Dauch Corporation ($DCH)

Thank you so much for Join us. I wanted to really thank the Dauch team for being such a good partner from my 20 years at Bank of America. You've been involved from the debt and equity side, always with the investor focus. With us from Dauch, we're joined David Dauch, the Chairman and Chief Executive Officer; and Chris May, Executive Vice President and CFO, and they're joined by an extraordinary IR team, led by David Lim and Joe Pudlik, which I'm not sure if we've met yet, but I'm looking forward to talking in the future. The Dauch Corporation is kind of special to my heart because in 1998, when I first started, it was the very first plant that I visited was an American Axle plant. And I'm really thinking like, wow, this plant is so clean and auto industry is so great. And then I visited about 10 other plants after that, and I realized like that plant was different, the first one I saw, how organized it was. So I recommend anyone starting in the auto industry to take a look at one of the Dauch plants, and they're pretty special. So with that, I want to thank them again and thank the audience for being here. And why don't we turn it over to Alex to kick up the first question.

Yes. Thanks, Doug, and thanks to the Dauch team for being here with us today. So I actually wanted to start off with a few housekeeping questions actually, and then we'll take it up for a few levels. But -- could you maybe just talk about your free cash flow for this year and what may change for 2027 and beyond. And maybe as a part of that sort of discuss the restructuring cost for this year, when should we see the benefits? I think it's been a key topic for the investment community. So I just wanted to lead with that before we start going into more strategy.

I'll take the -- this is Chris. I'll take that as a crack. Look, our guidance for the year from an adjusted cash flow perspective is $235 million to $325 million. Of course, that's before any restructuring and synergy implementation costs. So still on a consistent way on how we disclose our cash flow, continued strong delivery expected here from our operations. However, inside of 2026, we have a few things going on. Number one, we have to close the transaction as it relates to Dowlais which we did in early February. We paid the cash associated with that here in the first quarter. Some of that will also be in the second quarter. But that will go away after 2026. The next piece that we have is our restructuring costs. So you really have 2 elements associated with that. First, we have the completion of our Dowlais restructuring, which is about 2/3 of that. They've gone through, I would say, a journey over the last couple of years restructuring their U.S. operations moving to Mexico, Germany operations to Hungary, and some other elements inside of Europe. So they've been on a significant campaign, as I mentioned, for about 3 years. This is really the final leg of that restructuring. So we will see a sizable step down as we go from '26 into calendar year '27 with those restructuring costs. I would expect less than half of what we experienced here in '26. So excited to put that in the rearview mirror and behind us. And of course, associated with that is the ongoing then P&L benefit from that restructuring. We also on the legacy American Axle side of the house, we announced at the end of '25 a closure of an operation in Germany that will also complete in 2026. So that's part of that core restructuring element. So again, holistically our restructuring costs will go down by about half into '27. So a very positive momentum for the elimination of the acquisition costs, sizeable down of the restructuring costs. And then the last piece is really our synergy implementation costs. So this is really now stepping into that journey for the combined acquisition of Dowlais, where we expect to have $300 million of annual run rate savings over the next couple, 3 years building into that, what we had said is we will spend or invest about $1 of investment to get $1 of annual run rate synergies. So in total, $300 million I would expect that front-loaded sort of more towards year 1 and 2. You see our guidance here for '26. Similar number will be in '27, and then that will sizably set down in '28. So our company is set up really well positioned for core operational cash flow. Think of our adjusted cash flow numbers. And then some of these, I would call them, some are one-off for the close, but even the restructuring and the synergy implementation costs will continue to fade away and really drive us into strong cash flow momentum into '27 and then again into '28 as, number one, your synergies are continuing their final leg up of performance and all those costs associated with implementing them are stepping down. So hopefully, that sort of next couple of years. So we're pretty excited about it.

And then I guess, last housekeeping question, and then Doug will take us into some of the more strategic questions. But maybe just bridge for us the Dowlais adjusted EBITDA to your guidance. So the 2025 adjusted EBITDA to your guidance, could you maybe just walk us through sort of the bridge there?

From Dowlais perspective?

Yes. Yes.

As you just sort of to maybe level set everyone is listening. So Dowlais reports in IFRS. They also have different adjustments when they compute their adjusted EBITDA number. So really, if you take the Dowlais numbers that they would publish for 2025, and those are still in the process of being finalizing now, but very similar to some of their, I would say, guidance that they gave in the January time frame just before the close of the transaction. You would have to take from that number, you have to subtract out a little over $100 million associated with U.S. GAAP to IFRS adjustments. That's really driven by lease accounting differences, pension accounting differences and some R&D accounting differences. Again, all consistent with what we expected as part of the transaction. Also part of that, how they account for their unconsolidated joint venture, now our unconsolidated joint venture in China being the largest. It's about $1.5 billion operation. They do gross that up for EBITDA. It's not consolidated on their books. It will not be consolidated in our books. You had to unwind that as well. So that's about -- in total, the 2 between the IFRS and the joint venture accounting adjustments, about $100 million, again, consistent with all our planning for the transaction. Another key element, they've been very successful over the course of the year 2025 in reaching resolution with commercial settlements, especially on their E side of the business, where volumes did materialize, et cetera. So you have some onetime commercial settlements flowing through their '25 results of about $75 million. So you have to subtract that piece out when you step from calendar year '25 into calendar year '26. And then lastly, as you know, at the macro level, volumes are down a little bit. And right near the end of '25 they sold some small pieces of their operations. So if you put those pieces together, gets you right on top of where our guidance was for the year. Hopefully, that steps -- but thank you for asking those questions.

So from a bigger picture standpoint, I mean, I love the Dowlais transaction because as a creditor, bondholder, credit investor, you kind of double the size of the company and kept the balance sheet leverage about neutral. But there's a lot of opportunity expanding the business in Europe, gives you a lot of diversity. If you could just kind of hit some of the higher points of what made you think about that transaction? How long were you looking at it? And what really could drive some of the growth for the entire company?

Yes. Let me take that. We actually tried to buy GKN Automotive back in 2018 and then again in 2022. We saw them as an outstanding partner to expand our business to create a more robust business model. It would help us from a diversification standpoint in regards to the product side, the geographic side and the customer side of things, reducing our dependence on our largest customer, General Motors, from 40-plus percent down to approximately 25% to 27%. That was all positive. In light of the age of which propulsion system is going to survive in the future, we also thought that we wanted to have a more agnostic product portfolio, half shafts, which they're the market leader in that product or side shafts as they call them, that was a great addition to our portfolio. It's the only driveline product we historically at AAM had not made or didn't make. In addition to that, there's tremendous synergistic opportunities, which we talked on earlier in regards to $300 million, and we've broken down that appropriately between SG&A, about 30%, 50% in purchasing and the remaining amount in the operational side of things. There's a very talented team there of all the acquisitions we've done in our 30-plus years as a company. One of the more talented resources that we're picking up, which will not only help us on day-to-day leadership but also on our succession progression planning going forward. But to your point, we got a much stronger robust business model. Obviously, they're headquartered in London. They've got a strong German engineering presence as well that's received very favorably in the marketplace, much like us, they're a strong engineering and manufacturing company. I do see opportunities for improvement from an operating system standpoint in each of their facilities as I've been around to many of them already and have more to get to. But that's all part of what we factored into the bigger plan and the synergies that are there. They've got very strong relationships with the European OEMs, not that we don't, but they have a stronger, a more lasting relationship there. And I would even say on the Asian side, where we have strong relationships, they have even stronger. So I think there's tremendous cross-selling opportunities with the European and the Asian customers. We're historically founded in the U.S., and our Detroit 3 is our primary customer base, so we can obviously help them in that respect also. So we feel real good about what we've done here. Like I said, it gives us the size and scale of the robust business model, the diversification, not to mention the high margin potential with the synergies as well as the cash generation, which will allow us to service that balance sheet on a go-forward basis.

So I think a big part of the Dowlais transaction. You talked a lot about synergies. So I think $300 million of synergies, the majority realized by the end of year 3. I know you've broken it out in the past, but can you maybe expand a bit more on what goes into the $300 million of synergies? And provide an update on how the integration is progressing so far?

Yes. Let me start, Chris, then you can add to it. So as I mentioned, we've publicly announced the $300 million of synergies. I just covered what the breakdown was, 30% will be in the SG&A side, so a minimum of $90 million there, 50% in the purchasing or procurement side, so $150 million there. The balance remaining 20% or $60 million on the operational side. We feel very good about our ability to meet that $300 million number. Again, that number was established before we were able to get in to see a lot of their operations. So we're not changing that number at this point in time, but we think there may be some upside in the future. We'll have to figure out what that is and when that is. Obviously, on the purchasing side, and the buckets may move around a little bit from what we originally guided. But we're very confident that we can deliver that $300 million. But what we publicly initially stated is that we'll achieve a run rate of 60% by the end of year 2 and 100% by the end of year 3. And then in our recent earnings call, we identified that we expect over $100 million run rate here in year 1. So that all bodes well for us in regards to we feel very confident about the plans, the market baskets that are filling up. And ultimately, we hope to overachieve that on a go-forward basis. When you go back and look at what we did with MPG, we originally established MPG a roughly 3% of sales, and we delivered well over 5% and essentially stopped counting at that point in time because it just became normal business. We know how to manage synergies. We know how to deliver the bottom line results, and we expect to do the same thing here with this acquisition. I don't know, you already touched on the cost of implementation.

Yes. We talked about the cost, but also if you look at some of the buckets that David just articulated, really plays to the strengths of our company. And what do I mean by that? So in the SG&A portion, it's not just traditional SG&A and public company costs, but it's optimizing our product engineering spend, which we've been on a journey the past couple of years to do .Dowlais has done something similar. Now combined, we can really leverage that scale inside of that spend. But also on the purchasing side, it's not just the scale for purchasing buying power, but it's also leveraging our vertical integration strength as a company. We have -- we're founded effectively on a vertical integration policy and approach. But now you bring in this. We're the largest automotive steel forger in the world. Obviously, Dowlais buys a lot of or historically has bought a lot of forging -- steel forgings on the outside. We had a small powder metal business inside of our operations. We bought powder from Dowlais. So now we vertically integrate that and even more of that powder buy. So it really leverages some of our key strengths as a company, not to mention the operational side that David just mentioned. So we're pretty excited about this opportunity that sits before us.

Maybe -- I think you mentioned this earlier, but I'd love to expand upon it a bit more. Can you maybe talk to us about how much customer diversification and even platform diversification was a key part of this acquisition. Obviously, you had the pretty heavy GM concentration. I think you're the GM T1XX is a large part of the business. Obviously, that may downsize here with this acquisition. But maybe walk us through -- I think this takes up your Toyota mix a bit. So maybe talk to us about customer diversification and even platform diversification?

Yes. I mean our top 5 customers, I mean, General Motors, when we started the business, we had 2 customers, GM at 98.5%, Ford at 1.5%. After the MPG acquisition, GM, as I said, was around 40%. Chrysler was our -- Stellantis was our next largest customer around 13% to 14%, and then Ford was slightly behind that. With that -- with the latest acquisition, GM comes down to that 25%, 27% range. Stellantis is still a large customer for Dowlais as well. So they'll stay around that 13%. Toyota is a big customer there, so they come up the ladder. Ford is a big customer as well. So they'll be in the top and the Volkswagen will round up the top 5. But now we've got thousands of customers when you factor in hundreds of customers in our steel forging business and thousands of customers in the powder metal business. So we've really grown substantially from a customer base standpoint. But again, our primary customers are the top 20 global OEMs around the world is what they are. Chris, I don't know if you want to talk to the platform.

Yes. From a platform perspective, look, legacy American Axle, top 2 platforms in our company were the T1XX platform and the RAM heavy-duty platform. They are still our top 2 from a dollar perspective platforms in the combined company. We actually gained content on the T1 as we bring in side shafts from Dowlais as well as some other powdered components. So it's a critically important platform for us. We think it's one of the best platforms in the world to be on as a supplier. So that's very strong. But we also add platforms with Stellantis on some of their crossover vehicles. We had platforms with BMW through the Dowlais acquisition and then some of the names like David mentioned on the Toyota side as well. So we're pretty excited about this expansion as it relates to the platform and the content we provide.

Yes. And the other thing, it's not only just Toyota, I mean, they're touching base with almost all the Japanese OEMs. And where we're doing 50-50 in China between Western OEMs and Chinese OEMs, they've shifted that more towards 60% approaching 70%. So that's a positive, especially as the Chinese OEMs are gaining market share globally around the world.

Maybe I'll lead us into some China question. So Dowlais 65%, 70% of their business is domestic China.

Yes, through the joint venture, yes.

That's a great number. You've been in the business a long, long time. We're looking at China. It's been a $30-plus million market. How is the company positioned to support that growth or if they were to bring more product to Europe, more product to South America and potentially maybe even in the U.S. one day.

Yes. That joint venture is a jewel in this whole acquisition. They've done a tremendous job establishing that joint venture with HASCO. The joint venture name is called [ STS ]. As Chris said, it's about $1.5 billion in sales. It started with Western OEMs and grew into domestic OEMs, where there's more of a balance there now, but weighted more towards the domestics, like I said, that's all been positive. It's a profitable joint venture. So that's an important thing. I can't say that about all suppliers in China or even all the OEMs in China. But I think the government is starting to step up to some of the pricing issues that were going out or the price wars that were taking place there is what it was. But for us, they're well established with a multitude of OEMs there. So are we -- together, we have a wider band of Chinese OEMs that we're working with. There's an installed capacity of about 65 million to 70-plus million units in China, but their market, as you said, is a little over 30 million units, okay? They just last year became the #1 exporter surpassing the Japanese. So they have a planned export vehicles. It's just a matter of which countries are going to allow or accept those vehicles into their areas. Clearly, Europe is a target for them. They're being very aggressive with respect to Europe, but they're also being very aggressive in regards to Southeast Asia and also Latin and South America. And here recently, they just cut a deal with Canada. We'll see what happens in regards to the U.S. I mean, Trump is supposed to go over and meet with [indiscernible] in the future. We'll see what happens in that respect. But Trump's whole thing has always been about just building jobs or building vehicles and product in America and putting Americans to work and protecting our GDP and all that as well. And I'm not here to talk politics at all because everyone varies in that respect. But the bigger thing is the fact that the Chinese market is plateauing right now at that 30 million units. So if they want to show growth, they've got to go outside of China to realize that growth. And at the same time, their market is uniquely different compared to the rest of the world, 55-plus percent of their business today is electric or hybrid type applications. Where you go to Europe, it's 15% to 20% is that electric or hybrid. And in the U.S. we peaked around 10% to 12%. We're sitting at 5% today. And we've had a lot of regulatory and policy changes, not only here in the U.S. but also in Europe, that is really slowing down what people thought the adoption rate was going to be. And personally myself and our company, we never totally believed in the 50% attainment of electric vehicles by 2030. We were very selective about our investments, we are very selective about what OEMs and what products we developed and what platforms we went after. You don't see us writing off a lot of issues. I mean the market spoke to the consumer spoke when ultimately said that, hey, we can't afford these vehicles. That's the biggest issue with electrification. At the same time, we don't have the infrastructure in place to do it either. And now we've got $70 billion of assets that have been written off in the last 12 to 18 months. And there's more to come from some of the other OEMs that are out there. So that was a big miscalculation. But ultimately, you learned a long time ago that the market is the boss and the market is the consumer and the consumer is going to vote with what they can afford. And most people can't afford more than a $25,000 to $40,000 car, the average electrification vehicles around $55,000. Today, the average for a vehicle is around $47,000. Before COVID, that number was below -- around $30,000. So that's how much increase has taken place in regards to transactional prices.

I think that's a good lead into the next question, which is sort of this repivot back to ICE platforms. I think on the surface, it would feel like it's maybe a really good thing for you guys, given sort of your platform concentration and your key customer segments. Just maybe talk to us about that and how you're sort of balancing product development and capital investment across powertrains?

Yes. I mean it's a fantastic thing for us. We already have an installed infrastructure, right, is what we have. But I also don't want people to mislead in regards to my comments. And we're big believers in electrification of the technology. We just didn't believe in the adoption rate that was being that forecasted by the prognostic. And it's going to vary, like I said, between Asia or China that's at 55%, Europe in that 15% to 20% and the U.S. and that 5% to 10% when it's all said and done, growing maybe to 20% over time. But the opportunity here is right now, we're really working on a lot of contract extension, securing our business out into that 2030, 2035 plus period of time. That bodes well for us for a strong cash generation. At the same time, it minimizes some of the CapEx we have to put into place because it's already in place. Now we do have some major platforms like the T1-2 with General Motors that we're launching this year over multiple years because it's a phased approach. It does have some CapEx requirements to support the incremental technology that's being built into those vehicles on a go-forward basis. But we still think our CapEx will be in that, Chris, 4.5% to 5% range of sales for this year. And then historically, at times, we've been up in the 8% and 10% when we did the MPG acquisition because we were both very capital intensive, and it has happened to be at a certain time. Those investments have been made. And we always said that we wanted to be in that 4% to 6% range, and we're comfortable that we can deliver that on a go-forward basis. And then we talked on the engineering side of things. Again, we put a lot of money into development and electrification portfolio. We're going to continue to invest in that. But with the acquisition of Dowlais, GKN, it helps us minimize some of those costs going forward, that otherwise, we would have spent historically from an AAM standpoint where now we can -- on a combined portfolio basis, we filled a lot of those gaps then there's still a little bit of work to do to have that bookshelf technology. So when the market responds, then we can respond effectively with the market appropriately is really what it can be down to. But I don't know if you had anything else you want to add?

Yes. No. You've seen that in our R&D spend each of the last 2 years, we have reduced that spend to align with this macro condition that you just described. But I think walk away as you think about the extension of ICE or continuation of these programs or into their next-generation programs will allow us to have a lower capital intensity than would have seen us over the last 10 years prior when they were going through all different models and changeovers and things like that. So I think this really bodes well for us from a cash flow perspective over the next couple of years, no question and then even longer potentially past that.

Maybe you could ask a question. We had a few speakers prior kind of as we anticipate June, July, USMCA discussions. If you could just help us think about -- I mean, how you're thinking about it internally, how it could impact your business and you've got like material assets in various parts of North America.

Yes. And personally, I'd like to see USMCA stay together stay together. That's how we've all planned our business over the last several decades. So I think it's important that we try to protect that as best as we possibly can. Clearly, the Trump administration is going to use their leverage appropriately against the trading partners of both Canada and Mexico. I think there's probably a stronger relationship with Mexico than there is Canada today, just openly speaking. We don't have a lot of exposure to Canada from our own manufacturing standpoint. We do have critical suppliers there in Canada. But at the same time, we've talked to them about localization strategies if we need to move in that direction. We've got a big complex with thousands of people, and we've added to that now with the Dowlais acquisition in Mexico. Our job is to keep those facilities utilized and generating the proper returns and financial performance. But the customer is the boss too. And if they decide they want certain plant loading, our products tend to be a little bit larger in size. So we want to put them in closer proximity to the OEMs. But you just don't pick up $1 billion plants and move them -- it cost years to do that and hundreds of millions of dollars to do that. And it's very costly to shut down a plant, probably more costly than it is to launch a plant. So it's one thing to say that I draw it on paper. It's another thing to go execute it, right? But clearly, the Trump administration is putting a lot of pressure on OEMs to make investments in the U.S. You're seeing a lot of new and incremental investments and in some cases, at the expense of both Mexico and Canada because you watch those jobs in the U.S. And therefore, the OEMs have to do what they need to do once we get clarity on the OEM strategy then we can finalize our independent strategies. And those will all be individual business cases that we'll review with our customer base and then make the right decision for both parties is what we'll do. So -- but like I said, we really would like to see USMCA stay together. There may be some adjustments to that, but I think it's in the best interest of our industry that it does that and our trading partners for that matter.

So now that the Dowlais acquisition is closed and integration is underway, what does Dauch's acquisition pipeline sort of look like from here? Are you evaluating smaller tuck-in acquisitions? Are you focused primarily on integration and balance sheet strengthening. Can you just maybe talk to us about capital allocation priorities and how the recent acquisition fits into that?

Yes. Let me touch first, and then Chris, I'll have you cover some of the capital allocation is. We just finished the closure on February 3. So we're 6 weeks into acquiring a $6 billion company. So I'll focus the next 2 years is really on integrating this company and realizing the value and the synergies that we talked about and that cash generation, that's critical. We wouldn't be fair to you and wouldn't be fair to ourselves and our governance that we didn't deliver on what we said we're going to do. So our priority is clearly on that. Now with that being said, I will say this, historically, we always went back and looked at twice a year, our product portfolio and said, what's core and what's noncore. We'll do that same thing and are doing that same thing with Dowlais GKN. There will be some assets that we potentially may want to divest in the future. That's a source of cash for us to bring that in. And then Chris and I will -- and the Board will determine what do we do with that cash. But obviously, a priority to us is to get our balance sheet and our debt level strengthened. Historically, AAM, we finished last year at leverage-wise at 2.5x with the deal closing, like I said, it will be around 2.9x to 3x call it approximately 3x. Our goal is to get down to 2.5x before we start looking at shareholder-friendly activity, I think stock buybacks or think dividends, something we haven't done since the 2009 period of time. At the same time, our longer-term leverage goal is to be under 2, but we're comfortable being in the level that we are today, but with a solid game plan to deliver the synergies, generate the cash. And we think there's just tremendous cash generation opportunity in this business, not only -- not so much in 2026, but still healthy but much stronger as we go out in the outer years.

So leverage kind of popping up to about 2.9% and then the target is around 2.5% and then after you get 2.5% can have a more balanced approach...

Yes. Because typically, our capital allocation has been on organic growth and debt paydown and a little bit of tuck-in strategic things. But we never really went down the path of the shareholder-friendly activities. And that's where now we can have more balance and we can look at what's the best return on those and how do we optimize that for the best interest of the shareholder and the company.

And we wanted to put out some milestone points to hit with 2.5x lower than 2x and below.

But that's one of the nice things about this acquisition is it gives us that more robust business model that we can carry a little bit more leverage and then open up the capital allocation strategy even more.

Makes sense. So I wanted to ask one on OEM vertical integration, if you see that as a risk or not? Are there risks to the Tier 1 suppliers in terms of vertical integration? And how is the company really sort of truly differentiating your value proposition?

Yes. What I would say to that is there was more of a risk if electrification was going to take off at the rate that was being discussed. Even today, the OEMs buy a lot of ICE and hybrid business on the outside, from companies like us and Dana and others that are out there. Even with electrification, they would do some of that, but they would also make some of it in-house. So it's just a matter of what that balance is going to be. But now that we have some investments on ICE and hybrid why would the OEMs make that vertical integration that when they could put that money to better U.S. elsewhere. And right now, we're not hearing that chatter or that talk about in-sourcing. Quite the opposite is what can you do to help us. What they're more worried about is the health of the supply base and then they have too many smaller suppliers that are disrupting their continuity of supply, and they want to work with more of the robust Tier 1 suppliers to strengthen that continuity of supply so they can run their operations efficiently and generate cash as much as they can.

Maybe we could you talk a little bit about the -- jump around a bit, but some of the R&D and some of the kind of -- as we kind of migrate a little bit away from EV, there's still a lot of R&D and opportunity in the ICE platform to bring new product to market more efficient, lighter weight, stronger. Can you just maybe tell us about some of the new initiatives you have on like future products?

Yes. I mean there's obviously going to be a big push on efficiency. I don't care what technology, whether it's ICE, hybrid or electrification, it's about efficiency. There's going to be a lot of push on light weighting, so there's going to be more use of nonferrous versus ferrous type materials or hollow type applications that were in the past more solid bar things along those lines. Clearly, we're going to look at from an engineering standpoint, we're going to continue to work with Dowlais in regards to the industry leader, like I said, in side shafts and on prop shafts, and what we want to do is continue to work with them on those same initiatives so that we can stay on the cutting edge, much like we are historically from a [ BMAX ] or from an all-wheel drive system standpoint. So those are the bigger areas that we're going to concentrate our stuff. Not to mention, we'll be working on in-sourcing opportunities. We'll be working on a lot of reshoring opportunities from the supply base. That all requires engineering time and validation and involvement. And in a lot of cases, even some customer involvement. So that's where we're going to shift some of our engineering resources because that will lead then to greater synergy opportunities and paying ourselves versus paying the supply base in some cases, too. But I don't know, Chris, anything?

In addition to supporting the customer initiatives is they're looking to distinguish their vehicles when they get into things like [indiscernible] what technologies do we have that can allow that vehicle to perform at a level they can market to their end customers. So there's a lot of investments going on even in the traditional space, as David mentioned. And of course, there are continued investments on the electrification because that segment also...

Don't forget, we announced the award of the Scout front Axles. And we announced earlier this year. We also won the disconnecting sway bar or smart bar, as we call it, in the industry. So we're going to continue to make the necessary investments in electrification. There'll be select products that we develop. We'll target certain customers and certain platforms that we think will be successful because everyone has grandiose plans about what those volumes are going to be and then volumes don't materialize and then you're stuck holding the capital, which is why a lot of companies are writing off a lot of assets right now. And then we've been very disciplined, like I said, in regards to the process that we go through to select who those partners will be and what technology will go after and what those financial hurdles need to be.

Perfect. I'll ask one last one and then we'll open it up to the audience. Can you just remind us sort of the cadence of the year. So I think you noted meaningful downtime in January at key customers and you expected 1Q to be a bit softer, and you only had the partial contribution from Dowlais. So maybe just walk us through sort of the cadence of the year and how we should think about that?

I mean, broadly speaking, I mean, in a normal year, we would have typical seasonality inside of our year, right, fourth quarter usually has less production days. This year, as you mentioned in our earnings call, we did talk about -- there was some heavy downtime to start the year from some of the truck plants at our customers that was predominantly done in January, so they're back up and running, so that's a good spot. I would expect also tariffs have reset in terms of negotiations with our customers, as you see across the supply base. So usually, we have a little lag on tariff recovery between tariff incurrence and recovery. So you'll have, again, probably a little heavier tariff cost in the first quarter. It's collected through the balance of the year, and we still expect to sort of be slightly -- just a slight cost associated with tariffs for the full year like we experienced last year, but there is a timing lag. And then our seasonal cash outflow would expect in the first quarter, that's a working capital build coming off at year-end. It's seasonal for us, seasonal for Dowlais so that would continue. But then for the rest of the year, obviously, you would pick up some tariff recoveries, as I mentioned. And then really, it will be cadenced around normal seasonality for production, a little downtime in early July. And again, generally, at the end of the year, December time frame, you see some. But at this point in time, I wouldn't call it any other seasonality that we would face that would wait one quarter over the other versus the items we mentioned for the first quarter.

We'll open up to the audience to see if we have anything out there?

Question over here left.

I wanted to know how the revenue synergies are coming along relative to your forecast and elaborate on how we can quantify the upside to some of those figures.

Yes, we did not build in any revenue synergies into our overall synergy number. Although as I mentioned earlier, we think there are cross-selling opportunities that would exist. So anything that we're able to realize and achieve will be upside potential.

I wanted to just double check on that vertical integration, make versus buy. And if we think about post acquisition versus I'll just take last year, '25, how has that changed now in terms of maybe fixed cost versus variable cost, your incrementals on $1 of revenue or maybe some of you can define it, how much you actually purchase from outside versus you want to use to sell it yourself, buy more from our own internal operations, potentially a nice enhancement to your margins but maybe a little bit trade-off in terms of fixed cost.

Yes. As Chris said, I mean, from a powder standpoint, we're already buying from GKN on the powder side. So now we're one company. So we can now -- but we're also buying from their competitors as well. Now we can buy more. That's just an internal management decision and go through the proper product validation with our customer base to make sure we can do that. So that's a no-brainer in regards to the things that we need to do in that respect. Staying on the powder side, GKN Auto and GKN Powder Metal were really run as 2 separate companies. When you really look at this, we're really integrating 3 companies into 1, not 2, okay, is what it comes down to. GKN Auto was even buying from their GKN powdered metal business. When I walked the factories, I saw all their competitive products in there, but I didn't see their GKN powder metal. So that's another thing that we'll go back and look at it. Let's source work to ourselves first, before we go to the outside, but we'll balance that appropriately based on capital needs and other types of things. On the forging side of things, we're the largest steel forger in the world based on our acquisition of MPG back in 2017. And because we got a strong capacity, and we added to that with MPG. They buy, as Chris said, probably 25% of their -- they make 25% of their forgings internally and buy probably 75% on the outside. We have open capacity, that's a no-brainer. That's just a profit that will drop right to the bottom line. Now if we need to make proper investments or certain investments that we'll just run the business cases, on the make versus buy and just decide what's the right time to do that based on what the business needs for the company. But we'd be crazy not to take advantage of that full vertical integration. But the other part of that was there's a hidden cost to is continuity of supply, right? We're not at risk. If we're just looking at ourselves in that case, and we're very comfortable that we know how to operate and run our factories where we can't say that all the time about our supply base. And so that's a hidden cost that we can avoid that ultimately will not disrupt our operations and allow us to be more efficient in our current factories is what it will be. Go ahead.

As I say, I would not expect to increase our fixed cost very much through the in-sourcing opportunities some tooling, things of that nature David...

You have the capacity in place.

Yes, we have the capacity in place. So you would really capture that variable margin that would come in from the supply base into us, that's how we would think about it. All fixed cost, but not much.

There'll be a select areas that we'll have to invest because you got to understand, when you make a side shafters, the main products are [indiscernible] tripods, outer races and inner races. And they've got the capacity in place for some of that, but not all of that. So therefore, they'll have to make some investment, but the volume that they're producing are using will justify itself in a very short period of time.

You put out some [Audio Gap] post this deal. explain...

We haven't yet. But historically, we've always tried to run our operations in that 85% to 90% utilized. If you're not running at that level, you're not making the type of money you should. So we're going back and looking, and we also had some presses in storage too, from a forging standpoint that could be installed that we are already owned is just the cost of installing them, which is a lesser cost. Yes. Good question.

Perfect. Paul, I think that is all the time we have. So I really want to thank the Dauch team for a really great conversation, and thank you all for attending. So thanks again.

Thank you very much.

Appreciate it.