Adient PLC at JPMorgan Auto Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ryan Brinkman - JPMorgan Chase & Co. - Analyst : Thank you. And my first question here relates to the change in expectations around battery electric vehicles, maybe a little bit more relevant for Adient than one might think, given the relatively agnostic nature of powertrain agnostic nature of seats because you have specifically targeted these vehicles for growth and they are growing just not as quickly as was forecast. I think at the start of the year, S&P Global mobility thought that global bev production would rise 32% in 2024, but their latest forecast out on August first calls for just 10% growth. What in your view accounts for this significant reset of expectations? And has the slower near-term growth of production caused you to think any differently about the ultimate, the medium or long term potential? And what are the implications do you think for Adient? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 2:15PM, ADNT.N - Adient PLC at JPMorgan Auto Conference

Question: Ryan Brinkman - JPMorgan Chase & Co. - Analyst : Interesting and thank you. My second question relates to another big theme in the industry, which is the strong growth of the domestic Chinese automakers. They were quick to embrace electrification, either their quality and design have improved so considerably. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 2:15PM, ADNT.N - Adient PLC at JPMorgan Auto Conference They're introducing new models, sometimes twice the rate of global peers. BYD five years ago was 13 largest in China another first, I think collectively, they've gone from like 35% to 55% since the start of the pandemic. Still small outside of China, but with a lot of ambition. So how do you see this trend continuing to evolve inside and outside of China? And many of the suppliers we cover is still less levered to the domestics. What is your exposure to the domestics within China? And then can you talk about maybe any actions that you're taking to reposition the portfolio to better benefit from the growth of these quickly rising OEMs?

Question: Ryan Brinkman - JPMorgan Chase & Co. - Analyst : Maybe a question on the 8% margin target by 2027. And really the emphasis on by 2027. And I like you, I see no reason why the business can generate an 8% margin. But thinking about some of the headwinds that are impacting you now, it's kind of like to test the degree to which they will have surely subsided by that point in time and including the customer mix issues. I mean, look, if scientist cuts on some inventory in June. Okay. But what about Volkswagen in China ? Is that still going to be an issue for us going forward? And what about on some of this program stuff, some of the EB, if it really does track materially softer, et cetera. What penetration rate of EVs is maybe assumed in that 8% margin target. I don't know if that's even the most important planning assumptions. But maybe just what other factors both inside and outside Adient's control are necessary to get to that 8% target?

Question: Ryan Brinkman - JPMorgan Chase & Co. - Analyst : And you've got a question on Europe on the call knows it's just going to be more restructuring because you said that you were evaluating all the levers. You said that could include pairing of operations, sharing of operations, combining of operations and anything that can eliminate that overcapacity in the region. Maybe just talk about what opportunities are available. Are other people struggling as much as you would have a motivating factor? And could anything be done that wouldn't entail levering and cash out the door or ?

Question: Ryan Brinkman - JPMorgan Chase & Co. - Analyst : What about the on as an avenue for margin expansion via this more modular approach, right ? I first learned about that in December of 23 in Plymouth. You've been talking about the 8% target for quite a while before that, and I use later after you introduce things that are used are putting that year on it. But what was the modular approach contemplated when you first rolled out the 8% target? Or maybe is that incremental is needed to offset some of the softer volumes or mix that we've seen? And how big of I mean, you seem to imply is kind of game changing, you remind us 30% out labor, something like that. How much of an opportunity is that to get to your targets?

Question: Ryan Brinkman - JPMorgan Chase & Co. - Analyst : Another avenue for margin enhancement is vertical integration. So certainly I know that you guys are vertically integrated to did foam trim metal components. In fact, I think when it comes to the structures, you might be more vertically integrated than some others. But obviously, they've made that a big part of their margin strategy and I've been asking you in meetings for five plus years. What you think about you'll see heating and ventilation and lumbar and massage conclude because I cover Gentherm's always kind of looking at it in that perspective, too. And I just asked I mean, in the other room, if you like I said, I feel like added over the years has really backed up a lot of the things that Gentherm is that because when I ask (technical difficulty) we can compete just as effectively where we don't need to tell. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 2:15PM, ADNT.N - Adient PLC at JPMorgan Auto Conference We can partner with Gentherm. They have excellent products and go to market against Lear. And so I was pushing them on that because when I went to and you mentioned it too. When I met with James in China, they talked about the [jumbo] joint venture. So now you actually are doing vertical integration and they say they talked about it, but it was to meet China market specific needs or something. But is there any reason why that couldn't be applied outside of China that you can pick up some margin by vertically integrating that technology, mechanical spirits or nomadic or some like that. And I wonder when you are saying that you didn't need to do that over the years and maybe that's because earlier when you were over-levered, you'd rather pay down debt. And now when your stock is so cheap, you'd rather buy back stock. So you have to compare it against that opportunity, but what's the latest on vertical integration? And if that could be an avenue for getting you there to the 8%?

Question: Ryan Brinkman - JPMorgan Chase & Co. - Analyst : And maybe ask on capital allocation. You're targeting the $20 million to $50 million of free cash flow this year. We've already bought back to under $25 million. So you're really returning all of it now. And I'm just curious if we should think about that as continuing as a priority. I mean the question earlier about doing something strategic in Europe to address that. Would that require cash or would it not require cash or would it require cash that's included in the restructuring. And so the free cash flow is after that, or curious too on if you would ever since almost silly to talk about this after it used to be still levered, but now you're not in. And would you ever leverage to buy back stock after just today in any kind of almost at that? If you think about it when you did the same thing transaction, I mean, obviously you delivered and bought back stock. But if you think about it, you've got cash on the balance sheet and then you bought back stock in excess of the free cash flow. You're going to see kind of levered to buy back stock. So would the appetite for that -- but I wouldn't have asked that question at $30, but maybe it's relevant now. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 2:15PM, ADNT.N - Adient PLC at JPMorgan Auto Conference