had available to you, why did you see that as the best fit for the Volta Zero? As we looked ahead and looked forward, we sought partners that had the reliable credibility, the experience and the innovation in the technology that they provided us. Meritor had all of that in this partnership. We are very excited about that, in that selection and look forward to the journey ahead. No, that's great. Essa, I just want to say thanks for taking the time today. Thanks for the feedback, and we look forward to supporting your growth in the future. Our new business wins expands our customer base and breadth of opportunities across the commercial vehicle space. We have production, prototype, and collaboration awards with 14 different manufacturers across the medium- and heavy-duty vehicle markets. Customers ranging from long-established players like PACCAR and Volkswagen to new entrants such as Hyliion and Lion, and strategic investments such as the one we made with SEA Electric. Keep in mind, over 50% of the production business awards in 2021 were in the medium-duty space. We have won awards in full battery-electric, hydrogen fuel-cell, and natural gas. Meritor is fuel source agnostic. These wins demonstrate customer confidence in Meritor's electric future. As Chris highlighted, we've been very successful with our electrification business, winning a number of customer awards. In this next section, I'm going to explain why we've been so successful, what we're doing to differentiate ourselves from a product and capability standpoint, and how we are transforming our company from a traditional drivetrain manufacturing company into an electric powertrain technology company. Our transformation actually started in the late 1990s when we introduced the industry's first electric axle in 1998. This was the first time we integrated an electric motor into a drive axle, and it was used successfully on hundreds of Mercedes buses throughout Europe in the late 1990s and early 2000s. We then rode the momentum of that product launch and introduced a low-floor electric axle in 1999. This was another industry first, because if you look carefully, you'll see this product had two motors mounted at the wheel ends, which enabled a complete low floor. It's the first time a product was able to do this. In the mid-2000s, we expanded our capabilities further and developed a complete electric vehicle system, including an electric corner module for a low-floor delivery van. At that time, we were the first company to demonstrate how to improve a fleet's operational efficiency, meaning the time it takes to load and unload passengers or people through an innovative electric vehicle design and electric drivetrain architecture. Over the last five years, we've been busy developing our lineup of next-generation electric powertrains and Blue Horizon products, and are again, the first company to launch a heavy-duty electric powertrain, the 14Xe, into production. We also expanded our software and controls capabilities and vehicle integration capabilities by acquiring Transpower, a leader in heavy-duty electric vehicle conversions. You see, we have a long history in e-mobility with a strong track record of success, and it's this technology development over the last two decades that has built a foundation for us to leverage, which is why we are again leading the industry in bringing innovative electric powertrains and EV systems to market. Looking forward, we see electric vehicle architectures evolving, and we're positioning our company with the right products to take advantage of this evolution. Today, many electric vehicles use an electric motor that is mounted remotely from the drive axle. We call these remote mount configurations. The reason some OEMs are starting this way is simply because the motors are readily available, and it is quicker and easier to bring these vehicle configurations to market, even though it may not necessarily be the most optimized solution. There are two types of remote mount configuration. One where the motor is mounted to a multi-speed transmission and another where it is not. In either case, we are offering our lineup of traditional axles, brakes, and drivelines that we've optimized for electric vehicles. We call these our eOptimized platform of products. The market is already moving away from remote mount systems to integrated electric powertrains, due primarily to two significant advantages ePowertrains provide. First, electric powertrains free up space between the frame rails of the vehicle that can be used for more batteries. Most electric vehicles are challenged with range, and OEMs can package more batteries and thus get more range with an electric powertrain. Second, ePowertrains are significantly lighter than remote mount systems, several hundred pounds lighter, which means a fleet can carry more payload or more passengers with an ePowertrain. Due to these advantages, we expect 1/3 of the global market will be using ePowertrains by 2025, and that number will grow as OEMs bring their next generation vehicle platforms to market to 95% by 2030. This is why we are focusing so intently on being first to market with our ePowertrains and differentiating with innovative features. One of our most powerful differentiators with our ePowertrains is our modular architecture. Modularity is important because commercial vehicles are incredibly diverse, and one, two, or even three ePowertrain configurations will simply not cover the variety of applications we see every day. At least they won't cover them well. We have purposely designed our ePowertrains to have several options for the key subsystems, like the motor, transmission, and gear set. By doing this, we maximize the application coverage of our different platforms. These variants are all interchangeable, which makes it very easy for us to mix and match to meet the unique needs of our customers. We've also selected an architecture that allows us to leverage our legacy expertise in gearing, brakes, axle housings, and wheel ends, the foundation of our ePowertrains. We can continue to utilize our global manufacturing footprint, and we don't end up with any stranded assets. You put all this together, and we are bringing to market a highly flexible 14Xe ePowertrain platform that can be configured with three different motor sizes, two different transmission types, a range of axle ratios, and even geared wheel ends if we need them, depending on the application. This high degree of flexibility is one reason why OEMs are so attracted to our ePowertrains. Now, as you can see, this illustrates how we mix and match the various subsystems to suit different electric vehicle applications. What you see here are the primary subsystems that make up our ePowertrains, namely the transmission, the electric motor, the base carrier, the axle housing, brakes, and wheel ends. As I mentioned earlier, our 14Xe ePowertrain comes with three different motor types, a 200 kW, a 180 kW, and a 150 kW motor. Each motor has the same diameter with a different length, so we can easily swap one motor out for the other without changing the rest of the components in the system. Similarly, our base carriers can be configured with gear sets of different sizes. For example, the 14Xe has a 390 mm gear set, while the 12Xe has a smaller 343 mm gear set, and the 17Xe, a larger 430 mm gear set, depending on the size of the vehicle our powertrain is being used in. Each of these base carriers have the same motor mounting interface, so the same motors and the same transmissions can be used with each. Another differentiating feature is our high-efficiency hypoid gears. Hypoid gears allow us to change the axle ratio very easily to tune the performance of our e-powertrains to suit whatever the end user wants, whether it be high efficiency, high top speed, better acceleration, whatever they need. Our transmissions mount to the back of the motor, as you can see, with a common interface. We're able to change from a single-speed transmission to a two-speed transmission to a three-speed transmission easily and without changing the motor or any other components in the system. We also have three types of wheel ends, a standard wheel end, and two different types of geared wheel ends for high performance or extra heavy applications. We have a number of brake options, including the industry's only e-optimized brakes. Finally, our e-powertrains are designed to use our conventional axle housings. We've designed the motor, transmission, and gearing to be a bolt-on subsystem, just like a conventional axle. We can drop these electric powertrains onto existing housings, whether they be fabricated, cast, or even independent suspensions. Again, the so what of all this modularity comes down to the expansive application coverage our e-powertrains provide, which is unmatched in the industry. Our medium-heavy platform, which is now in production with our 14Xe, covers all of the application shaded in gray, almost 70% of the addressable market from Class 5 to Class 8. Our heavy, extra heavy platform, which includes the 17Xe, will hit the road next year and covers most of the remaining 30% of the addressable market from Class 5 through 8, shown in blue. OEMs like this application coverage because they can cover most, if not all of their vehicles with a common motor and inverter platform using the same software, the same controls, and the same diagnostics. They also like that we can do this without sacrificing efficiency, weight, performance, or cost. Again, all enabled by our modular architecture approach. Another differentiating feature of our ePowertrains is our high level of integration. What this means is we're designing the motor, the inverter, the transmission, the powertrain control module, and the geared carrier as a single system to have the fewest level of components and the highest level of power density. Our 14Xe integrates the motor's rotor and stator with the geared carrier. We don't simply bolt on a motor. We're literally wrapping the rotor and stator around our gearing, and that results in an extremely compact design that packages in the same space as a conventional axle. Furthermore, our 17Xe takes integration even further by combining the motor and the inverter and the powertrain controller into a single assembly on the axle, thereby eliminating phase cables, housing structure, and a number of other components. We're carrying this through to all of our platforms, including our next generation 14Xe. This high level of integration saves space, saves cost, and most importantly, saves weight. Now, as I mentioned earlier, weight is important to maximize payload, but it's also important from a technical perspective, so that we can minimize the amount of unsprung mass that we are adding to the vehicle. Unsprung mass can impact the performance of the vehicle. We know this, and we've addressed this. Finally, both platforms use high-efficiency hypoid gears because these gears provide the highest power density of any gear type. I'll explain more about how we are able to do that while others cannot in just a bit. To bring our e-powertrains to life, we are leveraging our core gearing expertise. Meritor is the industry leader in manufacturing gears for heavy-duty commercial vehicles, producing over 8 million gears annually of all gear types, including hypoid, helical, spiral bevel, spur gears, all of them in our facilities all around the world. Our core expertise goes way beyond just making gears. Anyone can buy a gear-cutting machine and use off-the-shelf design software to become a gear manufacturer. We've been making gears for over 100 years, and through that time, we've become experts in everything gearing, from the steels to the heat treatments to the microgeometry, the tooth profiles, and the lubrication methods. We have our own proprietary metallurgies and process specifications that result in better power density. We have our own proprietary tooth topology optimization methods that result in longer-lasting and quieter gears. We have proprietary ways of controlling the hydrodynamic film thickness between the gear teeth, which extends the lives of our gears. We make our own precision forgings. We do our own cutting and post-processing, and we have our own proprietary heat treatments. Most importantly, we specialize in high-efficiency gear technologies and are one of the only companies in the world that can manufacture a hypoid geared system with similar efficiency as a helical geared system, up to 99% efficient. That's how we're able to use high-efficiency hypoid gears in our ePowertrains without sacrificing efficiency, while other suppliers simply cannot, and it's a huge advantage for us. All of this is relevant because ePowertrains have up to 2.5x more gears than conventional axles, up to 23 gears. We are uniquely positioned to benefit as the market transitions to electric powertrains, and this is why we are at the forefront of moving the industry in this direction. To complement our ePowertrain products, we acquired Transpower, a company that specializes in heavy-duty electric vehicle conversions. Through Transpower, we've now integrated over 180 vehicles across a variety of heavy-duty market segments. This acquisition was important to us for a number of reasons. First, some of our key customers want a supplier that can provide a complete turnkey electric vehicle system to them, not only including the electric powertrain, but also the battery packs and the battery management system and the power controls and accessories subsystem, what we call a PCAS, which includes the vehicle controller, the electric accessories, the high and low voltage distribution systems, and onboard charging unit. TransPower enables us to do that, which then helps us get our ePowertrains on more vehicles. Essentially, our EV kits are another path to market for our ePowertrains. Second, Transpower brought a wealth of experience in vehicle controls across the breadth of applications. This real-world experience has been invaluable in strengthening our controls and software development capabilities. Third, we now have an extensive fleet of development vehicles to validate our ePowertrains. We recognized early on that we need to get our ePowertrains on as many trucks as possible and accumulate as many miles as possible to drive reliability growth. TransPower has been instrumental in doing that, essentially growing our test fleet exponentially. Let's take a closer look. Meritor has been an industrial company making axles for over 100 years. Now we're adding motors, transmissions, and power electronics. From a prototype demonstrator to a full production validated product, Meritor has become a powertrain provider, not just an axle provider. Our team designs, validates, and manufactures full EV kits with the Meritor ePowertrain, supporting heavy-duty tractors, drayage applications, and heavy-duty refuse vehicles. These vehicles have been tried and tested from a durability and reliability perspective. The acceleration, the quietness and smoothness of the ride, and overall performance is certainly appealing to a driver, but most notably, our customers are ensured to have an outstanding experience due to the benefit of zero-emission technology. As the market adopts, we will not only grow with it, with our partners, we will lead it. Turning now to software and controls. This is another area of differentiation for us because we are focusing on delivering automotive grade software with all of our electric powertrains and EV kits. So what does automotive grade mean? It means we are developing our software to automotive standards that are not yet even prevalent in the commercial vehicle industry today. We're leading the way with ISO 26262 functional safety designs, following full ASPICE software design processes, making our software AUTOSAR compliant and designing our own PCBs with the most updated and capable microcontroller families with cybersecurity features. As I mentioned previously, our acquisition of Transpower added vehicle controls to our portfolio. This enables us to offer more software application features to our customers, such as battery charging management, and torque path management, even when we don't provide the complete EV kit, because we can embed these same features in our ePowertrain controller. We are bringing advanced ePowertrain controls to market, such as staggered shifting, adaptive shift maps, and slip control, features our customers value and are willing to pay incrementally for. We are applying this capability to our conventional axles and brakes as well, adding intelligent features like brake wear prognostics and wheel-end monitoring that notifies fleet managers of issues before they happen. We're setting ourselves up such that with every hard part we sell, we also have optional software features and analytics we can provide to help our fleet customers with diagnostics, prognostics, maintenance, and aftermarket parts. It's in this way that we are transforming our company from a traditional drivetrain manufacturing company into an electric powertrain technology company. Going from our M2019 plan to our M2022 plan, we've built on our core capabilities in axles, brakes, drivelines, and gearing by adding electric powertrains, EV system integration, and full EV kits, powertrain controls, and vehicle controls. We're adding smart sensors to our traditional products, and we've strengthened our internal software development capabilities. We are refocusing the organization on electronics and algorithms. We're not satisfied with that. Looking forward to our M2025 plan, we are focusing on growing our capabilities in power electronics, expanding our collaborations in motors and inverters, and bringing diagnostic and prognostic analytics to our customers through the cloud. It's a long and exciting journey, but one we started and are executing. As the evolution occurs, Meritor is well differentiated to win. We have a global footprint and scale, extensive gearing capabilities, automotive-grade software and controls, modular integrated ePowertrains built on our traditional axle platforms, full electric system solutions, vehicle integration capabilities, 180 vehicles on the road today, and we are in production. Keep in mind, heavy-duty commercial truck and bus axles see the harshest environments of any component in the industry. They carry incredible amounts of loads. They go as fast as passenger cars down the highway and then get off and go off-road. In some cases, they see massive shocks and vibrations. They start and stop all day long, every day, and they have to last for 500,000 to 1 million miles. The duty cycles are extreme and so is the abuse. That is the environment we know. When we talk about our 110-year history, we're talking about more than a century of developing products that exceed our customers' expectations in harsh conditions. This is another reason why our customers have peace of mind when they select our products, and why Meritor will lead the industry in electrification for the next 25 years, just as we have for the past 25 years. Now let's talk about our core business. Overall, the global market for commercial trucks is forecast to grow through 2030. The internal combustion engine market will remain relatively constant while electric trucks demand grows through 2030. We plan to grow in markets outside North America and Europe, with over 75% of our growth coming from outside these regions, mainly Asia Pacific. As you can see with the previous M plans, we've been successful in growing outside our core markets. This diversification means we're less dependent on our cyclical markets and our strong market positions in North America and Europe. With that in mind, we have another agreement to announce today. Meritor will supply 100% of the rear axles for the first Daimler-branded truck, called the Actros, in the China market. The China on-highway market is shifting towards higher quality and more efficient products. Production is anticipated to start by the end of 2022. Daimler's joint venture with Foton will produce and distribute Mercedes-Benz trucks in China. Now, we're pleased to bring to you comments from Dr. Holger Scherr, President and CEO of Beijing Foton Daimler Automotive Co. Ltd. I'm Holger Scherr from Daimler Truck, and we will build Mercedes-Benz trucks in China soon. China is by far the biggest heavy-duty truck market of the world last year, bigger than all other markets altogether. Here we as a leader in heavy-duty truck want to be and want to perform. Up to now, the Chinese volume market is basically covered by Chinese domestic players only, as price was overriding every other truck buying criteria. This now is changing. We see an upgrading of the truck towards more sophisticated trucks. There's superior reliability and quality, benchmark TCO and efficiency, as well as sophisticated safety becomes a key buying criteria. First, Chinese regulations have followed European ones. Now, the regulations in China are even shaping worldwide regulations in some areas. With more technologies coming in, it's natural that the industry is upgrading. Second, the customer professionalizes more and more from owner-drivers to fleets. Third, we have more and more demanding logistics that arise. The truck and logistics industry is investment good industry, which will follow its own industry logic as it did in other material markets like U.S. or Europe. Now is the right time to bring superior European truck technology into the Chinese market. We will deliver same quality and same performance as Western countries, but with localized trucks, so we will reach beneficial cost level to become price competitive. Meritor and Daimler Truck are both companies with a long established history back over a century. We appreciate and value Meritor's widely respected global expertise, as well as Meritor's extensive local experience in China's commercial vehicle industry. It was a natural move for us to partner up with Meritor to have a reliable partner to produce our axles for our trucks in China. We rely on Meritor as a partner who will give us superior service and superior axles with benchmark quality and benchmark performance. All our Mercedes-Benz truck components are validated rigorously, also these axles. We made some adaptations to perfectly fit to our truck. We are happy with these axles, so we even put our three-pointed star onto these axles. They now are real Mercedes-Benz axles. M2025 has growth defined across all our core business platforms. As I said earlier, we have seen market share growth in most of our business. The aftermarket team is establishing an industrial business unit to capitalize on the opportunities created by the acquisition of AxleTech. We see market opportunity in defense, leveraging again the acquisitions of AxleTech and Fabco. We will be delivering a new hub reduction axle in Europe to address noise abatement standards being adopted across the continent. In our brake business, our single-piston brake, which is standard position on the Freightliner Cascadia and growing share, it will also be standard position with Volvo. M 2025 is the next chapter in our story. It is one driven off the building blocks of our previous M plans. Overall, we're driving at three financial targets as part of our next M plan. First is to grow revenue by $500 million above market during this time period, of which we expect approximately $250 million to come from electrification. Second, we're looking to expand margins to 13%. Third, we're looking to generate $600 million in free cash flow over this three-year time period. We have a proven track record as we've demonstrated time and time again our ability to achieve stretch targets. The foundation and platform has been set from the past. In M 2016, we expanded EBITDA margins by 300 basis points. In M 2019, we doubled earnings per share. In M2022, which we're in the last year of the plan, we expect to drive a significant step-up in cash flow conversion. The true north star of this plan is to accelerate our pathway in electrification and position the company for $1.5 billion in revenue in 2030, while at the same time, driving significant shareholder value throughout our M2025 time horizon. As we think about the growth trajectory for electrification adoption, we are providing a market view by region for both 2025 and 2030. There is a significant range of forecasts around the timing transition to electrification for the commercial vehicle market. We have used this input, along with our own internal assumptions, to develop our forecast. As a percentage of the market, North America and Europe are expected to lead the electrification adoption through 2030, where we are currently projecting a 30% adoption rate in that time period. Over the next three years, we do expect most of the markets to slowly ramp up, and at the 2025 levels, most markets, especially North America and Europe, are expected to be around 10%. China has led electrification adoption primarily through the bus market in a remote mount solution architecture and is expected to transition a little bit more slowly to ePowertrain. Our other key markets in South America and India will initially lag in electrification adoption. As we see those markets, as they get closer to the end of the next decade, we expect them to be about 10% and 15% respectively. The architecture is predominantly remote mount today, but ePowertrain is expected to be the dominant architecture by the end of the decade. Overall, the transition to electrification is providing a sea change event for the industry and one that Meritor will be at the forefront of. Looking at what this means for Meritor, in 2022, our e-business revenue is relatively modest at about $30 million. We are currently spending about $45 million of expense this year in 2022 as we did in 2021, as we continue to invest for the future. As we look forward in this M2025 plan, we do see peak expense levels for our electrification spend in 2023. Additionally, we are looking to increase our research and development expense by 20%-25% during this time period. In total, by 2025, we are driving revenue to increase by $250 million and have breakeven EBITDA margins. If you think about it, revenue conversion on this incremental $250 million is approximately 20%, which is consistent with what Meritor has done in the past. As revenue accelerates towards 2030, margin will become more accretive. In fact, EBITDA margin for the EV business is expected to be in the high teens as we get into 2030. Our 2030 profile is to have $1.5 billion of electrification revenue driven by higher content and new business wins. In addition to our growing electrification business, we are also planning to grow our core business during M 2025. Based on our previous track record, we expect to deliver $500 million of revenue outperformance by 2025, half of which is coming from electrification, but the other half is the outperformance we are seeing in our core markets. Replacement levels are increasing around the world, leading to an elongated truck cycle. We anticipate more than 75% of our core growth will be outside the North America and European linehaul markets, and we are well on our way to achieve this market outperformance objective, beginning with the Daimler China award that we announced today. Building on our track record, we will continue our journey of margin expansion as we drive toward a 13% EBITDA margin by 2025. Specific drivers in this plan include electrification earnings improvement to break even, greater than 20% earnings conversion on higher revenue growth, and continued operational performance. We do expect pension income to be lower in 2025 as we further de-risk our plans in preparation for an eventual annuitization. At the completion of M 2025, we expect to deliver almost 600 basis points of margin expansion since we began the M plans. One of the key tenets of M 2025 is centered on free cash flow. During the three-year timeframe, our key objective is to generate $600 million of free cash flow. If I were to include our 2022 cash flow expectations of around $200 million, we will generate approximately $800 million in free cash flow during this time period, which represents over 40% of our market cap. From a planning perspective, embedded in our assumptions is an increase of capital expenditures to 3% of revenue, which is a $25 million-$30 million annual increase in order to support our growth requirements. Overall, we anticipate significant free cash flow generation that will drive and create value for our shareholders. Let's talk about capital allocation. Our balance sheet is in strong position, and we are targeting to maintain leverage at 1.5x-2x. Since we are in this range now, we do not need to allocate any capital to pay down debt. We optimize our cost of capital at this leverage level, which is consistent with strong BB credit metrics. In addition, our pension plans are actually overfunded with limited future required contribution. What are we gonna do with all this cash? First, we will further invest in the business to accelerate growth opportunities in electrification and industrial automation and advancements. We will also consider strategic and accretive M&A that fit within our growth objectives, and we will opportunistically allocate capital for share repurchases. As a reminder, since the beginning of our M plans, we have repurchased over 35 million shares and have returned over $600 million to our shareholders. Through 2025, we expect strong global truck markets, new electrification business of $250 million on a pathway to $1.5 billion by 2030, core revenue growth of $250 million, break-even electrification margins by 2025, and free cash flow generation of $600 million, resulting in an M2025 profile that includes revenue of $4.6 billion-$4.8 billion, an adjusted EBITDA margin of 13%, and $5 of earnings per share. At the heart of Meritor is our people. Safety and quality are most important to us. Our M2025 target for recordable incidents is 0.5 on a journey to zero. Focusing on quality, our target is 20 PPM. To drive this, we're expanding our Industry 4.0 initiative. To illustrate this, let's take a look at Cameri, Italy, our European axle plant. Over the last several years, Meritor has invested in Industry 4.0. It helps empower what we do. Our European plants are fully connected, which has allowed us to optimize capacity and increase productivity by 5%. The continuous and centralized monitoring of machine status allows for preventive maintenance and has lowered unforeseen downtime, ensuring 99% delivery accuracy. The automated processes allow for increased flexibility, benefiting our customers and helping us improve quality levels while creating a safer and more ergonomic work environment for our people. Digitalization as well as digital tracking support sustainability, leading to paper-free plants in Europe and reducing landfill waste to nearly zero. Industry 4.0 is part of Meritor's M2025 plan as we prepare our operations for the road to the future. We're also taking steps to expand the diversity of our employees with actions like inclusiveness training and diverse mentoring programs. We appreciate that the pandemic has made people think about their careers. We want Meritor to be a happy and preferred workplace. We're initiating actions like hybrid schedules, recognition events, and many others to attract and retain great employees. As mentioned earlier, we're excited to introduce new sustainability goals. We have been working with ESG in mind for a very long time, and we have many initiatives underway. Blue Horizon products are reshaping the industry and helping our customers meet their sustainability goals. We're active in the communities in which we operate, with one example being Focus: HOPE, where we have helped fund truck driver training programs. We're also the largest brake shoe remanufacturer in North America. Let's take you on a trip to Plainfield, Indiana, to show you the difference we're making. Welcome to Meritor's Plainfield, Indiana, remanufacturing facility. At this site, we remanufacture used components like brakes and axle differentials, taking them back to like-new performance. We are the leading commercial vehicle brake shoe remanufacturing operation in North America, remanning more than twice the volume of brake shoes versus the next closest competitor each year. This results in significant raw material and energy savings. In one year, we remanned 5.2 million brake shoes, 12,336 brake calipers, and 1,260 differentials. This results in a highly positive environmental impact as we avoid using nearly 31,000 tons of raw steel. Certain products, like brake shoes, can be remanufactured many times, further contributing to cost, material, and energy savings. Our commitment to quality ensures that only components that can be remanufactured to work at least as good as new are used. When they are not, we recycle them in the most efficient way possible. In just one year, we recycle over 7 million pounds of metal. In each of our locations, we strive to minimize negative environmental impacts. Through efficiency in our processes, the use of recyclable materials, and sustainable manufacturing, we continue to work towards a more sustainable carbon neutral future. Our sustainability targets for M2025 and beyond are reduce emissions by 25% by 2025, 50% by 2030, and to be carbon neutral by 2050. As part of this journey, we're committed to transparency and accountability. We will adhere to third-party standards and audits. A portion of our long-term compensation will also be tied to these goals to ensure alignment to achieve these targets. As we close, I want to reinforce the key points of today's program. Meritor is positioned for $500 million of growth above markets. We will accelerate our journey to electrification with 3x-4x content opportunity and $1.5 billion of electric revenue by 2030. At the same time, we will expand margin and deliver $600 million of free cash flow. We have a demonstrated track record of performance with our first three plans. As we look to the future and put in place our bold M 2025 plan, Meritor will lead the market. We are powering life forward.