Okay, great. Thank you all for joining us. It's my distinct pleasure to be hosting Lear Corporation for this session. My name is Mark Delaney. I lead coverage of the U.S. autos and industrial tech sector. With us today from Lear, we have Jason Cardew, SVP and CFO, Frank Orsini, EVP and President of Lear Seating, and Carl Esposito, SVP and President of Lear E-Systems. Really appreciate you all coming over again this year.
Yeah, thanks, Mark.
Yeah, I thought to kick off, we could start with some questions around the overall industry, and it's been a very volatile production environment, mixed macroeconomic trends. Of course, we had, you know, the strike as well, but despite all of that, production has risen in 2023. Now that OEMs have reached tentative agreements with the unions, do you have any update on the fourth quarter?
Yeah. So, we still have three weeks to go, but the fourth quarter is shaping up about how we expected, and it's really—it's turned out to be a fantastic year for the company. Revenue growth of 11%, earnings, core operating earnings are up $235 million, or 27%. Earnings per share have grown almost 35%. So it's really been a fantastic year, and it looks to be a solid finish to the year. The strike did end a little bit earlier than expected, so revenue likely comes in a bit above our initial guidance for the fourth quarter and the full year. Both businesses are really performing well.
And so we're very happy to see that, obviously, and I think more importantly, too, is there's increasing stability in the production schedules. You know, this year has been better than last year. We expect that to continue improving as we look out to next year. Overall, you know, industry production, I think, is gonna end up 87-87.5 million units for this year. As we look out to next year, probably you know, expecting a flat market overall, around 87-88 million units globally. But we do expect North America to continue improving. We see North America up probably 2%, Europe down a little bit, and China flat, as we look out to next year.
Okay. Yeah, a few follow-ups on some of those points. So, a little bit better revenue, perhaps, in the fourth quarter. Should we think about some flow-through on EBIT, as well? Or is there any cost offsets that you're seeing so far?
Yeah, it should flow through, you know, in line with our, at least our segment margins in both business segments.
And then, very helpful comments around some, I think, probably early views on 2024 production by region. I mean, how much visibility do you have at this point from customers? I mean, are you getting some feedback to drive those opinions, or is it more observing macroeconomic trends that's informing those views by region that you talked about?
It's, yeah, really a combination of both, Mark, and we do have pretty good visibility, certainly now into the first quarter with customer releases, and we have customer schedules, and they're planning volumes for next year. You know, we were in, Coventry, earlier this week, visiting our team here, and the Jaguar Land Rover business, for example, has been just fantastic for us this year. We saw a really nice volume improvement on the Range Rover, Range Rover Sport, and the Defender. That really helps both business segments. They've got an order bank, that extends, you know, throughout all of next year and maybe beyond on some of the platforms, so we see continued strength on select platforms.
We have some pretty good insight, both from the customers and from kind of the macro indicators overall, that would suggest that, you know, it's reasonable to expect at least flat production volumes year-over-year.
Okay. No, that, that's very helpful. Maybe Frank, I could go to you next and have some questions around the seating segment. Lear continues to lead the automotive seating industry in terms of operating margins and has delivered consistent returns despite the volatile industry conditions. What differentiates Lear from competition and has allowed the company to achieve these results?
Yeah, great, Mark. Well, listen, thanks for having us. We're really excited to be here today. I think there's a number of things that differentiates our seating business in the industry. First and foremost, we have an amazing team. We really do. I believe we have the best leadership team in the industry in seating, and they do a great job every single day. One of the things that we are known for in the industry is operational excellence. And, you know, operational excellence, to us, is all about running the plants very efficiently, launching our products very well, making sure that our quality is perfect. And I think, you know, from that standpoint, it's absolutely core to Lear Corporation in general, but from our seating business perspective, it's really important to get that right every day.
In that area, we see opportunity to unlock incremental value by investing in Industry 4.0. And I think we've seen a little bit of that, Mark. We've bought a few companies over the last several years. Many of those companies were focused on adding capabilities and talent in certain areas, like vision systems, automation, robotics, and now we're working together, Carl and I, on data platforms-
To make sure we're managing the business very efficiently. The other thing that really differentiates Lear is vertical integration. You know, vertical integration, we are the most vertically integrated seat company in the world. This has been a very deliberate strategy for Lear over the last 15 years. You know, we have worked very hard to make sure that we've added capabilities in areas that are growth segments in content for seating, but also where it's priceable content. So it's a win-win for both us and our customers. So without question, vertical integration in areas like leather and Thermal Comfort Systems, that we'll get to in a minute, have really differentiated our company and our products. The other thing that we're very proud of at Lear is our innovation, and this applies to both divisions as well.
You know, we are an innovation powerhouse, and, you know, when I think about what we've accomplished over the last several years, we've won 4 PACE Awards. Right now, we're up for a fifth with our ReNewKnit product, which is a 100% recyclable fabric product that we're launching next year in the industry. So, you know, we're very excited about what we've done, both on the product side and the process from a manufacturing innovation standpoint. Last thing that I think really stands out with Lear Corporation is our customer relationships. You know, we pride ourselves on our customer relationships. We work hard to foster the best relationship in the world, and what comes with that is early engagement and early involvement with our customers. It supports our technology vision.
It supports growth because, you know, we've demonstrated we've won a lot of conquest business over the last several years. So I think those relationships are paramount. And, you know, that combination of operational excellence, vertical integration, innovation, great relationships, that's what really separates us.
You mentioned thermal comfort. Maybe you can tell us a bit more about what Lear offers in thermal comfort and what's unique about that product portfolio.
Yeah, so thermal comfort is a very, very exciting part of our business right now, Mark, and I'll tell you why. We, we really believe we are differentiating our, our company through this, through this strategy that we have around thermal comfort. So maybe let me just start. I'll, I'll just talk a little bit about what thermal comfort is, the product portfolio, and then I'll explain why, why we believe we're reshaping the industry here. From a product portfolio standpoint, when I, when I speak about thermal comfort, I'm referring to different types of technologies, thermal being heat and cool and venting, and on the comfort side, it's lumbar and massage. And, you know, we purchased two companies recently, Kongsberg and IGB, excellent companies. They've added scale and capabilities to our business, and the product portfolio is extremely strong.
You know, the market itself is very attractive. It's a $2.75 billion market right now. It's growing to $3.5 billion by 2027. So we're, we're really excited about being there. But really, this, this all started about a decade ago. You know, Ray Scott, who's our CEO, has had a, a very clear vision for where we wanted to go with our, our seating business, and that was make seats more intelligent through software, make it more intuitive, and thermal comfort was always a focus of ours. We were spending a lot of time in engineering on it to, to come up with a value proposition for the market. So what we've done is we've, we've taken all of those technologies that I mentioned, heat, cool, vent, lumbar, and massage, and we've combined them into a module.
And what typically happens is, our customers direct source a lot of those components, and they just get layered into the seat. We saw an opportunity to reimagine and reengineer the entire system into a module, and in doing so, we took the module, and we attached that into our trim cover business as well. So it really creates a unique platform for Lear compared to anything else that's in the market. But the outcome of that module and the combination of all those technologies was a reduction in complexity of the part numbers that are used in the system, 50% reduction in complexity, 20% reduction in mass. We've improved time to sensation, the performance is better by putting that module into the trim, and we've also improved the cost structure of the product offering as well.
So it's a very attractive value proposition for our customers. The other thing that we've done is we've built it all on a platform of sustainable technology. So part of our modular strategy and part of our product offering is FlexAir. FlexAir is 100% recyclable product. It's a low-density polyethylene product that is 100% recyclable, it's a complete substitution for polyurethane foam, and it's 50% less in CO2 emissions. So real game changes. And ReNewKnit is also part of that, the PACE Award that we're up for. So, you know, the technology's great, and the other thing is, by going modular, we're pushing some of the labor content out of the just-in-time manufacturing facilities, and we're pushing them into the lower-cost manufacturing regions, where trim is made and things of that nature.
So it presents a value proposition there as well, in terms of labor reduction and dependency. So we're really excited about how the product itself is positioning itself for us. The thing that I'd like the audience to understand is, it's a very unique situation with Lear, though. You know, no other seat company has these capabilities in-house. You know, as I mentioned, it was a very deliberate strategy to get into this for quite some time now, and we looked at and tried a partnership route, but for Lear, it was important to own and maintain the revenue streams, the profit pools, if you will, and, you know, just making sure that the patents were gonna be owned by Lear.
And, you know, when you're in a partnership, you tend to debate over who's gonna own all of that, and in our case, there's no debate. Lear's, Lear's in, in a great position there. And we have laid a very, a very strong moat around our IP. We have over 250 patents of the module itself, FlexAir, how the module attaches into the trim cover. So I think we've done a really good job of protecting, this innovation in the industry. And, you know, our most recent discussions with our customers have been centered around: How do we take this innovation and, and expand it? And for Lear, we're interested in expanding our component sales. So, you know, we're working with customers to even take our module and sell it to other tier ones in seating as directed content through the OEMs.
And naturally, it's a win-win. They'll see a JIT labor savings from the tier ones, we'll benefit from the modular sales, and it's really exciting time for us in that regard.
When you think about the capabilities that you bring and the value proposition, maybe help us understand, for Lear, how big thermal comfort could be as a business and what it may mean in terms of your JIT market share, which I think it's 25% today. You have a target to get to 29% by 2027. Then, how big of a driver could the comfort, thermal comfort part of that be?
Yeah, it's a, it's a great question, Mark. So- ... Just to capture those stats, the 25% just-in-time market share growth up to 29% by 2027 is, that's our target. That's where we're heading right now. Just to put that in perspective, though, with the component sales and TCS taking off, we think we can actually capture 32% of the overall seating market, and that's where the component sales will factor in. But I would tell you is this: thermal comfort is absolutely a piece of this. It's a very important part of it. As I mentioned, that market is very attractive. It's growing at $3.5 billion. We're targeting to be a one or two player in that area. We're looking to double our revenue from where we're at right now. So we see that contributing very heavily.
The other thing I would tell you is our customers love what we're doing. You know, we, we've already picked up sourcing agreements with 9 OEMs on our, on our Thermal Comfort strategy to allow us to source our own components or our new innovations and technologies. We have 21 development contracts with our global customer base, so it's really going over well. The other thing I would tell you, too, just in general on market share, we have a lot of opportunity to grow. We have opportunity to grow in Asia, in China, and particularly with domestic OEMs there. We have opportunity to grow within vehicle segments. We have opportunity to grow with just, you know, the innovation that we're working on, and I think that's also going to be a big catalyst.
So whether it's FlexAir, ReNewKnit, TCS, like we just discussed, innovation, ConfigurE+ is another innovation powered rail system that we have. All of these are doing really well in the market for us.
So just add one comment to Frank's there. So that thermal comfort business this year is roughly a $600 million business. It grows to $1 billion in 2027. It's a break-even business at the operating income level today, including the purchase accounting related amortization. We see that growing to $100 million in 2027.
Maybe thinking more holistically on the seating segment, can you talk about the time frame and key drivers to reach a greater than 8.5% EBIT margin in seating?
Yeah, it's similar to what we outlined at our seating product day earlier this year. You know, our outlook for this year is 6.8% operating margins in seating. We see that growing to just north of 8.5% in 2027. Part of that's industry volume and backlog rolling on. It's about 60 basis points of the margin expansion comes from that. About 30 basis points is from our thermal comfort improvements, basically going from break even to $100 million over the next four years. And then the other 80 or 90 basis points is our net performance. So that's a combination of, you know, commercial negotiations on commodities and inflation, operating improvements in our plants, restructuring.
You know, we're closing a number of facilities in Europe, for example, to better align with the capacity with the volumes that we see in Europe over the next several years. You know, those are the biggest drivers of the net performance, and that's sort of offset partially by the impact of contractual price reductions and wage inflation.
Okay, very helpful. Maybe we can pivot to E-Systems and go to you, Carl. What do you think has led to some of the recent customer sourcing wins in areas like Battery Disconnect Units and Intercell Connect Boards ?
Thanks, Mark. It's great to be here again this year. Yeah, we make a product called a Battery Disconnect Unit. That's really one of the main interfaces between the battery of the vehicle and the rest of the vehicle, the power sources, both charging and discharging of the battery. And as Frank mentioned, the customer relationships and the tight alignment we have with our customers really helped us understand some of the challenges with this Battery Disconnect Unit, and particularly helping to solve that problem for General Motors with their battery electric truck. We were able to design a Battery Disconnect Unit for them that was 20% less weight, almost 30% smaller in size, 135% better power transfer.
All of those add up to better performance in the electric vehicle, faster charging, better performance of the vehicle, and obviously, weight is an important factor there. The battery disconnect unit itself can switch up to a megawatt of power. That's about 100 U.S. households in 3 microseconds. So if it's commanded to turn the battery on or off within 3 microseconds, it can do that from a safety and power management perspective. We did that through innovation. As Frank mentioned, a big focus of our business on innovation, driving thermal management and thermal performance, and patenting those, and also a PACE award-winning product, that battery disconnect unit.
We're able to take that experience and win with Stellantis on the REV 1500 battery electric truck as well, taking that battery disconnect unit technology that we developed with General Motors, reapplying it to another large truck platform that handles a lot of high power. We expect the battery disconnect unit market to grow from about $1.3 billion today in the next five years to almost double, and we're expecting about a 25% market share in those higher-end truck and SUV platforms that we're well positioned for. As Frank also mentioned, vertical integration is an important part of the battery disconnect unit and a number of our products across E-Systems as well.
We're able to manufacture components that go in that Battery Disconnect Unit, like the busbars, like some of the circuit boards, the wire harnesses, and the engineered components, ourselves, and drive that vertical integration into that product. The other product Mark you mentioned was our Intercell Connect Board. This again is a product technology that takes battery cells, individual battery cells, packages those together, both electrically and mechanically, into modules, and then those modules are then used to build battery packs. And so on the GM Ultium platform, we have the Intercell Connect Board, that those modules that the Intercell Connect Board creates are then applied, depending on the vehicle, maybe 6-24 of the Intercell Connect Boards and battery modules that go into a vehicle, depending on the battery size and vehicle capacity.
The Intercell Connect Board is a great combination of vertical integration, taking stamping technology, actually from the seating side, taking molding and overmolding technology from our acquisition of M&N Plastics we did back in 2021, and being able to bring those together in a very automated manufacturing process that we're deploying right now and launching that. So again, from an Industry 4.0 automation perspective, driving that right into the manufacturing design and manufacturing ramp-up phase. The Intercell Connect Board product area, about $1.6 billion. That'll triple over the next five years. So it's about a 25% growth rate, and it's a great product area for us because it applies the product into multiple different platforms.
So that Intercell Connect Board, those modules can get into many, many different types of vehicles across the Ultium platform. And we're quoting those Intercell Connect Boards for other customers as well, for all different battery packaging technologies, not only the pouch type, but prismatic and cylindrical cell technology as well. Again, using the stamping technology, the molding technology that we have, and that vertical integration. In Intercell Connect Board, we achieve almost a 60% vertical integration from all of those combinations of things across Lear. So really proud about that.
You know, when you think about some of those products you just mentioned, how key are they in achieving the $1.3 billion electrification target by 2025 that Lear has? And are you still confident in that target, especially given some of the volatility in EV production schedules?
Yeah, I'll take that, Mark. So those are the products that are driving the achievement of the $1.3 billion target. So electrification overall in E-Systems is the key driver of growth. It's about half of our growth over market. Roughly, you know, 6 percentage points of growth over market is what we're targeting in E-Systems, and roughly half of that is through electrification. This year, our revenue in electrification, $750 million. It grew from $565 million last year, so about 30% growth. We expect next year between 20% and 30% revenue growth to $900 million-$ 1 billion. Then looking out to 2025, we see revenue of approaching $1.3 billion.
Now, if you were to ask me that question six months ago, I probably would have said that could be as much as $1.4 billion-$1.5 billion. Because after we established that target, we won some additional programs. Carl mentioned the BDU with Stellantis. We also won some high voltage wire business with Renault and with Geely. And so that number was working its way north of $1.4 billion towards $1.5 billion, with some of the customers' recent announcements sorta slowing down the pace of you know, transitioning from ICE on certain platforms in North America. That's sorta come back down to $1.3 billion. We're discounting our customer volume expectations, so we could end up a little bit above that.
But it's, you know, it's a very fairly volatile area, but I'd say, you know, ±$100 million is, we should be within that range of the $1.3 billion target in 2025.
Okay, now, very helpful. I mean, you spoke on high voltage, so maybe we can go there and talk a little bit more on your opportunity in electrical distribution systems with low and high voltage harnesses, and maybe a little bit more on how Lear's market share is tracking. And then maybe talk a little bit more as well about how your investments in connection systems have improved your competitive position in vertical integration.
Sure. So on the wiring side of the business, for E-Systems, about 75% of the revenue across E-Systems is wiring and connection systems, and then 25% being electronics. We have about a 7%-8% market share on the wiring side, both low voltage and working towards that on the high voltage side as well. And really proud about some of the new wins that we've received and earned across the business in this year. Particularly, things like working with BMW on one of their new platforms. Really our first large wiring program win with BMW on one of their products. We've also won a number of new programs on EV and non-EV with General Motors, Volvo, Geely, Stellantis.
And so really trying to grow that customer base, expand that customer base, and that's really been a strategy of E-Systems. We've talked about that in a number of our earnings calls, is how we're driving customer expansion and diversification globally, and also, you know, platform as well, platform agnostic. Wiring is really platform agnostic, ICE or EV needs wiring. And we see that wiring evolving and changing over time. As the vehicle electronics become more computerized, more digitized, and we see that on our electronic side of the business, so good insight there. The wiring harness matches, and you see the wiring harness evolve and change, as it moves to have to handle more high-speed data and communication.
And so as the architectures in the vehicle change and the low voltage architecture changes, we see a transition to more high-speed cables, high-speed connectors, and a more networked electrical architecture. And so we see that really making the CPVs pretty consistent over time. The vehicle continues to get more sensors added, cameras, radar sensors, things like that, that take all those high-speed cables and connectors. On the high voltage side, we continue to invest in our connection system capability and building more high voltage products ourselves, as well as some of the channels and the engineered components. In fact, I was in Morocco two weeks ago. We are opening a new connection system facility, really building on that M&N Plastics acquisition, taking that internationally.
We're opening a new facility in Northern Africa that will supply and support, from a vertical integration perspective, our wiring harness business in Northern Africa, as well as our electronics business. And that facility, we actually reused a seating facility, you know, maximizing the capital investment, is already pretty much sold out. So capacity in that business is in that plant is already spoken for. And so it's great to see that coming up, already building parts for customers in that part of the portfolio.
Well, the margins have been doing well in E-Systems. I think, you know, shown some improvement over the last 5 quarters. And maybe you can talk about how you've gotten there. What have been some of the key factors in driving the E-Systems margins? And, you know, what are some of the key things that will allow E-Systems to get to an 8% margin over time?
Yeah, so going back to 2020, 2021, we really took a new approach to our E-Systems business, and we've outlined the strategy. Carl alluded to aspects of it. But what we did is we first streamlined our electronics portfolio, and we were in too many different product categories. And by simplifying that portfolio, we were able to reduce costs there and win business on distinct products where we have a competitive advantage, either from a manufacturing or an engineering standpoint, like a Battery Disconnect Unit. That was one step. The second was really growing in our connection systems business. That subsegment of E-Systems is the most profitable, highest margin subsegment of E-Systems.
So what you're seeing now over the last 5 quarters, where we've seen year-over-year margin expansion, and year over year from last year to this year, we're up 110 basis points in E-Systems. And really the inflection point was in the second half of this year, where we saw margins increase 160 basis points from the first half to the second half, is the effects of all, you know those strategic decisions we've made, 2, 3 years ago, sort of beginning to play out. Plus, the benefit of industry volumes recovering, particularly on some of our key platforms. I mentioned JLR as an example, earlier. So there's a volume element to it, and then there's a product element to it.
As we look out to the next couple of years, and we work our way from what's now 4.5% for the full year, 4.6% or 5.5% in the second half this year, towards our target of 8%, the biggest driver, again, is going to be combination of industry volume and the backlog. So roughly half to two-thirds of the improvement in margins will come through that, and then the balance is going to be through what we call net performance. So again, that's our commercial and operating performance in excess of our customer contractual price reductions.
And Carl can talk a little bit more about that, but it includes some additional recovery on commodities and wage inflation, which we've had some success with this year, but we see continued opportunity as we look out to next year and beyond. You know, I think we need industry volume sort of in that 90-91 million range to get to 8%. So it's maybe a little difficult to pinpoint, you know, whether it's in 2025, as we initially had expected or 2026, but we do see a pretty clear path to 8% in E-Systems.
Just to follow up on that, the product strategy, and answer a couple pieces there. One of the areas that we've been focused on as we refine that product strategy is also looking on the low voltage electronics and Body Domain Controllers and Zonal Controllers. Is where can we take those products across both ICE and EV platforms? And so both the zonal control modules and the power management products that we make, we're seeing applications of those products across customers platform, the architecture of the electronics and power management, taking those products across both ICE and EV, and so we've had some nice wins this year on that.
In terms of the operational improvements and productivity, we really focused this year, particularly in the North America region, on supplier stabilization and making sure some of our suppliers had a much more stable supply, source of supply, both on the wiring and electronic side of the business, and continue to focus on operational improvements in that area. In taking Industry 4.0 technology across a number of our plants around the world, from an automation perspective and a productivity perspective, and even from a digital tools perspective and analysis of the factories, analysis of the tools and equipment we're using in the plants, a digital approach to that, and kind of sharing that together with the seating side of the business.
Finally, from a customer agreement perspective, multiple core, multiple-year customer agreements, from a recovery perspective, to stabilize and make sure that we're getting those recoveries built into the piece price of the products.
We've, we've covered a lot already, the two business segments, and Jason, you shared some views around LVP, relatively flattish in aggregate for 2024. Maybe we can elaborate a bit more on the 2024 outlook and some of the key drivers as you're thinking about it today. You know, anything more you can share for 2024 in terms of revenue and margin expectations and some of the key puts and takes around that?
Yeah. So as I mentioned, I expect the industry production to be sort of flat with this year, so I wouldn't expect a meaningful impact on revenue or earnings from industry volumes or volumes on our particular platforms. So the biggest driver for us for next year is going to be the backlog. And, you know, when we initially announced our backlog for 2024, we expected it to be $1.5 billion. There has been some changes on a number of electric vehicle platforms that will lead that to be a lower number. As we sit here today, our best estimate of that's roughly $1.2 billion. So still a nice, you know, level of growth, year-over-year, and one of our most significant individual years of backlog that we've had in the history of the company.
So that we expect to convert at sort of 10%-12%. So that'll be the biggest driver of revenue and earnings year-over-year. The other factors to think about on the earnings side, you know, net performance should continue to be positive in E-Systems. You know, if you think about, you know, what we've done from the first half to the second half of the year, a lot of that's been driven by these commercial negotiations, passing through commodities and inflation, and the operating improvements, particularly in North America and our wire business here, where we've seen efficiencies improve, that we see continuing into next year.
If I were to think about the right launching point to model our margins for next year, in E-Systems, I would use the second half 5.5% operating margin sort of as the beginning point as we look to next year. In Seating, I think the full year operating margin at 6.8% is the right kind of starting point to model into next year. From that point, I do expect modest margin improvement in both, but not significant as we sit here today. I think... You know, one of the issues and challenges that we're working through is a combination of wage inflation, you know, which has been gradually escalating over the last couple of years.
And then also on the transactional effects, I talked a little bit about this on the third quarter earnings call, the peso in particular, you know, we do see a headwind year-over-year, more so than what we experienced this year. So that will weigh on the outlook a little bit as well.
You mentioned the backlog. I think you said 15 down to 12. Yeah, maybe you can talk a little bit more around the drivers behind that. So some reduction in some of the EV programs. How much is that maybe being offset by perhaps some upside on some of the ICE platforms? And how much visibility do you have on the EV programs at this point, and how, you know, clear they might be from the OEMs?
Yeah, I think we have pretty good visibility into next year. And I-- you know, we've tried to be a bit conservative in how we're calling the volumes. Again, we're gonna-- we're discounting what the customers are telling us they're going to produce next year, just given how slowly some of the platforms have ramped up. And we were just having this conversation yesterday, you know, what's happening with the ICE platforms is they're the lives are being extended. So we see that more that becoming more of a benefit to us maybe in 2025 and 2026, 2027, where we had expected certain platforms to roll off, and now they're being extended, and we'll benefit from that. So that is a bit of an offset to maybe a slower ramp-up with certain customers on the electric vehicle platforms.
So we have pretty good visibility out in the next 12 months. It's a little bit more difficult to predict as you get into 2025 and 2026. But we do have a great portfolio of vehicles that we're on, you know, and seating the GM full-size trucks in North America, being sort of the cornerstone of that business. And then in E-Systems, we have a great business with Ford in North America and in Europe for Super Duty. The Escape platform has been very strong for us. And then in Europe, I mentioned earlier, JLR has just been really a cornerstone for both businesses. And we see that, you know, volumes remaining strong on all of those platforms, which are our ICE platforms.
And when you think about the change in backlog, how much is Seating relative to E-Systems?
Yeah, seating's a little bit more of it than E-Systems, and we'll provide the more precise figures, you know, on our fourth quarter earnings call when we do update our three-year backlog formally. But we do have, for example, the GM battery electric truck seats in Factory Zero, and as GM has talked about, you know, that is off to a bit of a slow start, and it's a fairly high CPV in those platforms, so that's had a meaningful impact. I think, there's been some changes with Volvo, the timing of the launch of that EX90, the electric vehicle in South Carolina, that's impacted both seating and E-Systems. I think those are probably the two most meaningful individual programs that impacted the backlog.
So we have time for one more question. Yeah, Jim, maybe ask the last one for us.
Sure, just one quick one. $90 million-$91 million, what's your assumption on average transaction price? And that mixed dynamic, a better volume for you, is there any trade-off for you on potentially the trim levels, the mix? And how realistic is 90/91 when every OEM is saying, "We found religion on price, and we're not gonna push lower profit volumes?" Well, clearly, the consumer would like to see more choice on affordability.
Yeah.
Big debate. Just curious where you come out on that realistic 90/91.
Yeah, I don't see that happening next year. I see that either in 2025 or 2026. And if you think about where this industry was, gosh, we were at 93 million units in 2016, 2017. So you know, that is sort of the normal. I think normal demand is in that 90 million+ range for the industry. And at some point, you know, these vehicles need to be replaced. So, and I do see over time interest rates coming down, and that will factor into the affordability equation. You know, in the U.S., I would expect that at some point next year, you see interest rates come down, and that'll be a factor in U.S. demand. And so I think the customers are working hard on the affordability equation.
And our portfolio, you know, on the seating side, for example, Frank talked about thermal comfort. When we can design a system that's lower cost for them, you know, that gives them an avenue to lower prices as well. And so it's not just, you know, the, the normal, customer contractual price reductions that are, are driving our CPV. It's, also, you know, design and product ideas that we've developed that help customers lower prices, over time as well.
Well, great. Unfortunately, we have run out of time. Jason, Frank, Carl, really appreciate you all joining us today.
Thanks for having us.
Thank you.