Nexteer Automotive Group Limited (1316) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to Nexteer Automotive Group Limited 2021 Annual Results Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded. I'd now like to turn the conference over to Investor Relations Director, Mr. Tony Wang. Please go ahead.

Thank you, Rocco. Good day, everyone. Welcome to Nexteer's 2021 annual results call. We made a brief announcement of our annual results today. We will have our Executive Board Director, President, CTO and Chief Strategy Officer, Robin Milavec; Senior Vice President and CFO, Mike Bierlein. Starting from the presentation, we will have Robin to provide an update of the company's business development for the year of 2021. After that, Mike will lead us diving into the financial details and wrap up with company's consideration about 2022 and beyond. Following the presentation, we will be available for your questions. The slides accompanying today's call are available at our company's website. Please be mindful of the safe harbor statement governing today's communication in the second page of the presentation package. Now I will hand over to Robin.

Okay. Thank you, Tony, and hello to everybody on the phone today, and thank you for joining us for our results announcement. I'd like to start on Slide #6, which is our 6 strategies for profitable growth. Our strategies have remained unchanged. And today, I primarily like to talk about the progress that we are making relative to our expansion of our revenue base and strengthening our technology leadership. First of all, to summarize our business overview for 2021. It goes without saying it was a very challenging environment, particularly in the second half, as we saw ongoing impacts from the COVID pandemic, which cascaded additional challenges resulting in chip shortages and other production disruptions. Those production disruptions caused inefficiency throughout our supply chain as well as increased operating costs in terms of material escalations and logistics. Despite that, we had a very strong launch year. And overall, we have 36 major customer launches. We are seeing a richer mix of electric vehicles across all regions, and I'll talk about a breakdown of that in a few slides. We also achieved just under $6 billion in new revenue bookings for the year, which lifted our order-to-delivery backlog to a record of $26.8 billion. I'll go into that in a little more detail as well. We're also continuing to expand the diversity of our customer base as we're picking up a Japanese OEM in our backlog, a leading North American power sports company and a major global EV manufacturer. Our technology continues to receive a lot of industry recognition. And specifically, I'll highlight our Steer-by-Wire technology and Stowable Column. These technologies received both the PACE pilot award as well as the CES Innovation Award during 2021. And finally, we completed our go-to-market plan for a new product line, eDrive P0 technology, and I'll have more to say on that in a few minutes also. This next slide is an overview of the market dynamics comparing 2021 with 2020. Looking at the left-hand side of this chart, you can see that during the first half of last year, we were seeing a relatively good recovery compared to 2020. And you can remember that in 2020, that was the year when COVID pandemic broke out, and we experienced production stoppages and lockdowns across the industry, especially impacting our facilities in North America and Europe. Then entering into the second half of last year, we began to see the impacts of the chip shortage. You can see a half-to-half reduction of about 16% in terms of units impacted due to the chip shortage. During this time, we experienced OEMs taking out production schedules and closing their facilities for 1 to 2 weeks at a time, depending on the availability of chips that allow them to assemble their vehicles. Overall for the year, the industry volume was flat, with only about a 2% increase year-over-year. And I would say that the demand for vehicles in the industry remains strong, and we're at not for the chip shortage impacting the second half production, the year would have been much stronger than it was. On the right-hand side of this chart, a couple of examples of some additional headwinds that we were facing. First, in terms of commodities, whether it's steel, aluminum, copper or rare earth that goes into our electric motors, we experienced significant headwinds in terms of commodity inflation anywhere from 1.5 to almost 2x the normal cost during 2021. The same is true for ocean freight rates. For the eastbound freight lanes from Asia to North America, freight costs spiked at over 2x the traditional cost and even West bound from North America to Asia, the rate for ocean freight jumped to 1.5x its normal level. So this was an environment we were operating in. It was very choppy and unpredictable production environment, in the second half of the year, especially and then compounded by escalating commodity costs and logistics. Next slide is our launch performance, and let me briefly explain what you see on this chart because there's a lot of information here. First, the pictures represent the new vehicles that we have product on that launched during 2021. And wherever you see the green electrification symbol that indicates that vehicle was an EV. And where you see our product name in red font, for example, halfshafts that means that it's new business for Nexteer that was conquested. If it's shown as black font, that means it's a next-generation or incumbent business for us. As I mentioned before, we had a total of 36 new program launches, which was a very strong year for us. 11 of those were in North America, 6 in EMEASA and 19, our largest number of launches coming in the Asia Pacific region. And let me emphasize that almost 90% of these launches are conquest programs, which is a good indication that our future revenue will grow over market as these platforms ramp up in volume. Nearly half of the conquest programs are in support of electric vehicle platforms. It covers the passenger vehicles all the way up through light commercial vehicles. A few key EV programs that I'd like to highlight is the GM Hummer EV, which launched in the fourth quarter of last year. We have all of our products on that vehicle, including our new high-output Rack EPS system, our power column and premium Ball Spline Axle. The next highlight is the BrightDrop electric delivery van, which also has our complete product portfolio. And finally, in Asia Pacific, I'd point out the Geely Zeekr EV, which has our premium Rack EPS gear. This next slide summarizes our new business booking performance for the year. And let me talk about a few specific highlights. In 2021, we booked our first new Rack EPS business with the Japanese OEM, our first steering business with North America powersports company and our first steering business with the leading global EV manufacturer. We're also expanding our business with more Chinese EV players and startups in a little bit. I'll show you some additional information on those partnerships. In terms of bookings, we finished the year with $5.9 billion. You can see based on the customer timing. Most of these bookings occurred in the second half of the year. You can also see the mix in the pie charts on the right of this chart. In terms of those bookings, our EPS product line was a significant portion accounting for 80%, followed by Driveline at 11% of the total. By geographical region, North America was the largest year last year with 69% of the total. And then you can see which of those bookings are incumbent versus conquest. About 28% of our total bookings were conquest and 72% incumbent, which was led by the rebooking of one of our large Rack EPS steering programs in North America. Finally, the breakdown by EVs compared to non-EVs. 23% of the bookings last year were for electric vehicles. Here's a breakdown of our backlog. So the chart on the left shows the historical backlog going back to the end of 2019 when it was at $26.4 billion. It then dropped in 2020 to $24.6 billion, driven in part by the reduction in global vehicle production forecast due to the COVID pandemic. And then based on the $5.9 billion new bookings this past year, our backlog expanded to a new record of $26.8 billion. Pie charts on the right show the breakdown by product line. You can see that our electric power steering product line is the majority of the backlog at nearly 70%. By region, North America is at 58%, followed by APAC and EMEASA with 24% and 18%, respectively. Breakdown of the backlog by major customers is shown in the bar chart in the lower left and then the breakdown by EVs versus non-EVs on the chart at the bottom right with EV exposure currently at 25% and growing. Along with our customer expansion, we're also looking at our existing products and expanding this portfolio in order to continue to support the growth plan. All these product evolutions are supporting our continued market growth. The first one is our High-Output Rack EPS. That's the product that just launched on the GM Hummer vehicle. That platform will be ramping up in volume throughout the balance of this year. Next is our Dual Pinion product. This is an expansion of our steering product portfolio and will launch at the end of next year on the light commercial vehicle in Europe. Next, our Stowable column technology will also launch in Europe with a major global OEM in 2024. And when this launches, it will be the first high-volume production program for a Stowable Column. With the Driveline product line, we're very much focused on those technologies that are going to drive growth. This new halfshafts shown here is called the Ball Spline Axle, and it's the new technology supporting the GM Hummer launch. And then for battery electric vehicles, we know that improved NVH and high-efficiency drivetrain is critical to capturing new business. So we have been putting a lot of focus on developing these high-efficiency joint technologies in order to capture the opportunities in the EV market. So across the board with all of our product lines, we're targeting development activities in those areas aligned with those global mega trends such as electrification. This next slide drills down a bit deeper into our electric power steering portfolio and strategy for growth. The steering technology moving from the top of the slide to the bottom gets progressively higher in terms of steering load capability. Starting at the top with column EPS moving down through single pinion, dual pinion and finally, the highest outputs during system of Rack EPS. We know that these electric vehicles are requiring higher output from the steering systems. This is because the front-end weight of these EVs is heavier due to the weight of the battery packs. We're focused on increasing the steering output of all of our products. So in the end, we have the most comprehensive and competitive portfolio in the industry. And it's not only a small amount of increased output. You can see anywhere from 25% to over 40% increase in the capability of the steering systems that we've been able to generate across all configurations. This development work has been going on for the past few years and has positioned us very well for the electric vehicle trend. Next [ slide is ] for our driveline products. We're now focused on some very specific technologies in order to capture more of the EV market. These are 2 examples. So the top 1 is what we call a TriGlide joint. This is a joint that goes on the inboard side of the vehicle and is developed to improve noise, vibration and harshness, which is a key element that electric vehicle manufacturers are looking for. The joint at the bottom is called a high-efficiency joint and is placed on the outboard side of the vehicles to allow steering motion at the wheel. This shaft reduces friction and improves driveline efficiency, which is also key to electric vehicles. We're very focused on this technology in order to capture the electric vehicle market. Over the years, we've been what we've called a strong #3 player in this driveline market. There are 2 competitors that currently have more scale and size than us. But with this strategy, we're focused on future electric vehicle markets, and our goal is to become the #1 driveline supplier for these battery electric vehicles, and we intend to do it by developing this product portfolio and winning the race to electric vehicles as this market is rapidly expanding. A little more flavor on what's happening in the North America truck and SUV market as they continue to accelerate electrification as well. Last year, we had the launch of the Hummer as well as the BrightDrop electric delivery van. This year, we'll see the Ford Lightning, which is the electric version of the F-150 pickup truck as well as the Cadillac Lyriq which is an electric luxury vehicle. In 2023, we see the trend continuing with the Chevy Silverado electric truck, the Chevy Equinox electric vehicle and the Blazer EV. So this electrification trend is accelerating, and Nexteer is very well positioned in the North American market. A little bit more on the China market. There's obviously many new startup EV companies in China. And what we're trying to do is sort through that large number of OEM start-ups and partner with the ones that we think are going to be the most successful in this market. This slide shows a summary of some of those OEMs that we've started working with, including XPeng, Li Auto, Nio, HHT and we include Tesla on this list as they're not a China start-up, but they are certainly very active in the China EV market. We have a really great story relative to our Steer-by-Wire technology. This will most likely be the steering technology of the future because it supports most all of the industry mega trends. We call it the center link because it connects these megatrends such as electrification, autonomous and more. We've made significant investment in this technology over the past several years, and we're now seeing a lot of momentum in the market as OEMs are beginning to develop production plans for this advanced technology. At the same time, Nexteer has continued to receive outstanding recognition in the industry not only from OEMs that we partnered with, but from industry forms such as Automotive News and CES. Today, I'm very excited to announce a Steer-by-Wire business award with a major global OEM that we expect to finalize in the very near future. Not only will this business award be the first high-volume production award for Steer-by-Wire, but it will further expand our steering market share beyond our current OEM customer base. This award will be one of the largest business bookings in our company's history and will position Nexteer as the industry-leading supplier for Steer-by-Wire and will establish critical mass and production scale for us by the middle of this decade. We'll have more to say about this very impactful award over the next few weeks and months, but it's sufficient now to say that this is a major breakthrough for Nexteer and it reinforces our position as the leading motion control technology company. This next chart shows our product alignment to ADAS technologies. As you probably know, 3 to 5 years ago, ADAS was the trend in the industry that everybody was after. Autonomous self-driving vehicles and the technology supporting them was a major trend. And much of this momentum has slowed regarding fully autonomous level 5 vehicles, but it has not slowed in terms of ADAS functions and features. Today, most OEMs are focusing on ADAS features like lane keeping, auto park, autopilot and super cruise, just to name a few specifics. These types of technologies assist the driver and do not necessarily take full control of the vehicle for extended periods of time. We continue to align our products to meet the needs of these future trends. All of our products are aligned across the different levels of autonomous driving, from driver assistance on the left, all the way to Level 5 automation on the right. We developed what we call high availability EPS, which is a highly redundant system with redundant torque sensors, redundant ECUs, redundant software and even motor windings. This is a technology that's received awards and recognition from GM and other industry leaders. We're well positioned with this technology to support ADAS trends. And as you can see down this chart, our entire product portfolio is very much aligned to support the needs of autonomous driving. We continue to be engaged with all of our customers on adding functions in our products that they need to support autonomous driving vehicle features of the future. The final transforming product is software. We see significant opportunity in this area as vehicles become more and more software dependent, and it becomes the software itself that's driving the value of the vehicles in the future. And we're not entering this space alone. In January of last year, we announced the expansion of our growing software capabilities with an investment in Tactile Mobility, which is a leading tactile and virtual sensing data company based in Israel. Just recently, Nexteer and Tactile Mobility announced advanced road surface detection and tire health monitoring software to improve vehicle health management, safety and performance. This new software highlights how Nexteer is combining its expertise in electric steering and steering feel tuning with Tactile Mobility's sensing technology and data analytics to improve vehicles connection to the road and enable even safer, more reliable driving. Nexteer and Tactile have been engaging with key global OEMs and running demonstrations to illustrate the benefits of the software technology. Next, I'm very excited to share with you our announcement of a new eDrive product line with the launch of our 48-volt integrated belt-driven starter generator that hybridizes conventional internal combustion engine vehicles. Nexteer's innovative, cost-effective approach leverages our expertise in steering and driveline and helps OEMs meet emission regulations while enhancing the driving comfort for end customers. Our first class will be within next month and will be with a leading Chinese domestic OEM. The market potential for this technology is significant over the next several years as OEMs leverage this product to improve overall fuel efficiency of their IC engine platforms. This launch creates a foundation and entry point for our company's exploration into additional eDrive applications and customer expansion. Lastly, I want to highlight is our initiatives relative to environmental, social and governance, or ESG. In addition to meeting our industry regulations and leveraging our technology expertise, we also continue to focus on identifying those opportunities to support sustainability. We're committed to drive a more sustainable future. We do everything we can to align our technologies with those mega trends like electrification that I just mentioned previously. Last year, the EV percentage of our backlog increased to 25%, and that's a really solid proof point that we are well aligned to this electrification trend. Our cross-functional teams collaborate with external energy partners to assess and identify renewable energy opportunities not only to assess the impacts from a sustainability perspective, but also to prioritize improving our energy, resilience and efficiency while optimizing our cost structure. This one tangible result that I'd like to share with you. Our Mexico team successfully reached a renewable energy agreement and implemented a conversion to a new energy supplier in the second half of last year. With this new supplier, 80% of our energy consumption is now coming from a solar farm that's located near our facility in Queretaro, Mexico. This initiative is now enabling our 4 Mexico sites to capture favorable environmental impacts with a reduced CO2 footprint. At the same time, it also is estimated to reduce our annual energy bill by about $1 million. In addition to our innovation efforts, we continue to focus on improved business processes and have received industry recognitions for our manufacturing leadership and our cybersecurity framework. Furthermore, I just want to share a few highlights of our social responsibility achievements. We're very proud to receive recognition by Newsweek as one of America's most responsible companies for a third year in a row. It goes along with other similar workplace-related awards in multiple regions. Last year, we started an internal program that we call RISE. RISE stands for Respect, Inclusion, Support And equity. We see this as a very important enabler to drive our innovation and our business operations and establish excellence through the diversity of all of our employees worldwide. With our people and our future in mind, we build what we call our One Nexteer culture to engage, empower and inspire our global teams to expand their circle of sustainability. With that, I'll pause and hand the call over to our Senior Vice President and CFO, Mike Bierlein. Mike?

Thanks, Robin, and good day to everyone joining us on the call. Before we review our full year 2021 financial performance in detail, I want to share some perspectives on the operating environment. We and all participants in the automotive industry navigated through during the course of 2021 and continues as we speak with you today. We experienced significant volatility and fall off in OEM production volumes as we move through 2021. On a full year basis, OEM production volumes did increase 2.5% compared with 2020, albeit 2020 production was significantly impacted by COVID-19 containment measures taken in every major region we served. However, OEM production volumes in the second half of 2021 were significantly lower, both year-over-year and on a sequential basis, as a result of continued impacts from the pandemic and supply chain constraints experienced on material flows. Principally, broad semiconductor shortages impacting the entire industry, which accelerated as the year progressed. On a year-over-year basis, second half 2021 OEM production fell by 16% and sequentially fell by 6%. Significant inflationary pressures, coupled with the impact from sudden and frequent changes in OEM production schedules, adversely impacted our operating margins, which accelerated during the course of the second half of 2021. We'll go into further details on this, but we experienced significant manufacturing inefficiencies in servicing our customers' production schedules as they suspended operations due to the lack of component supply. Commodity inflation that we were unable to fully pass through to our customers and significantly elevated transportation and logistics costs, and the higher utilization of premium modes resulting from port congestion and container availability further impacted our operating and financial performance. The environmental challenges we experienced during the year weighted heavily on our 2021 financial performance compared with last year, as summarized on this slide. Revenue of $3.395 billion in 2021 rose by about $327 million or 10.7% compared with last year. While OEM production was higher compared with last year, favorable foreign currency and commodity recoveries from our customers were also positive factors. EBITDA of $361 million in 2021 was lower than last year, reflecting the impact of net inflationary pressures and volatile customer production schedules resulting from component shortages and supply chain constraints. EBITDA margin for the full year was 10.7%, compared with 12.5% last year. Net profit attributable to equity holders of $118 million for the full year of 2021 improved 1.4% compared with 2020. While our EBITDA performance was lower in 2021, our net profit comparison benefit from the nonreoccurrence of customer program cancellations causing impairments of $34 million recognized in 2020. Free cash flow for the full year of 2021 was positive $2 million. Compared with our 2020 performance, lower cash provided from operations was the primary driver, reflecting lower EBITDA and increased working capital investment, principally an increase in inventory investment of $55 million resulting from longer supply value streams to ensure we met our customer production schedules. As noted here, the largest driver of the year-over-year increase in revenue was represented by volume, net of customer pricing, which provided an uplift of $217 million. Favorable foreign currency contributed $57 million, as both China RMB and euro appreciated against the U.S. dollar, benefiting our Asia Pacific and EMEASA segments by $44 million and $13 million, respectively. Finally, commodity recoveries provided a year-over-year increase of $53 million, reflecting contractual and negotiated pass-through to our customers of increased commodity costs given the inflationary environment we experienced in 2021. Slide 26 provides a sequential view of our 2021 revenue performance comparing our first half 2021 revenue performance to the second half of 2021. On a sequential basis, our second half 2021 revenue of $1.624 billion was lower than our first half performance by $110 million with volume net of customer pricing lower by $122 million or 6.3%, reflecting lower OEM production volumes as our customers faced accelerating supply chain constraints, resulting in extended production downtime. This reduction in volume, coupled with increasing inflationary pressures we experienced in the second half had a significant impact on our second half 2021 EBITDA margin profile, which I will review in more detail in the coming slide. Unfavorable foreign currency of $10 million and customer commodity recoveries of $22 million rounded out the comparison. To the left of this slide, we have highlighted the change in OEM light vehicle unit production comparing OEM production for 2021 and 2020. OEM light vehicle production for 2021 rose by 2.5% compared with the same period last year. On the right of this slide, we adjust our reported revenue for 2021 and 2020 for foreign currency changes and customer recovery, specifically related to commodities. As noted, our adjusted revenue on a year-over-year basis of $3.25 billion rose by 7.2% compared to our 2020 revenue of $3.032 billion, outperforming light vehicle production by 470 basis points, while the increase in North America adjusted revenue of 1% was slightly higher than market. Both our Asia Pacific and EMEASA segment significantly outperformed the market as a result of continuing benefit of new customer program launches in China and India and the ongoing ramp-up of our Morocco operation. Over the last several years, we have maintained a strong pipeline of customer program launches weighted toward new and conquest business which has, and we believe will continue to fuel our revenue performance in excess of the market. Our regional revenue performance is highlighted on this slide. On the left of the slide, the regional distribution of our revenue for 2021 and 2020 is presented. For both years, our North America segment is the largest and in 2021, comprised 59% of our total revenue, followed by Asia Pacific and EMEASA of 24% and 17%, respectively. Compared to 2020, we have a more balanced regional revenue mix as both Asia Pacific and EMEASA represented a larger share of the total, reflecting several years of significant revenue performance in excess of the market. As noted on the right of the slide, all of our segments experienced higher revenue on a year-over-year basis given the full year recovery in OEM production from the low point in 2020 as well as the benefit from new and conquest customer program launches. For 2021, North America posted revenue of $1.964 billion, $59 million or 3.1% higher than last year. Asia Pacific posted revenue of $809 million, $168 million or 26.2% higher than last year, and EMEASA posted revenue of $586 million, $100 million or 20.6% higher than last year. As previously reviewed, adjusted for foreign currency for customer commodity recoveries and all regional segments outperformed the market with Asia Pacific and EMEASA significantly outperforming the market by 13.3% and 18.9%, respectively. Turning to our earnings performance. EBITDA for 2021 was $361 million, providing a margin of 10.7%, compared with $378 million providing a margin of 12.5% for 2020. As highlighted on the bridge on the right side, the challenging operating environment that 2021 brought forward had a significant impact on our earnings performance. We incurred significant increases in logistics costs and net commodity inflation during the year, which further accelerated in the second half of 2021. Combined, these inflationary pressures negatively impacted our EBITDA performance in 2021 by $72 million, resulting in a margin degradation of 214 basis points compared with our 2020 performance. I would also point out on the commodity side, the $29 million headwind presented here is net of commodity recoveries from our customers of $53 million that we achieved in 2021. Our commercial and supply chain organizations continue to actively engage our customers and suppliers to offset these inflationary pressures as we move forward in the current year. Certain government subsidies we had received in prior years lapsed at the end of 2020, including a state of Michigan employment credit and engineering investment subsidy in Suzhou, which lowered our EBITDA by $15 million compared to 2020. These significant headwinds were partially tempered by a higher volume environment, which provided a benefit net of pricing of $36 million. And excluding premium costs incurred for logistics and commodities, we achieved a benefit of $34 million from our net cost performance initiatives. Overall, our EBITDA performance and margin profile were significantly impacted by the macro environment experienced by the industry as 2021 unfolded. Turning to a sequential comparison on this slide. Our second half 2021 EBITDA of $148 million was lower than our first half 2021 performance by $65 million with sequential margins pulling in by 320 basis points. Elevated cost pressures for logistics and commodities provided a further drag of $6 million and $10 million, respectively, in the second half of 2021. Given the decline in OEM production in the second half of 2021 compared with the first half resulting from accelerating component supply shortages, volume and mix, net of customer pricing, lowered our second half 2021 EBITDA performance by $23 million, as customers continue to adjust and suspend production schedules. Finally, our net cost performance was a headwind of $26 million, largely reflecting significant inefficiencies in our manufacturing operations as we encountered volatile and frequent adjustments to the near-term production schedules from our customers, particularly in North America and EMEASA. This slide highlights our EBITDA and margin profile for each of our segments. North America posted EBITDA of $164 million, $71 million lower than 2020 with margin lower by 390 basis points to 8.4%. And North America being the most impacted by OEM production cutbacks as well as logistics and commodities inflationary pressures. Asia Pacific posted EBITDA of $151 million, $26 million or almost 21% higher than 2020, reflecting strong year-over-year revenue growth in the segment. Despite inflationary and supply pressures, our Asia Pacific segment maintained a very strong margin profile of 18.7%. EMEASA posted EBITDA of $38 million, $12 million or 46% higher than 2020 with a margin improvement of 110 basis points to 6.4%. Continued focus on operating efficiency improvements, particularly in the segment's Morocco operation, which has been in serial customer program launch, were the largest contributors to the improved performance even during a most challenging operating cost environment. Our EBITDA to net profit bridge for 2021 and 2020 is presented on this slide, and I'd like to highlight just a couple of items. Depreciation and amortization expense of $246 million was lower by $13 million compared with 2020, resulting from the nonreoccurrence of $34 million of customer program impairments recognized in 2020 and as well as successful cost recovery actions from certain customers in 2021 of previously impaired programs of $9 million. On the income tax line, recall that we recognized a significant income tax benefit in the first half of 2020, resulting from the U.S. Cares Act, which provided for carryback of U.S. generated NOLs to prior years at a federal corporate tax rate of 35% compared with the current rate of 21%, providing a permanent tax rate savings of 14%. This legislation provided a benefit of $7 million and $10 million in 2021 and 2020, respectively. On the left of this slide, our free cash flow performance for 2021 and 2020 is presented in our balance sheet metrics to the right. Free cash flow in 2021 was $2 million compared with $132 million in 2020, reflecting lower cash from operating activities. Cash from operating activities of $288 million in the current year was lower than 2020 by $132 million, reflecting lower cash earnings and changes in working capital, with a working capital reduction in 2020 and an increase in working capital investment in 2021, driven by increased inventories of $55 million. Cash dues and investing activities of $286 million in the current year, comprised of capital investment and capitalized engineering and product development costs of $132 million and $144 million, respectively, was slightly lower by $2 million when compared with 2020. As noted on the right of the slide, we ended 2021 in a net cash position of $180 million. Given the strength of Nexteer's capital structure, we executed the early redemption of our $250 million senior notes in April, using both cash on hand and lower borrowing availability under our U.S. revolving credit facility. Liquidity stood at $610 million at the end of 2021, which included $327 million of cash and committed borrowing capacity under our available credit facilities of $284 million. The balance sheet remains strong, and we remain focused on maintaining discipline in our capital allocation as we move through 2022 and beyond. Looking forward, 2022 will provide the industry another dynamic and challenging environment. The troubling events that have unfolded in Eastern Europe with the invasion of Ukraine by Russian armed forces in late February, only further clouds the near-term horizon. IHS's January 2022 forecast. OEM production was forecasted to increase to 82.9 million units compared with 2021 production of 76.4 million units, an increase of 8.5%, although the increase was weighted to the second half of 2022. With North America and EMEASA providing the strongest recovery, we believe the present situation in Eastern Europe and already resulting in increasing inflationary pressures and consumer sentiment impacts will likely result in near-term downward adjustments to full year 2022 OEM production forecasts. We expect supply chain constraints to continue to extend through at least the first half of 2022, especially semiconductor shortages with some marginal improvement in the second half of 2022, which would be a welcome benefit for the industry broadly. Inflationary pressures remain high, and we expect them to persist through the course of 2022 with an expectation of some tempering in the latter part of the year as central banks begin to pull in accommodative monetary policy. The full economic impact of the Ukraine, Russian conflict and the economic sanctions currently being levied are unknown at this point in time. While we again are presented a near-term fluid and ever-changing environment with macro factors beyond our control. We are committed to moving forward with our strategy for profitable growth and remain confident in our collective Nexteer team in overcoming near-term challenges we and the industry will face. The industry continues to undergo an unprecedented transition and transformation to a cleaner future. And our products and technologies and capabilities well positioned us to succeed with our current customers while attracting and securing new customer positions. Thank you, and we will now open the call for questions. Operator, Rocco, if you'll collect the Q&A.

We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Tim Hsiao with Morgan Stanley.

I have 2 questions. The first question is about a view on the cost capacity because I think during the presentation, you mentioned supply chain disruption and cost inflation affect the company's performance badly last year. So in your view, how much of a big impact would you reckon as transitional? And could Nexteer, could they effectively tap it to this year? And how much would likely be the structure over here? Because we highlighted about 200 bps of margin impact from commodities or logistics. So also wondering if we can recover any of that digit. So that's the first question. And second question is on. Despite the sector headwinds, I think Nexteer's sales will meaningfully outgrow industry production. So should we attribute that mostly to the older share gain or there are component entry pile up at the OEM side. So if chip supply meaningfully recovers later this year, will Nexteer see meaningful [indiscernible] or OEM will need to digest the component inventory at the warehouse first?

Tim, thanks for the question. So I'll take a shot at these. And if Robin has some further comments, he can chime in as well. So as far as commodity costs in 2021, our material cost increased related to commodity price increases by $50 million -- or by $82 million. We did recover $53 million from our customers during 2021, and that was through escalation contracts as well as negotiations that took place in 2021. So we recovered at a rate of about 66% of our commodity price cost increases. And we continue to negotiate with our customers in order to further offset these costs, and we've made some headway in this area during 2022. So we are also looking at forecasts related to commodity prices in 2022. Back towards the end of last year, there was an expectation that commodities would -- prices would significantly reduce as supply constraints eased. And I'd say with the Russia, Ukraine conflict that has elevated the commodity costs recently, still forecasts are, at this point, anticipating an easing in commodity prices as we move through 2022. So that certainly would be a benefit to our overall margin profile. As far as the chip recovery from what we're seeing currently, there is solid consumer demand. So to the extent that there's chip availability and other component supply constraints are resolved, I see a significant recovery in OEM demand. So it will certainly depend on components supply availability. And then I think also, a lot of it will depend on how the Russia and Ukraine conflict plays out here through the balance of the year.

I guess, I can add to that. Tim, this is Robin. It's nice to talk to you again. In terms of your second question, if the supply of ships recover, how is Nexteer positioned? I think we're positioned actually very well because if you look at our recent bookings history, we booked about $7 billion in lifetime revenue back in 2020, followed that up with almost $6 billion last year in 2021, and a good amount of those bookings are with Conquest wins for us. So we have the business in our portfolio. And as the chip situation recovers towards the end of this year and hopefully into 2023, we should be very well positioned to realize the aspects of those significant bookings that we've had in the past. And the Conquest business that comes on should also be incremental to our base business. And then we've got a pretty rich share of that business with EVs, and we certainly are anticipating the electric vehicle market to begin to really accelerate over the next few years. So given the chip supply improves, I think Nexteer is very well positioned to take advantage of that over the next few years.

And our next question today comes from Rebecca Wen with JPMorgan.

This is Rebecca. So 3 quick questions from me, first 2 relating to the cost front. So the first one is on the logistic costs. So you talked about commodity cost earlier. How about the logistic costs? Are we able to pass through some of these to our customers? Are we on negotiations with them at the moment? And then the second question is on -- you talked about we have frequent OEM production shutdown, which led to a cost increase of our operations. Have you found any way to manage this throughout the year? And what's the expectation for this year? Any inefficient fees that we continue to expect from this front throughout this year? And then lastly, you mentioned the key win on the steering business with a major global EV leader. So congratulations on that. But I just want to follow up on this. Would you be able to elaborate a bit more details like would this major win be mostly in the China region? Or is it a global model? And what's the ASP and margin compared to the usual steering business?

Maybe I'll take a shot here at the first 2, Rob and turn it over. So Rebecca, thanks for the questions. I appreciate it. From a logistics standpoint, we incurred $43 million of increased logistics costs in 2021 compared to 2020. And we still see elevated logistics costs as we're entering here into 2022 as well. So we are currently working through negotiations with our customers, working to offset these higher costs that we've been facing. We've made some progress on the customer front, as I mentioned, but negotiations are ongoing for sure. As far as the plant inefficiencies. So those in 2021 were largely related to customer production shutdowns, which often occurred with little to no notice. And so we're unable to efficiently plan our manufacturing in the plants. And so we have seen some disruption this year, certainly not the level that we've seen, say, in Q3 of last year. So some improvement from this front. And whether the inefficiencies will be ongoing will largely be related to the availability of semiconductors, which is what drove the OEM production shutdowns during 2021.

Rebecca, this is Robin. I can add a little more flavor to some of your questions here as well. In terms of the logistics cost, I think Mike covered that well. The other thing to keep in mind is the value chain is certainly strained at the moment. And what I mean by that is there's not a lot of buffers or inventory in place in our long value chains. And if you look at the value chains associated with chips, it's a very extended in global value chain. And without buffers or inventory in place, whenever there is chip availability, the OEMs obviously want to put those chips into the vehicles as soon as possible. So without those buffers in place, it creates the environment for this premium freight just to expedite all of the material that's already strained in the value chain. So this is a topic that we're discussing with our customers on in terms of sharing that logistics cost and that's an ongoing effort for us this year. In terms of the plant efficiencies, that's also a very important topic that we are trying to manage our best and a lot of it, as Mike mentioned, is last year, we saw a lot of surprise disruptions where we might have only had 1 or 2 days' notice to plan for one of our OEMs shutting down in the following week. So that makes it very difficult for us to take our fixed costs out without the ability to plan. So we are starting to gain better visibility into the supply chain so that there is better opportunity to plan. But I can tell you, it's still a very challenging environment for the first half of this year for sure. And with the Ukraine situation, that could provide additional challenges as well. Your question about the global EV leader. We did book steering business with a global EV leader. I can't disclose a lot about that at this time but it is a global leader in that space. And our particular business award is in the China region. So that will be our first entry into that automaker. And we would expect that, that first entry will provide additional opportunities with other product lines as well as other regions over time. And the profitability or the margins associated with that business, we would expect to be consistent with what we had seen our traditional margins in the business looking back at like 2020 as an example or 2019. Thank you, Rebecca, for the questions.

And due to the limited time, we will take the last question. Today's last question comes from Xinchi Yin with CITIC Securities.

I have a question about Tesla Cybertruck. So is there any chance that we can be a supplier of Tesla Cybertruck? And I was wondering what your comment on this truck, what are the positive or negative impact of tester Cybertruck to Chevy Silverado or Ford F-150? So I will be really appreciate if you can have any comment on that.

Thanks for the question. I think your question is around the Tesla Cybertruck and our ability for product on that. Currently, we don't have plans for product on the Cybertruck, although I would tell you that we have -- we are in discussions with Tesla. And a lot of the product that we have launching now with the GM Hummer, the Chevy Silverado coming up, the Ford Lightning, those are all the types of products that, that particular Tesla platform could leverage relatively easily. So although we don't have a contract or anything formal today, it is something that we have ongoing discussions with Tesla as we look to expand our business with them.

Thank you so much for all the questions and today's participation. If there are any further queries, please contact us at [email protected]. This conference has now concluded. We thank you all for attending today's presentation. You may now disconnect.