AXL - Earnings call transcript Q1 2020 | American Axle & Manufacturing Holdings, Inc.

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Operator

Good morning. My name is Chad, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the American Axle & Manufacturing First Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. reminder, is a recorded. As Instructions] today's being call [Operator

sir. conference to to Investor I ahead, like the Relations. call go of would now Director turn over Parsons, Mr. Please Jason

Jason Parsons

would Thank announcement. like joining you, on quarter we this first call. AAM's good quarter released Chad, morning, our us to everyone first who and welcome is Earlier morning, earnings I XXXX earnings

www.aam.com, services. on access Investor Relations website, this our newswire PR announcement the and can the You of through page

this for listen conference on can of XXth. also This slides You be beginning website X-XXX-XXX-XXXX, To supplemental page replay Investors well. this dial available May our XXXXXXXX. at to call of access can find the replay code X replay will Time call, p.m. as you a Eastern

like predicted everyone discussed remind which begin, quantified, Before from subject that contain and those would be we discussed. this may in future operations risks and forward-looking I cannot or materially matters to which comments results differ statements may of call activities to and cause uncertainties the and to

measures measures. a we financial regarding additional measures information refer to the our with to filings on we Commission. website. you non-GAAP GAAP this and that reconciliation Exchange certain of financial For these our Securities Also non-GAAP may as refer these during ask as to information, well call, Information non-GAAP is available

over things CEO, and Chairman me David AAM's let to that, turn With Dauch.

David Dauch

for to and joining Thank AAM's today everyone. of results you us first you, Jason, quarter for XXXX. good Thank morning, financial discuss the

comments highlight first Financial May, Officer. XXXX. today today, Simonte, my Chris President; and Mike AAM's Chief are: Vice Joining the begin the quarter AAM's of review I'll call me on our and To President

are pandemic how how discuss our our COVID-XX business. will adjusting impacting and is we Second, global operations we

profitably will vehicle global our discuss operate previously are steps production we our generate planned. we flow at level to discuss current scenario of significant light also reduced lastly, a business cash will structurally cash to realize and free XXXX. taking breakeven And for flow We as

Chris up liquidity first and financial of the the have. production. that results then quarter will XXXX. free open were XXXX call in to of global covers X.XX first performance the any strong COVID-XX the may flow on details X.XX of cash of impact questions unfavorable and After operating delivered the vehicle all our for AAM first generation status, AAM's we billion, quarter sales light despite compared XXXX billion quarter you

primarily The decrease our two a in year-over-year reflects revenues on basis factors.

unfavorable The due this shutdowns global that consumer to first quarter We approximately XXX of in million the in reduction estimate had production impact and an the relates COVID-XX of pandemic. demand to XXXX. first

was XXXX. to in of December first to operations, in longer In in AAM's of included U.S. compared base, a XXXX quarter XXXX which starting XXXX million sales. quarter the of the casting related addition, million adjusted sales our our therefore XXX was million or first sales. sales XXX.X quarter of XX.X% of or part and our EBITDA XX.X% XXX sold is is XXXX first This of iron no in

estimated impact iron the the and related to casting XX first to million of Our COVID-XX of of million $XX included U.S. quarter of business. down first year-over-year shutdown was adjusted production EBITDA XXXX because our quarter related the

year-over-year was in upside, the of the the performance margin However, and on launch lower improved the counterparts driver offset improvement. main costs operating decreases XXXX first significant quarter of

share earnings compared of per share per that XXXX. adjusted of was $X.XX XXXX share. first by quarter share, the impacted to in per $X.XX AAM COVID-XX quarter $X.XX approximately the AAM's in EPS estimates per first

XXXX the the free of a cash $XXX over quarter bright in We of compared use of first cash flow million, during free Another $XX the of flow. sport XXXX. was quarter million cash over generation to of adjusted of in our first generated quarter

XXXX of year. quarter first spent the lower in of in quarter XX was last what spending million the over capital we first than Our

to also favorable the details information provide will in Chris of regarding capital, our few additional compared last just year. working here. a We minutes experienced financial results

call our AAM, impacting and health it impacts business. COVID-XX to directly I'd the doing the part how and long-term crisis, today, implications like As address what address to of on the our is short-term we're

our On have of dealing severely cost has Slide and we in China, actions the in taken flexing can January AAM our to related the Starting the associates, production X been amidst governmental with and automotive crisis cash. global Europe actions in then and preserving in impacted you and coronavirus North of March, structure support issues operations. deck, February while presentation in shutdowns see some have the and industry America

in We're to up Europe in then begin June. and mid-May and continue production increase currently throughout of customer production a here America planning the slowly period ramp North to time month to the for

the China production our restart North look focused taking associates, As Europe in and to our planned America, staggered, production necessary to safeguard our we within while restart laser steps operations. ramped up facilities on operations and we are supporting customers in and other

to a that the and to me directly reports developments. on COVID-XX has our the meet and cross-functional and issues report on impact mitigate our As to company-wide business, taskforce taken as AAM far global daily actions COVID-XX track we established

Tier Disease that this workplace comprehensive Organization OEMs, a we've for and and a COVID-XX as as published up Center with peers is the included OESA own safety Control Second, Health guide we our input World facility readiness, input. guide guidelines well the X that select worked and AAM on powering benchmark

for semi-variable as perspective, the workforce, of across XX%, our executive our cost will of reductions reduction starting reductions the rest salaried workforce. our also overhead salaried We've such throughout XXXX. flexing all pay a XX% These implemented for at our officers, we're including hourly Directors material, be costs of variable of and utilities. direct mostly attacked Board with and variable From wages, XX% remainder costs

our reduced to We identified XXXX. million the and all current year to in spending in schedule. approximately and for have reductions launch assessment market $XXX forecast other million expected spending currently analyzed the salaried from reduce discretionary achieved million have $XX capital of customer for $XXX on We our overhead opportunities based and corporate or be We to costs overhead cost delay expenditures.

And an COVID-XX our as current lastly, has it additional a difficult recently announced for of vehicle to business provides very which the AAM amendment impact to adjust flexibility future global requires challenging time appreciate who prompt we financial say, credit very sacrifice and for associate. that have everyone. we our level swift on and Needless teamwork required demonstrated agreement, much contributed our production. of our response. appropriate light global each and AAM actions Reacting and We tremendous to crisis has to the decisive from a associates been

executive including level we the and guidance our level uncertainty XXth. COVID-XX, with restart of to domestic the XXXX to associated at continues we financial revised are the not Due and financial date result, plan, issuing and and orders, volumes ultimately remain end high Clearly, targets this withdrew production a customer uncertainty as consumer state on country XXXX And global of time. March demand.

is cash initial However, scenario year with breakeven a breakeven our to we consistent of estimate year. our the breakeven XX% We the cash our expectations full are for adjusted perspective which free we offering scenario XX% in than This flow are very flow free previous in be from XXXX the view that year. sales for cash disclosures. the lower can

billion year XXXX, liquidity Assuming below how flow is mentioned This which capital in and earlier. factors would and we target at cost scenario. how this are to over difficult the a meets well the I adjusted this end the experience liquidity our of analysis for spending scenario or be dollars, today, reductions total Again, reasonable free uncertainty exists the breakeven cash level. that that will is significant likely gauge with we is above it levels our it

and and from of to -- made. a previous and the solid we I up But it down believe reflect still assertions represents have baseline use confirmation

eventual production, that new not and for ramp the is as we As of vehicle normal the that and it the look plan what we to health we important new safety, look to to demand. it approach only up at consumer like, but looked globalized relates will future, manufacturing the

our production we but taking to through our margins to leading billion at going generate cash and The profit $XX how approximately only we a that temporary position restructure environment. and focused We're resilient are maintain profitable level. on strong not aim and industry flow forward business being our lower crisis, actions business this be

we're are are we and reassessing structure right next capacity optimization. expectation demand, size overhead We realigning costs actively base planning of vehicle that to an or and of to capital consolidation for vehicle the targeting global And capacity and facility support and sales opportunities demand. reduce X% updated to our to analyzing several light expenditures cost current this identifying years. below supply light We're to adjusted

future success, of difficult we opportunity this way an In opportunity position taking our to our for we and this every were company there's out make very time. crisis, as

to drive technology. transition like I'd electric Chris, positive developments to some our as Before relate discuss to I they

recognized AAM's industry I First, serves awards, recently News benchmark which technology as for two PACE mention that innovation. again was two with and Automotive

won technology. recognize I-PACE. also our These global drive along electric award honored ability AAM's driveline, electric vehicle electric units best-in-class electric featured as customer software, a in awards Jaguar the performance. and integration, our validate collaborate fully effectively rear with peer the further AAM case We're in on both technology only award controls market-leading to the front deliver NVH not Rover and this to propulsion but innovation and our for with partnership Jaguar the for to position Land leader AAM's

program value China. new in gaining This local the also it this wins, second program new are to China, battery in market. Like we brand driving relates part rewarded our of E-Drive customer. This in electric we the growth new our our this announce electric as brand, clearly and electric to We're in market. drive, was last one win a will front vehicle another support awards, happy Recently, business momentum Chinese another is the driveline wheel technology.

see while grow growing cost It's our share vehicles in tightly our for our and China invest of future in important growth. plan our future. opportunities energy market demand the believe and customer we and and We to structure, remain the we strongly profitable new many relationships, AAM our positioning leadership business realigning to technology are our steadfast new to that note managing to

We electric continue will next invest important growth business generation book to business support drive propulsion and we to launches, new solutions. of to and the we organic customer in profitable continue alternative seek will continue opportunities, and through

And with our now Chris and call let Chris? over that, Vice Chief turn Financial President May. Officer, me to the

Chris May

our and the cover of the results of good I I today. morning to will comments. prepared XXXX will financial David, slide part refer earnings you, Thank deck as details first quarter my also of everyone. you with

started So let's and get go with ahead sales.

the AAM XXXX. walk sales. first quarter the first shows in XXXX, billion to of quarter of down were first sales the a quarter sales a quarter first X.XX X billion, XXXX compared of In XXXX X.XX Slide

First, of we million sale quarter set to reflect in casting the down sales XXXX. XXXX first business the was of unit by that $XXX December our U.S. completed

of our the We having the shutdowns impact impact COVID-XX-related quarterly quarter an of estimated production certainly XXXX first $XXX globe the million, in was across significant and a unexpected results. the on

we approximately of see of did a million. Excluding COVID-XX, impact benefit mix $XX volume the of other

also foreign of the currency continue resulting in to first in the $XX metal in of and see trend prices market year-over-year sales XXXX, We lower a of million. decrease quarter

of This XXXX in Now, profitability. of the impact. operating sales, of was performance along of driven XXXX. XXXX of or to of This increase $XXX.X productivity on despite of This mainly U.S. business. profit basis the the $XXX XX.X% represents XX.X% sales. or basis million quarter is costs XX.X% XXXX. first or million in sales by to and compared margin million launch EBITDA $XXX.X unfavorable margin in the on lower let's sale $XXX.X increased first first compares as first EBITDA move million was XXX year-over-year casting in improved quarter in to or quarter the XX.X% COVID-XX Adjusted our Gross point lower of quarter the a with in margin

year-over-year see down Slide adjusted of details. more for You can X walk EBITDA on

after walk of with back the to of sale positive stay-at-home impact impacted from lower shutdowns related of mix first our in up COVID-XX about U.S. of did similar with margin to of just detrimental EBITDA a see orders in our comparable XXXX sales mix business. quarter The to adjusted benefit XXXX. being $XX estimated and volume by casting figures casting the production providing XX%. EBITDA governmental a quarter EBITDA and step an first to million, factor the other We production first representing Our a

catalysts positively we benefits year factors productivity performance, for being the operating of AAM back COVID-XX drove compared about our And the the And to and we significantly billion costs first expect and certainly quarter couple and factors we saw positive XXXX. these lower We by the once of from and impacted in the continue disruption. year-over-year the of improvement launch to beginning of the in spoke $XX over at to running XXXX quarter before these first next get other became operations contribute months. XXXX,

goodwill XXXX of impairment recorded accounting in of $XXX first charge million. a non-cash also We quarter the

annual and COVID-XX future as potential typically to production discount changes it represented by as While their in impairment. such demand test our disruption impacts, an lower to the inputs process on pandemic market related global projected have related to and driven assessment. indicator This result our rates was compared from production volumes primarily will goodwill for to last increased

compared quarter million $XX.X We was first first taxes. $XX.X expense $XX.X savings see decrease of million XXXX sales. This was take X.X% XXXX interest G&A as spending the other wage of Let in quarter and in compared me of in compared or actions in to quarter sales. SG&A million now expect reductions X.X% AAM's quarter would R&D first the $XX.X SG&A quarter hold. XXXX first million first to the to the R&D including to of and cost the of quarter or the in of second cover XXXX.

interest Net reflecting the ability our million first $XX.X year-over-year quarter $XX.X back lower In first in quarter from of calculation gain balances. carry one-time adjusted from CARES losses the to million has EPS. our recorded of million of XXXX, $X.X expense years This debt excluded prior benefit first XXXX, was to under of tax This in the the quarter we of a the impact related to XXXX, favorable overall includes compared $X.X a Act. been expense million. of

of While net all XX% into $XXX.X income that for share $XX.X to to account, first our to we during quarterly approximately effective XXXX first XXXX. the XXXX. by tax range. in million quarter Adjusted quarter full may $X.XX. sales the expect our Taking of income per net year continue be XXXX, quarter was adjusted million $X.XX -- We rate $X.XX rates share we first GAAP and related for adjusted the experience some to compared these charges was unfavorably lower per tax XXXX cost COVID-XX volatile of EPS in estimate of the for first loss the impacted quarter our EPS productions

flow to and capital be balance to Let's flow defined and sale provided by now activities the first cash equipment. $XXX.X impact payments costs. acquisition plant free million. AAM of cash from sheet. move defines onto adjusted We cash was cash free expenditures by cash flow net operating the property, free plus cash net of operating flow of for related quarter proceeds provided be for XXXX restructuring excluding activities the Net and of cash

the related net XXXX of property, and first was expenditures, for activity XX.X million. equipment Capital the payments proceeds XX.X million. for Cash of restructuring quarter of acquisition for quarter first the sale XXXX from plant and of was

million due restructuring between $XX consumer full beginning to million at the We our vehicle take restructuring future and acquisition in to actions be taking the additional pandemic global to payments and and estimates COVID-XX to from demand. to the light up response plan $XX year related production of for the XXXX, impacts that expected the of initial on year we're expect

adjusted of that was of million cutting and of quarter generated the last AAM significant XXXX. half compared cash free in benefited capital from XXXX. $XXX capital impact year million. nearly the in of $XX.X to activity, free losses. XXXX, of from or adjusted Reflecting working a the We outflow cut first spending in improvement saw first this We quarter quarter the cash is flow This first

leverage net months EBITDA March. of EBITDA. takes quarter times From divided ended cash of perspective, our we a at debt minus X.X with debt adjusted of net to a LTM adjusted last XX ratio the This the or total balances debt our leverage end available by calculation the

slight While from COVID-XX EBITDA as quarter, of the adjusted ratio we we cash flow of in generated on of free of in debt the a lowered a levels XXXX. net increase result this our resulted end first the the impact our

In Slide $XXX redeemed maturity our we schedule. On notes. quarter, our first XXXX have the XX, debt of we million

April as our our things, financial financial navigate maintenance revise we the uncertainty on covenants additional agreement addition In XXth, other our we to provide among credit to in exists amended flexibility today. that business

of We we revolver do cash of cash we of Since significant debt the $XXX hand ended of our end to have hand. XXXX, million $XXX XX, on including at million quarter, any down maturities $XXX October March the drew on our on million not until XXXX. drew an We proceeds hold additional on revolver.

we XXXX. important notes regarding few Slide of a On quarter highlighted the XX, second

of we these customers automotive industry uncertainty in already and are and entire While our the the chain. resumption in remains the restarts quarter, through key production related one regions, to including significant of the month pace supply of the by effectiveness

and We production America and are throughout month in increase ramp in North in a up the to mid-May continue currently June. to phase expecting approach begin Europe production of

Given our some be in production. supplier and will the as cost in uncertainty, we efficiency planning including there that we're startup resumed

We $XX needs million be in currently to estimate XXXX. approximately

additional the these $X.X should with we billion reduction second end actions. over offset liquidity. the Despite challenges in However, facing, we we quarter than with AAM's more to expect costs, are cost

the information flow on While we're full with not year. our providing for the you any scenario for year will cash XXXX, free provide breakeven financial targets David some

the initial David to that walks flow where on our some to table revenue XX% XXXX adjusted our gets to loss the takes on midpoint the the of assumptions. starts show down for scenario On EBITDA, of from cash EBITDA from XX% Slide puts is expect based us you left initial target adjusted that breakeven to we XX, with midpoint our our XXXX The targets XXXX two assumption discussed. the we have and and included financial initial our

only our include in volumes accounted assumed will initiatives and for start-up savings minimize on as it also benefit for are planning but AAM Most beyond. focused savings but to We our believe efficiencies start-up target the the inefficiency that not reduction well. production expenses to very prudent diligently in expected cost working importantly, those cost We're XXXX significant for and purposes. we're

in structure top savings production adjustments second Our staffing areas adjusting wage rate a cost of variable in fixed of are cost quarter, the reductions temporary run on focus that level to cost lower began of cost reductions, effective of other to indirect conduct to technologies our more and ways elements by office overhead, utilities, back including so labor reduce forth. even support on and so facilities, business leveraging travel, demand,

Beyond the $XX revised the EBITDA of of about payments interest approximately tax our than expected initial to reduce year. million million, down $XXX and at of the beginning expectations capital million, adjusted spending which million, lower amount, we is $XXX payments $XX

an We expect as of positive cash working inventory adjusted to estimated reductions and items be $XX free million, in other resulting flow approximately breakeven. capital

and on duration AAM is playbook our preservation flow managing all to breakeven and slightly takes our based downside of approach target we free taking. the levels, shows the downs. The to would in cash initial This market industry walk actions on cash of level. about This we're right different new expected the demonstrates demands. scenarios offset the walks protection different the which the breadth cash slide and take a actions and talked of from same implications conclusion COVID-XX the We've

both and demand program growth. in implications success effect. our on support future full lower be actions, taking is and scheduled positioned now ability profitable adjusting production future while launches to focused vehicle to short-term We're our important decisive business for of playbook financial customer and light We're the with ensuring volumes. The long-term

and summary shutdowns and on me move AAM by will availability production in at COVID-XX. few liquidity look as cash face the Q&A, to has longer-term. short-term revolver the the AAM we end challenges opportunities handle with with to I and hand points, near-term let significant Before a on the caused

difficult management for playbook is and from team, cost variable As structure, that established AAM experience all benefiting declines our production. in times,

with base will investments. supply other way critical customers, production will up associates capital for AAM and support safe and continue healthy and important work to to a our R&D in and stakeholders with launches customer ramp

exit company leaner years benefit disruption and the and upsizing for opportunity to have expect this come. We celebrating to a and temporary restructuring to business stronger by existing plans

following flow is American AAM profitable a impacts. SAAR in the And changes, our to focused COVID free be positioning that we near-term North XX generate significant will cash and if production on unit million environment business do. U.S. environment

call can your here we Jason participation back for you time the I'm to and stop going Q&A. Thank on and to the today. Jason. call the start over turn so

Jason Parsons

Thank you, you, David. Chris and thank

you time limit more some than reserved your questions two. would to questions. have ask I take choose to that no We

any So have. with at this may to Chad you proceed time, I'll turn questions over it to

Operator

from you. Instructions]. first ahead. will our Thank of with question Please [Operator come And America. John Bank Murphy go

John Murphy

if it the that a balance sheet, in have you've here quickly. really A reacting you're openings opportunistically bluntly here windows the or idea? situation good very really capital and headlock first got think I'm on consider you a though, of put in and you that good do question around seems that? raise Or done were sheet, entertain it don't curious in shape to kind even costs, this at balance just to job any just really there would reasonable

Chris May

is this John, Chris. Look,

we're our from an in and constantly looking consider. we'll I maturity table, First, tell there perspective, at but you very certainly if I good continued shape, think will to opportunity, we're liquidity, our liquidity a was access

John Murphy

that as folks? richer and and SUVs difference significant then I as question a to high probably as And they lot of by in curious, it's going mixes like I'm a here be an look appreciated There's up most automakers to crossovers, you to the market, low, lot a sort because there's wrap be vehicle, highest seems would the mix of have profitable might just mean, around going of of restart if North maybe and the pickups, going on opportunity this, under vehicles, GM a range particularly of it content be per real focus American obviously sort at on things really second remind and restart. of you by can producing the get us in you here.

David Dauch

John, this is David.

content as vehicle, around to far As maybe $X,XXX $X,XXX. up full-size average, on anywhere John, truck for ranges between

$X,XXX On things, in the range. it's $X,XXX, crossover vehicle that side of

So spot go comments their forward. profitable said, the we in XX%. we've positioned American own been your truck segments. Axle full-size years over vehicles marketplace the have was over it OEMs benefit that regards crossover should Those And as very prioritize favorably to, with profitability the we in segments and continued to on or for as the where those grow the needs

it over implemented health taking But year last the sales on that the sweet number XX% Last with are really now, and month, was SUVs. and restart our of that one the safety safety respect same overall safety those we're new that with time, that that. of and of very write is We to workforce market and to our we communicate powering focused spot to trucks or place for associates the protocols manufacturing priority think articulate prepared put new and published our to well be to that need into guidelines, place. own guidelines. the our which At all the clearly up

will priority from richer So, at we us. the that's benefit said, the the But like you time, mix. same for

Operator

with be Please ahead. will question Research. next The Rod from Lache go Wolfe

Rod Lache

just X.X XX% of address. could you just looks it decremental. speaking revenue so first billion XXX around be your would on hypothetical this in decline So, all, EBITDA like scenario, roughly We're hoping,

seeing. you're that If some you of the that to you what lose, kind back, incremental would margins of get revenue linear be that

$X.X we than But to billion feels the other that? wanted market. and back of billion comes rest words, apply whatever, truck you if the back coming full-size similar certainly calibrate it and would incremental or faster $X.X or XX% to So, margin like think in stronger about

Chris May

here sales Chris. the this we're scenario our around previous guidance $X.X of billion. midpoint Rod, using The is

closer sales decline down you in of more this yes, ranges. this similar would little a it's flex would in billion $X.X speaking, So, generally and up terms in but analysis, to see,

Rod Lache

adjustment still things? on of is flow in you kind your Can such concern volume through. million $XX EBITDA policies Was And What's the on for given Mexico there suppliers million thinking some something that operations of then was a there benefit lastly, something what just impact. like pricing will your Or is you'd case? with One that the there? is line be. us major see there top mix and the $XX Typically, high that obviously pricing if many else? two a base of clarify just latest

Chris May

where pricing. as Rod, truly of our some mixed it answer as pricing, volumes products. contribution and your first is you've to some of volumes saw some was not contribution and volume relates we related the It indicated. of to element It's I'll in a actually high Yes, margin some other and mix part our lower question that margin we lower higher product, declines

So, it in exemplifies happened of work a the kind way to a change favorable And wholesale this with bit. quarter. little

David Dauch

to will concerned order that the to protect in is still now as come David. whole happens align clearly, the hopeful folks of starting executive value week. Michigan the of Mexico, to work working restart here It's to of Rod, forward remaining back or and May. we're industry. start allowed the mid-May time the with early now that our order this critical is OEMs, very they in the that the the base order, the trade the with for May. mid is runs government supply chain Mexico, as period the the they country end and continuity With respect in right that supply Clearly, until end hit next of all going That's still associations, probably

Rod Lache

still is to a that it is is that or working uncertain? that, you likely believe that is something happen assumption That and

David Dauch

very we're but uncertain, still It's hopeful.

Operator

from question will next ahead. come Please JP Brinkman The go with Morgan. Ryan

Ryan Brinkman

of versus on be just million March to flow is for XXst. that on expected the liquid the Firstly, Can during make liquidity, versus cetera working other bucket cash to liquidity maybe cetera? relative the us $XXX June et quarter? total change there don't are outlook in to Or or million $X.XX XXth changing for able flow over CapEx of billion we capital billion that than $X.X of impact, items that to $XXX liquidity sort assume And tantamount assumption? cash otherwise in et you than are financing that impact by or allow less cash maybe that less out

Chris May

the second working been a This with Yes, a the would but change cash Again in QX. free quarter, your and benefit very flow end QX expect were to movement have capital of start even third through would beginning We capital end the second at inputs working matters main building course there's sales. is second cash capital In of up, in cash as other flow part free no in operational than other early reduced positive liquidity. QX, small working that quarter. we the the part the consume of operations predominantly of that's you'll cash quarter, of positive the We into two decline pre-COVID. Chris. the tail the significant then back back come quarter

Ryan Brinkman

thank And the maybe can how XX XQ? about rate contained And run decremental the quarter production there? can you could we you margin, progresses? run well did that, you million be we us you. it that Is get to implemented? you decline the additional then, say decremental, terms to track? year XQ as decremental harshest think speak Okay, how full degree how just to in as your about this as decremental largest won't have, of the tracking rate to what in expect my them the has maybe you Any will million in like as think guidance quite fair given give do XX in savings year of By

Chris May

to on QX, really which XX% half. COVID the decremental is relates in our of First impact experienced your back the we part question here

that. and magnitude of expect that size with allowed in semi-fixed a bit in a bit little kind tailwind, of North in and -- year second saw. was in facility since us I you to able that little at our company based the some in but fixed the average the terms terms some dynamic costs associated cases same in actually a and change of back this But of production, the more to of broad near kind Europe higher eliminate in year that. and of the as entire because to America of time, last similar down Asia and So impact minimize a the or all company online to was of to shut were quarter, which was broad would by the we quarter, zero

Ryan Brinkman

what of breakeven could we just million differently, what the cash out in non-adjusted year it any backed restructuring Finally, scenario kind adjusted or Or savings? cost cash item, housekeeping this FCF expect just free XX a is give a said items? the flow restructuring other of

Chris May

XX Yes, it XX with we and million the to line delta in were. where XX were million on in range. Think the have items with restructuring of kind piece here we that Beginning year, associated the XX. of to previously of to we XX

Operator

question Dan next Credit come go The from with Please Suisse. Levy will ahead.

Dan Levy

to just And to own trying is CapEx million with start in CapEx launch much getting delayed? reduction. wanted the view CapEx versus this I we that discretionary how lower action of reduction cut should your is a $XX sustainable year? of CapEx of How function the simply beyond

David Dauch

some to spending customer of our we that This driven launches The reduce internal based but the associated with. programs retiming largely the obviously, on by of our and efforts retimed CapEx some were were and is David. of AAM's initiatives,

Regarding the targeting we've with for X% hold we the of less. or years to forward. that part all been going can CapEx, question We're several very your again, numbers along regards confident those second

Dan Levy

primary is an question your of but your and exposure fuel second truck we is gas softened are my and recognized then North diversifying efficiency regulations. you're exposure, environment American in And cheaper

ability provides So [advanced] tech. take the foot some on off your to and spend this pedal arguably

the structurally tech does your disruption near spend make still So spend slow how here? and North tech America what looking you term given truck? are are And you are And exposures more at the the benefits? core down

David Dauch

foremost, the cost core respect commitments At time, of core protect We've as to steadfast and the touched that. same business. going our been continue part our invest electrification. in all and we're to to spending our of reduction and to have with business R&D we first Obviously, activity, not

Dan Levy

benefits near fully as that No impact? term on

David Dauch

what engineering just we We've how spend money jeopardizing the realigned doing want propulsion to alternative advanced product an technology. our we're without for

Chris May

of that our as outside And spend. in we well savings engineering are cost actions taking

Operator

next Itay The with the Please go come question will Michaeli ahead. Citi. from

Itay Michaeli

follow I just of couple had a ups.

the on clear working I'm sure Chris. make to First capital,

source Just the you've directionally capital be half expect a then year the would laid out, analysis to we of with working cash? second of

Chris May

Yes.

in happen. fourth working have the capital see we half expect typically particular the where year back quarter that a would you to If still I benefit, of

and second the the of just of part to revert sort benefit very it It's us the downtime half and first see of quarter, third flipped back. quarter, You'll use then first the back challenging quarter, then the second half of of early nature the quarter, the of sales.

Itay Michaeli

question. for second maybe David a And

you're terms new as is what changes and that is overall to just quoting this of CapEx business cuts of there through Company the pursuing Just how in environment XXXX? we looking any the well some including of to How pursue, about, the looking? should think kind crisis? How beyond

David Dauch

volumes hard time, after is mean, clearly those capacity greater in of We're the regional business. to I to to working global up with new excess go facilities very capacity At utilization. some that'll changing, our be consolidate same drive Itay, to the changing, there's going facilities. the free volume

time, And continue sales we we any that the trim of of managements that levels feel, senior our making the mentioned to that forward. in think So, to current go confident we we're we at we the in. opportunities market not can at in can we're that have bit plan organic anything, a capitalize reduced are if still, our earlier, light But are identified. spending then that CapEx very execute I little environment in we've this the the we as that as changing on which decisions other basket we cases that

Operator

Brian Our with next question will come Barclays. from Johnson

Brian Johnson

given opportunities to been through your acquired are Rivers just kind take back? Three elaborate what a years? Axle, they before Could there ability And, properties comfortable to we issues just we've sort the the those vis-a-vis last start? as 'XX, in acquired as of going maybe Because frontlines? want -- in how and get a from the to seeing looking with you've legacy general, you consolidate with over picking feel because seen Silao, more some Are on this have the think manage to I sense how couple I at opportunities? 'XX, some you're you and that and up MPG remember to days, I'm through you of those you're at you to know we re-ramp But it. and metaldyne Mike a plants those how been close

Mike Simonte

our made but quick have team frankly, assembled you've mostly flex almost before we're last again. a that facilities quite think the cost I and wouldn't of are, exactly MPG we've around, of that but environment. to point. do time. entirely, we from not to flexing type hoping Relative look, were terms these and entirely, structure good a time we the we for have here in the adjustments, to We the muscles really of facilities, We the now adjustments do this owned same period

don't these As really between we're far concerned, others. see and we difference operations as any

areas is these of the one Brian The operations. is of some size different

these David our fixed looking footprint reduce efficiency for And so are ways not to, that in a and larger to operations, better be sizes improve cash, the can as capacity we're get operations, but we utilization, just competitive. Three same cost consolidate in and mentioned just at Guanajuato, efficient looking cost not larger but consolidating operations some and of make more more in us slightly finding into opportunities Rivers

components our to don't CapEx favorable an increase in in us show This on. a to to that capitalize incremental such We balance We're area up for is have as example. in light. activities quoting add for our business seeing shafts,

ago. the to control. operations had we've or we control our got two these a and close close So, are over But how year going that you terms very I restart challenges launch in hear of point-of-view very years is some of

fact, whole one of Chris going these and we're management the me, team details senior operations. how In into every to of restructure David, the

Brian Johnson

footprint? through follow-up. And over remind there shutdown gradual the us and just the Can of in brought faring European And a the as what terms of you restart? acquisition how that's

Mike Simonte

very our down, that brought European forging while some two business us European is, the nicely sales Republic, is are One business The footprint. business Czech was and that areas, Germany and is to a improved being restructured be sort marketplace, businesses. reflecting by us, by ready the is in now very operated Zell core footprint here they're fire And soon. we'll OEM former up The of strong team. and in that which

was those we smaller now balanced that's that business what engines in other vibration had This part small levered systems Europe in business. And our engine, of in business. is the the to originally and engines. is powertrain that of The business this businesses, driveline we control our, is our called course

displacement I hybrid engines So, think small and engines.

We this we that looking in is business one a that business So that fair consolidation. four business. across facilities there's still operate amount growth of potential some for and are

Brian Johnson

remember you to helpful, very you, how last be Mike. with hate here through I but I Thank back follow And you again, time.

Mike Simonte

when a great you cost coming on this. attractive to really incremental we for set up frankly margins to positioning, can we this with this of out do back. Well, really -- know we manage growth, going but we'd job pleased do competitive how be of very structures be we side situation. rather lot -- how of And to about the some of managing were not we is We're it to manage a And too. right we now get this quite count feel sales our

Operator

ahead. Picariello Markets. next with Capital question James KeyBanc Please The comes go from

James Picariello

Really analysis. breakeven appreciate the free cash flow

that just And go the point, be color So year? within down at is, decrementals theoretically helpful. Could implied conversion? this the of the question how the there performance revenue minimum $XXX at the would in decremental using, find level you're you'd willing scenario, would XX% scenario beyond similar sustain a in level does CapEx scenario, for that XX% to actually savings additional any revenue change, on XX% be the a million the to range all? Just that down if cost in on down at then establish

Chris May

Chris. is This

the some on slide, would you then holistic down start of would take you you actions from begin drop our relates we probably and cost think stepped capacity that contribution to be restructuring But margin a view. additional taken some would in it about you especially you'll would of would be to duration how at of that back footprint we've to look fixed next declined, this, decrement, extended, But I similar As you a loss. and rate. that would able that you'll some exactly see elements. if of the today, where some if call obviously, that standpoint playbook experience further if as We do thought some our levels, to margin we you playbook, suspect

David Dauch

David. at time, In work as to on through that is this we're we adjust will respect is minimum obviously with market the question a but This your the CapEx, be, going XXX level need and programs our but level we we support to launch understanding an operating with got and that's and the think customers. will committed to we launch be booked programs with, that that appropriate need

James Picariello

maybe that then latest award is first launch? assessment I just the just an programs the the believe the you PX award on it. a had best your timing provide in And year, on update of the Got have Yes, China, E-Drive any mid-XXXX change for a or what Europe X yet makes that can start. -- of sense. in That later to program China timing? in possibly has lot mid a this

David Dauch

calendar year European is out are but moved relatively of The slightly first overall in line. go various China things again on on the is The of program. time. that award staggered time, still But because that XXXX variants into period the

Operator

Joseph Please from RBC ahead. Capital with Spak go The Markets. next question comes

Joseph Spak

quickly I just go clarify. to to Ryan's wanted question to back

or So $XXX $XX And so you're sort million of net for commentary, lower capital some million quarter. or like your quarter, it. outflow in it over sounds the on of the like planning sounds cash that's based other the working use CapEx it of maybe

way to to for mid- XXXs high of EBITDA, sort right those think all the So about marketing factors?

Chris May

it Joe, through also we X.X going because cash you're of EBITDA as that of consume end just So, the capital some will we greater two quarter. working Remember, than articulate to it's then consume But relates And well. our lower quarter as try so operations. our yes, billion. yes, to liquidity to

move and third flow quarter. capital on customers' benefit part. or with our second ultimately be back It'll half in get the your the in working between a tied You'll startup years,

Joseph Spak

playbook. shorter. the is is then it just, the sort And of this decline, range decline think And the between duration steeper Right. Slide is like of the the unclear. we're still like the the in range. I you part of sort seems but midterm think, I sales really sales now, XX But duration interesting, maybe right put And way I and duration, the really,

of sort customers, we sure as as you some your to well. think do and of I I'm talked

So out you go whether take this preventatively? that if experience you of thinking laid just sort And in more some the here? about should maybe you about do has the sort this of rethink you aggressive can actions even playbook you cause it's of how be dire to executing with more scenario,

David Dauch

are being very We going downside aggressive be are aggressive to respect implementing and very protection with to our playbook.

a that every our SAAR year, So going year. U.S. of on that realizing be very business boxes rate full there'll the restructuring second SAAR, which of the that million. activity in to run be areas. from expect one XX all in we're you the and is here I here, we're to can focused this XX.X mentioned million million earlier, half are America four And those realigning as will Knowing be this on it North XX and units around are

Operator

question from Sinkevicius your Stanley. Morgan comes with Please last ahead. Gentlemen, Armintas go

Armintas Sinkevicius

quarter Usually in seasonally soft first pre-COVID. flow? quarter, drivers you the is free of positive about positive a the flow first that mentioned You quarter. talk even free cash cash Can

You What here? have outflows. else? the something working difference it was no cash Is capital or

David Dauch

you your had Last inventory were couple capital. But, prior then of had -- years to focus it done. a actually was we different in ebbs that working favorable outflows. QX, flows us orders, that, here CapEx we in was free years, little seasonally and positive Couple on for been it's and but of of bit flow, And Armintas. stronger cash timing

Armintas Sinkevicius

China here and their the to And you that Is of impressive what getting in are conversation award from China seeing manage running? pick up China Or operationally standpoint? out trying a starting given then, particularly environment, E-Drive to the still people up? and operations

David Dauch

couple pre-COVID time for No, Month China, a to was actually production ramping this growth obviously years. and first them very getting is of levels. April a month in Armintas. We're seeing up David, close

here. see to going within I to think continue China you're improvements going forward

caught So, they to they're pre-COVID. up almost were pretty where well

Armintas Sinkevicius

around new conversation seeing as now you are well? up pick but Right, business starting to

David Dauch

opportunities? far As award business new as

Armintas Sinkevicius

Yes. Correct.

it the one for of half things So in more sign the award, a is near-term? Or is up you come have one more to year?

David Dauch

especially think new another vehicles opportunities the as back press to energy I years be there'll push government for and incentives continues No, the they've now. more in couple and put also there,

demand going how sourcing new stimulate be vehicles, I fair our additional there'll to and that's that So, think opportunities for more energy share. will get

Jason Parsons

to look thank you I we in this all forward the We talking of future. with interest in who AAM. have call. appreciate And on you participated your certainly

Operator

concluded. attending The conference Thank presentation. for now you has today's

now disconnect. may You

American Axle & Manufacturing (AXL) 8 May 202020 Q1 Earnings call transcript