Aptiv at UBS Auto Conference: Strategic Expansion in Focus

On Wednesday, 04 June 2025, Aptiv PLC (NYSE:APTV) participated in the UBS Auto & Auto Tech Conference 2025. The company outlined its strategic positioning amidst evolving industry trends, such as electrification and software-defined vehicles. While expressing confidence in these trends, Aptiv acknowledged challenges like tariffs and global uncertainties. The company emphasized its expansion into adjacent markets like aerospace and defense, leveraging existing technologies to drive growth.

Key Takeaways

• Aptiv remains confident in electrification trends, focusing on cost-effective technology and OEM partnerships.
• The company is expanding beyond automotive into sectors like aerospace and defense.
• Reaffirmed Q2 guidance with slight adjustments, managing tariff impacts strategically.
• Plans to spin off the Electrical Distribution Systems (EDS) business, focusing on liquidity and capital allocation.
• Positive outlook despite market fluctuations, driven by strong technology and strategic positioning.

Financial Results

• Reaffirmed confidence in Q2 guidance with minimal changes to production schedules.
• Anticipates slight weakening in North America and strengthening in China for the year’s second half.
• Direct tariff impact is minimal, with costs passed on to OEMs where applicable.
• Completed a $3 billion Accelerated Share Repurchase (ASR) program.
• Approximately $600 million to $800 million is required to run the business efficiently.

Operational Updates

• Focus on expanding into non-automotive sectors like aerospace, defense, and telecommunications.
• Progress with Chinese OEMs, aiming for revenue mix to match vehicle mix by year-end.
• Actively supporting Chinese OEMs globally, leveraging local capabilities.
• The EDS business, with a 130-year history, is prioritized for strategic growth and consolidation.

Future Outlook

• Committed to providing clarity on the second half of the year during the Q2 earnings call in late July or early August.
• Plans to appropriately capitalize the EDS business in the coming months.
• Expect adjusted net income close to 100 percent for the new Aptiv.
• Prioritizing liquidity and cash build position due to uncertainties.
• Remainco expected to generate free cash flow well into the 90s, close to 100 percent of adjusted net income.

Q&A Highlights

• Addressed concerns regarding rare earth metal supply chain, stating no direct impact.
• Discussed electrification pace and profitability, highlighting content increases with hybrid and EV vehicles.
• Clarified capital allocation strategy, emphasizing prudence in maintaining liquidity until clarity improves post-spin.
• Aptiv’s largest customer in China is Julie.

For more detailed insights, readers are encouraged to refer to the full transcript below.

Full transcript - UBS Auto & Auto Tech Conference 2025:

Operator: All right. I think we’re going to get started here. Next up on the agenda, we have Aptiv, very pleased to have with us Chairman and CEO, Kevin Clark and Varun Lorre, CFO. Gentlemen, thanks for joining us today. A pleasure

Varun Lorre, CFO, Aptiv: guess,

Operator: Kevin, I just want to start big picture. Obviously, there’s been a lot going on in the industry over the past year, maybe more than even normal when there’s always seems to be something going on. But like, even sort of stepping away from some of the tariffs and trade policies and if I look at Aptiv, you’ve really tried to position the company to capitalize on the megatrends you identified of electrification, software defined vehicles, active safety. Progression, I think, of those trends among your customers has, I would say, candidly been varied. And I think maybe downstream, that sort of impacted some of the nearer term impacts for you.

But I’m curious sort of as you sort of assess the industry and Aptiv’s positioning, whether you’ve seen any sort of more structural changes there? Is this sort of just a delayed progression of some of these trends? How do you, I guess, reevaluate how you’re positioning the industry?

Kevin Clark, Chairman and CEO, Aptiv: It’s a great question. Joe, thanks for having us here. Seriously, it’s always great to to be with investors and be with you. Taking a step back, listen, we’re big believers in the in the trends towards, know, increased safety, increase, you know, or reduce CO two emissions, increase fuel economy, and increase connect connectivity. And and in reality, our view is that goes across multiple markets and that will continue.

To your point, it’ll continue at different paces in different regions for a couple reasons. I think one, relative to where we were maybe ten years ago, the world has become more regionalized and there are geopolitics that impacting certain things. So pace of adoption in certain regions will be faster, China, certainly as it relates to electrification, slower places at least in the near future here in North America. But the general underlying trends continue. Right?

The world’s becoming more software defined. Digitalization’s happening at a much much more rapid rate. Energy transitioning is happening. It’s it’s going on as we sit here, and things are becoming much more connected. And I think there’s an element of near term.

There’s a a little bit of different paces in different regions, different execution with different customers. Right, that, impacts industry and maybe gives investors a sense of is this going to happen or is it not? Again, we’re firm believers it will, but at at different paces. And just making sure that we have the right technology that’s cost effective, that we’re worth the right OEMs and listen, that sometimes changes based on their competitive position or the market that they’re operating in. And an increased focus from us, know, we’ve talked about it, how do we take our technologies into other markets?

How do we take those low cost technologies? And how do we how do we participate in other markets that are somewhat adjacent that, are looking for similar sort of product applications, different go to market models, and how do we adapt to them?

Operator: Does does the, as you sort of describe it, maybe delayed timeline or adoption for some of these trends that you’re still sort of firm believers on, give you an opportunity to either double down or make a larger bet or maybe a different bet on that that? Like, does it because it gave you sort of more time to execute on the opportunity?

Kevin Clark, Chairman and CEO, Aptiv: Yeah. I don’t think given those trends that I talked about, it’s really a bigger bet. Right? So on on the electrification side, we’ve built out a a very robust portfolio where we participate quite frankly in the automotive space on vehicles that have internal combustion engines, on vehicles that are mild hybrid hybrid, plug in hybrid electrification. So we’re able to participate there.

Right? And again, I think it’s important that you’re on in regions on platforms with OEMs that are going to be successful and gonna be successful over the long term. I think those capabilities we’ve leveraged into areas like space, like aerospace and defense, like industrial as well when you think about power signal data distribution. So, again, we’ll talk about, on a go forward basis, more progress that we’ve made there. I would say that’s less product portfolio today.

I think it’s more go to market kinda cadence and approach. So I I did wanna, actually go down that that path and since you sort of brought it there a little bit.

Operator: I mean, like like you said, I think a lot of the the product I don’t wanna say it’s it’s sort of fungible, but it does seem to have additional application in some of these other other industries. So so what what is sort of the the bottleneck or the roadblock for you to sort of get larger? And is it Salesforce? Is it knowing the customers? Is Is it some tweaking of the product?

Like, where do you see the bigger challenges? Yeah. So just to

Kevin Clark, Chairman and CEO, Aptiv: put in perspective, when you look at our business today, 80% of our revenue sit a little under 80% sit in the automotive space, broadly speaking. 20% nonautomotive, and those are everything from commercial vehicle to aerospace and defense would be would be the biggest kind of non transportation, telecommunications, and broadly industrial. Those products tend to be very similar. They may be in certain applications, larger or smaller. It tends to be, quite frankly, again, that go to market.

Who are you calling on? What’s the value proposition that you need to present? How do you contract? I mean, it’s actually fairly tactical from an execution standpoint. So not that, to your point, the product automatically can come off of, you know, out of one of our connector plants, in Mexico and have applications, simple applications in a and d as an example, but with small modifications, there’s there’s a big opportunity across those various markets.

On the software side, it’s one of the benefits with the Wind River transaction, quite frankly. And and and the fact that they play across multiple markets, the bulk of their revenue is non automotive and the ability to bring in their RTOS, their Linux solution, their their Wind River Studio into customers who actually do utilize perception systems, who actually do do sensor fusion, who are actually focused on, increased use usage of AI at the edge, which is a overall global trend. It positions us well to exploit it.

Operator: Is there any, you know, chicken or the egg type problem in that? Like, say you’re hypothetically against sort of trying to win a and d business, and you can do the product, but you don’t actually do it, but they wanna actually see the product before they’re willing to sort of commit the the PO?

Kevin Clark, Chairman and CEO, Aptiv: Yeah. I think given given the fact that everything we do everything we do in our traditional automotive industry is related is is mission critical. Right? Mhmm. Whether it’s power or data distribution or it’s a perception system and an ADAS solution, it has to work.

It has to work a % of the time. That’s the same requirement in telecommunications. You can’t have a telecommunications systems go down system go down. It’s the same application in a and d. So that tends to to validate it.

I think more often than that, when you look at the product, there’s a certain element of the robustness of the automotive solution. Maybe it’s more robust than what it even needs to be for some of those applications. Applications. Right? So for us, it’s slight design changes in those particular examples.

But in others, Joe, it’s it’s opportunities like, you know, one of the items that that Joe Massaro running ECG is really working on. We’ve had great opportunities. How do we bundle our existing traditional automotive connector portfolio with what we saw at Winchester that goes across multiple markets? Because there is a tremendous amount of overlap opportunity. And it’s an incremental sale, it’s incremental revenue, how do we bundle that and bring that to customers.

So that’s where I say our our biggest change transparently, it’s not the product, it’s the go to market

Operator: approach. So definitely an area to sort of stay tuned and follow and learn more. Just I do want to move on and maybe sort of bring it a little bit more near term. If we go back in April when you reported, mentioned that you weren’t really seeing any underlying changes in demand. You issued the second quarter guidance.

Said things were sort of tracking well there, limited changes to production schedule. Now that we’re another month plus through and you will most likely have the schedules at least out through the end of the quarter. What what sort of the update there in terms of what you’re seeing?

Kevin Clark, Chairman and CEO, Aptiv: High level of confidence in the second quarter. So I would say we’ve seen minimal broad strength changes there, maybe some shifting between OEMs and platforms. Over the back half of the year, I would say slightly weaker schedules in North America, slightly stronger schedules in China.

Operator: And what you maybe anticipated prior?

Kevin Clark, Chairman and CEO, Aptiv: That we anticipated in our initial sort of guidance, back in in February. Some weakening in EV, EV, schedules principally North America, overlaid on top of that. So I would say some puts and takes in general slight softening, but but nothing that we would sit and look at and say is a significant change. Bearing on anything, Kyle, I think that’s been pretty comprehensive.

Varun Lorre, CFO, Aptiv: Feel good about the second quarter in terms of what we had guided. And just to kind of reiterate one point that Kevin mentioned, way back when we gave guidance in February, we talked about some inherent conservatism within our guide. And when we double clicked into it, we talked about EV platforms, for example. We talked about North America production, for example. And if you were to triangulate with, an external market, S and P IHS’s latest numbers, that market has largely kind of played out as we had kind of planned, Right?

I’d say North America is a little bit weaker. You know, China is better than what we had planned, and Europe is relatively flat. So that’s just to kind of give the latest color. It’ll be kind of interesting to see us too. So from the way we kind of thought about it, the market is pretty much playing out.

But with regards to the second quarter specifically, Joe, as your question was, we had visibility. We have visibility. We feel comfortable with the guide that we gave. And when you

Operator: talk about the back half, are you I’m assuming that’s based on sort of what you’re seeing in terms of schedules mainly for the third quarter at this point? Or is there already some indication that’s going

Kevin Clark, Chairman and CEO, Aptiv: a little bit further out? Yes. I’d say third and fourth. I they would be schedules Yeah. Lowercase s.

Right? So we get some, from most of our customers, some element of visibility.

Operator: So if we think back, Varun, and I know I know you you definitely sort of gave some of those those guardrails, and I think you were even trying to express even though that the guidance was withdrawn, that there was some good initial or there was a good amount of conservatism built into that initial guidance. And you gave the example of how much production would have to be down even to sort of the low end of the guidance. Are you seeing enough firming of or narrowing of bands of uncertainty to sort of reissue guidance when you report second quarter? Or how do you think about that? And if not, like what are you what do you need to see to sort of get guidance back?

Varun Lorre, CFO, Aptiv: Yes. Listen, great question. First of all, we would like to give guidance. We would like to give outlook to in terms of what we’re seeing for the broader investment community. That’s just kind of table stakes, and that’s something I just want to make sure that we reiterate.

Given where the situation was a few weeks ago, we certainly did not withdraw guidance. Essentially, we gave guidance for the second quarter, and we said we would get back given the levels of uncertainty for the second half of the year, given the latest on tariffs that were happening and just kind of waiting for our larger customers as to how they thought about production strategies, dealer inventories, how they were thinking about tariffs in general. Again, if you think about tariffs per se, hard costs associated with tariffs, we are comfortable with them. We find it very manageable, and whatever we believe, the small amount that, you know, needs to be passed through, we are passing through. Okay?

It was the softer costs associated with what happens to global vehicle production, what happens to North America production, how are the OEMs thinking about, you know, strategies associated with the higher input costs that they’ll be facing with. What does that do? What does it do to consumer sentiment? That was the uncertainty. And as we kind of fast forward the tape, call it five plus weeks since the time we announced first quarter earnings, I think it’s fair to say that uncertainty hasn’t diminished.

Right? I mean, we still have the ninety day pause, you know, on the retaliatory tariffs. We still have the China tariffs now, you know, through the initial part August, for example. So that that has not been clarified as of now. So with regards to the second half of the year, we are committed to providing clarity as soon as we have further, information.

But I just want to kind of share some of the moving pieces, those that we believe we have direct line of sight and we believe we have a good handle on, but the broader element is the question mark.

Kevin Clark, Chairman and CEO, Aptiv: Yeah. I think if I can just add to that. Listen. I think we have the benefit of we have two more months behind us. Right?

And that’s helpful. I I think we have more clarity on on on strategy as it relates to to USMCA. I I I think we have, I think, a stronger view on on what the objective is there based on discussions in The US and outside of The US. So I think we have we have clarity on that. I think there’s an element of we have more history of how this tends to play out with a Friday afternoon announcement and that so so so we we have more experience.

Maybe that’s a better way to describe it. To to Baron’s point, in in times like like these for investors, the reality is you need more communication versus less. And we firmly believe that. And we need to make sure though that we’re giving you information that’s useful, that’s very useful. Right?

And that’s what we’ll continue to do through the balance of this quarter and and, you know, when we announce earnings, as it relates to to our q two results in in late July or early August. And I’d say at that point in time, I’d say we’ll be in a better position to at least provide further clarity in terms of our view on the back half. Mhmm. You know what I mean? Maybe it’s a little different than historical periods of full year, but more clarity to investors.

We feel really good about where we are from a product portfolio standpoint. We’re making progress as it relates to customer mix. The direct impact from tariffs for us is de minimis, and there are certain areas where we’re passing that on to our OEM customers so we can manage through that. We’re continuing to rotate our supply chain to make it even less, and we can do that and do it pretty painlessly. So in light of everything going on, we feel really good about where the biz where where where where the business is.

And I would say maybe just a little bit different from the way Verint articulated, and we’re in complete aligned on this, hey, come Q2 earnings call, you’ll get more visibility to our outlook for the year.

Operator: I guess to that point, and I know you mentioned the direct tariff is pretty de minimis, but we have seen some like I don’t think that ninety day pause on China or the China relaxation was when you initially guided, right? So is there any meaningful impact from that or not? We ship very little direct from China today. And then what about, from this past weekend, some you know, additional tariff on some metals, steel and aluminum. Again, I I I I I you definitely use some of that, and I don’t think there would be maybe a direct impact, but it but the cost of the metals could be could be an impact.

Or are there contracts in place?

Kevin Clark, Chairman and CEO, Aptiv: It’s yeah. It’s it’s very it it is steel, aluminum for us is very, very small from a purchase standpoint. So the bigger the bigger issue, Verint touched on this for us, is how do costs like that impact, OEM pricing strategies with end customers, and then what does it mean for vehicle production? And that we’re in contact with our customers. We’re watching what what, they’re doing, but we don’t have perfect line of sight.

It’s transparent with everyone here. We don’t.

Operator: I guess one one of the other things that just sort of come up a little bit more more recently is rare earth metals and whether that could cause any sort of disruption in supply chain. Again, I don’t think any direct impact to you, but please let me know if you are doing any of that sourcing. But we’ve heard a little bit of noise out of Germany, maybe a little bit of noise from another company that was just on stage about some potential challenges in getting rare earths out of China given the export controls. Have you seen anything sort of show up in the schedules yet that’s overly meaningful?

Kevin Clark, Chairman and CEO, Aptiv: No. Okay. No. I I yeah. I no.

We we’ve we’ve we’ve not directly attribute attributable to that. We’ve not. There obviously are, products or sub products, components that use rare earth minerals, most a lot of which obviously is is supplied or sourced out of China that could be impacting either suppliers or, or OEMs. For for us, that’s a it’s a

Operator: small small exposure. Okay. One of the things that I think was interesting and probably, candidly, went a little bit under the radar given sort of the intense focus on tariffs and policy that you talked about is what seems like, if not improvement, at least sort of rate of change improvement in some of the your progress in China with domestic customers. And obviously, the customer mix has been in China has been a headwind to your business over the past year plus. Can we just dive into that a little bit?

Like what’s changing? What is is it is it really some of that the the customers that have been challenged are already at low levels, so it’s less impactful? Or are you winning with some of the newer with the other side of the business? Is it is it a combination of the two? Yeah.

No. That’s a

Kevin Clark, Chairman and CEO, Aptiv: great question, Joe. So I so for us, I I background, you’ve heard of we we we’ve been in China for close to four decades actually at this point in time. And when you think about our business in China, it’s it’s truly a China business with Chinese leadership team that’s been focused over the last, you know, decade really building out the China ecosystem and, the China supply base. So in China, we show up as a Chinese supplier to Chinese OEMs, whether they’re multinational JVs or they’re the locals. I’d say historically, just given where we came where we came from, there tended to be more focus on the multinationals.

Right? They’re just big market for for German and US OEMs, and I think naturally our our team fell into the let’s focus on on those customers. I’d say over the last five years, that’s changed. Our focus has changed. Transparently, I don’t think it changed fast enough if if I were to to be critical of what what what, you know, I did, we did as an organization, it didn’t happen fast enough.

Today, for us in China, Julie’s our largest customer. We do do business with BYD. We have opportunities in China and outside of China. We bring a unique capability, and we’re having discussions with multiple local Chinese OEMs about supporting them as they move outside of China. So we feel like we’re very well positioned as it relates to to that activity, as well as supporting them on their export programs outside, the vehicles that are headed outside of China to other markets.

So given our capabilities in Naojing, China as well as our experience with local regional requirements, they’re regulatory or other, we’re really well positioned. And and in that area, we’ve been very successful in terms of winning business. And that’s a place where business comes online literally. We have ADAS programs where we’re awarded, a program, and within 12, we’re launching an l two plus program on Chinese vehicles. So that will continue.

It won’t be a perfect line every quarter. There will be, you know, in terms of launch cadence, things like that, but we’ve made tremendous progress. And I think as as Varian said on the last earnings call, we’ll exit this year at the our revenue mix will match the, vehicle mix, China local versus versus, multinational in China. Did you just wanna focus on that for a second. Like, did you actually have to change or did you change your sort

Operator: of go to market strategy with some of those domestic players? Or was it really just sort of like, let’s refocus the sales force on Refocus the sales force. Okay. And then in terms of, you know, you mentioned growing with them as they sort of localize and expand around the world. Is that is that because of the relationship you’ve built with them in China?

Or is it more a function of, like, you have the footprint and the capability in the regions they’re expanding to? Is it is it both?

Kevin Clark, Chairman and CEO, Aptiv: It’s quite frankly, it’s both. I I mean, we we have several several of those OEMs. We’ve done in effect, you know, our version of a non deal roadshow where where whether it’s in Eastern Europe or it’s in South America or or elsewhere where we’re walking them through kind of what our manufacturing our engineering manufacturing capabilities are, our commercial organizations, making introductions to our ecosystem of suppliers so that to the extent they make that decision, they can have locally based in market capabilities.

Operator: Maybe just on you mentioned earlier sort of electrification, and regionally, it could play a different I mean, it seems like in The U. S. Here, we’re headed towards a direction where not that we don’t continue or march along the path towards more electrified vehicles, but the pace is going to be different. And I believe most of your what you sort of referenced is sort of like the high voltage portfolio was more in Europe and in China than maybe The U. S, so maybe not that impactful to you.

But I am curious sort of how you think about that could impact the growth profile for the business here. And then somewhat related, I guess, the profitability profile because the offset to less EVs is obviously more of everything else, right? And it’s not like you don’t have content on those vehicles. And in some cases, maybe sort of its extension of existing programs, which could be quite profitable as well. So how do you sort of see the interplay of all those factors impacting the business?

Kevin Clark, Chairman and CEO, Aptiv: Joe, I think that’s a great question, and it’s one of those items where we can probably do a better job communicating to to to investors. So so as we sit here in The United States, it’s easy to come to the conclusion that that EVs, broadly speaking, are right? Our customers operate in a long term environment where they’re developing vehicles over literally decades. Right? And and so the concept of of switching those strategies and turning them completely off, I’ll start with that.

That does not happen. Mix may change, so maybe less focus on bev, more focus on plug in hybrid or hybrid. Just reminding everybody from an ICE to a hybrid, it’s one and a half times the content. To a plug in hybrid, it’s almost two. To a battery electric vehicle, it’s over two from a content opportunity.

So we get a benefit along the way. And and so there may be some slowdown here. OEMs are still working on EV platforms, less focused today on introducing near term bev, more focused on on hybrid, so that’s what you should assume, but still working on electrification solutions. In Europe, OEMs continue to work on electrification platforms, most most being focused on platforms today that can be either bev, hybrid, or internal combustion engines. That’s the one piece that is is has changed from a, you know, from a a bev platform versus an ice platform, so heading down that path.

And then when you think about China, China’s all in. And when you think about China and what they’re exporting to Europe and focus on manufacturing in Europe, they’re EV platforms. So so again, that’s where we come back with. We’re strong believers in the energy transfer. We we believe it’s going to continue.

There will be periods of times where it will slow, it will accelerate. There will be periods of time given customer mix that our revenue will be impacted, but the general trend will be very positive.

Operator: Maybe you want to sort of move on to sort of the portfolio a little bit, and I know you’ve sort of announced the spin of the EDS or the wire harness business. I think on the last call, you talked about really none of this sort of policy stuff or any of the recent sort of developments has sort of changed that process. Maybe you could just sort of talk confirm that. But also and I know we’ll hear more about this as we sort of get later in the year. I think you’re planning for some analysis.

But like how do you think about sort of the positioning of of each side of the active businesses for for success to win in the marketplace? Sure. So

Kevin Clark, Chairman and CEO, Aptiv: the EDS business has been around for a hundred and thirty years. That’s its legacy. It’s number one or number two market position literally across every major automotive market in the world. So very strong competitive position. 70% of the programs that they work on are we call them full service programs.

So so we design and optimize whether it’s a part of the harness or the whole full vehicle harness. So we’re bringing value to our to our customers. Our margins in that business relative to our peer group is is you probably see is is reflects that value we bring. Right? It is a I would we refer to it as a program business.

So although we’re driving towards standardization and automation of the wire harness so that we can automate manufacturing and then working with several OEMs on how do they automate their installation process in the assembly plant, it’s still fairly program specific. We have literally we produce wire harnesses for certain OEMs on a VIN specific basis. We ship from Morocco to to an assembly plant in Serbia and arrive at the assembly line four hours before vehicles produce and it’s installed on a VW or a Range Rover or other vehicle in Europe as an example. So they have tremendous capabilities. That business led the whole drive for Aptiv on smart vehicle architecture, just given our historical experience there in terms of how do we drive towards that path, and it’s well positioned to participate, one, in consolidation in automotive, which needs to happen in that space.

It needs to happen. And in reality, there were certain a few opportunities over the last couple of years that we passed on because it didn’t work well for Aptive, higher margin, lower margin. It it didn’t. But that wasn’t what was best for that portfolio. And it’s now positioned to whether it acquires or it’s a part of a consolidation to to being even a stronger player in that market.

And then we have significant opportunities off vehicle. Like I mentioned, whether it’s aerospace and defense, it’s robotics, it’s energy infrastructure, those are all areas that that team is very, very, very focused on. Remainco, listen, those are two product orgs. So our ASUX business, the margin progression you’ve seen in that business has been the result of two things. One, we’ve productized solutions so that we don’t we have much higher levels of engineering reads on the software side.

We are now, more often than not quoting software separate from hardware, drive that behavior in our organization and that mentality with our customers. We are much more focused on how do we make it hardware agnostic, especially from an SOC standpoint, and that includes China with China SoCs so that it’s well positioned for high margin, higher growth in giving our customers choice because it’s open architected. On the ECG business, you are all familiar with players like TE or Amphenol. Those are product businesses. And and that is a business that is operated at a product as a product business.

It’s an area where we’ll continue to do M and A opportunities. It is high margin. It is solid growth, but it’s a matter of taking our existing product portfolios near term, bundling them to grow organically and outside of automotive, but also looking at, you know, M and A opportunities.

Operator: Yeah. It sort of answered my next question a little bit, but I guess on that on that ECG business, right, there are and you sort of alluded to is the beginning of our conversation, just alluded to now, I think there’s a lot more end markets, if you will, where the product can serve. How do you balance those sort of trying to develop those organically versus sort of looking for acquisitions? And just, I guess, to sort of put it out there, right, like you mentioned AmphenolTE, right? Obviously, the data center AI has sort of been a huge growth area that seems to be actually fairly consolidated at this point, but the pie keeps getting larger and larger and larger.

So is there an opportunity for a player like Aptiv either organically or inorganically to at least evaluate in end market like that? Absolutely.

Varun Lorre, CFO, Aptiv: Yeah.

Kevin Clark, Chairman and CEO, Aptiv: I mean, we do today. Just transparently, we do today. Evaluate or participate? Well, we participate in it organically today. We evaluate opportunities today, though, as well.

K.

Operator: Anything in in the in the audience? Any questions? Okay. I guess, maybe sticking with the, capital allocation a little bit, right? Like you completed the ASR.

If we go back to your original guidance, I know your cash flow still seem sort of pretty healthy here. But one, you have some of the uncertainties you still talked about. Two, you do sort of have this spin coming up. So should we think about things being relatively calm from a capital allocation perspective until we get through some more clarity, maybe we get through the spin? And then how do you just sort of think about maybe preliminarily some of the thresholds for each of the businesses?

Yes.

Varun Lorre, CFO, Aptiv: Absolutely, Kevin, if that’s okay. Yes. So with regards to the balance sheet, we’re in a good position. We talked about paying down $1,000,000,000 of debt by the end of twenty twenty five. We’re running roughly about three quarters ahead.

That pre payable debt has all been paid off as of now. As we talked about a few weeks ago with the first quarter earnings. The ASR, the $3,000,000,000 ASR that was done last summer, that is completed. And really at this point of time, Joe, as you rightly pointed out, it’s more about we believe it’s prudent to maintain liquidity and just kind of let the dust settle. Right?

And so it’s more of a cash build position at this point of time. So that’s really where we are. And then kind of evaluate opportunities, whether it be on the M and A side, whether it be other avenues, but kind of having that liquidity, we believe, is the right thing to do at this point of time. With regards to your question about the relative levels of cash needed within the business, from an as is basis, roughly about 600,000,000 to 800,000,000 is typically what we would require. We haven’t kind of broken it out between you know, the spin versus versus, you know, new Aptive post spin.

But, you know, we are we are intensely focused on making sure that we capitalize the EDS business appropriately. As Kevin mentioned, it has a certain set of strategic priorities, you know, to continue to, you know, deliver what it has been for over a century. And then if there could be some opportunities for them also. It’s just making sure that is appropriately set up from a cap structure perspective. But again, we will share more details in the

Operator: coming months on both those pieces. Maybe just super high level, like, there any material working capital differences between the businesses? Or is that relatively different?

Varun Lorre, CFO, Aptiv: No. Listen, both businesses actually deliver a tremendous amount of free cash flow, right? Number one, the EDS business has been a tremendous generator of free cash. And then with regards to ECG and our AS and UX business, marginally higher, right? So if you think of the new Aptiv, that will be well into the 90s, close to 100 percent of adjusted net income, right?

That’s how you should think about that.

Operator: Excellent. Maybe just to close here in the final minutes, Kevin. I know, you know, we’ve spoken a lot over the years and especially, you know, I think over the past year where there’s been a number of industry challenges, right, I think there’s been some frustration with the stock price and the valuation. What do you think from your perspective and meeting with investors all the time is sort of most misunderstood about the Aptiv story and opportunity.

Kevin Clark, Chairman and CEO, Aptiv: Yeah. Listen. I I think I think there’s still opportunities that are significant within automotive. And I think there are still significant opportunities within the automotive industry overall. So I I let me start with that.

We seem to have gone from from electrification hype to no electrification to tariffs to now rare earth minerals. So it seems to be one item after another. And and listen, I understand investors decide decide where to allocate capital, and the more complicated things are, the harder it is to do do. And we appreciate that. We understand that.

And that gets back to my my point about, making sure that we’re communicating information more frequently that’s more valuable for you guys. So you have our commitment to do that. But I think net net, listen, transportation continues. Technology in vehicles continues. That’s where we sit.

That’s where we apply. We have a highly competitive cost structure, a great competitive position. We have a starting position outside of automotive that we’re confident we can take existing technologies. And with small tweaks and changes to the go to market, we can get incremental revenues. And that’s where we’re focused, while at the same time, we’re serving our our largest customer base, right, which is very which is very important.

But, you know, we feel like, there’s a tremendous amount of opportunity, but we understand the complexity that that that investors at this point in time, the lens that they’re looking through and what they’re hearing.

Operator: Great. So Well, with that, gentlemen, Kevin Vernon, thanks for joining us today at

Kevin Clark, Chairman and CEO, Aptiv: the conference. Really appreciate Appreciate it. Great questions. Take care.

Varun Lorre, CFO, Aptiv: It’s always great to see you. Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.