Dauch Corporation ($DCH)

All right. Welcome back, everyone. Very pleased to kick off this next session with Chris May, CFO although they left the [indiscernible], so apologies for that, Dauch Corp. So Chris, anything you want to make some opening -- thanks for joining us. I think you want to make some opening comments, and we'll get into Q&A.

Yes. Thank you, Joe, and good morning, everybody. I certainly like to thank UBS and yourself, Joe, for hosting this event. It's been a great day so far, having some great conversations and look forward to talking more about Dow Corporation and our business over the next half hour or so. Look, to start the year, we obviously closed on our transaction with the acquisition of Dowlais in early February. We posted our first quarter results early May. Very pleased with how we started the quarter, nice operational quarter for us, good margins, in line with where we thought we would be from a cash flow perspective. And then from a leverage perspective, we really started our journey with this combined entity at 2.7x. So a little better than we thought previously from a leverage perspective at the start of the year. But the base business continues to also operate quite well. We continue to announce awards. We've been expanding relationships with Cherry in China. We've secured some additional extensions of our core product in Brazil, which continues to align with the themes of extensions and next-generation product really to lock in and secure our business for many, many years to come. But also on the sideidhaft side, which is a new driveline product for us with the acquisition of Dowlais, we continue to win new business there, won over 6 new awards with various customers, which is playing out right to the theme we thought with that key product. But as it relates to Dowlais, I know we'll probably have some questions there, but the integration off to a very good start. We provided some updates at our first quarter earnings call from a synergy perspective. We saw a positive flow-through in the quarter of $5 million, positive EBITDA performance. But maybe more importantly, from a run rate perspective, we provided insight to where we stood at our earnings call about a $35 million per year run rate at that point in time. And as you know, our goals as we go forward is, by the end of year 1 to be at $100 million run rate by the end of year 2, about $180 million a year run rate. And then at the end of year 3, the full achievement of our $300 million of synergies. So we think we're in a really good spot as we sit here today. excited about what has to come and excited for the first quarter and excited here for the rest of the year. So with that, I'll also remind everybody to take a look at all our forward-looking disclosures on our website before I turn it over to you, Joe, on the audience for any Q&A you may have.

Yes. Perfect. Thanks, Chris, for that. I guess just to start, we've prepared a lot of questions, but we saw some news, I guess, late Sunday and Monday about the actions of Three Rivers and like this is something that we've been monitoring, and I think we sort of talked about and the rhetoric from at least coming from the union and seemed pretty difficult and obviously, authorized the strike vote a couple of weeks ago, if not longer. So this is always a possibility. And I know it's a very sort of sensitive situation, but maybe you could just let us know like what you can say about the situation, where do we stand? And how should investors think about it?

Yes. Currently, our workforce at our Three Rivers facility is out on a work stoppage, but it's a very active negotiation at this point in time. So there's not a lot I can say. And of course, our goal, along with their goal is to reach a mutually beneficial agreement that both parties can be successful on a go-forward basis. But at this point in time, negotiations are very active. Not a lot we can say, in terms of, I would say, current status other than their ongoing at this point.

Can you give us a sense of -- I mean you know what products are made there, but can you give a sense of sort of output per week or anything else from -- that comes out of Three Rivers.

Just from a dimensionalize, our Three Rivers facility is our largest U.S. driveline facility. From a unionized workforce, it's about 1,000 people approximately. Our revenues there per week are around $20 million to $25 million per week of revenues and we supply the GM heavy-duty truck as well as their midsized truck and, to some degree, their full-size ban out of that facility.

And you mentioned it's the largest facility, but you obviously have some other facilities as well. Is there any potential to sort of compensate and produce a little bit more at some of the other facilities if this remains down for an extended period of time.

Yes. At this point in time, that would be limited based on the product that it supplies into GM for their heavy-duty trucks.

Okay. And then maybe you could just remind us, like I think we're somewhat familiar with your footprint, your U.S. open from legacy American Axle, but you obviously took on a bunch of new plants from the Dowlais side as well. So I know plants and labor negotiations and union contracts are on a plan-by-plan basis. But what is sort of the time line or cadence look like for negotiations with some of those other facilities beyond 3 Rivers?

Yes. We have a mix inside the U.S. from a unionized and nonunionized workforce. And as you mentioned, all of our agreements from a union plant perspective are sort of stand-alone plant contracts. And we have contracts that expire, I would say, almost every year at some point. facility of plants. And we've obviously been very successful working collaboratively with our partners there to reach agreements on those in the past, and we would expect to continue to do so in the future.

And I mentioned unionized and nonunionized, can you just give us a sense of the plants you inherited from Dowlais, what the mix looks like there?

Yes. Most of those are nonunionized.

Nonunionized. Okay. Okay. All right. Moving on to -- with that of the way, and I appreciate the commentary color there. I understand the importance of the question. I'm sure it's something you want to get behind you guys as well. aside, I guess, from the sort of work stoppage and we'll sort of see how things sort of play out there. Since you provided your outlook, we've seen some changes from some of the third-party forecasters look, those -- that's not the -- it's necessarily sort of ground truth there making estimates just like everyone else. But I was curious to sort of see from your perspective and your customers, which again is a little bit different maybe than sort of broader industry, how you're sort of seeing production play out? Because I think you typically do have sort of at least that sort of a couple of months sort of visibility there. So what you're expecting or what you're seeing right now, maybe even into a little bit in the third quarter. And there's obviously some sort of concerns raised by S&P, I guess, in sort of production in the back half, it seems are sort of more macro caution than anything from my perspective, but I'd be curious to sort of see here what you're seeing and what the message is from your customers?

Sure. Yes. And most recently, S&P's updates, they had some, I would call, slight adjustments in the regions, in particular, Europe and North America that we supply into. But in terms of what we have been seeing at this point in time from a second quarter perspective, I would say, generally, volumes have been decent. They've been running pretty strong in many cases for some of our products. As you know, we take a view on the GM full-size truck franchise. When we provide our guidance, we said 1.3 million to 1.4 million units. We don't see at this point in time, any reason to be making any adjustments associated with that. That truck continues to be in very strong demand, that product as well as some other products that we supply into the marketplace. But I think to your comments on maybe some of the macro as we think about the back half, obviously, we're watching this closely as S&P and yourself and as well as our investors, and we'll see how that plays out. But if you look at May sales, it just came out, I think, yesterday. They were pretty decent, which, of course, will continue to -- if you have decent sales that will continue to support some level of decent production would be our thought process. But in the near term, right now, our schedules are okay. longer, deeper in the year, we'll have to see how that plays out. But right now, we're in a good spot.

I guess just going back to the production schedules, especially sort of think about second quarter and maybe even sort of tying it back to some of your comments about the strike. I mean, again, just sort of reporting what -- the Wall Street Journal said, I'm not sure where sort of grants really rise, but they said they sort of seemed to hint that GM had been sort of stockpiling maybe 2 weeks of inventory. So that would suggest maybe $40 million to $50 million based on your numbers. Do you think that's a fair assessment that maybe the first quarter came in a little bit better because there was sort of a little bit of cushion built just in case something happened.

Well, keep in mind that truck, in particular, on the heavy duty was down most of January. So they've been building strong to meet demand for that truck in terms of inventories that they may or may not have had we can't speak to that. There's always some level of inventory in the system, but there's clearly strong demand for that vehicle I would expect that to continue moving the work outage aside, our expectation is they'll continue to be robust demand for that platform.

Okay. I guess just turning to your outlook for the year then and assuming production is sort of more or less in line with what you were expecting when you last updated us, you had the pro forma Dowlais sales, I think we're plus 5% up in the first quarter. seems like the implied guidance that sales are down for sort of the full year. So maybe you could just help us understand some of the factors that sort of driving that decline in the back half?

Yes, certainly. In the first quarter, and I think you're referring to our year-over-year, so you did have a little bit of a dynamic on the Dowlais side as it relates to FX and the euro that was a little bit weaker first quarter last year, much stronger here first quarter in 2026 and then really it strengthened in the second quarter last year. So some of that year-over-year dynamic will sort of minimize. You have normal seasonality, of course, that plays out through the course of the year, and they had, quite frankly, a good first quarter from a sales perspective, which has a lot of production days in the first quarter. But also some of the commercial arrangements that they were beneficiary of were really back half of the year, meaning back half of 25 weighted. So on a year-over-year basis, you'll see some differences associated with that. And we called out some of those in our pro forma amount wards of $100 million in the back half of last year. So those pieces really sort of drive some of the nuances or dynamics that you're talking about. But other than that, they would fall within the production ranges of our macro guidance.

Right. And despite that, and I think you did lower technically the -- some of the industry volume assumptions. But you raised the high end of the guide on both sales and EBITDA. So maybe you can just sort of talk about some of the comfort level behind that? And is it -- is where you sort of fall in the range really just like a volume-dependent factor at this point? Or are there some stuff more under your control that you think can influence where you come in.

Yes, from a main guide to our initial guide for the year from volume, obviously, we remain firm on our view of the truck side from a volume. North America, we remained relatively straightforward, and it was down a little bit from the European marketplace. But as we think about the full year, maybe I think the spirit of your question is a little bit of what are some of the puts and takes, if you will, as we think about it. Clearly, volume, and we talked about that a few minutes ago. We have to see how the back half plays out at this point in time. But also, we talked a little bit about the impact of the macro on our business from, I'll call it, inflation or cost increases associated with some of the increase in fuel oil, fuel surcharges, things of that nature is mentioned potential $5 million to $10 million inside the second quarter. If that continues deeper into the year, those type of costs. Obviously, we've got to look to mitigate them and offset them. But in the very short term, you're going to incur some of those costs. So those -- that would be another sort of I'll call it a swing factor a little bit in terms of inside of the range of our guidance. Those are a couple of the macro pieces I would think about. Clearly, volume and a little bit of inflation pressure.

One of the things you mentioned on the call was seeing some maybe better economics on some of the new programs coming on. I was wondering if you could sort of talk a little bit about that and what's sort of driving those economics? Is it really just sort of a repricing of new contracts for the realities of the current labor environment versus other contracts that were sort of stuck with old Life requirements? Or is there something else involved?

No, I think broadly speaking, that commentary was associated with, in particular, like product extensions where we have seen where we can then leverage and install capacity base that would minimize investment to support maybe another 2-, 3-year run of product where you can see some better economics with that. whether it comes to pricing, whether it's new products or even extensions, we have certain hurdle rates that we look to maintain and we'll continue to drive towards the optimal output or outcome, if you will, of those financial hurdle rates. And it does vary by product by product to the extent where we have a nice position from either extensions or a good product set, we think that our customers value greatly. We'll work with them to get the best pricing we can.

How much of a headwind has pricing contracts, if you go back to, let's say, '20, '22, '23 that are sort of still in the business now that where labor was at a significantly different level than it is now. And so you can't really sort of -- it's tougher to sort of go back and sort of recover that or is now as you're sort of quoting business, you're able to sort of quote the business for like the new realities of the labor. Like it seems like as those new programs come off and some of those other ones roll off. It seems like there should be almost a natural margin.

Like a true-up of inflation, if you will. Look, if you -- to your point, we saw that real spike in inflation back in the '22, '23 time frame. And we did reach agreement with our customers to be compensated for some of that.

Labor to though.

Well, it will be a mix of broad inflationary, not labor specific, but utilities and things like that, we're very significant back in that time frame. So some of that started to become built in. But to the extent you can reprice for current economics on a go-forward basis, it's always beneficial.

Yes, right.

As you know, we secure our programs, especially on our big drilling programs for 6, 8 years depending on the program like and to the extent you have an opportunity to reset pricing on a go-forward basis when those contracts come up, it is helpful.

You mentioned $35 million synergy run rate in May. I think that's probably a little bit ahead of schedule for what you're thinking. Has that mostly been in -- when you originally gave the $300 million synergy target you gave a number of buckets, I think SG&A, procurement and manufacturing, like is it sort of mostly been the SG&A part thus far? And sort of how should we think about the phasing of the buckets of the synergies, where they come in? Like what's the low-hanging fruit? What's going to be tougher to get.

Yes. No, great question. As we think about the 3 buckets you got them spot on, it was SG&A was about 30% of our $300 million, half was purchasing. And there's a little bit of sub buckets we'll talk about that sit inside of each of these and then operations was the 20% of the last piece. So if you think coming right out of the chute, obviously, I'll call it, you refer to the low-hanging fruit, some duplicate public company costs, some SG&A. Obviously, these are the ones we can get at very quickly, attack them right out of the shoe, which is what we did, and we were pleased with that performance. We've started to see a little bit of purchasing start to receive some benefits inside of that $35 million as well, but that's also one that will play out over the next many months, and especially into early next year because a lot of contracts would reset, for example, on Jan 1 versus midyear breaking contracts with suppliers, et cetera, to gain some favorability. But yes, so I guess, maybe initially, out of the heavy SG&A public company costs, but as I think about phasing, we'll continue down additional SG&A opportunities that are in front of us that will also include things such as engineering costs duplicate offices, which we're starting to close and rationalize. So those are key for our success. And then heavy in the purchasing realm and purchasing comes in really 3 areas for us, true out negotiation -- negotiating with the supply base for economies of scale, you bring a bigger buy. Obviously, they're interested in that work. You can achieve savings that way. But also vertical integration, which was a key piece of our thesis for this acquisition from twofold. Number one, we and our smaller powder metal business than legacy American Axle, we bought powder from DOA as well as others. We can in-source now more to ourselves. At the same time, as the largest steel forger in the world, meaning legacy American Axle, legacy Dowlais bought a lot of steel forgings many, not from us. So planning that piece of vertical integration strength and then obviously, margin capture to us accretes for those synergies. So that's a key piece of the purchasing piece and the....

[indiscernible], like how much powder metal did old axle buy?

Yes. I mean the business itself, I mean, it was a couple of hundred million dollar top line business for us, of which this would be a portion, obviously, from a call it, half or less in terms of your cost of sales. So we bought some from them and some from, I'll call other competitors. So -- and then, of course, the benefit of the company is the margin capture in the [indiscernible]. And same with the forging side as it relates to the Dowlais business. And then logistics. So we have a significantly expanded scope of logistics, so negotiating with carriers and things like that to get optimal buys. That's another key piece of the purchasing. And those are all underway. They take a little time to negotiate. Then the third piece is the operational side, which we estimate around 20% of the $300 million. And that really comes in twofold. It's true, I will call operational efficiency improvements and you obtain that through identifying and taking 2 good operating systems, merging them together, taking the best of the best and then spreading that across your fleet of plants. So we're deep in that process now, assessing both operating systems, going through locations, determining what's the best of the best. And obviously, then you have to sort of recalibrate and reroll out that to the different facilities where then you'll gain true operational improvement, better quality, lower scrap operational or OEE improvements in your factories that will drive real dollars. And then the last piece of that is footprint rationalization, some opportunities there. That will be the longest tail of the of these savings.

I mean building off that, I remember when you announced the deal and you're sort of still in sort of the unofficial phase, but you were sort of talking about the deal and an official meeting it hadn't closed, right? And you were sort of talking about the synergies. One of the things you had mentioned was that you weren't able to because you didn't own it necessarily really get into some of the facilities and really sort of evaluate and you thought that as you were able to do that, maybe you maybe had to sort of make some haircut it or conservative assumptions in terms of what you could do in the plant. Now that you've owned it, I'm curious like where you are in the process of sort of going through that analysis. And are you finding that your assumptions were reasonable? Or is it possible that there might even be more opportunity as you sort of move through these plants for savings?

Yes. As it relates to the process, we're very active conducting operating reviews at all our locations. Our operating teams have been working very well together on both sides and bringing together what they're starting to view as the again, the best of the best in terms of an operating system and starting to lay the planking to roll that type of activity out across the facilities. And I would say our excitement in this area continues to be very high. This is a core strength of legacy American Axle. In terms of our operating system, they have some great elements inside of their operating system, which will benefit the fleet of legacy American Axle plants, but very active. [indiscernible] still continue to be very excited about this area of opportunity for us at this point in time. But again, this takes a little bit of time to assess, plan it out, roll it out, train and then start to see those benefits come in. But I would say very active and very excited about this area.

What about -- historically, you've sort of given a new business award, some commentary I'm curious here on 2 fronts. One, like what can you sort of say about the backlog or book of business you've inherited from Dowlais, what does that look like? And two, are we sort of seeing any additional sort of potential synergies from being able to sort of come out with a more complete broader sort of portfolio for your customers. That might take a little bit of time. But obviously, you're starting to have these discussions with your customers. So how -- what can you say that?

Sure. And maybe I'll start in reverse. So in terms of the customer element, this is again, one of the I would say, elements when we looked at this transaction, super excited about it. As you know, we're very much historically very much overweight to GM, a little bit less or so to Stellantis and Ford, but principally, the big 3 made up 75%, 80% of our company's revenues. And when we looked at the Dowlais book of business, very diverse, many great global customers, Toyota, Volkswagen several in China through their joint venture as well as many others. And we have begun I would say, the outreach, if you will, to having dialogue with these customers. We're looking to set up technical days to share with them not only what they haven't historically familiar with on the Dowlais side, but now some of the product that we can provide to them as part of the legacy American Axle side of the business. And this is a process. It's like planting a seat and watering and it will grow and the to expand those relationships and then awards will start to come will be the thought process from there. We've built none of this into our planning or our synergy numbers, but certainly really excited to get into some marquee names and expand those relationships going forward. We see this as a real opportunity for us. But again, those are a little bit longer term to play out.

I know we've got a long time between now and next January or February. But if we are able to sort of fast forward and we're sitting in early '27, you're giving your '27 outlook, should we expect that a new business update is something you'll look to sort of engage with and provide commentary to the Street.

We've not provided the last couple of years really principally due to the dollar acquisition. But certainly, we've heard this request, and we're taking a look at some things we can disclose on a go-forward basis.

Okay. And is there still a plan to sort of have some sort of event that sort of goes over the strategy for the combined entity?

Like a Capital Markets day?

Yes.

Yes, we are currently assessing and planning 1 of that hopefully near the -- before the end of the year.

[indiscernible] prices. So that could also be maybe a good opportunity to talk about the commitment opportunity. You mentioned the leverage from the deal and sort of the start you're talking about it. I think you have a plan to sort of reduce that leverage over time, clearly. Maybe just sort of go over how you sort of see the time line playing out to get to get to targeted levels. And then what -- historically, I think you've sort of maybe target, I think, I recall is 2 to 2.5x on a sort of a stand-alone American Axle 2x, right? Is that still sort of the right sort of level you're sort of targeting? Or have your has your thinking on sort of leverage change here going forward?

Yes. I would say our thinking on leverage has changed a little bit early with the acquisition of Dowlais and I mean by -- what I mean by that is sort of previously, you heard us in prior years talk about, look, we want to get to 2x or below before we start to think about other capital allocation alternatives. With the acquisition of Dowlais, with the bigger balance sheet, with the robustness and our view on the opportunity that sits before us on our synergy potential what we think now, as I mentioned, we started the year at 2.7x a little better than I thought in terms of where we would be. As the year plays out, look, we'll have cash flow generation, but we had to fund. Obviously, the acquisition closes and the synergy patient costs. So we'll be probably still in the same ZIP code of that leverage through the course of '26 and then you'll start to see some real traction here in '27. But back on the leverage point, we articulated through our acquisition that once we get to 2.5x levered, we intend to open up that capital allocation playbook. So a little higher leverage than you heard us talk about historically because of the size and strength of our balance sheet and a little bit more robustness from our business model. So first key, I would say, marker, if you will, from a leverage perspective as we get to 2.5x, open up the allocation playbook, i.e. shareholder-friendly type activity. I would expect we're still focused on reducing and strengthening the balance sheet after the 2.5x. We would love to be in a position to get 2x or below more of a medium-term target, if you will, on a go-forward basis. But with a little more balance in our capital allocation.

Is that mainly through higher EBITDA levels? Or are you also thinking about sort of gross debt reduction?

Both. Both. The cash flow will support debt paydown or gross debt reduction and then EBITDA growth really on the back of the synergies.

Okay. I guess within that and within sort of like the free cash potential of the company, like I know we've done the math, and we've had many conversations between us and this about how if you look through, you could be looking $450 million, maybe sort of $500 million of more sort of normalized free cash flow once we get through all this noise, I think one of the points that investors always sort of point to and quite frankly, give a little bit of pushback is restructuring, which I know is higher this year. And I think you think a more normalized level is below this. But then there's concern out there that you are more European-centric now than you were before and then maybe that requires a certain elevated level of restructuring in Europe may be higher than you're assuming. So maybe -- I know it's a long into sort of intro here, but maybe you could sort of talk a little bit about your level of comfort with the European footprint, the size of it. What actions are sort of currently planned and sort of how you monitor as to sort of whether there will be more action needed. Because that is one of the levers there, right, towards getting to that.

Clearly, in the current year, you can see the spend is relatively elevated. Look, if you think historically, legacy Dali has a bigger European footprint in legacy American Axle, and they have been spending a significant amount of restructuring dollars to really optimize that footprint, move out of high-cost countries into lower-cost countries to really put us again, this -- as we went through some of our diligence to set us on a better footing going forward, and we thought we would be able to capture that upside in future years because that spending has been done. We still believe that to be true. My point here is A lot of that restructuring has been done, and it's getting concluded generally speaking here this year. I would expect our overall restructuring to step down meaningfully in '27, maybe by half or so. And then from a legacy American Axle side, we've made some, I would say, minor -- relatively minor in comparison to maybe some of the legacy dollar adjustments inside of our European footprint. We did close the facility into last year. That's part of the restructuring cash here this year. again, all holistically as part of I expect to step down into '27. But big picture, I would expect some level of restructuring as part of the normal course of our business. I mean driving productivity, creates opportunities to restructure to continue to optimize, to continue to be cost competitive. But our goal is not to have elevated levels of restructuring forever, right? Our goal is to reduce that to the extent we can and still maintain a good operating footprint that's competitive with the marketplace that we're in. But our goal is to reduce that amount significantly.

Two more big topics I want to sort of touch on. One is, I think if we look out over the past probably a month or so really, there's been a lot more focus on what is an automotive supplier with the key competency, right? And I think one way you could sort of view this is, right, you've got deep knowledge about certain products and how to manage those supply chains, how to industrialize, how to manufacture the sort of high quality. And some of those skills might be needed in additional end markets. Now I think as we've seen sort of a lot of nonauto interest in some of the other names. Now I think people will think of DAC and sort of say, well, you don't just high-level glance, you don't sort of really fit this bill. But I mean, I guess as you sort of look at your portfolio and even more importantly, not your portfolio, but your core competencies do you see opportunities to sort of diversify the business into other end markets?

Yes. I mean the core competencies of our company play very well to many different industries. And I mean, you have the basics, right, of engineering manufacturing assembly, machining, things of these forging, these are all core competencies that apply to many different industries. But even taking a step back of some of the core competencies of our operating system, quality management program management, global capabilities. These things are just above just the core of the machining and the factory floor, right, that can allow us to replicate and support other type of industry opportunities. We do supply in a much lesser degree. Other elements inside of our business, like on the industrial side, for example, our powdered metal business, about 20% of that revenue is 2 of the industrial side of the business anywhere from washing machine components to mixers and things like that, that you might find in your kitchen. They have a very unique use to it, a different customer base. But obviously, our products and capabilities to support that industry sits inside of our metal business today or metal forming operation. So -- but the core competencies of the company applied to many different industries, aerospace, industrial, things of that type of nature.

And like internally, maybe you could just sort of shed some light on like how you Think about this as a management team? Do you have sort of like a incubation type of process where you say, hey, like we're very good at doing x company needs this thing, let's sort of show them our capabilities. And so I mean, maybe you could just sort of shed a little bit of light of how that process sort of works in terms of seeking out and scoping those new opportunities.

We think about exactly that. It starts with what are our core competencies that we do today, where what are adjacencies to our business meaning outside of the auto business or even other elements inside of auto. But outside of auto, I think it's a little bit of a spirit of your question here. And where can those competencies and product sets and knowledge apply to. And we do various evaluations. We have discussions and debates internally inside the company on where we can maybe expand some of those skill sets into other areas of the business. Obviously, right now in the current state, we're very focused on integrating the Dowlais acquisition. But I think this is clearly an area that we'll gain more and more attention inside our company going forward.

Yes. And I guess like just like putting a bunch of different sort of scattered pieces together here, right? Like you have increased your U.S. footprint with Dowlais, like maybe there's a chance for some plant consolidation. I think you alluded to that earlier, which then gives you a decision on what to do with that plant. But then if we think about other big picture thematics where there's like this onshoring theme, like is there -- does that open up an opportunity for you to fill some of that capacity that might free up with some of these other additional opportunities. So how do we think about that?

Yes, absolutely. And we're actually -- and we're seeing, of course, that's in our auto business today, but we're absolutely seeing a lot of activity last year and discussion points after a lot of the tariff activity of potential onshoring, in particular, leveraging our metals business. What we're starting to see now this year in calendar year '26 is PO and awards or that type of business as people are looking to onshore maybe some of these type of components that over the last decade or 2, they have pushed to global sourcing strategy. So they can clearly see now the benefits both economically as well as logistics side of our North America footprint, and we're set up very well to do that.

A good segue into sort of the last big picture question topic I wanted to sort of touch on here, which is USMCA and the renegotiations and know late last week, we saw some news that the government might be pushing for 50% U.S. content. Maybe you could sort of just remind us sort of how -- well, again, we don't know where things are going to land to be clear. But like how you sort of -- I think there's been an effort underway by you and other suppliers are ready to sort of try to source more and get U.S. content higher because I think it was -- even if we didn't know the 50%, I think it was quite clear that there was going to be some sort of U.S. requirements coming. So where do you stand? What efforts are underway? And how far do you think you could sort of push this?

Yes. I mean, look, U.S. NCA, as you know, is extremely critical to the auto industry. And we have maybe a few more months before this is finalized, and we'll see where it goes. I'm sure it will be an interesting journey between here and the end negotiation. And obviously, we're watching it very closely. But our core company philosophy always has been to sort of build and buy in the region that we produce and support our customers. And that, first and foremost, I think, has served us well from some of this either tariff activity or some of the risks associated with trade or changes in trade arrangements. But that said, recognizing the push holistically from the current administration to bring more onshore into the United States. I think it's also a very nice setup for our footprint in the U.S. We clearly, as -- as a lot of this activity changed the course of last year really allowed us to think about the Dowlais acquisition, expanding a little bit of more capabilities, both from a driveline and metal forming side inside of the United States with additional facilities. So I think that positions us really well to navigate what changes may come as part of USMCA. But that said, we've been focused on making sure and evaluating U.S. sources for our own supply. For example, almost all of our steel that we buy it goes into our primary driveline products is U.S. sourced steel even steel we send down to Mexico in our Mexico facility is all U.S. Steel and it comes back as U.S. content and steel. So we've been very conscious of this, understanding sort of a little bit where this is positioned, but I think as a company, both from our manufacturing footprint as well as our sourcing strategies has us set up really well to navigate what's coming at us and also benefit from it as people look to bring in more product into the U.S.

What are the pain points for you right now in terms of sort of U.S. content? I'm assuming there are some there some elements you just sort of can't get from the U.S. right now.

Things of -- we don't have a lot of it, to be frank, but things like in the electronics space, a lot of that comes out of the Asia market. Most suppliers have brought in from China or others in that that's probably the #1 piece. But in terms of some of the core stuff that we do, a lot of that's all within either our control of the source or build internally inside the U.S.

Okay. Maybe just here in the final minutes, I want to close on electrification. So I vividly remember being at a conference with you in like 2018, and we had speakers there about sort of electric legal penetration and you're like, it's coming, but it's definitely not going to happen that fast. And look, I think you were probably more right than wrong on that view. But I think even you and David and the team sort of acknowledge that there is sort of a longer-term shift where eventually at least certain vehicles will sort of move more to electrification. I think you've gained a little bit more sort of capabilities in there with Dowlais. But it hasn't sort of, I think, really gotten a lot of focus. So I know I'm not giving you a lot of time with 2 minutes left. But maybe you could sort of talk a little bit about some of the competencies you've gained from Dowlais, what they do, I think, specifically in China, I believe, is where they're stronger and is some of that leverageable to customers.

Yes. No, absolutely. So I mean, first of all, our view on electrification is it's a very good technology. It's here, and it's growing. It's just growing at different paces in different markets. Our home primary home market of North America, obviously, with the recent last couple of years has slowed down dramatically. In particular, as it relates to our truck segment. Again, our view on that really hasn't changed. We believe that will be the last segment to electrify maybe decades and who knows. Europe continues to grow. And China, as you know, has grown significantly in that space and has been very well adopted by end consumers in that market. So we're very well aware of the different regional elements that drive volumes for electrification, and we want to make sure we're in a position to support that. So how have we done that? We historically on the legacy American Axle have made investments into our driveline systems to support that, both from drive units. And as you know, we're in Mercedes and or Jaguar and others and also into our e-beam axles, which has seen a lot of traction in the China marketplace actually as it relates to electrification. Legacy Dowlais has done very similar in terms of their investments historically into electric drive units. They're in several platforms -- but combined now, we have a very nice bookshelf technology, if you will, that are in either active products or can be easily quoted in passenger cars, crossover vehicles or truck segments that require B axles. So I think we're in a really good spot from that standpoint. From a component standpoint, obviously, these are things that we make very similar in ICE hybrid and electrification, very similar. So both companies combined have these skill sets, and we are in these type of products today. But even as we thought about the Dowlais acquisition, 1 of the key, I think, features of that product was the SideChef business. As you know, they are the global leader in side chest, 40% market share. Now we -- our 40% market share, it's completely agnostic. You need a side shift on a ice vehicle. You need to decide you have to in a hybrid vehicle and you need a sidechaactually you need more of them on average in an electric vehicle. So as we thought about our product portfolio, we thought about from drive units, good slot from electrification and the investments that we've made combined. Now we're in a good spot, components as well as sites, yes. Hopefully, I didn't rush you, had 2 minutes here. I tried to move it quickly -- but the China marketplace is growing for us, and we are leveraging that joint venture, which is about roughly about $1.5 billion of sales, does a really nice job inside China, and this will obviously allow us to advance in the electrification space as well.

Great way to close. Chris, thanks again for the conversation. Really enjoyed it.

Thanks, Joe. Appreciate it. Thank you.