Aptiv PLC (APTV) Earnings Call Transcript & Summary

Okay. If everybody can get settled. I think we're going to get started here. Next up, we're very happy to have Aptiv, an industry leader in electrical architecture, connectors, active safety, early-stage autonomous tech, basically, all things AV and EV, particularly with its Motional JV with Hyundai. So we're very happy to have them here talk about the future and maybe not so much about the present, which is a little bit tough for everybody. Today, we're very happy to have Joe Massaro, Senior Vice President and CFO. I think I first met Joe, I don't know, I think it was over a boccie game.

It might have been. Yes, yes. I remember that, yes. That's right.

[indiscernible]. So Joe is a great source of knowledge and great CFO here at Aptiv. So we're very happy to have him here and grill him now. So thank you so much for joining us, Joe.

No, thanks for hosting.

So I guess the -- without getting into too much on the short term and what you can't actually talk about, there's a lot of disruptions right now, and we're kind of looking at it and see a lot of suppliers. And I guess there's a couple of big questions on the short run. There's volume, there's stability of volume and there's mix. So if we think about those 3 main factors, which are all kind of moving around right now, which don't get to short-term stuff, which would be the biggest relief for you right now if you think about those 3 main factors?

I think it's probably volume stability. We've -- we set out this year with, I think, a very reasonable target for global vehicle production, a little over 79 million units for light passenger vehicle, and we do -- we're estimating about a little over 3 million for commercial vehicles to sort of get to an 83 million. So that's a relatively low level. There's not a lot of heroics in that number, right? We've -- we really looked at that and said just where the supply chain was relative to coming back. We expected vehicle production to be up 6% for the year, with a flat first half and about 15% in the second half, and that really, one, matched up well with our customer schedules, but also where we thought the supply chain was in terms of sort of getting back to some level of normalized production. So -- and that's up high single digits in Europe and North America, and we had China down 1%. So I think we had a reasonable starting point for volume. And again, got there for different reasons than -- other than COVID in China and the Ukrainian war, but I still think we're within an area where that is -- remains a manageable range. Mix continues to be very positive for us. So we had a really strong mix last year as OEs needed to really triage what vehicle platforms got built and what content levels. We saw them -- and this was really a global phenomenon, consistently go to richer content, more active safety systems, digital cockpits under the theory that if there were going to be fewer cars available, they wanted really the higher option packages. And while we don't expect '22 to be quite as strong as '21 from a mix perspective, we still view '22 as a very strong mix year and expect our outgrowth -- our growth over vehicle production to be between 8% and 10% this year. So really driven by that kind of content growth and that kind of mix. So those 2, we feel good about. I think volume stability is the one where it's tough. It's tough for our customers. It's tough for ourselves. Quick shutdowns or disruptions are expensive. We've seen that really now for the last 2 years in 2020 due to COVID and 2021 due to some of the supply chain constraints. We're experiencing some of that now in the Ukraine where we had 4 facilities, 2 of which are off-line, 2 of which now are significantly diminished from a capacity perspective. I think we did a really good job of getting ahead of that. We moved production, and this is mostly in our electrical architecture business, which is a little bit easier to move from a manufacturing perspective than some of our electronics or connection systems. But we started actually moving that production even before hostility started. We had one very high runner program for a German OE. We started moving that work from the Ukraine to Romania and got a little bit fortunate, and the Romanian plant had built a predecessor program to that vehicle. So there was still some familiarity with that platform. And our last day of production for that program in the Ukraine was the first day of the invasion. So we're working through that. I think we're managing it well, but it would still be better obviously not -- than not to have that disruption. And now China, we're certainly seeing some shutdowns in China. The Shanghai area is obviously a heavy automotive concentration. We've got a heavy presence there. We've got some plants that are able to continue to operate, some of our larger facilities. They've taken advantage of -- all within the government rules. They've taken advantage of, in some cases, if you can house employees within the campus itself, employees are allowed to stay for a period of time, and you're able to operate. But we have had some facilities shut down. I'd say it's more of a -- there's more communication. There's more planning around the shutdowns than certainly what we saw in February of 2020 where China shut down [ Howard ] for weeks, and it was sort of hard to figure out what exactly was happening and when it was going to come back. These tend to be more localized. They tend to be somewhat more organized. And they tend to be -- because they're in sort of these geographical pockets, we're seeing a lot of cases where our customers are going down. We're going down at the same time. And then they'll rotate and see another area go down and that other one comes back up. So there's a little bit -- you're a little bit better -- in a better position to sort of orchestrate those shutdowns with the customers.

I mean -- and when you think about those plants very specifically just [indiscernible] that is -- I mean, the product is flowing in or the parts are flowing in and the parts are flowing out, and there's no jam up on that, right? If the plant is staffed and people are living there, a little weird, but they're living there...

Well, a lot of those plants have dormitories. There is -- that's not completely unheard of there. There are some larger campuses or dormitories.

Okay. But the product flow, if the plant is staffed, there's no real -- there's no extreme issues on supply coming in and your parts coming out.

For -- we'll be able to -- as an industry, we'll be able to run like that for a period of time. At some point, the supply chain stretches out. You've only had so much raw material in the plants. But at this point, with sort of these, we're seeing shutdowns of 3, 5, 7 days, then a reopening. Materials were able to flow again. So to date, it's certainly disruptive. It's not how you'd want to run, but it's not what you saw in 2020 where plants were shut down, the highways were shut down, the on-off ramps for the plants were -- from the highways were physically closed. So there is -- and this tends to be more in the Shanghai area at the moment. So it is proving to be more manageable certainly than 2020 was.

And when you think about what's going on with supply chain shocks, I mean, obviously, there's a focus on getting product to where -- whether it be your product or finished goods product, to markets where it sells, right? So there seems to be a little bit of a push to try to get everything to North America right now because it's a little bit more robust at the moment or I presume it seems to be. I mean how much fungibility do you have in your product? And how much movement can you make to try to emphasize North America as a region or maybe it will be Europe next year? I mean how much movement can you -- do you have or flexibility do you have in your own...

Yes. From a manufacturing standpoint, we're very regionalized. So even China, well above 90% of what we manufacture in China is for the Chinese vehicle production. So manufacturing is set up, and our capabilities are there. It tends to be -- where we would tend to need to move product around would tend to be on these -- part of the supply chain around electronics, whether it's semiconductor, some of the passive electronics, the printed circuit boards. And there is ability -- and unfortunately, we had to do this for the balance of last year. Those are the kind of parts where you could -- if you wanted to, you could put them on an airplane, you could get them from one region to another fairly quickly. And at least at a, what I'll call, a platform or discrete level, the industry has been doing that really all of last year, right? There was a bias in North America to truck and SUV production. There was a bias in Europe towards some of the higher-end platforms and some of the EV production. So over the course of last year, as there were constraints on certain semiconductors -- just not for us. This is more -- is much broader from an industry perspective as well. You would see that type of -- those type of components moved around to support production in one area versus another. So it's something the industry certainly has the capability to do, and the muscles fairly -- it's been fairly well exercised over the past year for doing that.

So I mean -- so in some ways, right, where it basically seems like costs are inflating across the board, I mean, you're -- and operating, right, I mean, it seems like it's on logistics. It's going to be on raw mats. I mean has anything changed in your discussions with automakers as far as your contract terms in the near term or other things being fed in and sort of pass-throughs? I mean we started to hear about ocean shipping rates being part of forward contracts because rates are inflating so much. And there's just a more broad discussion as to sort of getting paid for your value-add versus some of the logistics and stuff that are just not on your purview or something you can control. I mean has anything started to change there in those discussions with the automakers?

They continue to evolve. A lot of those -- again, a lot of those discussions have been going on for the balance of the year now just given some of the premium freight and some of the first supply chain inflation that we saw are now certainly in some of the components. And we've talked about this before. I think that's going to be a discussion that really evolves over the course of 2022 around whether it's price for the components, it's -- versus price downs. There's other opportunities to offset. There are -- and I think the OEs are -- I think the majority of them are constructive. They want to make sure the supply base stays healthy. They want to make sure the product continues to flow at the same time. They want to keep pressure on the supply base to -- if there are other ways to offset those costs, to make sure that we're looking at it as well, right? So I think it's more of a holistic view. But the discussions, I'd say they remain constructive. There's a big focus on making sure we can get the parts, making sure our customers can make the vehicles because that's the first line in mitigating the cost, is keeping the lines up and running. And I think we've been very successful at doing that. It has been an expensive operating environment in the past year. But I'd say where -- it's not going to be a situation where pass-throughs to the customers solve all of the inflation concerns. I think we're going to need a balanced approach, and that's what we've been working on.

Got it. Doug here. Given your proximity with the technology in vehicles is high, can you give us a little bit of advantage of how you're seeing this chip shortage, how it impacts your specific business? And maybe looking out the next year or 2, when do you think this is going to normalize?

Yes. Listen, I think you have to go back -- we all talked about semiconductor constraints as if it was sort of one event last year. And it was really a -- at least from what we saw, there were several things that -- and it was almost sort of almost by quarter that significantly impacted semiconductor availability to automotive. I think when we first saw constraints in Q1 of last year, that was really a mismatch of supply-demand expectations between the automotive industry and, I think, our semiconductor providers. I think our semiconductor providers maybe were forecasting more of a U-shaped recovery in automotive. We, our customers, everyone was single in V shape. But at the same time, you had a lot of other demands for chips, and they may not have been the exact same chip. But somewhere in the production process in the raw materials for semiconductors, there was competition for things from the stay-at-home industries or a lot more cameras or a lot more imaging chips that needed to be -- needed by broader industry than just automotive. We started working through those constraints in the beginning of the year. Supply became incredibly tight, which meant that any type of disruption was felt and reverberated throughout the industry. So you had some severe weather issues in Texas that significantly impacted some of the fabs down there. That was sort of late Q1 into Q2. Then you had the Renesas fire, which -- at the Naka facility, which was massively disruptive for automotive. And again, when you were so tight anyway on supply, anything else sort of...

Cascaded through, yes.

Yes, cascaded through. And then we finished the year with significant COVID disruptions in Southeast Asia where just -- the semiconductor industry does a lot of its final test and assembly. So when you look at all of those, I think some of the lessons learned involve just getting your orders in earlier. We're on our noncancelable, nonreturnable orders out to 2023 now with semiconductor suppliers. That's something the industry hasn't -- the automotive industry hadn't historically done because, quite honestly, there was some desired flexibility in what you ordered, and OEs like to make decisions on options or trim levels very close to vehicle production time within months, right? And if you start to look at 50-month or 60-month or 70 -- sorry, 50- or 60-, 70-week lead times, that sort of impinges your ability to [indiscernible] flexibility.

[indiscernible], yes.

We've taken the approach -- if you look at something like radar chips, we're going to manufacture this year close to 40 million radar units. We can take a little bit of -- we can lean in on inventory for radar, right? Those chips are designed in. We're going to be building 40 million radar for a long period of time with the same chipsets. And so we've entered into some of those contractual relationships to make sure we've got a better -- we've got better visibility into our supply and our suppliers have the commitments they need to start the wafers, to start the manufacturing process, which is something they're very focused on. At the same time, a lot of -- and we talked to one point, we had over 100 reengineering products around how to design some chips out that were constrained, how to consolidate the number of chips on a board, right? And automotive -- and John knows us well, you tend to overengineer things over time. So something that needed -- a particular board may have had 2 or 3 chips and could you get the same kind of functionality or acceptable functionality with 2 chips, not 3? How do you start to think about some of those engineering changes? So that's really been what we focused on over the course of last year. I think we also did a great job -- we had worked very hard on our supply chain as just part of our normal annual sort of how to get better, how to deliver annual performance, annual improvements. But really -- and it started actually with COVID as we started to sort of go around the world and where could our supply chain be impacted and then through the chip constraints, really started to put some investment and some effort behind supply chain resiliency. Some of our modeling capabilities around, okay, we've built models. We've built what they like to call the digital twin of the supply chain where we've really got a lot of information now, and we can scenario plan within the supply chain. And we did it last year when there was some flooding in Belgium and Germany that impacted our connector business and some of the raw material. And we're actually able to work through -- with suppliers in the area, how may they be impacted, who are the alternative sources. And that event happened at the back end of 1 week. And by Monday, Tuesday, the following week, we already had orders in for those types of components with suppliers that weren't in the impacted regions. And again, willing to take a risk of a little too much inventory at a period of time, but certainty of supply.

So I mean, basically, the question in the industry is, is there a need for a large inventory buffer, right? And there's different places in the value chain where it can be kept, right? It's in finished goods, right, which we started last year with a little bit of excess, right, and that got worked down because of the supply chain issues. But I mean do you feel like there's going to be an incremental burden -- a significant burden like as you kind of just talked about put on you for carrying costs and operating cost for managing that supply chain at a greater level than you ever have before? Or do you think this is something that you can price for? Because, right, the automakers are basically going from excess inventory at the dealer level, right? Now we're incredibly lean and maybe build some of that back and then forcing back into the supply chain these inventory buffers, right? Ironically, you're moving from finished goods to raw goods through to the value chain and pushing that onus almost on you as suppliers. I mean is there a recognition like as you're discussing this with them that like that's something that they used to bear the cost for. Now that you're -- it's kind of reversing and it's coming back into the supply chain, and that's something that you'll be able to get reimbursed for or recoveries for or pricing for? Or -- I mean -- or is this something where it's just going to be [ hey, guys, ] I mean, you have to have an extra 20 days raw mat inventory to deal with this?

I think the solutions are going to be more complex with that. The problem is we're going to need another 20 days. If you add up all these crises, they've all lasted well past 20 days, right? So...

Well, yes, we blew through that -- yes, we blew through many -- yes, yes.

I'm not sure there's -- it's that old is there's enough warehouse space in the world to have all the inventory to work through what we've been through in the past 2.5 years. So I think there's going to be more holistic situations. There's going to be situations like I described with the radar chips where we're willing to take the risk of more inventory for a period of time. We've got noncancelable, nonreturnable orders in based on a volume forecast, but that's on a relative basis very manageable from a balance sheet perspective if and when something was to happen from a demand perspective where we wound up with more chips. We've got an active safety business that's growing well over 20%. And so it's a, I think, a very educated risk. I think there's going to be -- you're going to have to have a number of solutions. Inventory may be one of those. But we even saw it last year, right? If you were in the first quarter and the second quarter, there was a lot of discussion around how the Japanese OEMs were much better -- in much better shape because they ran higher inventory balances, and they were going to produce longer. That was a Q1 and Q2 benefit. By Q3, they were generally in the same soup as everybody else, right? So there's only so much inventory you can hold. There's only so much -- particularly for semiconductors, it's going -- you got to be thoughtful about it because it's going to take a while until that industry could actually build up enough capacity and build up enough inventory in the channel to allow folks to hold inventory. So I think there's going to be -- there needs to be better communication. We've got -- we're continually working on our forecast processes as are our customers and our -- it's also important, our competitors. I think as an industry, we're doing that. It's hard to build a car with 90% of the parts. So you need everyone to sort of think through these things, which I think they are doing. I think the industry as a whole has responded to this. But continue to think and -- so I don't think, hey, if we just got rid of just in time, does this problem solve? It's lasted a while that electronic supply chain is going to be heavily weighted towards Asia Pacific for a while. It'll be a long time before you got European or U.S. or North American capacity where you can sort of regionalize. So I do think it's going to be a multipronged approach. Inventory is going to play a role, but I don't think it's -- that's the only answer. And I think, quite honestly, I think -- and Kevin has mentioned this a number of times. I think the way this plays out with customers -- are you going to be able to go back and say, I'm holding an extra $20 million of inventory, I want more money from you? Probably not. I do think over time, though, particularly the Tier 1s that do the best job of building up resiliency in their supply chain, provide their customers with the least amount of disruption are going to be recognized over time. I do think this separates the pack along those lines more than just every time we've incurred another dollar of cost going back to the customer. I think what they want to see -- and it's a perfect reasonable request -- is they want to see resiliency in the supply chains. They want to see improvements. Like I said, the discussions over the past, both with COVID and supply chain, they're generally very constructive. It's how do we make sure the cars get built. And I think a supplier that does a good job of that over time and works through this, things like the Ukraine through China in a open, transparent and effective manner are the ones that are going to be rewarded over the long haul.

So when you think about this near-term mayhem, it's crowding out a lot of time, right, for everybody. But I'm just curious, as you're going to market with new products and going to customers, how much of that is still going on, right? Are we still looking at normal bookings, RFPs? Are you going out there and bidding on product at a normal pace? Or is there actually a little bit of crowding out and a little maybe pushing out of product launches in the industries because there's so much to deal with coming from a fire?

Yes. I would say the crowding out occurred in the first half of 2020 when COVID was -- we didn't know what we were dealing with, was sort of just -- it was all consuming, right? I think pretty quickly after that, particularly as you saw the ramp in the back half of 2020, the EV electrification just started coming on so strong. You pretty quickly saw -- and we did see ourselves. We saw the customer side of resources dedicated to the constraints, to the problem areas, dedicated resources, not giving somebody 2 or 3 hats, but putting someone in charge of those issues. We did that. We stood up a supply chain constraint office over a year ago now. It's a global office. It's permanently staffed with folks. All the supply chain constraints go in there as we go into that group. We gave them the IT systems and the tools to manage it. They're on the front lines with our customers' bottleneck offices or constraint offices. So I think at this point, the industry has done a good job of realizing this all isn't going away next Tuesday, how do we make sure we got people that are focused on it, but how do we then continue? And I think you saw that last year. We had $24 billion in bookings, a record bookings year. Last year, it was really reflective of all the relevant technologies in -- future technologies going into the car. We booked about $3.5 billion of high voltage bookings. So I think we've done a good job and as have our customers of coming into terms that some of these constraints are going to be with us a while and how do you put folks on them to manage them effectively while at the same time making sure people can run the day-to-day.

So more recently, you made the relatively large acquisition of Wind River, right? And it starts to kind of put an exclamation point on the software-defined vehicle. I mean -- so I mean, as you look at that and SVA, they seem like they are these great growth opportunities, but they're a little bit -- a little further out. Between here and there, can some of that stuff be leveraged, right? Can Wind River be leveraged? And can SVA be leveraged or we're trying to continue to drive pretty significant growth? I mean I think I imagine the answer is simply yes, but I mean how do you take these -- sort of these longer-term bets and investments and then also leverage them into the near term to drive growth?

Yes. I think it's -- the answer is yes, it can. There will be some midterm benefits. I think the path we're on with the software-defined vehicle and SVA is very consistent with how we've seen some of these complex technologies go into the vehicle over time, right? Our first active safety Level 2 system advanced development award was in 2012. It went into production in 2015. It was our first launch of a large Level 2 system. Our active safety business is now almost $2 billion in revenue, right? So if you sort of look over that 10-year period, we went from advanced development to a very robust product line. And we've got content now with almost 20 OEs on active safety, right? So that is a -- I think that's a representative time line. As you start to think about SVA in the software-defined vehicle, we have 9 advanced development programs going on right now. They've been really working on them over the past 1.5 years. I think things will probably move a little bit quicker than the 10-year time frame for active safety in part because the industry has gotten a lot more comfortable with this technology, and there's actually a lot more demand for either regulatory or end consumer for more of this technology in vehicles. So I think it is going to follow the same path. One of the things we're seeing -- and for those who aren't familiar, it's really -- if you think about Smart Vehicle Architecture, it's really been what our vision for a redefined, consolidated architecture in the vehicle where you eliminate the hundreds of smaller compute platforms or processing that goes on in the vehicle, you consolidate it into 2 or 3 larger domain servers. There's a consistent software stack across those servers, the vehicles architected or network in such a way that allows for the power and signal transmission in the vehicle to really support these new technologies, right? It's really a -- it's not dissimilar to maybe some of the architectural changes that have happened over the enterprise or other industries over the past 20 years. It's hard for the industry to do. There's a ton of legacy architecture, a ton of legacy processors and design to those vehicles that really it takes time to consolidate. But one of the things we're seeing in the interim are these zonal consolidations. So we've got customers that are big believers. And ultimately, "My 120 control units, small computers in the car need to go into larger redundant systems that control the entire vehicle, but I can't go from 120 to 2. So how do -- but I want to be at the 2 in 2030, right? So how do I start to do that?" And we've had a number of awards, and we're launching next year some of the zonal architectures, which start to break the car up into sort of intelligent zones. The processing start to get consolidated within those zones. We start the process of abstracting some of the software applications from these really small processors, putting them into a more centralized larger unit. So you've got some software abstraction. The hardware at the outer edge of the vehicle becomes much more of just a signal processor than actually deciding what the car should do. And that's starting now. And we'll have some zonal architectural launches over the next couple of years that will help drive that active safety, that ASUX segment and continue the outgrowth. And as some of you may know, our outgrowth projections -- we tend to provide multiyear outgrowth projections. We raised it this year to 8% to 10% above vehicle production for the next few years, and that is in part on some of what I'll call those precursors to Smart Vehicle Architecture.

And there's this constant fear as we move in this direction that more and more of what you're working on is going to get in-sourced, whether it be the electrical architecture to some degree, but more on the software side and, ultimately, what will happen with Level 3 plus, right, technology. So I mean what is your answer to that? I mean it does seem like in the near term, the automakers might want to in-source more and [ hub ] more to understand exactly what's going on because it's a new technology, it's a new world, but ultimately, they may push that back out. I mean what's been your take as SVAs ramped up, as you're making this acquisition of Wind River, as you're working on more software that helps define the vehicle? I mean the automaker may -- I'm supposed to define the vehicle. It's my vehicle. Why are you defining it? I mean what's your answer to that? And how much opportunity is there for you versus what might happen on in-sourcing of this -- all these products?

Yes. No, listen, I think there's -- and you're right. That conversation often gets, I think, sort of oversimplified to some extent, and Kevin's articulated this well. The amount of software going into the vehicle is increasing significantly. Our view -- you'll have a $90 billion software market, broadly speaking, in automotive by 2030, right? And that's the dollar value of all the software going into vehicles globally.

And what is that now about?

Under $30 billion.

So triple.

Yes. So we see it as sort of a significant increase. There's no doubt that the OEs -- and they are. They're all doing this. They talk about it. They need to invest in their software capabilities. They need to understand the software that's going into the vehicle. Ultimately, the OE is the only one that has the complete picture of all the software that's gone in the vehicle, right, because you're the only ones that see the completed vehicle. So we certainly see a lot of investment on the OEs parts to -- to your point, to help define their individual strategies, make sure they understand the software that's going into the vehicles. And there's going to be software development that our OEs, they're doing it now, that our OEs view is important to their brand and they're going to want to participate in. Whether that's HMI or some of the vehicle behavior software as you get into the automated driver assistance systems, no doubt they'll participate there. We don't see a scenario where -- if you look at where we're really strong today on software, it's a lot of in the application or feature level, where we're writing radar algorithms for radar applications and vehicles, where we're writing -- doing the software for sensor fusion, which is taking in the signals from the radar, the LiDAR, the vision systems and allowing the vehicle to start to make decisions from a path planning or driving policy perspective. We don't necessarily see that, right? We think you're going to have a software stack that's in the vehicle that includes our application features because 20 OEs going out and writing their own radar algorithms, that's just not a good use of capital, of time. And we put the first vehicle on a car -- radar on a vehicle in 1999. So there's a lot of cumulative experience there that is a pretty cost-effective solution. So we think it'll be a shared effort. We think the markets -- the growth in software in the vehicle is large enough for OEs to take in a piece of that, and they should. They should understand the software that's going into a vehicle. We also think there's a lot of opportunity. And what we have with Wind River now where, if you think of a software stack, we have the application of the feature levels. OEs tend to be in that same area. When they design something for their vehicles, it tends to be an application software or feature software. But really with Wind River, we now have a very robust, real-time operating system, middleware solution that has a cloud-enabled development environment that has been deployed in over 2 billion devices, 2 billion edge devices, whether it's in aerospace, telecommunications, industrial automation. That provides for full life cycle management of the software that's on that edge device on that vehicle through a -- through the cloud, through what Wind River refers to as a single pane of glass, which means one individual. If you have our -- the software stack on 500,000 cars, that's 500,000 instances of that software that's out and about in the world. And you have the ability to manage upgrades, enhancements, bug fixes to that full software stack over the cloud. And we think that's a fairly -- going to be a fairly unique offering with automotive. We don't see a lot of folks moving in that direction yet. And we don't envision a world in 2030 where there's 20 of those solutions, where every OE has gone all the way down to the operating system, has developed their own DevOps environment. We think it's a solution where 2 or 3 players can have a meaningful impact on the industry, and we think we'll be one of those 2 or 3.

I got one more question. We have 5 more minutes. Does anybody in the office have any -- I mean, office -- in the audience have any questions? Got one over here. [indiscernible] mic.

Yes. One balance sheet-related question. I guess you did the bond deal a couple of months ago now, and you did the bond deal last year. How do you think about deleveraging, leverage profile following all of that?

Yes. The bond deal last year was a refinancing of some bonds that were coming up in 2024. Took, quite honestly, an opportunity in the market to push out. We did a 30-year bond offering. It was the third 30-year bond offering we've done in the past couple of years, which obviously is a -- from a quality of balance sheet and a tenet perspective, a fairly significant move. Over the last couple of years, we've moved the tenor of our debt up from 7 years close to 18 years. So significantly improved the financial profile of the business. We did go into the market right after we filed the 10-K for the Wind River financing. We expect that transaction to close sometime in late Q2. But just given everything that was going on in the world, we felt it was important to go out and get that -- to get that locked up. If you looked at what we did there, we did a mix of 30-year, 10-year and some debt that comes due over the next couple of years. We did that short-term debt as a means of sort of demonstrating our commitment to delevering. We -- our financial policy is to [ remain ] investment-grade rating in sort of the mid-investment grade where we are now. Very good discussions and relationships with the rating agencies. We took them through the Wind River transaction before we announced the deal. But again, I think it's important not only to have the ability to delever through EBITDA growth, but to have within the capital stack a means of getting there over the next couple of years, which we do. Yes.

And maybe -- we have one over here.

Over here in the corner. Good to see you all. Yes, I want to get your perspective on inflation and some of the key components that matter to you, semiconductors, electronics and copper, resins, I think, being the major ones. And how that's changed after Ukraine and then with the lockdowns in China, if that's having an impact on those as well. And just the OEM willingness, if that's also changing to cover some more of that inflation into next year.

Yes. I would say China at this point and even to some extent the Ukraine haven't seen a lot of direct impacts. Obviously mindful of the Ukraine around some commodity pricing, including oil, obviously, which at some point will work its way into resin pricing. Resin, we buy about $750 million, $800 million a year. Our semiconductor buys about $1.5 billion. Copper, we buy a lot of copper as well. But for 80% of our copper buy, we're indexed with our customers. We pass along those price increases on a quarterly basis. In some cases, it's every 6 months, but vast majority is quarterly price increases. So we're generally protected on copper. As I mentioned earlier, I think the dialogues with customers continue to be constructive. They're not going to cover it all, right? We don't have any customers, I don't think this is a surprise to anybody, saying, "Okay, what's the price increase? Let us know, and we'll take it all." That's not happening. At the same time, though, they're still constructive. They understand -- we've had positive discussions where we've been able to pass through price. There has been some pushback about going into the supply chain, which obviously we're doing as part of our sort of natural sort of procurement process. We tend to say no first when suppliers come in on price increases and wrestle with them about it. I think where the customers are probably being most constructive, which is very helpful because we can't do it without them, is how to reengineer or take out some suppliers, right, where you're going to have suppliers that are in a very strong position either from a technology perspective, or in some cases, in automotive. Over the years, the industry has gone down to using only 1 or 2 of these particular semiconductors for a given application, and there's just not a lot of choice. And in normal times, it's disruptive and expensive to reengineer those products out, to look at alternatives, to qualify alternative suppliers. And I think where customers have been most constructive is freeing up their engineering time, some of their engineering capabilities and funds to start looking at some of the more problematic, whether it's a chipset or a particular circuit board. And that, to us, is just as important because that's how you fix it long term, right? That's how you get the cost out of the system for both the customers and ourselves, is by redesigning the products. And again, it's something that just in the normal day-to-day of growing the business and new awards and new activity, it tended to be something that didn't get a lot of attention. But as these prices have gone up, it's certainly been a refocus. I think Kevin has mentioned a couple of times, we have over 100 of these projects now going on with customers. And that -- if you looked at sort of complete reengineering project, I think at normal times, you would have been hard-pressed to find 10 across the company.

I want to sneak in one real quick because we got it with a slight break. The -- when is the payoff pitch on Motional come? Before then, is there incremental capital that you may have to put in? I mean Hyundai has kind of anted up a decent amount there. And then as we think about sort of the portfolio more generally, I mean, Rodney O'Neal used to always joke, not joke, but say it's like you're always investing in the stuff in the future to grow the outgrowth -- drive the outgrowth in the future, but you're also carrying off stuff at the back end that is underperforming on growth. I mean how do you think about that? I mean Motional first and then just the aggregate portfolio. Are there things being considered to carve off the back or are they wind downs?

So let me start with Motional. So that's our automated driving joint venture with Hyundai. It's funded into 2024 with Hyundai's original -- when we formed the JV, they put $1.6 billion of cash in there. So at some point, will it need additional financing? Probably before it's cash flow positive, I think that's reasonable assumption. We're working very hard at the moment on finishing off the technology sort of road map. We launch next year or they launch next year with both Lyft and Uber Eats with automated -- fully automated, no safety engineer in the car, driving services for Lyft in the Las Vegas area, for Uber Eats in the Santa Monica area. There needs to be a lot more commercial activity. I'd expect to see more of that type of commercial activity over the next 12 to 15 months, I think, which would put us in a really good position to sort of take the next steps on what some of the funding alternatives are. I think as we've demonstrated in the past, we're not tied to any one particular strategy or opposed to any. I think we'd continue to look for the best ways to create value in that joint venture, including sort of the organic technology development as well as other additional partners, are there additional structures that could work. So not -- certainly not opposed to any ideas, but I think there's still a little bit more time as that technology sort of -- technology road map completes and we show the commercial activity. On the culling question, I think that's always -- Rod was right. Rod knows -- was in the business for years. I think there's -- I think we've done a nice job. If you look -- we really moved the portfolio hard between 2015 and 2019. We exited the thermal business. We spun powertrain or the internal combustion business. The investments in both organic and inorganic investments have really been focused on technology that is, to some extent or in a large extent, powertrain-agnostic. I think our total content tied to internal combustion engines at this point is about a $200 engine earnest that we've always netted out when we showed our content growth in EV. So we've positioned the business very well to avoid decremental content around things like internal combustion going away. With that said, you've seen us sunset some products over the last couple of years, and it's all been within the outgrowth. We've been able to grow through it. We exited the display business. A part of our -- in infotainment, we tend to do the high-end infotainment digital -- sort of digital cockpit compute boxes. We had a business that had just grown up over years where we're basically buying the displays, the screens for our customers. They were effectively pass-throughs. We did a few hundred million dollars of that business. We made the decision to stop doing that. We wound it down. So I think exits will look more like that. There's not a lot of them, quite honestly. Everything that we have is -- some things grow a lot above market. Some grow slightly above market, but it's a pretty good portfolio at the moment from that perspective.

Great. With that, Joe, thank you very much for the time. We greatly appreciate it. We're a little over. But hopefully, we'll have time for the next one.

Absolutely. Good to see everybody. Thank you.

Thank you very much, guys. Thank you. Thanks, Joe. Exciting stuff.

Thanks, man. Good stuff. Thank you, sir. [indiscernible] Appreciate it.

[ Say hi ] to Kevin for me, please.

I will. Yes, yes.