We're going to start with the next session. Very pleased to have with us, Dana. With from Dana we have Bruce McDonald, CEO, and Tim Kraus, CFO. Thanks, gentlemen, for joining us.
Thanks, Joe.
This morning. Really appreciate having you here. I guess, you know, maybe just to start, and I think the question on sort of a lot of investors' minds is, you know, a status of, you know, you've announced a sale or, 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, you know, late second quarter. I guess now that we're in June, we're sort of heading into the home stretch. Maybe just an update on the status there and how.
Yeah. I mean, I think, obviously we really can't get into an awful lot of specifics, but I think it's been a very competitive process. And, you know, during this time we've had, because we announced the sale, we've had a lot of inbound activity. We have a very competitive process. I would say the uncertainty around tariffs slowed things down, and the tightness in some of the credit markets has been a factor in there as well. Nevertheless, I mean, 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.
Okay.
It is not, not the first play in the red zone either.
Perfect. So, I guess just again, I mean, you know, you sort of mentioned some of the, you know, with the advent of sort of all the tariff noise that buyers or potential buyers are sort of taking a little bit of a look. When you sort of just mentioned that and sort of the credit tightness as the reasons, I just want to be clear. Is it like the comments you're sort of making today are sort of similar to what you were trying to communicate when you last reported? Or.
Yeah.
Have they sort of taken a look at tariffs? Now they're taking another look at tariffs because.
I think the tariff situation's better. It's improved since, since, it contin even though, you know, we just got the new ones on steel and aluminum. Overall, the magnitude of the swings is a lot better. It wasn't because off-highway's mainly European business.
Mm-hmm.
Doesn't have that much exposure to North America. It is more around the impact of tariffs on the end markets.
Mm-hmm.
For instance, you know, U.S. AG is probably binary. It could be a big winner out of this tariff battle as we cut some deals, or it could be a big loser.
Mm-hmm.
So that one's kinda binary. It, the concern around tariffs is more around the expectation of when the off, 'cause off-highway's trending down before tariffs, right?
Right.
It's really been when buyers think the business was going to see its normal cyclical recovery, and is that going to be pushed out a bit? It's not really that big of an issue in terms of, you know, what's the impact going to be on 2025. It's more, "Hey, we know this business is troughing, and when is it going to pick up?" That's probably going out. They just need to sort of get their hands around that, understand it. You know, Tim, you probably talked, I think our business has done a nice job of being able to flex its cost. 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?" etc., etc.
And, Tim, you know, do not wanna cut you off, and please expound on that. I guess just maybe you could also add in, like, is the potential sort of buyer group, I mean, obviously they understand the sort of cyclicality. Like, do they understand though that this is a business that is maybe potentially closer to sort of trough levels versus normalized or sort of peak levels? Like, have they done that sort of work, or is that sort of what they are trying to understand from you?
No, no. I think that's been part of the diligence process that everyone that's in the process has gone through. I think, you know, to expound on Bruce's point, I think, you know, a big part, the cycles tend to be short and steep in off-highway versus the other businesses that we run. You know, 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. I think a lot of the bidders run 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? Right? This isn't how they think, maybe think about, you know, Europe or the business. We've had to spend a bit more, probably more time helping them understand that. Obviously, it's a good thing, you know, it's a positive for the business because it tends to operate, you know, very, very effectively whether the market's going up or going down.
Yeah. I would maybe just add to that, Joe, I would say the fact that we've had a very competitive process and the scarcity value of this asset has really mitigated any value deterioration. It's, there's heightened concern. It's taken more time. In terms of where we think this asset's going to trade versus what we thought, it's in the same, I won't say ballpark, but it's in the same bull's eye.
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, you know, something reasonably close to what you're thinking. Just, you know, remind us sort of how you think about, you know, use of those proceeds, how you thought to think about the capital structure for RemainCo Dana if you would.
I'll maybe just start and then let Tim get into detail.
Sure.
I mean, we're looking at this as, "Hey, this is a transformational opportunity for Dana to move out of, you know, I say the trailer park into the top neighborhood of automotive suppliers." You know what it looks like. There's a bunch of guys that are in the two- to three-times leverage range. Then there's your, I would say, more like your quality names that are down in the one-times. This is an opportunity for us to fundamentally change it, really look at the negative impact that we have on our cost of capital from being over-leveraged to get into a target zone and be in a position to reward our shareholders too. Once you sort of.
Yeah. I mean, I think, you know, Bruce's got it right. We're looking at, you know, first-use proceeds, obviously, you know, reduce the leverage on the remaining business. And, you know, we continue to think about it as kinda one-time's net over the cycle. Some points the cycle'll be a little better. Some points it'll be a little above that. And then, you know, we'll still have, you know, proceeds that we believe we can distribute or return to shareholders in some form, you know, around the time we're able to close the transaction.
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, you know, 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, you know, 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.
Yeah. I think the, you know, one part of the story I think that's less well understood is if you look at the cost reduction activity that we've made great progress on, I can't thank the team enough. We look at the step up that we're going to get next year, which is only due to annualization. It's not like it's more actions next year. You combine our improved profitability when we're saying, "Hey, we believe we'll be double-digit EBITDA next year on a pro forma basis." You combine that with the better balance sheet and the interest savings, the lower tax costs because our off-highway business drives up our cash taxes, 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 cash flow generation, we're saying it's like 4% of sales. It's getting better, not worse. We will be able to accelerate some investment in our business and buy back stock on an ongoing basis.
I just wanna maybe go back to something you said 'cause maybe, maybe I think that maybe there is a little bit of a misunderstanding that's maybe on my front. You know, on the cost savings part, you talked about $225 million this year, right? You raised that from $175 million previously.
Mm-hmm.
That's of the $300 million. What you're saying is to get to sort of that 300 rate, it's really just sort of the full year impacting.
It's the annualization. If you think about it, we took about $10 million out last year.
Yeah.
We're going to incrementally do $225 million this year.
Yeah.
That puts us at $235 million.
Yep.
And, you know, a decent amount of the actions are happening in the back half of the year. That'll end up flowing through. And there's about an incremental $65 million next year, which is really from annualization of what we're doing.
Was it was done?
What's happening this year in sort of, you know, quarters, think of it as quarters, you know, sort of two through four, really.
Yeah.
One, you almost have a full year in, but.
Yeah. If you think about to hit the number that we've talked about in Q4, we need to save like $70 million-$75 million.
Mm-hmm.
In Q1 of this year, we saved $41 million. We go into Q1 of next year, $75 million versus $41 million.
Right.
It's a, you know, $30 million.
Right there. Yeah.
Package.
The math makes a lot of sense.
It is not more action.
Okay. But it does beg the question, and is it like, and maybe there needs to be sort of a pause and a settling to see how sort of the organization handles itself. But like, is there even further opportunity, you think, for.
Yeah.
For sort of cost savings?
Absolutely. I mean.
What would those areas be?
If you think about it, Joe, like when we've talked about where are we saving the money, it has been in a, if I was to do a pie chart of our total cost, it has been in a small sliver. You know, there's an awful lot of opportunity in our, in the plants.
Mm-hmm.
We think there's still some longer-term benefits that we can get in the cost above our plants, but we're going to have to make some investments to get there. I think on the commercial side, there's some opportunity. Yeah, I don't think, you know, talking about cost reduction or margin enhancement is going to be a big part of the story going forward. That's something that I would say I'm with our management team really starting to focus on now is, okay, this I don't really worry about are we going to get the $300 million or $225 million.
What you do beyond that.
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.
Yeah. I think the way to think about it is, 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 reduction. It's really margin enhancement across the board, and thinking about things, you know, where are the footprints? What do we need to do around, you know, our plant structure? Where do we want to be? What's really important that drives, you know, from a strategy percent, that really drives real value for the company and for our customers? What are the parts of the bill of material that, you know, we don't need to make in-house? How does that affect, you know, our cost structure and what we need?
'Cause don't forget all those plants come with infrastructure and everything else that needs to go along with it. 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 six or eight months around what we're calling cost reduction, which is a lot of heads, which obviously impact a lot of the people that work for us in a lot of ways.
Yeah. I would just give you a couple examples that are very tangible. If you like, if you think about Dana in the past, we, you know, rightly or wrongly, and, you know, I was sitting on the other side at the board, and I was part of this. I, you know, we believed in how much the opportunity we had with electrification. Obviously, the market's done a 180, and we've gotta pivot. The amount of capital that we were putting in to support that endeavor squeezed the rest of our business. If you went into a Dana plant, you would find things like robotics, and I'm talking not, like, not Elon Musk-type walking robotics around, but I'm just talking like cobots that load and unload machines. You talk about material handling.
We have very few AGVs, AGM, so we've, and those are very high payback-type opportunities, especially in our high-cost country plants. And so, you know, those are things that we just didn't have the capital to invest. Footprint is another one. You know, we're taking on a few things this year. Again, we didn't have the cash flow to sort of invest in optimizing your footprint. Make versus buy. 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. 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 there's opportunity, you know, those just be a few of the buckets. I, you know, I see more out, a lot more.
I mean, if I 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? 'Cause 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.
High risk. Yeah. You know, things like, you know, we've really taken a step back and looked at our aftermarket business. I mean, that's a very profitable part of our company, but it was kind of run as a bit of an afterthought. You know, we just haven't made the investment in some of the more sophisticated pricing-type tools that, I'll say, like benchmark-type aftermarket organizations use. There is a lot of opportunity in, I would say, our aftermarket business, even though it is our most profitable part of our company.
As you make some of those adjustments in an area like aftermarket, is that an area that you think there's sort of further growth opportunities, either organically or inorganically?
Absolutely.
For sure.
Absolutely. Yeah. Absolutely. I mean, why don't you talk about not just North America or what we're looking at North America here.
Yeah. I mean, if you think about on an aftermarket basis, right, our, our, you know, we sell, think of it as hard parts and, and I'll call them soft parts, but they're not really. But our core driveline business, and then we have a thermal and sealing business. The sealing business aftermarket, we're a number one or number two player in Europe with Victor Reinz. You know, we're really not a player in North America. There are historical reasons for that coming out of bankruptcy and what we had to do to exit. We're, you know, moving back into the North American market.
And, you know, you'll, you know, and that's a, there, there's a, you know, it's, it's dominated by one of our competitors. And really, we've kind of had a start again, stop again approach to this. 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 do not 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. That can ramp very, very quickly at very high margins to really help drive the profitability.
I think, you know, there is one. And then really thinking about, hey, how, 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, you know, best, better, good, good, better, best, right? I mean, a lot of, right, to Bruce's point, a lot of things that, you know, companies that are really core focused on aftermarket, you know, do day in and day out. It was not probably the focus that we had, for a lot of reasons. We were focused on a lot of other things. Today, that's some of the work we're doing internally. I think of that as, you know, it's sales growth and margin enhancement, but it's not cost cutting, right?
Right.
It can deliver a lot of value.
This, I think, is the ancillary benefit that we're getting from eliminating a PT business unit. We talked about we saved like $30 million-$35 million combining it, but putting all of aftermarket together.
Mm-hmm.
Is, is it's kinda been an eye-opener about, hey, we're really not doing it as well as other people with businesses of our size. There's a lot of opportunity there. Similarly, on the rest of the business that we put in with Light vehicle, you start to look at, well, what does this business look like without the aftermarket profitability? It's pretty terrible.
Mm-hmm.
Like, it loses money. It's like, well, hey, I make zero one on the weekend. I'm not coming to work to make less than that. We, you know, Byron and his team have been charged that, hey, you gotta earn our targeted return on the OE side of this business. Otherwise, we gotta get out of it. I think we're going to, you know, a year from now, we're going to be saying, hey, you know, we thought we were going to save $30 million or $35 million, and it's going to be more like $100 + million that we're going to realize from doing that.
To be clear, you're talking about the OE portion of the prior power technology.
Correct.
Yeah. Think about this, right? I think the easy way to think about this is like, think of the sealing business, right? You know, the very high-profitable aftermarket business, which, by the way, we make a lot of those Gaskets that go into that. We also make those same Gaskets selling to the OE, right? It was combined. You looked at the margins were pretty good. I mean, we always, you know, it wasn't like we didn't understand that the OE business was less profitable. But when you really sort through it, and yet now it's separated, those things sort of float up pretty quickly to the surface and become, you know, really high priority to go take a look at.
That is what the team, to Bruce's point, Byron and the team are, you know, 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? Those changes are sometimes really helpful because you do get a new perspective and somebody asking different questions and leading you down paths 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? We are really, you know, 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.
For sure. I guess just maybe, is there like, it sounds like a lot of what the aftermarket is, is basically, right, products that 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?
Yeah. I think it's, it's not so much new aftermarket products as it is, taking the product portfolio we have and utilizing those channels. If you think about, we've got channels for the sealing that perhaps we didn't really use particularly well for the Spicer brand in driveline products. You know, you can sell both of those through the same sets of channels, but before they were separated, right? That aftermarket business was in LVD and the other one. Now it's all combined.
Now it's like, well, what's the go-to, what's the channel strategy for our highest-end products across, you know, distributors or the big four retailers, right? I think that's the benefit we're getting. Not like, hey, let's go figure out how to make, you know, to sell windshield wipers. That's not what we wanna 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 continue to push, and be better at aligning the channel strategy with what the products we have and getting them to customers that are willing to pay for those high-quality brands right away.
Why don't we move a little bit more towards the here and now? I mean, I know on the last quarter, you gave some sort of, you know, broad strokes market outlooks for the different markets. You know, given that we're now, your end market, so given now that, you know, we're, you know,
Third of the year.
Two-thirds of the 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?
Yeah. Why don't you start with that one, Tim?
Yeah. I mean, so, you know, we continue, so I'll take Light vehicle first, which is, you know, for us, generally in North America. I mean, volumes continue to hold up pretty well. We're not seeing, we were, you know, concerned about whether we would see a volume impact 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, you know, a little bit like you take Super Duty. It's a new truck, right? It's work truck related. You know, it's a little bit more insulated, which is helpful. You also think about, right, we had Wrangler, which was coming off a pretty difficult year. That's still holding up really, really well.
And then you think about Bronco. Bronco's been a really great vehicle for Ford and for us. 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. Volumes there are lower than where we were expecting them. It's what we talked about in, you know, 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, you know, Brazil is holding up. That's principally from a CV perspective for us. That's still good. That business continues to improve. You know, we've got new leadership down there, which is really doing a great job. Then you look at Europe, which is primarily the off-highway business.
And again, as I mentioned before, while, you know, a bit weaker, the teams have done a really, really nice job of maintaining the quality of the earnings in that business, as they kinda do. By the way, they're doing two jobs, right? They're working to sell the business and still running the business. I really, really appreciate the effort that that entire team is really putting in. It'd be really easy to blame the process on not keeping their eye on the ball. That really hasn't been the case.
I'd probably say, though, if you just sort of step back, Joe, is the tariff, you know, we said on our call, hey, the situation's manageable. We're not too, too worried about it. I would say since then, the absolute magnitude of the tariffs has gone down.
Mm-hmm.
I would say we feel increasingly positive that we will get substantial recoveries from our customer. I'd say more substantial than we thought 60 days ago. I think the fact that, on the CV side, when we talk to our customers, 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. I think the fact that the OEs have this sort of two-year transitional offset really de-risks the volume uncertainty that I think we all had 60 days ago. I feel like a lot better about it. I would say we're focusing on mitigation now instead of just, like, understanding what the hell the impact is.
Right. Tim, you mentioned, you know, the off-highway in Europe. I thought on the last call you were seeing maybe some hopes or at least some signs of sort of green shoots. Is that, did that not happen?
Yeah. We're still seeing some of them. I mean, I think the, you know, they're still there. They're in it's a pretty diverse end market, right? It's not just ca-construction and even getting into.
Mining, mining.
Mining, mining's definitely a positive for us. You know, 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, you know, especially when you look at the warehouse side, right, that continues to be a growth area for us in that business. Yeah, we're still seeing some of that come through. I think ag's probably the one that, you know, continues to , there's, it's not getting progressively worse, but, you know, we're holding our own around ag, especially in North America.
I think that's a lot driven off of much of the stuff around tariff and, you know, are we going to be able to export grain and farm products to China and how's that going to be affected.
I guess to be balanced, though, I, you know, we are keeping, I'm sure folks are talking about the rare earth issues for we.
It was the next question, so.
Yeah. We are keeping our eye on that. I mean, I, you know, for us, it's not a massive issue, but for the industry, it is. You know, I was pleased to see, you know, yesterday, we got our first export, or our supplier got its first export license approved on our high transmission business that we, I think, we won the PACE award. We were talking about last call. So it has about, you know, less than $10 worth of magnets. And, but without them, we can't make it. That was very positive that we got a little bit of unclogging. Now we still have issues elsewhere, but hopefully, that gets better. I'm sure a lot of your other guys are talking about it.
Yeah. I guess the question on, on sort of rare earths that you brought up, and it sounds like there is a little bit of a direct impact for you in some of your products, but I guess the other would be indirect in that it's.
Absolutely.
It's sort of not a product that Dana's providing, but the vehicle you provide too needs it, and there could be some disruption.
All over the place.
Yeah.
That's always the issue, right? Really, it's, you know, you don't, it doesn't take much to take the, the.
Yeah.
Of a particular program down, and then you end up, you know, well, you weren't the issue. The OEM can't make the vehicle. It doesn't really matter. They're not going to order the part from us, so.
There's just.
I think the positive is, like, we submitted our first application. It got rejected. We need more information. We submitted it again, same thing. Yesterday, we got it approved. At least.
A little bit of looseness. Yeah.
I mean, I'm not going to declare victory, but it's better than I said it is.
Right.
It's a green shoot maybe.
Right.
Maybe a tiny one.
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?
Not yet.
Yeah. Nothing that we would necessarily be able to continue to keep an eye on.
Yeah. Of course. I mean, I think you can.
Our customers are basically going out supplier by supplier, like, how much of this stuff do you have? You know, what's the status? Which inventory do you have? Like, where are you at? Yeah. And when are we going to have a problem? Yeah.
Is it, we know it's in Light vehicles. I'm assuming it's in, it's in across all end markets, or is it more?
Yeah. I mean, there's some, I mean, some level somewhere you just think about, you know, any type of electronic product.
Some of our motor and inverter stuff.
Too. Yeah. Motors and inverters for us directly are probably, you know, one of them, but.
Again, those volumes have come down so much from where they were. I mean, it hurts, but it's not a major, major issue there for us anymore.
Fair enough. I guess the other sort of more, to use the word late breaking 'cause it seems like there's always something more sooner that comes up. Over the weekend, we had some news on steel and aluminum tariffs. Maybe you could just, A, remind us of your buy and the mechanism in place. I think, like, I think in the past, and again, like, this is, I think most of the steel you buy in the U.S. is what you've mentioned in the past. It's more of an indirect impact in that the price of steel may, may fluctuate, but.
Yeah. I think the way to think about it, sir, 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 Thermal products. Also, we use, you know, that for the Battery cooling business. So that's a direct buy. 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.
Most of that's coming through, you know, we're buying steel sort of indirectly through buying the semi-finished product. You know, we have pass-through mechanisms for changes in the commodities. To the extent that the price increases on 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, you know, we are going back to the customer to get those recoveries immediately. We have very, very high confidence given that, you know, a steel tariff generally just raises the price of base steel on the index anyway, so that will be able to be recovered through normalized mechanisms versus having to go and deal with it elsewhere.
Just the size of it, Joe, I mean, for us, we talked about it being about a $20 million, like, when it went to 25%, it's about $20 million roughly. So it's another $20 million. You know, in the past, we would always say, "Hey, we got mechanisms, but there's a lag." There is no lag because we capture the impact in our tariff recoveries, and then the index tends to rise up, and then there's a reset through the normal mechanism. I don't really worry too much about that one, in terms of is it going to have a positive or negative impact on Dana. That's not in my top 10.
Okay. You wanna go run through that top 10?
Yeah.
I guess just maybe, as we sort of start to wrap up a little bit, the one other thing I sort of have been thinking a lot about is just footprint, right, and sort of investment.
Yeah.
I think you guys have a pretty solid U.S. footprint, especially for some of your sort, sort of core products. You know, if you think about the, you know, the goals or sort of intention here to sort of resource more to the U.S., and, you know, because you work with your customers, maybe they want you to, you know, move more to the U.S. for compliance purposes as well, right? Clearly, as you look across a vehicle, there are some lower value parts, let's say, that are going to be difficult to move and some higher value parts that might make more sense. I would say Dana's products tend to fall more in the higher content, higher value portion. Do you agree with that?
Is that and, like, for what you don't do in the U.S., are you having conversations with your customers about what it could look like to move capacity?
I would say that is an excellent question. Until there's a bit more certainty around, like, is this the final rule, I know when we talk to customers, like, "Is this going to survive the next, like, what's it going to be like in four years' time?" It is something that we talk about with our customers as we quote.
Mm-hmm.
Because they're saying, "Hey, like, I'll just give you Super Duty as an example, which we just won, is, 'Hey, we at a target cost, we put in, okay, we can do this and this and this, maybe move more stuff out of, you know, to Mexico or overseas, take advantage of labor arbitrage or whatever.'" Now that we're saying, "Hey, here's the, you know, that quote, here's the tariff adjustments. Now maybe we need to rethink that, that, hey, moving this from the U.S. to Mexico, we thought it was going to save that, but you know what?
Maybe it's better to pay $5 more and keep it here in Warren or Sterling Heights or wherever, but the tariff impact's going to be less. We are doing it like that, but I would say we aren't really having any discussions yet anyway around moving things around. That's just, I mean, I don't know what your other suppliers are saying, but for our stuff, it isn't happening yet.
Yeah. I think the other thing to think about here is, like, 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. I mean, there's, you know, it's some of the componentry really around them, but, you know, it's hard to ship a, you know, axles a long distance. They're very heavy. They don't ship well over long distances. You know, it's like, we're already there. It's really some of the parts of the bill of material on some of the components, you know, that we're going back. But to Bruce's point, I mean, what's it going to look like in four years?
You know, I always make the comment, we do not invest capital for four years. A lot of times, especially in the core components machining, we are investing capital for 40 years. Like.
Right.
Like, which is part of the problem with what's going on, right? You know, we're trying to make—we're not making decisions for the next, you know, for the next term. We're making it for the next.
Yeah.
You know, next four decades.
Yeah. When you think about our exposure, Joe, for Dana, it is really a question of where we've sourced things from. It's like a big one would be castings and forgings from India. There is no other place to get them. It's not like we can say, "Oh, let's start buying those." Maybe a little bit, but we can't say, like, we buy $200 million of castings. Let's go move it all to a foundry or whatever in Ohio. There is no empty foundry, right?
Right.
We have, in aggregate, about $80 million of stuff that we buy from China, and we're trying to resource that, for sure. Some of that would be small wire harnesses or electronic parts that, you know, it's not a lot of money, but when the tariff was 145%.
It comes a lot of money.
It's $100 million, right? And then it, it on steel and aluminum, it tends to be, "Hey, it's grades that we can't get here.
Right.
So we do not have a ton of opportunity around resourcing, I would say.
Okay.
Some sub-assembly stuff that we do in Mexico, maybe we could move up here, but it's not the lion's share of it.
That's more, I guess what you call, like, you know, brownfield or you have excess capacity as opposed to.
Yeah.
A new facility.
Correct.
That's a good way to think about it. Okay.
Yeah. And, you know, the big assumption out there is, is our, our, you know, we got USMCA being renegotiated in 2026, right? So is this exemption around USMCA compliant going to stick or not? And if, you know, we'll have to see how those negotiations go 'cause that probably will drive a lot more of that activity that you're suspecting.
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 with India and some of China, it's like, some of the stuff we get from these countries, are we really ever going to do it again in the United States? And so.
Yeah.
There might need to be some sort of consideration from a policy perspective.
Yeah. I think that's right.
Okay. Great. I think that brings us to time. Bruce, Tim, thanks so much for joining us.
Thank you.
Really appreciate it.
Thank you.
Today.