Magna International Inc. (MG) Earnings Call Transcript & Summary

Okay. We're going to get going with the next presentation. Once again, I'm Ryan Brinkman, the U.S. autos analyst at JPMorgan. Very happy to begin our fireside chat with Magna International, the largest revenue supplier that I cover, one of the largest companies I cover. And I believe the third largest part supplier.

Third or fourth...

I have Patrick McCann, Executive Vice President and Chief Financial Officer; as well as Louis Tonelli, Vice President of Investor Relations, Pat and Louis, thanks so much for coming to the conference.

My pleasure.

We've been starting off with some generic sort of industry-level questions correlating the responses from the different CEOs and CFOs. Firstly, want to know demand. Demand has been tracking stronger, at least in the U.S., quite a bit. Just curious how you would rate the strength of the various different end markets in which you operate and what your outlook is here going forward?

Yes. I can start, Louis jump in and everybody can hear me. I'm with you. I was surprised that the resiliency of the markets. And our expectation, we started the year was under $450 million of production in North America, under $16 million or $16.2 million in Europe. So very weak numbers, China 26, which is unchanged, but sales have been strong. You mentioned the U.S., I find Europe as the real surprise, and that's reflected in our adjustments. But it's more than that. We're seeing stability come back into the market on production schedules, but even inventory levels aren't increasing. So there's a bunch of factors that were pleasantly surprised with, I would say, Louis.

Yes.

And the other piece, so that's reflected in our current updates. So when we brought our volumes, we came up from 15 in North America production into 15.2. We're seeing inventory hold flat. This is subject to the elephant in the room be and UAW negotiations. And in Europe, we're going from 16.3 to 17. But I would say we're still at the more risk-averse level of production with a lot of that upside behind us. And China keeps chugging along, 26.4 and it's unchanged.

Great. And what about, the same question from a supply side. Where are we in terms of, do you think the chip shortage and the various different other supply chain bottlenecks such as port delays, labor availability, et cetera, that have impacted the level and the stability of customer production.

And you touched on that a little bit last week, I'd say generally supply constraints have improved this year. And hopefully, they continue to improve through -- we expect them to continue to improve through '23. So that will be helpful for our overall production going forward.

That's helpful. And what about -- I wanted to ask on like the overall operating environment has impacts supplier margin generally. The average EBITDA margin for the 12 suppliers we cover was 11% last year, maybe it hit 12% this year, but it was 13%, 14% in the years leading up to the pandemic. Considering all the various different macro and industry factors that roll up into the backdrop for supplier margin, the aforementioned level and stability of customer production, the timing of commodity and non-commodity supply chain costs and associated recoveries, needed spending on R&D in advance of revenue to support industry change. Where do you think we are on the path back to normal margin? Or do we have a potentially new normal of margin, just considering the structural increase in input costs and maybe suppliers need to be evaluated on maybe an ROIC type metric to better gauge performance, what do you think?

I might answer those in reverse order. When I think about ROIC, you're speaking to the acquire here. So this is our view of how we measure our businesses and maybe it's a fact of how diverse we are. So we compare -- we don't necessarily compare margins between our BES segment, which is a capital-intensive segment with our Seating business because they have completely different margin profiles, but we do evaluate their ROIC returns. So on an apples-to-apples basis, that is something we use as an internal measure. I would say it's our #1 measure, I think, across the company, whereas we get into margins more, it's really a predominantly a margin -- a program management type to tool.

Tool.

Thank you, Louis. You listed up a whole bunch of negatives over the last 4 years, and it's been an incredible 4 years with COVID. And actually, it started in the back half of '19 with the strike at GM and with the UAW. So that was a starting the way into COVID chip shortages.

In China downturn even before that.

Yes. So it's -- you're right. And it's -- so you can sit there and focus on the negative. So what are we doing about it? And you look at it. So we spoke earlier about volumes coming back. They're still depressed relative to 2019 levels. We talk about chip supply, Louis talks about chips. We're talking about it getting better, not to where it used to be. So we're starting to see progress on those things, and that's really been driving some of our margins has been the stability of production. And when you look at the cost, I think that was the real driver that the industry hasn't seen in 20 years. In our case, we were -- we had headwinds last year of about $530 million. Roughly half of it was energy. So not only do you have COVID, you have a war. And so we were impacted -- we had assets in Russia, but the impact in our European operations. So we are the fourth biggest automotive supplier in the world. So we have a disproportionate amount of our work in Europe. So we did get hit more so because of inflation on energy and then it rolls into labor. That's the reality. When you fast forward to where we are, it's how do you get those costs out. So the first thing is you can't just go to the customers, how do you reduce them? So you have, on the labor side, you have automation projects. How do we deal with getting labor out of the plants becoming more efficient, but it's all built off stability of production. Two, when you think about energy, how do you become more efficient, can you unplug from the grid, a lot of your business cases around that make more sense. And I think thirdly is you're going to customers looking for offsets. And part of them were built off of what are your touch points into the customer? It could be when the program is awarded. Can you touch it before launch? Can you go in at a mid-cycle enhancement, engineering changes. So really, it's a partnership between us and our customers that are driving our margins. So when you fast forward to 2025, to where our margins were, we're creeping back up to where we used to be.

Yes. Thank you. And maybe some of the more company-specific questions. You've identified 3 key contributors to Magna's growth going forward. You've got the powertrain electrification, the battery enclosures, and ADAS. So I thought to ask some questions around these topics, beginning with powertrain electrification. You're looking for really huge growth here going from de minimis, just a couple of years ago to $2 billion already this year, and then looking to more than double that over the next couple of years. So how much of that increase in revenue is already booked? What trends are you seeing in terms of like the types of customers or geographies that are more interested in your systems? And can you update us on the status and outlook for the joint venture with LG specifically for the 3-in-1 systems, which I think is the fastest-growing part of one of the fastest-growing parts of the business, right, with like a 50% type CAGR. What's the outlook there?

Maybe I'll start with just what's both say out to 2025, which is the outlook we gave back in February. That's nearly all booked. So we have high bookings out there. Obviously, the whole -- further you get out there, the more of the stuff that's we're quoting around necessarily booked but well booked into 2025. We're seeing opportunities really in every region with all kinds of different customers, and that would be both on the full systems as well as on the components. So I'd say the 48-volt business that we have, the mild hybrid business is more centered on European customers and European markets because they're more near term, more focused on 48-volt, but we're seeing opportunities all over there.

Interesting. And what about moving to battery enclosures. Another area that's levered to the electrification megatrend, right? You project it actually to grow more quickly, I think, than powertrain electrification. So how do you see this business progressing? When it comes to powertrain electrification, we hear a lot about the opportunity in terms of some suppliers -- some automakers looking to in-source part or all of that capability sort of mitigate some of the opportunity. But I haven't really heard this about battery enclosures like I do about the EDUs, right? So is that a reason why this business is growing faster -- even faster than powertrain electrification, do you think?

I think there's a few pieces to this. When I think about a battery tray and for your perspective on these Ryan, these are huge components, right? They're 3-foot by up to 5, 6 foot and all the batteries go into them. And so they're highly engineered products and Magna's history comes out of metal forming. And so this is really our sweet spot. And the tolerances, multi-materials, the different joining techniques. So they're very complex, and they have to code it and they have to be leak tight. So they're very complex. I think when you contrast that with some of the other parts that we could talk about EDUs being in-sourced for how long. I think there's going to be a view of they might in-source it, they can learn the product and they start outsourcing it. But if they do in-source, they might want to in-source the motor and the inverter. So that's our strategy. Do you have a system strategy and a component. So when you come back to this, why would they outsource it? Most likely, when they -- when customers have a traditional tandem line stamping, they're going to fill capacity. When our capital that's elevated, that's related to this is bricks and mortar. These are full-on dedicated facilities for one assembly line. You have e-codes. So the facilities are huge. So the business model from their point of view is it's probably not much of an in-sourcing plate compared to an EDU. Our view is when we think about this type of product, it reminds us of the '90s when we were first getting into truck frames. And we had -- we rewarded the truck frame for the Chevy Silverado GMC. At the time, that was in 1997, and we're still producing it, and we're going to keep producing it probably for the next -- at least next generation. So you're looking at a big capital investment that's going to last most likely 20-plus years. So from a customer's point of view, do they want to make that investment, they were experts, low-risk and they just outsource it to us.

Yes. I just wanted to go back to the -- that's for LG, and we didn't really address that. But -- so the LG joint venture, it really supplies motors, inverters and onboard chargers. To the extent that we have business with a Japanese or Korean-based OEM then they would be -- the joint venture would be the lead, let's say, the supplier of the system, we would likely supply the gear set, if you will, into that type of program that we have. And if it's anything -- any other kind of -- any other customers outside the Koreans or the Japanese then we would be the system supplier and we would likely use the motors or the components from LG. The LG joint venture has got tremendous growth in front of it, and it continues to grow at the pace that we've been talking about for a few years now.

Great. And moving on to the third of the key growth contributors beyond powertrain electrification, and battery enclosure, you've also identified ADAS as another growth driver. What can you update us about in this part of the business, particularly following the closure of the Veoneer business now, right? Prior to including Veoneer, I think you were targeting a 20% top line CAGR for ADAS products over the next several years. How does the inclusion of Veoneer impact the growth or margin profile of this product set?

Yes. I'll start and Louis jump in, please. So Veoneer. So we closed Veoneer on June 1, and there's a whole history of how we go out there. But really, we were looking at Veoneer, it had a great -- it was very complementary as far as products. So we filled out our sensor suites. They had -- they were strong positions in radar. Some of the thermal cameras, we brought our camera technology, our digital radar and some of the different DMS solutions. We broadened our whole portfolio of sensor suites, but then that makes you stronger on the whole system side and the fusion of those various signals. We also -- we're a $40 billion company you start with, but we still don't do business with every customer and being your [indiscernible]. So we actually have access to new customers because of this. And nice footprint matching. And then lastly, it was really an access. You have a battle for talent around software engineers, in particular, this was a great opportunity to fill out our portfolio. So we gained scale really, really quickly. When you speak about Veoneer, because we were competitors, we had to do everything through a clean team structure. So you're operating blind from the time of announcing until closing, and you're working through clean teams. And we were pleasantly surprised, we got in, there was no surprises. 25 years of doing M&A, there's always something. This one here, we came in and the due diligence. We identified everything we thought was out there. So we're hitting the ground on synergies. We're hitting the ground on org structures, culture surveys. So I think we're really off on a positive first step. It's only been 2 months, right? So we do have a lot of work ahead of us, but we're here to execute it.

And the metrics so on track. We talked about $1 billion of incremental sales in '23. We said about $3 billion on a combined basis by '24, that's on the sales side. On the earnings side, we said about 20 basis points impact to us in '23. We said EBIT would be neutral. The impact of being here in 2024. Synergies, we said $70 million plus by the end of '25. And I think we're all on track to improve margins beyond that.

You mentioned the whole history of how you got there. And I'd love to go there because it is kind of fascinating the saga and because now the transaction is closed, so it would be great to get the sort of CFO's retrospect. I don't expect a total blow-by-blow.

We have $20 million.

Well, a little bit of a summary here on the financial terms because it's really quite interesting. It looks like you ended up paying $1.525 billion to acquire a business with $1.2 billion of 2022 Active Safety revenue expected to grow to $1.9 billion in '24. So somewhere between sort of like 0.8 and 1.3x LTM or NTM sales roughly. The $5.25 billion you paid is quite a bit less than the $3.3 billion enterprise value deal you'd originally struck with Veoneer before being outbid by Qualcomm, which ended up buying it at a $4.1 billion enterprise value, with the difference reflecting some combination of the value of the Arriver software stack that Qualcomm stripped and kept for itself. And presumably, I think a good portion of this is changed market conditions, right, between the time of the announcement, the S&P and the NASDAQ, I'm not sure how are you thinking about this transaction in retrospect, after you ended up paying $1.8 billion less than you'd originally proposed and $2.6 billion less than what Qualcomm paid, by my math to get the business less Arriver -- is Arriver worth $2.6 billion? I don't know if you have to answer that directly. I know you were disappointed when you originally were outbid, but did it in the end actually turn out to be more financially attractive deal for Magna to have gotten outbid considering how much less you paid while keeping the vast majority of the revenues and the $100 million breakup fee, right? So how are you thinking now in retrospect about how it all went down? And how pleased are you to have the Veoneer Active Safety business as part of Magna going forward?

A long question. So I'm going to try. So we go back and we think about being here, it was a spin-off from Autoliv at the time. So it was a public company. So it was 3 distinct pieces. You mentioned Arriver. There was Active Safety piece, but then there's also a Restraint Controls piece that came into it. When we came in, we did a whole bid for the full piece. The one call me you said is Arriver worth $2.5 billion, $2.6 billion. Proxies are an incredible source of information. So if you go back and read the Veoneer proxy, that's roughly what Qualcomm had valued it out for perspective. And they had a completely different business case that we did around Arriver. For everybody's benefit, Arriver is really a Mobileye competitor. So it's the actual perception software. They're a chip company and the idea was can they turn -- be the Mobileye competitor, so you'd have the stop, you can put the Arriver onto the Snapdragon chip and then you could build your infotainment type space as well. So very different business model compared to where we were looking at. So when they bought it, it was a wonky structure. But at the end of the day, we came in, we were interested in the Active Safety. So a, we probably would have been at a disadvantage having Arriver, b, we didn't go after the Restraint Controls business because it was just a derisking strategy. It's a stable nongrowing business, good business, but higher risk. So we were more strategic in how we came at it. So I think what we ended up without that day was the $1.5 billion of purchase price, the revenues, as you said. You have less vertical integration, but the flip side to all that is you can now come in and say, customer A, he want to work with this perception stack, we can support you. Here's our sensor suite, we can do the system. We can do all the drive policy on top of it. Customer B, you want to use a different perception stack. We can do that for you as well. So that's what we bring is we have experience working with Mobileye. Veoneer brings experience working with the Arriver stack or it used to be called something beforehand. But that's really that we're able to service more customers without having the whole perception piece. And it's a growing business, and there's just risk around the chip piece of it, too, right? You still need a chip to write your perception on. So there was a whole bunch of permutations, but I think where we ended up is really a best case scenario for Magna.

Absolutely. Thanks for filling in the missing piece on the Restraint Control but -- and also for answering the question, it ended up in your favor, right? Absolutely. Maybe moving on to the complete vehicle assembly business. What sort of update can you provide there in terms of the launch of the battery electric Fisker Ocean in Europe recently, how the Arcfox vehicles are doing in China? And maybe specific to China, what is the capacity utilization in that plant look like maybe it's a little bit less than I would have imagined. And yet it's in a market that just seems ripe for additional customers. And you may recall, too, I've been asking at this conference the last several years about the potential North American plant. And I read with interest an article or an interview in automotive news with a Magna Steyr executive. I don't know if you know him, Kurt Bachmaier, you familiar with this guy, in which he indicated that you were evaluating locations in the U.S. with high amounts of sun and wind that could support an environmentally friendly renewable power assembly plants for vehicles for Magna Steyr. And I haven't heard you talking about this or so let me talking about this as much. So how close might you be getting to a decision there? And how did the subsidies of the Inflation Reduction Act maybe make this more attractive?

So a couple of thoughts. Let's go through the regions. So I would start with Europe because that's really where we grew up. So we have one facility in Austria. It has a capacity of a range, but -- and the restriction is usually the paint line. So we can paint about 180,000 vehicles there. We do have the G Wagon, we announced we have the next gen that's going to bring us out to 2029. We've been an exclusive producer of that. It's an iconic vehicle if you ever have a chance to drive one, drive one, not on the streets, but like really drive it. We were just awarded the NEOS program. So it's another off-road type vehicle. It's going to be interesting. And as you mentioned, we're launching the Fisker. The flip side is the 5 series BMW split production rolled off in the first half of the year. So we're going through a transition right now. So when you do look at our CVA segment, you can see some reduction in profitability, and that's really a change in the volume curve, and then you have launch costs as you launch vehicles, which happen once every 4 to 5 years. But it continues to be a strong business. When you look into China, again, roughly 180,000 capacity, and we're building for one customer there, it's a joint venture partner, the Arcfox brand. So I think, Ryan, you're at our event in Pontiac, and we have the vehicles. So it's a nice vehicle, but it's not selling to our level of expectations. So there's 2 vehicles. It's the ash and the tea. We're looking over the next couple of years to launch 2 more. I think you mentioned it, the reality is you have a facility that can produce 180,000 vehicles. And that's what we bring. Our model is flexibility. It's not high volume production. It's how do you have one facility, one paint line, one assembly line that you can put multiple vehicles through. That's the real secret sauce that Magna Steyr brings to it. And that's what we want to do. our JV partners support of us doing that and bringing in more production. And you're right, there's so much change in China. We have to keep pushing for that opportunity. I think North America is a little bit a different animal in the sense that to start a production facility anywhere globally from scratches, it's financially hard. So you do need a significant commitment from a well-capitalized sophisticated partner that it's not -- you're not looking to build a vehicle for 4 or 5 years, you're looking to build multiple generations of the same vehicle. And I think what we provide and Louis jump in, I think we provide -- we've built 4 million vehicles over our lifetime. We know how to build vehicles. We know how to launch vehicles. We know how to engineer vehicles. We don't necessarily design them, but we can engineer them. So it's really exciting that you can bring all this. It's news to me that Kurt's walking around somewhere in the U.S. looking for a placement...

[indiscernible] CFO.

Son, but I read the article, but I think it's really that business case. The only one who ask, we get ask, and it really comes down to a business case.

It sounds those build vehicles. We're building that quality and we have to meet the quality requirements of our customers and our customers are pretty well-known prestigious customers, and we do that. We've been able for years and years to build at a very high quality, and that's an important element as on.

Thanks for mention the 4 million cumulative vehicles, but I haven't really thought about that are appreciated that. And I'm just kind of doing in my head the math, it might be about as many vehicles as Tesla's ever built, maybe about roughly, I'm not sure, but it can't be too far off. I wanted to ask about the oscillation is a nice way to put or a whipsaw in financial guidance this year with your stock declining in a typically large amount for an investment grade, a relatively low beta supplier when first guiding to softer-than-expected full year 2030 results. I know you mentioned demand is coming stronger, everybody appreciates that. And -- but then gaining a lot of that back with an atypically large move to the upside when you reported better 1Q results and raised the guidance, a lot of the way back up. What were the key variables? And now you raised it again with 2Q and another increase. So we've kind of round-tripped that a bit. And what were the key variables that were changing relative to your outlook for the full year? And how much was driven by company-specific Magna factors versus how much was just driven by an understandable evolving view on the industry, which is, of course, as mentioned pleasantly surprised the upside in production, maybe some good news on inflation. What was the back story there?

I think the back story, if you go back to what happened. So we had a weak Q4. I think people -- we were disappointed more than anybody in this room was disappointed. We were disappointed with our Q4 results. And then we came out with an outlook. And the outlook really was below consensus for 2023 and that we can surmise -- I don't know for sure, Ryan, but the view is I think people were surprised by the level of inflation that was "sticky into our numbers". And it's still a big number. So what's happened since that point in time. So we have traded up. We measure ourselves against our competitors. We are off their numbers anyway. So we're still trying to gain traction. We raised on Friday, our stock went down. So we're asking that what happened. So I lost somebody out there I said because we -- they were pleasantly surprised with Q2 and our stock went down I said, I guess we should stop pleasantly surprising apparently. But it's volumes. So our volumes were up. Europe has been better than we expected. Stability, as Louis talked about, is key, right? So if you can crew a facility and it comes in and you're building what you're expected to build, that's more important than having sky high volumes. I think third is the pivot to -- not the pivot, the increased focus on operational excellence and cost containment. So how do we come in, as we talked earlier, before you're going to the customer ask for recoveries, how do we just get those costs out of the system to begin with? And then I think the last and third biggest piece is just on the inflation piece. So we've benefited from lower inflation rates, I would say, on energy in particular, in Europe. People are happy the numbers down, but there's -- it went from 8x normal to 3x normal. So we still have to push. We still have to look at wind and some, as you talked about earlier, how do you get off grid, but even the cost containment. So how do you use data within all of our facilities to make more effective buys on purchasing. And Louis was talking earlier about some of the synergies we're able to execute on the Veoneer acquisition. You just -- a lot of the synergies are coming out of purchasing. So there's that opportunity. I think those are the 3 biggest drivers. And I think just commitment to every single day, having 350 management teams pushing for every penny. That's the biggest driver. It's an incredible amount of work. I'm actually proud of how much we've done so far in the first 6 months.

And it should give you confidence about our future in terms of given outlook beyond '23 and should give you confidence that we can get that.

You mentioned earlier UAW risk. I was just curious how -- maybe you get less of your revenue from North America than you used to, but how you think about -- is there anything you can do to prepare the company for that? I'm not sure. And just what your outlook for how that could potentially unfold and hopefully not a repeat of 2019. But it does seem like the rhetoric is, is maybe even more bellicose than has historically been and the 2 sides maybe a little bit further -- a lot further apart than they've historically been? What are your thoughts?

Yes. I don't have a crystal ball. I think you have a combination of factors that work here at play rather. So you do have the situation that happen in 2019. You have a new union leadership that are -- were elected on a certain platform, probably an appropriate platform that they are elected on. You have 3 automakers that have record profits, record cash flow. So you have this dynamic. And then the third macro dynamic is inflation, where you have a workforce that hasn't had a raise in 4 years. So they're underwater by 15% just because of inflation. So -- so when you read what's in the paper and the dynamics of my take, Pat McCann's view is they're trying to negotiate a pre-bankruptcy agreement, DBs, raises, COLA, and like jobs banks trying to put it back in. The other side is I'm -- yes, we have record profits, but we need the cash. We're investing in EVs. So I think to your point, it's, it's a tough one. It really is. So what does that mean for Magna, we have been prepared. So we've shown -- we went down in COVID. It was seamless. I was amazed at the ability of our management teams across the world. They were organized calls. And so we had a call on Tuesday morning with -- and we're already starting to talk about what are the scenario planning we can do for a shutdown location because it's not a one size fits all for every location. Who gets -- if there's a strike, do they strike one customer 2, 3. How long? How do you do it? So you start from day 1 is what can you do that's out of cycle and pull into maintenance, planning launch? Can you do burst builds? Can you do move a lot of that non has to happen on Tuesday type work out of the cycle and do it. Beyond that, unfortunately, you're probably looking at laying people off in the short term. And then you have to play it by a year. I don't know if you have anything to add...

No, it's not much we can do really what we just talked about.

Curious, you mentioned earlier about the initial outsourcing of EDUs maybe could be -- or the initial insourcing, maybe could be outsourced later. We feel like anything the automakers can do maybe suppliers to do more cheaply, like it doesn't really make sense for every automaker to reinvent the wheel like quite literally, right? You can amortize that across more units than an automaker can. And yes, I see a lot of these battery electric companies, they all feel like they need their own inverter. They all need their own motor. Sort of curious. I wonder if it just kind of take it a page from the Tesla playbook because that's what the equity investors have latched on to. But just curious how you see that all playing out and I know you get more CPV, but there is that insourcing headwind that investors are worried about. And on the other hand, there's probably some things that automakers do today that they don't want to do anymore. I know some of the axle stuff or driveline for internal combustion. How do you see this playing out? And how do you see it impacting the Magna would Magna ever look to pick up something that automakers do today? And what are your thoughts on that?

Well, that's a tough one. I think it would really depend on what they want to outsource. I don't think we want to get into something that has a short tail. So if they came to us and said, do you want to build engines, a, we're not good at it. We've never done it, and it has a short tail. So it's probably not something we're interested in. If it came down to they want to outsource Class A work or they want to outsource something that we provide an expertise. We want to be somebody that builds things that are hard to build. So a battery tray. So if they're going to outsource a battery tray, a frame, more body in white, we know they're going to recently like even full systems, motors, inverters, that's where we can play. That's where we're strong. But just to say, we want to take on dying businesses or...

Something we don't do currently.

Yes, like it'd be -- you don't want to -- we've had one experience where we bought the business from our customer, it doesn't turn out well. It's not a good situation.

But was that expense?

No, when you buy a business from your customers.

So I thought you were going to give me an example.

No, that...

[indiscernible]

No, it's just -- it doesn't end well necessarily because it's -- you have an ongoing relationship. Business, when you do an acquisition or disposal, they're really good transactions when it's a one and done and you're not having continuing relationships. So when you have -- when you're buying from your customer and you have a continuing relationship or you're selling wise versa, it's always -- it's a difficult situation. That's my experience, I don't know.

Do we have questions for Magna in the audience?. Maybe I'll ask on capital allocation. I think the message is we're paying down debt associated with Veoneer, share repurchase on hold. Is everything else on hold? Could you do tuck-in acquisitions, anything that you want to complete your portfolio? Or are we just paying down debt? And when do you get back within your targeted leverage range where it opens back up more choices.

Yes. I think, I would look at it in reverse order. So number one is we're going to get back within our targeted range. That's supposed to happen based on our internal projections in 2024. So it's not a long, long track, right? So I think when you do that, you say, okay, would we look at acquisitions? Yes. But again, is it going to play within building out our portfolio, giving us an edge in certain areas, then you would get into share buyback. So our share buyback for '23 is behind us. It ends in November, but we're not going to execute against it. We get to our November time frame, we'll look at it again. We'll take our business plans. We got to get all the noise of UAW exposure behind us. It's going to change. We'll make a decision for 2024. So I think that's really the decision point is going to be November, December this year. Do you turn the NCIB, the Normal Course Issuer Bid back on because you need regulatory approval. And then you come into M&A, and it's back to normal. You're within the debt range, M&A or even just more growth, right? Like -- we could have a that are coming. It could be other EDUs, whatever it is, it gives us flexibility. So that financial flexibility is driven like always by the debt ratio. And then we -- it gives you a lot of power. And listen, we went through COVID 4 years ago -- 3 years ago -- 4 years or 3 years ago, it works, right? We're able to raise what we needed to.

I thought I'd ask you on the Seating business and the relative attractiveness there because you tend to say a lot of favorable things about it and say don't look at the margins, look at the returns. And I know there was that time that Don Walker suggested at the trade auto show that you can buy Adient, I mean, I don't know if I remember that, yes. But it's just -- you've shown a lot of inclination here. And I visited with you in China during the quarter and learned that seeding is a much larger portion of your business over there, less body structures, et cetera, and you maybe benefited from some of the Adient Yanfeng reorg and whatnot. So maybe just give some updated thoughts on the relative attractiveness of the seating segment for you?

Yes. I really like our Seating segment. I know Dan said it, and we've been saying it for decades. A, you're right. So China people underappreciate our China business. So we are a strong supplier in the China market for C OEMs in particular. In North America, we have a very strong footprint. I think my perception is over the last couple of years, our Seating group has been disproportionately hit. And it's been driven by OEM behavior that they don't have the chips to build a vehicle. They're reallocating chips from -- we're heavy on the Chrysler Minivan. They'd rather sell a fully loaded Dodge, Ram, with higher margins. And I'd make the same decision if I was in their situation. So our margins have been negatively impacted by that. But if you come back to where we are this year, I think we posted really strong margins for the business as it grows. And we go out into 2025, we've seen continued progress nearing traditional rates.

Yes. We've been able to win some business and some new areas for us that. So our portfolio is changing a little bit within Seating. So we're pretty positive on where our Seating is going.

Great. Thanks. We are out of time. So please join me in thanking Pat and Louis for the great insight.