Dana at UBS Auto & Auto Tech Conference: Strategic Sale in Focus

On Wednesday, 04 June 2025, Dana Incorporated (NYSE:DAN) participated in the UBS Auto & Auto Tech Conference 2025, unveiling strategic plans amidst both opportunities and challenges. The company’s focus was on the potential sale of its Off-Highway business, capital allocation strategies, and market conditions, including the impact of tariffs and supply chain issues.

Key Takeaways

• Dana is in the final stages of selling its Off-Highway business, with a deal expected by late Q2.
• Proceeds from the sale will be used to reduce leverage to 1x net over the cycle and return capital to shareholders.
• The company aims for double-digit EBITDA margins next year, driven by cost reductions and profitability improvements.
• Tariffs on steel and aluminum could impact Dana by $20 million, but recovery mechanisms are in place.
• Dana is exploring resourcing opportunities due to tariffs, focusing on countries like India and China.

Off-Highway Business Sale

• Status: Dana is nearing the completion of its Off-Highway business sale, describing its position as being in the "red zone."
• Competitive Process: The sale has attracted significant interest, with a competitive bidding process underway.
• Timeline Factors: Tariff uncertainties and tight credit markets have slightly delayed proceedings, though the tariff situation has improved.
• Mitigation and Value: Dana’s ability to adjust its cost structure has reassured potential buyers, maintaining the asset’s value.

Capital Allocation and Financial Strategy

• Transformational Opportunity: The sale is seen as a chance to enhance Dana’s financial standing significantly.
• Leverage Reduction: Proceeds will primarily reduce leverage, targeting a net debt of 1x over the cycle.
• Shareholder Returns: After deleveraging, Dana plans to return capital to shareholders.
• Profitability and Cash Flow: Double-digit EBITDA margins are anticipated next year, with cash flow projected at 4% of sales.
• Investment: A stronger balance sheet will support accelerated investments and potential stock buybacks.

Cost Savings and Margin Enhancement

• Current Savings: Expected cost savings have increased to $2.25 million this year.
• Future Opportunities: Additional savings of $65 million are anticipated next year from structural changes.
• Strategic Focus: Dana is optimizing plant structures and strategic sourcing to enhance margins.
• Aftermarket Business: Improvements in pricing tools and brand management are expected to boost the aftermarket segment.

Market Conditions and Outlook

• North America: Light vehicle volumes are stable, while commercial vehicle volumes remain weak.
• Global Markets: Brazil shows strength in commercial vehicles, while Europe faces challenges in the Off-Highway sector.
• Tariffs: Dana is increasingly confident about recovering tariff costs from customers.
• Rare Earth Elements: The company is monitoring potential impacts on the supply chain.

US Footprint and Resourcing

• US Presence: Dana’s US operations remain robust, particularly for core products.
• Resourcing: The company is evaluating sourcing opportunities from India and China, though options are limited by existing supply chains.
• USMCA Considerations: Dana is keeping an eye on the upcoming USMCA renegotiation in 2026.

In conclusion, Dana’s strategic initiatives at the conference highlight its commitment to transforming its financial and operational landscape. For more details, readers are encouraged to refer to the full transcript below.

Full transcript - UBS Auto & Auto Tech Conference 2025:

Joe, Analyst: We’re gonna start with the next session. Very pleased to have with us Dana. With from Dana, we have Bruce McDonald, CEO and Tim Krause, CFO. Thanks, gentlemen, for joining us

Bruce McDonald, CEO, Dana: Thanks, Joe.

Joe, Analyst: This this morning. Really appreciate having you here. I guess, maybe just to start, and I think the question on sort of a lot of investors’ minds is a status of you’ve announced the sale or proposed or evaluation of the sale of the Off Highway business. You talked about a goal to be able to announce a deal by late second quarter. I guess now that we’re in June, we’re sort of heading into the home stretch.

So maybe just an update on the status there and

Bruce McDonald, CEO, Dana: how Yeah. I mean, I I I think I mean, obviously, we really can’t get into an awful lot of specifics, but I think, you know, it’s been a very competitive process. And, you know, during this time, we we’ve we’ve had because we announced the sale, we have had a lot of inbound activity. We have very competitive process. I would say, you know, the uncertainty around tariffs slowed things down, and the tightness in in some of the credit markets has been a factor in there as well.

But nevertheless, I I and I I’d say the way to sort of put it right now is we still feel good about the timetable that we’ve committed to, and we’re in the red zone.

Joe, Analyst: Okay.

Bruce McDonald, CEO, Dana: And it’s not not the first play in the red zone either.

Joe, Analyst: Alright. Perfect. So I I guess just again, I mean, so, you know, you sort of mentioned some of the with the advent of sort of all the tariff noise that buyers or potential buyers are sort of taking a little bit of look. When you sort of just mentioned that and sort of the credit tightness sort of as the reasons, I just want to clear. Is it like the the the comments you’re sort of making today are sort of similar to sort of what you were sort of trying to communicate when when you last reported?

Or have they sort of taken a look at tariffs? Now they’re taking another look at tariffs because

Bruce McDonald, CEO, Dana: I I think the tariff situation is better. It’s improved since since it continue even though, you know, we just got the new ones on steel and aluminum. But overall, the magnitude of the swings is is a lot better, and and it it it wasn’t because off highway is mainly European business Mhmm. Have that much exposure to North America. It is more around the impact of tariffs on the end markets.

Mhmm. And, you know, for for for instance, you know, US ag is is a is probably binary. It could be a big winner out of this tariff battle as we as we cut some deals or it could be a big loser. So so that one’s kinda binary. So it it the concern around tariffs is more around the expectation of when the off because off highway is trending down before tariffs.

Right? So it’s really been when buyers think the business was going to be kept see its normal cyclical recovery and is that going to be pushed out a bit. And so it it it’s not really that big of an issue in terms of, you know, what’s the impact gonna be on 2025. It it’s been it’s more, hey. We know this business is is troughing, and when is it gonna pick up?

And that’s probably going out. So they just need to sort of get their hands around that, understand it. And, you know, Tim, you you probably talked a lot. Think our business done a nice job being able to flex its cost, and so that’s something that they wanted to get comfortable at, hey. You know, can you continue how have you done that in the past?

Can you continue to do it? Etcetera, etcetera.

Joe, Analyst: And and and, Tim, you know, don’t wanna, cut you off and plea please expound on that. But I guess just maybe you could also add in, like, our is the potential sort of buyer group. I mean, obviously, understand the sort of cyclicality. Like, how are they understand, though, that this is a business that is maybe potentially closer to sort of trough levels versus normalized or or sort of peak levels? Like have they done that sort of work?

Or that’s sort of what they’re trying to understand from you?

Tim Krause, CFO, Dana: No, no. I think that’s been part of the diligence process that everyone that’s in the process has gone through. I think, to expound on Bruce’s point, I think a big part the cycles tend to be short and steep in Off Highway versus the other businesses that we run. The idea or the playbook to take costs out and limit the impact on the contribution flow through is really part of the DNA of the business. And I think a lot of the bidders running to really understand, especially given the footprint of the business being particularly in Europe, how does one do that?

Why are they able to do it? This isn’t how they think maybe think about Europe or the business. So we’ve got to spend a bit more probably more time helping them understand that. And obviously, it’s a good thing. It’s a positive for the business because it tends to operate very, very effectively, whether the market’s going up or going down.

Bruce McDonald, CEO, Dana: Yeah. And I would maybe just add to that, Joe, is I would say the fact that we’ve had a very competitive process and the scarcity value of this asset has has really mitigated any value deterioration. It it’s it’s heightened concern. It’s taking more time. But but in terms of where we think we’re gonna this asset’s gonna trade versus what we thought, it’s it’s it’s in the same I want I’m not say ballpark, but a much it’s in the same bull’s eye.

Joe, Analyst: Okay. Perfect. Maybe just sort of tacking on to, you know, the conversation of the sale, and let’s assume it sort of goes through at something reasonably close to what you’re thinking. Just remind us sort of how you think about you use of those proceeds, how you sort of think about the the capital structure for for RemainCo, Dana, if you

Bruce McDonald, CEO, Dana: I’ll I’ll maybe just start, and then let Tim get into detail. But but, I I mean, we’re looking at this as, hey. This this is a transformational opportunity for Dana to move out of, you know, I I say the trailer park into into the top neighborhood of automotive suppliers. And you you know what it looks like. There there’s a bunch of guys that are in the two to three times leverage range, and then there’s your, I I would say, more like your quality names that are down in the one x times.

And so this is an opportunity for us to fundamentally change it, really look at the the the negative impact that we have on our cost of capital from being over leveraged to get into, like, a target zone and be in a position to reward our shareholders too. So why don’t you sort of Yeah. I I mean, I

Tim Krause, CFO, Dana: I think, you know, Bruce got got it right. We’re looking at at at a, first use proceeds, obviously, reduce the leverage on the remaining business. And we continue to think about it as kind of one times net over the cycle. So at some points of the cycle, it will be a little better. At some points, it will be a little above that.

And then we’ll still have proceeds that we believe we can distribute or return to shareholders in some form around the time we’re able to close the transaction. So I think it does give us an opportunity to fundamentally reshape the balance sheet and return some capital to shareholders and then put us in a position to really be the ability to continue to invest in the remaining businesses that we own on the light vehicle and commercial vehicle side and really work to make those businesses efficient, profitable, cash flow generating businesses that will continue to not only support our customers but generate a lot of value for our employees and our shareholders.

Bruce McDonald, CEO, Dana: Yes. I think the one part of the story, I think, that’s less well understood. If you look at the cost reduction activity that we’ve made great progress on, I can’t thank the team enough, And we look at the step up that we’re going to get next year, which is only due to annualization. So it’s not like it’s more actions next year. You combine our improved profitability, and we’re saying, hey.

We we we believe we’ll be double digit EBITDA next year on a on a pro form a basis. And you combine that with the better balance sheet and the interest savings, the the lower tax cost because our our our off highway business is drives up our cash taxes, then then we’ll be in a position where we’ve got a great balance sheet. We can return capital to shareholders on day one. We’ll have our our our our cash flow generation, we’re saying it’s like 4% of sales. So it’s it’s it’s getting better, not worse.

And so we’ll be able to accelerate some investment in our business and buy back stock on an ongoing basis.

Joe, Analyst: I just wanna maybe go back to something you say because maybe maybe I think that maybe there is a little bit of a misunderstanding this maybe on on my front. So, you know, on the cost savings part, you talked about $2.25 this year. Right? You raised that from $1.75 previously. Mhmm.

That’s of the 300. What you’re saying is to get to sort of that 300 rate, it’s really just sort of the the full year impact It’s

Tim Krause, CFO, Dana: the annualization. If you think about it, we took about 10,000,000 out last year. Yeah. We’re gonna incrementally do $2.25 this year. It puts us at two thirty five.

Yep. And and a decent amount of the actions are happening in the back half of the year. So that will end up flowing through, and there’s about an incremental $65,000,000 next year, which is really from annualization of what we’re doing. What’s happening this in sort of quarters think of it as quarters two through four, really. One, you almost have a full year end.

But Yeah.

Bruce McDonald, CEO, Dana: So so if you think about to hit the number that we’ve talked about in q four, we we need to save, like, $7,075,000,000. In ’1 this year, we saved 41. So we go into q one of next year, 75 versus 41. It’s it’s, you know, $30,000,000

Joe, Analyst: Right there. Yeah.

Tim Krause, CFO, Dana: Half in q one. The math may the math makes a lot

Bruce McDonald, CEO, Dana: of sense when it’s It’s not more action.

Tim Krause, CFO, Dana: Okay.

Joe, Analyst: But it beg it does beg the question, and is like, and maybe there needs to be sort of a pause in the settling to see how sort of the organization handles up. But, like, is there for even further opportunity, you think, for Yeah. For sort of cost out?

Bruce McDonald, CEO, Dana: Absolutely. I mean

Joe, Analyst: What were the what would those areas be?

Bruce McDonald, CEO, Dana: Well, if you think about it, Joe, like, when when we’ve talked about where are we saving the money, it it has been in a if if I was to do a pie chart of our total cost, it has been in a small sliver. You know, we there’s there’s an awful lot of opportunity in our in in the plants. We we think there’s still some longer term benefits that we can get, in the in the cost above our plants, we’re going to have to make some investments to get there. I think on the commercial side, there’s some opportunity. So, yeah, I don’t think talking about cost reduction or margin enhancement is is gonna be a big part of the story going forward, and and and that’s something that I would say I’m I’m with our management team really starting to focus on now is, okay.

This I don’t really worry about, are we gonna get 300,000,000 or $2.25. Yeah. It’s it’s now, like, let’s look at what we can do that’s a longer term, more structural, and it’s a target rich environment, I would say.

Tim Krause, CFO, Dana: Yeah. And I I think the way to think about it is I don’t I don’t think of where we think we can take the business, from a structural perspective as really being additional. I don’t think of it as cost reductions. It’s really margin enhancement across the board and thinking about things, where are the footprints, what do we need to do around our plant structure, where do we want to be what’s really important that drives from a strategy percent that drives real value for the company and for our customers? And what are the parts of the bill of material that we don’t need to make in house?

And how does that affect our cost structure and what we need? Because don’t forget, all those plants come with infrastructure and everything else that needs to go along with it. So I think there’s a lot of ways we can continue to push margin in the business up that aren’t really the tough process we’ve been through here over the last, you know, six or eight months around around what we’re we’re calling cost reduction, which is a lot of heads, which obviously impact a lot of a lot of the people that work for us in a in a in a lot of ways.

Bruce McDonald, CEO, Dana: Yeah. I I I would just give you a couple examples that are very tangible. Like, if you think about Dana in the past, we we you know, rightly or wrongly, and I was sitting on the other side of the board, and I was I I was part of this. I you know, we we believed in how much opportunity we had with electrification, and obviously, the market’s done a one eighty, and we’ve got to pivot. But, the amount of capital that we are putting in to support that endeavor squeeze the rest of our business.

So if you if you went into a Dana plant, you you would find things like robotics. And I’m talking not, like, not Elon Musk type, lock and robotics around, but I’m just talking, like, cobots that load and unload machines. You talk about material handling. We we have very few AGVs, AGM. So so we’ve we’ve and those are very high payback type opportunities, especially in our high cost country plants.

So, you know, those are things that we still have the capital to to invest. Footprint is another one. You know, we we’re taking on a few things this year. Again, we we didn’t have the cash flow to sort of invest in optimizing your footprint, make versus buy. We we suboptimized several things because we didn’t have the capital, so we outsourced it even though maybe it wasn’t the best economic decision overall.

So so once we get ourselves in a position where we can step up our capital, I’m not talking, like, way up or anything like that, but but we we there’s opportunity. Those just be a few few of the buckets. And and, you know, I see more of a lot more.

Tim Krause, CFO, Dana: I mean, if if I

Joe, Analyst: were to paraphrase, it sounds like actually what this is is it’s a more efficient use of your capital spending that has a clear return. Right? Because if you mentioned, like, some of that investment was for EV, which as you mentioned sort of didn’t really pan out as Long tail. Yeah.

Bruce McDonald, CEO, Dana: High risk. Yeah. Yeah. Yeah. And you know what?

Things like know, we’ve really taken a step back and looked at our aftermarket business. I mean, that’s a that’s a very profitable part of our company, but it it kinda run as a bit of a afterthought. And, know, we just haven’t made the investment in some of the more sophisticated pricing type tools that I’ll say, you know, like benchmark type aftermarket organizations use. So there there there’s a lot of opportunity in, I would say, our aftermarket business even though it is our most profitable part of our company.

Joe, Analyst: And as you as you, make some of those adjustments in an area like aftermarket, is that is that an area that you think there’s sort of further growth opportunities either organically or inorganically? Absolutely.

Bruce McDonald, CEO, Dana: Absolutely. Yeah. Ab absolutely. I mean, we well, why don’t you talk about not just North America or what we’re looking at in North America here?

Tim Krause, CFO, Dana: Yes. I mean if you think about on an aftermarket basis, right, our we sell we think of it as hard parts and I’ll call them soft parts, but they’re not really. But our core driveline business, and then we have a thermal and ceiling business. Well, the ceiling business aftermarket, we’re a number one or number two player in Europe with Victor Rheins, and we’re really not a player in North America. And there’s historical reasons for that coming out of bankruptcy and what we had to do to exit.

We’re moving back into the North American market. And that’s a there’s a it’s dominated by one of our competitors. And really, we’ve kind of had a start again, stop again approach to this. Well, now we’re really thinking about this as a strategic way to grow the business in a very profitable way and getting those ready made we don’t do any investment. We already know the SKUs, and we have the parts.

Now it’s really going out and selling those and doing the work to price them appropriately, get them on the store shelves, get the sales group to be focused on selling those. And that can ramp very, very quickly at very high margins to really help drive the profitability. So I think there’s one. And then really thinking about, hey, how should we? We have high quality, high visibility brands.

Are we pricing for the value that those brands bring? Do we have the right brand stratification, high best, better, good, better, best? I mean, a lot of right to Bruce’s point, a lot of things that companies that are really core focused on aftermarket do day in and day out. And it was not probably the focus that we had for a lot of reasons. We’re focused on a lot of other things.

But today, that’s some of the work we’re doing internally. And I think of that as sales growth and margin enhancement, but it’s not cost cutting. It can deliver a lot of value.

Bruce McDonald, CEO, Dana: So this, I think, is the ancillary benefit that we’re getting from eliminating a PT business unit. So we talked about we saved like 30,000,000, 30 5 million combining it. But put putting all of aftermarket together, it’s kind of been an eye opener about, hey. We’re really not doing it as well as other people with with businesses of our size, and so there’s a lot of opportunity there. And similarly, on the on the rest of the business that we put in with light vehicle, you you start to look at, well, what does this business look like without the aftermarket profitability?

And it’s it’s pretty terrible. Like, it loses money. And so it’s like, well, hey. I make zero one on the weekend, so I’m not coming to work to make less than that. So so we you know, Byron and his team are have been charged.

Hey. You you gotta you gotta earn our targeted return on on the OE side of this business. Otherwise, we we gotta get out of it. And so I think we’re gonna you know, a year from now, when we’re saying, hey. You know, we we thought we were gonna save 30 or 35,000,000, and it’s it’s it’s gonna be more like a hundred plus million that that we’re gonna realize from doing that.

Joe, Analyst: To be clear, you’re talking about the, OE portion of the prior power technology.

Tim Krause, CFO, Dana: Correct. Yeah. Think think about this. Right? I think the easy way to think about this is, like, think of the ceiling business.

Right? You know, the the the very high profitable aftermarket business, which which, by the way, we make a lot of those gaskets that go into that. We also make those same gaskets sell in the OE, right? It was combined. You looked at the margins were pretty good.

I mean we always it wasn’t like we were we didn’t understand that the OE business wasn’t it was less profitable. But when you really sort of sort through it and yet now it’s separated, those things sort of float up pretty quickly to the surface and become really high priority to go take a look at. And that’s what the team to to Bruce’s point, Byron and the team are you know? And and by the way, some of this is just a fresh look. Right?

New group, new management team asking new questions, like how does the business work? Why do we do this? And those, you know, let’s face it. Those changes are sometimes really helpful because you do get a new perspective and somebody asking different questions and leading your downpas of, well, do we really need to be in that business? Or how should we be pricing that product?

Or do we really understand what the costs are in that business? And so we’re really at the really front end of that process, which I agree with Bruce, has an opportunity to yield pretty significant additional margin improvement for the business. Sure. I guess just

Joe, Analyst: maybe is there like it sounds like a lot of what the aftermarket is, is basically right products as you sort of already make on both the OE and aftermarket side. But is there also a further opportunity to leverage the brands you have, leverage the channel relationships you have to sort of take on new aftermarket product?

Tim Krause, CFO, Dana: Yes. I think it’s not so much new aftermarket products as it is taking the product portfolio we have and utilizing those channels. So if you think about we’ve got channels for the ceiling that perhaps we didn’t really use particularly well for the Spicer brand in driveline products. Well, you can sell both of those through the same sets of channels. But before they were separated, right?

That aftermarket business was in LV and the other one. Now it’s all combined. And so now it’s like, well, what’s the channel strategy for our highest end products across distributors or the big four retailers, right? And I think that’s the benefit we’re getting. Not like, hey, let’s go figure out how to make to sell windshield wipers.

That’s not what we want to do. I think that’s too complicated to do for the business. We have good parts like that have high quality brands associated with them that we think we can we can continue to push and and be better at at aligning the channel strategy with what the products we have and getting them getting them to customers that are willing to pay for those those high quality brands right away.

Joe, Analyst: Why don’t we move a little bit more towards the here and now? I mean, I know in the last quarter, you gave some sort of broad strokes market outlooks for the different markets. Given that we’re now your end market. So given now that, you know, we’re, know, two thirds of way through and, you know, you probably definitely have the schedules for the next month, like, how have things sort of progressed, do you think, maybe by end market or by region?

Bruce McDonald, CEO, Dana: Yes. Why don’t you start with that one, Tim?

Tim Krause, CFO, Dana: Yes. I mean so we continue so I’ll take light vehicle first, which is, for us, generally in North America. I mean volumes continue to hold up pretty well. We’re not seeing we were concerned about whether we would see volume impacts from tariffs and higher pricing. We’re not seeing that.

Schedules are holding up pretty well. Now we’re on products that tend to be a little bit like you take Super Duty, it’s a new truck, right? It’s work truck related, so it’s a little bit more insulated, which is helpful. But then you also think about, right, we had Wrangler, which was coming off a pretty difficult year, but still holding up really, really well. And then you think about Bronco.

Bronco has been a really great vehicle for Ford and for us. And then so that’s sort of on the commercial vehicle side, we continue to see weakness in commercial vehicle. There was In North America. In North America. There’s some expectation that there would be some pre buy.

We didn’t really see that. That’s really most of the OEMs have come off of that. But volumes there are lower than where we were expecting. Mean it’s what we talked about last month or in April in the first quarter call. That hasn’t really improved any.

When you look around the rest of the world, Brazil is holding up. That’s principally from a CV perspective for us. So that’s still good. That business continues to improve. We’ve got new leadership down there, which is really doing a great job.

And then you look at Europe, which is primarily the off highway business. And again, as I mentioned before, while a bit weaker, the teams have done a really, really nice job of maintaining the quality of the earnings in that business as they kind of do it. And by the way, they’re doing two jobs, right? They’re working to sell the business and still running the business. So I I I really, really appreciate the the effort that that entire team is really putting in to to it’d be really easy to to to blame the process on on not not keeping their eye on the ball, but but that really hasn’t been the case.

Bruce McDonald, CEO, Dana: I’d I’d probably say, though, if you just sort of step back, Joe, is the tariff you know, we we said on our call, hey. The situation’s manageable. It’s not we’re we’re we’re not too too worried about it. And I would say since then, the absolute magnitude of the tariffs has gone down. Mhmm.

I would say we feel increasingly positive that we will get substantial re recoveries from our customer. I I’d say more substantial than we thought sixty days ago. And I think the fact that the the I would say on the CV side, our our you know, when we talk our customers there, they’re they’re they’re in discussions with the administration around trying to get the same type of deal that the, automakers got, which would be a positive. And I think the fact that the OEs have this sort of two year transitional offset, really derisks the volume uncertainty that I think we all had sixty days ago. So I I feel like a lot better about it.

And I would say, we’re focusing on mitigation now instead of just like understanding what the hell the impact is. Tim,

Joe, Analyst: you mentioned the off highway in Europe. I thought on the last call you you were seeing maybe some hopes or at least some signs of sort of green shoots. Is that did that

Tim Krause, CFO, Dana: not happen now? Some of them. I mean, I think the they’re they’re still there. They’re in in in it’s a pretty diverse end market, It’s not just construction and even Mining. Mining is definitely a positive for us.

We continue to see some stuff in material handling that continues to be a bright spot for us, not only from a volume perspective, but also from our market share in that business. That’s a business that especially when you look at warehouse side, right, that continues to be a growth area for us in that business. So but yes, we’re still seeing some of that come through. I think ag is probably the one that continues to we are there’s it’s not getting progressively worse, but we’re holding our own around ag, especially in North America. And I think that’s a lot driven off of much of the stuff around tariffs and are we going to be able to export grain and farm products

And how is that going be affected?

Bruce McDonald, CEO, Dana: I guess to be balanced, though, we are keeping I’m sure folks are talking about the rare earth issue. Well, that’s

Joe, Analyst: the next question.

Bruce McDonald, CEO, Dana: So we are keeping our eye on that. I for us, it’s not a massive issue, but for the industry, it is. You know, I was pleased to see yesterday, we we got our first export or our supplier got its first export license approved on on on our the high transmission business that we I think we won the PACE award, and we’ve been talking about last call. So it’s got about, you know, less than $10 worth of worth of magnets. And, but without them, we can’t make it.

So, that was very positive that we got a little bit of unclogging. Now we still have issues elsewhere, but, hopefully, I guess they’re I’m sure a lot of the other guys are talking about it.

Joe, Analyst: Yeah. I I guess the question on on sort of since you brought up, and it sounds like there is a little bit of a of a direct impact for you and some of your products. But I guess the other would be indirect in that. It’s it’s sort of not a product that Dana’s providing, but the vehicle you provide to needs it, and there could be some disruption.

Bruce McDonald, CEO, Dana: All over the place.

Tim Krause, CFO, Dana: That’s always the issue. Right? Really, it’s, you know, you don’t it doesn’t take much to take the particular program down, and then it and you end up you end up you know, while you weren’t the issue, the the OEM can’t make the vehicle. It it doesn’t really matter. They’re not gonna order the part from us.

Bruce McDonald, CEO, Dana: So I I I think the positive is is, like, we submit our first application. It got rejected. We need more information. We submit it again, same thing. And yesterday, we got it approved.

So at least

Joe, Analyst: A little bit of loosening.

Bruce McDonald, CEO, Dana: Yeah. I mean, I’m not gonna declare victory, but it’s it’s better than I

Joe, Analyst: Right.

Bruce McDonald, CEO, Dana: It’s a green shoot maybe. Maybe a tiny one.

Joe, Analyst: But have you and have you seen any, changes or adjustments to schedules because of, again, maybe not Dana the issue, but just sort of broader through the supply chain?

Bruce McDonald, CEO, Dana: Not yet.

Tim Krause, CFO, Dana: Yeah. And nothing that we would necessarily Something something that you’re keeping an eye on. Yeah. Of course. I mean, I think

Bruce McDonald, CEO, Dana: Our customers are basically going out supplier by supplier. Like, how much of this stuff do you have? What’s the status?

Tim Krause, CFO, Dana: Which inventory do you have? Like, where you at?

Bruce McDonald, CEO, Dana: Yeah. And and when are we gonna have a problem? Yeah.

Joe, Analyst: And is it we know it’s in light vehicle. I’m assuming it’s in it’s in across all end markets, or is it more Yeah.

Tim Krause, CFO, Dana: I mean, there’s some I mean, some level somewhere you just think about, you know, any type of electronic problem.

Bruce McDonald, CEO, Dana: Of our motor and inverter stuff. Yeah.

Tim Krause, CFO, Dana: Motors and inverters for us directly are probably, you know

Joe, Analyst: Yeah. One of them. But

Bruce McDonald, CEO, Dana: But, again, the you know, those volumes have come down so much from where they were. And it’s it’s it hurts, but it’s not a major major issue there for us anymore.

Joe, Analyst: Fair enough. I guess the other sort of more to use the word late breaking because it seems like there’s always something Yeah. More sooner that that comes up. But, you know, over the weekend, we had some some news on on steel and aluminum tariffs. And maybe you could just, a, remind us of your buy and the mechanism of place.

I think like I think in the and again, like this is I think most of the steel you buy is in The U. S. Is what you’ve mentioned in the past. So it’s more of an indirect impact and that the price of steel may fluctuate. Yes.

Tim Krause, CFO, Dana: I think the way to think about it, sorry, we do buy some base raw steel and aluminum. Easy one to think about on the aluminum side is aluminum substrate in the thermal business. We buy rolled aluminum. It’s not pure aluminum. It’s got other things in it.

But and then we plate it and stamp it and turn it into a thermal products. Also, we use that for the battery cooling business. So that’s a direct buy. Most of our most of the metals we buy are in the form of semi finished either forgings or castings for our driveline components, which we then finish with machining and assemble them. So most of that’s coming we’re buying steel sort of indirectly through buying the semi finished product.

We have pass through mechanisms for changes in the commodities. So to the extent that the price increases or anything that’s coming in is tied to an index, that index is likely to move, and we’re able to get recovery. On the direct tariffs, we are going back to the customer to get those recoveries immediately. But we have very, very high confidence given that a steel tariff generally just raises the price of base steel on the index anyway so that that’ll be able to be recovered through normalized mechanisms versus having to go and deal with it elsewhere.

Bruce McDonald, CEO, Dana: But just to size it, Joe, I mean, for us, it’s we we talked about it being about a 20 mil like, when it went to 25%, it’s about 20,000,000 roughly. So so it’s another 20.

Tim Krause, CFO, Dana: Mhmm.

Bruce McDonald, CEO, Dana: And, you know, in the past, we would always say, hey. We got mechanisms, but there but there’s a lag. Mhmm. There is no lag because we we capture the the the impact in our tariff recoveries. And then the index tends to rise up, and then there’s a reset through the normal mechanism.

So it’s I I don’t really worry too much about that one in terms of is it gonna have a positive or negative impact on Dana? That’s not in my top 10.

Joe, Analyst: Okay. You wanna go run through that top?

Bruce McDonald, CEO, Dana: Yeah. Yeah. Yeah.

Joe, Analyst: I I guess just maybe as we sort of start to wrap up a little bit, the the one other thing I I sort of have been thinking a lot about is just footprint, right, and sort of investment.

Tim Krause, CFO, Dana: Yeah.

Joe, Analyst: And I think you guys have a pretty solid US footprint, especially for some of your sort of core products. But if you think about the goals or sort of intention here to sort of resource more to The US and as you work with your customers, maybe they want you to move more to The US for compliance purposes as well. Clearly, as you look across a vehicle, there’s some lower value parts, let’s say, that are going be difficult to move and some higher value parts that might make more sense. And I would say Dana’s product tend to fall more in the higher content, higher value portion. So do you agree with that?

Is that and, like, for for what you don’t do in The US, are you having conversations with your customers about what it could look like to move capacity?

Tim Krause, CFO, Dana: I

Bruce McDonald, CEO, Dana: would say that is an excellent question. But until there’s a bit more certainty around, like, is this the final rule? I know I know I know when we talk to customers, like, well, is this gonna survive the next like, what’s it gonna be like in four years’ time? It it is something that we talk about our customers as we quote. Mhmm.

Because they’re saying, hey. Like, I’ll give you a super duty as an example, which which you just won, is is, hey. We we did a target cost. We put in, okay. We can do this and this and this and this.

Maybe move more stuff out of, you know, to Mexico or overseas, take advantage of labor arbitrator or whatever. And now that we’re saying, hey. Hey. Here’s, you know, that quote. Here’s the tariff adjustments.

Now maybe we need to rethink that, that moving this from The US to Mexico, we thought it was gonna save that. But you know what? Maybe it’s better to pay $5 more and keep it here in Warren or Sterling Heights or whatever, and and but the tariff impacts will be less. So we are doing it like that, but I would say we aren’t really having any discussions or yet, anyway, around removing things around. That that’s just I mean, I don’t know what other suppliers are saying, but for our stuff, it it isn’t happening yet.

Tim Krause, CFO, Dana: Yeah. And I think that the other thing to think about here is, like, you you mentioned that we have high high cost, you know, high high value goods. Most of our axles are assembled, you know, close to where we’re delivering them anyway. So, I mean, there’s you know, it’s it’s some of the componentry really around them, but, you know, you it’s hard to ship, you know, axles a long distance. They’re very heavy.

They they don’t ship well over long distances, and and, you know, it is like we’re already there. It’s really some of the parts of the bill of material on some

Joe, Analyst: of the

Tim Krause, CFO, Dana: components that we’re going back. But to Bruce’s point, what’s it going to look like in four years? And we don’t I always I always make the comment that we we don’t invest capital for for four years. We a lot of times, especially in the core components of machining, we’re investing capital for forty years. So, like Right.

Like, which is part of the problem with what’s going on. Right? You you we’re trying to make we’re not making decisions for the next, you know, for the next term or we’re

Bruce McDonald, CEO, Dana: making it for the next Yeah.

Tim Krause, CFO, Dana: Next four decades.

Bruce McDonald, CEO, Dana: Yeah. When you think about our our exposure, Joe, for Dana, it it is really a question of where we’ve sourced things from. And so it looks like a big one would be castings and forgings from India. There is there is no other place to get them. So it’s not like we can say, oh, let’s start buying those.

Like, maybe a little bit, but we can’t say, like like like, we buy 200,000,000 of casting. Let’s go move it all to a foundry or whatever in in in Ohio. Like, there is no empty foundry. Right? We we have in aggregate, we got about $80,000,000 of stuff that we buy from China, and we’re trying to resource that for sure.

And some of that’s, like, would be small wire harnesses or electronic parts that that that you know, again, it’s not a lot of money, but when it when the pair of was a 45% a

Joe, Analyst: lot of money.

Bruce McDonald, CEO, Dana: It’s a hundred million. Right? And and then on steel and aluminum, it tends to be, hey. It’s grades that we can’t get here. Right.

So so we don’t have a ton of opportunity around resourcing, I would say. Some some subassembly stuff that we do in Mexico, maybe we could move up here, but it’s it’s not the lion’s share of it.

Joe, Analyst: That’s more, I guess, you call, like, you know, brownfield or you have access capacity as opposed to sort of a new facility. Correct.

Tim Krause, CFO, Dana: That that that’s a good way to think about it. Okay.

Bruce McDonald, CEO, Dana: Yeah. And and, you know, and the big assumption is out there is is our our you know, we got USMCA being renegotiated in 2026. Right? So is this exemption around USMCA compliant gonna stick or not? And if you know, we’ll have to see how those negotiations go because that probably will drive a lot more of that activity that you’re suspecting.

Joe, Analyst: Right. Yeah. I guess it’s a great point. I mean, I think though, you know, holistically, and I think even sort of what you mentioned with the example of India and some of China, it’s like some of the stuff we get from these countries, are we really ever gonna do it again in The United States? And so Yeah.

There might need to be some sort of consideration from a policy perspective.

Bruce McDonald, CEO, Dana: Yeah. Yeah. I think that’s right. I think that’s right.

Joe, Analyst: Okay. Great. Well, I think we’re we’re that that brings us to time. So Bruce, Tim, thanks

Bruce McDonald, CEO, Dana: so much

Joe, Analyst: for joining us. We really appreciate you us today.

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