Dauch Corporation (DCH) Earnings Call Transcript & Summary

Welcome back, everyone. Continuing on here with the AutoTrak at the 2024 UBS Industrials Conference. Pleased to have American Axle next up here with us, we have Shannon Curry, VP and Treasurer; and David Lim from Investor Relations. I think David wanted to -- just a brief disclaimer comment.

Yes. Yes. Fantastic conference. We always enjoy being here. But we do want to tell all of you to look to our forward-looking statements that's on aam.com on the IR site. And with that, that's right.

Yes, let's kick it off. So obviously, a very volatile year, let's say, to say the least in automotive. And since we are sort of approaching year-end, I think I got my like Spotify wrapped, let's see sort of feeling a little bit nostalgic. I'm wondering if you could sort of maybe just take a step back and assess what you think went well for American Axle in a very challenging year and where there are still some areas to sort of work on?

Yes. So I'll start with that. What's gone well? I think we've seen -- we've been really focused on some operational improvements in our plants. We've seen sequential margin improvement quarter-over-quarter. We've seen stabilization in the supply chain and also in our workforce and some of the hourly labor availability issues that we've been facing are certainly still there, but we're seeing stabilization, and that's also leading to some of the margin improvement that we're seeing, particularly in our metal forming sites. So I think we're feeling positive about the operating momentum that we have going into the end of the year.

Perfect. I know you gave your advisers sort of outlook a little bit here or tweaked it, I guess, at the end of the third quarter. We've seen as per usual, right, schedule is always sort of change soon announcements of downtime, pluses here and minuses there. When we net it all together, any sort of major surprises we've seen here sort of in the fourth quarter as we begin to think about next year?

We've seen some incremental downtime that we didn't contemplate starting in the quarter. We did anticipate and we talked about this on our third quarter earnings call. Some volatility in our production schedules because we have a couple of big launches that are occurring on 2 of our major programs, but we've seen a bit of top line pressure on top of that as well.

Yes. How -- can you just remind us like on those sort of major platforms you're on, especially when there's a changeover, like what's sort of the lead time that you sort of see like in terms of sort of capacitizing and sort of getting the product ready for the production of the vehicles.

Are you referring to like when we get full ramp-up.

Yes, exactly.

I would say maybe within a couple of months, 3 months. It really depends on, like how quickly the final assembly is, how comfortable they are with their final assembly, if there's like quality issues, they'll slow it down a little bit. But within 2, 3 months, it should be open. And with some of the additional downtime, you mentioned sort of maybe a little bit unexpected. Was there still enough flexibility in the system to sort of take some costs out to deal with it? Or do we sort of see sort of normal flow-throughs on that volume? What should we expect? So I think what we should think about is every time there's a volume decline, there's always a 25 to 30 contribution on the downside. But if you take a look at what we've done in the last several quarters, we have a strong emphasis and operational improvement. And our goal is we're going to continue to make stride there, the question at hand is how much is the downtime going to impact this overall. So look, I think our focus will continue to be on optimization. And what you saw in the first, second and third quarter from what we're trying to do, we're trying to continue that momentum.

Okay. Again, recognize that we're not going to sort of get $25 million now, and we'll have to wait for your fourth quarter report. But I imagine the company is clearly, if not squarely into sort of the planning process for next year. So just at a high level, right, how are you sort of thinking about the industry and sort of the market and some of your key customers. And has some of the election outcome and potential policy because we haven't anything sort of happened yet, right? How is that beginning to sort of factor in at least for sort of contingency planning or anything?

Okay. So I think it's '25 guidance is obviously too early. We are observing the same data points that you guys are all observing right now. I would say that interest rates are something that's top of mind, affordability with the consumer and there's a lot of policy rhetoric that's happening. We just have to wait and see. I mean if it goes one way, there could be a snowball effect that impacts other areas of the industry, and we have to see it as a whole rather than just pieces two at a time. So it's difficult to answer your question because the policy could really way one or the other, and it really changed the way that we could possibly change the way we do business in the mid- to longer term and could have obviously short-term repercussions. So Look, I think once the Trump administration gets into office, there's more clarity. And we have some time from now to when we report 4Q earnings to sort of sharpen up our direction of what we can do.

Well, I mean double click on some of the policy because there's 2 main areas. I want to sort of, I guess, EV policy and one is trade, right? So let's start with EV policy. I would argue, maybe you disagree that irrespective of who won the selection, it was clear that something was going to need to change from either a regulatory perspective or you could just see the demand wasn't as expected for EV. So we look at some of your key contributing products and you look at some of the third-party forecasts, as you get to sort of the middle of the decade, back half of the decade, there's a tail off but it's completely supplanted by electric visions of that product. Are you -- internally, do you think now that and maybe you always thought this, but is that outcome less likely in your view?

Yes. That really has been a view that we've held. And if you've talked to David and you've heard him make comments over the past couple of years that it seems that the EV kind of ramp up where it might be expected to be 2030. That seemed a little overexuberant from the forecasters from our perspective and that ICE would have a longer tail than maybe what was being forecasted. It seems like that is what's going to play out. And if I had a longer tail, that's good for us. We have a lot of installed capacity, of course, to support those programs. Those are good cash generating programs for us. And so as what we see is that those propulsion systems will coexist, we think, for a long time that EVs won't completely supplant they'll coexist. And then also that there will be an expansion of hybrid vehicles that come out, and that's something that we also can support very well. We're well positioned to do that. And so that's overall generally favorable for us when we look at our programs from a volume perspective. If the ICE tails longer and we extend programs that we're already on, which, of course, are large programs, that's good.

I know we don't have the engineering team up on stage. But from a hybrid or sort of plug-in hybrid perspective on some of those trusts, is it -- and I know it depends on the configuration, but generally, driveline axle sort of is that -- is that still a decent opportunity for you if some of those larger vehicles move in that the hybrid?

P Yes. Yes, absolutely.

Yes. I mean I think Shannon has mentioned during our investor calls that when General Motors did the hybrid version of their big trucks and with that, I mean, it was really no different axles with similar content. There could be actually opportunities for more content. So yes, I mean hybrids are great with us, too. And does -- you mentioned you've always had sort of a slower adoption outlook for electric fields and maybe some third parties clearly proven to be correct. It does seem like you are still at least stepping up some of the investment you're making for electrification. Now maybe that's not as much as you originally planned, but this still is higher. Is there an opportunity to sort of push that out even further if certain policies you do see sort of if there's clear signs of certain policies do you take hold.

Yes, certainly, there is. We would continue to develop out our full electrification portfolio and continue to optimize our traditional products from a lightweighting perspective and focus on other efficiency initiatives that would benefit the ICE and hybrid programs. So we would expect to continue to focus on R&D, but there's definitely an opportunity to regulate it at a more kind of spread out pace, same for CapEx. If we're extending ICE programs, that's going to be less CapEx for us, maybe it's retooling and things as opposed to new equipment. So we could spread the CapEx out. We do -- we are believers in the EV technology. So we certainly see that still a growth area for us, and we'll continue to focus on that. But being able to regulate it with cash flow generating core business while we're doing it, is definitely helpful for us from a cash flow perspective, helps balance for sure.

I do want to come back to policy and other aspects but since you sort of brought up CapEx and the reusability to the extent that ICE last longer. I mean it seems like to me like where you get sort of spikes in your CapEx is when you do have big program changeovers even for existing ones. And as you mentioned earlier, there are some big ones coming up. So how should we think about CapEx heading into '25?

So I would say that, look, I think the general thought is we want to stay 5% or below, there are going to be periods of where it's going to go up episodically a little higher than that. And look, in those situations, it's going to be probably more related to launches than not. And if you take a look at like the S&P production schedules, you'll see some big programs are about to change over the next couple of years. We're going to typically spend CapEx about 12 to 18 months before that launch period. So yes, but if you take a look at our historical CapEx, I want to say, in the past, we used to run like 8% to 9%. And we've done a fantastic job in controlling that. So again, 5% or less, and there could be periods where it could maybe trend a little bit above that. .

Are there major changes to axle and driveline all just sort of a refresh of the capital because some of the tooling is old .

So it's going to be a little bit of both. I mean there is going to be capital that we're going to reuse, remaintenance or always be capital that's going to be needed in any kind of launch. But if you take a look at what the directive was from the top of the house, maybe 2, 3 years ago, is a program to go in and say, "Hey, what do we really need to buy all new? Can we reduce things? Can we refurbish things?" And that's how you've probably seen our CapEx numbers sort of trend downwards over the last couple of years.

So let's move on to everyone else's area of focus here, at least from the investor side, on the policy which is trade. And I'm sure you've been -- you've probably gotten this in some of your meetings today, and I'm sure you prepared for it. But look, we could all see your footprint, right? There's definitely U.S. facilities. There's some maximal to be perfectly candid, right? This is an industry-wide issue, right? The industry is very heavily reliant on Mexico and to a lesser extent, in Canada. We obviously don't know what exactly will happen. But again, in a similar vein to what we were talking about earlier, there has to be some sort of contingency planning. So can we just sort of talk about your footprint, what a potential impact would be, I believe you operate Macquiladora. So that seems like it might have some additional mechanism is places like I'm not sure how much of the product comes from the U.S. into Mexico and then sort of back out to the U.S. But what -- how would you sort of frame your sort of exposure to Mexico, let's say?

Yes. So it is really impossible at this point for us to speculate on the exact impact that it might have, as David mentioned, in isolation, without considering what might -- may or may not happen in other regulatory or policy changes. But to give some context, we do have a large manufacturing presence in Mexico, we produce about 35% to 40% of our sales come from our facilities in Mexico. The majority of that is sold to OEMs within the country of Mexico. Now they then produce automobiles that most are subsequently imported into the U.S. So there would be a tariff that would apply to that will ultimately we would imagine would result in inflation and the cost of a vehicle and put some pressure on affordability, which then could have a pressure downward effect on demand. So indirectly, yes, we'd be affected. We wouldn't directly be paying tariffs if they were applied in that direction. Our overall philosophy as a company is that we source generally as much as we can in the same region that we produce for the market. So in the U.S. for U.S. production, we're buying most -- sourcing most of our direct materials from U.S. sources. So not as much risk there. Now our Mexican operations buy from U.S. sources. So if there were retaliatory tariffs, that could have an impact. So there are several different pieces to think about, but just to give you some context. Those are some data points.

So the GM's facility is not supplied from Mexico?

It is.

It is. Okay. So there is -- so you said the majority, but there is clearly some product across the quarter.

Yes.

So -- and recognizing that look, ultimately, this will be brought to the negotiation if the tariffs are sort of put in place. But by the way the contracts are just written, if there was a tomorrow and you had to ship an axle from Mexico to across the border, who is actually paying that.

Yes. Our customers generally take ownership at our dock. So they would be the importer of record in the U.S.

Okay. But then they would obviously come to you and saying, we've got to figure something out.

Potentially, right. Yes.

Okay. And does the Maquiladora status that all impact some of that like -- because if some of the product is coming from -- my understanding, and correct me if I'm wrong, I'm not an expert here, but is that if you have some U.S. product coming into Mexico, be the Maquiladora, but then it sort of comes back from Mexico into the U.S. It would only really apply value-added portion in Mexico? Or is that not.

It's possible, but that's where it gets really difficult to speculate without knowing specifically the details of the rules and where it would apply or where it wouldn't and any exception. One thing that is just the fact, is the automotive industry it's so important to the U.S. economy. The automotive industry in North America is completely interconnected. So it's hard to think that a new administration would want to damage the U.S. auto industry and tariffs being applied the way that they're being discussed would definitely be a shock to the system. So whether something might be applied over a longer period of time or in a different way, we need to wait that out to determine it, but I'm sure there will be rational thinking about the effect it would have overall on consumer demand and affordability in the industry as a whole.

Yes. In the last earnings call, David sort of mentioned or alluded to the new business quoting of iron being a little bit more muted. And I think there's valid reasons for that. I guess what I'm wondering is the expectation now given it seems like even greater uncertainty because you reported, I think, pre-election, right?

Day after, I think.

Was it day after, okay, maybe. But still, now there's even more potential uncertainty. Do you expect that to remain the case here for a little bit? Or are some of the conversations with customers sort of continuing on because they realize like irrespective of what happens like there's a need to move certain things in certain directions.

Yes. The uncertainty definitely makes it difficult for the leadership at our customers to make long-term decisions. So some of that may continue to hold quoting activity and program decisions for a bit of time. But I think as you said, irrespective of exactly what happens, it does seem clear that the ICE for longer tail and some of the EV maybe incentives or regulations will change. And so having that piece of the overhang, it feels like will end, and then they can start to make some decisions about that. Now if their plant footprint decisions or other things, those I think will be on hold, and we'll need more information, probably to settle out. .

In ICE for longer scenario, do you envision that being like brand new ICE programs or sort of more of an extension and sort of more elongated in life refreshes, maybe not sort of completely new programs, but sort of minor to somewhat major refreshes to sort of keep that capital investment sort of on their end, some at function.

At this point, I think our view would be the latter, as there would be program extensions, maybe just higher volumes on programs even pre-extension and with maybe design adjustments and other things, that would be kind of something we think of right now based on what we know.

And it seems like that would be a somewhat of a positive for you because it was one that you need to invest. Obviously, there would be some refreshment or refurbishment of capital or whatever. But that -- but to the extent the programs you already have business on just run for x number of years longer, that seems like that's positive for your margins and cash flow.

Correct.

Okay. So we're crossing our fingers for that. And I guess, by extension, sort of the other side of the quoting activity and sort of the backlog, which I know you'll sort of update in January, February, whenever we report. But as you do sort of was reported as a gross number, but then talked about historically, there's been about $100 million to $200 million of attrition. So is it that the gross number is lower, but the attrition number is also lower. So net were at a fairly similar level. Is that a high-level way to think about this?

Yes. The way that program extensions would affect attrition is it could run it to the lower end of that because if we previously felt that a program would expire or end, and now it extends, we would have less attrition in that case. It's hard to say what that does to the backlog because we do expect there still will be new program awards and things like that. But on its own program extension should reduce attrition that we had expected.

What about as automakers, right, because we sort of have focused our conversation to date really very much on the U.S. and North American market, which makes sense for your company. But a lot -- but some of these automakers are a little bit more global, and there are obviously challenges in Europe and likewise, some of whom are struggling in China as well, the foreign brands. So as they think about where they want to invest their capital, if they still have to deal with some other calls on that cash, do you see more of an opportunity for business to come your way from business that they've maybe historically done themselves? Or is there even an opportunity for them to reevaluate suppliers they may have used in the past or a certain product to see if they can get a better, more cost-effective product.

Yes, we certainly think there's an opportunity for that, and we're very well positioned for those kinds of discussions. I mean, our history of how our company has grown. GM outsourcing their axle business to us. We're really good at that. And the relationships we have with our customers are very strong, and our capabilities are strong and our customers appreciate that. So we think if it trends that way, we're well positioned to support them. .

But it has to make money.

I guess, and that would be -- I mean, that would be around sort of core axle and driveline product where you see the biggest opportunity or some of the other areas?

Could be core driveline product, it could be maybe they were thinking about electrification doing more in-house and they shift their gears on that. On the electrification technology side, as you know, we can provide e-Beam axles, we can provide e-Drive units. We can also provide components. And so we'd have the opportunity to support in maybe more of the full system way if one of the OEMs were to ship there planning in that direction. So I think both.

Yes. So moving back to sort of thinking about the future sort of at a high level, and let's again sort of ignore some of the trade uncertainty. If we think about the profitability of the business and the margin profile of the business, obviously, volume is a key factor, probably the most important one, as it is for pretty much every supplier. We could all make in this room and on the webcast or on sort of assumptions about volume. What I'm curious to learn a little bit more about is aside from volume right, going back to sort of how you sort of rated maybe some of the 24 performance. What is in American Axle's control that can still drive margins either higher or lower going forward. And how much opportunity do you see there at the DC?

Yes. We are intensely focused on continuing to improve efficiency and productivity in our plants. So we think that -- what you've seen this year in our margin improvements, we think that, that can continue and that in both of our business units, there's further opportunity there. We're looking at plant loading, how to optimize our production among our plants. And then as I mentioned, some of the things that have started to stabilize that can run more at optimal levels. That's a real focus for us. So big opportunity there.

But I guess the schedule stability certainly has improved, I guess, versus sort of some of the low lights, I guess. But like -- but if we sort of go back and sort of commentary just mentioned, it does seem like there's there is sort of a lot of uncertainty. So is there the potential for some of that volatility of the return? And what lessons learned from the prior periods of volatility can you apply it to sort of going forward if it were to occur, I'm not saying it, well -- but if it were to occur, what type of future?

Yes, absolutely. That's a great point. We're focused on being as agile and adaptable as we can be, which is hard when there's short plant downtime, short notice for the plant downtime, but that's one of the things that we're just trying each time it happens to get better at it, to reduce the decrementals and things like that so that we can adjust as quickly as possible. So that will continue to be a focus for us. There will always be volatility, the schedules won't be perfectly what you planned. So we need to be as structured and good at that as we can be.

Recoveries were also part of the equation in '24. Is that still -- is there still some level of recoveries you expect to occur next year?

So I think the general thought for next year is if things stay the way they are part, it's going to be pretty muted next year from a recovery standpoint. .

Okay. Yes. And then we see -- and in commodities, I guess, are sort of a little bit unclear as well, although that might be another area that's also sort of subject to tariffs, I guess. So can you just sort of remind us some of the buys and maybe even what you saw happen with steel pricing. I know you buy SPQ, but what happened sort of in Trump 1.0 and tariffs are put in place on sale?

So 2018, I think we had about $5 million of tariff impact in '19, call it, around $10 million to $15 million, maybe a little closer to the $15 million side. So we'll see, but most of our steel buys are now here in the U.S., we do very minimal outside of the U.S. So I think in that sense, it sort of insulates us now a little bit more. But again, with any kind of tariffs, we'll have to see the broad spectrum of how that's -- how the policy is going to unfold. And are there any sort of contractual levers on the commodities for -- so as you already know, we do direct buy with some of our raw materials, and then we have the pass-through element. And that's just mechanical, we pass through 80% of any increase or and it goes the other way to.

The tariff would include be considered part of that increase or now?

No. That is kind of the indices as they change the tariff would be separate from that if it were paid on the base price.

Yes. So yes, those are the 2 elements on our commodity base. Okay. And we touched on CapEx a little bit, but anything else sort of we should think about from a free cash or free cash conversion perspective into next year?

No. That's really the main point. I mean the EBITDA generation and the CapEx looking at the forward programs, our interest, cash payments for interest should come down over time as we continue to consistently pay down our debt levels and interest rates, we do have a pretty high percentage of our debt is at fixed rates, but some of it is variable. So as rates decline, that should help that as well. And then just keeping focus on working capital management, there may be some opportunity in the -- for example...

Job there, but is there an opportunity here?

There could be some opportunity in the inventory levels that we carry as things continue to stabilize. But in periods where there's volatility, it's -- we may hold a little bit more stock just to protect ourselves and our customers. So -- but overall, we manage working capital, as you mentioned, very well, so.

One of the things that we're hearing from a number of suppliers, I'm not sure how applicable this is for some of your businesses, but is looking towards more automation in the plant. What -- maybe you could sort of let us know like what have you been done? What are you looking into? What are you investigating? Is that a meaningful opportunity at all for you?

I think it's -- the automation side is going to take a little longer. I mean definitely, we could put automation equipment in more on the quality control side. We already have robots working on manufacturing. I think we have to really weigh the investment in automation versus is it cheaper to automate or retain employees. So once we get that fully figured out, we'll probably be more and more on automation, but it has to make sense from a dollar perspective. But -- and the whole initiative behind that was because of the lack of labor, it really forced the industry and maybe we can just talk about ourselves for American Axle to go back and say, we see this problem. It could probably reoccur in the future. So what do we do in order to mitigate that. And it's something that's being evaluated from our COO's office.

Yes, it makes -- it's not just a cost and math problem, it's an availability problem that automation can help solve.

Yes, for sure.

I want to see if there's anything in the audience. We got a couple.

A question just on recoveries. You talked about it being maybe a more muted year in 2025. Curious if there's anything about the sort of repricing or piece pricing that you've been working through over the last couple of years that would maybe start to carry over into 2025. So you're not seeing the actual recoveries, but you're seeing sort of better profitability per unit, whether it's covering the cost of labor, covering the cost of commodities, anything like that, that you could speak to?

So I mean, when those costs are being covered, we're not necessarily adding margin to the recovery. So that's the way that we probably think about it, it's being the increased cost, input cost is just being additive to the overall bill of material.

What about -- I know there's another question there, but just to follow up on that point. If we think about when peak inflation occurred a number of years ago, that's in the quoting on those programs, that's probably about -- like this year is probably when those programs start, right? So is that not -- I mean, I guess, like is that a benefit for you that you sort of quoted at sort of higher levels of inflation? I know inflation hasn't sort of necessarily come way down. I guess it depends a little bit on the commodity. But -- and I guess to follow on to that, if there was a program that was bid on at sort of peak commodity levels and commodities are down, are your customers coming back to you saying we need to rethink that pricing?

So I think the simple answer is they monitor input costs like Hawks. We monitor our input costs like Hawks, and it works both ways. When inflation was going up, we went to them. And if we made a contract a couple of years ago at peak commodity and peak labor prices and that sort of falls down, the negotiation is both ways.

Yes, okay. Sorry, go ahead.

I have a couple of questions. First on steel, for your non-pass-through buy, what percentage of that is renegotiated here in Q4 for the start of the year? And is that sort of 1-year contracts, 2-year contracts? Obviously, steel prices have come down. So I'm trying to think through -- should we look at last year's steel prices, 2 year ago steel prices? Help me understand some of the details.

Yes, that's a great question. We normally contract for 1 to 2 years. We haven't broken out a split on how many of that dollars and cents or a percentage of what's 1 year versus 2 years. But normally, our contracts are for 1 to 2 years.

And they do reset at the start of the year.

Generally, the negotiations are going on or the discussions are going on, I mean, as of right now.

And it's about 20% that's nonpass-through pardon? It's 20% of your buy nonpass-through. Is that a good number?

So we haven't broken out the number between direct buy and pass-through. We just said that there is an element where we do a direct buy from our steel mills, et cetera. And then there is an element that we do pass through to the OEM customer. But we never -- we haven't dimensionalized the 2.

Okay. And then obviously, the tariffs, who knows what the peso will do moving forward, but it seems a bit weaker than where we've been. Have you quantified the impact of the peso on your cost structure? What kind of sensitivity should we think about there?

Yes. So in a given year, we buy between MXN 5 billion and MXN 6 billion of pesos to support our Mexican operations that are selling in U.S. dollars. So that's mostly the labor and local overhead that we have. So that's kind of to give scale to it. We do hedge the majority of that on a 3-year rolling hedge program. So in the coming year, we would normally be 70%, 80% hedged for the coming 12 months. And then as we go out in the second year and the third year, we'd be hedged at a smaller percentage. So it won't move quite as much in any initial year as what you're seeing in the market. just to give you some scale. You will see like this past year, some of the hedging, we were placing hedges that are 3 years out when it was at 17. We also had some this year that are settling that were at 20 that we bought 3 years ago. So it just kind of blends in. You won't see it be as prominent in year 1 when there are changes.

So if it stayed at this level for another 2 years and in 3 years, you'd start to see somewhat of a tailwind.

Yes, for sure. Yes. And the way the mechanics of the peso trade works is when you buy forward, you actually are buying at a better rate than you would be today. So like for today, we're buying pesos 3 years out at 23. So -- and we do that on a rolling basis, so it all averages in over time.

Right. Anything else? So, maybe just to close, we sort of talked a little bit about the free cash flow. You sort of mentioned some of the debt profile and the fixed versus some variable. Just remind us sort of the leverage targets, when you think you can get there, what is actually sort of prepayable or come down? And I guess, like in -- I think deleveraging has been one of the priorities for the company. So if the ICE for longer world sort of plays out and the cash flow is stronger because these programs are extended and we don't have sort of the tariff situation, can some of that actually be brought forward a little bit with a stronger free cash?

Yes. So I'll take that. There are a couple of questions there. So I'll start with our target. So we've said -- we ended the quarter at 2.8x net leverage. And we've said that our target is to get to 2x or less. So we want to trend towards that over time. We haven't given a specific time frame because that's just really hard to do because there are a lot of things outside of our control. But we want to trend towards that. We've been dedicated to using a portion of our free cash flow in a very consistent way to repay debt. So even this week, we fully redeemed our 2026 senior notes. So we don't have any senior debt note maturities now until 2027. So we like to keep a nice runway there and a long-dated maturity profile, so we can be opportunistic as we decide to refinance. But all of our debt, we could repay half our capital structure is term loans that we can prepay with no penalty at all. And the senior notes are all prepaid or callable just at variable rates. The '27s will be payable at par next year. So we have plenty of ways we can allocate the cash when we want to make a debt payment.

Is the 2x leverage target anything you'd ever reconsider? And I just -- I asked because we -- just prior to this, we had Dana, who post their announcement will look more like an American Axle type company, right, without the off-highway business. And they said that for the RemainCo, they're going to target more like a half turn to a turn. So is that something you'd take another look at?

Well, we say 2x or less. So we've said that. We'll reevaluate when we get to that period of time, we'll look overall at what the next steps are.

Okay. Great. Well, Shannon and Dave, thanks so much for joining us today. I really appreciate you having us.

Yes. Thank you. Thank you, everyone.

Thank you.