Hi, everyone. It's 11:30, so we'll make a start. I'm Vanessa Jeffries from Jefferies. It is just a coincidence. I work in the global autos team, and really happy to have Chris May and David Lim here with me from Dauch. Maybe just to start, you've had a really big year, obviously, with Dowlais couple of guidance upgrades. If you could just give some comments on how you think the year has progressed.
Yeah. No, maybe I'll give a few opening comments. I think we'll address that perfectly. First of all, good morning to everybody. Thank you, Vanessa, for hosting us here today, and thank you to Jefferies for having this event. It's been a great, productive day so far, and I look forward to some continued dialogue here.
Before we begin our comments, though, I do refer everybody to our forward-looking statements and disclosures. You can find those at www.dauch.com. Getting used to saying that. Look, in terms of some maybe opening remarks, the highlight of the year for us, and you mentioned that a little bit, Vanessa, is our Dowlais acquisition. Then, of course, the integration that we've been on this journey really for the last six or so months. We're quite pleased with our progress.
Our objective was by the end of the first year to achieve a run rate of $100 million of synergies. At our last earnings call, we provided an update, and we're pacing towards $70 million at this point in time. So we're making great progress. We've got the rest of the year to go to continue to deliver and meet our objectives. We've been highly focused in the areas of SG&A and product engineering, and those results are translating into the run rate numbers that I shared with you. Our ultimate goal, though, is to get to $300 million of run rate objective by the end of year three. Again, with $180 million at the end of year two, and then to the full rate of the $300 million by the end of year three.
As we stated on our earnings call, again, good progress on the SG&A, good progress on the product engineering. We'll continue to drive in those areas for the balance of this year and into next year. Starting to work on some of the purchasing elements, both the indirect and the direct side of our purchasing. The indirect, we're making some good progress there back half of the year and into next year.
The direct, as our CEO said on the call, given the macro environment of some of the pressures there, it's going to take us into 2027 and into 2028 to realize some of those savings. But again, pacing towards our overall objectives. So certainly excited about that, and we'll continue to drive performance in that area. As it relates to overall 2026, the first half of the year, we were quite pleased with our performance.
The macro environment was solid. Our volumes were steady and consistent, and that's really where you see our company shine in terms of the ability to deliver performance. You saw that in the first quarter, and you also saw that inside of the second quarter. As we transition now into the second half of the year, we will start to go through some key changeovers and new platforms with our customers, in particular with the full-size light-duty truck with General Motors, who are starting to experience downtime here in September, early part of October, as planned. That'll impact us here in the third quarter, as it relates to a little bit of revenue and the contribution margin associated with that. But it's a beautiful vehicle. Hope to sell very well for that as we enter into 2027.
I would also say inside of the quarter for third quarter, we continue to see some, I would say, elevated launch costs associated with that platform, as well as some other launch activity have been going on, in particular driven by some challenged suppliers. As some of that stressed macro environment is pushing some pressure on some weaker suppliers, we're encountering a little bit of some challenges there.
Working through that through the course of the quarter. Again, driven by some of those macro events of oil and pressures and fuel surcharges and things of the like. But that's where we sit here in terms of the quarter. Overall volumes have been steady. We have seen a little bit of softness in some other heavy-duty platforms inside the quarter, but big picture-wise, you see the releases by S&P Global. The market is overall relatively flat and steady. With that, maybe that's a nice introduction for Dowlais integration as well as where we stand for 2026.
Definitely. You've gone a little bit into the second half of 2026. We know GM changeover. You probably have a little bit more seasonality than investors are used to with more European exposure. We like to work less in August, and China's getting tougher. No one knows how it's going to go. Maybe if you could just talk about some of the offsets to that in the second half.
Yeah. In terms of some of the seasonality, you are exactly right. Inside of North America, seasonality generally is a little bit in the front end of July as you go through some model changeovers. Of course, really globally at U.S. and Europe in the deep part of December is seasonal. As we have increased our European exposure this year, we have experienced a little bit more of that August dynamic as it relates to seasonality.
So we have absolutely experienced that, so we have been planning for that. We generally plan our schedules and staffing around that, as well as our cost structures around that. But in terms of offsets, our focus has really been on our synergy deliveries and our integration of the two companies outside of the seasonality of the business, which really do not impact, per se, those elements.
And maybe if we could just go into the synergies a bit. It is obviously always a focus topic for investors. There is a lot that is within your control, SG&A operations. There is a very heavy corporate cost structure at Dowlais. Then there is some, maybe takes a little bit more external work, like the purchasing. So maybe you could think about how you think about timing of those over the next three years and any surprises you have seen since the acquisition.
Sure. Well, if we take our $300 million of synergies and sort of break them down into the three buckets, it is how we think about it, that is how we manage them inside the company. 30% of that is SG&A, 50% of that is really in the purchasing area, and the last 20% is in the operational side. So if you think about the, I would say, main elements in the SG&A section, it would be things such as duplicate public company costs, duplicate departments. From an SG&A perspective, the ability to optimize your SG&A footprint as well as optimize our engineering spend. So all well within our control. These are areas where we have gotten at right out of the chute. That is why we have seen the great progress that we have so far this year.
We still have more work to do in that area to drive performance, so we are excited to continue to work through that piece. The second element, the largest bulk would be the purchasing piece of our savings or 50% of our goal. I would think about that from really three perspectives. You have a direct purchasing spend that we have, so think of where we go out and buy parts that end up in our parts. We have an indirect spend, so think of service contracts, or maybe we are buying gloves for the factory workers to use inside of the production methods, things of that type of nature.
The third piece is vertical integration, where we have an opportunity, given our strong Metal Forming footprint, both on powdered metal as well as our forging, to insource components that we buy on the outside and really bring in that margin capture associated with that. Each one of these three take a different timeline and have different types of end parties you have to deal with.
On the indirect side, for example, is something where we've started to work our way through. You're negotiating with service providers, et cetera. You're combining services on the outside to optimize spend. That's going quite well, and we see that continuing tracking on the timeframe that we thought. I made some comments as it relates to the direct side in some of my opening remarks.
That's where you have to negotiate with a counterparty, but also, at times, our customers involved as it relates to approval to resource or move product around. We knew and planned for that, but it's just a timing perspective as that stands. The last piece is vertical integration, and quite frankly, it's one of the things we're most excited about because we leverage really the skills that we have in the company. We'll insource powder that we buy, raw powder, we now can insource to ourself, as well as raw forgings we can insource to ourself. We're well underway of that process. Again, some of these just simply take time. You have to validate and move suppliers or bring it in-house. Again, all in line with what we expected.
The last bucket is the operational piece, which is 20% of our savings, and I would think about that really on two elements. You have pure operational efficiency where we are driving a common operating system across all our plants, legacy Dowlais plants, legacy American Axle plants, together as one Dauch operating system. Well underway. We've been into all the facilities, laying the planking, picking the best of the best.
We're starting to see some progress on that front as well. Again, that'll take time over the next couple of years as you integrate and train and bring everybody up to speed and all on the same operating system. The last piece of the operations would be some restructuring where you are combining some efficiencies to bring open capacity or commonize and maximize capacity that we have for certain products.
Again, those planning stages are underway, and by its nature, our view was that was always the longest tail in the pipeline. Again, the planning has already begun for that. Hopefully, that gives a nice overview. It was rather lengthy, but hopefully, it gives you a nice overview where we stand on our synergy roadmap.
You went a little into the plant piece, and you've obviously had the chance to visit all the plants this year. Have there been any surprises, and what would you say are the key differences between Dowlais and American Axle plants?
Yeah. I would say there's been no significant negative surprises. I think the mindset is when we went into this acquisition was we have two companies that have a great legacy of engineering and manufacturing. We bring them together. We pick the best of the best across these operating systems and put that together across our entire fleet of factories. I would say we're marching towards that plan. We're excited about the opportunities to improve on all our facilities and drive some of those synergy savings. But I would say no significant negative issues have arose since the acquisition started.
One topic before the acquisition close is maybe the potential cultural fit. Any issues you've seen there, or has that been quite smooth?
For the most part, it's been relatively smooth. Again, you start from the core foundations of the companies, engineering and manufacturing as a tier one supplier. So the starting page, if you will, is similar. Similar customers, similar geographies. In terms of cultural issues that you deal with a little bit maybe on the fringe, work arrangements on the office staff, things like that, we've been kind of working through. I think every company's dealing with that in some form or fashion, whether they're going through an integration or not. But that's probably the number one, I would say, cultural issue that we continue to work our way through. No concerns, and that'll just work its way through our process.
At your recent update, you talked through your strong quoting activity. I know it's hard to give a historical view on that given that you've just acquired Dowlais, but maybe how does that figure compare to what you've seen in the past, and what's the mix of that like compared to what you've seen?
Yeah. No, we're super excited about that. That figure is, we said we had over $2 billion of opportunities that we're actively quoting on and looking at. I just sort of dimensionalize what that is. It's almost double for what we talked about as legacy American Axle in the past couple of years. Of course, doubling the size of the company, increasing our product portfolio with powdered metal and side shafts.
You could now start to see that flow through in terms of quotation opportunities for us with different customers, which is super exciting for us as well. The mix of this, I would say it basically touches all our products that we sell, whether it's legacy Dowlais products or legacy American Axle products, but the combined Dauch Corporation touches them all.
We're seeing a reigniting, if you will, of interest in new programs as it relates to ICE and hybrid, new programs as it relates to some in electrification. So we thought that this would shift from electrification to hybridization and ICE platforms, especially in North America, and we're seeing that play out right in front of us with some of these opportunities. But geography-wise, mirrors almost the exact geography mix of the company's revenues, about 60% in North America, 25% in Europe, 15% rest of world. So it's lining up quite nice. We're super excited to get at this, by the way. This is one of our growth drivers.
I guess it's been harder to be explicit on any kind of revenue synergies. So maybe if you could go through initial customer reactions to the merger, if you've seen any opportunities there.
Yeah, initial customer feedback has been positive. Look, they are always excited when they are able to work with strong suppliers such as Dauch Corporation. This continues to strengthen us as well as provide more product content, more global reach to some of the suppliers that require that, but also expanded our respective regional reaches, which will help with some of the macro trends we are seeing from a new tariff regime, if you will, in the current moment.
That has worked very well to our advantage, plus bringing a wider set of products to our customers, to new customers that we really did not have exposure to previously. Think of some of the Japanese OEMs, some of the Chinese OEMs, we are gaining more insight into, especially through our joint venture with SDS. That is playing out really well. Again, these take time to build those relationships, start to get in the quotation process, start to gain awards, but we are really pleased with where we sit here today.
If I may add to that, basically, it is a global organization, so as these OEMs look at global platforms, we could support them around the globe, 24 hours, whether it be manufacturing or engineering, and that is what they really need and want.
You went into the powertrain mix of the order book a little bit and how that has changed. I think it is fair to say a few years ago, there was buckets of suppliers where people thought the products will be irrelevant, and now that sentiment is completely changed on that. How do you manage your portfolio now where you have more geographic diversification and Europe is seeing really strong EV growth and the U.S. is obviously not?
Yeah, that EV mix is becoming more and more regional oriented, at least in the current mindset. But, if you think about our playbook has been to be ultimately agnostic to propulsion systems in what we design and develop. That was also part of our rationale and thought process with the acquisition of Dowlais is they brought in a significant product that we didn't make that would be side shafts that are 100% agnostic to the type of architecture of the vehicles. And actually, they go up in content and size as you transition to electrification. So, being agnostic to the product in terms of whether it's ICE, hybrid, or EV, starts with really the first recipe from that perspective.
But we have tried to be, and we continue to do this, and we saw this also in Legacy Dowlais, was to be measured in our investments, target areas that we think leverage our expertise. For example, we are now moving in China in particular, growing our electrified e-Beam business. So this is our feature product on the Legacy American Axle side was the beam axle in North America truck.
You now have an electrified beam axle in China that's starting to launch with a couple of customers over there. Again, leveraging that expertise, measured investments, putting a balance of spend from a R&D perspective to support technology that's required by the customers, but also leveraging our strength versus just going all in. We didn't do that at the start several years ago, and I think we've benefited from that.
We've won great awards such as the Scout platform, which is leveraging that advanced technology of electrification, again, with the beam architecture of our axles. But also a lot of the EV wins that we've seen Dowlais win through side shafts. But also on the component side, both legacy companies, strong component footprint to supply into drive units and other architecture elements of an EV vehicle. Again, product agnostic, measured and disciplined. That's sort of how we've been approaching it, and I think it's playing out as well.
And maybe if we just go a little bit regionally, maybe if we start with China, because it's obviously a big topic, and I know you don't have a crystal ball on how subsidies and customer demand is going to evolve in the next year, but you've got two strong businesses there now. How have you seen the year play out, and what are your expectations for the rest of it?
Yeah. So maybe just to level set how we play in the China market today, as Dauch Corporation, we have a wholly owned subsidiary, that we supply all-wheel drive systems as well as the electrified beam axle that I just mentioned. We have been transitioning that business from many, many years ago when it was started from a, I would say, basically exclusively Western OEMs to now we have over half of our business now is with Chinese OEMs, and Chery would be a future customer of that facility. And growing the electrified beam business with multiple different customers. As we transitioned and brought in Dowlais, one of the jewels our view of that company and that asset was their joint venture with HASCO called SDS in China. It is about $1.5 billion of revenues.
It serves the China market exclusively, selling all of the products essentially that Legacy Dowlais provided. It has also been on a journey to transition to over 50% of their customer base is with Chinese OEMs and growing. They also play in the electrified axle space, so growing on all-wheel drive or two-wheel drive vehicles in that segment for EVs is critical.
That is where we are starting to see our, I will call, push into that segment through that joint venture. So I think we are positioned really well, in terms of how we play in the market from a nice risk/reward balance perspective. We are growing with the Chinese OEMs and obviously supporting their products domestically, but any they would export, we would be on that content as well to the extent they are exporting the vehicles we supply.
And I guess on that topic, Chinese OEM market share gains in Europe is obviously a very big topic. How does that impact your business? Are you seeing any kind of fundamental changes in the market, whether it is pricing among your customers, competition?
Yeah, look, it is clearly a big dynamic going on in the European market and elsewhere, by the way, around the world. The Chinese OEMs are developing outstanding vehicles, competitive price points, and starting to either export them out of China or you are starting to see them build regionally now or start to install the capability to build regionally some of the products that they will supply. So again, it plays very well to what I would say is our number one element is our footprint to supply to them in the areas and regions that they look to build factories. And also supply them out of China through either our wholly owned and our joint venture with SDS.
But it all starts with building that relationship with the end customer, which we believe would start in China, and that has been a key focus of us to work our way into those supply chains. We have competitive products, competitive pricing, technology, all things that they need and require, and we will continue to work and invest to grow that book of business because it is clearly gaining share around the globe.
How do you think about that European business over the next couple of years and how to manage them?
Well, look, we are certainly understanding each platform and how it is impacted. Some they are consolidating, so we may not be impacted at all by some of these announcements. But obviously working closely with our customer, understanding their vision for end products. But how do we support them best? We support them best by being cost competitive for the end vehicles they want to provide, as well as the technology they need for those vehicles. If we bring the technology and we bring the cost competitiveness, then we will win that business or maintain it, whichever it will be.
Then just moving to the U.S., I guess how do you think about your preparedness for any USMCA changes? How are you set in terms of tariffs?
Yeah, so I would say in terms of maybe going in reverse, just tariffs holistically. Our approach as a company has been to build and buy in the region that we produce and ultimately ship to our end customer. Legacy Dowlais had a very similar type of an approach. As best we could, as best they could, and combined the best we can, we are positioning ourself to try to minimize any tariff impact that we would have just naturally inside of our business.
USMCA, though, is a very interesting arrangement. It is, as you know, Mexico, U.S. and Canada, and has really been built with its predecessor, NAFTA, since I think went in 1994. So 30+ years, the North American auto industry has built itself around this trade agreement. It is very important to the industry, this trade agreement, to support production in Mexico, U.S. and Canada.
We have built our factories around that. Our customers have built their factories around that. So paying very close attention to the end rules and regulations are critical to the success of not only us, but also the industry. How do we think about it? We want to be flexible in terms of what we need. So we have manufacturing in Mexico, we have manufacturing inside the U.S.
With the acquisition of Dowlais, we have increased our footprint inside the U.S., which we think will be helpful as part of all these transitions and rules change. At the end of the day, our customer sources, and they also source the end location for which we build our product. So working closely with our customers to deal with whatever the rules change may take place over the future for this is what we will do. We will continue to monitor, but flexibility and good communication is key.
I guess if we look forward to 2027, one of the key topics to consider is that inflation is probably not moving lower. How does your customer compensation structure work, if you could just remind us of that?
Yeah. As it relates to 2027, you are correct. Inflation does not appear to be going anywhere anytime soon at the current moment, but we will see how it plays out for next year. By and large, our contracts with our customers generally are fixed pricing with the exception of commodity type inputs that change on the open market. What do I mean by that? For example, steel that we buy, input into that steel is a variety of different commodities.
As those commodities move each day and are procured by the supply base, they pass their cost to us or reduce their cost, and we pass that on to our customer contractually, either through monthly or quarterly type arrangements. The base price of these items that we buy, base price of steel, base price of aluminum, those are ours to manage.
That is where you could see some inflation pressure. We would need to use productivity as our first step to offset some of that. If it became excessive, obviously we would have some dialogue with our customers. You saw us do that back, as well as many in the industry do that back in, I think it was 2022 timeframe, when you had some very rampant inflation. But it is clearly a pressure point inside the industry. We would need to work with productivity as well with our customers. But it is a real item that we have to deal with.
I might just stop for a second, see if anyone has any questions. Okay. Maybe if we could move on to, as you are integrating Dowlais, some of your key learnings from your past acquisitions.
Yeah, I think one of the key items that we learned is probably our largest acquisition part of Dowlais was the acquisition of MPG back in the 2017 timeframe. One of the key learnings from that was just prior to our acquisition of them, they won several, I would say, large awards, ones we were very interested in because they were products our view would run for 20 years.
These are the big high-speed transmissions. They are still running today, so they are sort of playing out as we thought they would. These are not products that get changed very often. But they were sizable launches, and maybe we underestimated the size of some of those launches as we stepped into that, assuming the program management for those system was in place.
As we got into some of these launches, I think they became a little more challenged over the course of maybe the following year. If you go back to 2018 timeframe, you look that we had some challenges with some of these big launches. The lesson learned from that was prior to close, early on, after close, is really dive deep into the readiness state of the launches of all the big programs, all the key products that are coming in the company that we would acquire, obviously Dowlais in this case. To understand them, make sure we are ready, get on them, fold them right into our core program management system right away, and stay on top of these early so it does not become an issue going forward. That is exactly what we have done.
I think one key positive we have seen with the Dowlais acquisition is you have done so well with the GKN Powder Metallurgy this year, and that was a business in the past that was always kind of seen as a little bit of a problem child, even though actually was higher margin, cash generative.
Because there was this perception that it was too ICE exposed, et cetera. Maybe if you could just talk about what you have done there with that business to achieve the success that you have.
Yeah, we have integrated as part of our segment with our steel forging side, so combined, this is our Metal Forming group. But continue to have operational improvements here. Of course, the dynamic on the powder piece of the powdered metal, so the raw powder, has played a little bit to our favor. One of the key competitors in that space has gone out of business, so we picked up some nice new business there.
Also allowed us to work on our vertical integration even more as part of our synergy plan. But focused on operational execution, a stable environment, they got great IT systems, things of this nature, and just letting them run and letting them perform with the appropriate support from the rest of the company, I think, has transitioned to good performance for that business unit.
I think the other piece there is that we'd always heard about these new programs, magnets, and other opportunities they were exploring. Maybe if you could just give your thoughts on that.
Yeah. It's a very interesting business. There's a lot of, I would say, potential growth vectors inside of the PM business from a product perspective. Additive materials, magnets, some very much in the experimental phase, some starting to see interest on lightweighting certain components on additive type applications. Think 3D printing, that type of stuff, all plays into the PM products that we supply.
These are, I would say, investments legacy Dowlais has made to start to venture into some of these areas. Some of these we think have real opportunity. Some we probably would conclude maybe they don't. But it is nice to see some growth vectors inside of our PM business that maybe don't even relate to auto, which is really where you see some of these opportunities.
Just more generally on that, we have seen, obviously, a lot of emergence of non-auto stories among tier one suppliers, given the difficulty of the industry. How do you think about that? I know you've already got enough industrial exposure, but are there any new areas you'd like to move into, or are you focused on integration right now?
Well, clearly, first and foremost, we're focused on integration, right? Through this acquisition was to become the premier Driveline tier one automotive supplier in the world, and that's exactly what we're focused on from an integration perspective. But if you think of the core competencies of the company, engineering, machining, assembly, global program management, forging, powdered metal, et cetera, these are characteristics and elements that many industries need as part of their supply chains or products that can translate very well to many different industries.
We always look for different opportunities as it relates to, especially on the organic growth side. As you know, about 20% of the GKN Powder Metallurgy historically, before the combined companies, was in the industrial type of products, to where again, that skill set was needed in that space, those products are needed in that space. To the extent we can see that type of growth, we would explore that. But those characteristics of their company will continue on that will play well to many different industries.
It would be interesting to hear in that context, your R&D to sales is a lot lower than many of your peers, who that is their focus area at the moment in getting costs down. How do you think about that R&D over coming years?
Yeah. I would offer two perspectives. There is a piece of our business, so think of the Metal Forming segment, which really does not consume a lot of R&D, right? The R&D is very much overweighted more towards the Driveline segment of our business. So holistically, when you look at our company, it is disproportionate towards that.
So when you add $3 billion of revenue on the Metal Forming side, round number, it sort of dilutes that ratio, if you will. That would be my first point. Go back to some of the comments when we were talking about the EV opportunities, and our thought was to be measured. Measured on what we invest in. Focus on the key areas of our strength. Do not go all in and spend gobs and gobs of resources over the last several years to grow into what was a pretty expansive EV environment.
I think that has served us well, so we did not have to peel all that stuff back. So I think it puts us in a good footing here today. There is still room to optimize our engineering spend. You have seen us do it over the last couple of years, even with the change in EV, because we were spending some on that. We will continue to look to optimize the spend going forward, and it is really part of our synergy plan.
The conversation I always have always is about free cash flow inflection over the next few years, especially after the integration, the synergy costs kind of wind up. I know you probably don't want to give any guidance on 2027 and forward, but maybe if you could help us think about those moving pieces a little bit.
Yeah, we're not providing 2027 guidance here today, but some of the moving pieces are very consistent with what we've been talking about here over the past six months. So one of the key, aside from the company's base performance, but our synergy realization and the ability to convert that to cash, this is EBITDA synergy, so it should convert to cash.
That's sort of the first piece of an uplift, if you will, for cash flow performance. Continuing to keep our CapEx at a spend of 5% of sales or less is critical to that. So having, again, a moderate and measured CapEx spend. Would that spike up? Where would it spike up? That would spike up in scenarios where you have significant new programs that are launching in a condensed period of time.
Quite frankly, it's probably a trade we would take if we had to spend it for that, but from an organic growth perspective. So it's the synergy piece, it's the keeping the CapEx at 5% or less, then also I would say on the, we use the term adjusted free cash flow, but the other elements that we spent cash on here this year, like our acquisition cost to close the transaction, will go away.
Reducing our core restructuring costs of both legacy companies, reducing that spend is critical to that. We'll have some cash spend to implement our synergies. Our guide there has been we'll invest a dollar to realize a dollar of synergies, and that will continue between now and really the conclusion of that through the end of 2028. So that's how I think of some of the big moving pieces for cash flow.
So it'd be great if you could let us know your thoughts on de-leveraging versus eventually shareholder returns versus maybe any other M&A that you want to do.
Yeah, no, we think this is another great part of our story. As you know, we carry a little bit of leverage. We closed the second quarter at 2.6 x. It's artificially a little bit low because you have some trailing LTM benefits from an EBITDA perspective on some good commercial settlements in the back half of 2025 by Dowlais. That said, we think we're pacing really well from a leverage perspective. Our first key milestone that we want to get to is 2.5 x. What does that do? Between here and 2.5 x our, I would say, almost exclusive use of our cash flow generation will be to pay down our outstanding debt. We paid down $128 million, or $125 million of our 2028 notes in the second quarter.
We did the exact same amount and took out the remainder of our 2028 notes here in the third quarter. So we're deploying that cash to pay down our debt. Once we cross that 2.5 x, we'll bring a little more balance to that capital allocation. We would expect to continue to pay down debt, but open to some more shareholder-friendly type use of that capital. Then, of course, we would love to be 2 x or less into the future, want to continue to strengthen the balance sheet, but it'll be more of a balanced capital allocation versus exclusively debt pay down.
I guess as you've done this big merger, how do you think about industry consolidation going forward?
Well, the industry's been consolidating over the last 10 years. I know if you, I think our CEO gets asked this question very frequently on the earnings call. His view, our view is the industry's going to continue to consolidate over time, especially as propulsion systems change, competition changes. The environment is squeezing out small suppliers that get troubled. We talked a little bit about that in my opening remarks. The OEMs are going to want bigger, stronger Tier 1 suppliers, and they'll consolidate over time, and potentially at the OEM level as well.
Conversely to that, it would be interesting to hear your thoughts on any potential divestments you want in the portfolio. You have owned Dowlais for a while now. Is there a lot of portfolio overlap or anything that does not really work?
Yeah, I would say first, there is not really a lot of portfolio overlap at all. A little bit on maybe some of our components and all-wheel drive systems, but at the macro level, not a lot of overlap first and foremost. Both companies, over the last year or two, have been focused on trimming a little bit of their portfolio. We exited about $100 million worth of value last year. Dowlais did something very similar. I would call those sort of as small, good opportunities to monetize some assets inside the business that we did not view as part of our product portfolio longer term. We will continue to do those type of evaluations, and where there is good and small action items to take, we would certainly do so.
I think we are just at time. If you want to maybe give us any key messages you want to get across before your Capital Markets Day.
Yeah, look, I think my opening remarks said most of where our attention is today. It is on the integration of Dowlais. We are really excited and pleased with where we are at at this point in time. It is a journey, right? We have three years to get our synergies done, and we are focused on delivering that $300 million. We talked a little bit about our 2026 performance, but we are excited for this Capital Markets Day to sort of share with our broader community who we are and get a little deeper insight to how we think and how we are going forward. So thank you today for all those questions, and I appreciate everybody's time.
We'll look forward to hearing from you in November. Thank you very much.