Adient at Deutsche Bank Conference: Strategic Focus on Value Creation

On Wednesday, 11 June 2025, Adient PLC (NYSE:ADNT) presented at the Deutsche Bank Global Auto Industry Conference 2025, discussing its strategic focus on value creation and operational excellence. The company highlighted positive cash flow and strong performance in Q2, while addressing challenges such as tariff impacts and increasing competition in comfort systems.

Key Takeaways

• Adient reported a strong start to the year with positive cash flow and a focus on operational excellence.
• The company is actively engaging in share buybacks, having purchased $25 million in Q1.
• Adient is optimistic about its long-term position regarding tariffs, with a strategic footprint in the U.S.
• The Americas region is expected to drive growth, while Europe shows signs of stability.
• Automation and innovation are key focuses to address labor scarcity and improve efficiency.

Financial Results

• Q2 Earnings: Adient experienced a strong start to the first half of the year, with margins and cash flow aligning with expectations.
• Capital Structure: The company refinanced certain notes, with a significant note of $500 million due in 2028, maintaining a strong cash position.
• Leverage Ratio: Adient has been within its target leverage range of 1.5-2x for the past 18-24 months.
• Share Buybacks: The company repurchased $25 million in shares in Q1 and plans to continue buybacks, driven by positive cash flow.

Operational Updates

• Regional Performance: Stability was noted in the Americas and Europe, with strong demand in Asia excluding China. China’s stability is driven by exports.
• Tariff Exposure: Initial exposure was $12 million, with China leading at $9 million. Adient is mitigating risks by reshoring production to the U.S. and other strategic locations.
• Automation: Investments in automation are being made in metals, foaming, and trim businesses to improve efficiency and address labor shortages.

Future Outlook

• Tariff Impact: Adient expects to benefit long-term from tariffs due to its U.S. footprint, with customers gaining clarity on tariffs and opportunities.
• Americas Region: The region is anticipated to be a growth engine, with expectations of margin progression and improved business performance.
• Europe: Restructuring efforts are ongoing, with a goal of achieving a sustainable 5% margin, though pre-COVID levels are not expected soon.
• China: The company is diversifying its customer base towards a 60/40 mix with Chinese OEMs by 2026/2027.

Q&A Highlights

• Increased Competition: Adient is enhancing R&D to compete in advanced seating functionalities, with investments in tech centers in Chongqing and Yokohama.
• Automation: Continuous improvement through automation is a priority, with investments made via direct investment, series B funding, or partnerships.

In conclusion, Adient remains committed to creating value for shareholders through disciplined capital allocation and strategic operational improvements. For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Deutsche Bank Global Auto Industry Conference 2025:

Unidentified speaker, Unidentified role: Lively

Unidentified speaker, Unidentified role: room. We’re gonna play some music, pump it up. Yeah. I guess so. All right.

Let’s begin, shall we? Very pleased to welcome Adient to the Global Auto Conference joined here by the President and CEO Jerome Dorlak and CFO Mark Alswell. Thank you for joining us. Adient, for those of you are not familiar, is a leading global auto supplier with top market share positions in most regions. And to kick off, I think Jerome would like to present a few slides.

Unidentified speaker, Unidentified role: Yeah. Thank you very much. Appreciate the time today. Just a couple of slides. I’ll maybe present one, and then I’ll hand it over to Mark as well.

Just a little bit in terms of how do we view creating value for our stakeholders. I think what’s important is we are really laser focused on capital and capital allocation. And how we think about that is really through the sustainable value creation flywheel. It’s really around operational excellence. That underpins everything that we do.

I mean we’re focused on driving our operations. Seating is really about doing 1,000 things right every minute of every day in all of our JIT operations, our Trim, our Foaming, and our Metal operations. We drive that then with innovation, talked about disciplined capital allocation, and then portfolio management. When we came into the business in 2018, we undertook a lot of, I’d say, rationing of our portfolio, eliminating things that weren’t adding value Even recently as what would have been Q4 of last year we made another announcement where we trimmed out one of our joint ventures in The U. S, freed up dividends to NCI going forward.

And so you have a management team that’s focused on disciplined capital allocation, managing the portfolio, underpinned by operational excellence and innovation in order to drive margin expansion. With that?

Mark Alswell, CFO, Adient: Thanks, Jerome. So again, we’re fresh off our Q2 earnings, so I’m not going to go into a lot of details just in terms of the earnings. But I did want to make a few comments just in terms of with regard to the earnings. They were obviously a very strong start to the half of the year, where September year, we had a good start in Q1, we continued that progression in Q2, you saw the margins there, the cash there. The cash, Adient is typically a half cash generative company and so the cash came in line with what we had expected.

We continue to look at the balance sheet and as Jerome indicated, we are very much focused on capital allocation. So we did take a few steps to basically look at the capital structure. We refinanced certain of the notes there that you’ll see there on the chart. Really no near term maturities for us. We have $500,000,000 in 2028 that’s due, so we’ll start to look at that.

But all in all, very strong cash position, very strong flexible capital structure there. Gerald mentioned capital allocation, so we typically, and we’ve given a target of our leverage ratio between 1.52 times, We’ve been in that range now for the past, call it year, year and a half, two years and that’s really afforded us to do share buybacks. So we’re out there actively purchasing shares. You’ve seen first quarter we bought 25,000,000. We expect to generate more positive cash flow this year, so I’d expect that would continue as we go through the half of the year and our cash generation comes on.

We’ll also look at making sure that we continue to be flexible with that capital structure. We recognize that we’re a cyclical company, in the event that there’s certain debt that we want to voluntarily opportunistically repurchase, we may do that. So again, just keeping in mind you, the shareholders, the debt holders, making sure that we’re adding value to our customers, our investment group, right? That’s really what we’re focused on. I think through the results that we’ve shown in the half of the year, as well as the capital structure that’s here laid out on the slide, I think you can see that we’re making progress towards that.

So that’s really all I wanted to talk about here in terms of the capital structure.

Unidentified speaker, Unidentified role: Fantastic, I’m sure we’ll come back to this topic a little bit later. To kick off, we’ve been asking all the companies taking part, you know, about the industry conditions. It’s been a dynamic start to the year, you know, let’s just say from certainly a policy perspective, what are you seeing on the ground in various regions that you’re involved in?

Unidentified speaker, Unidentified role: Yeah. I mean, maybe if we just kind of go around the world. I think in The Americas, you know, we’ve started to see stability and certainly stability in customer production schedules, both in whether it’s coming out of The U. S. Or Mexico.

We’ve seen customers, I think, balance in that level load. That’s been welcomed from that standpoint. If you move over to Europe, if you compare Europe this year to what would have been Europe last year, significantly more stability. You saw that of year over year and adding sequential results with business performance now starting to show through already in Q2. And so we expect to see continued improved business performance as it pertains to us, really driven from not only self help that we’ve talked a lot about, but also just improved macro from customer stability and schedules, not necessarily expanding volume, but really just customer stability.

As

Unidentified speaker, Unidentified role: you

Unidentified speaker, Unidentified role: move into China, I think in China it’s important to recognize even though you may see an expanding SAR there, a lot of that SAR is driven from exports year over year driving and expanding it. But there is stability in the region, but not necessarily I’d say domestic growth. And then in Asia ex China, even with the risk of tariffs, we still see very strong demand on Adient products. And with that demand, there has been some, what I’d say, instability driven from overtime requirements, especially in our Japan footprint. But that’s been, I’d say, welcome because it’s driving, I think, revenues year over year on some of the launch programs that we had last year.

And we talked about that, especially when you think about things like the QX80 and the Armada where we have the jet trim foam and metals on vehicle content upwards of $3,000 vehicle. And then looking into other regions, Thailand, Malaysia, areas like that, I think we see stability. Thailand, which is a very large region for us, we have greater than 45%, 50% market share in that area. There is a broad based kind of vehicle recession there. There’s stability in the schedules, albeit at a depressed level.

Unidentified speaker, Unidentified role: Maybe we can go ahead and do a little bit more on the various regions. On North America, think probably the the most biggest thing for tariffs. You you provided already a very detailed analysis on on the exposure. Is is that trending kind of as you expected? Did the did some of the truce with China help at all?

Any updates there?

Unidentified speaker, Unidentified role: Yeah. I think we were very transparent in terms of what the tariff exposure meant. You know, we had declared prior, call it $12,000,000 of gross run rate, with China being the leading exposure of that. I think we had spelled that about $9,000,000 if I recall from China, and that was at roughly about 145%. Now there’s some stacking elements in there and other things.

Since the truce that had taken place, that’s obviously coming down. Just as you go from 145% to maybe a blended rate of closer to 45%, that’s going to come down naturally. That said, there has been no let up in what is both our self help, and we talk a lot about the self help that we are engaging in, really leverage from what is our world class footprint on our metals and mechanisms business where maybe historically that had been a drag on the business coming out of what were the 2014 and twenty fifteen acquisitions of CRH and Kuiper. We’ve really now been able to turn that into a positive, leveraging our footprint with our joint venture partner Kuiper in Mexico, but also leveraging our own internal capacities in Rockeenhausen, Germany and also Thailand. And so we’re quickly pivoting to those regions where maybe you have a different tariff profile, but then also reshoring product back into The U.

S, working with our customers in order to drive that exposure down. We haven’t let up on that activity at all in order to take that exposure down. I think the other thing on tariffs that we’re starting to see, and we talked a little bit about this on the call, is as the customers now are getting greater clarity into what some of this could mean for them, the opportunities for Adient longer term, even maybe mid term, and by mid term I think we mean essentially fiscal year twenty six, are starting to come to light. And we have always said there’s going to be winners and there’s going to be losers in this. We firmly believe Adient is a potential winner just driven from what is our class leading footprint in The U.

S. If you look at where we’re positioned, we’ve gone through and really looked at where do customers have body on frame production in Mexico, where would they move body on frame production in The U. S. Because you can’t put body on frame vehicles in a unibody plant, you can’t put unibody production in a body on frame plant, at least not in the short term, longer term you can. And then where does that line up with an Adient footprint?

So customers looking to move unibody production to a unibody plant in The U. S, does that even have a footprint there? And then do we have capacity? And we did that analysis. We’ve then taken that analysis.

We’ve started to proactively reach out to customers and provide them value solutions. And it’s starting to now, I think, pay dividends where we’re not going to front run our customers, but we’re starting to see contracts being released. We’re starting to see incremental volumes coming from that in plants where we have open capacity. And so it’s going to be without large incremental tranches of capital. It’s going to be bolt on capacity for us, on revenues that we’ll start to see paying dividends.

So we believe in that conviction when we look at tariffs long term, Adient is going to be a winner from this as we move forward.

Mark Alswell, CFO, Adient: So when you look at that region in total, The Americas, it’s really giving us excitement just if I look out over the next couple of years, right, in terms of pivoting to the growth engine over there, looking at what that margin progression can be, looking at the improved business performance, right, the cash generation of that segment, that region. So we’re very excited about the Americas region.

Unidentified speaker, Unidentified role: Yeah and I think if you just step back and you’d say how we’re how was Adient position heading into the tariffs. You know we had basically exited Canada in 2022. We didn’t have a lot of Canadian exposure to begin with. And then if you look at our Mexico versus U. S.

Revenue, just by the way our business has formed over time, we were generally kind of overweight U. S. And underweight Mexico to begin with in terms of the platforms we supported. So we had, you know, generally a better position going into the, you know, kinda what is the current setup versus some of our peer group. It’s a

Unidentified speaker, Unidentified role: it’s a super interesting point, and I I know you’re not, you know, necessarily announce anything, but there’s obviously some big news yesterday on one of The US OEMs that that maybe maybe is relevant. But

Unidentified speaker, Unidentified role: if maybe if we switch to

Unidentified speaker, Unidentified role: kind of the the the element of just the recovery themselves. That’s been a big point. Is that kind of trending as expected both in terms of timing and quantity?

Mark Alswell, CFO, Adient: Yeah, is. So, you know, we came out a couple weeks ago, we gave you the gross amount, we gave the net amount, Right? So I’d say those are playing out as expected. But, yeah, no no change from those perspective. Okay.

Unidentified speaker, Unidentified role: Shifting to Europe, you actually had very strong quarter in Europe, very strong performance. I I think you alluded to some of that being maybe timing. But it does seem that Europe is turning the corner. Would agree with it

Mark Alswell, CFO, Adient: or should we look out for next? Yeah, I’ll start and Jerome feel free to weigh in. I’d say and I think I made the comment on the call, one quarter does not make a try. So we are seeing some, what I’d say green shoots of certain of the restructuring actions that we’ve taken. It’s going to be a multi year, you can’t look at second quarter and I’ll start to pencil an upward sloping line there.

The macro conditions, the overall dynamics of that region, it’s just structurally easy fix. And it’s not only an Adient issue, it’s structural within automotive. But we are seeing the green shoots of the restructuring. More importantly, we’re winning business over there, we’re winning conquest business. So when I look out into, it ’27, ’28, in addition to what I’d say, the benefits of the restructuring, the balance in, balance out, we’ll also get some top line support, right, in growth there.

So again, longer term, I’m enthused for the region, but I’m not ready to call, you know, victory over the restructuring yet.

Unidentified speaker, Unidentified role: On China, mentioned, you know, obviously the market is dynamic and there’s quite a few moving parts. One angle, you know, the the the sorry. The the foreign, the JVs have struggled a lot as I’m sure you know. Do do you think kind of the worst is over maybe for them from from a market share perspective? Can it get any worse?

Unidentified speaker, Unidentified role: I mean, I would never say it can’t get any worse. I think it’s it’s all about product product product, and they’ve gotta be able to get a competitive product into the space. And, you know, with the pace of change, the cycle, how quickly the domestics are able to develop, launch, and place a competitive product in the space, the Western OEs have got to be able to catch up and put a competitive product into the space there. I think what’s important for Adient is our diversification that we have and the fact that we’re not overly dependent on one OE or one domestic or one western OE. We have a very diverse customer base.

We continue to drive that diversification by the time we get to back half of ’26, 2027, we’ll be kind of reshaping our mix from what was fortysixty to sixtyforty with Chinese OEMs. In addition to that, because of our extensive joint venture footprint that we have there, we have, in addition to our, call it, 1,400,000,000.0, 1,500,000,000.0 or so of consolidated, we’ve got another almost $2,200,000,000 of nonconsolidated that we bolt on top of that, that spits out a very attractive dividend stream every year. And that is largely all Chinese domestics that are on there. Along with, if they’re not Chinese domestics, it is Western, but more and more that business is controlled by the local Chinese given the JV structure that they have behind our JV partners. And so it is a very nice mix that we have that kind of developed over time since we exited our own JV there.

And we really paired it back, the JVs that we need and the partners that we need, along with our own fully owned business in that region.

Unidentified speaker, Unidentified role: Are there some unique factors going on just more from the the content perspective or from the

Unidentified speaker, Unidentified role: future perspective we see, like, zero gravity

Unidentified speaker, Unidentified role: being much more popular? You you would think that’s higher content, I guess, better, and and also the the com is the competition more intense because the cycles are faster?

Unidentified speaker, Unidentified role: I mean, certainly they have it’s a unique content and very competitive content, and a lot of that is just by driver positions, you know, where occupants choose to sit in the vehicle. You know, in a lot of cases, the primary occupant will sit in the row versus row, which drives a lot of the zero g solutions in the row versus row of the seat there, which means you do get a lot of higher content not only in but also in row that follows throughout. And so you do see on certain vehicles higher content, which is for Adient, if you look at where we tend to play in that market, our content per vehicle is generally higher than that of our peer group. And because where we segment ourselves in the market is generally in $700 and above content per vehicle seating in that marketplace. And then to the part of your question, on the competition side, is it more aggressive because of the cycles?

I think that fuels a more competitive product. When you’re able to innovate with an eighteen to thirty month cycle, you’re able to constantly be driving through a more competitive product. And that’s one of the reasons why I think in that space we as Adient are very competitive. we have a China for China management team there. That starts with our engineering group.

Our head of engineering there is a Chinese local. We just relaunched our Chongqing technical center that has full capability all the way from test leds through to a full multi axis shaker table, full airbag testing the entire suite, which is highly competitive. We have as many engineers in China as our next closest competitor and almost twice as many as the guy in the region. And so we are extremely competitive from an engineering standpoint with a local team in that region. And then that runs all the way through our operations.

So we’re able to keep up with the pace of innovation there. And then with that comes change and change that allows us to drive margin, allows us to drive a competitive nature in our business as well.

Unidentified speaker, Unidentified role: But I wanna shift gears a bit more higher level. I think there’s a, you know, there’s lots of talks in the past about maybe a little bit consolidation going on in in in seeding. Curious on your latest thoughts about certain market positioning.

Unidentified speaker, Unidentified role: I mean, I think there’s there’s been a lot of discussion about consolidation in seeding. I mean, I’ve been cracking on now for seven years, and I haven’t seen any consolidation in Seating. I could maybe be more detailed than that, but I think that’s kind of the simple answer to the question. Mean, I’ve always been very vocal that there are too many players in Seating. I don’t think I’ve ever given a different answer to that.

And when I’ve answered the question about Europe, I’ve said, you and Europe used to make 21,000,000 seats. Today we make 14,500,000 seats. But yet there’s still the number same number of seating plans. There’s you know, the same number of seating players, if not one or two more. And, you know, fundamentally, I think there needs to be consolidation in seating.

Gotta find someone to do it.

Unidentified speaker, Unidentified role: Do you think that’s the main problem, just not a not a obvious consolidator? Or

Unidentified speaker, Unidentified role: Yeah. I mean, think you have to find an you know, you I go back to what I started the discussion with this. You know, Adient is going to be a disciplined allocator of capital with focusing on creating value for our shareholders. And so we’re not going to go out and consolidate for the sake of consolidating. We’re going to be laser focused on driving value for our shareholders.

And so we’ll consolidate if it makes sense because it’s gonna create value. Because the worst thing you can do is just consolidate to consolidate. And so if we think there’s something to be done to create value, we’ll create value. And I think if someone else is out there that thinks you can consolidate to create value, know, that’s what capital markets do, someone will create value with it. You know, why it hasn’t been done over seven years or however long it’s been happening, I I don’t know, but I I think fundamentally, there’s probably too many seating players.

Unidentified speaker, Unidentified role: From a just from a content perspective, we we sort of touched on this on the China aspect. It seems that you look at most of the new cars coming, the the content you see is getting more advanced, more feature rich. Would you would you agree with this? And then I I guess how do you see the the the CPP kind of playing out across the world, you know, going forward outside of China?

Unidentified speaker, Unidentified role: Manny, I think there is more content coming in to see. I think you see flat goods, however, coming down. And what I mean by that is flat goods trim. So I think you’re seeing more substitution of eco friendly materials still. So you’re seeing more PU PVC replacing leather and so that content coming down and it’s being substituted by other things.

You’re seeing more call it massage systems, heating systems, those types of things coming in that are replacing that. And so feature content is higher. That doesn’t necessarily translate into content per vehicle however. And what’s driving that is because if you take the comfort system market, and we’ve talked about this in the past, if you go back four years ago, you probably had three qualified players or two qualified players on an eight way adjustment system. And you maybe had three qualified players on a pneumatic massage system.

Today you’ve got five or six qualified players on a pneumatic massage system. And as those players come in, you’re seeing the pricing on a pneumatic massage system come down and you’re talking double digit compression on price on those products. It’s the same way with an eight way lumbar system. You’re seeing double digit compression. And those guys are all localizing into The U.

S. Or into Mexico, I should say. And so the number of options that you have to source from in some of these high end comfort systems has gone from three to six or from two to seven. And so the price of the components has come down at almost a double digit CAGR. And so while content is going up, affordability is coming down.

And so your CPV, while it is going up, it’s not going up necessarily at the same rate that you would think. And so the value to the end consumer is actually a significant value proposition from that standpoint.

Unidentified speaker, Unidentified role: That’s fascinating. Moving on to what I think more of the financials. Obviously, there’s a we talked a bit about Europe. Can you maybe remind us of the margin opportunity there? How you think about it over multiple years and where are we kind of in the process of life

Mark Alswell, CFO, Adient: cycle? So Europe specifically?

Unidentified speaker, Unidentified role: Yeah.

Mark Alswell, CFO, Adient: So I’d say that, you know, we’re somewhere in that 3% today, right? Plus or minus, we’ve got the restructuring actions in place, we’re executing those. Additional restructuring will need to be done, right? It’s just a question of being prudent, being good allocators of capital with that. Do I think that based on where we see the overall market, just in terms of volumes are not going return back to the pre COVID levels, You’ve got a lot of factors, Jerome’s talked about certain of those, the Chinese imports coming in, you’ve got certain OEs that are looking at insourcing, so there’s going to be more restructuring that has to be done.

Do I think that that market ever gets to a margin where our corporate target is, so call it 7.5%, 8% ish? No. Do I think that we can go from, let’s just say a 3% to somewhere in a 5% range sustainable? Absolutely.

Unidentified speaker, Unidentified role: It’s going to

Mark Alswell, CFO, Adient: take time to get there though, this is a multi year journey.

Unidentified speaker, Unidentified role: And in terms of the, I guess the

Mark Alswell, CFO, Adient: so again, we indicated last year, I think we announced 160,000,000 charge, We indicated this year’s cash restructuring is elevated, call it $100,000,000 plus, 120,000,000, somewhere in that range. So I think that we’re going to need to be in that range probably this year and next year, And then look at years three, four and five to see what’s absolutely necessary, what can be pushed based on our customers production programs, what programs are going to run off, which ones are going to be backfilled. You know, I have a better look in years three and four, but for this year and next year, do I think it’s elevated over a 100,000,000? Absolutely.

Unidentified speaker, Unidentified role: In The Americas, I think you’ve called out some opportunities to to roll off less profitable order order business. Can you give us a sense on the on the size of that and and how that’s progressing?

Mark Alswell, CFO, Adient: Yeah. I think it’s it’s progressing the plan. So if you looked at in the first quarter, U55X, which was, you know, underperforming metals program that that ran off. That was part of our balance out. We got the IBK-two that will start to balance out within The Americas.

We got new programs that are rolling on. We’ve got opportunities for the onshoring into The US, right? So I think that helps the balance and balance out equation. That’s what gives me confidence in the line of sight in terms of what happens to margin within The Americas over the next couple of years. That will in fact get towards that 8% -ish corporate average due to those factors and drivers.

Unidentified speaker, Unidentified role: How much can this is broadly speaking, not necessarily specific to anything, how much can automation potentially help on efficiency and margin? Yeah, mean I

Unidentified speaker, Unidentified role: think we continue to drive automation where we see, you know, returns and where we see labor scarcity. You’ve really got to look at it from both, you know, both sides. Know, do you have the labor? If you don’t, can automation supplement it? And do you have a reasonable payback on the automation that you’re putting in?

You know we’ve been on the forefront of automation in our metals business. You know we had automated lines, you know building and welding front seat backs before our peers did. We certainly had automated lines, welding, row, complicated structures before Pierce did and we had that in high cost countries both in Spain and in The U. S. And in those cases we see fairly reasonable returns all less than two years where we have new capital investment that needs to go in.

And so we continue to drive that aggressively. In our foaming business, we continue to drive high levels of automation really driven from what I’d call labor scarcity but also returns. Foaming line is a difficult place to work, especially in the South where you’ve got 100 plus degree temperatures and you really think about a line that’s moving at this kind of a pace, you’ve got to place parts on it, and we’re able to do that now in an automated fashion, which has I think paid significant dividends for us. If you think then about TRiM, where I think we’ve got kind of the two d flat base in a very competitive state automated and everyone is driving towards where can we get to three d, and we’ve landed our cells in both Mexico and Asia working on three d selling. It’s always going to be a question of payback.

And what does the payback look like when you’re replacing what is an asset that is fairly what I call fungible that you can scale as volume scales with now what will be a fixed asset. And the beauty of the TRIM business is you know it’s always been a high ROCE business because it’s low capital investment, and do you want to trade that off and make it more similar to what is your metals business, which then becomes a very high fixed asset base? And that’s what we’re always evaluating on the automation front. But I think our automation portfolio is very healthy. You know, we continue to drive significant CI year over year.

If you look at our business performance, you know, we continue to drive positive business performance in all of our regions, and automation is a very large part of that. You know, we’ve chosen to do it so far through either direct investment in series kind of b funding for a couple of companies or through what would be partnerships with companies. We think it’s a very healthy way to do it.

Unidentified speaker, Unidentified role: There’s a couple questions left at the time. We’re gonna hit on the guidance a little bit naturally, David, to the end. So you you did, you know, we did reiterate the last earnings, you’re you’re least on a slightly different calendar than than the most suppliers. But you had I think there was a bit of conservatism perhaps embedded in that. And with, I think, maybe the the tariff situation, the volume situation seemingly more stable, Do you feel better, maybe more optimistic about that?

Mark Alswell, CFO, Adient: Yeah, we’re not going to update guidance today. Obviously we were out a couple weeks ago, we gave what our inputs were to that just in terms of where we thought production was going to land. Nothing significantly has changed since then. I think certain of the conservatism that you might be referencing or referring to is around the tariff recoveries, right? So we know that we’re getting hit with certain of the tariffs.

We do have negotiated outcomes with our customers in place, but there’s going to be some level of timing difference between when we incur those costs versus when we receive the funds coming in. So I think when you look out into our Q4, that’s probably, you know, it’s mitigating certain of that upside. If those weren’t in existence, right, could we have increased our outlook for the year? Very likely, right? So it’s just a question of timing in terms of when those recoveries come in, but we’re feeling very comfortable just in terms of the overall dynamics now versus where we sat a couple of weeks ago.

Unidentified speaker, Unidentified role: And then I think on the, if I look at the last quarter, the net performance was incredibly strong. How are you thinking about that, I guess, contributing to that?

Mark Alswell, CFO, Adient: Yeah, when I look at the overall business performance or material margin performance, that’s typically lumpy between quarters, right, because it is timing of certain of the commercial recoveries. So I think I made some comments in the Q2 call that when you look at each of the quarters, there is some lumpiness and that lumpiness is driven by those recoveries. If I look at first half, half, you know fairly constant, when I look at first quarter versus third quarter probably fairly close, second quarter to fourth quarter fairly close, so again taking a longer view on that I think you balance out that lumpiness, But again, consistent first half, half. Last question? Just one more point on that, with more cash generation obviously in the half of the year because that’s where we generate cash.

Unidentified speaker, Unidentified role: Last question for me on and it kinda goes back to the slide I think you you showed earlier on on the capital allocate allocation. What what are the I guess, what are your key priorities, I guess, as you think about debt pay down, shareholder returns, maybe some tuck in M and A? How do you think about, I guess, the

Unidentified speaker, Unidentified role: various buckets that you can

Mark Alswell, CFO, Adient: Those are the buckets, right? So when I think about, you know, what we sit back and Jerome and I have discussions daily, right, just in terms of creating the value of what we’re doing in terms of allocating capital, I think we both agree what separates good management teams from great management teams is the way that you allocate the capital. So from an Adient perspective, right, it starts with operations. We have to make sure that we continue to operate very effectively at the plant. We’ve to make sure that the customer recognizes value with us.

That then leads to obviously better business performance, which obviously generates more free cash flow. When we have the cash flow then obviously based on where we are trading today, we see tremendous value in adding in stocks, so we’ll continue with repurchases. We recognize the fact that we’re a cyclical company, so looking at our debt even though we’re within the leverage target range of 1.5 to two times, would we opportunistically look at bringing in certain of that debt? Sure. And then that bucket is obviously some dry powder for some inorganic growth.

When you start talking about the inorganic growth, obviously, there’s certain hurdle rates that we look at, When we look at the overall industry, we look at the macros, we look at leverage, we look at how fast we could pay down if we did have to take on a little bit more leverage depending on what the size of that asset was. Those are all the conditions that go into those, what I’d say, determination in terms of any type of inorganic growth or pull the trigger on that.

Unidentified speaker, Unidentified role: Open it up in the last minute or two to the audience, I I think we

Unidentified speaker, Unidentified role: got something in the back. Yeah.

Unidentified speaker, Audience Member: Thank you for coming. Just a quick question. You mentioned the increased competition in some of the more advanced seating functionalities and features. How do you you know, going forward, how do you is there an r and d plan also to go and compete better? And then how do you trade that off at pricing compression?

Is there a return on that r and d? You know, if you wanna try to appreciate your your seating systems, what’s the trade off? Like, do you want deciding whether to invest or not in certain R and D functionalities? Yeah.

Unidentified speaker, Unidentified role: I mean, I think from an R and D standpoint, if you look at our toolbox that we have really around the world, and that’s where we made the investment in our Chongqing Tech Center to go and expand it, you know, to give us the full technical suite that we need in China. And then we do see tremendous payback on that. You know, it shows in our bookings and our bookings rate that we have in China. We did the same thing in Japan. You know, we expanded our Yokohama Tech Center.

We invested in that, and it shows in our bookings in Japan. I mean we’ve expanded our business in Japan by almost $600,000,000 over the past three and a half years, and we’ve taken that business in Asia and been able to hold and expand margins and expand free cash flow generation. That’s how we look at those R and D investments. What’s the business pipeline we have available and will this allow us to become more of a relevant factor with our customers? And that’s what we look at.

Digging a bit further, it goes back to Mark’s question is, is there anything in our portfolio from an inorganic standpoint that we need to compete in order to be more relevant with our customer base? And we’re constantly evaluating that. At the moment, I don’t think we see any white spaces in our portfolio. And we were asked the question two years ago, especially on the comfort system side. I think on that, given all the players that are in the market and the partnerships we form, with the likes of Gentherm and players like that, I think we feel like we’re in a very good space at the moment.

Thank you.

Unidentified speaker, Unidentified role: Fantastic. Well, thank you very much.

Unidentified speaker, Unidentified role: Great. Thank you. Thank you.

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