American Axle & Manufacturing Holdings Inc Q3 2024 Earnings Call Transcript

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

Question: Ryan Brinkman - JPMorgan - Analyst : Hi. Thanks for taking my questions. Maybe starting with the comment on slide 5, I see that your outlook is predicated upon North America light vehicle production of 15.5 million, so seemingly in keeping with S&P Global Mobility's outlook for 15.48 million. Just wanted to check if you think there might be some downside risk to that, given that some other suppliers, Lear in particular, assumed below S&P production levels in 4Q, primarily in Europe, but also in North America. I know you're less exposed to Europe. There's some caution around some of the Stellantis programs, I think where you might have some exposure. Just what's the latest that you're seeing in terms of this evolving Detroit 3 inventory correction actions so far here in 4Q? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 08, 2024 / 3:00PM, AXL.N - Q3 2024 American Axle & Manufacturing Holdings Inc Earnings Call

Question: Ryan Brinkman - JPMorgan - Analyst : Okay. Thanks. And then, lastly for me, maybe just to follow up on some of your comments about the sale of the commercial vehicle axle operations in India. Just wanted to check whether that includes the totality of your business in India, if anything remains. I know you were excited about some of those light commercial vehicle e-Beam awards there. Presumably, that's sold as well. Does anything remain? And then, are there other operations, whether commercial vehicle operations globally -- I know you've got a small business in the UK or Scotland, right? Anything else globally, maybe even beyond commercial vehicles? Was this something opportunistic? Did somebody come to you? Or were you kind of thinking we're looking for ways to improve our margin profile and financial leverage and there could be other avenues to doing that as well?

Question: Ryan Brinkman - JPMorgan - Analyst : Thank you.

Question: John Murphy - BofA Global Research - Analyst : Hi. Good morning, guys. I'm going to ask the -- sort of the obvious question about the implied in the fourth quarter of about $142 million in EBITDA at the midpoint. And Chris, I think you kind of just guided to this in some of the schedules and stuff. But is the bulk of this the Ram HD changeover and some downtime at GM trucks that's really kind of the sequential pressure point? Or are there other things that are going on?

Question: John Murphy - BofA Global Research - Analyst : Okay. And then, just a follow-up. That leads to two very different stories between the first three quarters and the fourth quarter on EBITDA margin. You're looking at something that's about 12.5% for the first three quarters and then about 10% for the fourth quarter. So, as we think about 2025, and I doubt you want to go there in detail, but as we think about the walk-off point for 2025 numbers, is the first three quarters, at this mid-12% EBITDA margin, much more representative of how we should be thinking about sort of the base to walk off for 2025?

Question: John Murphy - BofA Global Research - Analyst : Great. That's very helpful. And just one clarification. You're just on the Ram HD, right? The other RAM pickups, you guys have little to no content. Is that correct?

Question: John Murphy - BofA Global Research - Analyst : And those inventories are tight. Okay. Great. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 08, 2024 / 3:00PM, AXL.N - Q3 2024 American Axle & Manufacturing Holdings Inc Earnings Call

Question: John Murphy - BofA Global Research - Analyst : Thanks.

Question: Joe Spak - UBS Equities - Analyst : Good morning, everyone. David, I know we're not going to talk about '25, but I did want to sort of touch on one portion that I know you'll update next quarter, which is -- which relates to sort of the backlog because it doesn't seem like maybe there's very many major awards being awarded right now. But I know you won some stuff that you highlighted today. But you did also mention some program extensions. So I think you normally consider about $100 million to $200 million of attrition. If we consider both those factors, which is, new awards might be a little bit constrained, but attrition is a little bit lower, from a net basis, do you expect much of a difference from what we've seen over the past few years?

Question: Joe Spak - UBS Equities - Analyst : Yeah. And maybe one quick follow-up and maybe it's a definitional thing. I just want to understand -- like I understand you're not baking in sort of program extensions, but if that were to occur, your attrition would go lower, right? Because when the program ends, is it not in that attrition number? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 08, 2024 / 3:00PM, AXL.N - Q3 2024 American Axle & Manufacturing Holdings Inc Earnings Call

Question: Joe Spak - UBS Equities - Analyst : Okay. We're on the same page. Okay. And then, Chris, I think one of the things that investors are starting to sort of think about here with -- post the election is tariffs, obviously, but also steel prices. Can you just remind us what happened last time with some of the steel actions globally and how that impacted you, if at all, and how you are protected or mitigated on that?

Question: Joe Spak - UBS Equities - Analyst : Okay. Thanks for that reminder. Appreciate it.

Question: Dan Levy - Barclays - Analyst : Hi. Good morning. Thank you for taking my question. I wanted to ask about the EBITDA bridge in the third quarter, $28 million of positive performance, inflation. Maybe you could just unpack some of the benefits there. I know there's a point here of $13 million of favorable warranty, but still even absent that, a pretty good result. And then maybe you could just remind us of sort of what is left in terms of inflation unwind benefit [eventually]?

Question: Dan Levy - Barclays - Analyst : Yes. And then, just in terms of sort of any remaining low-hanging fruit on perhaps whether it's metal forming underperformance or other inflationary items that you're recovering on?

Question: Dan Levy - Barclays - Analyst : Great. Thank you. As a follow-up, with this environment and I think the expectation by some that the election outcome could drive an extended ICE tail, maybe you could give us a sense of what that means for the resource outlays at American Axle. You had talked a little bit to some reduction in R&D. What does this say about the CapEx trends, et cetera? Just anything on the resource outline would be helpful. Thank you.

Question: Dan Levy - Barclays - Analyst : Great. Thank you. That's helpful.

Question: Tom Narayan - RBC Capital Markets - Analyst : Hi. Thanks for taking the questions. Two follow-ups to stuff that's already been asked. The first one, I just want to confirm, if I'm looking at that Q4 implied versus Q3, except for the hurricane -- I just wanted to be sure -- so all these items, the platforms, the production cuts that you already knew about, was this already known that the dynamic that Q4 would be kind of more depressed versus Q3, I guess, except the hurricane? Or was there something new that's kind of changed when you gave -- as opposed to when you gave your guidance in Q2?

Question: Tom Narayan - RBC Capital Markets - Analyst : Okay. And then, a follow-up on the tariff question. Maybe you could remind us what happened in 2018, 2019 on an OEM exposure level. On one level, you're more exposed to US. D3 should be a benefit potentially. But then, you had called out today winning business from a European luxury OEM and a Chinese OEM. So to what -- maybe you can remind us how that affected based on OEM exposure in the last round of this. And also, how this impacts your strategy to conquest OEM business? Does it make you favor more domestic OEM targets? Or -- yeah, those are the questions.

Question: Tom Narayan - RBC Capital Markets - Analyst : Got it. Okay. Thank you.

Question: James Picariello - BNP Paribas Exane - Analyst : Hi, guys. I've got a quick one on FX and commodities. And then, because I'm so creative, I also have a question on tariffs. FX, commodities were a positive contributor to EBITDA in the quarter. Was this driven by the peso primarily? And just how are you positioned for the fourth quarter? Should this stay positive for you?

Question: James Picariello - BNP Paribas Exane - Analyst : Got it. That's helpful. And then, just on your Mexico footprint and the tariff potential we'll all have to navigate from here, if certain OEMs were to prioritize their US capacity to max out full frame production, right, depending on the tariff scenario, how should we consider your driveline capacity optionality and your North America footprint? If the industry does tilt toward running US plants to max utilization, do you guys have a similar lever to pull or not necessarily?

Question: James Picariello - BNP Paribas Exane - Analyst : Yeah. If I could just squeeze one quick one. Regarding the divestitures, did you share the EBITDA impact that's going out with the two India plants? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 08, 2024 / 3:00PM, AXL.N - Q3 2024 American Axle & Manufacturing Holdings Inc Earnings Call

Question: James Picariello - BNP Paribas Exane - Analyst : Thanks.