AXL - Earnings call transcript Q3 2020 | American Axle & Manufacturing Holdings, Inc.

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Operator

Good morning. My name is Steve, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the American Axle & Manufacturing’s Third 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 call to Mr. I like the over would now turn to Jason Parsons, Director of Investor Relations. Please go ahead, Mr. Parsons.

Jason Parsons

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

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

To our code listen X-XXX-XXX-XXXX, conference also a call for on today website PM Time find as available page Investor replay replay till can this well. You of Eastern PM be this November of to dial replay at call, XXXXXXXX. supplemental the can X:XX Xth. beginning XX:XX will slides you This access

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

additional reconciliation our regarding information and non-GAAP things website. of filings as to get AAM's measures Chairman financial to to over measures, well during that let certain as Dauch. with David is refer the non-GAAP refer non-GAAP Information information, these our to on turn financial this to Securities available Commission. these Also, measures. With me Exchange and you the we For we call, may ask CEO,

David Dauch

everyone. morning good and Jason you, Thank

by and compared AAM’s are the the that flow by today and results. are XXXX. $X.XX saving I'll begin President XXXX volumes cash estimate strong today, the to third approximately We of reflect Simonte, my Joining Vice To on quarter and generation quarter benefits financial production quarter $X.XX billion sales XXXX of our third Chris operating sales impacted AAM’s some COVID-XX were cost global call me for Officer. AAM's during the color quarter $XX provide in results quarter third the million. recovering president; Financial free on Mike AAM's third third billion and of AAM Chief actions. of negatively May, comments

cash generated the additional has free flow we year, a positive fourth over $XXX million of the a compared cost cash third In adjusted From XXXX AAM, quarter part addition, This to sales share included approximately items compared December are XXXX. quarter per quarter adjusted to generated of was XX% customer XXXX. This $XXX our casting our quarter quarter was as of no in of third XXXX. achieve significant earnings and third sales $XXX.X of quarterly quarter doubled XXXX the AAM million an reimbursement year-to-date $XX free $X.XX Adjusted third our was operations. from of $XXX by $XXX.X the of Adjusted strong quarterly they or Despite XXXX. related generate estimate adjusted or This negatively sales sold to these represents nearly perspective, reduction aggressive We of sales. mix, our of during million, the COVID-XX base sales for this and over a expect third million longer we U.S. for of AAM sales free in the for of despite quarter business in face of cash third flow EBITDA was actions AAM million $X.XX to benefited margin. XXXX lower challenge also challenges, the the million cash quarter EBITDA by XXXX. record the of flow XX.X% in that timing record in XXXX. to flow XXXX EBITDA iron third of in adjusted EBITDA of impacted the of

lowered our very leverage the strong nearly we the of billion of strong and in continue result have third end quarter the As of a net performance $X.X position we September. strong, cash debt flow, liquidity operating at free to from

Our take a an On Malvern an occurred all to quarter on you strong update XX, fire third Ohio. performance September at in significant minute was evacuated safely to that I’d financial experienced like highlighted unfortunate event give were and injuries. facility operating without industrial a last associates by performance month. manufacturing we our results, Thankfully, and

immense our the AAM significant disruptions. avoid any working a and with manage has around then Just suppliers customers job supply done this phenomenal to challenge our team and

In facilities other Malvern up at they've facility continuity back incident, days been metal running the addition, we utilizing the protect of forming to sections AAM of resources had and within supply. three of

work some you a that coordinate been do, today's has care can possibly around stakeholders more XXXX difficult and financial the our challenging remarks. little we our adjusted impacted and cost with have associates mitigate no are customers implications for operations everything provide behind will doing is to in pandemic economies global Significant our of we’ll prepared remain the repair doubt fire, still and we to key our production world. have to AAM In later response, I year protect that bit our a There flexed assure little a challenges everyone. structure. While schedules. the the can and to bit continue Chris color that for has

from to the volumes recover ourselves pandemic. of stronger a be have as the We industry positioned impact company

many Today, uncertainty resilient well. but slowly and many has a September, to the truck in to support, pre-COVID Asia for look key see plus world. AAM. we regions as to platforms favorable been COVID-XX. the want of light has improving North revised outlook in While schedules towards to we quickly of levels. and continues mix still a benefit and To-date, is for units key of the XX America Europe automotive Customer returned desired Most we of XXXX. strong provide has steadily recovered production the reached related million industry financial

to environment. ability of year our reduce of of deliver efforts dynamic health our as approximately our drive providing and leadership, safety and financial has business supply, $X.X balance and the our $XXX spent to our disruptions. full to range and flow the on adjust follows. emphasis million. down global were while and production through sizeable full-year and attention reducing million generate industry our our challenges in market flow cash of for the EBITDA opportunities there are AAM’s in and production year, recovering electrification. demonstrates protecting this our a strategy, technology cash, and are solid And and been reduction in much stabilize, year of and execution the Assuming flow cash on preserving slowed adjusted associates, playbook $XXX substantial you demand breakeven support this year debt $XXX million with of in of a the downside our disruptions revised continues and Sales market quarters new to ago, business and automotive continuity cash on critical of XXXX the adjusted billion, is of $XXX our performance walking enhance the the growth customers we to free for economy not launch track range our we cost industry, scenario, Two over to in cost a million the AAM investment now adjusting significant to no targets and initiatives free have with results

winning current and drive electric customers on upcoming continue award We on our support programs launches units. our to

development cost and the can capital focused segments human We’re achieving power also and drive to density, next generation investing financial various significant vehicle our that on and requirements. regions the scalable in advanced all industry be on electric technology leading of performance, competitiveness meet customer and space

and environment. We success the taking We achieve necessary have weathered difficult steps XXXX the the and industry remain XXXX an trends a heading through the to the and operational cautiously storm macro rest into about optimistic marketplace. and ever navigate of changing financial in for are facing

and You our can have optimize our structurally to continue look reduce impact on capacity, ways business, the for performance adjust initiatives savings costs. our we to had our and cost see financial

this profile. built exhibit it we profit industry that strong continue have this allowing to flow the our Chris to and plan to cash we generate in expect we prepared leading XXXX, call our to us future into year, financial place. concludes my to margins, for paving May, We and now we excitement brighter performance our an to and momentum but put morning. the positive innovative, start Chris? to continue and as build about for XXXX important relates path as head free electrifying as powertrain is and more to system compelling cash as opportunities say expectations strengthen investments developments have We'll year more advanced even tuned in as our business well And AAM this stay yield building two further out electric area. I'll close free profitable on towards electric growth next already new laser our launches focused ahead, This AAM financial solutions. is to targets turn launches drive significant with flow And over in component multiple remarks many propulsion and after more

Christopher May

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

quarter billion, third ahead third sales. were X XXXX quarter go shows XXXX. in quarter third third of Sales $X.XX $X.XX billion let's and a with the XXXX quarter sales compared So of the walk sales. of in XXXX down the start Slide to to of

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

expected the the estimated Next, related $XX Brazil we India. of be the lower we note than work impact estimate in account last the year. unfavorable two-thirds sales, third we about sales for from add XXXX third which GM the it quarter of stoppage nearly and impact Then of million. COVID-XX One of on impact to back quarter COVID-XX to approximately

$XX are exit significantly small million. and the new North of year-over-year drive million to the efficient market mix during a throughs axle came metal by AAM, volume rear they impact by Thailand operations foreign from million these its and On SUV approximately at positive independent million. by impacted axle for approximately GM’s transition accounted we’re $XX the sales highly $XX and relatively size was impacted mainly decrease global or year-over-year. million, AAM basis, ream currency pass of lightweight a white markets $XX quarter. Other driven year-over-year a by and mix by in impacted for truck in still by full approximately And beam GM’s for were pandemic by Pricing While also sales in strong $XX America.

profitability. XX.X% EBITDA in was XXXX XXXX. to million $XXX.X third the on of $XXX.X million Now of Gross Adjusted or quarter in let's profit quarter or to sales the was in XX.X% of third compared move $XXX.X million the of marks of history first time XXXX to third XXXX million This XX% adjusted sales. XX.X% margin plus the sales. of or of compares the XX% $XXX.X quarter a third EBITDA This AAM’s or post in quarter. quarter to of sales in

walk we through got how Let's there.

can EBITDA the back the comparable of down unit sale third sales, COVID-XX EBITDA to includes result to few Similar and see SUV relates backed EBITDA lower We mix significant There full the U.S. out X. GM $XX XXXX then quarter quarter provide million in after and added size XXXX. XXXX also and of walk our on profit U.S. impact of which business transition impacts You the third adjusted it a work stoppage. in items by we other a exit casting Slide impacted to of million. as up estimate the EBITDA the sales of casting of to $XX year-over-year quarter figure call the were the third that GM the Thailand approximately Other as walk. Volume approximately was a

cost third primarily one settlement third development This and thing the of will reimbursement The customer engineering higher first our This were in in net costs were quarter relates XXXX. for payments quarter in resulted ultimately R&D part and lower new our as to of product R&D $XX design of in note approximately future to customers program. to EBITDA. reimburse arrangements our quarter the or the sharing past that million

and We quarter $XX million for did higher million for costs operations COVID COVID productivity Another financial able Even operating costs. performance achieving major reduction of improvements on $XX of aligns million which savings the cost been of of on third currency see with currency expenditures. a FX. were than teams commercial in We for foreign savings settlement we and savings potential mainly in these along quarter about of market third reductions XXXX. was May, metal total to experienced But the in quarter the our and approximately when those XXXX now expect in that startup a the continue an in XXXX related to our of to by additional many we about approximately Back in million in customer the cost target and to incur costs quarter benefit in $XX out, the expected the compared $XX to mitigate And our spend inefficiency net approximately of realized backing realized factor was $X came driven originally of $X related perform of overall We third this XXXX. with avoid our financial These in quarter, AAM quarter. was XXXX. cost top in million in COVID second impressive slightly and related million had in significant the foreign for favorable an and quarter. reimbursement performance it million. $X

acquisition costs and incurred quarter. related we the restructuring to of relates it in million costs, such $X.X As

of fire related the property, that the previously These related recorded result primarily also to down a applicable the $X.X We less proceeds mentioned. deductible. Malvern as equipment million of insurance are the of plant to write and net our fire, estimated net the David damage charges expenses

impacts. the of EBITDA the event and the adjusted to related end damage caused by excluded quarter, These been from experienced at As fire we was the continue this the have EPS. adjusted extent costs of assess and

sales in third expense. look sales. million a quarter compared million X.X% of at SG&A $XX $XX.X XXXX to compares was quarter primarily million basis decrease SG&A R&D on of third the This to third reflects the discussed in of spending or recovery. XXXX. quarter third of X.X% million The take in the in a the or XXXX Let's approximately $XX.X was previously R&D including quarter of R&D in the year-over-year XXXX. $XX of

Now of million quarter let expense Taxes. quarter $XX.X Net XXXX. million me of XXXX in third third in was compared interest the to $XX.X cover Interest the as and

benefit lower in XXXX. Income million XXXX $XX debt. million tax continue interest was to We we of pay of third as to quarter costs of third the quarter experience compared a expense outstanding our down $XX.X in as

You may interest $XX related remember tax our a carryforwards. of assets deferred last valuation expense quarter that against we to recorded allowance U.S. million

third included final Treasury issued regulations the During release post changes important of quarter clarifications in and valuation quarter, the and the and additional in IRS Department XXXX. resulting us that to and ultimately this regulations allowance

in allowance quarter and tax was third rate of reversal for XXXX. income Our special adjusting effective when items the valuation XX% approximately the

in and We range. million of per fourth a drivers Adjusted compared to all third of $X.XX $X.XX share quarter of XXXX loss third the share expect tax or rate to the the quarter was compared per quarter XX% per was income in net of or XXXX. be quarter of the share cost account, $X.XX $XXX.X our the per net the to Taking XX% to of in $XXX.X XXXX quarter XXXX. share million third $X.XX in sales GAAP these in into in third earnings

million the from XXXX operating and of adjusted costs. quarter third flow million. the the of quarter of was costs adjusted operating and approximately million cost quarterly Capital for This income XXXX. third related and million. in in includes losses net We spending, cash It profits, were is for strong million. initiatives. in from free XXXX of of reflect $XX net net related provided significantly was approximately from defined with on payments cash the plus activities the end or by to restructuring operational on to activities, generated ratio adjusted cash the third equipment flow $X.X activities at to plant our excluding and of for acquisition flow times. quarter of cash XXXX Act. the debt cash sale impact under free move down by the provisions Liquidity a property, to quarter quarter perspective, flow define This payments Reflecting we XXXX proceeds of flow September cash $XXX.X was flow generation. spending EBITDA the was is LTM received expenditures $XXX.X $X.X quarter of at plant EBITDA capital cash implementation operating the property, a of CARES leverage refund, we a the be the net acquisition second received Net Cash let's net of Now capital cash of leverage the an savings and equipment. AAM’s in and the to From on of related for sale record AAM be also debt cash tax strength and utilization billion. AAM of ended cash X.X proceeds lower free free third these net of balance restructuring the sheet. $XX.X

and details We David updated of at amounts through financial have has XXXX of cash over debt no gone XXXX. September our revolver no our $X.X significant targets. until XX, maturities billion outstanding and on the full-year

So continued I ability flex and to highlights our our believe structure. adapt I will not repeat XXXX performance AAM’s cost them. in

in savings significant actions and today. guidance to and for that position believe to come. strong drive innovative cash and close progress profitability opportunity next a to operating we growth actions turn will Q&A. tuned the We're will call as savings flow turn deliver next successful over back start Stay a cost continue power important make we generation more Jason, to for Jason? on long to the XXXX electrification Thank I'm for call on note participation out time and going on for technology your can generation so year. to you time on look help these the upon cost XXXX. build working we well busy calendar. us Meanwhile, and turbulent detailed year that for Our the

Jason Parsons

Thank you, Chris and David.

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

have. questions proceed to feel So at may this please you time, any with free

Operator

John America. comes proceed. first from [Operator question from Instructions] Bank Murphy John, Your of please

John Murphy

guys. morning, Good

David Dauch

Good morning, John.

John Murphy

morning. Good

COVID. a rationalization question. obviously parts then Just of a first There's moving of lot your And around activities. some

on seems XX%, XX% quarter. based it in on you're plus XX% like the fourth number here, see, MPG like be the what got back quarter seems You even track a after what to applying in on third EBITDA we can margin adjusted

MPG So to we're we through that you could going David, XXXX just think about XXXX get the forward, there EBITDA curious, and noise? to maybe any had in that the XX% I'm and the trouble range reason is with as once XX% margin back COVID the pre you

David Dauch

year. first unprecedented obviously, year mean, morning. change And of our structural pick We're globally business be in at us. as letting world. able We've But an leading But lower that continue we the give clearly for guidance we’re changes around industry clearly given We'll outlined. level good hopeful taken we need early listen, that up to this overall perform well we a performance. to not No, next all, that structure. financial friend, make cost generate the business was you've that I have market be to our in that volumes continue that to volume will we're John, to the made any we've the to today. demand, to to regards to comfortable resized our

Christopher May

was in, of a quarters, nearly us. you favorable in nearly Yes, see point you also would million. really settle And volume Chris. this John truck cost you we mix where COVID taken to starting posted in the $XX three first during our quarter we've ahead is XX%, performance last year actions, the I savings see as this to

cost up in lining those you looking in nature, some yet deliver fit convert million in We're those very that we're as know, but are we're nice. fixed terms temporary think nature we to on of improvements. more year. continuing here And to focused really So this $XX of to

deliver margins. we're and to strong for So year, we're excited next excited

John Murphy

backlog the just Okay, question. you've on bidding views helpful. a on that's give second And Any very process, what us can there? won, any then update you

David Dauch

where be only market we're to clearly, our next ourselves programs programs our two thing two as say in we’ve well for launching point shift now in the we got as some panelists more baskets electrification proposition sure want traditional from value mean, sort vehicle of to very portion The today, about the electrification, time. OEMs share fair And we've product. advancements year, need and on can will additional at which traditional backlog I half there's opportunities, of are electrification, the we support what a the with we're the billion technology is to clearly this component what is position support production I'll $X.XX got business business. in a trying win we nearly products, our tied to make of our where of that just internally, electrification the that have new product sits marketplace to the versus with comfortable to We outsourced the be do growth. will then to out themselves and of that

John Murphy

David, mayhem, are statement? fair that made say It's is activity backlog. that things being still delays seeing you're stalled. everything it be not relatively Is after, still is a to side. in fair on right. like the going fitting progress there's The normal the amidst on that we're And there'll

David Dauch

Yes, in out product opportunities. OEMs I traditional we're looking over we're an business they'll in carry to so But more forward. forward. regard balance a are uptick going some or electrification to mean seeing our of going And opportunities, themselves seeing reduction conventional

John Murphy

very Okay, thank much. you

David Dauch

you, Thank John.

Operator

please Joe from next our Joe, RBC Capital. proceed. of Spak question comes And

Joseph Spak

everyone. morning, Good Thanks.

David Dauch

morning, Good Joe.

Joseph Spak

think did say had $XX was So back maybe at was that this talked was million in first you half higher I is it netted being $XX $XX R&D Chris, about settlement? just of million million. something, that because the want clarify rates more I to year? it But against like you a really the

Christopher May

would be is as is Yes, the as terms [indiscernible] and into $XX million the concept netted that. commercial recovery related of well two-thirds is settlement, about in EDND that that right,

to it you'd have for that. up gross So

the So range. $XX million to closer

Joseph Spak

is way go spend on forward think basis? $XX quarterly to a million the that and the right about

Christopher May

probably be traditional and probably yes. one a we'll continue resources to electrification. Yes, in towards it spend converting some related so to cost space, deploying neutral, and but of may our up the into continue product. to which we And obviously And will design bit spend terms XXXX little from generation development the some R&D near-term, next Obviously, in of deploy recall you product step of into our electrification savings commentary, to of previous million $XX you lot as $XX electrification, right, a now our probably that put range our cost initiatives rewind million million redeploy we have a us in range, place allowed in into pressing we're we're to have we previously in that cost if as we've $XX but about add to existing year-ago, was much closer to And won't done. electrification. investing as

Joseph Spak

Okay. of these or has think closer you the or of capable of you do center And and I the really as you're move to a of sort for about even versus seen customers some structure vehicles, and the which on your investing you more where seeing I’m the versus if that wheel how there, customers thinking that's then my in-house are vehicles have sort some is, in vehicle. motors the larger whether if is second what announced? of vehicles, your to you're you sort phase see we've ID question to David, right, externally, changes realize wondering any what's like more on maybe larger, plan in and structure, indicate if development of Model do you electrification. And X on X capability as the

David Dauch

necessarily the on of the out technology developing as value we an from feel that proposition technology, solution wheel well. But best cost evaluating power some with best lens, integrated of that are our inverter. ourselves differential the we more OEMs integrated motors them. the Not differential that are Joe, motor is is a center we and that electronics drive standpoint utilization electronics with and within still some still center electric into a recognize power No,

Joseph Spak

luck. Best so of Thank you much.

David Dauch

Thanks.

Operator

Our comes please proceed. question Lache from Rod of Wolfe Rod, Research. next

Rod Lache

everybody. morning, Good

David Dauch

Rod. Good morning,

Rod Lache

Can you hear me?

David Dauch

Yes.

Rod Lache

you So we if million timing, if number of I’m the able about run should So it number annualized you billion? How what of saw, kind doing EBITDA, revenue, on sustain and think mean? that exit $X.XX just we of have billion that at about guess that. would just is to reimbursement be of billion trying thinking be $XXX about commercial be annualizing would realistic were out done or that rate you to an EBITDA the a does $X.XX more could settlement $X we you

Christopher May

I one Chris. Yes, metal to through other Look, a trying about the what quarter, Rod of do effects in this some would articulate there, things couple favorable you're think right. is have sort we in

out a You that number spiked to would I on time that's try walk, don't on to from happens that just our also see based know you it time annualize, currency.

temporary, fourth the our objective be So that's actions And full-year, for $XX bit then, reduction we costs quarter, some the our in million, was pace of $XX come quarter. little that discrete I a is as you also would this tell year. on cost at to a that for inside right, million save will the mentioned, out little bit

mix the to from work probably obviously question. bit the yes, the them very were a reductions on on truck bit continue a still productivity depend of have nice strong R&D lower little the side basis, cost sales that see a wage so that on temporary But but of that we'll as on rest talking side. of bit such your leveling to things side. maybe And previous quarter about element third to we level. while Right, from focus than like a strong you'll But little a we on that. think quarterly so a that, spend little We'll So and that, perspective.

Rod Lache

run something annualized that want clear, say that some and you $X just that million, is Okay, we $XX of a is it's Is that rate. talking that we're portion or would million wouldn't about maybe $XX million but there nothing? that something that

Christopher May

right, you on scorecard. (Inaudible). rate quarterly basis, a I this that wouldn’t run just wouldn't annualize

Rod Lache

Brazil's that mean, at here. so at we're anything look really I not of the out, operating you've or you'd not The here that a dramatically that going not pointed XX Okay, right like else least right $X is out seeing looks a what there a number is not this we're that, a for don't to out we billion, mean, beyond are average other lowering be on now? things that pointed with markets, say you've it level, and but you, quarter. SAR other like were you're There's that do the I pointed you you've sustained EBITDA benefit great, mind. million keep like in

Christopher May

you at days, discretely to our even during when beginning throughout take of fact days they production right, you quarters you'll that shut typically have do quarter. you at look year. was to of above the And you have look of the the what also quarter, beyond at production look the the number third of the customers a have other have ran inside quarter, which would at the down and Yes, normal seasonality

one extrapolating take into just to you So consideration that well. have quarter, as

Rod Lache

know about in even we you'd this updated $XX that opportunities, point, that on you'd want new laid to any Or I talking be And you some should like beyond that? originally really Okay. views investment million the at out, up crank been savings thinking the David, look, areas electrification.

something So maintain? structure be see that to today is we want you'd we the should thinking cost that

David Dauch

in demand. we've business quarters multiple same David, our we're we've job this tremendous size reduce invest capacity, to advanced structurally But done to our optimize electrification going right organization a the as time, continue new and as again an to said the for market Rod, Yes, now at our is to developments. costs,

that conventional we yes, traditional leading starts to answer engine the the is on electrification, focus it's is just matter is, as industry period to and about, around is has with Obviously, that, it can us, we've cost a transition win we talked are said industry see other but that this way also time than So especially but with to volumes we look the it regions to be that today, way. utilization positioned the still lot that up long there. do turn grow, of at products, recognize the try our as The same the Malvern and fast is marketplace will growing, leader of grow to while margins, in is product we've I some experienced, and most structure, we and our that optimized of we'll capacity make market continue can as products for really to and a that I'm protect a and feel, time. IT negative to share the like question of how customers ourselves to generate growing, drive starting on it at continue our fair the we to. sure way of that when, our a we're an feel here world, those bodes I which to regions Other of the utilization. recover on able But fire position that still still to things we for really shift been positive which which that well of driven earlier, going the segments big a electrification into other world, we we've the had which to the major facilities,

Rod Lache

Great, thank you.

David Dauch

Rod. thanks Yes,

Operator

Brian Your proceed. comes Johnson please with from Barclays. Brian, next question

Brian Johnson

it looks metals, the same the the Or XX% costs are a help kind me you margin, from Let issue. decremental walk going just just million it of seasonality? could there if to it's XQ, FX the us typical to, But One, other reimbursement out does we're is questions. all that maybe back in off. two back? after XQ get with still $XX imply wanted you just coming like I

Christopher May

for little I morning, QX as our of Chris. insight think will the we Brian. give bit think call QX, as into midpoint center basically around guidance of in about equates it Yes, what that commentary is me Yes, walking my a QX. good and the full-year This EBITDA about from to let

thing step the associated well, is full-year come that million metal other market our extrapolate to obviously you out year-over-year similar, day sales sales days. out it foremost into let with XX which about while you need days again, to is really is talk very similar production million. lower very that But first production think very FX element and the the item have $XX but less similar will and I our you associated per $X did as would one-time the with You

you'll revenue. drop So decremental our up XX% when they or into you'll based associated nearly that and our with see call $XXX down you fourth guide go our that million the on revenue quarter into and profits like

as is well. a that key So piece

we you that's that the pricing versus little weighted this leveling down of full-year. the million bit, little cost in fourth have do a of terms do bit towards have quarter. bit of saw year And that quarter come fourth little a of terms little a $XX performance half in a the the the of You back that'll back a bit the half about I settle into little talked quarter through bit in third

and this activity of get I horn, back is kick that. say, around bit next you restarting of little a associated little And with year. the to our all is of piece a the expansion project balance there launch into bit, starting up some would a activities So

Brian Johnson

Okay.

you electrification of startups XQ. you and backs which give sent can GM certainly so well Secondly, you did you're electric in-source LTM your update of apart metal were axle electrification day your into to since in you then threat as to that the the largely maybe beam in you what a core your that market, the an discuss been the SUV you've know a participating business, on wrap? and into as think that from which drive your three shaft gotten number more of getting more there's as should EV number B, announced of with But stock kind painfully platforms on its announcing announcements, dying, you efforts, that traditional the of down, as solid skateboard, the plans go pursuing, do that side truck how market, pickup see the just but about we large A us

David Dauch

David. is this Brian,

strategic whether to working made a where regards made in-source a vehicle units. relationship were outsource use subsystems started with and closely different in are all, clearly to in-sourcing an the OEMs that go they have work, clearly product components LTM integrated the we understood wanting doing surprise the lines they're ever the a the standpoint. announcement supplying still work, to others, some a we're to they working they and decision We GM XXXX, from OEMs them. support been us. with to close investments are Clearly, work, full of where after in since there, will wasn't EDU very back it from need we of supporting and that our what be We've company GM looking game in or standpoint GM First battery

providing So market. the front we wheel sure that wheel some business developing to When think and on that, really it's and overall we forward all crossovers right proposition we're and -- have after to and front in performance MBG a it's defend to we in our the make don't said modular those all same picked drive going support We units today. SUVs let cost it's when we to lot we focus passenger products it's done, about the customers. That bring and space. on for we're while continuing and up working will not technology a done, competitiveness, put but to smaller value greater allows going advanced greater quite market car same power up at developed said go scalable. greater today. our about the pickups, density, time, At whole that's honestly the space packaging providing proposition that We're we're us value the picked time when drive

see growth our there. current the opportunity At time, ourselves to defend So business. we positioning we're same

I'm stated engine on still long the for I As earlier, IC pickups.

offer entrants think. FCA going propositions of they a to like value electrification going help them do what and any good and Ford for recognize I standpoint period vehicle think a time their to to them to going protect supplier, to market their truck do protect need market. all are Chrysler, longer And we're forward. share also But that than people it and are GM will be that I from there's around bringing new

are about products meeting new to or And market And to year. various very which the that of be in we capabilities generation So feel we launching in next good development the today good that technology. we're products, we’re respect production. about regards customers We where accelerating those we’ll our real in we're those, also with feel about next that feel advanced products improving with out. developments good the actively our

Brian Johnson

is like anything anything, and duty the or the in Okay, pipeline truck marketplace, wins of there? in any the sort heavier

David Dauch

As only product has electrified other do and announce be to I we're internally Ford said, have has at going will now, but the this discussions Detroit that than been to they're traditional that with in nothing decided know really GM with that need the the identified I and sourced, their don't I compared as platform Series from right anything but of on what well. they that's componentry the to of time. as Again, upstarts that customers to X F announcement do. the lower to those the volumes other we’re some in pays said, when bills is cases. for their all There entrants, today where we're a not new position electrification development with bigger are in supplying or things activity

Brian Johnson

Okay, thank you.

David Dauch

Thanks, Brian.

Operator

from And of question comes proceed. our Itay next Please Citi. Michaeli

Itay Michaeli

morning, Good thank you. Great, everyone.

David Dauch

morning. Good

Itay Michaeli

Good morning.

should about think how say talk two the to about think latest next, markets. company, let's three maybe years thoughts on for it, you hoping end we Just or your the about if revenue relative

an leverage targets? some as expect you see you hoping of and on progressing front your of in maybe how on give that of next prior market Chris, whatnot, over growth deleveraging well as the and couple update with when years, So the kind over

Christopher May

Yes, look reverse. of Itay, will gear in work obviously, the one kind of

priority One of and our is do flow a from company of we continued, us perspective, think cash for is lower that the to performance, the strong continue while building strong with key our this high so we're top flow the to for delever, obviously then leverage will it delever, to focus bit delever but a on quarter, continue objectives EBITDA a path to still generation, you CapEx, saw cash very to still favorable generation company. and us is us very operating strong obviously allow little

that see I couple the things about over years, you think markets, of per of think couple a growth next our we look on inside going As se.

that And those growth area lastly, powder winning working On space see, truck gain have areas light the example, continue metals, hyper in that's an there the business we then our component we invest pickup see obviously be sweet a you we as from to us. benefits PCS component electrification we lot segment. the a EDU now a continuing. opportunity share see of articulate us, lot a business vehicles supports or continue they that continue that side, interest traditional product our growth for as space product, and to which engines, crossover that of well, of in downsize to side, growth we David supply which that the interest set. type continuing metal consumer which for spot rising into business, from in is more see for of such a market, in in full side, vehicles, on where core the in in areas, whether forming, win to and and You even enjoy

Itay Michaeli

And That's helpful. just second question. a

are With seeing embedded the any fourth chain of supply COVID into your cases curious you quarter just any risk in weeks, unfortunately disruptions rising last couple additional quarter risk is of and if the of the in guidance? fourth that

David Dauch

in quarter down January, production. America that our regards There in part North bigger we this clearly and that announcements we've supply when have the actually through with started is. base just of when regional our to were first risks here were was we to concern. supply our But quarter in manage because announcements running watch David, mainly Obviously, the where announcements government clearly, risk country to of able operations the Europe. is successfully Itay, or third or this base and been back quarter the second

or some are of this at the as they've respect to to been are challenges right our issues nothing continuity interrupted with So COVID customer to there We've supply our all result manageable. that out of time, ourselves there a now. that. very that's But had

Christopher May

No talked full-year been that of little to We a embedded $XX as the significant have our bit balance beyond we have guidance. impacts included million year-to-date $X it in on about which to question year? of your for Itay, in guidance, this incurred million. it relates with our the as cost, over associated And about we of

David Dauch

right them. picking to is mean health going to We're is volumes the that supply base thing demands watching now forward. financial we're the be of going capital are back I placed can biggest up they stomach accelerating make that this that are Itay, the financially the working watching David on and again. sure

as a And so very the a And list for that. as at on that's we're keeping far entire manageable now, right base. time eye supply this watchful us

Itay Michaeli

that that. all that's appreciate detail, Great, helpful. appreciate Thank you. all Absolutely, very

Operator

Our Dan, please of next levy Dan question Credit Suisse. comes proceed. from

Dan Levy

Hi, good Thank you. morning.

say same of view First, offering. on and your next to a RD&E, how probably do has then the deleveraging pay extent and down just relative you your EV do generation how want for end the that enhance let's key to EV RD&E year, time priority. at But obviously sort you ask a the pay there's debt that and debt deleveraging relative to increased to opportunity R&D desire incremental waivered EBITDA down is boost view cycle to you on follow-up what incremental to beyond recovery, if is continued what

do. Is tell can't clear benefit could us Or opportunity R&D it the very do on you if pay me the missing tell perhaps just you have and relative expense how you incremental your to is down elevating first, to out additional priority there So, other? each then debt? to any delever to two you view

there. We have to start

Christopher May

down, ability can any prepayable those morning. time. very Chris, from debt is Dan, first pay would tell you good down our This instruments we are have at pay I flexible. look to We debt, debt

what debt crux would amount of to question our I But standpoint. amount from is that the and I if we R&D? performance a we our a we you pay we in and do reallocate guess clearly in is, to your is from R&D, would as we're data, to that So a felt I point we our good tell our sizable being critical position of our to think in that future, appropriate if the continue support in generating, we're down flow obviously as capital obviously, getting ready to at growth we expand at embedded long-term continue you can company, our product We’ll if now to of next we in to of investment success. to that we that to can those, amount expand investment time generation the look support support us in base. front investments That need themselves, invest launch. the clearly to opportunities our growth drive you to space support and growth areas see cash product, the continue do. is said, continue the drive R&D in that our we're such that customer And need present in free in and support to future believe set are of product the

Dan Levy

on sustainability you to sort clarify And to that forward in be as Great. you see pay down debt? quick just go flexibility advantage end is down? your the down have a then Do pretty, markets debt of initial the comment, need just to you of on or we paying pretty about upside, that that of debt should certain paying to taking expect you achieve

Christopher May

come about about always down, time are considered think the factor, from the of think forward debt we within a cash, but seasonality and when from pay down. it, about trajectory Certainly, obviously, circumstances and So business gross think when we a debt pay gross down, we year. timing if net you think pull your and would about

four example, we years debt maturities usually First cash XXXX about us being flow, to quarter think want outflow for of XXXX. environment. for of macro is to have use again, the an no you But

it. in a handle have So, flexibility we we lot how of

Dan Levy

obviously, combustion ask second current de-allocation think of your development, your don’t de-allocation X.X core there's for the within know same the actually of then called on there And vehicles. markets, is while EV XX%. of thank the we question, still resources, And at great. your we and from America, and about is, what vehicle customers North Okay, all significant there's time, But away to vehicle mix own massive this accelerating that your I especially wanted obviously, resources that combustion this dynamic I is you. of know Powertrain are customers content.

more, rely very on automakers more So, you argue that shifting guess the supply I to outsourcing they content it focus gain you is possible Powertrain as more heavily their effort? chain their that have but could is relevant, shift that, combustion more as to X.X EV, could gain to

David Dauch

that. is is David. to The answer yes this Dan,

at position mix and regards very I'm First here healthy spot. as a our in and foremost, North IC we're weighted I on share. trucks, our it heavily vehicles engine, the sweet crossovers, today, look towards earlier, And right in is you market SUVs to the of said the especially in and in when America, which

perform forward from very to years manufacturing to of of At not want and business in So to the well, going assess technology a we're just the couple they for much multiple going have OEMs. here. continue years, They're become to going same but demands the for stay profit the operating versus what as pools performance X.X They're launch like to they interrupted because their make time, proven them, to grow larger going proven how within capital standpoint. to if to going look performance, there. that a decision, a supply Axle performance, they might financial and outsource want have that proven continuity of to, obviously have companies they afford American they're capability, to to proven can't quality

relevant or make they want to portfolio. where the our in bets us opportunity that's in to financial going an evaluating relevant the OEM But question that monitor to world, those the from deciding customers suppliers, timing in for a standpoint, our markets. forward. products. make we to the pay to the be in to close good a the mature only may your was clearly not to Every in We're there'll respect respective various markets and regards going we're future and the related but our around on portfolios now, also traditional So their because the we adoption where investing again, there. stay heavily with the have be to decisions it appropriately answer engine position based position we're our think products, what right now electrification sustainability strategic are and in think in to needs very to future makes and regards we yes, just IC we you're to bills, ourselves the company whether And today then right regards products in think short

Dan Levy

And right. now? with it having an that incremental Or front in on game? just the you too are discussions customers still is All early

David Dauch

Yes, position should but was I'm that. I if or a on Nor to time. not announce discussions, in nothing I in discuss to this comment at

Dan Levy

thanks. Okay,

Operator

from comes And JPMorgan. please proceed. Ryan our Ryan, Brinkman question with last

Ryan Brinkman

implication thanks yet Hi, not margin, question, early you’re not the for to beat, out-year is my big XQ’s of until another XXXX be from one that for although next cognizant to which taking around year. going guiding specific course

be hopefully, I think is here to or a of as increased leaner your structurally margin normalized result post-COVID. learning maybe

in And Firstly, might settlement, have that's volume still And view in nature? cost versus actions? could just in margin the category permanent of would called your reduction in out how think back with how that margin normalized tailwinds, FX, of $XX I et trying Even of would performance from What XX% you then more up, backing have sustainability savings differ out you How come then that proportion this those does also. around and if confirm rate been you million terms other? Thanks. of being to just XQ. couple though, those much secondly, improved, called items, understand a cetera. commercial you including

Christopher May

good million and QX, which the Ryan of that see terms the we of think quarter, flowing you is through perform hear commentary, we full-year said $XX would for you $XX effectively morning. Yes, million QX. I Chris, XXXX, this at was QX our Look, would third in

out of you in sort So operational I a for little bit, range. and would between performance. And to that sort delta that the call more of it level have

quite well this you're per to price core offset that those this overhead I optimizing that more will things for use continue a as your lines, example, traditional throughput perspective, nature. traditional area things and call company, from we would in your part frankly. a scrap manpower wise sizing we structures, performance, that the would where you're hours continue. be limiting downs, nature, on spending salary be So things right where like overhead will But inflation that's of productivity, been increasing would that the of of into things Obviously, produced, reducing and perpetuity certain

be about year, we forward. expect here delivering to So this $XX we going sticky this talked million,

in. But temporary, next Some repopulating more be going that where back structural to our and thought as with that some of take would mentioned, a that, beyond. I quarter it’s that process stuff, year we're build into

Ryan Brinkman

generally, or or awarded, been on are terms GM And if just curious you're you maybe that there you that have more helpful. in be to then have about, electrified EV in talk at you any very Okay, pickup finally, I'd or if for out trucks permitted of new content can awards the what development? talk products currently electrified Hummer other full-size about

David Dauch

is this Ryan Dave. Yes,

that We’re point not in in at position this to time, a sorry. question answer

Ryan Brinkman

Okay, thank you.

Jason Parsons

Thank the talking to certainly look of We on you, forward you for future. your Ryan. all in call with you the in We thank today. interest participating AAM. Appreciate

Operator

today's The presentation and conference may is now concluded. attending now you Thank you for disconnect.

American Axle & Manufacturing (AXL) 30 Oct 202020 Q3 Earnings call transcript