Wolfe Research Global Auto Industry Conference

Jan 15, 2019

Slides

Okay. It's I think we're ready to go. If everybody can just filter in. I'm going to introduce our next speaker, which is Lear Corporation. I think as everybody here knows, Lear is one of the largest global suppliers of automotive seating systems. That business accounts for around two thirds of the company's earnings. And Lear is also a growing player in vehicle electric architectures through their E Systems segment, which accounts for around a third of the company's earnings. At a high level, we view Seating as a compelling segment because of its attractive free cash flow, also its relative earnings and cash flow resiliency. And I think saw a little bit of that showing through in the guidance that the company released this morning. Over time, we also like Lear's exposure to growth in vehicle electrification. And just to remind everybody some numbers out there, the potential addressable E Systems content for a combustion vehicle should be around $500 per vehicle. It's $800 per vehicle on a mild hybrid, 1,700 on a full hybrid, and $2,500 for an electric vehicle. So obviously, a huge opportunity for growth in content per vehicle. Clearly, Lear is not immune to cyclicality or extreme volatility in production schedules. And we saw that a bit during the second half of last year. But those underlying secular trends are still there. And that relatively impressive not relatively, but absolutely impressive free cash flow clearly is still there. Here to talk more about Lear and the secular dynamics, the outlook, how things are shaping up, I'm very pleased to welcome Ray Scott, the company's CEO and Jeff Venest, CFO. Ray, I'll pass it along to you. Thanks, Rod. It's an honor to be here today participating in the first Wolfe Research Global Auto Investor Conference. And thanks for everyone coming here today and listening to all the great things going on with Lear Corporation. Before I begin, I'd like to direct your attention to our safe harbor statement as we will be making forward looking statements and referring to non GAAP financial metrics. More information regarding these items are available at the end of the presentation. I'd like to begin the presentation with some background on Lear Corporation. We're a large global automotive technology supplier of two critical automotive systems, seating and electrical and electronic systems. Both our Seating and E Systems segments are industry leaders and we have very low leverage and the ability to generate significant cash flow. Given our financial performance and track record of returning cash to shareholders, we have delivered superior shareholder returns. Over the last five years, our total shareholder return has outpaced that of the S and P five hundred and dwarfed that of our automotive supplier group. Lear has a very resilient business model, industry leading operational excellence and a financial performance, a strong balance sheet, a robust backlog, and the ability to generate significant free cash flow. We are in an excellent position to take advantage of any market opportunities. And as a matter of fact, we have never been in a better financial position or had more financial flexibility than we have today. And our commitment to maintaining our strong financial disciplines ensures that any business that we take on will offer fair returns to our shareholders. Lear has all the key ingredients to invest, innovate, differentiate, grow, and create value. We are committed to holding our investment in innovation and technology sacred and are working towards expanding our top and bottom line with our products, our processes, and our business model advancements. Lear has tremendous capabilities in innovation and technology in two business segments that are perfectly aligned with the industry megatrends. We have consistently outperformed our peer group across every major financial metrics. This level of performance is the result of having the best team in the industry, investing in the business over the long haul, and continuing to focus on our customers' operational excellence and achieving profitable growth. This slide highlights our global business segmentation by region and customer. As you can see, our business portfolio is very well diverse. We are not dependent on any one customer or region to deliver sustainable results. Recent volume reductions in the current macro environment, though not something we seek of course, have increased our customer diversification. For example, Ford represented over 20% of our sales in China in 2017. We estimate that number to be around 10% in 2018 and are forecasting our Ford China sales to represent approximately 5% of our business in China in both segments in 2019. We are launching a significant number of new programs this year. Slide seven highlights some of our key launches in seating. We are very excited about several major new programs in key vehicle segments. Many of our most important programs are transitioning to new models, including GM's full size pickup trucks in North America. As we discussed in our third quarter earnings call, we will experience downtime in advance of the start of production as these OEMs reconfigure their assembly plants in preparation for new vehicles. On a couple of these large North American seating programs, we expect thirteen weeks of downtime to the first three quarters of this year, with eight of those weeks occurring in the first quarter. We couldn't be more excited about this business because these are some of the most coveted platforms in the industry. We're also launching significant backlog in our E Systems with premium vehicles such as Land Rover Defender and several BMW models. We're excited about these product launches because they contain some of the most complex technologies we have ever produced, including the 11 kilowatt onboard chargers for the Volvo Pole Star II and the Jag Land Rover, I PACE, and I TYPE. As you can see on slide nine, we have consistently outperformed our peer group across every major financial metrics, especially those metrics related to earnings growth and converting those earnings to cash. We are experiencing a transformational time in the automotive industry. The next five to ten years will bring robust content opportunities from the auto tech secular trends that will shape the future of the industry and accelerate growth. Lear has been developing industry leading capabilities and technologies across all these megatrends. We have a strong leadership position in seating technology, which includes our Intu seating portfolio. We have industry leading expertise in high power electronics, cellular, Wi Fi connectivity, and dedicated short range communication based V2X connectivity with safety applications. In cybersecurity, we have a dedicated product security team based in Ann Arbor, Michigan, which is led by the industry expert Doctor. Andre Bieberskirsch. Our recent acquisition of XO Technology brought us expertise in vehicle positioning and advanced sensor fusion software capabilities. And across all these trends, we are pursuing significant opportunities in software, services, and data. Lear is well positioned for growth in these key areas. Our investment in innovation, both internally and externally, are the key to our future growth in alignment with these industry megatrends. The key to successful innovation is forming collaborative partnerships with all these players in the ecosystem. We'd like to highlight a few of these initiatives that we just recently announced last week and this week. The launch of the Lear Innovation Ventures led by our CTO, John Absmeier. LIV will enhance our focus on product, process, and business model innovation. Through LIV, Lear will invest in advanced development teams, partnerships, and early stage technologies. We recently announced that we are a corporate partner of Techstars Detroit, a venture fund and mentorship driven for accelerators and startups. We also reached an agreement with Hyundai to be the first Ekso technology development partner. This partnership will allow Lear and Hyundai to enhance vehicle positioning systems currently on the road while developing advanced systems for fully autonomous driving. In addition, we just launched a joint development partnership with Gentherm to accelerate the future of in vehicle microclimate. This last slide, I just want to talk to you a little bit. Like I said, we couldn't be more excited about the innovation and technology that we've been talking about and developing with our customers. And this slide just gives credit to what we're doing in monetizing and really taking these programs to the next level. If you look in the right hand corner, this is the Jagged Land Rover, the Jagged I PACE with a seven kilowatt onboard charger. In the bottom right hand side of the slide is the Audi. We've talked about the continuation of the most sophisticated connected gateway with a communication box. Those programs are going across multiple platforms with Volkswagen. A great growth story for us. In the right upper hand corner, I want to talk about this. I think a lot of people have seen different videos or ideas on what the interior could look like. And with our capabilities and convergence of these systems and seating, we've developed a power rail system with a very unique set system that sits within the rails. We're currently going to launch this in 2020 with a German OEM. And so what's important about these programs, we talk about we're an operational excellence company, very focused and that's at the DNA of our company. But we're also transitioning and being recognized by our customers with technology and innovation. In the bottom right hand corner, John just was at the Consumer Electronics Show last week and we partnered with Renspeed to show the capabilities that we have with intuitive seating. And these programs that we've talked about in the past are in development programs with our customers today. So it's not just about the innovation technology that we have within our company, but how we're capitalizing those and commercializing them with our customers. They are going into production either in production or going in production in the near future. Sorry, Jeff. So with that, I'm going go ahead and introduce Jeff Van Ess, our CFO, to discuss the financial outlook. Thanks, Ray. This slide shows our updated three year backlog. It's important to note that our sales backlog includes only awarded programs net of any lost programs or business rolling off and excludes pursued business or content growth. Our updated backlog includes the negative impact of approximately $300,000,000 of customer announced program cancellations and a $100,000,000 decline as a result of the impact of foreign exchange. Despite these negative impacts, our sales backlog for 2019 to 2021 of $3,350,000,000 represents the largest backlog in Lear's history. The backlog is well balanced by region and customer, driving continued diversification of our top line. Of our overall consolidated and unconsolidated backlog of approximately $3900000000.01200000000.0 dollars is in China with approximately 45% of that in our E Systems segment. From a segment perspective, our backlog is split approximately seventy-thirty between seating and E Systems, and consistent with last year's backlog, approximately 90% of our seating backlog is on CUV and SUV programs. With respect to our E Systems segment, we continue to take share and win new business aligned with emerging industry trends, especially vehicle electrification and connectivity. Over 40% of our E Systems backlog is in electrification and connectivity. For 2020 and 2021, there are still several programs that are up for bid, so we expect the backlog in those years to continue to grow as those new programs are awarded. Here's our financial outlook for 2019. Our sales guidance of 20,900,000,000.0 to $21,700,000,000 represents a wider than normal range, reflecting the current uncertainties in both the operating and macroeconomic environments. We developed the high end of our sales guidance using December IHS estimates as a baseline with modification for information gained from the customer and also our own internal assessments. Our outlook forecasts our top platforms in North America and Europe to be down approximately 51% respectively, which is generally consistent with IHS's December forecast. In China, our forecast reflects our top platforms to be down more than 10%. From a currency perspective, our guidance assumes an average euro of $1.13 per euro and an average Chinese RMB of RMB6.95 to the dollar. As Ray previously highlighted, given the launch on some of our key platforms, we will experience thirteen weeks of downtime as those specific programs, primarily in the first half of the year, launch. As a result, the cadence of sales will ramp up from the first half of the year to the second half of the year. And to put that even more in perspective, at the high end of our guidance range, it assumes that our first half sales are down over 5% year over year, but our second half sales are up more than 10% year over year. Core operating earnings are forecasted to be in a range of $1,600,000,000 to 1,700,000,000.0 The high end of our guidance range reflects full year Seating margins of approximately 8% and full year E Systems margins of approximately 12%. We are expecting another year of strong cash generation with free cash flow forecasted to be in the range of $850,000,000 to $950,000,000 Restructuring costs are forecasted to be approximately $140,000,000 up $40,000,000 from our 2018 outlook, primarily reflecting footprint and census actions attributable to the macroeconomic and current industry environment, including the impact of some of the recent customer announcements. And based on our projected mix of earnings by country, we expect our overall effective tax rate to be in the range of 22% to 23%, but our effective cash tax rate to be approximately 20%, reflecting our cash tax attributes. Lear has one of the strongest balance sheets in the industry. Our debt structure includes a combination of flexible term debt, a $1,700,000,000 undrawn revolver, and fixed debt with no bond maturities until 2024. Has never been in a better financial position nor had more financial flexibility. Lear has a long history of converting earnings to cash and a disciplined approach to capital allocation. Our strong cash generation allows us to not only invest in our business, but also return cash to our shareholders. Our first priority is always to invest in the business, supporting our customers, expanding our product and process capabilities, and improving our overall cost competitiveness while making strategic acquisitions that add product capabilities and top line diversification. We're committed to maintaining investment grade credit metrics and returning excess cash to shareholders on a consistent basis. Since 2011, we have returned nearly $5,000,000,000 to shareholders through our share repurchase and dividend programs. Now I'll turn it back to Ray for some closing thoughts. Thanks, Jeff. To sum it up, we're very excited about where we are as a company. We have a very resilient business model, strong and flexible financial position, and the ability to generate significant free cash flow. We have a proven track record of operational excellence and superior earnings growth and shareholder returns. We are well positioned for the megatrends that are transforming the automotive sector, And we are accelerating the pace of innovation within our company. We are separating ourselves from other competitors and we have never been in a better position to take advantage of any opportunities that may present themselves. Their future is very bright. And with that, we'd be happy to take some of your questions, Rod. Is this mic on? It is now? Okay, perfect. Thanks. It sounds like your expectations are pretty conservative with respect to the key platforms that you have exposure to. And I was hoping you can drill down a little bit into what some of the levers will be in the E Systems business specifically. You know, the margins in that business had been running at 14%. There was obviously some key platform exposures that came down, and now you're expecting that that's going to sustain at that 12% level. Still good, but not where it was. Do you have visibility into certain things that can help drive the profitability back up to the level that it had been at? Do you see some big opportunities on the horizon with respect to electrification, which should have more terminal connector content, or on the connectivity side? Yeah. Okay, good question. I think this isn't an area we've been unfamiliar with too. If you think back in seating, obviously we're disproportionate with one customer and we were able to do a nice job of balancing across multiple customers. Very similar to what we're seeing in E Systems where we had a good portion of and we talked about the numbers in China with CAF, almost 20% of the total sales down to 10% for last year. And we're looking at 5% of the total business in 2019. So I think we're being prudent and smart given what we've seen over the last several months. But as far as levers, one thing I don't want say excited, but one thing we're really good at, I mean we're operational our operational excellence in how we get at not just our cost but the overall business. And we have the ability to modify and renegotiate some of the agreements we have or productivity that we have with our customer. We're very good at getting at the right sizing within the facilities. And I think last year, some of that was intermittent. It was coming as extremely quick. It was difficult for us to really manage because of some of the clarity on where we thought it was going to be long term. So we're going to get at that much faster than we did in the second half of last year. And then we have all kinds of other levers that we can get at. But I think from an E Systems perspective, you look at what we did and we've always talked about this billion dollars of core to business. And I think there's something we're learning with some of these new technologies. It's taking a little bit longer toward those programs. Specifications, our customers are getting very sophisticated at looking at how they can scale those across multiple platforms, legislative changes. And so what we ended up with was about 50% of that being awarded. And what's exciting is and we've always talked about winning 25% to 30% of what we're quoting. And that's exactly what we did in electrification connectivity. We were awarded about $150,000,000 So we're at that rate that we've talked about. And within that, about two thirds of that is electronics. And that obviously gets a premium a more higher margin. And so that's another element we're looking at. But not going to say I'm not concerned with it, Rod, but I absolutely think we have everything within our control to get those margins back up. We're just going have to get at through the cost levers that we have and the growth that we're seeing in the more premium, high power electronics components. So you believe that as we look out maybe into 2020 and beyond that historical range maybe getting back towards that 14% is very Yes. Definitely it's going go up. And when you look at I think another element here too is what's exciting. It's a positive story. We've introduced new customers. Significant growth with Geely. Significant growth with Audi. Significant growth with Mercedes. Significant growth with Volvo. And so those customers that we're bringing on, and you said it, it's still really good margin. But there's a maturity within that where we had programs that were older, more mature, were added through BEV, cost savings, you know, rightsizing the facilities, all the efficiencies that we're really good at. These are brand new customers that we're launching with. So we're protecting those customers, make sure our reputation is in line because that's all part of us being awarded business. And then over time, programs are going to mature at a higher level of profitability. Yeah. And I'll pass it along in a second. But last year you said that there was $1,000,000,000 of potential opportunity that you looked at prospectively. Can you just give us some thoughts on what you see this year looking forward? It sounds like there's just a lot of activity in electrification and some other areas. Yes. There's been a lot of I think go back to WLTP and some of the changes and some of our customers took a step back from 48 volt to what they want to do with their portfolio. So 50% of that's carried over into 'nineteen. So 500,000,000 of that is carried over. We're looking at $1,000,000,000 right now. I think, Rod, if you go back to this time last year, we're talking around $700,000,000 and so that number grew significantly. We don't see that changing. We think over the next several quarters that number will increase as far as programs we're quoting. And I think it's important to note, I mean, knows Lear, the DNA, we're going to it's profitable growth to us. So there's a lot of opportunities to quote business. When we talk about the quotes that we're looking at, it's not where it's there's a program that could lose money or a program that has a captive supply base that we'd have to spend a significant amount of pay to play or those type of things, that's the business that we believe that we can obtain and still get a really good fair return for our shareholders. And so we think that's going to increase throughout the next couple of quarters. Thank you. Got it. Hi, it's Dave Tamber here from Goldman Sachs. Jeff, in your script, you talked about $300,000,000 of headwinds to backlog in E Systems from programs being canceled. Can you give us a little information as to what regions or what OEMs those programs were canceled with? I think part of that is associated with the GM and Ford announcements that the cumulative effect over that timeframe is roughly 300,000,000 So it's the Volt, for example, on AE Systems and those type of programs. Got it. And then from a CapEx perspective, I believe it's $700,000,000 for the year, which looks a little high relative to sales from a historical perspective. Does that start to dissipate exiting 2019 and perhaps after you get through some of the launches in the first half? Or is that does it end up normalizing back down to maybe sub-three percent of revenue? Or is that fully dependent upon what the new business opportunities look like going forward? I think a little bit of both. I think the uptick in the if you judge it by a percent of sales, historically we've been in the high 2s. But what we've seen associated with the type of business that we're winning, specifically in E Systems and even more specifically in electrification and connectivity, there's more investment dollars that are associated with those programs. So as E Systems becomes a bigger part of the overall company, we should see an increase in CapEx. I think that the increase that we're seeing here is maybe at a high point And I don't think it'll go back to maybe what we've seen several years ago because E Systems will continue to be a bigger portion of the company, but it's going to moderate somewhat downward, but not in a meaningful way. Just maybe to follow-up on the $300,000,000 of backlog that evaporated with the automakers changing programs. Just curious, how do those conversations go? I mean, is there sort of a make whole provision and when that cancellation comes through, is there a makeup in the future on backlog or economics? How do you how have you dealt with those conversations? And do you think those are all largely done in what we're seeing in product cancellations in these sort of quick shifts that we've seen in product portfolios? Yeah. I'm not sure I picked up the second part of the question. Are we done with these quick shifts or sort of these cancellations and programs in short order, which are obviously Okay. So let me give you our experience. I mean, one, I think having the type of relationship we have with our customers is going in and trying to first figure out how we can take care of a particular situation or cancel a program. Example, with the focus with Ford Motor Company, we were awarded the Ranger Bronco. And so that was a great switch for us. And so, you know, from our perspective, every time there's an announcement or there's clarity on what the changes that they're considering, we go in and work in a very collaborative way. And in a lot of cases, those will work to our benefit. As far as, you know, things being done, I think our customers are, you know, there's still some things that we probably need to work through, but I think in our guidance, we took that into consideration even though there might be not absolute clarity. But we're looking at probably some other actions that may occur that may impact us. We're looking at that within our 2019 guidance. And then just a second question, also kind of following up what Rod was asking before on margins on E Systems, but maybe not just on margins. I mean, Seating is relatively consolidated. It's a great business. You guys are running it well. The industry is running reasonably well except maybe one of your biggest competitors, but that's a different discussion. But when we think about E Systems, we're just out at CES last week, everybody is all over this stuff. I mean, everybody. From the non traditional players to the traditional players to the big players like ZF and Magna, and you're in this game as well. As we think about the competitive set and where this segment needs to go over time, do you think you have the wherewithal to be one of the big players? And is this something that we should look at as being consolidated in sort of the fashion that seating has been over time? Because it just seems like everybody is jumping into the car here and not everybody can win and some of economics that look very good right now might not look as good five, ten years down the line? Okay. From our perspective, I think you see it through the actions we're taking with collaboration and partnerships. We are looking at I mean, we're very selective in our space. I mean, we're not the mega supplier trying to do a lot of different things to every single customer. We're very specific in where we want to strategically go after business in our E Systems business, and it's worked for us. We've been very successful. We have a collaborative working relationship with our customer. You know, to sit here and say you have the mega suppliers that are out there that have a lot of different experiences and capabilities, Lear Corporation was awarded with Audi the most sophisticated gateway for a number of different reasons. One, I think it's because of our position with our customers. They do see Lear differently. So I don't know about a consolidation would benefit because our customers are still looking at different types of applications and products from the supply base. But I do think that how you look at innovation technology and like I said, we've always been an operational excellent company. It's at the DNA, you know, how we operate our plants. But now we are transitioning and being recognized as innovation technology. And some of those collaborations, even last week with the things that we're doing, those are smart plays because you have limitations in investment in human capital. So I think the bridge between collaboration is going to extend, but I still think we have a great space and it's being recognized by our customers today. Can you just give a little more detail about the underlying market assumptions in the it sounds like you said down 5% H1 plus 10% H2 and then also the margin cadence as we go through the year? Think it was industry assumptions, yes, and then the cadence with margins. So as I said in the presentation, with respect to North America and Europe, our assumptions are pretty much in line with IHS in terms of their volume on our top platforms. With respect to, you know, what are our top platforms, obviously the K2XX, which has some fairly significant downtime in all of next year, but primarily in the first half of the year, Ford Explorer, you know, there's several of them. So we're aligned with IHS in general, and I think the same thing holds true for Europe. With respect to China, I think IHS has historically not been as credible an indicator or forecaster of volumes there, I think we see it now with respect to China. And also, we've taken a little bit of a different approach on Ford, for example. What we've guided to or what we're guiding to that supports the top platforms in China down over 10% is a view that the run rate that CAF in China has experienced in the back half of the year and what we're seeing in releases from them in the first half of the year will run through the remainder of the year. So as a result, that customer is down significantly on a year over year basis, not much as comparison to their second half, but as comparison to their first half and as a result, their year as a whole in 2018. So that coupled with the downtime, we said this in our third quarter earnings call, so next year what you'll see from a top line perspective is because of the downtime and the launches being heavier in the first half, you'll see the sales cadence go up from the second half from the first half rather to the second half. And what you'll see from a margin perspective is the same thing. It will go plus or minus from the full year margin guidance of 8% in Seating and 12% in E Systems. In that, because sales are going to be lower in the first half, you'll likely see margin lower than that overall average for the year. And in the back half of the year, you should see margins a little bit higher than that full year average. And just to be clear, I think Jeff said next year, you can't get out of 'eighteen. We're talking about 'nineteen. Stuck on 'eighteen. I was younger in 'eighteen. Can I just clarify one thing on your answer? These are Lear's assumptions for how these customers are going to be going, so CAF and so forth. This is what you've decided to factor into what you're communicating today. This is not necessarily what you're hearing from your customers? That's right. What it is effectively is we've made the assumption with respect to that customer that the run rate that we are seeing in the releases in the first quarter will extend through the remainder of the year. Maybe just to rephrase that, so there'll be a bit of a destock at that customer in the first half, but demand levels will stay constant from, say, the 2018 such that business is probably flattish second half. Is that the right way to think about it? Didn't hear Yeah. Okay. Just to be clear, yeah, we're talking about the last quarters that we've seen. That's what we'll recognize as the run rate going forward for 'nineteen. Armintas from Morgan Stanley. My question is, we had the Investor Day in late June. Presumably, we knew about the maturity element of the customers. So I'm just curious as we think about the Investor Day in June versus today, how much of the change to the margins has been macro versus micro related? I think it's percentage wise, it's a combination. If you think about when we've already discussed some of the premium customers and the volume dropped since the Investor Day, a significant issue. I think the WLTP issue, because we are more vertically integrated in Europe with Ts and Cs and wiring, is more of an issue that we've talked about short term. But I think even evidence today would suggest that I think there was a lot of down volume in Europe last year that was attributed to WLTP, but I think post what happened, they're kind of crediting 50% of WLTP with a down volume, the rest being the macro climate. And so that was an issue. And I think we've got to mention that we continue to invest. You know, there's an easy way to just sit here and cut R and D and we said that we're going to hold steadfast in our investment in these systems with good reason for growth. So it was a combination kind of between China and Europe primarily and then some other factors that we chose to invest in the business. And then we had WLTP last year. I don't know if you're having any conversations with customers on RDE, but what are your thoughts on the impact that could have into the end of the year? I'm not sure I understand the question. Last year, WLTP was a headwind of production. This year, you're going to have RDE on September 1. Just curious what your thoughts are and if you've had any conversations with customers around that? Yes. We've had conversations with our customers. And at this point, I'm not going to really address those conversations, but we are having conversations in respect to any potential issues that may arise. You. Dan Levy, Credit Suisse. I apologize if I missed it before, but your Seating backlog increased materially versus last year about like $450,000,000 or so. Could you just give us some color on what happened within the backlog? Was that some wins on the competitive side? Or is it just doing better on core platforms that you have? And then just a follow-up. I assume that most of the Seating platforms that you have are dual sourced or maybe even trisourced. To the extent that you're dual sourced on a platform, how much can the volumes change on that platform? Meaning, what's in your backlog? How much can volumes skew upward if the OEM decides to change the mix between the suppliers on a dual source platform? Okay. To give you a little bit of insight, about one point we get asked this question too on conquest business. About 1.1 of our seeding backlog was representative of conquest business from some of our obviously from our competitors. And that's a net number. And we've talked about business that we refused to quote or even take because the margin profile wasn't there. So that's a net number. So a significant amount of that business came from conquest from our competitors. As far as the dual sourcing, I can't think of a position that we're in that would create a risk. I mean a lot of our programs are single sourced. We might be there might be directed components within the seat system, but we don't have too many programs that have multiple suppliers supplying the exact same system. And so, you know, we're very unique in that respect and I can't think of a program that we'd have that would create that type of problem. So I don't see that as an issue with the sourcing and where we're at today. Well, I guess to turn it around, if there is a supplier that an OEM is not particularly pleased with, and they may have one variant of that platform, is it possible that mid cycle of a program, you could be allocated more business that wouldn't have otherwise been reflected in your past? Yeah, I think that's always a possibility. I think that's happened in the past that we've been the beneficiary of. I don't see anything today that is screaming it's going to happen, but that's always a possibility. Great. I think one more question. Maybe just to build off conquest business and you talked about how you're in a good position to win business. You also talked about how you allocated from Ford, for instance, some new products when they switched when they took away a program. How much of an advantage is being incumbent from a facility perspective, particularly in North America? And how difficult is it to take over? What exactly happens if you do take over business from a different supplier? Well, there's a big advantage if you're the incumbent. I mean, you have the footprint in place and again, our customers, it's all about reputation. Are you delivering quality? Do you have efficiencies? Are you managing your costs? So you have to hit all the other metrics that go along with it and that puts you in a very good position. And as far as taking over business with an incumbent, we've done that in the past before too. So there's challenges to it, but it absolutely isn't limited. We can absolutely do those type of things. And we've done that multiple times around the world too, not just North America. Great. With that, I think we're out of time. I want to thank you, Ray and Jeff, Yes. For Thanks, you guys. Appreciate it. Thanks, Rod.