Aptiv at J.P. Morgan Auto Conference: Strategic Moves Amid Market Shifts

On Tuesday, 12 August 2025, Aptiv PLC (NYSE:APTV) participated in the J.P. Morgan Auto Conference, discussing its recent financial performance and strategic plans amidst evolving market conditions. While the company reported strong Q2 results, it also addressed challenges such as tariff impacts and a potential slowdown in vehicle production.

Key Takeaways

• Aptiv reported strong Q2 performance, driven by increased vehicle production and operational efficiencies.
• The company plans a stock repurchase in the latter half of the year, citing stock undervaluation.
• Adient reduced its monthly tariff impact significantly and is focusing on conservative EV investments.
• Both companies emphasized maintaining operational autonomy post-spins to avoid dis-synergies.
• Aptiv expects a moderate slowdown in vehicle production in Q4 2025 due to tariffs.

Financial Results

Aptiv reported a robust second quarter, with increased vehicle production and enhanced operational efficiencies leading to margin expansion and strong cash flow. The company sits on a strong balance sheet with 1.4 billion dollars in cash and plans to repurchase stock later this year, reflecting its confidence in the stock’s undervaluation. Adient, meanwhile, managed to reduce its monthly tariff impact from 12 million dollars to 4 million dollars through strategic efforts and partnerships.

Operational Updates

Aptiv is focusing on expanding into industrial markets and regionalizing its supply chain to mitigate tariff impacts. The company is also exploring opportunities in the digital twin of its global supply chain for enhanced visibility and alternative sourcing. Adient is looking to grow its business with Chinese domestic automakers and is taking a modular approach to save customers significant costs.

Future Outlook

Aptiv anticipates a moderate slowdown in vehicle production in Q4 2025 due to tariffs, with continued strong EV adoption in China and Europe. The company remains focused on top OEMs in China and is optimistic about opportunities with emerging automakers. Adient aims to improve its EBITDA margin in Europe over the coming years, focusing on maintaining cash flow and sustaining its business.

Q&A Highlights

During the conference, Aptiv’s CEO, Kevin Clark, highlighted the company’s plans for smart M&A activities and returning cash to shareholders. He emphasized the importance of USMCA compliance and strong EV adoption in China and Europe. Adient’s CFO, Mark Oswald, underscored the company’s flawless operations with partners like Ford, ensuring high-quality manufacturing and launch processes.

For further details, please refer to the full transcript below.

Full transcript - J.P. Morgan Auto Conference:

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Hi. Once again, I’m Ryan Brinkman. We’re going get going now with our first presentation. Very happy to have with us Marquee, auto parts supplier, Aptiv, including their Chair and Chief Executive Officer to my right, Kevin Clark and on the end, Varun LaRoya, Executive Vice President and Chief Financial Officer. Kevin and Varun, thanks so much for coming to the conference.

Kevin Clark, Chair and Chief Executive Officer, Aptiv: Thanks for having us. It’s been a pleasure.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Maybe to start, coming off a strong second quarter, you commented that your reinstated 2025 outlook contains some elements of conservatism around the second half, industry builds, etcetera. You’re sitting on a really strong balance sheet, 1,400,000,000.0 cash. How do you think about capital allocation in light of your performance year to date, your expectations for the remainder of the year and the market backdrop that arguably remains a bit uncertain?

Kevin Clark, Chair and Chief Executive Officer, Aptiv: Sure. I’ll start and Bernd can certainly chime in on it. Second quarter was very strong for us. So from a backdrop standpoint, vehicle production was stronger than what we had expected in Q2. We thought there would be some tariff impact beginning to affect vehicle production in Q2.

We didn’t see it. Production was much stronger. We think there may have been a little bit of pull ahead into Q2 just from a consumer demand standpoint that resulted in our OEMs increasing vehicle production. We continue to see strength in July, so it gives us incremental confidence in our Q3 outlook. As Ryan had said, we basically we’ve been presuming that we’re going to see some softening at some point in time during 2025 as a result of tariffs under the presumption that at some point OEMs would be pushing price increases through or reducing sales incentives.

And that ultimately would impact end consumer demand and therefore vehicle production. Haven’t seen it yet. We have baked some of that into our back half outlook. So we do see a or our forecast assumes some slowing principally in Q4. We’ll see how that plays out.

If it doesn’t play out, quite frankly, there’ll be upside to our guidance, which is a positive. The second quarter, first half of year, do want to add to my response to Ryan’s question. The business performed extremely well. So in addition to getting the benefit of vehicle production, when you look at what we’ve delivered from a manufacturing efficiency, from an engineering productivity standpoint, from an SG and A productivity standpoint. Operationally, we executed extremely well.

I’d say we’re back to and even better than where we were pre COVID from an overall the factory operating and connecting the full integrated supply chain. So it’s translated into strong margin expansion, although we’ve had this year significant FX headwinds, principally the peso, but very strong operating productivity, very strong cash flow generation. And I think to answer the last part of Ryan’s question, our real focus is how do we continue to take our existing portfolio, expand into industrial markets. We’ve obviously made a lot of progress in our ECG business. We’re making progress in our ASUX business as well as our EDS business.

We’ll continue to push that organically as well as inorganically in an intelligent way. Given where we sit today from a cash generation standpoint, we’ve made a decision we will be back in the market repurchasing stock in the back half of this year, just given where our stock sits today, which I think is important for you as investors in our view that we can quite easily do smart M and A while at the same time we can return cash to shareholders, especially when we’re in situations like we are today where our view is our stock is significantly undervalued.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Great. Thanks. And you referenced tariffs. How have you managed the direct impact on your company? And then how are you thinking about the indirect impact going forward in terms of the potential for demand destruction as automakers raise prices?

Have you changed your estimate of the normalized level of U. S. Light vehicle sales or North America production as a result?

Kevin Clark, Chair and Chief Executive Officer, Aptiv: Yes, that’s the question. So the indirect piece is tough to give a precise answer to. I think it’s implied in our back half guidance from a vehicle production standpoint that there is some impact. We haven’t seen it yet, but I think it’s reasonable to assume that there will be some some impact over over the long term. As it relates to direct impact for us, it’s been de minimis.

I mean, literally, it’s been de minimis. I part of that is we’ve been very focused over the last really since the first Trump administration from a supply chain management standpoint, really focused on regionalizing our supply chain, so in region, for region. Our supply chain visibility on a global basis, I would say, is the best in the industry. I mean we have a digital twin of our global supply chain where we have the ability to go down multiple levels in terms of where we source and quite frankly, where we don’t source from so that we have visibility for alternatives. So a long time ago, we made the decision to really push towards regionalization, where we’ve had potential direct impacts.

We’ve already made shifts in terms of who we’re sourcing from and where that’s located. There have been a few areas where we weren’t able to address from a supply chain standpoint, and we’ve been able to pass that on to our customers with agreements with contractual agreements, but also with a commitment that we’re going to work jointly together to find alternatives to reduce that pressure on them. But that amount is relatively small. I’d say the one area that we’re focused on and watching we just don’t know enough about it yet. There’s not enough clarity is the potentially proposed semiconductor tariffs and how that plays out.

Obviously, a big part of what we do is reliant upon advanced compute, reliant upon semiconductor chips. So that’s something that we’re watching closely.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Thanks. And as far as how the tariff backdrop may evolve going forward, we’ve seen a trend of tariff rates coming down, right, with The U. K. Getting a 10% rate, Japan 12.5%, EU and Korea 15 yet Canada and Mexico remain at 25%. How do you see that maybe evolving?

And then any look ahead to the six year joint review of USMCA scheduled for July 2026 and the potential impact to Aptiv given your large operations in Mexico, particularly for EDS?

Kevin Clark, Chair and Chief Executive Officer, Aptiv: Yes. So 95% of what comes into U. S. For comes in through Mexico and of that over 99% is USMCA compliant. So USMCA is very important.

Our view based on our discussions with administration here in The US as well as in Mexico, importantly, where we have strong relationships as well, is USMCA will stay in place. The US administration will be pushing for more US content that their real focus is vehicle assembly in The United States when you think about the nature of those jobs and the pay associated with those jobs. That when you look at it from a part standpoint other than engine parts, really things will stay in place as they operate today. We used to get a lot of questions, for example, about our EDS wire harness business. That’s one where the administration and the industries work very closely together.

There’s no situation where that’s going to move to The U. S. And there’s no situation where that’s going to be subject to tariffs. Between U. S, Mexico and Canada, you’re going to see more driving as well, more content across the three countries.

So those standards will go up. But we think it’s going to be actually very manageable. Mexico has played this very well. They’re very supportive of the U. S.

Administration and are willing to do, I’d say, just about anything to make sure USMCA stays in place, given the importance of USMCA and job creation in Mexico, as you can imagine. So, so far, things look like they’re going to play out reasonably well. As it relates to tariffs overall, tariff rates, I think it’s reasonable to assume that with the exception of China, you’re going to see tariffs stay in place, and they’re going to drift around 10% to 15% depending. And that’s going to be kind of the lowest level and virtually every country will be subject to tariffs.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: That’s helpful. Thank you. And next, I wanted to ask what your very latest outlook is for vehicle electrification, including in light of the recent changes to the regulatory backdrop, such as the elimination of the $7,500 U. S. Federal consumer tax credit and the relaxed enforcement of greenhouse gas and corporate average fuel economy standards.

How has your outlook evolved? And in what ways might you be running the business or allocating capital any differently as a result? Yes.

Kevin Clark, Chair and Chief Executive Officer, Aptiv: So our view, maybe for people here, IHS still has a forecast where by 02/1930, EV penetration, which will be bevs, plug in hybrids, hybrids, would represent basically 70% of vehicles produced globally. That’s their general outlook. Our outlook is closer to 50%. Our view is you’re going to continue to see very strong adoption in China. That will continue.

In Europe, you’ll see stronger commitment or we’re seeing stronger commitment to EV and bev adoption than what we certainly have here in The U. S. Although, as you all know, the targets have been moved couple of years and the EU is still working with the member countries in terms of how do they settle with a more holistic sort of CO2 targets and how do they support member states in terms of achieving those targets. As you know, a number of the OEMs are working directly with them. Here in The U.

S, our view is EV adoption is basically flat. You’re not going to see growth. You’ll see growth in some growth in hybrid, plug in hybrid. Having said that, we’d tell you virtually all of our OEM customers are working on dev platforms. You saw the announcement from Ford as an example.

And the way I would explain that to you is all of them believe that if they need they’re going to be competitive globally, they need an EV vehicle. So all of them are working on those sorts of solutions, that it’ll be very low volume here in The US for the foreseeable future for the reasons that the long list that Ryan went through. EVs are very beneficial to Aptiv when we talk about content opportunities. Bevs, it presents opportunity relative to a nice vehicle on plug in hybrids. It’s almost two times.

So it’s good for us from a growth standpoint. But our general view is where we’ll see opportunity is in Europe, slower than what people were anticipating previously. It will continue to move very quickly in China. In North America, we’ll be fairly flat.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Great. Thank you. And the next question relates to your approach to adapting to the rapid growth of domestic Chinese automakers. At the conference last year, we asked each of the suppliers to update us on their current exposure to Chinese automakers and to outline any plans to increase that exposure going forward. And the answer that I think investors were looking for was that suppliers were doing absolutely everything and anything they could to hitch their wagon to that star.

I wanted to check-in a year later after Chinese automakers probably grew even more quickly than was imagined, took even more share. Yet at the same time, there are these headlines about them commanding very favorable pricing and payment terms with suppliers. The government even recently encouraged automakers to sign a pledge to please pay suppliers on time. So what’s your sense of the dynamic there? And what is your approach to balancing the opportunity for growth with commercial discipline?

Kevin Clark, Chair and Chief Executive Officer, Aptiv: Yeah. So I was going to say you have to define star at the end of the day. For us, it’s profitability. Now the China market, we’ve been there for almost four decades. And we’ve been in China for China.

For us, it never was sourced for other countries. It’s actually the perfect market as you think about technology development and advancement. It’s quite frankly ideal given the pace of change. So we use that. The market is competitive.

Our real focus is on the top 10 OEMs. In reality, given growth in market share, it’s really the top five that for us really, really matter in terms of market share penetration and true revenue growth. So being with BYD, being with Geely, being with Chang’an, being with Chery and Great Wall, that’s where our most significant focus is. The other is the next five, it’s a bit more opportunistic. We’re really focused on those that are taking vehicles overseas.

So we’re working with BYD in terms of their plans in Europe, what they’re doing in South America as an example, because we can bring incremental value. So although we’re making progress from a booking standpoint to match our revenues with mix of local versus nonlocal, we’re not going to be a slave to it at the cost of cash flow and profitability. We’re not. So we’ll continue to gain in terms from a market share standpoint with that mix of customers, but our real focus is how do we continue to generate profits in China that are that have acceptable returns, right, quite frankly.

Unidentified speaker: I don’t know. No, I think that’s comprehensive, Kevin.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Thanks. And moving to the EDS spin, could you discuss the ways in which the spin can enhance value creation through optimizing capital allocation going forward? For example, have there been or do you anticipate that there could be potential acquisitions that would be financially or strategically attractive to EDS to pursue on its own, but which might not meet the parent company’s hurdle rates for margin or growth or conversely will new Aptiv be freer now to pursue higher growth or higher margin targets that might have been deemed too dilutive to valuation inclusive of EDS? Of the various motivating factors for the acquisition, where does capital allocation optimization rank? And just how large is the opportunity, do you think, for value creation in this area on both the EDS and Nuaptive sides?

Kevin Clark, Chair and Chief Executive Officer, Aptiv: Yes. I guess for us, I mean, I guess factoring the capital allocation is capital returns. And I think that was the primary focus, right? I should start with the EDS business is a great business. Competitively, it’s the number one or number two player in literally every market it operates in.

It’s on one of every four or five vehicles produced globally. So the market position of EDS is significant. When you look at the margin profile of EDS, it’s almost 2x any of its competitors in the global wire harness business. And the reason for that is the bulk of their business is we refer to it as full service. They design, manufacture and supply.

And in doing so, they’re able to drive more value to customers and higher margins. And they operate in an industry today where there are a number of players that do build to print items like that, which is reflected in their margins. Our view is there’s opportunity to consolidate within automotive in that space. We’ll see if that plays out. But the reality is virtually everything you think about has a wire harness, right?

Whether it’s a drone, it’s a robot, it’s a humanoid, we can go through the whole list. It has a wire harness. And one of their big focus areas is going to be how do they, in an intelligent way, take the technology that they develop and deliver today in a very demanding environment and apply that to other markets in an intelligent way? And being standalone will give them a lot more flexibility to do it. And in fact, today, we have a customer who’s taken us into satellite, space, energy infrastructure, robotics as a start, and we think we can leverage that know how.

On the RemainCo side, you think about our Engineered Components business similar to what I was talking about in terms of EDS, everything has an interconnect. So to the extent you see more cameras, more radar, more LIDAR, more sensors, you need interconnect solutions. You need high speed cable assemblies. You need all that. So there’s tremendous opportunity that remains in automotive as more content goes on the car as well as opportunities outside of automotive.

It will be a very big focus area. On the ASUX side, as you think about M and A, I would say it’s more partnering, more investments with technology partners than it is straight out M and A from a software standpoint. But those will be areas of focus as well. So our view is given the focus, given the more focused portfolio, given the capital structures and businesses that generate cash flow, there’s all sorts of opportunities to grow and generate returns for shareholders. And quite frankly, in both businesses at the same time, return cash to shareholders.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Yes. The benefits of the EDS spend, they do seem obvious. And as a financial analyst, I also think there’s a tremendous sum of parts valuation opportunity there. At the same time, I also found quite compelling the earlier proposition of there being significant benefits to supplying both the brain and the nervous system of the vehicle, perhaps that by designing them closely in conjunction under the same roof that maybe they would work more harmoniously together, enabling simplification, cost reduction by pursuing a whole systems approach. So do you see any potential for revenue dis synergies?

Or how can you mitigate that risk? And how will how do you plan like to go to market? How would it work for highly integrated solutions such as smart vehicle architecture? Would Aptiv’s ECG group serve as a Tier two supplier to EDS? Or would they be officially Would they be a preferred partner?

Jerome Dorlak, President and Chief Executive Officer, Adient: How is that going to work?

Kevin Clark, Chair and Chief Executive Officer, Aptiv: Yes. So our view is because of the transaction, there should be no revenue dis synergies. So let me start with that. The second piece, just backdrop on how we run our businesses. Our businesses are global stand alone P and Ls.

We have very little overlap. We have no overlap from a manufacturing standpoint. We have very little overlap from a technical or engineering footprint standpoint. We have some overlap when you think about G and A overhead, right? So from a facility standpoint, not from a management standpoint.

And those businesses are global. They’re managed at regional levels with regional MDs. They all have P and Ls, balance sheets, cash flow statements. The relationship between our sister companies is arm’s length. It’s commercial.

So it’s not driven by tax planning in terms of where we put profits. It’s truly a commercial sort of negotiation. Where we develop full system solutions is where the business leaders get together and decide we have a particular edge in an area or a relationship, you have a particular capability, how do we come together to do that? The reality is we do that with outside suppliers too. So that’s something that we’ll just continue to do.

In a weird way, for those of you that haven’t operated in industrial companies, sometimes it’s easier when you don’t have a brother sister company in terms of how they get along and how do they work together. So we think there’s tremendous opportunity that will continue. ECG operates today as a Tier two to EDS, just like TE operates as a Tier two to EDS, just like MOLEX operates or Amphenol. I can go through the list. So that will continue.

And we think the separation will have really no impact on those relationships and hopefully drives accelerated revenue growth that they all can benefit from.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Okay. And you mentioned non automotive in response to one of the earlier questions as an opportunity on the M and A side for new Aptiv. Could you talk about the nonautomotive business more broadly? It’s been rising as a percentage of sales. For a long time, you’d targeted getting to 20% nonautomotive revenue.

Actually, new Aptiv’s already at 22% or will be post spin. So I’m just curious if you might set a new target after the spin.

Kevin Clark, Chair and Chief Executive Officer, Aptiv: I’m not sure we’ll establish a specific target.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: 30%.

Kevin Clark, Chair and Chief Executive Officer, Aptiv: I would say for investors and we’ll talk about this more at our Investor Day in late November. It needs to be meaningful, but it needs to be done in an intelligent way, right? And so that’s both organic and inorganic, and we understand that from a framework standpoint. But to get a more balanced revenue mix, a view from a multiple that we have exposure to high growth markets like A and D, like telco, like data center, like other, it needs to be certainly higher than where it is today at 22%. Now organically, industrial market is growing north of 10% this year.

It will be our fastest growing revenue sector on a revenue base. It’s roughly $1,800,000,000 So the team is doing a great job. To really move the needle, we’re going to have to do M and A. So that’s a part of our overall plan. But we’ll figure out whether we give specific number or target.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Thank you. Maybe turning to award activity. Where are you with regard to new business bookings? Are the awards that you’re booking now sufficient, do you think, to support the medium term growth you’ve targeted for the two segments? And a lot of suppliers have reported an industry wide slowdown in requests for proposals with automakers as they paused plans amidst regulatory uncertainty with regard to emissions, fuel efficiency, tariffs, etcetera.

With the increased clarity that we’ve gotten recently around some of these factors, do you expect now that there could be a flurry of activity? How is Aptiv positioned to capitalize upon any such rebound in industry bidding?

Kevin Clark, Chair and Chief Executive Officer, Aptiv: Yes. So I think what we’ve talked about this previously with Ryan. I wouldn’t say we’ve seen a slowdown in the activity. We’ve seen an elongated award cycle. So the number of opportunities that are being presented and our OEMs are calling out, that hasn’t changed at all.

The time from start of the process to actual award has lengthened. And it is purely the purchasing organizations who are dealing with the weekly announcements as it relates to trade and tariff, what it means from a supply chain standpoint. So striking that balance, I think it’s been difficult. Having said that, every OEM is focused on how do they put new vehicles with new content out on the road. And the only way they’re able to meet their schedules or their strategic plans from a product planning standpoint is to award the business.

Otherwise, suppliers, the engineering organizations within those OEMs are unable to start working on those programs and you run into issues as it relates to delay. So I think you’ll see a flurry of activity in the back half of this year. We’ll see how big the flurry is. But I would say every OEM is focused on introducing new solutions.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Thank you. And one of the products that seems you might have found particular traction with an awards recently is your Gen six ADAS product with two such awards in 2Q, including one with Leap Motor in China that utilizes a Wind River real time operating system. You mentioned the cost pressure from tariffs as a potential catalyst for automakers seeking this product. Maybe you could just unpack that a bit for us. And then what role does Wind River have to play here?

Can you explain that further?

Unidentified speaker: Sure.

Kevin Clark, Chair and Chief Executive Officer, Aptiv: LEAP Motor, our relationship with LEAP Motor is originally was vis a vis Ashley Stellantis and their work with LEAP Motor. So that was the initial focus. Stellantis is a large customer as it relates to ADAS for Aptiv and has been for a long period of time. When you think about our Gen six ADAS solution, it’s really focused on it’s an open architected platform. So it gives customers choice from a vision standpoint, from a radar standpoint, from a feature development standpoint.

If you have an OEM who’s developed certain features that they want incorporated into a vehicle or another supplier, we can do that. And it’s fairly chip agnostic. It’s not as easy as you can just shift. But we can operate on different power sources for ADAS controllers. So it gives them a lot of flexibility.

And when you look at our reference platform that is based off a StradVision vision solution, our most advanced radar solution, relative to the standard comparable system, it’s a 25% cost savings at equal performance. And given everything that OEMs are going through, including tariff costs, tariff expenses being pushed on to them, concerned about vehicle production and their cost structure, there’s a lot of interest, especially given that it’s open architected. They’re not locked in by a supplier on a given solution. They have choice. They have flexibility.

So we’re seeing a lot of pull from both traditional legacy OEMs as well as we’ve had a couple of awards in China, some of the China local OEMs as well. What does Wind River play? So Wind River is the RTOS and Linux layer. Allows the way Wind River’s architected an easier separation between the software stack and the hardware stack. It’s architected in a way where where it’s much more efficient than the traditional solutions used used in the industry.

There’s an engineering tool chain that goes with it that for those OEMs who want to develop some of the software, it’s fully connected with the ecosystem of suppliers that are contributing to the platform. So it’s more efficient, drives productivity. You’ve heard us talk about in our ASUX business, roughly 80% of our programs today utilize Wind River Studio Developer. We’ve experienced 20% productivity from an engineering standpoint, software development standpoint. It’s massive from a quality standpoint, connectivity standpoint.

So we’re trying to bring value like that to our customers, a more holistic approach. But again, give them flexibility.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Thank you. I know growth over market performance has been closely watched by investors, including after a softer performance in 2024 in which you fell short of your expectation at the start of the year, given vastly different performance at certain customers and the EV slowdown generally. This year, though, you continue to look for the same five points of global growth over market as at the start of the year, about 2% organic growth on minus 3% industry production. That’s an improvement versus last year, both in absolute terms and versus your expectation. What have been the main drivers of the improvement?

And while I understand that you haven’t guided to 2026, what would you say are the high level puts and takes on growth over market as we head into next year, including as it might relate to cycling past in 2026, the roll off of any legacy programs or underperformance of

Kevin Clark, Chair and Chief Executive Officer, Aptiv: 2024 and to a certain extent twenty twenty five twenty twenty four significant impact from customer mix, EV and non EV. And the big players were U. S.-based global EV company, a German automotive OEM with a BEV platform, a French based global OEM, who all of the production came down significantly EV and non EV. Those for us were the biggest headwinds. I would say when you look at that mix this year, it’s really principally isolated to that global EV manufacturer.

There is a and we’ve been talking about this now for a year and the headwind will end in the fourth quarter of this year. There’s a large user experience program, legacy user experience program that has been running off for the last two years that has been, I don’t know, worth about two points of overall growth when you think about revenue growth. That’s been the headwind. So that will go away. I think you see a more normalized sort of growth relative to vehicle production.

I think the dynamics in the China market, especially today, and then the mix of platforms between bevs, plug in hybrids, ICE vehicles make the predictability of growth over market much more difficult. I think it’s a reference point that investors should look at. I think it’s worth looking at it. But I think when the world was principally built platforms where there is more predictability as a guidepost, it was more useful. So it’s something that we’re from a communication standpoint, we’ll continue to provide the information to investors.

We’ll deemphasize it as a priority. And then how do we make sure that we provide you with information where you can see where are we gaining share? How are we gaining share? Who are we gaining share with? Okay.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: And I have some more questions, but why don’t I pause to see if there’s any in the audience? And as they’re thinking of their next question, I will sneak in one on copper tariffs. Can you explain what’s going on there? I think that there’s not an EBITDA dollar impact apart from timing differences, right, but there is an EBITDA margin impact. Is that the way to think about it?

And then also, you gave your outlook for how Section two thirty two automotive sectoral tariffs may evolve. How do you think the copper tariffs might evolve? Because the steel and the aluminum tariffs are not stackable on top of the automotive tariffs, but copper is. And that just seems sort of odd. I’m curious if it might get addressed.

Unidentified speaker: Yes. First, thank you for having us here. On the copper piece specifically, if you kind of go back to when we gave guidance at the start of the year, what we had thought about from a guidance perspective, revenue and then also anticipated the level of FX and commodities pressures. What has come through, obviously, has been stronger production, and you’ve kind of seen the print in the first half of the year and now some conservatism at the back half of the year. Specifically to FX, as we’ve called out, our single biggest exposure is the Mexican peso, where we do not have a natural hedge.

And then from a commodities perspective, it’s essentially copper, right? And from a copper perspective, essentially within our EDS business, the wire harness business is where we have. With regards to the revenue side, commodity prices being higher certainly helps from a revenue perspective. But then from an OI perspective, as you rightly pointed out, Ryan, less so. The FX impact is bigger because 70% of our copper is essentially passed through, right?

So that’s indexed through our contracts in any case. And then the remaining, we typically hedge up to a certain point. So that one is more manageable. Again, this is more a case about risk mitigation rather than trying to make an incremental turn from that perspective. And then with regards to the Section two thirty two tariffs, in terms of when the proclamation was made and as things continue to get clarified, we see that our specific exposure is de minimis.

Given the digital twin that Kevin mentioned earlier, we have good insight into the level of copper content within our products. And again, from a sourcing perspective, we obviously will try and mitigate as much of that as we can, but we do not see that to be a big exposure to us.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Great. Thank you. Question in the audience, microphone on the way for the webcast. Thank you.

Kevin Clark, Chair and Chief Executive Officer, Aptiv: One thing if I can just augment what Barron was talking about. So the Mexican peso, we talked about naturally. So you think about it, we have 75,000 employees in Mexico, we pay in pesos. Our business generates dollars, right? So to the extent the peso strengthens, which it has significantly, it’s in the 18s at this point in time.

Obviously, that’s a headwind from a cash flow standpoint, from an earnings standpoint.

Unidentified speaker: Neil Patel, thank you for your time. How will your capital structure evolve post the separation? Yes, I certainly can. Listen, so as we as Kevin mentioned and one of the questions, Ryan, you’d asked was what are the kind of priorities as to what drove the EDS separation. Apart from just the strategic and operating focus between the two businesses, but also resources and investments, Capital allocation is also an element associated with that, just making sure that we align the right shareholder basis with the two separate businesses.

As you think more specifically about the two businesses, EDS grade businesses, Kevin mentioned, but really more of a lower growth but very steady and high cash flow generating business. So as we think about the cap structure for that business, great dynamics, but essentially, we would set it up as a high sub investment grade cap structure. So call it 2x levered or less than that, right? That’s how we’re thinking about the EDS business. And then from a new AptivRemainCo perspective specifically, higher margin, higher growth investment grade, that remains a priority for us.

And given the prodigious free cash flow generation from both parts of the businesses, we think it certainly aligns better from a capital allocation, but also from a cap structure perspective. So in summary, EDS high sub investment

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: investment grade. If I can just add, I think the important thing for us is capital structure that provides us flexibility

Kevin Clark, Chair and Chief Executive Officer, Aptiv: Aptiv to do M and A and return cash to shareholders. That’s our focus. That I think given the margin profile, growth profile of RemainCo, it’s obviously investment grade. On the EDS side, just given the size of the business and nature of it, it’s likely very high sub investment grade, but we’re very sensitive to overleveraging that business, quite frankly, so that it has the flexibility to execute on its strategy.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: And that is all the time we have. So please join me in thanking Kevin and Varun for all the great color and insight. Okay. Once again, I’m Ryan Brinkman, the U. Automotive equity research analyst at JPMorgan.

Very happy to get going with our next presentation, which is we’ve got supporting slides, but it’s a fireside chat with Jerome Dorlak, Adient’s President and Chief Executive Officer. This is the largest seeding supplier in the world and Mark Oswald, Executive Vice President and Chief Financial Officer. So Jerome and Mark, thank you so much for coming to the conference.

Mark Oswald, Executive Vice President and Chief Financial Officer, Adient: Thank you, First

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: question is on the impact of tariffs. For the industry overall and for your company in particular, How have you managed the direct impact so far? And how are you thinking about the indirect impact going forward in terms of the potential for demand destruction as automakers raise prices? Not so much so far, but how have you maybe changed your estimate of normalized demand for sales or production in The U. S.

Or North America as a result of tariffs?

Jerome Dorlak, President and Chief Executive Officer, Adient: I’ll start, and then I’ll hand it over to Mark for comments. I think if you look at our Q2 call, we had published kind of a number of an annual or not an annual, sorry, a monthly impact of about $12,000,000 From that time to when we had our Q3 call, the team is working both internally, but then more importantly with our customers, we were able to whittle that down to a monthly impact of around $4,000,000 And that’s really a testament to what we can do when we put the collective might of this industry to bear, both working with our global footprint, able to move things from high tariff regions to low tariff regions, requalifying things for USMCA, going through looking at adding more value in the USMCA region, resourcing things very quickly and then working with our customers on recovery activities. And so generally, we’ve been able to manage through the tariff issue and take it to a level that is manageable. And again, that’s on a gross level, not on a net level. And we’ve talked about getting to levels of recovery with our customers.

On average, that’s north of 85% from that standpoint. I think if you then talk about demand destruction and what it means, I they just before this meeting had the print of the inflation numbers for The U. S, and that’s right around 2.75%. So I think demand destruction generally seems to be holding up well. I mean, the July SAAR was north of $16,000,000 How much of that’s pull ahead because consumers are worried about what pricing will do, I think, remains to be an unknown.

So I think the question around demand destruction really is yet to be seen. I know you have, I think, GM later today and Ford later today as well. I’d be curious to see what they say, how they’re viewing MSRP and their pricing schemes. I think Toyota has already come out with some of their ’26 pricing with really de minimis impact somewhere in the 200 to $300 range, knowing that as ATPs creep up for the industry wide, once we kind of crest that $50,000 mark, that becomes a psychological impact for the consumer. And so are they going to manage that through lower level trims pushing more lower level trims out there to try and keep the demand catalyst going?

I think that remains to be an unseen. I think what’s important for us is managing the things that we can manage. I think we’ve demonstrated through the 2025 fiscal year, we’ve got almost now $115,000,000 of business performance. Coming into the year, we thought it’d be somewhere around 90,000,000 So we’ve been able to step up business performance, and that includes the tariff impact. And we’ve been able to do that while still having the bottom line compressing by sorry, the top line compressing by about $200,000,000 on an FX adjusted basis.

So it shows that the Adient operating model really does allow us to drive business performance even with volume challenges. And I think when we think about how 26 is shaping up for us, it’s really controlling the things we can control. So controlling business performance, managing through tariffs and then taking a wait and see approach to see how does North American demand shape up.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Thank you. And my second question is to ask what your very latest outlook is for vehicle electrification, including in light of some of the recent changes to the regulatory backdrop, such as the elimination of the $7,500 U. S. Federal consumer tax credit, the relaxed enforcement of greenhouse gas and corporate average fuel economy regulations. How has your outlook evolved?

And in what ways might you be running the business or allocating capital any differently as a result?

Jerome Dorlak, President and Chief Executive Officer, Adient: I think on I’ll take the back half first, and then I’ll turn it over to Mark for the first half of the question. I think what we’ve done is when we look at how we allocate capital and when I talk about capital, it’s not just dollar capital. I mean it’s both human capital and dollar capital. It’s looking at every program and saying, for that program, do we have the ability to sweat assets we have in house today? And so for us, when we run a JIT program, as an example, and we do that for certain customers, can we run it on an existing JIT line in an existing JIT facility such that if that program doesn’t run at volume, we’re not stuck with stranded assets.

And if we have the ability to do that, then that comes with a certain set of contractual conditions that we then have the discussion with the customer about. And if we can’t, then we have a different set of discussion with the customer that comes with commercial backstops. Because given the uncertainty around EVs, and we now know it’s very policy driven, then we need a different set of recovery boundary conditions such that if the volumes don’t come to fruition, we have backstops around it. And I think so far, whether that is certain Korean programs, certain domestic programs, almost all of those have run on existing capital or an existing jet plant. So as volumes have ebbed and flowed, we haven’t been struck with stranded resources We’re stranded capital from that standpoint.

And so I think that’s how we’ve really looked at capital allocation. And Mark, maybe you want to touch on the Yes. First

Mark Oswald, Executive Vice President and Chief Financial Officer, Adient: I’d say that’s right, Jerome. Ryan, when we look at this, we look at it from a capital allocation perspective. We don’t want to invest new buildings, right, for EV programs. For example, we’re taking a conservative approach. And so really then when you ask the question in terms of where is EV demand going to be or where the sales are going to be, I don’t want to say we’re agnostic to it, but it doesn’t impact it as it would if we were actually building out plants and facilities for that.

So we feel very comfortable in terms of what our planning assumptions are. We always take what our customers tell us, we’ll trim a little bit, be a little bit conservative, we’ll use asset reuse, we’ll not use dedicated facilities. And so in the end, whether or not volumes, EV volumes are down 10% or 15% year on year, it really doesn’t have that much of an impact to us in how we’re running the business.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Very helpful. Thank you. Next question relates to how you are adapting to the rapid growth of domestic Chinese automakers. At the conference last year, we asked each of the suppliers to update us on what they were doing to increase their current exposure. I think the investors wanted to hear anything and everything, right?

I wanted to check-in again this year though, the Chinese automakers have arguably grown even more quickly. But because of some of the headlines about payment terms that they’re commanding and pricing because everybody wants to align with all that growth, We’re asking each of the suppliers to please comment on how they are balancing the opportunity for growth with these customers with maintaining commercial discipline at the same time.

Mark Oswald, Executive Vice President and Chief Financial Officer, Adient: Yes, maybe I’ll start there and then Jerome can follow-up there. But similar to what we said last year when we were here sitting with you, we had indicated that obviously we were looking at growing with the Chinese domestics. At that time last year, I think our mix between what I’d call Chinese domestics versus foreign, we were 60% foreign, 40% China domestics. We said over the course of the next couple of years, we’re going to be swapping that, right? So we’re going to be 60% Chinese domestics, 40% foreign.

We’ve actually seen that play out with our wins, right? So if I look at our wins so far this year, it’s been mixed out at 70% Chinese domestics, 40 foreign, right, which gives us confidence as we look out over 27%, 28% as those programs start to roll on, that’s what the mix is going to be. When we look at it from a commercial standpoint, we look at who we’re winning that business with. We’re making sure those commercial terms take into consideration if there’s certain risk, if there’s volume risk that we think with those customers coming to market. So again, it’s really with those commercial terms, what we’re doing from collecting the engineering payments recoveries in advance, etcetera.

So it’s really that balanced approach and again, not driving any new, what I’d say, capacity to grow with those people.

Jerome Dorlak, President and Chief Executive Officer, Adient: Yes. I would just add on to that. I think one thing that we don’t always talk a lot about, I think you get the benefit of it because you spend time with our team in China, is not only do we have our direct business in China, but we also have a very attractive nonconsolidated business in China. We have our joint venture with Kuiper that’s now approaching almost $1,000,000,000 that spits off a very nice dividend. And then we also have our nonconsolidated business with CFAA that’s almost approaching $2,000,000,000 that also is very attractive dividend for us.

And we have two other joint ventures, one in the South and then a smaller one in the North, and that are both unconsolidated. And so we get exposure both through our consolidated business there that’s now approaching, again, almost $2,000,000,000 but then also through our network of nonconsolidated joint ventures that’s going to reach close to $3,000,000,000 here. And so through that, we have the ability to manage how much exposure we want through the payment terms, through the commercial, I’d say, avenues to both the domestic and nondomestic customers there. So we have the ability to kind of toggle the exposure that we get through these, what I call, joint ventures and through our consolidated sales network. And really, the focus of James and the team out there have been managing and toggling through this through the customer selection process.

In addition to that, we’ve talked a lot about on the last couple of earnings calls growing the business, especially with BYD and some of the other, I’d say, maybe more aggressive customers in terms of payment terms through the component sales. So we’ve been very successful now on the trim business, on the foaming business with BYD, where you don’t necessarily get some of the flashy top line figures, but you do get more attractive payment terms, more attractive commercial terms through the component sales, which has been a very successful avenue in for us.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Thank you. And maybe moving to your European operations, where do you think you are in terms of the turnaround and the path to get to mid single digit EBITDA margin from the sort of two percent to 3% type today, how much of the improvement do you expect to come from restructuring savings, footprint optimization or other cost cutting actions versus how much is more contingent upon top line improvements, whether within your control, such as the intentional runoff of certain unprofitable programs or the conquesting of others or potentially outside your control, such as market factors like industry production growth, etcetera?

Mark Oswald, Executive Vice President and Chief Financial Officer, Adient: I think when we think about where we are today, I’d say it’s a multiyear plan, right? We’ve indicated that that region is not going to turn around overnight. So we’ve announced restructuring actions last year. This year we’ve called out, call it $130,000,000 of cash restructuring for that region. We’ve indicated that for 2026, it’s going be elevated again.

I think the drivers to get us to what I’d say that mid single digit margin, call it 5%, 5.5%, really comes from a couple of different buckets. One, it’s the balance and balance out that you were talking about, the non performing metals business rolling off. We have a line of sight into that in ’twenty six and ’twenty seven. On the last earnings call last week, we did call out some key program wins in that region, right? So again, recognizing that we are a volume business, we are going to have to start growing in there.

Some of those wins were conquest wins. That will start coming in 2027, 2028. And then a portion of that will be the restructuring. You know, restructuring over in Europe is pretty tight and it’s not good restructuring, right? So, for every dollar we spend over there, that full dollar isn’t accretive to margins, right?

So I’d say a smaller piece is the restructuring, but again, it helps stabilize the business, then it’s the balance in, balance out and then it’s the growth in ’twenty seven, ’twenty eight that really get us to where we need to be. And again, when I think about that region, it used to be a $7,000,000,000 revenue business. If we can get that to a 5,000,000,000 to $5,500,000,000 in print, a 5% to 5.5% margin, generating cash flow over there sustaining that business, that’s really where we want to get to.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Thank you. And what about the potential for M and A to be part of the solution in Europe? You’ve spoken before about the pronounced overcapacity problems in the region, both at the automaker and supplier level and a willingness, too, for Adient to be part of the solution. What are your latest thoughts regarding this topic?

Jerome Dorlak, President and Chief Executive Officer, Adient: Yes. I don’t think our thoughts have changed. I think in Europe, if you just, again, look at the market, there used to be a need for somewhere, call it, 20,000,000 units of seating capacity. If you look going forward, that need is going to be somewhere, call it, 14,000,000 to 15,000,000 units of seating capacity. And so fundamentally, we believe you’re either going to be a consolidator or a consolidatee in that region.

And I think we’re willing to be part of the solution on either end of that. But consolidation for consolidation’s sake or M and A for M and A’s sake doesn’t really make sense. There has to be an economic outcome to it. And as of yet, there hasn’t been anything brought forward that makes a reasonable economic outcome from that standpoint. So we’ll continue to drive performance into the region.

We’ll continue to execute, do what we need to do and be good stewards of capital in the region as we have been and perform as we should be performing.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Perhaps moving back to the China region, where your operations have a great track record of strong growth, margin and returns. Although in the fiscal third quarter, did demonstrate a fairly material revenue underperformance versus the change in industry production, most of the suppliers we cover are not growing nearly as quickly as the industry because just like you, have less leverage to the faster growing domestic Chinese. They’re working to change that. But you’ve also pointed to progress in bookings, including traction with BYD and content per vehicle tailwinds such as zero gravity seats. How do you see your top line performance versus the industry in China maybe trending going forward after F3Q?

Jerome Dorlak, President and Chief Executive Officer, Adient: Yes. Maybe I’ll start, then I’ll hand it over to Mark. I think you almost alluded to it a little bit in your question, you almost kind of have to bifurcate the China region to BYD and then everyone else. And if you take China less BYD, I mean, we grew, call it, at par, maybe just a little bit below par within the region. And a lot of that was driven by delayed launches with two of our key customers as they work on getting some of their programs right and their underlying software correct.

And so as we then think about how does that shape up for the out years without going into any kind of 2026 guidance, I think a lot of that will just come down to our customers’ launch cadence. Do they get some of these launches on track, the Chinese domestics I’m referring to? If they’re able to correct their launches, correct their launch cadence, I mean, we’ll see 2026 returning back to a growth year. How that shapes up relative to market, a lot of that will just come down to how does BYD grow in 2026. We’ve been very vocal.

We’re under indexed to BYD. We have components business, no JIT business. That probably won’t change as they’ve gone back to a two supplier strategy on JIT, their in house business along with their joint venture. And so less BYD, I think, will be at market, maybe slightly above market. But again, it will come back to how do these customers launch within the ’twenty six calendar and fiscal year.

Mark Oswald, Executive Vice President and Chief Financial Officer, Adient: Yes. And just to go back to my earlier comments, if I look at the bookings that we’ve won so far this year, 70% Chinese domestics, right, clearly, as that starts coming out in ’twenty twenty seven, 2028, we should be at or above market growth over there again.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Now offsetting the underperformance versus industry production in China within your Asia Pac operations has been strong outperformance in Asia outside of China. Can you remind us of your key customer exposures there or market exposures in Asia outside of China? And what has been driving that outperformance? And how would you rate its sustainability?

Jerome Dorlak, President and Chief Executive Officer, Adient: Yes. I mean our key customer base in Asia ex China is, I mean, really driven. We’re very strong with Toyota. Very strong with Nissan, very strong with Ford of Thailand, Mitsubishi in Thailand, very strong with HKMC as well. What really drives that, and we talked a lot about this in 2025, we just had a lot of launches in 2025.

We were launching the what would be the Armada, what would be the QX AD program, launching significant business with HKMC. We’re going through significant launches in Thailand. And so then when you just look at kind of the year on year comparables, as that business then starts to ramp up, you get a lot of nice growth coming out of it. We also made significant investments, especially in our Japan operation, as we looked at putting a very sustainable investment into that in order to nearshore or onshore a footprint there, especially around our metals operation. We were exporting significant content out of China from what would have been our legacy Yangfeng at the time, adding Yangfeng seating.

As that separation really concluded, we wanted to near shore that or onshore that into Japan. We took that decision, and that’s really paid dividends with significant new bookings. Same thing for us in Thailand, where we’ve stood up our own mechanisms business in Thailand, which has led to incremental growth there, it’s paid off in new business wins.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Okay. And I think your largest customer in Asia outside of China is Nissan. They recently announced a restructuring and closure of some plants in Japan. The vehicles that you happen to supply to, though, I think were not impacted by this. What is your exposure to Nissan there?

What is the outlook for the vehicles that you do supply? Do they even benefit because they’re a larger portion of the remaining Nissan portfolio? I’m not sure.

Jerome Dorlak, President and Chief Executive Officer, Adient: I mean, so in Japan, Nissan would be our largest customer. In Asia as a whole, it’s it actually would probably be Ford and Thailand from But that in Japan, yeah, it’d be Nissan. And their announcers announcement to close does not impact us. The plant that they’ve decided to shutter, we don’t supply content into. So no direct impact from that standpoint.

And where they’ll pivot production into or plants they’ll look to fill. I mean, we actually see that as being a net benefit to us, especially with the programs that we’re ramping up in fiscal year twenty twenty five and in fiscal year twenty twenty six. We’ll probably see that as a net benefit.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Great. And moving to North America, I was curious about the reference on the most recent earnings call about expecting to potentially benefit from onshoring as automakers move production to The United States, including because of the relative weighting of your North America footprint to The U. S. What are your thoughts on some of the recent onshoring announcements by automakers as a result of tariffs? We’ve seen GM invest $4,000,000,000 to bring back a number of body on frame pickups and SUVs, crossovers, BEVs Mexico to Michigan, Kansas and Tennessee.

Nissan is bringing more rogue crossovers from Japan to Tennessee. Honda is moving the CR V from Canada to they haven’t said, but Indiana or Ohio. It looks like a lot of your facilities are kind of clustered around those more Midwestern U. S. States versus in Canada or Mexico.

Is Adient in a position to benefit from this onshoring trend? Have you maybe had any preliminary discussions about supporting automakers with their onshoring activities?

Jerome Dorlak, President and Chief Executive Officer, Adient: Yes. So I think we’ve said there’s about 600,000 units so far that have been announced to come back. We’ve already booked about 150,000 of those units. The Rogue business coming from Japan to The US, that’s a net win for us. We have the Smyrna footprint out of our Murfreesboro, Tennessee facility.

They’ll be a piece of business that will come from Canada into The S. We’ve booked that as well. We haven’t said which customer it is. We’ll keep that anonymous for now. In addition to that, we think out of the other announcements that have come forward, we feel, I think, confident that there’s 100,000 units in there that will be a net win for us.

And I think what’s important to differentiate between maybe us and some of our competitors is that when we talk about this, given our footprint and because it is so heavily US weighted with 75% of our production being in The US, these are net incremental wins for us. Whereas maybe for some of our competitors, if they’re going to move production from a body on frame facility in Mexico to a body on frame facility in The US, that’s just going to be a net neutral for them. That’s going to require more investment, more engineering and it’s not really going to be incremental volume. Whereas for us with that business going from Japan to The U. S, that’s incrementally positive.

With the business coming from Canada to The U. S, We don’t have the business in Canada, so that’s going to be incrementally positive for us. The other 100,000 units that are going to come from Mexico to The U. S, that will come from a competitor to us, that will be incrementally positive. I think we do see, and we’ve talked about it, with this onshoring, nearshoring, there’s going to be winners and losers.

And we think given our footprint, given our capabilities, more importantly, given our execution and our intimacy with the customer, we really do see Adient positioned to be a winner coming out of this.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Great to hear. Thanks. And maybe next, could you describe your innovative modular approach to seat component and seat system assembly? Is this most interesting to you from the ability to improve your own margin? Or is it that the advantage is in helping the customer improve their margin by simplifying the steps of final assembly, reducing JIT hours, etcetera.

So is it a competitive advantage for you, which could lead to higher market share? What’s the right way to think about modular assembly opportunity at Adient?

Jerome Dorlak, President and Chief Executive Officer, Adient: I think it’s both. I think it’s we’ve offered our customers really a menu of solutions at this point. The practical example is as we went through the USMCA activity, we were able to deploy Adient’s modular assembly solution to requalify components by adding more modular assembly content in the USMCA zone and actually working with one of our partners, Gentherm, in order to accomplish this and take parts that were not USMCA qualified, qualify them for USMCA, saving one of our Japanese customers almost $2,000,000 a month. And that pays significant dividends for them. So that’s an example where we’re actually just taking what otherwise would have been waste out of the system using Adient’s modular assembly process.

A knock on benefit of that is not only do USMCA qualification, but we’re also then able to take labor out of a high content zone. So you demonstrate benefits both ways. I think some of the solutions that we’re working on with some of our European customers, where they have a desire to look at potentially what I would call JIT assembly in house because they already have the assembly in house, is how do we make their process more efficient using Adient’s modular assembly process and conquesting business from our peers. So we’ll take over components by using a modular assembly approach and we’ll conquest components business that we don’t have today by giving them a modular assembly process for the trim and foam that makes their end item assembly more efficient. And so it really is a menu based approach to how we can accomplish these types of solutions.

It will benefit us. It will benefit them. But it’s really working jointly with them on the solutions approach. I know, Mark, you’ve been part of these discussions as well. Any comments from your side?

Mark Oswald, Executive Vice President and Chief Financial Officer, Adient: No. Again, I think it helps out them. Obviously, it saves them. It helps us efficiencies at the plant. We’re saving labor costs at the plant, right?

So it’s really a win win as we look to partner with the customers and have that relationship with the customers.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Thank you. And I wanted to follow-up by asking how unique or differentiated you think your approach to modular assembly may be, given that some of the competition, Lear, for example, has told investors that they can also offer customers the same type of benefits. So just curious if the benefits might get competed away and passed along to the customers without the seating industry necessarily benefiting.

Jerome Dorlak, President and Chief Executive Officer, Adient: I don’t know how different or unique it is. I think one thing that differentiates Adient’s solution versus our competitors’ solution is our flexibility to integrate others’ value chain offerings. So we’re willing to work with whether that’s a Leer comfort system, a Gentherm comfort system, Cameco metal structure, a Fisher’s metal structure, an Adient metal structure. At the end of the day, what we want to do is provide a sustainable solution that ensures our customers have the most value added, efficient process for the long run. And that’s what we’re focused on doing, where I think some of our competitors have a laser focus on looking at, I want the entire value stack.

So I want a solution that takes my comfort system with my jet, my trim, my foam, and this is what I want to put into the value stream. Whereas we just want to make sure our customers are getting a sustainable value solution at the end of the day that makes them credible for the long term. And I think that’s what we’ve been able to differentiate with.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Thank you. And continuing with the theme of the competitive environment, but maybe specifically as it relates to full size truck seating in North America, where you are the incumbent supplier for the Ford F Series, you have been for a long time. Lear is the incumbent on GM full size trucks, they have been for a long time. We don’t usually see frequent switching between Tier 1s for these programs, I think because the switching costs would just be so high. I know Lear has mentioned wanting to conquest your F Series business.

At the same time, you may be in the running for conquesting their GM truck business. What is your confidence that you will be sourced on at least one of these programs? Do either you or Lear really have the capacity to service both of them if the awards went that way? And what would be the financial implications of going from currently one to either both or none of these two programs? And given the switching costs, would both companies maybe lose somewhat if you swap programs with each other with Lear conquest and the F Series from you, you conquest and GM trucks from them?

How should investors be thinking about all of this? And when do you expect that they may learn more in terms of how it’s likely to play out?

Jerome Dorlak, President and Chief Executive Officer, Adient: So I mean that may hold the record for the highest number of questions in a single question. So I’ll try to start and then I’ll hand it over to Mark. In terms of how do we feel about kind of the F Series booking, as we said on the earnings call, we’re focused on adding and putting in front of Ford a value package that makes us the supplier of choice to them. Give them a solution that they can’t walk away from in terms of how we can add value to them, and more importantly, to the end consumer for the world’s best selling truck. And that’s what we’re focused on doing.

And I think we’ve been able to do that. In the end, they’ll make a sourcing decision that represents that. And we’ll see what happens and what comes from that. In terms of the GM full size truck, I think we’re working to do the same. There is a high barrier to entry there.

And GM will, I think, make a sourcing decision accordingly based on how they make their sourcing patterns. I think a lot of that will come down now to how they’re going through some of their onshoring activities and where some of that shakes out. But I think you’ve as you asked the question, I think you pointed out some of the hurdles that go along with it. There’s high switching costs. There’s a lot of capital investment that goes with it.

We’ve made clear to both General Motors and Ford, they’re some of our most favored customers, and there are no hurdles in terms of capital deployment. We’ll be smart about it from that standpoint. But we have I mean, we pour more foam than anyone does in the world and certainly more than anyone does in The US. And we have jet capacity. We have jet footprint to be able to service them.

So I don’t think there’d be a capacity hurdle from that standpoint. Maybe, Mark, if you want to touch

Mark Oswald, Executive Vice President and Chief Financial Officer, Adient: on some Brian, the other financial were in Plymouth, I think it was last November. And we were talking about this. So we’ve been talking about this for for quite some time now. And I think I remember talking about we don’t want to give them a reason to switch, right? So we’ve been very much partnering with Ford.

We’ve been providing them with solutions for their seating today as well as into tomorrow, right. Our manufacturing, our quality, our launch has been nothing but flawless, right. So again, it’s really going back to the operations, making sure that the team is performing not to give them a reason. And then for Jerome’s point, all the points that he just made, right, they do value us as a valued partner. They want us as a supplier of choice, right?

So we have strong confidence there. And again, we’ll hear from them in the coming weeks, right, just in terms of the decision they make. But again, we haven’t given them a reason not to come with us.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Thank you. And I wanted to ask on the bidding process for ZF Lifetech airbag business to which Adient has been connected in the media. The most recent articles suggest that private equity firm Fountain Vest Partners may be the sole remaining bidder in that process. I’m not sure the extent to which you can or would like to comment on this particular potential transaction. If you can, that’s great, although I’m still interested in your appetite for M and A generally and what it might say about it.

I’d sort of gotten the sense in recent years that something transformative or outside of your core product area likely wasn’t on the agenda as you focus on execution, simplification, cash conversion, etcetera. Also, given some of the comments that you’ve shared around not needing to be vertically integrated on the seat heating, lumbar and massage side in the same way that Lear has with Kongsberg, with both you and Jen Thurm speaking to the potential revenue dis synergies associated with a Tier one vertically integrated in such a manner. I thought maybe the same logic might apply to airbags that are sometimes affixed to seats. At the same time, maybe there’s something to be said about vertically integrating airbags, given all the excitement around zero gravity seats, robotaxis, etcetera. So just how should investors be thinking about this generally?

And what can you share?

Mark Oswald, Executive Vice President and Chief Financial Officer, Adient: Yes, maybe I’ll start and then I’ll turn it over to Jerome. Just obviously, we can’t talk about specifics in terms of if there was anything under consideration, right? It’s not what we do. I would say from an overall M and A activity, right, it really gets into capital allocation, right? And what do we want to do with our capital?

Jerome and I recognize what separates good management teams from great management teams is really capital allocation. And so when you think about that capital allocation, right, you’ve seen us buying back shares, you’ve seen us nibbling away at some debt repurchases. The other piece of that that we’ve always said all along is, we’d like to have some dry powder for some inorganic M and A activities, right? That said, we also recognize that the hurdle rate to do M and A is very high, right? And if you think about where that threshold was, let’s just say twelve months ago, eighteen months ago versus where it is today, it’s that much higher today only because the uncertainty with tariffs, what’s happening from a macro economy perspective and then also looking at adding some stock price, right?

I mean, it’s hard to argue that buying our shares back right now isn’t the best use of our cash. So, again, that’s the way we look at M and A holistically, right, in terms of how we’re thinking about it. But in terms of where we might want to play or what we might want to look at, clearly, we’d look at where we could add value to our customers because if we could add value to our customers, obviously, that’s going to drive value to our shareholders. Jerome?

Jerome Dorlak, President and Chief Executive Officer, Adient: Yes. I mean, hit the nail on the head. It’s how we really look at M and A, it’s not a point in time type of metric. I mean we may look at what the returns on capital of that acquisition have to be twelve months ago are very different than what they are now. It’s a sliding scale given where our next best alternative is, where the market is, what the dynamics are, what the uncertainty is associated with that, what the uncertainty is in the macro environment.

And as Mark said, today, the hurdle rate for any acquisition is very high, just given where the macroeconomy sits, where our shares are and what some of the next best alternatives are.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: Great. Thank you. I have more questions for these guys, but shall I stop and see if there are any maybe in the audience? While the audience is thinking, let me ask one about bidding activity and what’s happening with your awards. We talked about a big one, obviously.

But a number of suppliers have reported an industry wide slowdown in requests for proposals from automakers as they pause plans at first amidst changing consumer preferences with regard to EVs and then regulatory uncertainty with regard to emissions, fuel efficiency, tariffs. We’ve gotten some increased clarity recently around some of these factors. Curious if you think there now may be a flurry of activity in the back half or into next year and how Adient may be positioned to capitalize upon any such rebound.

Jerome Dorlak, President and Chief Executive Officer, Adient: Yes. Mean, would say we were highly encouraged with the last six months. I mean, we booked more business the last six months, in particular, in our European operations than we did in the prior eighteen months. If you look at our bookings out of our China operations, they’re as strong this year, if not stronger than they were last year. We don’t give a backlog number.

And then if you look at our Americas operations and what’s happened with the onshoring activities, we’ve talked about the F Series. But certainly, from a booking standpoint, we haven’t seen a slowdown consistent with the rest of the industry. If anything, I think we’ve seen an acceleration in the last six to eight months, really driven by the strong execution, driven by the relationship, the partnership that we have with our customers and the value proposition we’ve been able to put in front of them. And so as we look forward over the next six months or the next twelve months as the industry kind of comes out of what has been, I think, some of the unknowns, I mean, we would expect that to continue.

Ryan Brinkman, Automotive Equity Research Analyst, JPMorgan: That’s very encouraging to hear. Thank you. So we are out of time. So please join me in thanking Jerome and Mark for all the great color and insight they shared.

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