Dana Incorporated (DAN) Earnings Call Transcript & Summary

We're going to start with the next session. Very pleased to have with us Dana. With -- from Dana, we have Bruce McDonald, CEO; and Tim Kraus, CFO. Thanks, gentlemen, for joining us.

Thanks, Joe.

Really appreciate having you here.

I guess maybe just to start, and I think the question on sort of a lot of investors' minds is a status of -- you've announced the sale or proposed -- or valuation of the sale of the off-highway business. You talked about a goal to be able to announce a deal by late second quarter. I guess now that we're in June, we're sort of heading into the home stretch. So maybe just an update on the status there and how...

Yes. I mean I think -- I mean, obviously, we really can't get into an awful lot of specifics. But I think it's been a very competitive process. And during this time, we've had -- because we announced the sale, we had a lot of inbound activity. We have a very competitive process. I would say the uncertainty around tariffs slowed things down and the tightness in some of the credit markets has been a factor in there as well. But nevertheless, I mean, I'd say the way to sort of put it right now is we still feel good about the timetable that we've committed to, and we're in the red zone. And not the first play in the red zone.

Perfect. So I guess just again, I mean -- so you mentioned some of the -- with the advent of all the tariff noise, buyers or potential buyers are taking a little bit of look. When you just mentioned that and the credit tightness as the reason, I just want to be clear, is it -- like the comments you're making today are similar to what you were trying to communicate when you last reported? Or have they taken a look at tariffs, now they're taking another look at tariffs because...

I think the tariff situation is better. It's improved since -- even though we just got the new ones on steel and aluminum. But overall, the magnitude of the swings is a lot better. And it wasn't -- because off-highway is mainly European business, not that much exposure to North America. It is more around the impact of tariffs on the end markets. And for instance, U.S. ag is probably binary. It could be a big winner out of this tariff battle as we cut some deals or it could be a big loser. So that one is kind of binary. So the concern around tariffs is more around the expectation of when the -- because off-highway is trending down before tariffs, right? So it's really been when buyers think the business was going to see its normal cyclical recovery and is that going to be pushed out a bit. And so it's not really that big of an issue in terms of what's the impact going to be on 2025. It's been -- it's more, hey, we know this business is troughing and when is it going to pick up and that's probably going out. So they just need to sort of get their hands around that, understand it. And Tim, you probably talk about -- like our business has done a nice job of being able to flex its cost. And so that's something that they wanted to get comfortable with, hey, can you continue -- how have you done that in the past? Can you continue to do it, et cetera, et cetera.

And Tim, I don't want to cut you off and please expound on that. But I guess just maybe you could also add in like are -- is the potential sort of buyer group? I mean, obviously, they understand the sort of cyclicality. Like how are -- they understand though that this is a business that is maybe potentially closer to sort of trough levels versus normalized or sort of peak levels? Like have they done that sort of work? Or that's sort of what they're trying to understand from you?

No, no. I think that's been part of the diligence process that everyone that's in the process has gone through. I think to expound on Bruce's point, I think a big part -- the cycles tend to be short and steep in off-highway versus the other businesses that we run. So the idea or the playbook to take costs out and limit the impact on the contribution flow-through is really part of the DNA of the business. And I think a lot of the bidders want to really understand, especially given the footprint of the business being particularly in Europe, how does one do that? Why are they able to do it, right? This isn't how they think -- maybe think about Europe or the business. So we've got to spend a bit more -- probably more time helping them understand that. And obviously, it's a good thing. It's a positive for the business because it tends to operate very, very effectively, whether the market is going up or going down.

Yes. And I would maybe just add to that, Joe, is I would say the fact that we've had a very competitive process and the scarcity value of this asset has really mitigated any value deterioration. It's -- there's heightened concern. It's taking more time. But in terms of where we think we're going to -- this asset is going to trade versus what we thought, it's in the same -- I'll not say ballpark, but much -- it's in the same bull's eye.

Okay. Perfect. Maybe just sort of tacking on to the conversation of the sale and let's assume it sort of goes through at something reasonably close to what you're thinking. Just remind us sort of how you think about use of those proceeds, how you sort of think about the capital structure for RemainCo, Dana, if you want.

I'll maybe just start and then let Tim get into the detail. But I mean, we're looking at this as, hey, this is a transformational opportunity for Dana to move out of, I'd say, the trailer park into the top neighborhood of automotive suppliers. And you know what it looks like. There's a bunch of guys that are in the 2 to 3x leverage range. And then there's your I would say, more like your quality names that are down in the 1x times. And so this is an opportunity for us to fundamentally change it, really look at the negative impact that we have on our cost of capital from being over leveraged to get into like a target zone and be in a position to reward our shareholders, too. So why don't you sort of...

Yes. I mean I think Bruce got it right. We're looking at [indiscernible] use of proceeds, obviously reduce the leverage on the remaining business. And we continue to think about it as kind of 1x net over the cycle. So at some points in the cycle, it will be a little better. Some points, it will be a little above that. And then we'll still have proceeds that we believe we can distribute or return to shareholders in some form around the time we're able to close the transaction. So I think it does give us an opportunity to fundamentally reshape the balance sheet and return some capital to shareholders and then put us in a position to really be -- the ability to continue to invest in the remaining businesses that we own on the light vehicle and commercial vehicle side and really work to make those businesses efficient, profitable, cash flow generating businesses that will continue to not only support our customers, but generate a lot of value for our employees and our shareholders.

Yes. I think the -- one part of the story, I think, that's less well understood is if you look at the cost reduction activity that we've made great progress on. I can't thank the team enough. And we look at the step-up that we're going to get next year, which is only due to annualization. So it's not like it's more actions next year. You combine our improved profitability and we're saying, hey, we believe we'll be double-digit EBITDA next year on a pro forma basis. And you combine that with the better balance sheet and the interest savings, the lower tax cost because our off-highway business drives up our cash taxes, then we'll be in a position where we've got a great balance sheet. We can return capital to shareholders on day 1. We'll have -- our cash flow generation, we're saying it's like 4% of sales. So it's getting better, not worse. And so we'll be able to accelerate some investment in our business and buy back stock on an ongoing basis.

I just want to maybe go back to something you said because I think that maybe there is a little bit of a misunderstanding, maybe on my front. So on the cost savings part, you talked about $225 million this year, right? You raised that from $175 million previously. That's of the $300 million. But what you're saying is to get to sort of that $300 million, it's really just sort of the full year impact.

It's the annualization. If you think about it, we took about $10 million out last year. We're going to incrementally do $225 million this year. It puts us at $235 million. And a decent amount of the actions are happening in the back half of the year. So that will end up flowing through, and there's about an incremental $65 million next year, which is really from annualization of what we're doing -- what's happening this year in sort of quarters -- think of this quarters, 2 through 4, really. One, you almost have a full year in, but...

Yes. So if you think about to hit the number that we've talked about in Q4, we need to save like $70 million, $75 million. In Q1 of this year, we saved $41 million. So we go into Q1 of next year, $75 million versus $41 million, $30 million...

The math makes a lot of sense.

It's not more action.

Okay. But it does beg the question and like -- and maybe there needs to be sort of a pause in settling to see how sort of the organization handles up, but like is there even further opportunity you think for sort of cost savings?

Absolutely. I mean...

And what would those areas be?

Well, if you think about it, Joe, like when we've talked about where are we saving the money, it has been in a -- if I was to do a pie chart of our total cost, it has been in a small sliver. We -- there's an awful lot of opportunity in the plants. We think there's still some longer-term benefits that we can get in a cost above our plants, but we're going to have to make some investments to get there. I think on the commercial side, there's some opportunity. So yes, I don't think talking about cost reduction or margin enhancement is going to be a big part of the story going forward. And that's something that I would say I'm with our management team really starting to focus on now is -- okay, I don't really worry about are we going to get to $300 million or $225 million -- yes. It's now let's look at what we can do that's longer term more structural. And it's a target-rich environment, I would say.

Yes. And I think the way to think about it is I don't think of where we think we can take the business from a structural perspective is really being additional. I don't think of it as cost reductions. It's really margin enhancement across the board and thinking about things, where are the footprints, what do we need to do around our plant structure, where do we want to be -- what's really important that drives from a strategy perspective, that drives real value for the company and for our customers. And what are the parts of the bill of material that we don't need to make in-house? And how does that affect our cost structure and what we need? Because don't forget all those plants come with infrastructure and everything else that needs to go along with it. So I think there's a lot of ways we can continue to push margin in the business up that aren't really the tough process we've been through here over the last 6 or 8 months around what we're calling cost reduction, which is a lot of heads, which obviously impact a lot of the people that work for us in a lot of ways.

Yes. I would just give you a couple of examples that are very tangible. Like if you think about Dana in the past, we -- rightly or wrongly, I was sitting on the other side at the Board, and I was part of this. We believed in how much opportunity we had with electrification. And obviously, the market has done a [ 180 ] and we've got to pivot. But the amount of capital that we are putting in to support that endeavor squeezed the rest of our business. So if you went into a Dana plant, you would find things like robotics, and I'm talking not Elon Musk type [indiscernible] robotics around, but I'm just talking like robots that load and unload machines. You talk about material handling. We have very few AGVs, AGM. So we've -- and those are very high payback type opportunities, especially in our high-cost country plants. So those are things that we just didn't have the capital to invest. Footprint is another one. We're taking on a few things this year. Again, we didn't have the cash flow to sort of invest in optimizing our footprint, make versus buy. We suboptimized several things because we didn't, have the capital. So we outsourced it even though maybe it wasn't the best economic decision overall. So once we get ourselves in a position where we can step up our capital, I'm not talking like way up or anything like that, but we -- there's opportunity. Those just be a few of the buckets. And I see more -- a lot more.

I mean if I were to paraphrase it, it sounds like actually what this is, is it's a more efficient use of your capital spending that has a clear return, right? Because if you mentioned like some of that investment was for EV, which, as you mentioned, sort of didn't really pan out.

Long tail, high risk. Yes. And things like -- we've really taken a step back and looked at our aftermarket business. I mean that's a very profitable part of our company, but it's kind of run as a bit of a afterthought. And we just haven't made the investment in some of the more sophisticated pricing type tools that, I'll say, like benchmark type aftermarket organizations use. So there's a lot of opportunity in, I would say, our aftermarket business, even though it is our most profitable part of our company.

And as you make some of those adjustments in an area like aftermarket, is that an area that you think there's sort of further growth opportunities, either organically or inorganically?

Absolutely. Absolutely. Yes, absolutely. I mean we -- well, why don't you talk about just North America -- what we're looking at in North America here?

Yes. I mean if you think about it on an aftermarket basis, right, our -- we sell -- we think of it as hard parts and I'll call them soft parts, but they're not really. But our core driveline business, and then we have a thermal and sealing business. Well, the sealing business aftermarket, we're a #1 or #2 player in Europe with Victor Reinz, and we're really not a player in North America. And there's historical reasons for that coming out of bankruptcy and what we had to do to exit. We're moving back into the North American market. And that's -- there's a -- it's dominated by one of our competitors. And really, we've kind of had to start again, stop again approach to this. Well, now we're really thinking about this as a strategic way to grow the business in a very profitable way and getting those ready-made -- we don't do any investment. We already know the SKUs and we have the parts. Now it's really going out and selling those and doing the work to price them appropriately, get them on the store shelves, get the sales group focused on selling those. And that can ramp very, very quickly at very high margins to really help drive the profitability. So I think there's one. And then really thinking about, hey, how should we -- we have high-quality, high-visibility brands. Are we pricing for the value that those brands bring? Do we have the right brand stratification, high -- best, better -- good, better, best, right? I mean a lot of -- to Bruce's point, a lot of things that companies that are really core focused on aftermarket do day in and day out. And it was not probably the focus that we had for a lot of reasons, we're focused on a lot of other things. But today, that's some of the work we're doing internally. And I think of that as sales growth and margin enhancement, but it's not cost cutting, but it can deliver a lot of value.

So this, I think, is the ancillary benefit that we're getting from eliminating a PT business unit. So we talked about we saved like $30 million, $35 million combining it. But putting all of aftermarket together, it's kind of been an eye-opener about, hey, we're really not doing it as well as other people with businesses of our size. And so there's a lot of opportunity there. And similarly, on the rest of the business that we put in with light vehicle, you start to look at, well, what does this business look like without the aftermarket profitability? And it's pretty terrible, like it loses money. And so it's like, well, hey, I make 0 on the weekend. So I'm not coming to work to make less than that. So Byron and his team are -- have been charged, hey, you've got to earn our targeted return on the OE side of this business. Otherwise, we got to get out of it. And so I think we're going to -- a year from now when we said, "Hey, we thought we were going to save $30 million to $35 million, and it's going to be more like $100-plus million that we're going to realize from doing that.

To be clear, you're talking about the OE portion of the prior power technology.

Correct. Yes. Think about it this way. I think the easy way to think about this is like think of the Sealing business, right? The very high profitable aftermarket business, which, by the way, we make a lot of those gaskets that go into that. We also make those same gaskets, sell in the OE, right? That was combined, you looked at, the margins were pretty good. I mean, we always -- it wasn't like we were -- we didn't understand that the OE business wasn't -- it was less profitable. But when you really sort of through it, and now it's separated those things sort of flowed up pretty quickly to the surface and become really a high priority to go take a look at. And that's what the team to Bruce's point, Byron and the team are -- and by the way, some of this is just a fresh look, right, new group, new management team asking new questions, like how does the business work? Why do we do this? And those -- those changes are sometimes really helpful because you do get a new perspective and somebody asking different questions and leading our down paths of, well, do we really need to be in that business? Or how should we be pricing that product? Or do we really understand what the costs are in that business. And so we're really at the -- really front end of that process, which I agree with Bruce has an opportunity to yield pretty significant additional margin improvement for the business.

Sure. I guess just to maybe -- is there -- like it sounds like a lot of what the aftermarket is basically right products as you sort of already make on both the OE and aftermarket side, but is there also a further opportunity to leverage the brands you have, leverage the channel relationships you have to sort of take on a new aftermarket product?

Yes. I think it's not so much new aftermarket products as it is taking the product portfolio we have in utilizing those channels. So if you think about we've got channels for the sealing perhaps we didn't really use particularly well for the Spicer brand in driveline products. Well, you can sell both of those through the same sets of channels, but before they were separated, right? That aftermarket business was in LV and the other one -- now it's all combined. And so now it's like, well, what's the -- what's the channel strategy for our highest-end products across distributors or the big 4 retailers, right? And I think that's the benefit we're getting. Not like, hey, let's go figure out how to make -- to sell windshield wipers. That's not what we want to do. I think that's too complicated to do for the business. We have good parts like that have high-quality brands associated with them that we think we can continue to push and be better at aligning the channel strategy with what the products we have and getting them to customers that are willing to pay for those high-quality brands right away.

Why don't we move a little bit more towards the here and now. I mean I know in the last quarter, you gave some sort of broad strokes market outlooks for the different markets. Given that we're now -- your end market. So given now that we're 2/3 of the way through, and you probably definitely have the schedules for the next month. Like how have things sort of progressed, do you think maybe by end market or by region.

Yes. Why don't you start with that one, Tim?

Yes. I mean, so we continue -- so I'll take light vehicle first, which is, for us, generally in North America, I mean, volumes continue to hold up pretty well. We're not seeing -- we were concerned about whether we would see volume impacts from tariffs and higher pricing. We're not seeing that. Schedules are holding up pretty well. Now we're on products that tend to be a little bit -- you take Super Duty. It's a new truck, right? It's work truck related. So it's a little bit more insulated, which is which is helpful. But then you also think about, right, we had Wrangler, which was coming off a pretty difficult year. So that's still holding up really, really well. And then you think about Bronco, Bronco has been a really great vehicle for Ford and for us. And then -- so that's sort of -- on the commercial vehicle side, we continue to see weakness in commercial vehicles. There was...

In North America...

In North America. It is some expectation that there would be some prebuy. We didn't really see that. That's really -- most of the OEMs have come off of that, but volumes there are lower than where we were expecting. I mean it's what we talked about last month or in April on the first quarter call. That hasn't really improved any. When you look around the rest of the world, Brazil is holding up. That's principally from a CV perspective for us. So that's still good. That business continues to improve. We've got new leadership down there, which is really doing a great job. And then you look at Europe, which is primarily the off-highway business. And again, as I mentioned before, while a bit weaker, the teams have done a really, really nice job of maintaining the quality of the earnings in that business as they kind of do it -- and by the way, they do 2 jobs, right? They're working to sell the business and still running the business. So I really appreciate the effort that, that entire team is really putting in to -- it'd be really easy to blame the process on not keeping their eye on the ball, but that really hasn't been the case.

I'd probably say, though, if you just sort of step back, Joe, is the tariff -- we said on our call, "hey, the situation is manageable. It's not -- we're not too worried about it." And I would say, since then, the absolute magnitude of the tariffs has gone down. I would say we feel increasingly positive that we will get substantial recoveries from our customer. I'd say more substantial than we thought 60 days ago. And I think the fact that the, I would say, on the CV side, when we talk to our customers, they're in discussions with the administration around trying to get the same type of deal that the automakers got which would be a positive. And I think the fact that the OEs have this sort of 2-year transitional offset really derisks the volume uncertainty that I think we all had 60 days ago. So I feel like a lot better about it. And I would say we're focusing on mitigation now instead of just like understanding what the hell the impact is.

All right. Tim, you mentioned the off-highway in Europe. I thought on the last call, you were seeing maybe some hopes or at least some signs of sort of green shoots. Did that not...

We're still seeing some of them. I mean, I think the they're still there. They're -- it's a pretty diverse end market, right? It's not just construction and even...

Mining...

Mining is definitely a positive for us. we continue to see some stuff in material handling that continues to be a bright spot for us, not only from a volume perspective, but also from our market share in that business, that's a business that -- especially when you look at warehouse side, right, there continues to be a growth area for us in that business. So -- but yes, we're still seeing some of that come through. I think ag is probably the 1 that continues to -- we -- there's -- it's not getting progressively worse, but we're holding our own around ag, especially in North America. And I think that's a lot driven off of much of the stuff around tariff and are we going to be able to export grain and farm products to China? And how is that going to be affected so.

And I guess, to be balanced, though, we are keep -- I'm sure folks are talking about the rare earth issue...

Well, that was the next question, so yes...

So we are keeping our eye on that. I mean, I -- for us, it's not a massive issue, but for the industry, it is. I was pleased -- yesterday, we got our first export -- or our supplier got its first export license approved on our -- the high transmission business that we -- I think we won the PACE Award and we've talked on the last call. So it's got less than $10 worth of magnets. And -- but without them, we can't make it. So that was very positive that we got a little bit of unclogging, now we still have issues elsewhere. But hopefully, that gets better. I'm sure a lot of the other guys are talking about it.

Yes. I guess the question on sort of rare essence brought up, it sounds like there is a little bit of a direct impact for you and some of your products. But I guess the other would be indirect in that. It's sort of not a product that Dana is providing, but the vehicle you provide to needs it and there could be some disruptions.

It's all over the place.

That's always the issue, right? Really, it's -- you don't -- it doesn't take much to take the particular program down and then you end up -- you end up -- while you weren't the issue, the OEM can't make the vehicle, it doesn't really matter. They're not going to order the part from us.

I think the positive is, like we submitted our first application that got rejected. They need more information. We submit again same thing. And yesterday, we got it approved. So at least...

A little bit of loose shift...

I mean I'm not going to declare victory, but it's better than -- it's a green shoot maybe a tiny one.

But -- and have you seen any changes or adjustments to schedules because of, again, maybe not Dana the issue, but just sort of broader through the supply chain?

Not yet.

And nothing that we would necessarily...

That you're keeping an eye on...

Yes, of course. Our customers are basically going out supplier by supplier. Like how much of the stuff do you have? What's the status...

How much inventory do you have like, where you're at...

And when are we going to have a problem, yes.

And is it -- we know it's in light vehicle. I'm assuming it's in across all end markets? Or is it more ...

Yes. I mean there's -- I mean some level somewhere you just think about any type of electronic.

Some of our motor and inverter stuff.

Yes, motor inverters for us directly are probably 1 of them but...

But again, those volumes have come down so much from where they were. And it's -- it hurts, but it's not a major, major issue for us anymore.

Fair enough. I guess the other sort of more -- I hesitate to use the word late-breaking because it seems like there's always something more sooner that it comes up. But over the weekend, we had some news on steel and aluminum tariffs. And maybe you could just, a, remind us of your buy and the mechanism you have in place. I think like -- I think -- and again, like -- this is -- I think most of the steel you buy is in the U.S. is what you've mentioned in the past. So it's more of an indirect impact that the price of steel may fluctuate, but...

Yes. I think the way to think about it or we do buy some base raw steel and aluminum, easy one to think about on the aluminum side is aluminum substrate in the thermal business. We buy rolled aluminum. It's not pure aluminum, it's got other things in it. But -- and then we played it and stamp it and turn it into thermal products. Also, we use that for the battery cooling business. So that's a direct buy. Most of our -- most of the metals we buy are in the form of semi-finished, either forgings or castings for our driveline components, which we then finish with machining and assemble them. So most of that's coming through -- we're buying steel sort of indirectly through buying the semifinished product. We have pass-through mechanisms for changes in the commodities. So to the extent that the price increases or anything that's coming in is tied to an index. That index is likely to move, and we're able to get recovery. On the direct tariffs, we are going back to the customer to get those recoveries immediately, but we have very, very high confidence given that a steel tariff generally just raises the price of base steel on the index anyway, so that, that will be able to be recovered through normalized mechanisms versus having to go and deal with it elsewhere but...

But just to size it, Joe, I mean for us, it's -- we talked about it being about a 20 -- like when it went to 25%, it's about $20 million roughly. So it's another $20 million. And in the past, we would always say, hey, we got mechanisms, but there's a lag. There is no lag because we capture the impact in our tariff recoveries. And then the index tends to rise up and then there's a reset through the normal mechanism. So it's -- I don't really worry too much about that 1 in terms of, is it going to have a positive or negative impact on Dana. That's not in my top 10.

Okay. You want to go run through that top 10? I guess just maybe as we sort of start to wrap up a little bit, the 1 other thing I sort of have been thinking a lot about is just footprint, right, and sort of investment, and I think you guys have a pretty solid U.S. footprint, especially for some of your sort of core products. But if you think about the goals or sort of intention here to sort of resource more to the U.S. and as you work with your customers, maybe they want you to move more to the U.S. for compliance purposes as well, right? Like clearly, as you look at across a vehicle, there's some lower-value parts I say, that are going to be difficult to move in some higher value parts that might make more sense. And I would say Dana's products tend to fall more in the higher content, higher value portion. So do you agree with that? Is -- and like for what you don't do in the U.S. are you having conversations with your customers about what it could look like to move capacity?

I would say that is an excellent question. But until there's a bit more certainty around like, is this the final rule. I know when we talk to customers like, well, is this going to survive in the next -- like what's going to be like in 4 years' time. It is something that we talk about our customers as we quote because they're saying, hey, like I'll just give you a Super Duty as an example, which we just won, is, hey, we made a target costs. We put in, okay, we can do this and this and this, and that's on this and this may be move more stuff out of -- to Mexico or overseas to take advantage labor -- or whatever. And now that we're saying, hey, here's that quote, here's the tariff adjustments. Now maybe we need to rethink that, that moving this from the U.S. to Mexico, we thought it was going to say that. But you know what, maybe it's better you pay $5 more and keep it here in Warren or Sterling Heights or whatever, and -- but the tariff impact will be less. So we are doing it like that, but I would say we aren't really having any discussions yet anyway around re-moving things around. That's just -- I mean, I don't know what other suppliers are saying. But for our stuff, it isn't happening yet.

Yes. And I think the other thing to think about here is like you mentioned that we have high cost, high value, good most of our axles are assembled close to where we're delivering them anyway. So I mean, there's -- it's some of the componentry really around them, but it's hard to ship axles a long distance. They're very heavy, they don't ship well over long distances. And it is like we're already there. It's really some of the parts of the bill of material on some of the components that we're going back. But to Bruce's point, what's it going to look like in 4 years. And we don't -- I always make the comment, we don't invest capital for 4 years. We -- a lot of times, especially in the core component machining, we're investing capital for 40 years, so like which is part of the problem with what's going on, right? We're trying to make -- we're not making decisions for the next term, we're making it for the next 4 decades.

Yes. When you think about our exposure, Joe, for Dana, it is really a question of where we sourced things from. And so it's like a big 1 would be castings and forgings from India. There is no other place to get them. So it's not like we can say, oh, let's start buying those like maybe a little bit, but we can't say -- like we buy $200 million of casting. Let's go move it all to a foundry or whatever in Ohio, like there is no empty foundry, right? We have -- in aggregate, we got about $80 million of stuff that we buy from China, and we're trying to resource that. For sure, and some of that's like would be small wire harnesses or electronic parts that -- again, it's not a lot of money, but when the tariff will go 145%.

Comes a lot of money.

It's $100 million, right? And then on steel and aluminum, it tends to be, hey, it's grades that we can't get here. So we don't have a ton of opportunity around resourcing, I would say. Some subassembly stuff that we do in Mexico, maybe we can move up here, but it's not the lion's share of it.

That's more I guess, what you call like brownfield or you have excess capacity as opposed to a new facility.

That's a good way to think about it.

Yes. And the big assumption is out there is our -- we got USMCA being renegotiated in 2026, right? So is this exemption around USMCA compliant going to stick or not. And we'll have to see how those negotiations go because that probably will drive a lot more activity that you're suspecting.

Right, yes. I guess, it's a great point. I mean, I think though, holistically, and I think even sort of what you mentioned with the example of India and some in China, it's like some of the stuff we get from these countries are we really ever going to do it again in the United States. And so it might need to be some sort of consideration from a policy perspective.

Yes. Yes, I think that's right. I think that's right.

Okay. Great. Well, I think we're -- that brings us to time. So Bruce, Tim, thanks for joining us. Really appreciate [ joining us ] today.

Thank you.

Thank you.