Aptiv PLC Q4 2024 Earnings Call Transcript

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

Question: John Murphy - BofA Securities - Analyst : Kevin, just a first question on your statement that you've taken somewhat of a conservative outlook, which is totally understandable given what's going on in the world and the country in the US right now. But when you look at that down 5% in North America, if we said that was closer to flat, it seems like it would add, I don't know, $360 million, $370 million more of sales roughly. If that were to occur, what kind of incremental margin, and I'm saying if, right? I mean it's a big if, what kind of incremental margin do you think you would get on those incremental sales, if that were to occur?

Question: John Murphy - BofA Securities - Analyst : Okay. And then just a second follow-up on slide 5 of the $31 billion of gross bookings. There's another big, big year for you. As you kind of walk forward two to three years out, has anything changed in sort of the mix of customers in China? And are you shifting more quickly towards the domestics than you were previously. Just curious how you -- if there are any updated thoughts there.

Question: Joe Spak - UBS - Analyst : Kevin, maybe just going back to sort of the conservatism comment. Are there any other areas of the outlook that you'd highlight besides that sort of adjustment to North American production? And somewhat related, I mean, just the growth over market, which I know is not sort of an official metric anymore, but implied in North America, maybe just some commentary on what's driving that for the year.

Question: Joe Spak - UBS - Analyst : Okay. I guess, just as a second question, this is, I know bigger picture because there's obviously a lot going on. But it sounds like the automakers as they, I guess, should be, at least have some contingency planning scenarios if they have to react to tariffs even if my impression is that still might be a lower probability. But I guess, I'm sure you're doing something similar from a contingency plan perspective. I am curious though, if any of those OEM conversations have cascaded down to you? Because if anything like this award to need to occur, there would obviously need to be some pretty meaningful coordination and time and validation and ramp up. So I guess I just want to understand how you guys are internally planning for this and the level of coordination across the value -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:00PM, APTV.N - Q4 2024 Aptiv PLC Earnings Call

Question: Chris McNally - Evercore ISI Institutional Equities - Analyst : Just you can see the tone of everyone's questions is around the conservatism in the guidance in Q1, Kevin, particularly around the volatility we've seen in mix over the last two years. I think one of the things that we all struggle with is the discussion of production that you gave out for Q1. And for you, you look below IHS, minus 5%, minus 3%. But that's probably on an active regionally adjusted basis. Have you looked at those numbers for top customers where your top customers are for Q1 and full year, just so we can have a sense of how much the conservatism is built in?

Question: Chris McNally - Evercore ISI Institutional Equities - Analyst : Yeah. And Kevin, I was at I think trying to figure out March depending upon how tariffs sort of across the street on has really done. So that's actually super helpful. And you did call out North America, I think, which is where the concern lies, particularly when we've seen two of the three OEMs who had good years sort of last year already being cautious on Q1 and you mentioned the third who was in a rebound. Just a simple one for me. I don't know if this has been answered yet. I apologize if it has just sort of peso benefit year-over-year, we've been sort of waiting for it. We got a little bit of help in the second half. But with peso at '21, should this be a tailwind of material form to margin in '25? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:00PM, APTV.N - Q4 2024 Aptiv PLC Earnings Call

Question: Dan Levy - Barclays Bank - Analyst : Wanted to ask about the China commentary, which shows that you're expecting some underperformance versus the China market. Is this just a continuation of what we saw in 2025 -- 2024, where it was just a couple of key customers that were dragging down results, but you're still growing with the domestic. Maybe you could just provide a little more color on the expectations within China and the domestic versus multinational split?

Question: Dan Levy - Barclays Bank - Analyst : Okay. And the underlying domestic growth that's in line with sort of where the market is?

Question: Dan Levy - Barclays Bank - Analyst : Okay. Great. As a follow-up, I wanted to ask about some of the cost actions, which you had talked about the third quarter call, I think there are a number of things you talked about salary reductions and flexing the workforce and material cost, manufacturing pricing. I see in your bridge that you're assuming some positive performance, but maybe you could just double-click on the extent to which you're seeing benefits on the cost actions, what's low-hanging fruit versus what's going to take a little more effort to achieve on the cost side. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:00PM, APTV.N - Q4 2024 Aptiv PLC Earnings Call

Question: Emmanuel Rosner - Wolfe Research - Analyst : My first question is around the outlook for EDS, I wanted to zoom in to it because it will obviously be its own stock soon enough and investors need to understand how to value it. So basically looks like revenues was down 6% in 2024. In your guidance for 2025, you assume stable revenue in EDS. And then obviously, when you announced the future spin-off mid-single digit is sort of like the midterm target in terms of growth for it. So can you maybe just give a little bit of color on what you expect for this year? Why just stable if electrification accelerates a little bit maybe in Europe? And then what will drive this acceleration to mid-single digit through 2028?

Question: Emmanuel Rosner - Wolfe Research - Analyst : Got it. And then I wanted to come back on the potential for cost reductions. So in the -- in this year's guidance, you have about $400 million of performance offsetting essentially labor economics and increased depreciation. What is the potential for Aptiv to take further cost actions or the appetite for it beyond just sort of like performance and efficiencies. We've seen some other suppliers meaningfully scale back maybe RD&E based on maybe a slower pace of electrification than previously anticipated. Is there room to do something that is sort of like more structural? Or have those actions already been taken and now it's really about offsetting the economics?

Question: Adam Jonas - Morgan Stanley - Analyst : A bit longer-term question, if I may. You mentioned aerospace and defense in the SP&S and also like diversifying your TAM within Wind River as well. I'm curious who are you winning business with, how significant is the aerospace and defense contribution today? And I'm curious how big this could be. Any other TAM that you might describe here because your customers I believe, especially post spin, if you only anchor your revenue to the auto industry and the legacy auto industry, there are scenarios where those companies are going to be much, much smaller and many of them won't exist. So if I even see kind of a gold standard of Western EV, Tesla, they're effectively -- they're pillaging resources, getting resources out of the traditional electric vehicle market into other markets, even humanoids and things. That gives you a very unique perspective, I think, of those next TAM. So I didn't know if you in the board are kind of actively tracking this and any messages that you had for investors today, thinking longer term of the surface area between what you do and other expressions of smart machines beyond just cars?

Question: Adam Jonas - Morgan Stanley - Analyst : Thanks, Kevin. You guys made our humanoid 100, by the way. So congratulations, but I look forward to continuing the discussion. That's all I got.

Question: Colin Langan - Wells Fargo Securities - Analyst : Just wanted to follow up on -- if I go through the margin walk on slide 16. Talked about the pace is not an issue this year. If I translate the FX, it would be smaller than $100 million drag. What is driving that headwinds for FX on margin? And also, what is the net pricing commodity? Is there a commodity headwind we should be thinking about too.

Question: Colin Langan - Wells Fargo Securities - Analyst : Got it. And we talk a lot about trying to catch up with the mix with locals in China. There is growing concern about the profitability on that business because the product cycle is so short. It's kind of hard to sort of get your costs back from all the upfront investment. Any color on how your margins with China locals look today and whether you're able to kind of get the added sort of tooling costs given the shorter life cycle of products over there?

Question: Tom Narayan - RBC Capital Markets - Analyst : First question is on ASUX. We heard from one of the D3s last night that they're at a critical point in deciding on what to do with advanced autonomy, whether they work in-house or do more partnerships with others. And we've experienced your guys Level 2 plus demo at CES and quite impressive, not overly costly. Just curious, in recent months, you've experienced an increase in interest for advanced autonomy and on the flip side, the UX side, it seems to be structural kind of impediments there. Just curious how you see that business playing out if there's things you could do to reverse any structural issues there?

Question: Tom Narayan - RBC Capital Markets - Analyst : Okay. And a quick follow-up on that semis topic, just the shortfall you see. Is that -- is this company specific? Or is it like an industry-wide dynamic or something you're always expecting?