AXL - Earnings call transcript Q2 2021 | American Axle & Manufacturing Holdings, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, everyone, my name is Jamie and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the American Axle & Manufacturing Second Quarter 2021 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. [Operator Instruction] As a reminder, today's call is being recorded. like the I'd to call time, Mr. this to conference turn over At of Relations. Lim, Investor David Head Please Mr. go ahead, Lim.

David Lim

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

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

to on find as XXXXXXXX. the available slides replay conference replay listen Investor well. Time today PM of also for X-XXX-XXX-XXXX, supplemental at XX.XX can beginning call, call You This this PM August website page our To dial be you Eastern a of this X. X:XX through replay can will code 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 GAAP AAM's measures Chairman financial you to over measures well during that let certain as Dauch. with David is refer a 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 that the we For we call, may ask CEO,

David Dauch

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

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

with trucks fast or $XX.X for in related experienced we in the recovery financial delivered approximately our XXX% including were challenges. of these for to COVID-XX what details light loss the The some increased up will sales. we we communication XXXX. questions news covers second navigating anticipated did of exciting which believe you discuss sales unprecedented for compares production AAM light $XXX.X to financial recent will truck recovery of lastly, reflects a levels. year-over-year OEM industry will production as than of XXX% them XXXX of well Consumer programs support the I'll year-over-year revenues platforms our announcements certainly should our outlook. industry last Chris we in last increase about the up the for quarter challenges After year. American We at ongoing an any key our supply quarter on challenges remained and our basis deal business according These in continuity North production XXXX customers quarter below within the approximately through to in million remains and excellent second the development Next, of estimates, shutdowns the benefit from Oshawa demand industry GM's truck strong light from that volumes the our the year-over-year. AAM. $X.XX our the the up XX.X% the possible. extended significantly the And core year. Chinese products we demand performance Inventory call are AAM's primarily touch plant. $XXX XXXX an supply on of results EV that and with the of greater job the the billion team resulting financial robust that and million managing then quarter second as This these AAM's levels have. OEM environment was was inventory in solid chain and may open operating of originally combined quarter results. up building volatility lead normal but compared adjusted second were EBITDA quarter, XXXX third-party to in XXX% was beginning million a obstacles on lack stemming

In quarter. to XXXX levels, driving free million and XXXX. our cost the $X.XX the contributed $XXX AAM's benefiting several intense as adjusted the past outflow compared production of the over $X.XX business our quarter second of to XXXX. managing We higher focus in flow million addition in quarter optimizing and an quarter factors quarter. remain quarters from generated EPS in our control. performance structure generation loss the our was committed on for And greatly our second to cash underneath of the second a compared flow flexing I'm adjusted excited to to of cash of the in about per of cash, $XXX We in approximately share very over efficiency

and Our performance cash operating spending this commitment higher capital free to flow. drove level of efficient

of debt. the $XXX over the since paid the million million second have long-term quarter to prepaid we And quarter. fourth XXXX XXXX, quarter approximately $XXX of of second loans in we term down Additionally,

committed further It to we sheet we on sheet. that delivering and and X.X team's reducing As ratio net are leverage We AAM's times goal. are debt the second strengthen is year, we to our this focus balance stated, previously this in achieved quarter. balance strengthen management our

that Chinese to we business components front, don't know vehicle announce who to their supplying supporting China's will of is excited pioneer is, NIO, electric who vehicle be and OEM NIO NIO the and are program, e-powertrain On leading those a electric vehicle in for next we a very market. generation electric

in drive commitment of support and both existing applies electric announcement This with growth good technology see components. sub-assemblies our and Today's a units excellence customers. clearly electric underscores new and AAM's space. to range wide continue within to propulsion and with this vehicles We vehicle opportunity to

plenty dialog design see and of eager technology, product We interest. are this the very very opportunities continues intensely global support support engineering over attracting this as several multiple our compact offerings We constructive global customer. as new new be are electrification to OEMs to state-of-the-art strong to next are The with transformation. manufacturers focused years

electrification multiple new globally. the Our next-generation engineering developing while of programs teams rapidly technology are launch supporting

focus on allowing it to comes securing by to when propositions start-up core. win sub-assemblies Our future Clearly, theme the compete electric customer of the drive Having units, business It of to exciting and choice technology, the on and innovation our very with that, AAM. supplier strong to is components. continue service for our the be the times value protecting OEMs OEMs. our both to are traditional and we these said deliver goal

that our and high AAM This facility. the pickup on-time Oshawa demonstrates quality delivery rear with supplier smart, We sole will the will In an as completed are long-term in axles core quick strategy. is value of We financial development reiterate metal immediately was acquisition pleased full-sized also acquisitions returns. And business, products expand provide quarter, and return to the very front bolt-on component powder solid supporting relationship be their look strong and GM and as we high that well the components. capabilities our to production with for meet complement synergies drive they production Motors. our of part This purchase AAM, should mentioned as a our inventories. their lightweighting consumer that will we demand specializes rebuild as to trucks successful producing we General do before, benefit GM's which compelling forward

Overdrive GM' are Winner recognized Award we as in Finally, XXXX.

award, excellence the commitment will demonstrates as us the grateful while fire are Operational for us last for it We very forward. an provide our and addressing continuity competitive core benefit a supply, and unfortunate certainly this value to industrial of year. is going advantage AAM,

environment operating and containers, value Before semiconductors, is rising I our commodity delays our The chain I guidance. on want steel, shipping from transition prices to talk current unprecedented. stress Chris, stemming shortages, and in about financial is port to the labor,

environment and the year. half quarter semiconductor production challenging XXXX causing to volatility in the headwinds that will second schedule semiconductor the improve XXXX We are volatile. believe challenges second schedules. of with availability saw and to issue Second in remain the was quarter continuing be the of the a still our These trough this we the

and to we into constraints other to challenges XXXX. continue supply However, chain expect this related

For customers. will with extended customers to to of protect our our continuity work AAM, continue base supply our supply support we diligently and and

financial guidance. Let's our discuss

we operating especially flow and Although range, adjusted the maintaining free of there low our raising raising end uncertainty, was cash of our are revenue EBITDA for with guidance semiconductors, availability outlook. the our we continued are also

guidance Our follows. is as

about revenue $X.X $XXX our adjusted prepared will $XXX details $X.X and in guidance billion will $XXX Our to be adjusted $XXX million his of EBITDA remarks. free more million. provide Chris flow to to cash

Aside impact of very, from in operation metal our well. business market challenges, issue semiconductor running the is very and the

business. efficiency and on We while expenses costs managing optimize are ensuring to focused our operational and capital our

operating normal priorities are AAM, conditions. before, return strong mentioned margin have support I've we important. these two As and as to opportunities should we fundamentals both equally over-achieving At

focused an unwavering on now, support here and that and commitment means the management operational to the our strong customers. we're First, cost excellence,

We and cash continued these control, to yes, strong that generation have we demonstrate free can sheet. flow factors to stronger manage a leading balance qualities and

future. on our Second, we're focused

in electrified components products future lightweighting continue the of investments of growth. will and make We generation to develop to R&D the to next profitable drive

This offer the propulsion things understanding of Our and to chains the for propositions our AAM. us advantage me us, system. products, electric a what our and with depth Chris these exciting are the solid let by solutions high only that creative from technology times development, not And an Clearly, competitive value very our are is drive engineering Chris. over vehicle but to future developing in breadth customers. interest May. want OEMs, provides the and to OEMs also with teams and bright in for is demonstrated very turn

Chris May

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

ahead to quarter X, million So, $X.XX quarter In quarter XXXX, sales. second were begin of Slide billion sales. sales XXXX. second a of walk XXXX compared second the and sales of let's XXXX in AAM shows go quarter the second with to $XXX

increase COVID-XX the back in we million. shortage the million of which $XXX add by $XXX second million. and semiconductor First, Other approximately Then unfavorable $XX of impact for for we approximately of estimate pricing of an of was quarter from of Metals the negative second XXXX mix quarter to sales in XXXX. volume impact we million. the FX and accounted be $XX account

have primary that we the quarters, materials several see related an in last increase we index metal-based purchased. to continued inputs the to During

in by through the recall, of elevated changes. may our we hedged with year-over-year this passing portion those on You index-related a The risk customers comparison. reflects metal this column majority pass-throughs

XX.X% or profitability. Gross quarter of comparison second profit on XXXX. loss of sales, of of the quarter in sales million of loss Now, of of $XXX.X second to XX.X% second compared $XX.X EBITDA in XXXX. was $XXX Adjusted XXXX, move second million the in million quarter the a XXXX let's of in a million this to to or quarter the $XX was

benefited see continue performance. can adjusted a Slide permits year We margin in year-over-year increase You as on the of walk from on contribution the net EBITDA we sales down positive from last experience to and X.

As receipt from and during lead steel, reducing of notice half out of our reverse the WIP benefit we inventories changes such This a and items we the of anticipate as in a finished in timeframe. schedule timing, as year quarter. inventories production second that long this raw million result inventory increased absorption should short drove inventory $XX goods

strong our schedules a mentioned note. the volatile we quarter to expected, the part than the of more quarter, close but we throughout latter able on were As were

to in XXXX. including sales. declined Now This as in second year let due controlling our related smartly the X.X% emphasis funding pursue was products We at of spending effective utilizing XX.X% in in quarter launch an quarter vehicle $XX SG&A. rapidly to of current million the We key manner. to new and from R&D costs meet to last time, $XX the successful all resources emphasis expect as also second the innovations, But appropriate half level R&D are do sales to of SG&A XXXX of XXXX expense second and in focus our of be cost objectives. the continue in to while we XXXX on technologies year, million to increase revenues includes support SG&A business. positioning million same This COVID-XX in the quarter of me compares includes of of and or technology electric more $XX traditional invest electrification. AAM's, cover was continue quarter with compared second R&D a shutdowns. on development the to an first to

We in continue significant to and interest our products experience technology. customer new

$XX.X the in $XX.X Now interest compared interest let's million taxes. of of move XXXX. to on XXXX, million to in the Net second quarter expense and quarter was second

debt of trend favorable this of In expect quarter $XX.X benefit of the we expense We million we second benefit million second a $X.X income of continued to the tax as XXXX, compared recorded to in quarter reduction. from continue, XXXX.

into As the of loss GAAP We to the loss in we share, range. quarter press to in the of XX% $XX noted the net Adjusted in compared effective would Taking $X.XX tax our second a XXXX, taxes or to earnings of second compared cash XXXX. per we share second share be was $X.XX expect loss these into in our per rate for a million the items per earnings income XXXX. which approximately million cost $X.XX all $XXX.X to or of continue quarter our to quarter of XXXX, million sales be of and share share per per million $XX impact XXXX, account, $X.XX in $XX expect release of excludes to quarter was drivers the of second XX%.

was the the of of now from second restructuring from The million the we in payments acquisition-related the second balance activity expenditures, XXXX quarter Net of $XXX.X plant an and flow compared $XX to the quarter. sale million activities of was recovery related for September quarter of $XX cash net proceeds to Malvern Let's for million. in equipment quarter XXXX outflow inflow Cash the last million. to the $XXX.X million cash for property, move of sheet. XXXX Capital fire cash year. by experienced XXXX was were and and the of the net second provided $X operating for

ratio in Malvern However, of fire total, change net the the expect proceeds would cash debt an timing for a we flow of anticipate the by $XXX.X $X.X EBITDA or million With a guidance. of ended this Reflecting of our our to prepaid Subsequent AAM's in of our strong full declining of adjusted we $XX from at the second no this for in cash and we of generated calculating cash we costs billion acquisition of AAM to and term $X the leverage million X.XX trend million ratio the on to over of prior neutral reduce is free XX. flow the the over achievement debt leverage a $XXX in the and times this million loans on a critical a time. generation, marks year. LTM with have insurance activity, cash $XX $XXX impact perspective, quarter. X.X notes quarter the continues redeemed year impact expenditures XXXX. a From XXXX. we leverage net in free more goal end cash adjusted XXXX quarter This to turn additional of June align leverage the and second quarter, due as restructuring full XXXX, In billion

sheet balance and future lowering reducing interest payments. strengthen expect our to to AAM's continue by debt We gross

our million loans XXXX approximately and in today, of have $XXX down we term in alone. paid notes As

Before portion financial our let my me we Q&A close of outlook. move thoughts comments out to with the the call, on some XXXX on

outlook As press for increased lower our have you to at We range see David billion mentioned, cash as adjusted we can raised and our range. our revenue release of a and the maintained from free we EBITDA $X.X flow. our end $X.X outlook adjusted

and our Our customer schedules, based best truck are on the reduction information this in regarding week. outlook including production we experiencing latest production is the we GM have

our building cash optimization. we plus semiconductors The a assume growth uncertain on our reduction ranges result the forward. customers capital the efficient spending, range pickup margin capital have focused remains, and going SUVs of provided. full-size free to and revision restructuring flow is related year-over-year backdrop and prioritize continue trucks We to to But initiatives, will cost working

Our focus AAM and continues profitable to solidify used our growth. strong our research and to long-term results financial value success. initiatives reduce support be future shareholder will development building and debt for position on to

in on focused future our are electrification. We

future financial more provide development continue drive growth. allocate We profitable resources our OEMs to to to products and and to high-value engineering technology compelling

results now making. see are of we award business new to beginning are You the announcements tangible

We flows, performance will an well to on centers that delivering organization focused passion legacy to yield highly our forget run best-in-class the core optimization, secure strong business our cash around results. will into future. And let's continue platforms that efficient not cost and structure, strong of

you and second environment. There participation second as in under chain call The in this these and theme going plenty XXXX stated the quarter experienced a Thank back I'm challenges for turn difficult that call to with in of control David. management of of navigating relates near-term the continues to team today. and the is half your factors to operating here of confident managing and over the it our uncertainties are obstacles. time stop on XXXX, the supply

Q&A. So, we can the David? start

David Lim

Thank you, Chris, and David.

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

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

Operator

Instructions] our Murphy question. from ahead from [Operator your America. Bank with question first go And today John comes Please of

Aileen Smith

Smith Good This for Aileen everyone. on morning, John. is

David Dauch

morning. Good

Aileen Smith

just and customers schedules wondering in to cost First choppy have very and been very We've helping to trying to that and some let's logistics mechanisms question, call the avoid had recoveries spot in the other manufacturing on their receptive have But cooperative environment. automaker and also margin suppliers to disruption. are others to those as or with for out releases? semiconductors buckets from environment cost with if for heard extended suppliers just automakers the overrun automakers buy those anyway benefiting buy recovery were that the shortage? meet they favorable go have for that's suppliers tight inventory stop Have side with production your customers have been on from been clearly more experienced that pricing you semiconductor

David Dauch

is This speaking. Dauch David

First our we've suppliers with able and OEMs to our to respect to been protecting work supply our foremost, with and business. semiconductor

time need go protecting the to allocating customer case-by-case any respect there on as to We premium chips the accordingly, supply But have situation detailed a to further with the the And to each the in relief very paint we've want at At been rolling. for with some all of lead go understanding trying to there's there of no we're continuity, following out that's protect With the So they're I costs shortages respective the asking to that. supportive the respect been sharing to with just adjusting of. incurred same that. and which being we're are marketplace. customers. of really don't and customers a their from or they're prioritizing and on in ask for standpoint the deal process, have that other because same industry some of been basis, keep any the to time, supplying and

Aileen Smith

are value it chain? question your volume second a is you second And I in to helpful. environment year. probably be sub that's margin commodities, incredibly we've mix EBITDA margins. bit us will you pretty the what elevated in bridge ask but wanted that, get sequentially Okay offsetting return XX can be the to or to what a year some over year there But help half of versus then, outlook think the quarters margin just through the full where the landed, cost or got We've lingering probably Obviously, around But to a from factors strong better. the XX that how second quarter? normal, you the of stood seen will to still past a performance it's I

Chris May

some is this bridging Aileen, our of Yes terms the would of performance, half, performance quarter off trough. about second May. points similar the in or sort quarter very half. as emphasize of some would certainly, second you Chris first think expect obviously, that if I with A semiconductor to return an of sales you. I morning couple Good of strong benefit second the

a there, that of Offsetting benefit items. of some continued have of performance. some different a So we'll have is benefit couple a we'll

to difference, in about out see you where build back year through a year-over-year how had in quarter business initiatives, if neutral bridge which half of of the we of our One of that walk inventory just the will timing electrification year, a whole new the bleed of some benefit second actually this you our EBITDA opportunities. think also but we're it's advancing some

us will little quarter bit that second we'll rise the bit. throughout to primary little know, impact the of of to rise as year, of spend. that dialoguing a sales terms half So of spend the half and associated from we're weighted again here little as a the the you some heavier and six we've some impact the have that. And you product second benefit bit markets and some continue half little past well associated engineering sort back the and our light metal it's step price months elements up expect more the margin to year a a you'll this Mechanically, of is to and of this going little our decreases with of of in weight the little others with others of some half things to of as with been are year with it are of the be well. up year-over-year on engineering over Those associated timing year, pick a performance product in going mitigate to that bit into first the

Aileen Smith

past, the leverage might is anyway? the in achieved And framework to that and helpful sub And target very change Can talked capital then sheet theoretically your cash that's how to, that Great good you is two get could get you've last progress Clearly target what you if make in remind I delevering. allocation months. XX about net next one on in that balance that generating the times, as may. us you question the to to be a something color. in timeframe continue

Chris May

making articulate Yes to goal the later to we're second leverage we're we've heard get not targets you a as two there meaningful of well, you've times progress in already into laid certainly obviously of two and times leverage playbook. know, a year-to-date, our to quarter is specific terms a us the objective. X.X times objective target rather in here dialog obviously there think we would that allocation level than our topic. start capital from some have And then that point, when further you that's I to on at that framework opens sooner get But perspective when that

Aileen Smith

taking for questions. the Thanks Okay.

David Dauch

Thank you.

Operator

question comes Lache next from Our with Rod go Research. Wolfe from ahead question. Please your

Rod Lache

schedules everybody. to guidance? to in or in is in incrementals your and production at surprised least half would gaining see the I I'm short Aileen's Really implied just And I'm just that's the back the sensing by it still you does confidence having volatility. Thanks, be nice pricing. the any question are short if production or But there these wondering, understand frankly just production of quarter actually that notice or contributing that to I'm also timing you bit given look limited change high in But are decrementals run? very the wondering in that like are what's those

David Dauch

vehicle major facility to be managing that's positive. next uncertainty AAM protected continue into at Obviously this all will But to the carry we I marketplace to as our need stuff forward, also clearly catch with is will many have going our core some make this our understand to the with first expect and turn respect be in and downtime efficiently maintenance this Obviously, extended be have do go so the been give manage some we we platform do need aftermarket that respect crossover type didn't Yes challenge a benefited profit just Chris. that. utilize blow, to we business just in coming week Rod, year to customer I'll plants, for online and we can we've GM's because select David. comments, a of our back we're truck greatly still then We starting of week, to and balance XXXX. that time pools. a of of platforms major the couple our we our OEMs indicated suppliers platforms We that up took as their to to see work. done other this we think just downtime prepared have their core full-size with adjust that's part I'll protecting but on down to the to some base that. And week. But people and GM service with respect

into to a positive. want comments actually to Rod's make you But Chris, any So and negative a we question? turned

Chris May

mean if I that's imply margin lot I've out our for the example be total. previous neutral if points mean different at in known EBITDA key elements driven. margin just throughout inventory stuff example are And didn't on lot listed guide, our a you year which about and sort Yes second and I think basis the them timing well or year. to other impact this you timing think in of the just, a question. was the timed point a drivers see And it's half about as of absorption of would us on previously you we of the XX But end that's that change the for the truly a within top

Rod Lache

like of see seeing looks year to assets going that next also you could And opportunities things. sounds be provide the like Okay. you that that to any you you you're for opportunities turns it a with of net two so. or And secondly, over that, leverage it And should lot just other provide acquisitions get Can more a on then flexibility or the particularly just bidding that electrification. this if point? magnitude you complementary talk the little that at would organically, about color just you're on to bit

David Dauch

the question how opportunity new which we of and is with start this $X.X our first. David. with that days is about the incremental worth shifting We're have which had the to. based excitement so been products a that Yes our engineers it's RFIs Rod, latter that quoted industry billion business, I'll for matter category, XX% various to developed. The in quotation that that customers, electric have business we're converting And into now about pivoting whereby where is shifted in is is a quoting of with with and dramatically of opportunities difference And hybrid what the just because seeing those the today to of the garnered biggest mix the now fact that's that quoting past. of quoting technology has especially we're RFQs we've vehicles, forward. consistent going on or the is positive, some our book and we've

to be And smart we're that in We're side our in hold about scale clearly the as things, also becomes very sheet driveline excited our to have acquisition those has balance to will traditional And acquisition prepared But size a to to and want partnership then opportunities we're again, types leverage to remarks, even looking respect at of benefit that front comes business. of act a the side. well side did the integration And to the a going things certain strengthen vertical our want we that priority keep synergies as the and want do capabilities especially our as we on and we capital are it as it's forming I keep When said on with about small we my metal that acquisitions. the stronger. core forward. us we see can and So both in we there to what structure to more to bolt-on as well that as capabilities metal electrification. overall of get noted where financial appropriate that, powder business. on our we've consolidate business going or business when

Rod Lache

you. Thank Great.

Operator

question. Ryan Please Brinkman comes go ahead Our from next question JPMorgan. your with from

Ryan Brinkman

China, venture Thanks Wanted to a questions my taking with within of in so in check Hi. that. for regard relatively couple around the to new still question. events

integrated I unit business claimed has its one to company. although Firstly, venture case operates via Magna capabilities some within a in drive their with think realize all Electronics, LG having BorgWarner also electric benefits joint I

differentials as such So well wanted side with you, might have thoughts or strategy to confer introductions NIO for customer where new related with venture think based or with China, any. what some if units? drive the go-to-market for or get curious helps advantages that, these Inovance benefits either introductions customer in, if as a electric win, on I'm component your disadvantages, approach regards complete you they're if on the And also to on other the in with as note, may

David Dauch

is So, David. this Ryan,

as that any the did not As business, it standpoint NIO. bonding won or Inovance NIO to with a our that. respect that for our with to capabilities, involvement relationship That's they to work have we've their we share needs an a that NIO continue from of partner market and relates based NBH. turned in to have on is of in they sub-assembly building a China product greater the overall product, they grow directly to NIO, us with the especially from and need and AMM We business demands just performance established area really the their

that for in to positive big building regards a us been that's So relationship.

China. On the China us They've within helped Inovance startup well the good a been in other for partner market. Inovance us question, OEMs, as introduce us has certainly to many OEMs as

We are growing business and Inovance's some leadership in our cases. in with clearly China support

opportunities. it products China or relationship growth further today very globally and whether for will positive be us expect that to marketplace, far the product only So that's offerings capability we developing and world in next-generation positive. around our been our going some We're as as the is strengthen jointly a

we and doesn't winning right going knowledge do capability like have there, the as our very mean bringing fair we to well in have when Inovance value necessarily partnership the we to completely vertically we within in with order forward market, As of before, have but to to successful table to to is we've and today the be it Clearly, that win business, have go we and share the partners But comes our said ourselves. it now. been the the we'd integrated business. don't we're strengthen everything proposition that

Ryan Brinkman

insources full-size been Ultium earlier then they of of of production produce Okay. for had that thinking on benefiting in-house TX at you XX% about additional of supplier in should pickups much drive Ontario already from GM non-Ultium Or maybe Oshawa, out how sole do to the as having question at thinks about Do gone is they outsourced? program topic, could transitioned more shift from then we program. front components American And driveline as capabilities on its named you last is the the I architecture. pickup whereas can a any GM versus how signify as potentially have producing maybe didn't GM the driveline Thanks. want reallocate And like the Arlington maybe capacity think of reassess, content they this resources what and How kind and some already terms in work these of driveline excess they GM that Does axles KXXX for about make more to XXX% you they the in-house context to investment, as facility. to Axle? think pickup might components the an this capacity, your truck and rear in be future, how nearby. XXX% in want this up GM's

David Dauch

Yes.

Rapids pickup in-house and Grand that business get they the to of of we've a into are that regards that me decision a made Clearly, business decided started, we essentially Let we only traditional business electrification. the the duty GM about portion running decision talk their installed. to that them in I the that side light talk decision, they've capacity and they executed help program business is before understood take facility. That to, GM truck with to running,

positive several that's that, on us. obviously for So and overcome had them, incremental through has and last our we've that everyone of that SUV, directly. have duty any come that that we've business capacity remind the we're in-source supplier GM the all did heavy work American the over All not towards on I'll Axle. the programs and impacted the of GM financials But managed years.

relationship, the confidence decades, we're to the time and that's value for it their based but for program performance positive being our grateful At and in our to even regards here latest us. that the lately. we've on in very brought the same So earned we Oshawa propositions them

we apply models. recognize with to of involvement from good relationship our will is time, there as vehicle the strong. us, same very But benefits their platform, we then the doing their field need General that supply recognize and is to an time, propositions it proposition in and today very the at some a will and segments electrification. them if standpoint. the with what they the value and senior need understand they value on from shared confident same and that we've offer many at on electrification. very, the Ultium We within entertain had our they a highly battery us, both That base They EDU them Motors, products have with So regards good and technology from they're traditional GM leadership we're in

is come, So where this confident we're about more nothing point Motors. but at to our more to with very say General relationship in time,

Ryan Brinkman

Thank you. Great.

Operator

next your Our Suisse. from with Please Dan Levy Credit comes ahead question. question from go

Dan Levy

you quarter, Hey. comment did missed you earlier, second for morning, this in if expecting how much thank And margin? but strong mix sorry mix question. Good I the into I'm the you're what just on the play a taking could in maybe second half? role the for

Chris May

the Motors quarter really Dan, building it of with end to focus our of second some and full-size or their crossover of be detriment the their is others, applications has impact here whether truck vehicles. semiconductor Clearly Chris. the this been customers, the Yes. of inside emphasis Stellantis General

our mitigate sort as back mix the continue they half We a the previous revenue normal for course a you bring overall call would small associated of those terms little into facilities back with year. expect our here to I third more this online benefit that the obviously profile. of do it of, So, But get bit mix quarter. that in of would through towards will

in Now, that this in taken they've some quarter you the trucks that downtime we third talked experiencing size about. full we're as know week the

that inside quarter. plays dynamic So the bit a little third of

Dan Levy

magnitude on drag? color as premium freight premium in freight then the And a Great. of the quarter. the Any

ChrisMay

the a freight chain it a - in supply challenges make quarter of couple Yes. inside of worth inside We material. supply, sure to framework of - it have think adequate due the bit concept dollars’ little of to wasn't we million premium of basically the had

Dan Levy

year on giving and created entry whomever program. you. top you of this supposed getting discussions about on their think like launch whether entry Thank PX just OEM I be follow-up, a Got I an discussions with that it. for in the in to trying maybe that is But for advanced program,I'm on to just eDrive, half give Luxury think in this And unit. Europe into Award EV? eDrive program sense you that, that could with talked you on is that an any progress for program bad point a is an And that may a then back the how as update on higher customer, you're hybrid of get content past,

David Dauch

David is Dauch. This

in that a also But and OEM us this be PX at have our successfully technology are and European Luxury you're development build ability program, strengthen and over time, program. we here. their a right with strengthen OEM At of to application a You're you new our as it going that a side. Clearly to launch will year. new the going to work to that and closely variants the be the opportunity years launching multiple confidence for only to to there'll forward not program launch an and anytime our seven relationship, electrified end the that advance relates same going

that to that that working that also technology developed supportive we're type out some today present we're opportunities opportunities we're PX use themselves. other that could that right with of seeing OEM in expect others Because sharing there now. of other application the on is the us capability We are and Luxury

product What the referred needs is that got yes, plans. and and versus them earlier. themselves we offering offers they've in-house want can that customers to their what solution clearly So that themselves future. are, about present to long-range other is, PX applications to do the the respect of technology base the will same them, technology that supply on to time lot and a or competitive will do that want we they first in demonstrate to have with a very whether good PX opportunity provides. feel at we opportunities other that are with provide in based the working what their we And opportunities value that of All advanced that we're then proposition the electrification it's - determine they all, space and

Dan Levy

unit? Okay. And that a eDrive that much how PX eDrive differ from technically does unit, bev

David Dauch

passenger a at But from high-performance we're vehicles into same said, I type bev is our really application. full the It's mean, different PX solutions, this our wheel want the type it's in of a with most I that, than technical off of time, I like here. car, architecture completely vehicles. electric-type to time get more a spending that other battery derivatives with full

Dan Levy

Thank it. Got you.

Operator

your question next RBC comes Our question. ahead Spak with from go Capital. Please from Joseph

Unidentified Analyst

on a Garrett half. XX% step taking just in is for This up Joe. margin Thanks. to the the back first mean almost but back, I you Maybe put going margins,

even the some high if normalized R&D, the with of associated of still I think XX%. inventory you and normalize kind more right you're differences for timing I XX% think around

semi what first of situation I volatility extrapolate the as the mean underlying about and as first scheduled business normalize? do the be the production things realize a this I think improve. the as operating normalized chains mix in performance and we what of more improves, pricing kind slight it comes should or about underlying what half business half say commodity of can may we can supply But may of in So, is hopefully kind the headwind. environment down, then where performance kind a normalizes be about,

ChrisMay

ex the strong those Yes. in strong be strong beyond to very It's forward half. second impacted be such don't in going half, very I that. about you as the to want items our business underlying going semiconductor metals, first answer to to But it's oversimplify the talked going this. very

Unidentified Analyst

can I maybe switching And lies $XXX, some us in the sense CTV XX% the in then solutions high And quoting. components? then maybe versus supply NIO activities, the just kind is for you're mean, of past be you win, that you the billion customers give Okay. of win EV where said to just think as are full percentage to that? based NIO eDrive the of components on of those what as I the gears where sourcing of the conversations $X.X looking

David Dauch

This speaking. Dauch is David

and assemblies state, the four think the approaching as different is fully seeing is and being guided the on the the in Two component on every now. As presenting one to we're I one application. four the shafts. to pricing gears differential We're on One others. forward. latest investment strategy. line market past mean the and those sub-assembly we've our think is award, on relates the states, right unit. which the going is we capitalizing that We're things in opportunities community in in opportunities of new The it themselves is Three of ways on so sub-assembly electrification gearbox, the indicated clearly integrated and is see with categories a so some we more and

more because On of fully our and per technology demonstrated that customer the to more been has the base, understood electric integrated the well drive direction. and by units, and just disproportionately just received in swing going because vehicle content is

three present in you. other plenty is categories the mentioned in itself, there to However, I opportunities of

Unidentified Analyst

Thank you much. very Okay.

David Dauch

Thank you.

Chris May

you. Thank

Operator

Johnson from from with Please question next our Brian comes question. Barclays. go And your ahead

Brian Johnson

Yes.

of Just lots truck vehicles building factories. stored OEMs particularly their have chips the issue around and their platforms, a don't on around that protecting by have full-size question

because have quarter may for Just those factories? from production or as of in any show kind deal we and you quarter? this next delivered numbers, an IHS axle Do that because sharp would finished sense the the perspective, that magnitude of of up your to its have pencils you not but out not trucks, get set they're

David Dauch

and there's building out know they don't with is a I configuration are chips. in clearly the building to Yes OEMs change units everyone Brian, some full is at or trucks the David. chips, this specific number take

the supply volume to top marketplace is and being now. integrated all are is. performance it's impacting with chips directly I ones. So and built probably soon manufacturers there what clearly, and - those know back And of fully chips steady they they're maybe of the truck the to better that just I that the to vehicles trade can't other question. three less clearly OEM my head. that as have get that you ask put as tell number right capability those system. But exact into the sell can they to to is what don't the still short and It's going -

Brian Johnson

just drive the component discussion the modules. start the a congratulations. win you following pitch on - a as did and question, second or dry up NIO the Okay and that Did e-motors

In with a of capabilities knowledge then the subcomponent? fact of of kind your some up wound and

David Dauch

NVH. remember, issues there. in And to of of capability and the have those the existing especially got performance, suppliers to they the today. they've product some got with it tremendous area set the skill as relates We some bring a You suppliers existing of

an So issue first solve have. they we that

opportunities taking our is could be identified that that some Second, that could opportunities hopeful we we're there dialog extended going there other will cope technology going even forward. of place, And that forward. advanced we include third, obviously is

Brian Johnson

you. Thank Okay.

David Dauch

Thanks, Brian. Yes.

Operator

question. question Our from Stanley. from Please with comes your next go Morgan Adam Jonas ahead

Adam Jonas

everybody. Hey,

a BEV, electrification versus you the that of of clarification, was and tell you activity us quoting? a XX% it hybrids quoting for electrification. of split was hybrid Can mentioned example that other First forms of the XX%

David Dauch

electrification. majority Adam, this is David Dauch, the of its

when say I mean all. So almost I majority,

Adam Jonas

- BEV? electrification pure by meaning non-hybrid Meaning

David Dauch

Correct.

Adam Jonas

Thank I are team, - there it's economies you. tricky because And not comparable. know or question a and is flux David comment on any scale some

margins when presumably just bit lagging? by EBITDA - these not I'm can what much approaching So profit so that wins of expecting that, think what's How color if gap provide narrow and as it than D-adoption. point you what could lower wins of the of the on virtue of I margin would programs is rolling may and say at Can any we exact of ramp you're kind off? of color color the these rolling is just breakeven could a profile or answer, starting off be we versus it's these the you but Thanks. between the gas on the

Chris May

Adam, Yes, Chris. hey this is

is of be element continue business. and big our business picture, our about As our are we are sourced very and But and customers on we one a to financial that tight price that. discipline. right, our high we element with another maintain a in invested new return both future we approach think or it source of to business supplier, capital margin objective that is traditional performing Margins in

Adam Jonas

Thanks. Appreciate it.

Operator

Itay Our ahead Citi. Please your from question. go from next Michaeli with question comes

ItayMichaeli

good Great, everyone. thanks morning,

David Dauch

morning. Good

Itay Michaeli

down at a kind I I quick implies the CapEx think and a just just if your CapEx quite flows to housekeeping in D&A the on just for color look start, there? outlook half, significantly D&A HX So Maybe first bit. the and the of it up compare year to

Chris May

back launching CapEx in fourth Yes, of that particular that clearly announced of as the in some weighted quarter, more is the the beginning the and half previously in programs process. so we've to we're year

one to of some relates our Brazil. to associated D&A, little a it that you As quarters notice, customers the a the region exited accelerated bit we in weighted first three of depreciation year may had with

at So a third the end seizes acceleration seeing standpoint. dynamic that the So from you're the of that quarter, depreciation actually that's

Itay Michaeli

a Great, if picture know And then to back to production kind broadly think just about on and beyond year electrification. helpful question early some talk that's considering But given any it's cadence there you're of how margin we investments do to incremental Chris. making next and then also the bigger XXXX. a a updated thoughts smoother I maybe choppiness range going year? Is, incremental this XXXX about margins have of

Chris May

the you think which Yes, into that. up generally if semiconductor - right will passes, our margin is issue you pick attractive next going about you'll volume pick as very you contribution with know year

about from perspective. truck positive a some customers are As talked to that's line into very you very of year. just and adding we that's capacity attractive obviously revenue And Oshawa our overall previously revenue our requirements that know, full-size volume next

house, invest On we've to the in side the continue R&D cost in as the we'll mentioned, space.

slightly have to would are But productivity next major that stuff as of over So partially typically continue I kind probably offset we into items. items a in walking about two terms you would thinking of other and are year. pricing, about those expect with talk increase that your time to normal few and

Itay Michaeli

in follow-up. come Great year? what stuff this to you is R&D quick a Did share expected

Chris May

step-up Right that in said of half a in year little the be step year. the next will into half $XX averaging we similar would quarter, the year we're would up about a back that of what first see to probably million the we over now,

typically start going been under million range to trailing at six, talking here million to into we've next $XX we've But recently. nine, been months. that XX that three, to So the we're over move $XX range,

Itay Michaeli

very all Thank you. helpful. that's Perfect,

Operator

question go And today our from Please Rosner Emmanuel ahead Deutsche from with final comes Bank. question. your

Emmanuel Rosner

morning good everybody. hi, Yes

David Dauch

morning, Good Emmanuel.

Emmanuel Rosner

of comparing three-year XX% number solution, from the I the is electrified to solution. very back that I come to which is was of wanted and quoting to XX% big backlog, Just your which a activity think EV

of solution about would the or three overwhelmingly shift or more So guess your it? should to think expect sort over I years electrified help you to backlog we how next

David Dauch

Yes, is is yes. and that The our I quoted the clearly which the less question of to electrification more in covered David. more and right seeing now space. absolutely Emmanuel opportunities this is just of that from mean with OEMs indicative are the less of I opportunities answer we're what traditional XX% electrification and

Emmanuel Rosner

so this data you comparison And early you do right any have above few back and you if years I'm some maybe your of annual Okay. the used electrification be backlog to on higher know traditional the have initial have with be curious quoting that in any get levels then rates days to averaging generally the efforts. is over on business? few now a data and on $XXX to But to the obviously contribution do next initial opportunity activity that the back? win million, may years

David Dauch

to business comfortable win regards we’re - ability forward. in clearly to Yes, no going our

win which that in business you to right business, historically, is long fully $XXX some low be range to end recognize backlog in backlog that been here, But But that have then million backlogs, in going As now to of we'll on any that million rate of to in time. we our a forward. that trading and years our some can we plenty come the opportunity we range. $XXX we traditional trending as we'll had that to offset XX% as continue with - growing know, lower that to expect out XX% we've is that support

Emmanuel Rosner

XX% wins. guess Is XX% experience your And for as to on opportunities win some electrification of the well? I those applicable initial potentially rate

David Dauch

and say to that. fair winning that's want We're I our share about business the in really all

Emmanuel Rosner

you. Thank Okay.

David Dauch

Yes. Thank you.

Chris May

you. Thank

David Lim

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

Operator

we'll call Ladies and today's and presentation. conclude gentlemen with that, conference

You disconnect your lines. may now

American Axle & Manufacturing (AXL) 30 Jul 212021 Q2 Earnings call transcript