BorgWarner Inc. (BWA) Earnings Call Transcript & Summary

I'll kick off with the next fireside chat. I'd like to start off with a presentation with BorgWarner. Most of you are familiar BorgWarner is my topic in the sector. One of the few names. I actually like as a sector as I'm pretty cautious, just hosted their Investor Day last week. I think is -- obviously, we'll talk about it in a bit, but very compelling sort of transition from ICE to BEV with some pretty solid wins there. So today, we have Fred Lissalde, who is the CEO; Kevin Nowlan, CFO. Fred is, I think, going to kick it off with going through a couple of sort of thoughts on the Investor Day to kind of set the tone.

Yes, exactly. Well, good, good morning, everyone. So last week at Investor Day, building on the success that we've had since the inception of Charging Forward in March 2021, you can see our scorecard in the Investor Day deck. We've announced that we would -- we have a plan to grow our eProducts to $10 billion in 2027. $10 billion worth the size of the company, the overall company in 2019. That's how fast we've moved. We've also announced that we're doing that profitably, matching to double-digit margins by the end of the decade with a clear milestone of 7% adjusted operating margin in 2027. And on the business that we keep what we call the foundational business post the spin off PHINIA, we want to maintain -- maximize the value, maintain market and maintain margins. This is the products that we -- the product line that we have created over the past years, and we effectively have product from [ grade ] to wheel. What we do for a living at BorgWarner is we are solving for efficiency challenges in the world of battery electric vehicles and electrified powertrain overall because this will lead to higher ranges or smaller battery pack depending on where the customer wants to position the car, the vehicle itself. So if you take a step back, $10 billion of eProduct revenue in 2027, it's about 49% of our revenue. 42% of our revenue will be in pure BEV, 42% in pure BEV in a market that we believe is going to be about 32%. So we are 1,000 basis points overweight in BEV. And if you take this in perspective -- put it in perspective, the $10 billion is comparable to $5.6 billion of eProducts in 2025, already 18 months from now. What is an eProduct? An eProduct is a product that go into the BEV or a product that go into hybrid that could go into the BEV. So a motor that goes into a hybrid could go into a BEV into an eProduct, but an e-turbo that goes into a hybrid powertrain can't go into a BEV. It's not an eProduct. That's how we define eProduct so that we have clarity with everyone here. And if you take 2027 at $10 billion, you grow at market, and we usually outgrow market, you get 2/3 of the company being eProducts by the end of the decade. From a footprint perspective, why would we reinvent the wheel? Post PHINIA, BorgWarner will have 60 locations around the world. We're using those locations when we grow eProducts. In North America, we're using Seneca who's making transfer cases right now for foundational products. We're going to include battery packs in this one. They know how to manage big systems. They know how to announce products. We have a very, very mature management team, who went through a tornado by the way, a few years ago. Some of you may remember. And we're doing that already with 15 of our locations, 15 of our 60 locations. So that is about 25% of our location. We already have plans to transition, transition capital and transition human capital. That goes in addition to the part level where we train engineers from the world of combustions to the world of electrification. Bottom line, on the next slide, you see the profile of the current margin in 2023 and the margin in 2027, what we say growth. What's more important is that, that growth is on about $7 billion top line growth. So in a nutshell, we're going to generate $750 million more of adjusted earnings, which is a 55% growth from the current year in 2027. Long story short, we believe BEV are accelerating. We believe that we have exceeded or substantially met all targets that we set to ourselves back in March 2021, and we're only accelerating. With Charging Forward 2027, $10 billion of eProduct revenue, 7% operating margin breaking even in free cash flow, maximizing our foundational products and leveraging the capital and human capital that we have in those foundational business to fund the Charging Forward 2027. With that, I turn it back over to you, Colin.

Okay. Great. Maybe to kick it off, the one number that jumped out at me from your Investor Day, and there are quite a few numbers, but I think it was 6.1 million is the inverter target for 2027. It's quite a large number. And where -- how much confidence do you have in that number? How much sort of already booked? And what kind of assumptions you have baked in there? And sort of where do you think that will sort of leave you from a competitive standpoint?

High confidence. In inverter, we have 3.1 million inverters have already been booked 18 months from now. You take a step back, if you look at the $5.6 billion of eProducts book in 2025 and if you take the $10 billion in 2027, you back out $1.7 billion of acquisition, it's $8.3 billion. So you compare $5.6 billion of eProduct revenue in 2025 to $8.3 billion in 2027. So we're pretty much more than 2/3 on the way.

Got it. And what is the competitive landscape in that product? Because I mean -- I don't know how many times you said scale at Investor Day, but I imagine in that area with 6 million units, it's going to be hard for people to compete against that in terms of scale?

Yes. We believe that we are the #1 in the world, non-captive already in 2025. So we are -- with the product and the efficiency that we focus on, we are participating in the upside of the market. Competitors, those are the usual suspects of high-volume electronic suppliers in the auto space; the Denso, the Bosch, the Vitesco, those would be our main competitors for those programs. When we book inverter business, those are not niche programs anymore. It's hundreds of thousands of products per year that most of our customers asked us to produce in 3 continents. So not many people can do that.

You're kind of talking 3 or 5 sort of major players are likely going to emerge...

That's right. That's right.

Okay. Anything on China as a competitor? Or are they still...

So in China -- we're very successful in China. If you looked at our Investor Day, out of the 29 awards that we have been able to announce, the vast -- the biggest portion of that 29 is in Asia, which China is a big portion. 70% of our business there is with the top 4 or 5 Chinese makers, car makers, not with the Western JVs. We're very, very successful there, too. And it's the biggest market. And you have to be successful. If you remember, Colin, we -- this is where we started 5 years ago. And we've done fair transmission for Chinese OEMs since about 10 years ago. So we're well established there and well established with leadership teams that are Chinese.

What about in-sourcing [indiscernible]? I mean, it seems to be a vertical integration. It seems to be very, very popular, varying among automakers when they talk about EVs. Do you see -- what about your technology [indiscernible] not bring it in-house, the way a lot of them we chat about?

Go down to, again, back to the basics of product leadership of efficiency. When we get to 6 million inverters or even 3 million in 18 months from now, we have 400 volts. We have silicon. We have silicon carbide. We have 800 volts. We have a combination of all those. We have modular design. We're producing those inverters in 3 continents. We've announced a numerous amount of inverters, already marching towards 6 million inverters. With scale comes competitiveness, comes preferred relationship with -- from an engineering side and also from other types of relationships with supply base who want to work with us. So at the end of the day, it's going to be better product at the lowest cost, and I think we can compete.

Okay. That makes sense. Maybe switch to the battery pack business, which I guess is the old AKASOL acquisition, supposed to be $1.3 billion. How should we think about that market? Is it more commercial and off-highway? And what sort of differentiates your packs versus the competitors that are out there...

Right. Yes, we are only doing battery packs for commercial vehicles, trucks and buses. We are not in light vehicle. And we start with buses, electrified buses. And we are, by far, the largest independent battery pack maker in this market for trucks and buses, very high-power density, great software and great thermal management. We are really at the forefront of this technology and we work with all the blue chip -- not all. We work with -- and I think it's public, right? We worked with Volvo. We worked with Daimler where really quite a few others where we couldn't [indiscernible]. We have -- we will soon have 4 manufacturing locations in the western world for battery pack manufacturer. And so we're pretty well established in this field. But again, we're focusing on commercial vehicle trucks and buses.

And the Investor Day focused almost all on battery, which is not too surprising, but you have quite a bit of ICE business still left. And I think your outlook is that it's down slightly. So I'm actually a little surprised by because I know ICE is falling, but my understanding is that -- a lot of you are exiting that market. It's sort of consolidating and then you still have penetration in things like turbos and [indiscernible]. So what are the drivers there and the sort of offsets to the ICE decline? Because I think you're still outperforming the decline in it but...

Yes. So we announced $11.5 billion to $12 billion this year going to $11 billion in 2027. So pretty flat. You've got different dynamics here. First, those combustion products go into hybrids. And in the foreseeable future, a lot of people talk about BEV. That's great. We find it great too, but there are a lot of programs in hybrids and essentially high-voltage plug-in hybrids that are going to be very important for our customers to meet the regulations. And so in high-voltage plug-in hybrid or in hybrid, you've got all those combustion components that make the engines smaller, leaner and more efficient, fuel-efficient in this case. So the market is still taking -- when you think about combustion, you should think about combustion plus hybrid. If you take thermal chargers, for example, in this country, the take rate of a turbo is about 35%. In other parts of the world, it's close to 90%. Why? Because the turbo is making the engine smaller and leaner. So you add also additional take rates in those businesses. You mentioned consolidation. It's true. Do you need 6 or 7 turbo suppliers in the future? Maybe not. Who are the customers going to bet on, most probably the ones that can support them the most, the ones that have the best, the strongest financial strength and the ones that can support them from a validation standpoint. And the ones that have relationship between combustion, hybrid and electric and BorgWarner is one of them. So now we're also anticipating the fact that this business is going to decline and restructuring and position of strength and Kevin talked about that in the Investor Day. So those are the puts and takes that you may want to think about when you think about our combu -- foundational business.

And I've heard some automakers are actually considering sole-sourcing instead of dual sourcing as they move -- do you see that as a trend? And I guess an opportunity? I mean that's even -- I don't say it as a leverage. I'm not sure if I would agree with you OEMs doing that, but...

Yes. I mean the OEM and companies like BorgWarner have relationship that stands across so many product lines that dual sourcing a particular program is not what it's going to ensure supply to the OEM. What's going to ensure supply to the OEM is working with a supplier that has the ability to support a resilient supply chain. And yes, you see movement to single sourcing combustion, but you also see movement to single sourcing e. I want to tell you a story on this. With the European carmakers, we've sourced the first tranche of an inverter for their BEV platform. And they wanted to source other supplier for tranche 2. And we came to them saying, don't bother sourcing a second supplier for tranche 2. What you want is too resilient supply chain, right? Yes, that's what we want. Keep your engineering money, don't pay the second supplier. We can support 2 very distinct supply chain that will never overlap from manufacturing the inverter in different [indiscernible] resilient supply chain down to [indiscernible], right? And we can do that because we have scale. If you don't have scale, you can't do that. If you don't have scale to stuff to create one supply chain resilient -- with resiliency, you won't be able to create two. So supply chain resiliency is part of the new paradigm now of product leadership. It's not only great efficiency in product, but it's great efficiency in product, great differentiation from an efficiency standpoint and very resilient supply chain.

Supply chain obviously has been pretty important in the last few years. Probably the biggest question out of the Investor Day was the margin target. So 2027, 10%, not up that much from the 9.4% sort of the point of guidance this year despite all of the growth. So why -- I mean what are those puts and takes into that? And sort of what kind of up and downside risk to your target as we think about it going forward?

Yes. I mean I think there's 3 things that when you think about the scaling up of the revenue and getting to that margin that you just have to keep in mind when you're thinking of conversions, I mean the first is make sure when you're doing the math on that, the acquisitions that we put in there don't come with conversion. You're just buying effectively whatever the margin profile is of that business. And I mentioned that because we know some of the people doing the math coming out of the Investor Day, we're assuming contribution on that $1.7 billion of M&A, but that's not how it really works, the math of it. Second, on the eProduct side. So going from basically breakeven in Q4 into this year up to 7%. We're pretty pleased with that because what it implies is ex-R&D that there's a 16% contribution effectively on that growth. And when you think about that, this is a business that's scaling up, launching a lot of new products because we're going from, call it, $2.5 billion of revenue this year and growing organically almost $6 billion over the next 4 years. So a lot of launches, a lot of program ramps that converting that at 16%, we're pretty pleased with. And so that gets us the 7% on the E, which isn't an end game, but it's an important stepping stone to what's next. And then third, on the foundational side, Fred touched on it. We do see a little bit of pressure, a little bit of decline in foundational between now and 2027, and that will come with some decremental margin, which is why we're proactive about executing on restructuring and other things. So that's really what takes us from the 9.4% to the 10% and so maybe some of the puts and takes. I think the bigger picture that we look at, though, is, in the slide, Fred put up on the screen, it's not just the 9.4% going to 10% out of $7 billion of revenue growth, which means our operating income has grown $750 million or 55% over that time frame. So I think that's where the real value creation opportunity is.

And the 16% that's with the -- I think -- you did a math like $200 million of e-R&D is incorporated into that?

No. The 16% is ex the e-R&D growth. So it's 16%, the e-R&D then takes off of that. So we're still ramping up e-R&D. We're actually ramping up CapEx, which is coming into depreciation and impacting our operating income as well. But even with all of that ramp up, we're still delivering 16%. But yes, the 16% is ex the e-R&D. It's everything else.

Are there any savings from ICE R&D coming down? And then I think it was like $80 million to $90 million of restructuring savings is also coming...

Absolutely. So the -- I mean, we look at the R&D separately. So the e-R&D is supporting the e-programs, the ICE R&D or the foundation R&D is supporting foundational. We don't look at it as a blended pot. We actually look at them as 2 distinct business lines. And so the foundational, the ability to sustain margin is really looking at all aspects of the P&L. They can be looking at R&D, it can be looking at [indiscernible] cause, they could be looking, in certain cases, of pricing opportunities. It's looking at restructuring and executing on that because we know, like, at some point, the eventual decline in that portfolio comes, we see a little bit of that headwind through '27, and that can come with healthy decrementals. So we need to be proactive in executing now to make sure we can sustain that strong margin profile.

And I guess one of the pushbacks I guess -- concern that's out there on the margin. Is the e-business, it's going to 7. It's eventually going to get -- you said in the past 2-year ICE margin? Or is it just a different return profile?

We actually price it on an ROIC basis to be the same. So it's -- we target any programs that come to us, whether they're foundational programs or e-programs, are priced to have a 15% ROIC over the life of the program. And generally speaking, the capital intensity of the programs are substantially similar between foundational and electrification. So over the life, we would expect to have comparable types of returns and therefore, margins. What impacts the e-business is we're still ramping up all along the way. We're not growing at 2% to 3% or 4% per year. We're still growing double digits, even out through 2030. When you can see '27 to 2030, there's another 55% growth occurring in just that 3-year time frame in the eProducts. And we still think by the end of the decade, we get to double-digit margins. but that's not the endpoint either. We think the potential to continue to grow from there exists. It's just we're still ramping up and scaling up at that point.

And you're targeting that break even by the end of this year. What sort of line of sight do you have to that? And what are the risks and puts and takes or kind of cause you to miss that?

I mean we have good line of sight to it because we watch it very closely. And I mean the biggest factor impacting our ability to get to the breakeven this year is really the scaling up of the revenue. We saw and -- we started disclosing our e-Propulsion segment, which is where 2/3 of our eProduct revenue lies today. And that's why we broke it out as a segment. You saw it was generating a negative margin in Q1, minus 7% in Q1 on just under $500 million of quarterly sales. But you can see as we ramp up through the year, and by the fourth quarter, the midpoint of our outlook, it's $800 million of revenue. So that ramp-up is really what's important. Because we've already leaned forward from an R&D perspective, that R&D is in the P&L today and the revenue ramping up and the contribution margin that, that throws off is what starts to offset that and gives us the breakeven. And that's the overall profile for eProducts. We've leaned forward pretty significantly in eProducts R&D. Last year, we increased at $150 million to about $420 million. This year, we'll do another $60 million to $70 million increase. But the pace of the increase in R&D is slowing, but the pace of the revenue is accelerating. And that's really the path to profitability breakeven at the end of this year, 7% in 2027, double digits by 2030. It's really the scaling of the business.

Got it. And the Investor Day you talked about sort of 4 key areas of the inverter or the pack, the eHeater and the eMotor. But you do have a lot of other capabilities, onboard charger DC-DC. And we'll say, from all the analysis, I have tried to pull those things quite fragmented in areas. How are you thinking about those? Are those areas that you are looking for acquisitions to scale up? Are there areas that you have on a clock and at some point you decide you know what the returns aren't going to be here?

Auxiliary power electronics. Yes. We would. I think we have products. The issue that we have is, we'll take more scale if we can and organically stuff because we're so busy from growing our inverter business. And our engineers are busy just ramping up and booking business. And we're very, very laser focused on what we want to book. We can't go after everything. Yes, if we have an acquisition that would have a book of business and a good engineering team, we will look at it in a disciplined way as we've always done, but we would look at it.

And where are you looking at in terms of acquisitions? Because I think you had every target on your last Charging Forward plant exact acquisition. So how is -- what kind of areas are you sort of focused on? And what does the pipeline look like? And what is your confidence of doing $1.7 billion?

I would say out of the 3-pillar, acquisition is the one that we are not exceeding. But [indiscernible] we still have some time to grow very good targets going into 2025. So -- but yes, we would look at scale in other power electronics. We will look at thermal management. We will look at getting scale in our charging business, which is also similar to our battery businesses focused on commercial vehicles, trucks, buses and fleets. Those are some of the areas that we would -- we are looking at.

And is there -- has the M&A market improved a bit now that some of the pack multiples have...

It's made the discussions between us and prospective sellers a lot more conducive to getting to a deal. I mean we've -- because a couple of years ago, when you're dealing with eProduct-based companies, you're always dealing with the competitive tension that potential seller could go access public markets and get a very frothy multiple, right? And so that caused a lot of things that we were looking at even 2 years ago to be more challenging to get executed because we're also, generally speaking, we're not -- we're sourcing our own deals. So we're not generally in auction processes when we're pursuing the acquisitions. None of the deals we've done today were auction processes. They were all deals we sourced on our own because we thought they filled needs. So what's the competitive tension. Is the seller interested in selling? And if they are, do they have a better exit strategy because it's either us or what? It's either us or going it alone or going to the public markets where the public markets are going for a lot of those companies and that opportunity. So -- and the capital is still challenged. Some of these companies are trying to ramp up, and they might be burning cash in the process. And they might have a tough time getting to the types of scale and being as successful as if that were -- portfolio were part of board. So I think it is definitely creating more opportunities and more conducive discussions than maybe in some of the situations we saw a couple of years ago.

Yes, that does make a lot of sense. You've been able to manage this volatility and been a great few years between raw materials, energy and labor better than other suppliers. What has made you more nimble than others there? What about how you start your business there to help you manage that those ups and downs better than others?

I mean as I look at over the last few years, I think what's been really Important for us is probably 4 things. One is, we were executing on the Delphi integration and driving a lot of synergies. I mean we ended up with over $200 million of synergies that came into the P&L and helped mitigate a lot of the headwinds that we've been seeing as an industry over the last few years. Similarly, 2 years ago, 2.5 years ago -- wow, actually, 3 years ago now. 3 years ago, we announced the proactive restructuring actions, just like we announced last week at our Investor Day. We announced $300 million of actions that generated over $100 million of annualized savings. It just kind of came into the P&L gradually over the last few years and helped again to mitigate some of the headwinds. Think third, last year, we were really aggressive about pursuing the inflation recoveries. And we had $674 million of inflationary costs come through the supply chain, and we recovered $585 million of it. So 85-ish plus percent of that, which I think was important that maybe differentiated us from some others. And then finally, I'll just say I think our operating model is critical. We operate with a very decentralized, what we call local accountability model. The locations don't wait for Fred or me to tell them what to do. They know what to do because they are profit centers and they control their own destiny. So when times are tough or there's challenges in the marketplace or in their particular business, they go and execute. They don't wait for us. We're not getting them -- telling them what to do. They go do it on their own. But those things have been differentiators for us.

That sounds definitely [indiscernible]. How about content per vehicle, maybe if we could just frame where you are today on opportunity for ICE versus BEV opportunities when the sort of later products that you're on?

Yes. I think if you look at the combustion post PHINIA, once we complete the spin-off of PHINIA, which is now scheduled to happen on July 3, you probably saw on our press release this morning and first trading day will be July 5. So once you -- once we exit PHINIA, we'll have about $550 of content opportunity per vehicle on a combustion vehicle, you look at [indiscernible]. If you look at a battery electric vehicle, it's about 4.5x that. It's about 2,500 per battery electric vehicle in 2027. So that's why we're positioning ourselves to be overweight in the e-space and to make sure that we're capitalizing to get to the same types of product leadership and ultimately, market leadership because it provides the type of revenue growth opportunity that you saw in our Investor Day last week.

The price -- the average price of an inverter overall is higher than all the combustion assets. Could we sell them all into an engine and transmission?

But yes, I mean you can be at $400 for a 400-volt silicon inverter, up to $800 for an 800-volt silicon carbide inverter, and we're saying all of our combustion business, if we can win all the content that's applicable to a particular vehicle, about $550. So you have that one product. And by the way, that content per vehicle, the 2,500 is per light vehicle. It doesn't include a battery pack. I mean, one battery -- well, if you take an articulated bus running around in Europe right now, that might have 6 packs. You're approaching $100,000 of content on that bus. So we don't count that in the 2,500 obviously, because it would just -- the numbers would be absurd. Same with the charging stations. I mean for a power converter unit, you're looking $25,000, $30,000. For the dispensary, you're $10,000-plus. So those contents are very different and obviously not really applicable to a light vehicle.

And the $550, is that adjusted for PHINIA...

It is. So PHINIA, I think, was about $300 or so of content that's come out from our combustion opportunity per vehicle.

And were there any -- it's kind of hard between the accounting, were there any stranded costs with the PHINIA's spin that sort of you need to absorb that impacted between the 2?

I mean, by and large, because of that operating model I referenced earlier, we were very decentralized. So we don't tend to have a lot of -- we don't have a global head of manufacturing or global quality individual or shared services that cut across the organization. The plants are really autonomous businesses that go operate on their own. That's why you don't see our corporate cost is [indiscernible]. So it's a long way of saying, we don't tend to have a lot of what you might think of the stranded cost. The $80 million or so that PHINIA is looking at adding is truly the cost of adding the corporate infrastructure to support their need as a public company.

There's a little bit that comes out of BorgWarner and goes from, I'll call it, left pocket to right pocket, but by and large, that $80 million of cost is new cost that they need to make sure they can file their SEC documents and support their Board of Directors and all those things that come along with being a public company.

Got it. Are there any questions in the audience? Maybe you talk about chargers, which is kind of with some of the announcement in the last few weeks, it's been a hot area. What motivated you to get into that market? How much synergy is there with your current business?

I think the synergy is very clear from a product standpoint. Also from a 50% of the better build material of a charger is made with stuff that we buy hundreds of millions of dollars a year. So we think we can make an impact from the product reliability standpoint, can make an impact from the cost standpoint. And don't forget, we are focusing on those commercial vehicle, bus, fleet market. And those people, they want to work with a global player. They don't want to work with supplier, one in North America supplier, two in Europe, right, they want to work with global players in it. We think we can be that global player that looks at the product and looks at the competitiveness of those chargers will be either an auto supplier.

[indiscernible] you're not trying to do like chargers, like charge point charges or something like that. These are more for individual business?

Yes, we do very high-power DC-DC, bidirectional chargers that are really tailored for trucks and buses.

And is there a synergy with like your inverter capabilities?

Yes. Absolutely. Synergies from a software standpoint, from a silicon carbide standpoint, from a controller standpoint, from a purchasing standpoint, absolutely.

You're keeping a good chunk, you could have spun more off, I suppose, with PHINIA of your ICE business. What was the rationale for doing that? First, I do think there's a pretty good hedge there, but why did you keep so much ICE exposure?

3 things really. The first one is, it helps our customer also bridging from combustion to hybrid to electrification. And we need those relationships to exist. And we -- this is an asset to us. Our customers need us. We need them. We're bridging that relationship from the world of combustion to the world of electrification. Two, those products that we retain post PHINIA are technology enablers for growing in the world of BEV. I'll take a few examples. Electronics in the world of combustion and powertrain in the world of BEV, it's the same thing. And keeping engine control unit, transmission control unit, our engineers, our relationship with the suppliers, the scale of purchasing, these are key enablers in getting -- in leveraging that scale in the world of BEV. Vehicle dynamic, 4-wheel drive, transmission components, motors, all that is pretty close to what the battery electric vehicle need. Thermal management in the world combustion, releveraging our EGR cooler capabilities to book battery cooling plate in the world of BEV. So both from a process and product standpoint, those are key enablers. And last but not least, they generate the cash that we need to carry out executing Charging Forward 2027. So that would be the 3 key reasons why we kept a significant portion of our foundational business in the company, which is going to account for about half of our revenue in 2027.

I think in Investor Day, you did have a slide or 2 that if your EV mix is off, your sales will be lower, but margins higher. So there is actually, in your financials, there is a bit of hedge as you go out, is that right?

There absolutely is, I mean. So we talked about our baseline scenario through '27 where our operating income grows about $750 million. And then we said, well, in playing that forward 3 more years, what happens? Okay, we're a $25-ish billion company operating around 10%. But we know the gun doesn't shoot that straight, right? And when you look out 7 years, forecasts are just at their forecast and they could be wrong. And you could have lower EV adoption than what we project or higher EV adoption. But our portfolio is constructed to be resilient in those scenarios. So if the market isn't at 48% battery electric vehicle production in 2030, like we project, would say it's only 40%. Our revenue is probably a little bit lower, maybe $1 billion plus lower because we're positioned to be in the fastest-growing portion of the market, E would overweigh. If that's not growing as quickly, our revenue doesn't grow as quickly. But at that point in time, the foundational portfolio, which is probably still a little bit stronger margin at that point, it would be holding up a little bit better, which is why the margin percentage is a little bit higher, probably low 10s. On the flip side, if battery electric vehicle production goes to 60% instead of 48% underlying our baseline outlook, okay, our eProduct is probably growing faster, probably making some more investments in R&D and other things to support that. And our foundational portfolio is probably coming down a little more quickly, which means it has healthy decrementals because we see decrementals probably bigger than incrementals on the way up. Higher revenue, slightly lower margin percentage. But when you just take a step back and look at the underlying operating income under those scenarios, it's roughly comparable, call it, in the $2.3 billion to $2.7 billion range under any one of those scenarios. So we feel like the portfolio is constructed to be pretty resilient under any of those outcomes.

All right. I think we're actually out of time. So there's no question. So -- all right. Well, thank you very much.