Dana Incorporated Aktie

Good morning, and welcome to Dana Incorporated Transaction Announcement Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and Q&A session will be recorded for replay and transcribed. For those participants who would like to access the call from the webcast, please reference the URL on our website. [Operator Instructions] At this time, I'd like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.

Thank you, Regina. Good morning, and welcome to Dana's update call. Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from what we discuss here today. For more details about the factors that may affect the results, please refer to our safe harbor statements and the disclaimers found in our materials published on our website and filed with the reports with the SEC.

I encourage you to visit our investor website, where you'll find this morning's press release and presentation. As stated, today's call is being recorded, and the supporting materials are the property of Dana Incorporated may not be recorded, copied or rebroadcast without our written consent.

With us this morning is Bruce McDonald, Dana Chairman and Chief Executive Officer; Byron Foster, Senior Vice President and President of our Light Vehicle Group and our incoming CEO; and Timothy Kraus, Senior Vice President and Chief Financial Officer. Bruce, I'll turn the call over to you.

Okay. Thank you, Craig. Good morning, everyone, and thank you for joining us this morning on what's been, I guess, short notice. We're extremely excited to be announcing a business combination with Eaton's mobility business. Just by way of background, this is a business that we've long been, you could say, coveted. Obviously, it wasn't available in the marketplace being a part of Eaton. And so since last January, when Eaton announced their intention to spin this business off, we've moved very quickly and aggressively to reach the agreement that we're announcing here this morning.

As we communicated at our Capital Markets Day in March, Dana's vision is to be the world's best powertrain company. And we believe this combination, we make a major step towards achieving our vision. If you look at it by combining our axle driveline and electrification portfolio with Eaton's transmission capabilities, we will be a truly differentiated supplier in the powertrain space. In terms of the transaction, it's structured as a Reverse Morris Trust or RMT, and that is being effected so that the transaction is tax-free for Eaton shareholders. The pro forma ownership of the combined company will be Eaton shareholders will own just over 50% and Dana shareholders will own just under 50%.

The combined structure -- or sorry, combined enterprise value will be about $10 billion based on our current share price. And as I mentioned earlier, the transaction while being tax-free for Eaton shareholders will also be tax-free for Dana's shareholders. In terms of the strategic rationale, it's fairly simple. This really transforms Dana and expands our 2030 strategy. It increases our scale in both CV and aftermarket segments, and provides us with cross-selling opportunities where we think we can accelerate the growth rate that we're already committing to in each of those 2 businesses.

In terms of margins, it's accretive to both EBITDA and free cash flow margins. We committed to a 15% adjusted EBITDA margins for Dana under our 2030 strategy. We believe we will be there in 2027, the first year this transaction is in effect. And we're upping our 2030 EBITDA targets and free cash flow targets significantly, and Tim will get into those later on in his presentation. And then lastly, we believe there's compelling value creation for our shareholders through the $250 million of cost synergies that we are absolutely committing to.

Turning to Page 5. I'll just go through a little bit more of the details on the transaction. In terms of the enterprise value at $5.1 billion, that represents a multiple of about 5.9x 2026 pro forma EBITDA, and that includes our run rate of $250 million of synergies. In terms of the shareholding, we already talked about that. The equity component of the deal will be about $4 billion, and that's essentially a fixed number of shares based on our VWAP, a 5-day VWAP on June 4. And then we will also pay a cash dividend to Eaton, which will be funded by new debt of $1.1 billion. And I would note the $1.1 billion dividend was subject to normal closing adjustments for cash and debt levels.

In terms of our balance sheet, we expect it to remain extremely strong at 1.2x immediately after closing. And we don't -- at that level, we expect our current credit ratings to be unchanged. In terms of the governance of the company, I'm going to transition, as previously announced into the Chairman role. Now my role will change. I'll stay on as Executive Chairman, and I will have primary responsibility for integrating the businesses and synergy realization. Byron will become the Chief Executive Officer on July 1. Tim Kraus will remain our CFO, and we'll be joined -- the management team will be joined by Erin Rowse, who from Eaton, who will serve as our CHRO effective upon closing.

In terms of the Board of Directors, in addition to the current 8-member Board that we have, we will be adding 3 Eaton nominees. One of them will be an Eaton executive and 2 will be current directors at Eaton. So we believe it will significantly strengthen the Board of the company, of the combined company with the addition of these 3 high-quality directors. In terms of closing, the deal is subject to normal regulatory and competition type approvals as well as a shareholder vote from our -- from Dana shareholders, and we expect the transaction to close sometime in the first quarter of 2027. And as I talked about before, we are committing to deliver $250 million of synergies within 24 months of closing, a number that we are extremely confident we can deliver.

With that, Byron, I'll turn it over to you to go through an overview of the new business.

Okay. Thanks, Bruce, and good morning, everyone. Thanks for joining. Let me give you an overview of Eaton's mobility business. In terms of the business's focus, it's really around providing engineered solutions for creating, distributing and optimizing power for commercial vehicle, light vehicle as well as supplying the aftermarket space. In terms of products, you can see some of the key product lines there. I'm on Page 6. Commercial vehicle transmissions, engine and emission systems and various components as well as a suite of EV products. And then an aftermarket business that supplies various products and components, which we'll talk a little bit more about in the coming slides.

In terms of the financials, $3.3 billion of revenue is the estimate for 2026, and you can see that split roughly 65% of that revenue is focused on the commercial vehicle space and 35% on light vehicle. 25% of the revenue is aftermarket. So a very strong aftermarket position, and we're looking forward to the opportunities of combining our aftermarket businesses. And then you can see from a margin perspective, in 2026, the estimate is 19% EBITDA margins. In terms of the regional split of the business, roughly 50% of the revenue is here in North America with the other half of the revenue, pretty equally split between South America, Europe and APAC. And then serving all of the major OEMs across both the light vehicle and commercial vehicle space.

If you turn to Page 7, you can see the global footprint, 28 manufacturing sites deliver to the customers. You can see a very strong footprint in the key regions, North America, South America, and then you can see 4 sites in Europe and 5 sites in the Asia Pacific region.

Going to Page 8, as Bruce mentioned, this combination fully aligns with Dana's vision to be the world's best powertrain company. And if you really look at the capabilities brought to the table from Dana as well as from Eaton's mobility business, it really positions the combined company to win in this space. Just to take a second here and walk through this. If you think about the drivetrain portfolio, Dana brings obviously, expertise in the driveline space as well as a low-cost manufacturing footprint that now combines with Eaton's leadership position in the commercial truck transmission and clutch space.

In terms of the powertrain, you can see, obviously, Dana brings expertise and depth in axles, driveshafts and various thermal management products that you guys know well and combining that with Eaton's transmission and mission-critical power creation and distribution products. So really broadening our product portfolio and the solution set that we can bring to our customers. From an aftermarket perspective, Dana brings a broad portfolio of sealing and thermal and driveline product to that space. That now combines with Eaton's global distribution network and commercial vehicle replacement parts. So again, bringing a broader set of solutions to our customers in the aftermarket space.

And then from a margin expansion and resiliency relative to cash generation, really the combination of Dana's program cadence, the cost discipline that we've put into the business, combined with a really durable demand pattern and margin -- strong margin portfolio. from Eaton really positions us well from a P&L and balance sheet standpoint.

If you go with me to Page 9 now, just to kind of step back at a high level and look at the combination. We're bringing together Dana's $7.5 billion driveline business that is very highly, from a mix standpoint, leveraged to the light vehicle space with 20% of our business being commercial vehicle and the remainder being aftermarket. Combining it now with Eaton's mobility business, $3.3 billion top line. And you can see the mix there being 42% commercial vehicle, 34%, light vehicle and the remainder -- remaining 24% aftermarket. So you can see that combination really provides a much more balanced portfolio across the end markets and a stronger position from a mix standpoint in the aftermarket space. So really excited about the combination of 2 great companies and the value that can be created for our customers and our shareholders.

So with that, let me turn it over to Tim, and he'll take us through more of the financial update of the deal.

Appreciate it, Byron. And thank you, and good morning to everybody. If you turn to Page 10, just to give a quick overview on the aftermarket business. It was -- the aftermarket growth was a key pillar of our 2030 strategy, and this transaction strengthens that pillar and helps accelerate the growth in our business. So as you can see, Dana's current business is about $900 million in the aftermarket. We're adding about $800 million from Eaton for a combined business that's about $1.7 billion. So we're very excited, offers a comprehensive range of genuine and all makes products. We believe there's a lot of additional opportunities around cross-selling and significant growth runway within this business. So we do see this as a high-margin noncyclical business that really helps underpin the financial strength of the combined business.

And with that, I'll turn it on to Page 11. And we'll talk a little bit about our Dana '30 growth strategy. So as Bruce mentioned, our strategy is to be the world's best powertrain supplier and this transaction absolutely strengthens that. And with that, we remain 100% committed to the strategy we laid out in March at our Capital Markets Day. So if you look, our prior sales target that we laid out for 2030 was $10 billion in revenue. We're revising that today to be between $14 billion and $15 billion, really accentuating that this transaction accelerates our 2030 growth targets, broadens the scope of our traditional products, that's both in CV transmissions and in cross-selling opportunities across all the products. And especially in aftermarket, as I just mentioned, broadens the breadth and really deepens the products across all of our end markets. So we're really excited to advance the growth strategy and take those targets up from $10 billion to $14 billion to $15 billion.

So part of the compelling value creation of this transaction are the $250 million of projected synergies. So as you look, we believe that this will be a -- be completed by the end of the second year of the acquisition. So $250 million of run rate savings after 24 months of the transaction. The synergies will typically come from corporate, so duplicative corporate functions, the integration of the CV and LV businesses between Dana and the Eaton business, additional purchasing opportunities. So as we gain scale and breadth and we'll be able to continue to leverage both organizations. Engineering. So there are a number of different engineering centers that we're going to be able to rationalize and bring together to drive cost savings.

And then manufacturing is another key pillar. So operational improvements as well as automation and footprint realization. And then, of course, aftermarket. As I just mentioned, aftermarket is a key pillar, and we believe there's a lot of opportunities to drive synergies through the business. So and as Bruce mentioned, we are 100% committed and don't believe we have any issue in being able to deliver $250 million of run rate savings as a result of combining our business. So that's $250 million out of what amounts to an $11 billion business.

So if you move to Page 13, the transaction, the combined businesses provide a robust financial profile and strong profitability. Combined sales on a 2026 estimated basis, about $11 billion, as Byron mentioned. Pro forma adjusted EBITDA, about $1.7 billion, driving margins to 15%. So as you may recall, our 2030 target was $10 billion with 15% EBITDA margins, and those are going to be realized immediately upon the consummation of this transaction. And then our combined aftermarket sale, again, $1.7 billion, creating a very large and scaled aftermarket business for the combined entity.

If you turn to Page 14. This transaction, given the significant component that's being paid in stock continues to maintain our strong balance sheet. So we have committed financing in place for the transaction, and we expect to refinance our existing capital structure as part of the transaction. And we expect the pro forma net leverage after considering synergies will be about 1.2 turns. So again, we're running around 1% today. We will continue to have an exceedingly strong balance sheet with maturities that are largely pushed out well beyond 2030. And we are committed to completing our existing $2 billion shareholder return authorization that we approved earlier in the year. We had to temporarily suspend the buyback program to preserve the tax-free nature of the Reverse Morris Trust transaction, and we expect our excess cash in the interim to be used for deleveraging. And we do expect our credit ratings to remain largely unchanged as a result of the transaction.

So if you turn with me now to the next page. So Dana 2030 driving multiple expansion, right? These are our new targets for 2030. Sales of $14 billion to $15 billion, adjusted EBITDA margin of approximately 18%, that's 750 basis points improvement over our 2026 guide for Dana alone and adjusted free cash flow margins of 8% to 9%. That's a 450 basis points improvement over our 2026 guide. So this acquisition accelerates and expands Dana 2030 targets. We have above-market rate growth. It fundamentally improves -- improvements in operations for top quartile margins, and we're accelerating our free cash flow generation. And we continue to be laser-focused on increasing shareholder value, and we believe this transaction does just that.

And with that, I will turn it back over to Byron for some concluding remarks.

Okay. So just to close it out. Thank you, Tim. Thank you, Bruce. We couldn't be more excited about the opportunity that combined with Eaton's mobility business presents to our team, to the Eaton team, to our customers and to our shareholders. Just a couple of highlights of the key points that we want to leave you with. One, it creates a comprehensive high-value powertrain portfolio right in line with the vision that we've put in place for the company. It accelerates our aftermarket expansion. We've shared with you that that's a key pillar of the Dana 2030 strategy. And so this just accelerates that plan for us. Increases our commercial vehicle scale and market coverage, again, bringing better balance to our mix of end markets that we serve, reduces our customer concentration. As you know, Dana has a very concentrated kind of customer mix. So this diversifies the customer base that we serve, combines really 2 exceptional teams that have history.

These companies go back a long way. We've had partnerships in the past, and we look forward to bringing these teams together, again, to drive performance and serve our customers, expands our margins and free cash flow, maintains our strong balance sheet, and at the end of the day, increases shareholder value. So again, we're excited to share the news with you all this morning, and we look forward to any questions that you might have. Thank you.

[Operator Instructions] Our first question will come from the line of Rajat Gupta with JPMorgan.

Congrats on the announcement. Just had a quick question on the long-term sales targets of $14 billion to $15 billion. Is there any change to like the legacy Dana organic growth assumptions? And also what's being assumed for Eaton Mobility organic growth in those targets? And maybe like you could layer in what kind of revenue synergies you're expecting from the deal that might be aiding that target as well? And I have a quick follow-up.

Yes. Let me take the first part in terms of Dana's organic growth plans. I would say no changes to the strategy that we have in place. If you'll recall, we talked about 3 pillars of growth, our traditional business, which we've already had some proof points in terms of our ability to continue to grow our driveline business with our key customers. Aftermarket, I think we've laid out a number of strategies of what we're doing there to drive growth in the aftermarket space, as well as our applied technologies that gets us into complementary markets where we think the Dana technologies and product portfolio can bring value. So those plans, those targets that are part of Dana 2030 remain in place, and we see no change to what we're driving there. Tim, do you want to speak to that?

Yes. So if you take a look, we're still committed, as Byron just mentioned, to our $10 billion target. We're showing $14 billion to $15 billion for the combined entity. Eaton is currently about $3.3 billion. So we see significant growth in -- or growth in Eaton coming as well over that 5-year period. Obviously, they're in some of the same markets we are. If you think about our growth in terms of the market recovery in CV, that's part of the story for Eaton. And then we do believe that there are opportunities given the products that Eaton has as we combine, and we start thinking about our applied technology growth pillar that we're going to find opportunities in that -- those pillars to be able to continue to push our sales further in terms of growth out in the out years. But the vast majority of all of the cost synergies, the $250 million of synergies that we're underwriting today are all on the cost side of the business.

Understood. That's helpful. Just a quick follow-up on the buyback. I understand the temporary suspension here. Given like this is like a bigger EBITDA base, a bigger free cash flow trajectory, is there any change to like the prior $2 billion through 2030 authorization? Or do you anticipate any change to that once this transaction is closed?

So no change to the authorization, so we haven't. But you hit the nail on the head. As we think about the size of the business and where the capital structure is, we believe we're going to have significant excess capital as we move into the latter part of the plan years, which should give us the ability to continue to and accelerate our capital return program. But as of today, we are fully committed to returning the full $2 billion within that time period.

And just so everybody knows, I don't think I mentioned it in my opening remarks. We are prohibited for 24 months after the closing of the transaction on the buyback. So that's the limit. So we believe if you fast forward, when we get into '29, we'll be able to resume the buyback.

And I think our previous $2 billion obviously didn't use up all of our free cash flow. So we had cushion there. And clearly, this gives us a lot more cushion than we had before. So I would say there's upward bias on our buyback as opposed to risk.

Our next question comes from the line of Emmanuel Rosner with Wolfe Research.

Can you maybe talk a little bit about the backdrop of this deal for you, how that came about? It seems like based on your recent Capital Markets Day, you have a lot of growth opportunities organically as well. Obviously, your 2030 targets are still very, very much there. So what is essentially this -- what is this bringing you essentially that would help you and get longer term?

Well, I think, first of all, this is a business that has always been of high strategic interest to Dana. The axle, our driveline, powertrain, especially when you look at some electrification, these products fit exceptionally well together. For us, this improves the scale of our business in commercial vehicle, which has accretive margins. It also brings a very healthy aftermarket exposure. So it's a business that we, I'll say, have long desired.

Unfortunately, it was a portion of Eaton, and it was not available in the market. So in late January, Eaton announced their intention to spin the business off and it became kind of a once-in-a-generational opportunity for us to acquire a premier asset of high strategic interest and fit with significant synergy opportunities. So it was opportunistic, but it certainly fits in our strategy to become the world's best powertrain supplier.

Got it. And then just a quick follow-up. Can you just give a little bit more detail on pro forma free cash flow, I guess, both now and sort of like post synergies? And then to the extent that the -- you're prevented from doing buybacks for probably the next couple of years, 2, 3 years, what would be sort of like the use of free cash flow sort of like in the meantime?

Yes. So their business is -- has a better free cash flow profile than we do, largely due to the higher margins that are coming in the business and the higher exposure to aftermarket, which is a big component of that. So we would expect our free cash flow in the near term, if you think about where we're at today, and where we're now projecting in 2030, we'll have additional free cash flow returns in the near term as well.

In terms of use of our free cash flow, so obviously, we need to integrate the business. There are cost to do that. So we'll spend a bit on that. And then we will use the proceeds in the interim or the cash flow interim to delever the business. And then from there, we'll continue to think about our ability to then redeploy that capital, whether it be in growth or as we talked about here just a few minutes ago in terms of increasing the size of our capital return program.

Our next question will come from the line of Colin Langan with Wells Fargo.

Any way to -- I'm just trying to struggle with the $250 million of synergies. It's quite a large number given that the sales were -- I think EBIT for the business that you're acquiring was only $400 million. What is driving that? Because is there a product overlap? Is there consolidation? Because some of the items you listed on the slide like purchasing and corporate, this is coming out of a large corporation. So why wouldn't they have had those synergies in the current company?

Yes. I'll maybe start with that, Colin. I mean, first of all, I think our $250 million is a certainty. It's a covenant that we're signing up to, and we have absolute confidence that we can deliver it just like we have with our other cost reduction commitments. In terms of the buckets, I mean, Tim kind of went through those in detail, but I guess I wouldn't look at it like we're taking $250 million out of Eaton's $3.3 billion. We're taking $250 million out of the combined company. So we have duplicative head off overhead structures in light vehicle and commercial vehicle on a regional basis, and we intend to run the company as 1 unit, not as 2 separate pieces.

Same situation, if you look at our aftermarket, that's completely duplicative network, warehousing structures, we intend to integrate those. Within Eaton's business, there's a fairly significant number in terms of corporate costs that are allocated to that business. And I can tell you, our overhead cost structure is a lot leaner than Eaton's. And so that's a big driver of the savings as well.

Yes. I think I'll comment a couple of other things here, right? You mentioned purchasing. I think the -- what we're seeing here is this business is very different from the rest of the businesses within the Eaton portfolio. And so there's a lot more synergies on the purchasing side with Dana than there was actually in the broad umbrella of Eaton. The other big driver, I think, on the -- or I don't think I know on the synergies is around the automation in their -- on their factory floors. They have exceptionally well-run plants, but much like the journey we have been on over the last few years, they had been spending a lot of capital on their EV journey.

We now see -- and not increasing automation and efficiencies from a plant perspective. So we do see all the things that we're doing around our 2030 being overlaid onto the Eaton -- the Eaton business and be able to really drive a lot larger synergy number than you would typically think you'd see in a transaction or a combination of this size.

Got it. And you didn't mention the -- my follow-up was going to be on the EV products. Any color on -- is there overlap with what you're doing today in that segment that you're acquiring? And you've been kind of deemphasizing EV? Is this a shift? Is that -- are you -- is this one of the assets you're looking at? Or how should we think about the incorporation of those EV assets? And what kind of position does Eaton have in those areas today?

Well, I guess to the first part -- it's Byron, Colin. The first part of your question, the products do not overlap. So think more kind of power distribution type of products and components that come with the Eaton portfolio. And they have gone through what the entire supply base and our OEs have gone through in terms of rightsizing and repositioning that business to the reality of kind of where the volume profiles are. At the end of the day, the EV vehicles, if you will, aren't going away. It's just the trajectory is a lot different than initially planned.

So they've been kind of rebalanced and rescoped to support the customers given that trajectory, much like we've done with our business. So we haven't stood up and said we're exiting EV. We just have to rightsize it to the real market demand and outlook.

Yes. And just to add on to what Byron's comment. We are putting 2 subscale EV businesses together. So that's a huge opportunity for the business. And then I think to your point, are we changing our strategy in terms of how we're thinking about EV? No, we are not. It's still part of, obviously, the portfolio, but we are going to continue to have the same philosophy towards EV is after the transaction as we have now, which is we'll look at opportunities. They have to meet our hurdle rates. And if the customer wants bespoke products. They have to pay for the capital and the engineering. If they want to buy an off-the-shelf product, then we'll work with them to do. So -- but we have not changed our EV strategy at all.

Our next question comes from the line of James Mulholland with Deutsche Bank.

I just want to revisit those 2030 growth buckets, if we could. So looking especially at that $1 billion in traditional aftermarket and applied technology, should we think of these as materially larger now to get to that $15 billion or the $14 billion to $15 billion? Or does the acquisition already accomplish the aftermarket component? Are these separate? What's your thought process there?

The thought process is that the acquisition is additive. So we will continue -- so if you think about our chart, right, we had $200 million in aftermarket, just speaking on that. We're still fully committed. And I think as we walk through the year, we'll be able to demonstrate the opportunities that we're capturing for aftermarket. But no, we got a $1.7 billion aftermarket today. You're going to add $200 million in -- from our 2030. And then there is additional growth coming with Eaton because they, like us, were focused on continuing to grow and find those opportunities on the aftermarket side. So the aftermarket is not, "Hey, Eaton solves that problem." It's additive to what we've shown in our current 2030 strategy.

And if anything, I would say, it brings the opportunity to accelerate our aspirations in the aftermarket space because things like boots on the ground, in the regions, supporting customers, I mean, we're looking to leverage that network that is much better in place, let's say, with the Eaton team than building organically. So we're really looking to leverage both the capabilities and capacity that Eaton brings to bear to accelerate our aspirations in the aftermarket space.

Great. That's helpful. And then I guess, looking at the new company's manufacturing footprint. I guess it's probably fair to say that some of the plants are going to need to be evaluated, maybe changed over to Dana Systems. But should we expect some material restructuring expense in the meantime? Or at first glance, does the footprint look relatively turnkey and something we won't expect to see material changes or closures? And if so, could there be some upside to synergies there if you do have to go out and close a few of these plants?

Yes. I think we -- we obviously have a lot of work to do in order to understand their manufacturing footprint. We do see opportunities. And -- but we'll -- as we kind of work through integration and do that planning, we'll come back. But to your point, do we think there's upside? Yes, we are supremely confident in our ability to deliver the $250 million. So if you just think about kind of where we've been on the journey on our own cost reduction plan, we're going to continue to work. We won't be satisfied with the level of efficiency that we've laid out. And as we find those opportunities, we'll clearly go after them.

Our next question will come from the line of Joe Spak with UBS.

Tim, maybe just going back to the product portfolio. As you mentioned, it does look fairly complementary. But are there -- is there any overlap? Or are there any sort of areas or products you think you might need to take a look at just for regulatory purposes?

Short answer is no. Joe, short answer is no. We have some transmission business in the specialty kind of sports car space, but again, very different product. And as I mentioned on the EV side, really no overlap there. So short answer is no, we don't expect that we'll have to peel anything on from a regulatory standpoint.

Okay. And then just back to the synergies. I mean, I guess I had a slightly different take because like when you sold Off-Highway, you found $300 million sort of stand-alone. And I know maybe there was some greater inefficiencies at Dana versus Eaton, although I think you just said it might be the inverse at this point. So just wondering, again, if you could give us a little bit more sort of color on those synergies and maybe just some high-level split of the synergies by the buckets you listed between corporate, purchasing, engineering, et cetera.

Yes. Joe, it's Tim. Look, I think we'll certainly, as we kind of come through give more detail around the buckets. I think we've done obviously, quite a bit of work, but we still have some more to do. But again, I think it's -- we're bringing an organization that has lots of overlap with what we have, and we do believe that the way we're going to think about running the business is going to allow us to drive those costs out of the business.

So again, we can kind of break them down as we get a little bit further into integration. But from our perspective, like $250 million is -- if you notice on our deck, it doesn't say approximately anywhere, it just says $250 million. And there's a reason for that. We're that confident in being able to deliver those synergies.

Yes. Maybe -- and Joe, maybe just to add on to that. A key decision for Eaton was should we spin the business off or do this transaction? And we have shared a lot more details with our synergy plans with Eaton in order to convince them that this was the best deal for their shareholders, and they have high confidence, hence, their decision to go with us that we can deliver that.

Our next question will come from the line of Tom Narayan with RBC Capital Markets.

Just understanding the Slide 5, that 5.9x '26 multiple for Eaton Mobility. And that includes the synergies. That doesn't include the $1.1 billion special dividend, right?

No. No, it does not. But the multiple. It's fully synergized. It's EBITDA plus purchase price.

Total purchase price. Total purchase price.

But -- yes, I'm sorry. It's based off the $5.1 billion enterprise value, which includes -- which includes the $1.1 billion, I apologize.

Okay. Got it. Okay. I understand. Okay. So that $8.3 billion then includes the $1.1 billion, but excludes the synergies?

Correct.

Okay. Okay. I guess -- and I know you said that we'll get more color on the buckets that Joe was asking about. But just -- I mean, is there any sense of kind of low-hanging fruit? There was obviously a deal that -- in the industry that just got announced with some fairly funky buckets, let's say, on the procurement side, it's like 50% of their synergies? Just I think people just want to better understand, given the percentage of "target" if you call Eaton the target here synergies, I think it's like 7.5% of sales does seem a little high versus kind of the standard 5%. So any just help on like what's like obvious low-hanging fruit? Is it like the majority of the $250 million? Is it just -- I know you're going to figure it out so any...

There's obviously a slug that's purchasing, but that's not the significant driver. The bigger buckets are the overlapping structures and automation and increases in productivity that we can drive into the business. But obviously, they run a fully standing group of businesses that are divisions within Eaton. We do the same. There are quite a bit of duplicative costs that are going to come out of the business.

And the -- I remember at the Capital Markets Day, a big topic was nonautomotive, right, like including non-CV either. Just wondering how that changes or improves potentially with this. There's been a lot of interest in things like data center, energy storage, et cetera. Does that change because of this? Or is it kind of what you've been saying before?

No. I think, obviously, we have a broader product mix and then maybe Byron can chime in. And we see more opportunities, not less as a result of the transaction.

Yes. Again, I think the spaces that we've highlighted that we see as great adjacencies for Applied Technologies, I mean, just think about the Applied Technologies portfolio, to Tim's point, now increases. So our way to serve markets like power sports or defense or what have you, would increase.

I think in terms of this data center question, our feedback isn't any different than what we've put out there at the last couple of conferences, which is it's on the list relative to looking at if there's a solution that would make sense and -- but very early stages at this point. And I wouldn't look at this transaction as changing or accelerating that particular market.

Our final question will come from the line of Dan Levy with Barclays.

I wanted to just first ask on the broader end market strategy going forward. When you did the Off-Highway spin, one of the rationale for that was a broader simplification of Dana. Now I know that you're still getting light vehicle commercial vehicles that's different from Off-Highway, but how do you address sort of the question of simplification, which I think has been one of the core targets here? Does that change that at all for you?

Well, no, I mean, look, we're going to continuously examine our product portfolio for those products that we think we can add value for our customers and shareholders and where we can't make those decisions about kind of where to go with a particular product line. So that work that we've been doing in Dana continues. And I know Eaton culturally had that same kind of mindset relative to their product portfolio. So obviously, our portfolio expands here. But again, each product, each segment, each customer that we serve has to stand on its own and deliver value, and we're going to continue thinking about the business in that regard.

Yes. Maybe just a little bit to add on to that. I mean when we announced the sale of our Off-Highway business. We had a lot of questions about CV next. And we like the commercial vehicle business. We recognize we had a lot of opportunities to improve the margins in that business. And so I would kind of look at this as this is highly complementary. We remain very laser-focused on commercial vehicle and light vehicle and this transaction only gives us an increased amount of scale on the CV side. So it further enhances our business diversification.

Great. And then as a follow-up, sometimes when we see companies spin out assets, sometimes those are assets that just didn't get the investment that they needed over the years. So what's your confidence that you had from your diligence that the business here has had the right level of investment and that there's not some uptick investment that you're going to have to make to get the products on par with where they should be?

Yes. I mean obviously, as part of diligence, we visited the main manufacturing sites. And I would say like Byron alluded to earlier, I mean, the business has spent a lot of money on EV in the past and probably just like us has neglected, let's say, capital spending on automation. They're probably where we are in the journey, maybe a little bit behind. So it's not like -- this is a well-run business that makes high teens margins. I mean let's not forget about that. But yes, there's definitely opportunities for increasing the investment in the plants and generating some of the synergies that we've talked about in the manufacturing area. But not -- it's not going to be a major uptick in our CapEx. And as Tim alluded to, our -- we expect our free cash flow margins to expand on day 1.

Okay. So with that, I think we'll bring the call to a close. Again, I want to thank everybody for joining the call on relatively short notice, and just reiterate how excited we are for the future of Dana and Eaton's mobility business coming together, serving our customers and shareholders. So we're excited. We'll keep you updated as the process matures. And again, thanks for joining.

This concludes today's call. Thank you again for joining. You may now disconnect.

All right. Welcome back, everyone. I'm very pleased to have Dana Incorporated up as our next conference -- next company here at the UBS Auto Conference. Pleased to have Bruce McDonald, Chairman and CEO; and Byron Foster, incoming CEO as of July 1.

July 1.

Right around the corner.

That's right.

A lot I want to get to here. Why don't we just start with sort of current trends, sort of what you're seeing in the business really from an end market perspective. I know you've laid out some of the -- some of your assumptions for different end markets, light vehicle, sort of light truck, commercial vehicle on your first quarter earnings call, we've seen some changes to third-party forecast at least on the light vehicle side, and we had some good orders numbers on commercial trucks. So maybe you could just sort of update us sort of what you're seeing currently in the market and where sort of the push and pull is really for the balance of the year on demand side?

Yes, sure. I'll start on the light vehicle side. So we're seeing good steady production from our customers, our large programs, we're actually seeing some slight volume uptick and the markets seem to be pretty stable and resilient despite kind of all the other things going on around the world. So we feel pretty good about the demand on the light vehicle side. Our plants are humming along right now in Q2, and we expect that to continue into kind of the back half of the year. On the commercial vehicle side, on the Class 8, we're starting to see pickup in demand there. So we're starting to see that come through in our orders, and we expect kind of in the back half of the year that there should be some uptick there. Now for us...

You expected that already though in your initial guidance? Or is it sort of trending a little bit...

Yes, it's trending a little bit ahead of kind of what we thought initially. But for us, just from a mix standpoint, we're a larger player kind of in the medium-duty space, and we're seeing that continue to be soft to -- flattish to soft, but some uptick on the Class 8. So net-net, there should be some slight upside for us from a volume side in the back half of the year.

And sticking with -- in the commercial vehicle segment with some of the international markets and whether it's Europe or China or South America?

Yes. For us, the larger markets for us are really North America. South America is fairly large. South America is kind of soft. North America, we're seeing the pickup and Europe remains kind of soft, but not a big region for us.

Yes. So when you reported, I think you sort of were indicating maybe towards the higher end of the guidance range. Is it really just sort of volume that's sort of going to determine here where you sort of play out within that range or even above that range?

Yes. I think for -- in terms of getting us -- continuing to see us at the top end of that range, we're looking for volume to continue to be stable. Again, we're seeing some good signs here in the quarter. The CV pickup that I mentioned earlier, should that really kind of continue to come through and the supply base be able to react to that, that could present some upside to us. And then we've got a lot of activity around continuing to drive cost in the business. So to the extent we can accelerate some of that, all combined, that would lead us kind of continue to the higher end of the range.

Yes. And then on the cost savings side, you've done a really good job there, a big part of the story, right, being able to sort of take cost out. I think as you sort of move through the year, you start to get up against some of the comps, if you will, from when you started to take more costs out there. So how should we think about that progressing? And one of the things we've talked about in the past, right, is how you're continually evaluating the business and always sort of looking for more and more [ options ]. So where do we stand on that?

I would say a couple of things on the cost side. So first, so far year-to-date, we've taken out $35 million of a plan to get $65 million out. So we're on track to deliver that $65 million for the year. But to your point, Joe, it's -- you never stop on the cost optimization piece. So when we laid out our Dana 2030 plan, we talked about an incremental $65 million of costs that we're looking to take out over the plan period. So we're constantly working on that.

And then if you think about cost in a broader sense in terms of our in-plant productivity, our purchasing savings, I mean, teams have road maps in place to deliver that, and they're constantly looking for ways to kind of over-deliver in that regard. Things like automation, right, a big effort on automation to drive efficiency, improve quality, improve safety in the plant. And so we're actively driving those projects and trying to go as quickly as we can.

Since you brought up automation, I mean, it's obviously something that you've talked about in the past. And -- but like maybe you could sort of just talk to us a little bit about your approach? Like are there things you automate in one plant that you then see this has applicability to a different plant and you can sort of scale it and then vice versa, there might be some other areas or...

Yes. I would say -- well, first of all, we are -- if you compare our manufacturing operations to, let's just say, an investment-grade manufacturer, I'm not counting automotive, but just in general, we were capital constrained, and so we're behind. So there's a lot of low-hanging fruit. But we have -- if you were to go into our manufacturing operations, I mean, some of our plants, it's well over half the people have jobs where they're loading or unloading a machine, and that is very low level single-arm robotic replacing 2 or 3 heads because 3 shifts, 2 or 3 shifts a day. And that's why we have such a high payback. So there's a lot of opportunity.

And we're -- and I'm talking about not loading something like this into a machine like we have lift-assisted things and it's banging around. It's not safe. It's ergonomically a challenge. It's not kind of jobs that the union -- our union colleagues like to do. So we haven't had any pushback in terms of, hey, this is where we're deploying automation. So it's not Tesla robots running around our plant.

Yes, exactly. I would just add to Bruce's points. So one, when we find an opportunity, we're very much looking to share that across plants, right, that have similar operations. So we have a road map of kind of best practices from a deployment standpoint that we can leverage, so we don't have to relearn this every time we want to deploy for a specific operation. The other opportunity is just material handling. So that's a big one for us. The movement of material through automated kind of AGV type technology is a huge opportunity for us.

So I think those investments are sort of contemplated in your -- in your CapEx budget. But like we -- like how long do you think this process sort of could take to get the plants up to more acceptable levels as you sort of -- to put in context [indiscernible]?

We have -- I think in our numbers that we put in the Capital Markets Day, I think we got about $175 million of capital here over a 3-year period. So $60-ish million a year type thing. And Byron's point, one of the things that we are finding is we've got a team that's going out and identifying projects by plant like that. And once we go into a plant and implement, then the plants are coming back and saying, hey, we got some other -- have now lived with this, we got some other ideas. So it wouldn't surprise me if we picked that number up.

Yes. That's helpful. And I guess not so much on the cost side, but -- or maybe it is, but there might also just be some other factors here. I think one of the other things you mentioned at the Capital Markets Day was there's a number of parts or products that are just not profitable today. So what -- maybe we can sort of talk about the effort to either get them profitable, whether automation or other aspects that are part of that or whether they make sense to remain in the portfolio?

Yes. So in the Capital Markets Day, we gave an example of one of our sealing plants that, that particular plant has quite a few SKUs. I think it's close to 600 SKUs. And so we've been going deep into part level, SKU level profitability and understanding where -- our margin profile looks like. And for those parts that are not meeting our hurdles, we then have to unpack, okay, what's driving it? Is it a design issue? Is it material? Is it pricing? Scrap throughput? So we go through all those to see what levers we might be able to pull to keep -- get the parts to an acceptable level of profitability. And if we can't find a path, be it on a set of SKUs, on a product line, on a set of business with a particular customer or what have you, then we have those discussions, and we're more than willing to exit.

I mean we just -- each product line, each SKU, each plant has to get to a level of sustainability from a profitability standpoint, and we're just attacking that in a very aggressive way.

Yes. I mean just to put it like in perspective, when you look at our numbers, like our quarterly bridges and you're seeing the contribution margin that we have flowing through on the volume because we've got repriced product going through here. And so this year, it's in the $30 million to $40 million benefits in our plan as a result of that stuff.

So it's not -- I think in your pre-question, you were sort of asked about the time frame. To the extent it's with, let's just say, Ford and we got a lot of other Ford business, we're more constrained. But what we're finding is we've got a lot of other customers, some competitors where it's fairly easy for us to implement the actions on a pretty timely basis.

And as you sort of go through that process, are there some parts where maybe you think you need to reconsider whether it's something you continue to do? Or do you think these are all sort of...

Yes, for sure. I mean we have some products where the volume is very, very low. It's kind of niche to a particular -- and so some of that pruning, if you will, will definitely result in some products just coming out of the portfolio, which is okay.

Yes. Turning back to the Capital Markets Day, and you highlighted a number of sort of, let's say, growth vectors for the company. One was sort of the backlog for, I guess, let's say, your existing traditional like light vehicle and commercial vehicle business. And I think like especially with the RAM Dakota win you announced last quarter, most of that seems sort of in the books. But maybe you could sort of talk a little bit about that.

And also some of the other drivers here, I guess the 2 I'd want to focus most on are, one, some of the adjacencies, like you mentioned A&D or maybe powersports to the aftermarket because I know that sort of seems to be a pretty sizable addressable market for you.

So maybe I'll start and Bruce can chime in. But on the traditional side, we were obviously very excited with the Dakota win. It fits right into our strategy, right into our sweet spot. It's in our current manufacturing footprint, a lot of carryover products. So it made a lot of sense for us and for Stellantis. So we're excited about that, and that obviously plugs a big hole in terms of backlog. We are not done yet. We have a list of great opportunities with our customers. I think in general, our team's ability to execute from a quality, delivery, overall performance, we have green scorecards. Our customers are looking for opportunities to grow with us. So there will be more to come on the traditional growth side, even though that plugged a big part of our road map, the team is not...

Just on that front, that means it could fall within certainly the 2030 time frame. But is there -- are there still opportunities that could be even a little bit more near term similar to Dakota or that's sort of mostly...

Well, I think for it to hit the business in the 2030 time frame, we need to deliver wins in the next, let's say, 12 to 18 months, right, for the launch in that time frame. So yes, there are other active opportunities that we're chasing that hopefully, we'll be able to deliver some good news on those within the next kind of 12 months. So that work stream is well underway. Teams are focused there. On the commercial vehicle side, in addition to hopefully what continues to be tailwind from the overall market, we're really doubling up our efforts in terms of being in the field, talking to the fleets, talking to the dealers to create that pull-through for the Dana solutions. And even though it's early days, we're starting to see some nice wins on that front. So again, our traditional commercial vehicle business should benefit from both of those efforts.

Do you want to take maybe the...

Aftermarket, I think we're sort of counting on a couple of hundred million dollars type opportunity here. The biggest single one is on the North American sealing side of our business. And this is where we have a unique value proposition in the market in that we are an OE gasket supplier, and we're competing against people that aren't. And so what we're seeing, it's a relatively inexpensive part when you're doing an engine repair to take you with an OE quality part. And so we've got excellent demand, I'll say, from the big box retailers. The way that tends to work, Joe, is if I use -- I mean, AutoZone as an example, they've got a number of regional DCs, and they typically would say, okay, you can have this in this DC and prove ourselves and to the extent we're successful, they will look to get incremental DC. So we've got a foot in the door. This is a business we really weren't in, say, 2 or 3 years ago. We're probably at like a $40 million type run rate. Right now, we're in AutoZone, O'Reillys and Advance and having some discussions now, but we're trying to lock them in. So we've been very pleased with the pull that we're seeing on it.

And right now, I would say we're internally constrained on our ability to take business on. We're going to have to add some distribution capacity in the U.S., and that's an investment that Byron and the team are looking at right now.

And just to refresh on a -- I mean, like this is something you used to do, you sort of lost the license and so you're reentering, is there a...

We sold a business with a 10-year noncompete, and now that expired 6 or 7 -- Craig probably remembers he was the one that was around back then.

He's a Dana historian.

We didn't jump back into it. And given the margin profile on it, it's very attractive. And so we have...

So it was more of a noncompete. It wasn't like someone else is making product with your name on it.

No. And this is a market where we've got 35%, 40% share in Europe, and that's our entitlement here in the U.S. And so we're very confident in that one. And so far, so good in terms of the effort building it up.

Okay. The other piece relative to growth, right, it was -- we have a whole work stream around adjacent markets, applied technologies, we call it. So taking the Dana product capabilities, technologies into new spaces. We've talked about powersports as an example, being one where the customers there are looking for more automotive grade, higher quality, more robust solutions for their vehicles. They're looking for hybridization solutions, local supply. So all fits right into the sweet spot of what we can provide from a solution standpoint. So we've been engaged with the top customers in that space at their CTO levels. We've got a number of RFQ opportunities in front of us. So that one is real. It's gaining momentum, and that's going to turn into something tangible for us.

And then defense is the other one we've talked a bit about, and we all kind of understand kind of the ramp-up in demand relative to defense. And again, there, we've got solutions that are relatively off-the-shelf, just kind of have to beef up some of the solutions we have because they're looking for off-the-shelf solutions that are already kind of validated and that can kind of get to market quicker. And again, there, we've got great traction with a number of the players in that space and it's tangible turning into real opportunities for us.

Yes. The reason I wanted to sort of recant a lot of that work at the Analyst Day is to sort of really sort of segue into one of the big themes that investors are sort of looking at in autos here, which is what core competencies do companies have that might have applicability to other use cases. And I think what you're -- the examples you gave here, right, like, okay, well, we're good on trucks and commercial vehicles. Are there applications in military powersports clear example of that, right, taking something you know how to do, finding a new end market. We just had a [indiscernible] that sort of worked through all the portfolios. And I think one of the areas that we highlighted, and I'd be curious to sort of hear your views on this are is battery cooling plates, right? So clearly, you do some of that in your business for electric vehicle batteries, but batteries are in greater demand beyond electric vehicles in terms of battery storage systems.

So maybe you can just sort of talk about what you do there, your core competencies, how portable is that like type of technology? And like do you see demand for your product in some of these other areas? And is there anything else in your portfolio that might also have some applicability?

[indiscernible] tag team?

Yes, yes, go ahead. I'll start. So just from a baseline capability, we have -- when we talk about the Dana product portfolio, we talk about thermal products, right? And so that can be helping regulate temperature of an ICE engine solution to the EV space, which is where we've spent a lot of time developing capability to cool batteries in an electric vehicle, right? So that product is just what it sounds like. It is a plate that is kind of sandwiched between the batteries to regulate temperature. And there's a lot of intellectual property in our solutions there. And we're on several key platforms with some of our larger customers, albeit at lower volumes than we initially thought, but we are in production with that technology today.

And I'll let Bruce take kind of how we're starting to look at how we might be able to apply that to some of these other markets that you're talking about, Joe.

Yes. So as it relates to ESS, it's a buzzword right now. In that space, we think the battery cooling plate opportunity right now is about $2 billion, like size of market. We -- our -- we have a stamped product. So basically, we stamp it and that creates the channels that we put coolant through as opposed to cast products, which are the primary product in the market today. We -- there's some technical benefits in terms of heat dissipation of our product versus the cast ones. And we think as the next-generation chips come out, we have a very good solution. So we are talking to people in this space as a Tier 1 supplier. But it's in the prototype technical solution engineer to engineer. We're not at a point where we're quoting things or going to win new business.

So when Byron talked about our applied technology growth initiatives, we have 5 of them. And as we said at our Capital Markets Day, look, we -- this isn't a one-and-done process in looking at our capability in that market. And so from the Capital Markets Day to today, this is an opportunity that's moving pretty quickly, and we are having discussions with folks in the battery -- in the data center space and some of the chip suppliers.

So it wasn't really considered in your Capital Markets Day?

No.

I guess just bigger picture then, like you said, like things are moving very quickly. All of a sudden, there's like an inflection of demand. You have, I would say, within Dana probably a lot of sort of technology and whether it's BESS or data centers or powersports, like I'm just curious sort of how you organize internally. Like is there some sort of team that's responsible for almost like incubation of ideas saying like, hey, we could do this. This is very applicable towards potentially this new use case. Let's see if we could sort of come up with a product and become differentiated.

That's a pretty good description of our process, Joe. So what's important is that you got to commit and dedicate the team and resources if we say, hey, we want to grow in this market. So first, we did the legwork of what's possible, what markets could have an opportunity where Dana could bring solutions to and got down to this initial list, and we're continuously looking to refresh that as we explore those markets and see if there's something there or not. And then we have dedicated teams. And this all starts out to Bruce's point, engineer to engineer. Do we have a technical solution that makes sense? Do we have a value proposition that's interesting for the customer? And then as these markets and opportunities become real, right, we will kind of build the team around those accordingly.

And we've -- when our -- we maybe done ourselves a little bit of a disservice because we've really focused on a window to 2030 and like...

[indiscernible]

So a great example of that would be in a powersports initiative that we talked about. We really saw that opportunity is around drive shafts and shafts and things like that, replacing, say, old technology, Chinese-based suppliers and things like that. And as we've gone into those discussions, what we found is a lot of opportunities for hybridization.

So looking at our high-performance transmission business, we're now doing demonstrator vehicles for a couple of the powersports manufacturers on a hybrid product, almost like a range extender. So a couple of miles of battery-only drive. And -- but those would be things coming in beyond like in 2030 tail end and beyond. So we're not limiting it to just a 5-year window. We're looking for market opportunities that are attractive and at accretive margins. So the bogey that we've kind of given to our Applied Technologies group is 25% type EBITDA margins as a threshold type thing.

You mentioned maybe turning the conversation just to plates again, just as an example here, right, that obviously, the volumes didn't materialize as I think everyone sort of planned and capacitized for. So -- or certainly planned for. I guess the question is, was it also sort of capacitized for? Like is that something where you do have some excess capacity on that front now? So if you do find a new use case...

Cooling plates, we definitely do.

So that's something that obviously, it would require some investments, some retooling potentially, but there's some of it...

Some of the core capacity is there that could be redeployed.

Absolutely.

Right. And I guess it's TBD, but is it -- do you think it can be sort of fairly fungible and flexible that you could sort of switch back and forth, let's say, EV or BESS demand if need be or they would be [indiscernible]?

No. Our technical teams are looking to, as they explore this opportunity, to see what solutions could make sense, right? They are doing that with a sense -- with the understanding of the capacity we have in place and can we leverage that process in whatever solutions we may come up with. So we'll see. I mean, again, TBD, ideally, right, this capacity could be fungible and we could kind of leverage kind of both markets. That would be ideal, but we're still in kind of...

I think one kind of way to think about it, I'm not the smartest guy in the room in terms of this topic. But as it relates to our base battery cooling plate business today, the market is moving away from like a cooling plate on a cell that's 2x3 to something that's the size of these screens or a piece of plywood. So it will be one plate for all the cells. And so we will have to invest in capacity for our existing business, which will free up because our machines can't make something that big. And we think the size that we have will fit the market demand if it comes through. So I don't see it being a very capital-intensive initiative for us.

Yes. Okay. Are there other areas that maybe even since the Analyst Day, as you sort of take a longer lens and longer scope beyond 2030 that may come into view, like, for instance, I think you're probably pretty good at gearing and stuff like that. So like in robotics, might there be use cases for some of your know-how?

We haven't really -- I would say what we have in front of us right now is kind of where we have the team's focus. And the big opportunity is in terms of the core capabilities around gearing, as an example, are in these markets that we talked about because they bring pretty good scale and size of opportunity. And then on the thermal front, right, beginning to explore. One, as the vehicle architectures change, we think the need for cooling and EVs is going to increase. And so we're working on some solutions as kind of the various computer modules come together into larger pieces where we would cool that. And then we're, again, obviously starting to explore the ESS space and data centers at a very initial stage, I would say.

Okay. And I guess just in terms of ease of entry into that market, should we sort of think about it as maybe some customers that -- some customers that are already customers on a vehicle side that might also be exploring some of these opportunities? Or is it broader than that?

I think it has the potential to be both. Obviously, some of our customers are starting to explore that. We have relationships there. They know us, they know our technology. So we'll see kind of where that could potentially go. But then there's going to be new players, right, where we're building contact, building relationships and starting to talk about what the needs are and what solutions we might have. And we've got teams kind of working in that space.

And I guess just last question is like when you have like -- and again, maybe these conversations are very, very early stages. But as you sort of continue to sort of advance that, is the conversation centered around, hey, we have capacity, we could do this. Here's what we know how to do? Or is it more around like what you mentioned before, where you have a stamped or sort of casting product, which is like we actually think we have a better mousetrap here.

It's the latter.

Yes, exactly.

It's definitely the improved heat dissipation from our product and the ability to have more surface contact or maybe mold it around a chip instead of just [indiscernible] part of it. So it's really about solving a problem.

Okay. Let's turn the page to -- Bruce, I know one of your favorite topics here over the past couple of years, which is sort of capital allocation. So obviously, you sort of laid out some free cash flow targets for the year, some longer-term sort of capital returns as well. Maybe you could sort of just refresh us in terms of how you think about the -- not only the cash generation, but in terms of how do you want to sort of use that capital?

And I am, I guess, just curious a little bit, like as we sort of start to think about and synthesize some of these potential new opportunities, is it -- are any of those -- it sounds like it's pretty capital light. I just wanted to make sure it's sort of not significant enough that maybe you -- or is it significant enough for you as you may have to reevaluate some other priorities?

No. I think our -- what we laid out at our Capital Markets Day was $2 billion of cumulative buyback by 2030. And that was -- that's what we sort of committed to so far. That would leave us with 0 net debt at the end, and that's not our desire. So we sort of said, look, we want to be about 1x leverage through the cycle. I think in hindsight, we had a debate with a lot of folks outside the company around to what extent would we see multiple expansion by reducing our risk profile. And we've moved up despite the fact we sold our off-highway business. I think our efforts in terms of improving our margin and our balance sheet, we've definitely been rewarded with multiple expansion. So we think it's prudent for us to stay within that 1x to ride out the cycle. So we've got in the...

You're saying -- but that would give you more than $2 billion of cap?

Exactly. So yes, we didn't say, hey, here's every nickel. To the extent our business continues to perform well as our leverage declines, then -- that we certainly have the opportunity to pull it forward and expand it in an aggregate sense. And so this year, we're sort of talking about -- we've committed to $300 million of buybacks, of which we're probably about halfway done right now where we sit.

Okay. The -- one of the other parts of the Capital Markets Day was sort of market share gains, right, across sort of a different -- different sort of array of categories. I am curious there as well what is sort of the factor that you think is sort of driving these sort of share gains from competitors into yourself? Is it -- obviously, things are always sort of some combination of price performance and durability, but...

Yes. I think the answer is slightly different depending on which segment we're talking about. So aftermarket, which we talked a little bit about earlier, is about reintroducing a brand that is recognized that we have great kind of vehicle coverage for and where our customers are looking for an alternative solution, and they're willing to give us that shot and give us some DCs and we're performing, and we expect that piece will grow. I think on the commercial vehicle side, there, it's about really getting the Dana value proposition into the market. So it's serving customers that we have underserved in terms of being in front of the fleets, in front of the dealers and obviously continuing to execute with our OEM customers. And there, again, people are looking for an alternative and giving Dana a shot, and we're seeing some great kind of early wins in that regard.

And then in our traditional space, the light vehicle space, I mean, we were able to deliver the Dakota program because our teams come to work every day and execute in a fantastic way, high quality, deal with a lot of complexity supplying the Jeep platform and have gained the customers confidence that we can do more with them. So I think for me, it all starts with our teams that execute every day in a world-class way and then our customers want to figure out how to grow us.

Maybe just double-clicking on the CV opportunity there, Joe. We have brand-new world-class axle, CV axle plant that we built in Escobedo in Mexico. I mean, it's state-of-the-art. Customers are blown away with it, like because I don't think there's been a new CV axle plant in a long time. And so our customers right now are very worried about the inevitable supply [indiscernible] -- can the supply base keep up with the demand? It happens every cycle, and we've got surplus capacity. So that's helping us. I would also say our quality and our cost base, we think we have an advantage. So I think a combination of, like Byron said, us focusing on the dealers and the fleets, which we have not done in the past could create additional demand as well as our ability to add capacity, reliable capacity is going to help us gain share.

Maybe just to close here. Late last week, we -- I'm sure we all saw the article about the government pushing for certain U.S. requirement and contents on USMCA. I don't think really that's surprising that the government was sort of pushing for it. I don't know whether 50% is ultimately going to be the right number. But maybe you could sort of talk about because I think you've already internally, like you already have a decent U.S. footprint. I think you've also sort of made some efforts to sort of try to get more U.S. content to help your customers? I know that's been sort of an [indiscernible] by the automakers to the suppliers. So maybe you could just talk a little bit about how you think USMCA might evolve and how Dana is positioned within that?

Well, I'll stay away from trying to predict like what the final solution looks like. But I will say to your point that because of the nature of our product being kind of large, we're within a close radius of most of our OEM customers for the final product. And then the component footprint, a lot of that is U.S., but also kind of global. So through this whole kind of tariff piece, we have worked that global supply chain to optimize it, to leverage USMCA as best we can and to partner with our customers on what the right long-term economic solutions are. And so when the new rules come out, will adapt and continue to evolve and get to the best low-cost solution for us and our customers. Where...

I would, I mean, just add on that a little bit because I don't -- for me, it's not something that keeps me awake at night, maybe because I will be leaving soon. No, I would just say to our customers' credit -- our customers' credit here in the U.S., they have done an amazing job working here [indiscernible] tariffs, chaotic. They have done an amazing job working with the administration Commerce Department on, hey, let's try and figure this out, like we're willing to go there, but we got to have a proper path to get there. And they've done a great job up to this point in time. And I think I'm very confident they will do it again.

Yes, I think that's a fair point. And it's not -- we don't know all the details of the larger potential agreement. And so I think that's a totally fair point. And I would echo your [indiscernible]. I think -- I don't think it's the administration's intention here to sort of inflict pain on this industry here.

Okay. Well, I think with that, we're perfectly out of time. So thanks for joining us today. Bruce...

Thank you.

See you off. I don't know, is this your last conference officially or...

Yes. Thank you.

Well, take care.

All right. Great. Thanks.

Bye.

Good morning, and welcome to Dana Incorporated's First Quarter 2026 Financial Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and Q&A session will be recorded for replay purposes. [Operator Instructions]. At this time, I would like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.

Thank you, and good morning. Welcome to Dana Incorporated's earnings call for the first quarter of 2026. Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from what we discuss here today. For more details about the factors that may affect future results, please refer to our safe harbor statement found in our public filings and our reports with the SEC. I encourage you to visit our investor website where you'll find this morning's press release and presentation. As stated, today's call is being recorded, and the supporting materials are the property of Dana Incorporated. They may not be recorded, copied or rebroadcast without our written consent.

With us this morning is Bruce McDonald, Dana's Chairman and Chief Executive Officer; Byron Foster, Senior Vice President and President of our Light Vehicle Systems Group and our incoming CEO; and Timothy Kraus, Senior Vice President and Chief Financial Officer. Bruce, I'll now turn the call over to you to you.

Okay. Thank you, Craig, and good morning, everyone, and thanks for your interest in Dana. Just maybe before we get into the slide deck, I'd just like to kind of reflect on the fact it's my last call as CEO, and I'm transitioning into the Chairman's role here now.

If you look at the first quarter results, Tim, Byron and the entire Dana team, I think, have delivered another terrific quarter with the first time since I've been back, we're showing revenue growth and extremely strong year-over-year improvement in our margins. I'd also reflect on the fact that these are the first of our 30 conference calls we're going to have when we talk about our Dana 2030 plan. And I think we're off to a terrific start. And with the -- that's the $10 billion revenue bogey that we put out there and with our margins getting into the 14% to 15% range.

You'll see in our deck, we've talked about winning the RAM Dakota Program. And with that award, we now have just over 60% of our growth through 2030 secured. So I think that's a great start. Anyway, I'll turn it over to Byron, and he'll take you through the highlights of the quarter.

Okay. Thanks, Bruce, and thanks, everyone, for joining the call this morning. As Bruce said, the team is off to a strong start to the year, and I'm excited to share a few highlights that I'll take you through on Page 4.

Starting with the financial results. EBITDA margin came in at 9.2% which, as Bruce alluded to, is a great year-over-year improvement of 400 basis points. So really seeing the margin expansion come through on a year-over-year basis. In terms of share repurchases, we repurchased 4.4 million shares in the quarter, returning $125 million to our shareholders, and that keeps us on track to our target of $300 million for the year here. If you look at the program to date since we launched back in Q2 of last year, that takes us up to $775 million of value return to our shareholders and keeps us on track to our target of $2 billion through 2030.

In terms of cost reductions, you'll see, as Tim takes us through the walk that the team delivered $35 million of cost reductions in the quarter, which is right on track to our target of $65 million for 2026 and a program total of $325 million. So the team remains highly focused on making sure that we remain a lean and efficient operation here.

If you look at new business growth, and Bruce mentioned it in his opening comments, we were able to deliver a significant new business award in the quarter, which I'll take you through here in a couple of pages. So delivering against our commitment of profitable growth for the company. And this is right in line with what we laid out relative to our Dana 2030 strategy around profitable growth and margin expansion for the company.

If you go to Page 5 in the deck, I want to take the opportunity again to thank all those that were able to spend time with us at our Capital Markets Day about a month ago. And as a quick reminder, our plan is about profitable growth in our Traditional business, our Aftermarket business as well as Applied Technologies, and it's about margin expansion through manufacturing excellence and structural cost reductions. You can see the financial targets that we've laid out and we remain committed to top line of $10 billion, which is 33% above our guide here -- the midpoint of our '26 guide, margins in the mid-double-digit 14% to 15% range, which is a 400 basis point improvement over the midpoint of this year's guide and then 6% free cash flow margins.

So as we go through our journey of the Dana 2030 strategy, you will continue to hear various proof points from us as we're in front of you, giving you updates on the progress of the business. And this quarter, we'd like to give you an update on the first pillar around Traditional growth -- growth of our Traditional product lines, if you will.

So if you go to Page 6, you can see the new award that -- we're proud to announce that we'll be participating on the RAM Dakota program with Stellantis, where our content will be front and rear axles. And it's really a testament to the continued performance of the team relative to world-class quality and delivery performance as well as competitiveness. It's also a great story because it leverages installed capacity that we have in place supporting the Toledo assembly complex and really leverages our core products on the ICE front. You can see that it's $250 million of annual sales, and that it will launch in early 2028.

So if you flip to Page 7, just to give you a visual now of where the backlog stands. When we were last in front of you, our 3-year net new sales backlog was $750 million, which takes it up to $950 million. And that's because as the program ramps, some of that $250 million that I referenced on the previous page will fall in the 2029 time horizon. So really proud that the team continues to deliver on incremental growth in our backlog and has secured a significant new award with one of our key customers.

So on Page 8, just in summary, again, what new Dana is all about. It's really about focusing on our core Light Vehicle and Commercial Vehicle markets, remaining a lean, efficient organization and ensuring that the work we've done to take cost out that, that cost remains out and that we remain efficient. It's about double-digit margin performance, and you're going to see that starting here in 2026, and you'll see that those margins increase over our 5-year planning horizon. And it's about delivering strong shareholder returns through profitable growth, margin expansion and maintaining a best-in-sector balance sheet. So great start to the year, great quarter. And with that, I'll turn it over to Tim to take us through the numbers in more detail.

Thank you, Byron. As we begin the discussion of the first quarter with the change in sales and adjusted EBITDA, you can join me on Page 10 of the deck. Starting with sales. First quarter 2026 sales were $1.868 billion, up from $1.781 billion last year. As expected, lower end market demand drove a $33 million headwind from volume and mix. Despite that backdrop, we continue to execute well across the organization, as Byron mentioned.

Performance actions added $2 million due to pricing and recoveries. Tariffs contributed $48 million, primarily due to the recovery timing. Currency added $64 million, largely driven by the euro strength, while commodities provided an additional $6 million top line benefit in the quarter. Altogether, those items brought us to the $1.86 billion of sales for the first quarter of 2026.

Turning to adjusted EBITDA. We started at $93 million in the first quarter of last year, a 5.2% margin and delivered a significant step-up despite slightly softer demand. Volume and mix contributed $27 million in incremental profit, reflecting favorable mix and improved profitability on new programs. Performance actions added $15 million driven by stronger operating efficiency and continued tight cost controls across all aspects of the business. Cost savings were a major driver, contributing $35 million as our cost actions continue to deliver exactly as planned and remain on pace for our full year and full program target of $325 million.

Tariffs were a modest $2 million headwind to EBITDA this quarter, while currency contributed $5 million. Lastly, commodities were a $2 million headwind on a year-over-year basis. Bringing it all together, adjusted EBITDA was $171 million, representing a 9.2% margin, a 400 basis point improvement over 2025's first quarter. This was a very strong quarter from a margin and execution standpoint, demonstrating the durability of our business post divestiture and our ability to drive meaningful profitable improvement even in a softer demand environment.

Next, I will turn to Slide 11 for a look at adjusted free cash flow for the quarter. First, you will note that 2025 comparisons include both continuing and discontinuing operations to be consistent with the structure of our Off-Highway transaction. In 2026, it will just be continuing operations contributing to adjusted free cash flow. On that note, adjusted free cash flow from continuing operations improved by $78 million, driven by strong operations following the completion of the sale of our Off-Highway business.

Onetime costs declined by $20 million on a year-over-year basis, reflecting completion of several of our cost reduction programs and lower restructuring spend as we move past the intensive phase of our transformational initiatives. Net interest expense increased by $6 million, driven primarily by the timing of interest payments related to the debt repayment activity after the closing of the Off-Highway sale.

Taxes were $6 million year-over-year headwind, reflecting timing of tax payments. Working capital was a use of $224 million, largely due to higher accounts receivable and the timing impact related to certain VAT recoveries and customer paid tooling. Finally, net capital spending was modestly lower by $3 million. Putting all these items together, adjusted free cash flow for the first quarter was a use of $195 million with higher operating profitability and lower onetime costs, partially offset by the loss of EBITDA from discontinued operations and normal first quarter working capital dynamics.

Please turn with me now to Slide 12 for an update on our full year guidance for continuing operations. Our guidance ranges remain unchanged from our February call, but we now expect to be at the upper end of our ranges for sales and see a commensurate adjusted EBITDA increase. Our 2026 outlook reflects continued operational execution, accretive new business and the ongoing benefit of our cost reduction initiatives.

Starting with sales, we expect 2026 revenue to be approximately $7.5 billion at the midpoint of our range. Increased backlog and the benefit of higher-margin new business are expected to largely offset a modestly softer market environment and changes in product mix. Beneficial sales mix, potential second half commercial vehicle improvement, higher tariff recoveries and currency translation will likely push us higher in our range for sales.

Adjusted EBITDA is expected to be around $800 million, an increase of roughly $200 million compared with 2025. This improvement is driven by the full year run rate of our cost-saving programs, continued operating efficiency improvements and the incremental margin from new business that carries higher profitability. At the midpoint of the range, this represents an adjusted EBITDA margin of roughly 10% to 11%, an expansion of approximately 250 basis points on a year-over-year basis.

Diluted adjusted EPS guidance for 2026 is expected to be about $2.50 at the midpoint. For this calculation, we're using a share count of 109 million and are not including future share repurchases in this calculation. Adjustments for EPS are similar to those in nature that we make for adjusted EBITDA. Adjusted free cash flow is expected to be around $300 million, in line with our 2025 performance. Free cash flow stability reflects disciplined working capital management, improved earnings and a normalization of capital spending as major investments over the past several years begin to taper. Our 2026 outlook demonstrates continued profit improvement driven by new business, operational efficiencies and the structural benefits of our cost actions over the past year or so.

Please turn with me now to Slide 13 for the drivers of the sales and profit change for our full year guidance. Beginning with sales, volume mix remains unchanged, and we expect to reduce revenue by approximately $95 million as lower demand in Traditional markets as well as ongoing softness in Electrical Light Vehicle program's impacts our battery cooling business. We are seeing the beginnings of higher demand for North American Class 8 trucks that may benefit sales later in the year. Performance is expected to be modestly lower, reducing sales by about $30 million, reflecting more normalized pricing environment as we lap last year's commercial actions.

Tariffs are expected to improve sales by roughly $50 million, largely due to the timing of recoveries. Foreign currency translation adds approximately $60 million, driven primarily by the strengthening of the euro compared to the U.S. dollar. Commodities are projected to add about $15 million in sales due to continued effectiveness of our recovery mechanisms with our customers, which recover about 75% of the average commodity pricing changes. As we experienced in the first quarter, foreign currencies have remained strong against the dollar so far this year. If that trend continues, we will likely see a benefit to sales from currency translation above what is shown here. Altogether, these drivers result in 2026 sales of approximately $7.5 billion, in line with prior year levels.

Turning to adjusted EBITDA, starting from the $610 million in 2025, representing an 8.1% margin. Volume and mix is expected to add approximately $20 million in EBITDA. Favorable mix within our businesses will drive higher profit on slightly lower sales. Performance is expected to increase EBITDA by roughly $100 million, largely from pricing improvements and continued operating efficiency. And please note, we still expect to eliminate about $40 million of post-divestiture stranded costs, which is included within this $100 million number.

Cost savings in addition to the stranded cost reduction remain a meaningful contributor, adding $65 million in profit in the year. Tariffs are expected to be a $10 million tailwind due to timing on recoveries. Commodity costs is expected to represent a $15 million headwind driven by timing differences in recoveries and expected material cost changes. All combined, adjusted EBITDA for 2026 is expected to be approximately $800 million at the midpoint of our range or approximately 10.6% margin, representing an improvement of roughly 250 basis points over 2025.

Next, I will turn to Slide 14 for details of adjusted free cash flow outlook for 2026. Our adjusted free cash flow also remains unchanged. As I discussed during the first quarter review, full year 2025 included cash flow from discontinued operations that will not continue in 2026. Even without the contribution from discontinued operations, we expect full year 2026 adjusted free cash flow to be about $300 million at the midpoint of the guidance range.

Onetime costs will be about $30 million lower than last year or about $40 million due to fewer strategic actions. Net interest will be about $70 million in 2026, about $95 million lower than last year due to our aggressive debt reduction actions completed in January. Taxes will be about $100 million, about $75 million lower than 2025 due to lower taxable income and the jurisdictional distribution of profits.

Working capital will be a source of $25 million in 2026, a $40 million improvement over last year. And net capital spending is expected to be about $325 million this year, which is about $70 million higher than last year as we invest in efficiency improvements in our operations and support our new business backlog.

Please note that we expect to utilize a portion of the proceeds of our Off-Highway transaction to buy out some facility leases. A portion of that buyout will flow through capital spending, but we are excluding it here as we have excluded the proceeds from our Off-Highway sale as well. These transactions will likely occur in the second quarter.

Please turn with me now to Slide 15 for an updated look at our sales growth and 2030 targets. As both Byron and Bruce mentioned, we look -- this slide will likely look familiar. We really walked through this framework at our Capital Markets Day back in March. What you're seeing here is the same underlying road map to the $10 billion in sales by 2030, but we've updated today to reflect the recently secured new business win Byron mentioned. As a result, we've improved both the timing and quality of our backlog. Approximately $200 million that we had previously shown as future sales growth has moved from the additional backlog column into the 2028 backlog category, increasing our near-term visibility of our sales growth.

In addition, $50 million has moved from nonsecured backlog into the secured backlog, further strengthening the outlook for our business. Importantly, this does not change the overall road map we laid out in March. We still see $2.5 billion of organic sales growth through 2030, supporting a roughly 6% compounded annual growth rate, driven by now larger secured backlog, commercial vehicle market recovery, share gains and continued growth in Aftermarket and our pursuit of Applied Technologies. The update here reinforces execution, converting opportunities into profitable sales and gives us even greater confidence in delivering the growth trajectory we outlined in March.

Please turn to Slide 16 for a brief reminder of our Dana 2030 strategy. I will end my remarks by reminding everyone of the key elements of our Dana 2030 strategy, which we laid out at our Capital Markets Day last month. The strategy is centered around above-market growth supported by new business wins, delivering 6% growth -- compounded annual growth in sales, 17% compounded annual growth in adjusted EBITDA and 11% compounded annual growth in free cash flow through 2030. Underpinning that growth is a fundamental improvement in our operations, driven by structural cost reductions, manufacturing excellence and a disciplined focus on the right mix of Traditional products, Aftermarket and Applied Technologies, all aimed at achieving top quartile margins.

At the same time, we're focused on accelerating free cash flow generation with free cash flow expected to grow from roughly $300 million today to $600 million by 2030 and deploying that cash in ways that consistently increase shareholder value. Importantly, the targets remain unchanged, approximately $10 billion of revenue by 2030, 14% to 15% adjusted EBITDA margins and around 6% free cash flow margin, which we believe position Dana for sustained value creation and multiple expansion over the long term. We are off to a great start to achieve them and intend to continue to execute strongly throughout this year and the years to come. Thank you, and I will now turn the call back over to Regina for any questions.

[Operator Instructions]

Our first question comes from the line of Tom Narayan with RBC Capital Markets.

Tim, I wanted to get back to that Slide 15 that you were talking about, the one that we saw at the Capital Markets Day. Just trying to understand like how do we think about those green buckets, the $1 billion worth, Traditional, Aftermarket, Applied Technology. I know Aftermarket, you said there's market share gains in there. I mean, what -- like is the Traditional product, is that kind of the easier to get and then it kind of gets harder to get as we go down that chain Aftermarket and then Applied Technology is the hardest to get? Like just trying to -- and also the cadence of what you could get sooner rather than later as we get to 2030. Just trying to understand as we get trying to get proof points and converting those greens to blues?

Yes. Tom, thanks for the question. It's a good one. So yes, I think the way to think about this, the $400 million in Traditional products, that's probably -- think about it as, hey, it's our current products. We're gaining share. We're able to sell those. I mean, to some respect, when you think about the Dakota program, we're using an existing plant. It's our core technology that's able to be applied at a very good incremental margin. That's obviously sitting in backlog.

But you can think about that with our Traditional products. That also does include Traditional products that is some EV as well because we have obviously a very good portfolio of EV products that we can sell that need minimal amounts of application engineering, off-the-shelf products that we can continue to sell to the OEMs. If you think through Aftermarket, we continue to work on growing our Aftermarket share. As we mentioned at the -- or as Brian mentioned at the Capital Markets Day, we have 30% or 35% market share when you think about our gasket business in Europe, and we have less than 5% in North America.

We do believe and are making really good strides to deliver increases in our Aftermarket business, especially around sealing. And I think as we move through the next couple of quarters, we'll be able to share some more there, which will probably give you some more comfort around how we're going to fill that up. But we have very, very strong conviction in our ability to deliver that $200 million over the next 3 or 4 years.

The last is Applied Technologies. So that's clearly the one where we're taking current -- our current technologies and developing products for new markets. Now if you think about that, some of those are in defense, where we're taking largely off-the-shelf commercial vehicle, even some light vehicle products and adapting them for use from a defense. Same would be true in powersports. So I think while that one probably has maybe a little bit longer tail, we are making, again, very strong inroads. We're receiving a lot of really inbound interest in a lot of these products from various customers, and we'll be able to share that too. And Byron, you've got a comment there?

I was just going to add on the powersports side, as an example, we've gotten over $200 million of RFQ opportunities in front of us. We're having workshops with the key players in that space. And they're really looking for kind of the automotive quality off-the-shelf product that we can bring to improve the performance of their vehicles. And so to Tim's point, we're expecting that those opportunities will begin to convert for us and launch kind of in the '28 time frame. And we look forward to kind of giving you some more proof points as those become reality for us. But we feel really good about the progress so far.

Yes. And look, we're going to -- what we just laid out here with the Dakota pickup truck win, we'll keep updating the schedule and moving those buckets from green to blue and showing you as we fill it up.

Got it. If I could just do a quick follow-up on the '26 guidance. I guess IHS numbers came down after you guys gave this guidance at the end of Q4. And now you're raising your guidance effectively. So just curious like -- so I mean, obviously, your revised guidance incorporates the weaker Light Vehicle production. Is that right?

Yes. I mean, obviously, we have to look at our specific programs when we think through that. But we have -- we're confident in where we're at today, and we do think there's opportunity, especially in the commercial vehicle side in the back half of the year. I mean we did see some softness in Commercial Vehicle in the first quarter, especially in Brazil, but we do -- we are watching that closely as we move through the year. But largely, we do see upside on the top line from CV. And as I mentioned, also from currency when you look at our first quarter, I think we printed $65 million in currency up. And so there's probably upside in currency as well from a top line perspective.

Our next question will come from the line of Emmanuel Rosner with Wolfe Research.

Curious if you could give us some sense of cadence for the earnings improvement throughout the year going from the 9.2% margin this quarter to like the 10.6% at midpoint for the full year. I think the biggest driver seems to be continued cost performance and cost savings, but just curious if there's any specific cadence or seasonality to that?

Yes. As usual, Emmanuel, typically second and third are our stronger quarters and then tails off a little bit in the fourth quarter, just given the production schedule. I would think that's probably how we can see it here. We're probably a little more weighted to third quarter just given the timing on some of the performance improvements. But generally, you can think about it the way we generally do, but probably more weighted in the third than the second. But we should see an improvement in margin as we march through the 2 middle quarters of the year.

Okay. And then on the Light Vehicle sales, so I guess, another -- or I guess, performance yet, another quarter of sort of like negative volume mix at the top line, but obviously, pretty solid sort of like at the bottom line. I think you flagged against sort of product mix. Can you just remind us what exactly is going on in there as well as for the full year?

Yes. So there's a couple of things in there. We've -- some of it is pricing around EV. So we've been very successful in getting pricing on EV products despite -- because of the lower volumes. So you're seeing lower volumes, but better pricing and better profitability coming through that. And then as we start to turn over some of these programs, we tend to have better profitability on them. So we're seeing refreshed and new programs coming through on that, which is essentially giving us despite a little bit softer on the volume, a much better conversion on the profitability. Brian, I don't know if you have anything else to add?

Yes, no. You hit it.

Our next question will come from the line of James Picariello with BNP Paribas.

Just a clarification question first, and I don't know if I only get one question or a follow-on. But operating cash flow is cited in the press release at $156 million use of cash for the quarter. And then if we just bridge that against the adjusted free cash flow, right, that would imply $39 million in CapEx, but the slide deck refers to $61 million in CapEx. So apologies if I missed the clarification on that, but...

Yes, it's just some of the adjustments. And we'll -- when we file the Q, we'll give you the full breakdown, but some of it has to do with how we're classifying some of the -- we still have some onetime costs coming through from the transaction. But we can help you clean that up when we give you the [ walks ].

Okay. And then just any order of magnitude on the operating lease buyouts that I think you said have a second quarter time frame?

Yes. There'll certainly be -- I mean, we're still in negotiations on some of these, but it certainly is -- it's tens and tens of millions of dollars as we go through. But I don't want to get too far ahead given we're in the midst of negotiating some of this stuff. But it's a sizable number. And it's some of the plants that we've -- when we were a bit constrained around capital that we ended up leasing. But from our view, it's -- these are facilities we should own because they're core facilities. And again, we're using the proceeds from the off-highway sale, which was our intention to pay for this.

Yes. It's probably also just worth noting, this is like a onetime catch-up. We've gone through and said, "Hey, our core manufacturing facilities, we should own, not lease," and there's a handful that we lease, and this is a onetime adjustment using our cash to clean it up.

Our next question will come from the line of Joe Spak with UBS.

I wanted to talk a little bit about how you're thinking about the incremental margins on the backlog because you've mentioned in the past, you're getting some higher-margin categories here. And then even on this Dakota win, you clearly called out utilizing existing capacity, minimal capital investment. So it seems like could come on pretty strongly. And I just wondered if you could elaborate on that?

Yes, for sure. I mean I think the Dakota win is a great example where we've got a pretty substantial footprint today supplying the Wrangler and Gladiator. And so this program will drop basically right into that footprint for both the final assembly as well as our component plant. So our ability to leverage all the fixed cost that's in place for those plants should deliver very strong contribution margin on the incremental sales here.

Yes. But Joe, don't forget our customer also knows that as well. So keep that in mind. The customer knows where we're going to assemble and what we have. So -- but we would agree the new programs -- and don't forget, as we move through the product life cycle, they tend to get less profitable over time given some of the givebacks and whatnot. So that's part of it as well. But I agree, they should come on at good margins for us.

Okay. And then just one quick one on the guidance. I know -- I'm just curious about the Commercial Vehicle market view actually, which is still flat even though I think there's views out there that, that could be up now this year. So I just want to be sure, you're saying you're trending to the high end even with a flattish commercial vehicle environment and then a decent growth there...

No, Joe, that includes some thought around the Commercial Vehicle market. Don't forget, it's North American Class 8. And -- but at the same time, we have a pretty sizable medium-duty business and medium-duty business is still flat, it's soft, it's actually a little down. So our mix is a little bit different. And then it's mostly line haul, which we have -- again, we don't have as large a representation as the overall market. So those are why we're still seeing -- we're being a little bit more cautious. But certainly, we're starting to see those back half. So -- and then, of course, our South American business was weak in the first quarter, and we got to keep an eye on that as well.

Our next question will come from the line of Colin Langan with Wells Fargo.

Just unusual question, I guess, but why not delay the earnings call until you have sort of more full financials? Usually, it's sort of unusual that we don't have like it's actually less information than the Q4 release. What is the thought process there? It just seems unusual to me, I guess, maybe as a former accounts...

Colin, I think we would agree. We would like to be here with our usual cadence of filing the Q this afternoon. We just continue to work through all the aspects of the transaction and tariffs and the like. And so we already had this scheduled, and so we wanted to make sure we got the information out on sales and EBITDA on our normal schedule. So agree. I think you see us in the second quarter, we'll be back to our normal cadence.

Got it. Okay. And then if I look at Slide 13 with the full year guidance, everything is identical to Q4, yet we've had S&Ps lowered, raw material has been all over the place, FX moved all over the place. Is really everything not changed? Or is just you're trying to signal that nothing has materially changed from what you had last?

Yes. I think what we're saying is, hey, we're still inside of our range. We're probably trending to the upper end of the range, driven by potentially some upside in CV and then a bit higher tariff and currency will -- if you just look, we're at $60 million. I think we [ printed $65 million ] in the quarter. So you just trend that, we would -- currency alone would drive us to the upper end. We did -- like when you think about the business itself, those are the drivers taking us to the higher end of the range. So we're still in the range of what we gave. And so we didn't go and kind of mix through the buckets. But we feel like there -- we'll likely be at the upper end of the range.

Okay. You mentioned tariffs in there. So Commercial Vehicle is better, currency is better. And then what is the tariff change?

Maybe tariff wise, just some of the timing and the recoveries around tariff, maybe a little bit higher than what we have here.

Our next question will come from the line of James Mulholland with Deutsche Bank.

Just as a quick follow-up on the Commercial Vehicle market. You've talked about some recovery in North America and South America. But conversely, has there been any discussion or concerns about the higher energy prices could impact any recovery we might be seeing in Europe's production? Have orders seen any improvement? It sounds like the truckers earlier today and last week came out, they sounded pretty positive. But any color that you could give there would be great. And then I have a follow-up.

Yes. No, I mean our European CV business is relatively modest. So we don't see it being overly impacted or any softness there overly impacting our overall results or our view of the way the year will come.

Okay. And then I guess just looking at your walk for the rest of the year, as you think about, I guess, call it, $125 million of performance and cost savings, excluding the stranded cost, do either segments have more room to run there? Or are the savings going to be generally proportional. And then from a cadence standpoint, should we think about it as relatively steady or really back half weighted?

So on the performance, it generally sized to the size of the business. So you can -- it will follow generally that split. And I'm sorry, your second piece of that question?

It was just on the cadence. I know I think you mentioned what Emmanuel asked earlier that there could be some -- a little bit more in the third quarter. So should we think of it as more back half weighted just in general?

Yes. I mean, yes, but I think in general, we're in the middle 2 quarters will be better. I mean our fourth quarter, just given production schedules and the holidays, it generally is a softer quarter. But I think if you think about our middle 2 quarters being generally our best 2 performing quarters, that's probably more weighted to the third than the second given what our historical performance has been in those. But I don't know that I'd say it's absolutely back half, but because of the way fourth quarter generally runs.

Our final question comes from the line of Dan Levy with Barclays.

Maybe we could just double-click on the commodity exposure, which you maintained a headwind of $15 million on the EBITDA line. And so I know that you have indexing in place and you're more exposed on steel, which hasn't moved as much. But maybe you could just talk about broadly what you've been seeing on the inflationary side, your exposure to things like aluminum or freight or other oil-based exposures that -- is there any risk that on the inflationary or raw mat side that, that could be something that deteriorates?

I mean I think we're obviously watching it closely. We're continuing to see what happens. Obviously, oil impacts a lot because it goes into -- even if it's only transportation, everything that we buy. I think from us, if anything, it's a timing issue based on when the costs come through and when we get the recoveries because we're on a lag for most of these indexed programs.

But we're watching it. I don't -- right now, we don't see it as a big potential issue for us. We'll continue to work through it. I think if you look through over the last few years, the recovery mechanisms we have in our contracts with our customers have worked very, very well. And we continue to have those dialogues with our customers to make sure we're in front of it.

And for some of the inputs like the oil or transport or freight where you're probably not indexed, I assume the mechanism is such that this would just be part of normal course commercial discussions with your customers and you have confidence that you would get fully reimbursed on the inflation over time?

Yes, that's right. That's exactly how it will work. And we've been through this cycle before. So we'd be in front of our customers working through recovery mechanisms for those items.

Okay. Just as a follow-up, you talked about earlier the volume mix benefit really reflect some of the EV pricing. We're seeing a number of the automakers put out in these large impairment numbers, which reflect payments to suppliers. Maybe you could just unpack, are the benefits you're seeing within volume mix on EV pricing, are these onetime benefits? Or is this a structural repricing of the contract such that you don't see any reversal in subsequent years beyond this year?

It's generally the latter. For ongoing programs, we're getting pricing that comes through over the course of the program.

Okay. With that, we're going to close the call. I want to thank you again for attending our call. Thanks for the questions and continued interest in Dana and the Dana 2030 plan. I do want to take the opportunity to thank Bruce for his leadership as our CEO -- Chairman and CEO, and we look forward to continuing to partner and work closely together with Bruce in his role as Chairman going forward. And I also want to take the opportunity to thank our customers and the Dana team for delivering a great quarter and a great start to the year. Have a great rest of the day, and we'll talk to you soon.

This concludes today's call. Thank you all for joining. You may now disconnect.

My name is Craig Barber, I'm IR Director for Dana. And again, I want to welcome everyone here and online. Again, Capital Markets Day, we're going to be making some forward-looking statements today that may differ materially from our actual results. So please have a look at our safe harbor statement on our posted materials and in our public filings.

We're going to go ahead and get started this morning with our first presentation. So let's go ahead and start.

[Presentation]

Good morning, everyone, and welcome to our Capital Markets Day. I'd like to start out with just introducing the Dana management team, starting with Byron Foster. Byron runs our Light Vehicle business and is our incoming CEO. Next, we have Brian Pour. Brian runs our Commercial Vehicles and Aftermarket businesses, and we're going to be talking a lot more about our aftermarket opportunity here in our presentation today. Seth Metzger is our Senior Vice President and Chief Technology Officer; Chris Clark, who runs our manufacturing operations, he'll be presenting today. Most of you know Tim Kraus, our CFO. And we also have in the room, on -- Doug, maybe you could just stand up. Doug Liedberg is our General Counsel and Head of HR. Kevin Williams back there, he runs Purchasing and Procurement. And then Andrea Siudara, our CIO. IT, not investment. Okay.

Anyway, when we -- when you saw the slide about Dana 2030, what we did is sort of think about just put it in perspective is we -- with the sale of our Off-Highway business and the pivot that we needed to make away from EV, we were all in an EV as a company. It sort of consumed all of our cash flow, as you know. And so we formed a cross-functional set of teams, 5 different teams which were comprised of about 60 of our Level 2 and Level 3 executives. Each of us on the senior management team, we sponsored the teams.

So the strategies that we're going to talk to you about today really reflect the bottoms-up initiatives that our senior leaders have put in place. And we're pretty excited about it. And I'm sure you will be as we share more of the information here later.

In terms of the targets, I mean, we previewed kind of where we see ourselves being in 2030 in our Q4 earnings call. No changes to this slide. We see ourselves growing at about 6% on a compound annual basis to get to $10 billion by the end of the decade. In terms of margins, we're looking to expand from the guidance that we gave this year by 400 basis points.

And I think a key takeaway there is this is not a back-end plan. It's fairly ratable. So we think we grow at about 60 to 100 basis points a year, year-over-year-over-year. So it's not a back-end loaded plan.

In terms of free cash flow, we guided to 4% for this year. We see that going up to 6%. I would point out that the cash flow number is not as much as the EBITDA growth, and that's because we are making some, I'd say, catch-up investments and margin-enhancing investments in our manufacturing operations. Which drives the EBITDA margin. And Chris will cover a lot of those in his presentation.

And then in terms of our primary focus in terms of capital allocation, we have a big shareholder return plan of $2 billion of buybacks and another $250 million in dividends over the 5-year period here.

In terms of the 5 growth -- we call them pillars or elements, we kind of use those interchangeably. But the first 3 are really focused around growth and how can -- now that we don't have the same growth that we thought we did from EV, how can we pivot more of our investment and capture some opportunities. So there's a team that's going to talk about our traditional products. And we think about that as our Commercial Vehicle and Light Vehicle Driveline businesses.

Aftermarket, we're forming a -- it was scattered around in the organization within the business units previously, whether it's a piece in Commercial Vehicle, a piece in Light Vehicle and a piece in Power Technologies. And when we eliminated the Power Technologies segment in 2024, we combined all of the aftermarket businesses, put a common leader underneath. Brian's heading that up in the Commercial Vehicle space, and really focusing on the options that we have there.

I heard an interesting quote from someone who said aftermarket, afterthought. And that clearly was the attitude that we had with our aftermarket business in Dana. It's a tremendous high margin, very stable business, as you all know. And so we're making that a priority in terms of our vision here.

And then Applied Technologies, Seth is really going to talk about this one. Here, it's sort of two pieces. It's both are how can -- we still have growth in EV. And you'll see in our slides here, our EV business is profitable. It was for 2025, and we expect to see it double here over the next 5 years. So we still have opportunities, not really here in North America, certainly not in the light vehicle space, but we do have opportunities there.

And then the really exciting part of Applied Technologies for me is how can we take some of the things that we do really well and apply those to new markets. And Seth will go through in a pretty granular basis, some of the target markets that we have and the growth opportunities that we have in front of us.

In terms of on the cost side, it's really two pieces. I maybe start with structural cost elements. This really builds on the $325 million that we took out of the business in 2025. And it's things that -- we call them structural because there are investments that we need to make to get there. So commonizing some systems, standardizing payroll, moving more things to our shared service center in Lithuania, things that we couldn't get done in 1 year that we still think we have opportunities in front of us.

And then lastly and most importantly, we have -- if you were to go into our facilities, a Dana facility and, I'll say, an investment-grade company manufacturing facility, what you would see is a radically reduced level of low-level automation. So I'm not talking about walking robots here. I'm talking about basic cobots, minor automation of loading and unloading machines. We have plants that 80% of our people are loading and unloading machines. So we have a tremendous opportunity to adopt off-the-shelf robotics. AGVs would be another one, and put those into our manufacturing operations. And as you know, those tend to be very quick payback, high-return projects, and we've got several hundred of those. So I don't want to steal Chris' thunder. Anyway, those are the elements of the plan.

In terms of capital allocation, I just wanted to sort of put this up and reinforce how we think about it. So first of all, it's -- we are committed to maintaining what we call best-in-sector balance sheet. So we do see keeping our leverage at 1 turn or less. And we think that's important because it's -- it has leaded, I would say, to multiple expansion. I mean as you go up the leverage curve, the beta on the stock and our cost of capital goes up and valuation goes down. So we want to maintain a strong balance sheet. That's where we're at post the sale of Off-Highway, and we're going to keep it there. It also lets us up the investments that we're making that we're going to talk through here today and ride out the business cycles.

In terms of how we're going to use our cash and we've talked about this on several of our calls is we continue to believe our shares are significantly undervalued despite the run-up that we've had over the last 15 months or so. We're going to grow our dividend in line, I'd say, with the reduction in our share count over the 5-year period. And we've got -- we're well into our $2 billion buyback. I think on a year-to-date basis, we bought about $120 million so far as of yesterday, and we're committed to returning $300 million this year.

In terms of the agenda today, just here's what you're going to -- here's the walk-through. So Byron is going to lead us off and go through both Dana overview as well as a traditional product growth element. Then Brian is going to come up and talk through our Aftermarket business and kind of do a deep dive there, followed by Seth, and he'll talk about Applied Technologies and EV. Then we'll take a break. So the first part of the day is about profitable growth. After the break, we'll go through our margin expansion initiatives, and Chris and Tim will hit those off and then end with a view of the financials.

So with that, Byron, why don't you come up and take us through the rest?

Okay. Thank you, Bruce, and good morning, everybody, from my side. I thought we'd start with giving you a bit of an overview of Dana and kind of where we're starting from post the sale of Off-Highway. So founded in 1904, we manufacture highly engineered powertrain components, modules and systems for the light vehicle and commercial vehicle markets. We have 27,000 highly engaged employees that come to work every day to deliver great products and services to our customers, 5,000 customers that we serve, and those customers operate in 120 different countries. And we do that out of 66 manufacturing sites and 11 tech centers that we operate across 24 countries. And you can see last year, the team delivered top line revenue of $7.5 billion.

So to give you a view of the $7.5 billion from a couple of different angles. So first of all, in terms of segment, you can see 70% of our business serves the Light Vehicle market and 30% for Commercial Vehicle. And you can see, pretty highly skewed to North America, and that's really because on the Light Vehicle side, we tend to focus on segments like pickup trucks, SUVs, so pretty dominant in North America. So you can see, 60% of our revenue is out of North America and 20% out of Europe, and then 11% out of Asia, 9%, South America. And then from a channel standpoint, primarily OE, but you can see 12% there serving the aftermarket. And Bruce mentioned it in his opening comments, big opportunity for us, and Brian will talk more about our plans to expand our presence in the aftermarket.

And then from a customer perspective, you can see Ford is our largest customer at 32%, followed by Stellantis and Toyota. And then you can see the gray area there at 24% of others. So these are multiple customers in various aftermarket and OES channels as well as Tier 1 suppliers that we serve as well.

So really when you step back, we serve and are strategic partners to all the leading OEMs on both the Light Vehicle and Commercial Vehicle side as well as the various aftermarket channels that we support around the globe. So a very large and diverse customer base that we have the opportunity to partner with.

So the team has been busy over the last 18 months or so, and I thought we'd just take a second to hit a couple of the highlights of what the team was able to deliver here recently. Starting with the backlog, our backlog is up 33% over prior year. We're sitting at $750 million of secured business in the backlog. We report our backlog on a 3-year basis. If you expand that aperture and think about it on a 5-year basis, then the backlog goes up to $1.15 billion through 2030. And you'll see that as part of Tim's presentation as he gives us a walk on the top line.

In terms of EBITDA, delivered great strong improvement over our '24 levels. We were up 310 basis points at just over 8% EBITDA margins. A big driver of that was the focus on cost, took out $310 million of cost. Another big issue that the team did a great job navigating through was obviously tariffs last year. So a lot of work on both the mitigation side as well as partnering with our customers relative to recovery. So we were able to deal with that headwind, if you will, and deliver strong results.

We obviously completed the sale of our Off-Highway business, which closed the first day of January at $2.7 billion. And obviously, as a result, a big driver in helping us get our balance sheet in a much more solid position on a go-forward basis. And then we've been buying back shares as well. So we purchased 23% of our outstanding shares or 34 million shares, and that equated to $704 million of return to the shareholders. And on a go-forward basis, we've doubled our capital return program to $2 billion through our 5-year planning horizon. So if you owned our shares last year, we delivered 111% return to our shareholders. So we're really proud of what's been accomplished so far.

But today is really all about what's left to go. And we're super excited because as proud as we are of those results, we've got a great plan on a go-forward basis. And as Bruce hit those highlights, it's really about giving you more visibility into the 5-year plan that we call Dana 2030.

For us, it was also with the sale of Off-Highway, a great opportunity to step back and revisit the company's vision, mission and values. And in terms of our vision statement, it's simple, but it's very aspirational. We want to be the world's best powertrain company. And if we come to work every day focused on our mission, which is to help our customers improve the performance of their vehicles, we believe we will achieve that, the vision that we've set for the company.

And just to spend a minute on the values because I think it's important. It really gets to the culture of the company and our ability to achieve our mission and our vision as well as the financial targets that we have in front of us. So the first two are really -- think about them as the nonnegotiables. So safety first, it's absolutely critical that the 27,000 teammates that show up every day get to return home in the same condition that they showed up. So it's a big focus for us, making sure we've got the systems and the processes and the training in place to make sure our employees are safe.

Acting with integrity, again, a nonnegotiable for us. Doing it right the first time, doing it the right way. The third one, empowering our people. So Bruce talked about the fact that our Dana 2030 plan is really a bottoms-up plan that was built by our team and their teams. We know that the best answers don't always sit at the very top of the organization. It's critical that we engage the 27,000 teammates we have to help us find the best solutions to drive the company forward.

Key value for us, be accountable. So this is about making a commitment and delivering that commitment regardless of the headwinds that we may face. And hopefully, you're beginning to see that in terms of how we talk about our targets and how we deliver on those targets. It's about playing to win. There was a football coach. I don't know if there's any Jets fans, but Herm Edwards was right? You play to win the game, right? And that's what we're doing. That's the culture that we're building. It's about driving innovation, and it's about focusing on quality.

I'm going to talk about protecting our core business in a few slides here. And if we come to work every day and we deliver on time at high quality and we're competitive, it's going to be really difficult for our competitors to gain a leg up on us.

Okay. So let's get into it, Dana 2030. Bruce mentioned, really, what the Off-Highway sale was a great opportunity for us to step back and set the course for the company for the next 5 years. We engaged the top leadership team, and our respective teams really like the top 100 folks in the company to help us build this plan. And you'll see as we go through it, it's a commitment to our customers, to our people and to the long-term profitable growth of the company. And executing it requires a keen focus on operational excellence, which is why we're going to allow Chris to speak today to tell us how we're going to execute the plan. And you'll see real examples of that and the opportunities I'm telling you are just in front of us, and we're just going to go pick them up and deliver in an exceptional way going forward.

So 5 elements of the plan, 3 of those elements are focused around profitable growth and 2 around margin enhancement and continuing to make sure that we're on a lean, cost-efficient organization. So if you look at the growth elements, it's about our traditional products. Again, this pivot back to ICE and hybrid technologies. It's great for us, falls right into our sweet spot. We're able to capitalize on new opportunities as our customers revisit their product plans and win new business as a result. As well as our markets recover, particularly on the CV side, we're going to see tailwind there.

On the aftermarket side, Brian will spend some time talking to us about that, but it's about leveraging the OE level of quality and performance that we can bring to the market and capitalizing on those opportunities to grow our Aftermarket business in a much more meaningful way going forward. And then Seth will talk to us about Applied Technologies. And in our mission statement, we talk about helping improve the performance of our customers' vehicles. There's a lot of markets that need our support to improve the performance of their vehicles, and we're looking at how we bring Dana's capability and know-how to those spaces, and as a result, grow the business in that way. So a very strong profitable growth agenda.

On the margin enhancement side, really two elements to that strategy. So it's about manufacturing excellence. So making sure that the 66 plants that I talked about earlier are all delivering at a high level of quality and efficiency going forward and making sure that we're giving the plants the investments they need to become more efficient day in and day out. And it's about structural cost reduction. We've done a lot there. There's more that we can do to make sure that we're efficient in everything we do to support our customers and our operations. And Tim will give you a little bit more color on that piece in his section.

So that's what Dana 2030 is about, and that's how we're going to spend the day, taking you through those various elements. In terms of how we're executing and making sure that this is more than just a PowerPoint. We've got a very structured approach to the program, if you will. We have a PMO structure in place that reports directly to me. We meet with the teams constantly, going through the various initiatives. We have over 500 initiatives that are part of Dana 2030. And the point of this structure is to make sure that we've got fast decision-making, that we're empowering the teams to go get after the opportunities that we all see.

Okay. So with that, we're going to jump in and we're going to go through the first element of the strategy, and I'll take us through that. That's our traditional product growth strategy. So 4 elements to our strategy here. So it's about driving margin expansion opportunities through product line profitability analysis. We have a lot of product lines and a number of SKUs and customers that we serve and really understanding what our profitability looks like down to a plant level, a SKU level. And for those product lines or products or SKUs that don't meet our financial hurdles, putting plans in place to fix those products either through cost actions or commercial actions or exiting products that we don't have a pathway to get to our profit expectations.

It's about protecting our key programs. So we're privileged to serve on some of the most attractive programs and platforms in our industries, and it's about making sure those programs remain a core base of the business. I'll show you a slide here coming up relative to Super Duty, which is the largest program that we supply on from a revenue standpoint. And we've recently secured that business through 2038. Wrangler is another key program for us, which is secured through 2029. And then the portfolio of JLR, Jag Land Rover trucks, again, secured through 2036.

So the key programs, the base programs of the company are well in hand through the next decade. It's about leveraging Dana's core capabilities and our installed ICE capacity. Again, with the pullback from EV, pretty much all of our customers are revisiting their product plans, extending ICE programs and, in some cases, introducing new ICE vehicles. And we're positioned well to take advantage of that -- those opportunities, I'll show you some examples of that.

And then it's about growing share where we're currently underrepresented, whether that be customers that we can get a higher share of wallet or segments or regions. And again, I'll show you that opportunity. But as we go into it, as I mentioned earlier, we're starting from a great spot where we've got a new business backlog of $750 million.

So just quickly to give you a look at the quoting activity, and I think this also shows you some of the market dynamics that have taken place over the last 8 or 9 years. You can see in the 2018-2019 time frame, the quoting activity was very low, and that was really a period where our customers were building their EV strategies and programs. And then you can see in the 2020 through like 2023 time frame, quoting activity really took off, and it was very heavily weighted towards EV. So a ton of EV activity there, you can see only 15% or so in 2023 was traditional or ICE business.

And then here more recently, you can see the pullback, and now the quoting activity has really -- the pendulum has swung pretty hard in the other direction. We're now 75% of what we're quoting is ICE-related business. So we've kind of gone through that cycle, if you will, and we've kind of dealt with the ramifications of that. Now we're back on a path focused more on ICE business and taking advantage of those opportunities.

So let's talk a little bit about margin expansion. And this is really kind of from the product strategy and commercial side. Chris will cover more, the cost side. But as I mentioned earlier, we've completed a very detailed product line and customer profitability analysis. We've looked at complexity in our portfolio and in our plants and looking for ways to rationalize various products or SKUs where we don't see the margins that we're looking for.

And so we're looking through a lens of, at a minimum, 10% EBITDA that each product line and SKU needs to deliver. And again, where we aren't seeing those levels, we've got teams in place to help us go fix those -- that part of our portfolio.

I wanted to give you one -- just double-click on this topic for a second and give you a view into one of our manufacturing sites. So this site manufactures gaskets. And if you look on the x-axis there, we have 665 different part numbers or SKUs in that plant. And if we look at the cumulative profitability of those various 665 parts, you can see roughly at around 150 of those parts, we kind of reach a peak EBITDA level. In that case, we got $65 million of sales, $15 million of EBITDA. So we're at 23% margin. And then every part number after that is either breakeven, so not contributing more EBITDA, or at the tail, starts to eat into our EBITDA because those are loss-making parts. So you can see under that curve, the next $15 million of sales loses $5 million.

So with this analysis, we're going through and understanding those 515 parts and understand, okay, why don't we make any money on these parts? Is it a cost problem, a design problem, a manufacturing problem or a pricing/commercial problem? So this is just one example in one plant. So we've looked across the entire network, and this is just a ripe area and opportunity for us to be more selective and fix parts of the portfolio that still have opportunity to contribute financially. So that's the margin expansion piece.

The next element is about protecting the base, and I mentioned that in my opening slide. So we've got a number of very attractive high-volume programs that are a core part of our revenue base, and we have to make sure that we continue on those programs cycle after cycle. So the Super Duty is a great example. We've been on the Super Duty program since 1998. And just last year, we were able to secure the next-generation Super Duty, and it will be a 10-year program. So that will take us out into 2038.

You can see just visually in terms of our content, we have a lot of content on the Super Duty, axles, prop shafts, a number of our sealing and thermal parts. And the good news is Ford is really looking to expand the volume on Super Duty as they expand to a second plant in Canada and we'll be supporting that expanded business as well. So we're excited to continue to partner with Ford on one of their flagship vehicles in a critical program, obviously, for the company that we've locked up for 10-plus years.

Another example on the Commercial Vehicle side, medium-duty truck. We've been serving Isuzu since 2018. And Brian and his team were just able recently to secure that business for us. And not only secure the next generation of the truck, but expand our revenue base through our catalog product by $25 million, so doubling the revenue of that business, which will launch in February of next year. So again, another great success story in terms of protecting our base business.

The third element I mentioned was leveraging our installed ICE capacity as we take advantage of this pivot away or dialing back, if you will, of the EV. And so there are a number of opportunities that we're in discussions with, with our customers, new programs that we are literally days, a handful of weeks away from being able to announce. So we're working closely with our customers, and we continue to see great opportunities to grow our core business as our customers revisit their programs that they have coming in development. So more to come on that front, but there'll be more exciting news we can share with you here coming up.

Okay. Growing share where Dana is underrepresented, another element of our strategy here under traditional products. This is a great example out of India for us, where we operate a great business with our partner, Anand Group in India. A customer there, Mahindra, had an opportunity where they wanted to outsource their current axle manufacturing. And they wanted, ultimately, Dana to participate so that we can improve the performance and the technology that they had developed in-house. So we'll be taking that business over mid-'26. It's $50 million of incremental revenue. And over time -- we're taking over the current design, and then over time, we'll migrate to Dana design and technology. You can see it's over 600,000 axles for us. So a great win for our team in India and another good example of how we're expanding in parts of the world that we are underrepresented.

Okay. Let's talk a little bit about the Commercial Vehicle market, as we see this as a great opportunity for us on a go-forward basis. As you know, we've been operating really at the trough relative to volumes in the CV space. On the left-hand side, you can see in Class 5 through 7, last year was really a low point at 195,000 trucks. And on the Class 8 side, you can see 251,000 last year, and our plan is built around 215,000 this year. On a go-forward basis, both segments are forecasted to grow, you can see at 11% and 7%. And that's really driven by replacement cycle, more clarity around emissions regulations and as inventory levels kind of normalize, we feel highly confident that this volume is going to begin to occur, and we're seeing it in our near-term forecast, demand forecast from our customers. So this will be a great tailwind for us over the next 5 years.

And in terms of what that looks like, if you combine those 2 charts that I had on the previous page, in total for the truck market, we're looking at a 9% CAGR from a volume standpoint. But for Dana, we see not only the leverage from the added volume, but we also have an opportunity to grow share over this horizon. So predicting that will grow closer to a 15% CAGR.

And so let me take you to the next page and explain the $200 million and kind of what's behind our strategy to grow share. So it's important to just kind of highlight the difference between our Light Vehicle business, where we work with an OEM customer on a new platform or product, we win that business, and then we supply directly to that OEM over the life of the program. In the CV space, not only do we have to sell to the OEM so that we are in their product book, we also need to sell to the dealers and to the fleets that are designing in their vehicles and making choices about whose powertrain they would like to have as part of their truck.

We have underserved the dealer and fleet network. We need boots on the ground to talk to the fleets and the dealers about the Dana value proposition and make sure that there is pull-through from the data book, if you will, that has Dana as an option. So we're investing in this area. And the map on the bottom is just a coverage map, but we're basically increasing our coverage of Dana representatives in the field, servicing those customers, the dealers and the fleets. And we believe that doing a better job there and telling the Dana value story will create pull-through of $200 million of sales opportunity. So really excited about that on a go-forward basis.

So just to wrap my section before I hand it over to Brian. Profitably growing our core business is about streamlining our product portfolio and driving margin decisions. It's about profitable growth. And those parts of the portfolio today that aren't delivering, we've got to attack and fix those pieces of our business. It's about protecting our incumbent position on some of the most attractive platforms in the industry, and I talked about how we've locked those up on a go-forward basis. It's about leveraging our core capabilities and market-leading technology to capture new programs. Again, our customers are all revisiting their product strategies, and we want to be there to provide the right solutions for them. It's about taking advantage of the growth in the CV market that we all know it's coming and making sure we're ready to capture that volume and gaining share through improving our fleet and dealer field support that I talked about on the last page.

So with that, I want to thank you for your attention. And then I want to turn over to Brian for the second element of our growth -- the growth side of Dana 2030 strategy, and Brian will talk to us about the Aftermarket. Thank you.

Thank you, Byron. As Byron mentioned, my name is Brian Pour. I'm the President of Dana's Commercial Vehicle business unit, which also includes our global aftermarket business. So today, I'm going to talk to you about our Dana 2030 aftermarket strategy.

But I'm going to first start by little bit of show and tell. I'm going to hand out some of our components that we sell in the aftermarket business, give you guys a chance to just see the type of products, the portfolio, the diversification of what we distribute through the aftermarket. So some different components here. And feel free to just kind of pass these out throughout the room. I'll also give you some samples of our sealing products, some of the driveline components. And you can see the diversification in the gasket sets, everything from the small valve stem seals, all the way up to what you see up in front here, which is a multilayer cylinder head gasket for a in-line 6 diesel engine. Please be careful. We are getting close to the end of the quarter. All those products need to go back into inventory. And we're not going to pass out the head gasket here because that one's needed to cover dinner from last night.

So let me start by saying that Dana's aftermarket business really centers around two iconic premium brands, that being the Spicer and Victor Reinz, and both of which have pioneered their respective categories nearly 120 years ago and have since been the brands of choice by nearly every major OEM nameplate when it comes to driveline and sealing components. The strong OE heritage has resulted in the Spicer and Victor Reinz brands being 2 of the most recognized names in the aftermarket industry when it comes to quality and durability. You also see up there that we have a third brand. That third brand is Tru-Cool. This is a new addition to our portfolio, and it is also built around our OE heritage of industry-leading thermal management components.

Today, our global aftermarket business is split about 60-40 between the Light Vehicle end markets and the Commercial Vehicle end markets. And it generates just over $850 million of annual turnover. About 85% of those sales come out of the North America as well as -- North America and the Europe, Middle East and Africa or what you'll hear me refer to throughout this presentation as the EMEA region. And the balance of the sales are really split evenly between South America and Asia Pacific. Globally, we estimate the total addressable market, given the product categories and geographies that we operate in, to be approximately $6.6 billion. And this really reinforces our confidence in the growth strategy that I'm going to take you through today.

Our aftermarket business services 4 primary sales channels. Obviously, with our strong OE heritage and extensive installed base as a major Tier 1 supplier in both the light vehicle and commercial vehicle end markets, the OES channel is the path where we support the vast dealer networks of our major OEM customers. In the light vehicle space, these relationships are governed by our typical service part requirements. But as the commercial vehicle OES channel is much more of a traditional aftermarket type of transaction and business. And it supports both our installed base, as well as the all makes or what we refer to as the independent aftermarket product. And that's really because of the diversification of the dealer service centers with the commercial OEMs and how many different nameplates those service centers support.

Warehouse distribution is our largest sales channel, where we supply customers such as TruckPro, FleetPride, Federated Auto Parts and Alliance Auto Parts, just to name a few of them. And this is predominantly a supply network for not only the captive locations of these warehouse distributors, but also the hundreds of thousands of independently -- independent auto parts stores and independently owned service centers around the world. Retail is our newest sales channel, and the one where we see the most significant near-term growth opportunity. And we've been aggressively working to break into this channel. And I'm happy to say, over the last 6 months, we have secured contracts and significant market share with 3 of the major big-box retailers in AutoZone, NAPA and Advanced Auto Parts. And those 3 retailers alone represent more than 17,000 storefronts across the U.S. and Canada.

Our e-commerce channel supports the familiar marketplaces such as Amazon, Summit, JEGS, RockAuto. But we're also closely aligned with the omnichannel strategies with our key customers across the other channels. And we do also offer a select number of unique SKUs through our B2C website as well.

Now as we set out to define our Dana 2030 aftermarket strategy, really, it was about first establishing our targets. And what we wanted to do is we -- our targets were set to grow the top line by no less than $200 million in annual revenue and to expand our margins by an additional $65 million of EBITDA on the bottom line. From there, we assembled a cross-functional team. We supported them with market experts. And we asked them to take a fresh look, fresh eyes look at what we were doing today and really identify what were the things that we're doing right and that we really just needed to capitalize on that momentum and continue to push forward. What were the areas that needed significant change. And then what were the things that we were completely missing, we did not have in place, and that we needed to develop the clean sheet processes and tools and deploy those out into our business.

This exercise resulted in 3 primary work streams. The in demand planning and distribution optimization, pricing, customer segmentation and loyalty and sales enablement and market share growth. And I'm going to take some time here to walk you through the details of these 3 work streams. The foundation of our aftermarket strategy starts with our distribution network and the execution within these sites. Historically, our aftermarket, as Bruce had mentioned, had been integrated into our OE business. And as a result, the key metrics and KPIs that we use to manage our OE channels tend to be counterintuitive to the aftermarket business dynamics. Right?

Aftermarket is very much an availability business. It's about having the right part at the right time in the right place. Aftermarket customers will prioritize availability over all other attributes, including pricing. And availability starts with being able to achieve and sustain industry-leading fill rates. And this is done through enhanced data analytics and agentic AI agents that predict future demand and then drive our structured sales, inventory and operations planning process, which we call our SIOP process. Essentially, these tools are helping us to interpret the market trends by product and by region and so that we're able to appropriate the necessary level of working capital to maintain the required inventories by SKU across all of our distribution centers. We're also revisiting our global distribution footprint to ensure that we're optimizing capacity, logistics and overall cost structure against the -- both the near-term and the long-term growth channels across all of -- near-term growth targets across all our channels.

And in addition, we're investing in automation and efficiency improvements across all our DCs to further open up margin and to ensure that we're able to achieve and sustain the industry-leading fill rates. While distribution is the foundation of our aftermarket strategy, pricing, customer segmentation and loyalty are the structural pillars to support our growth. This is where we become much more data-driven when it comes to -- data-driven and intentional in how we set our pricing and we manage our customers.

Historically, our list pricing was set based on a production cost plus model. We're now moving to a strategy where pricing is established according to the perceived value to the customer. This is where we consider factors such as improved performance, durability and brand reputation. When customers believe products deliver greater durability, efficiency or long-term savings, they're willing to pay more.

We're in the process of building out an enriched product content across our entire portfolio. And we're leveraging that product data to support the customer value alignment. This approach will allow Dana and our channel partners to maximize margins while still being competitive in the market.

Our second pillar in this work stream is customer segmentation. And this is where we use a data-driven approach to match service, price and customer support to customer value and behavior. Not all customers will be treated the same. So we've created a tiered structure, meaning that our top buyers receive one level of support, emerging customers will receive another level of support, and so on and so on. This allows us to focus our time, tools and offers where they are most impactful. Our data analytics will continually monitor elements such as strategic alignment, share of wallet, growth, cost to serve, training reach and distribution strength. And we expect this initiative to drive higher margins, better customer satisfaction, improved inventory efficiency and stronger channel partner relationships.

And finally, we're launching a loyalty and an incentive reward program. It's a strategic initiative designed to accelerate premium product sell-through and strengthen long-term customer engagement across our channels. We're leveraging QR-based technology that enables us to reward the technician at the point of install. In practice, this means that we're directly incentivizing the individual as typically disposing of the box and packaging. We're moving Dana from a traditional push model where we rely on our distributors to pull products through the channel to a true demand model driven further down the value chain. This approach gives us direct relationship with the actual installers. And it's a scalable platform for future promotions and new product launches. Now all of these actions, our perceived value pricing, customer segmentation and introducing loyalty programs will enable Dana and our channel partners to increase sales, improve margin and drive customer loyalty.

Now the previous two work streams were primarily focused on structural costs, process and execution to drive margin expansion and support our long-term growth targets. This final work stream highlights the changes that we have and are making across our sales force enablement tools to drive market share growth. Now here, I'm going to want to focus on just one of the substantial growth opportunities with our Victor Reinz sealing products portfolio and some of the products that we've passed along there. As part of our Dana 2030 strategy, we've developed a road map that will deliver $135 million in incremental annual revenue within this category alone. And given our OE heritage and pedigree with the light vehicle and commercial vehicle manufacturers, Dana is uniquely positioned to bring premium OE quality sealing products into the aftermarket.

Today, we already hold a strong market share position in the EMEA region, but there is still additional room for growth. And in North America, we are now launching the complete Victor Reinz portfolio and expect to achieve approximately $90 million in incremental annual revenue within the region. We have the proven playbook in the EMEA region, and we've recently dropped this exact same playbook here into North America. And as I previously mentioned, our strategy is working, and it's been validated over the past 6 months with the secured contracts and significant market share gains with 3 of the major big-box retailers in the U.S. and Canada.

Now to achieve these targets, it first starts with having superior product coverage. And due to Dana's OE relationships, we have the most comprehensive coverage in the industry. But we're also investing in new product development resources focused on further expanding coverage of the European, Asian and domestic nameplates. And we're prioritizing late-model coverage using industry data such as the VIO, or vehicles in operation. And that's really to ensure that we're targeting the applications that will offer the largest near-term growth by region. In addition, it requires appropriate investment in sales enablement and marketing. And we already have plans underway to significantly increase our investments in marketing and advanced AI sales enablement tools.

And finally, to support the growth, we're also expanding our staffing of customer-facing sales force, product management, content and category management. By 2030, our mission is to be the world's leading supplier of sealing components.

So if I wrap this all up and really leave you with the kind of the 3 key takeaways that underpin our Dana 2030 aftermarket strategy, it's about achieving industry-leading fill rates through our critical focus on demand planning and fulfillment. And that is enabled by the investments in our inventory systems and use of enhanced data analytics and agentic AI agents to be able to drive our SIOP process. It is also using our enhanced supplier management tools to ensure that we have the right part at the right time in the right place. And it is optimizing our distribution footprint and investing in automation and the efficiency improvements to continue to drive margin.

We're also -- we'll drive stronger channel partner relationships, increase selling price and drive higher volumes. And that is through the perceived -- pricing for perceived value based on performance, durability and brand reputation, and that's underpinned by the enriched product content that we create. We're also utilizing the data analytics to segment our customers into tiers and make sure that we are aligning our support, pricing and service accordingly. And it's about deploying an incentive-based loyalty program that creates a true demand model further down the value chain. And finally, it's about unlocking growth and margin expansion opportunities through investment in our sales and marketing, enhanced training and sales enablement tool. And as Bruce mentioned, ensuring that aftermarket is not an afterthought. And then the creation of an independent aftermarket team that has the autonomy and flexibility to be able to adapt and react to the unique dynamics of the aftermarket industry.

So with that, I'm going to hand it over to Seth Metzger, our Chief Technology Officer.

Thanks a lot, Brian. As Brian noted, my name is Seth Metzger. I'm the Senior Vice President and Chief Technology Officer here at Dana. Very excited to talk to you today about Applied Technologies growth pillar. We decided to call this section Applied Technologies because we're taking our 120 years of knowledge and capabilities and technologies and applying them in new ways. This could be applying to a new market or a new segment or creating all-new products that we can use for growth.

So in this section, we're going to talk through these 3 areas. So first off is our EV growth in current markets. We are changing our strategy and targeting specifically high-value powertrain segments using a platform approach to reduce costs and complexity and sharing risk here with our OEMs. We believe this upgraded strategy is going to create more value for our customers as well as our shareholders.

Next up is leveraging our current product to expand into new markets. In this area, we're trying to focus on some attractive growth markets and use the product that we have today and simply applying them in new segments that we haven't participated in a meaningful way. And then next up is leveraging our capabilities to create new products. This is where we have some technology that is very interesting to create a new product line that can address an existing segment or enter an all-new segment. Each of these areas are interesting areas for growth.

So first off, we'll go through a little bit on EV. On the left is our 5-year net new EV sales backlog. As you can see, 2028, we've achieved around $400 million. This is a component of the $750 million that Byron mentioned earlier. If you carry that forward to 2030, that number achieves about $575 million. This is mostly made up of, say, electrified axles, electrified transmissions, more so hybrid transmissions, some of the catalog motor and inverter products, as well as our thermal management technologies. As we -- as these programs come online, we're very excited to see these customers be successful in the market.

The next is trying to give you a view for what we see for EV adoption. And this is looking specifically at battery electric vehicle adoption. You can see, we're comparing North America, Europe and Asia Pacific as well as trying to give a view to what's been changing with the outlook. As everyone has seen, the outlook has been changing pretty dramatically, in particular, from '24 to '25. In North America, we saw a huge decline. And actually, our current outlook, there's even further decline. In Europe, we see the outlook somewhat stabilizing, so only a small change from the '25 outlook. In Asia Pacific, it's gone the other way. Going forward, these are forecasts. These are -- it's still going to be a bit murky on where we think EV will eventually end up. The only takeaway is that in all of these markets, despite the changes, there's still growth. And since there's growth here, this is going to continue to be part of our backlog and part of our future growth story.

Now since we are talking about our backlog and that this will continue to be part of the story, we wanted to give you a view here to EV profitability. As with many of the OEMs and Tier 1s, profitability really has been a challenge as we've been trying to scale the business and get more of these products into the market. And as such, '24 and back, we weren't profitable, again, like many of our peers. We're very proud that in '25, we not only broke even, but made a small profit at about 4%. And as we go forward and deliver that backlog, first off, our sales, we're expecting to be north of $1.1 billion of the electrified products and achieve attractive margins greater than 10%. And you've got a very diligent and focused management team making sure that the new programs we take will deliver those returns as these programs come online.

So let's talk about the segments that we're going to participate. Just to explain the chart a little bit. Across the top, you can see the different segments that we'll participate, along with an image of the vehicle. We're giving you a view to the total addressable market. We're expecting by 2030, the top customers as well as the products. Then I'll talk through each of these in some detail.

So the first one is the e-Thermal or the passenger car products. In this case, the e-Thermal and passenger car, passenger car volumes are very large. The e-Thermal product lines are a very good fit for those segments. You can see, the addressable market is about $3.5 billion. And if you look at the major customers, it's really all the major OEMs, as well as some of the major Tier 1s in this space. The products we manufacture, they're e-motor coolers, they're power electronics coolers, as well as battery coolers. It's a very interesting space. We're constantly receiving a lot of RFQs here.

The next is really addressing e-Transmission and driveline. And this is where I want to address the question -- I'm sorry, the comment earlier about participating in the high-value segments. So where we play in our powertrain, it really isn't the passenger car. We really play in these high-value segments. And we call them high-value segments because we think electrification will make the products better for consumers in these areas.

So just to explain, the super sports car segment. If you look at this, these -- the brands up there, they're really luxury brands or performance brands. People buy these vehicles for a different purpose than just every day going to get groceries or do work. They're buying them for excitement and pleasure. If you add electric to these machines, so in the case of like a hybrid dual-clutch transmission, you can make these machines more fun. I mean a 1,000 horsepower ICE machine is a lot of fun, but if you had 250 more horsepower, it creates even more performance for the buyers of these platforms. So in that case, EV will make these vehicles more desirable. So that's a key place for us to play. We've got about $0.5 billion of total addressable market by 2030 that we want to meaningfully participate in.

The other vehicles, say, light commercial vehicles over to buses. The other end of the kind of the mobility spectrum is where the vehicle will do work for someone. In this case, total cost of ownership. So the total operating cost of these vehicles, that's really what drives people to convert. Now if you look at the drive cycles, vehicles that drive very, very low speeds at very, very high torques, time and time again, it's proven that electric is really a better solution. Internal combustion engines aren't very efficient at those -- under those operating conditions, and electric are.

So in these cases, say, like a school bus, garbage trucks, maybe yard spotters in the field that are moving heavy haul equipment around, those, we believe will be electrified because it saves money. And that's going to be attractive here in the future. So if you look at this total market of the electrified business that we're trying to pursue, the total market is about $7.5 billion. So a very big TAM for the select areas that we're willing to participate.

Going on next. So next, we're going to give you just a view to how does the RFQ list look. In this case, so we call it a chase list. Chase list is nothing more than the RFQs we've received from the customers, as well as the opportunities we're already engaged with the customers well prior to them even writing the specs and giving us an RFQ. The first on the left are the electric drive units and e-Axles. These are for premium electric vehicles, commercial trucks, those vehicles that do work. In this case, we've got a chase list of over $300 million. So $300 million of RFQs that we're working actively with customers on. We've got a great catalog of products that we can reuse and redeploy. And our products are very compact. They're very efficient, improved power density. These are things that are going to be very attractive here to these customers.

The next up is the thermal management products. These are the kind of that mainstream pass car segment. We've got a chase list of over $125 million. We've got -- our value proposition here really is about our technology. Our customers come to us when they have the most challenging thermal problems, where there really have to get heat out of a specific area, and we've got some great technologies to help deliver that. This segment is also really interesting because the technologies and the products that we manufacture, they're very fungible between ICE and EV powertrains. So as ICE goes down, EV goes up, we're able to manufacture those on a lot of the same lines and same equipment.

And then finally, the hybrid transmissions. These are some of the world's most advanced 1,000-plus horsepower super sports cars. This is an exciting segment. We've already won a number of platforms. We've got 4 major OEMs. They're already using our widely modular and flexible dual-clutch transmissions in this segment. And we've got the chase list of over $200 million of incremental opportunities. We're very confident we're going to secure some additional programs here. Overall, these total EV opportunities is over $600 million just in the chase list that we've got in front of us today.

And before finalizing the EV section, I did want to announce one new heavy-duty pickup truck e-Axle win. So this is a truck that is used really predominantly for work. It's a very large platform. We expect that maturity. This is going to be around $200 million in average sales per year. Start of production is 2029, and this is with the new range extended EV platform. What is meant by range extended EV? Basically, it's a battery electric vehicle with a generator in the front. So you address any of the range anxiety, and it has a fantastic towing.

The value proposition for Dana here, really, it's our knowledge and proven reliability in this pickup segment. I think as Byron noted, we're very well known in the industry for leaders in the segment, whether it's in the heavy-duty trucks like this or the compact trucks so that kind of do the work all around the world. We developed a very innovative rigid e-beam design specifically for these environments, as well as that range extended EV. We're very excited to see this platform come to market.

Also for Dana overall, this helps solidify and preserves our role as a market leader in electrified market. We don't know what pace this segment will be electrified, but we have a great position in ICE as well as EV now with a standard catalog of products.

All right. Next, we're going to talk about some new growth areas. And before talking about the specific ideas that we came up with, we want to tell you a little bit about how did we come up with these ideas. So first off, we developed over 300 ideas for us to pursue. This was done by working with our employees from all around the world, talking to customers, going out and actually interviewing them, as well as some third parties to try to get lots of different perspectives on where we could play.

We then went through a filtering process. We wanted to filter on fit and then, of course, some financial metrics. Fit was really looking at do we have the right technology? Do you have a product? Are we in the right regions? Can we be close to these customers? And then on the financial side, it was trying to see how big is this market? Is it growing? Are there a lot of competitors? Really trying to understand the determinants of competitive positioning and where we could play.

When we down selected, we ended up with 5 very specific teams that we wanted to pursue. From there, we developed some growth teams. We wanted this to not be just kind of business as usual. We want to have some kind of supercharge teams where you have a leader that is specifically looking at these customers, developing these products and going out and trying to win. So we have a leader in each case for every one of these themes, as well as the team beneath them trying to turn these into businesses.

So proud to show, these are the 5 areas that we've identified for future growth. The same chart, so I don't need to explain that, but I'll talk through each of these in some detail. So the first off is high-performance compute thermal management, and that's a bit of a mouthful. What this is, it's really about cooling the high-performance computers that are on these mobility applications. Kind of the interesting part about the market right now is a lot of the OEMs are trying to transition from these distributed electrical architectures where maybe you have lots of computers all over the car. You could have as many as 75 little ECUs distributed all over the vehicle. By consolidating them, they're trying to remove all the wiring, all the harnesses, all those little connectors that exist on there, as well as all of the software. So moving to a unified architecture, whether it's a zonal type architecture or otherwise, as well as moving to software-defined vehicle takes a lot of cost out of that platform.

Now the only trade-off with that is once you put all that compute in one space, you need a bigger chip. You need the processing power needs to get more. And as that grows, the passive cooling that exists today isn't going to be enough and you need to move to some sort of a liquid cooling technology.

And that's really where Dana comes in. I showed before number of the products we make with power electronics coolers, battery coolers and so on. We definitely have the technology in order to meet these customers' needs. They also need to have a very clean process, and we have a unique fluxless brazing technology that is extremely clean. So it doesn't have to go through any after treatments or so on. So we can deliver this technology very much with the capabilities, both in the design side as well as manufacturing today.

Now you see the total addressable market. This is about $700 million. This is a really interesting space to play. But this is kind of the steep part of the curve. We expect adoption is going to be near universal for this type of technology because it saves money for the OEMs in a significant way. This $700 million could be a little faster, could be a little slower. The adoption can change that. By the time this hits the, I think, maturity, we expect this to be somewhere between $3 billion and $4 billion market for us to pursue. So very important we get into the ground floor, working with the major OEMs and Tier 1s in this space.

Next up is refrigerant heat exchangers. Refrigerant heat exchangers, these go in electric vehicles. Electric vehicles have a module called the thermal management module. What this does is it governs basically the heat between all the systems that need to be managed for temperature. So think about like the in-cabin experience. When you're sitting in the cabin, you want to turn the heat on or cool it down. Your batteries, your motor, your inverter, all of them generally want to be at room temperature. So this module is actually how they go through and do that, and it manages that thermal system.

Well, every module has 2 or 3 heat exchangers. And this is for the purposes of using a refrigerant cycle with which to basically generate the heat or the cooling functions. We've been very actively engaged with the OEMs here. We are known for the kind of the stack dish coolers that you see on that page. We've received over 35 RFQs in the last 12 months just in this space. So the time is really now where OEMs are moving to these battery electric platforms with this technology, and we've got a great redeployable technology to meet their needs.

The next is material handling. Now this is very much an electrified market, but at least the areas that we're pursuing. But it's electrified in maybe a different way than some of the pass car and commercial truck that we've talked about previously. Material handling has been electrified for 40-plus years. I mean, most vehicles are electrified working inside of warehouses because you don't want the emissions. This is a market that is still growing, mostly driven by, I think, the e-commerce and the large warehouse and distribution sites that have been set up really around the world.

In this area, we're pursuing both the fork trucks like you see there, as well as AGVs or AMRs, which Chris is going to talk about in some detail. Now, why now? This is an interesting space that because of the advancements in technologies, there's new functional safety requirements. So how do you keep the machines safe around operators and in these buildings? Those standards are much more stringent than the previous standards. And we've been actively developing solutions or products that meet those needs. Actually, a lot of the team and capability from our Light Vehicle business, we're able to redeploy that capabilities here and deliver. And we're the first to market with functional safe inverters that both meet on the software side, as well as the hardware with a multi-core safe device.

There's also a drive to improve the efficiency of these machines. People want to be able to operate these things, not just 1 shift, but 2 shifts without having to recharge. And we've developed some interesting technology in the motor side. The existing machines, the predominant solution is an induction motor. The induction motors are only about 70%, 75% peak efficiency. When you move to some of the technologies we have, you can get up to 95% efficiency. So what does that mean? That's -- it could mean you could have 30% less batteries or you have 30% more run time. Those technologies can really make an impact when you work with the OEMs in this space and to us as consumers.

Now the next 2 items, powersports and defense. These are really exciting segments as well, so much so that we wanted to dive a little bit deeper. So I have some slides coming up on these next. Overall, if you look at these new growth areas, this is over $6 billion total addressable market that we're adding for us to pursue new areas for us for growth.

Here we go. Okay. This next segment is the powersports industry. This is a really exciting space. If you look at the vehicle there in front, this is a side-by-side. I don't know if you knew, but they manufacture over 800,000 of these things a year. Like this is not a small volume segment. In North America alone, this is over 600,000 of these things are manufactured and consumed. And this market is going through some interesting times. It's changing pretty dramatically from the side-by-sides of the past.

So mostly the market as well as consumers, they're all demanding better products. I think you start to see when you drive around in rural areas, side-by-sides. They're being driven on the road. I'm not sure if any were driving around here in New York in the last snowfall, but if you went a little further out, you probably see these sharing the road with passenger cars. Because they're on the road, consumers want better NVH or noise vibration and harshness. They want a quieter ride. They want to be more refined. They want these to be enjoyable with some similar features to passenger cars.

The higher end models like this here is kind of one of the sport models. There's a form of kind of horsepower wars where everyone is trying to one up each other. These machines, when they started, they were 40 horsepower. Now they're 200 plus. And some of the OEMs are in this space are claiming that they're going to move to 300 in the future. So very much in competition with some of the past cars.

And then finally, as product reliability challenges. Obviously, as you improve horsepower, the demands are more on the driveline and powertrain. But also, this is a segment that's heavily modified. So as consumers buy these, they upgrade. They put bigger tires on, bigger suspension. You want to go over the next hill, you want to go faster. So people like to do that. And because of that, the products, they have some challenges. It's very common that if you're going to go out with your friends for the weekend, you're going to bring a spare driveshaft. You're going to bring a spare half shaft, maybe spare belts. That's not as much fun. No one wants to be left on the side of the trail here while your friends are blasting up. So real challenges that we think we can help them address.

Now this is a great fit with Dana, this segment participating here. Yes. So Dana has got a great off-road brand. I think probably some of you in the room, you can see the different screens around. We're very well known for our off-road heritage. We have collaborated with Jeep on the Wrangler since 1941. We're associated with the Ford Bronco, as well as the Land Rover Defender. Dana very much is an off-road -- in the off-road space.

We also have a great catalog of products that can fit the segment needs. Every one of these has a couple of axles, some drive shafts, as well as some of the powertrain products, particularly around hybridization, which is a new trend for the segment. And then dual-clutch transmissions, and I'll talk about this one for a second. So I mentioned dual-clutch transmissions when we were going through the growth areas and specifically associated with the super sports car segment.

Now the dual clutch transmissions we make, they're unique. They're made for mid-engine super sports cars. Now the side-by-side, the vehicle architecture is actually a mid-engine as well. So the engine is behind the driver and the passenger. Now that's a unique architecture, and it shares that architecture with super sports cars. Now I'm not claiming we're going to put a Lamborghini dual-clutch transmission in that thing. But I am claiming that the technology and the know-how to design and architect a dual-clutch transmission for that unique architecture, that's something we have a strong heritage of and great capabilities for. Overall, what we're committing is to deliver a power dense, more reliable better NVH product here to the consumers, which is really what they're asking for.

All right. Just to double click on that a little bit and kind of go into some detail. This is a look at some of the current industry products. Many of the products, they started at that very low base, where it was 40-horsepower machines and went up a little bit from there. But many of them are still based on this industrial style designs. Talking about bevel or spiral gears. These are noisy. They are very basic products. Pinion disconnect that maybe has a lot of lash, so it clunks inside of the vehicle. And universal joints and driveshafts that are not the most reliable. A lot of them are imported from China in these examples.

If you look at what Dana is able to deliver, we're able to deliver automotive-grade high-quality products, hypoid gears that are stronger than the industrial style designs, but also better in NVH and durability. Differential disconnects that remove all that lash and make it quiet when you're engaging the lockers, as well as Dana Spicer universal joints and driveshafts, which are very reliable. Overall, to consumers, we can offer better strength, better reliability, a quieter ride, as well as improved warranty profile. We think now, because of the demands of the industry, now is the time to introduce automotive-grade drivelines, and we're the partner that wants to do it.

Okay. Next up is the defense sector. Just to draw your eyes, look at the very bottom. You can see that Jeep looking device. That is actually an original Willys-Overland MB. So this was the military jeep that was developed for the defense industry. Dana interesting fact, we worked with Willys, Bantam and Ford to develop all of their prototypes. We provided the axles, the driveshafts, the transmissions as well as the transfer cases for this segment. And of course, we've experienced the benefit of the growth of that platform.

But if you look around the page, we're on some of the lesser-known products like the REO Eager Beaver, where we provided some driveline products, as well as some of the other heavy-duty trucks and so on. Even up in the top left, the tanks. That's actually a picture from our Warren manufacturing facility just outside of Detroit. So defense has been something that's been part of our heritage really from the beginning, and it was very, very logical. This is an area that we would invest in for future growth.

All right. So the defense industry. This is an interesting segment. It is one that is growing. We're seeing increased spending in North America, Europe and really the rest of the world. This is really driven by the large amount of political unrest that we all see today. Some of the trends here. Really, it's around modernization and this transition to something called commercial off-the-shelf parts. The defense industry wants to move to products where really, they're based on OE platforms upgraded for defense rather than unique kind of one-off platforms of yesteryear. There also is a strong drive for hybridization to reduce the cost to get fuel to the front lines. So these are great trends, and they create a great fit with Dana.

So we're on a number of the OE platforms, as you saw from the previous sections, with our axles, driveshafts. And we have a great catalog of e-Powertrain and generators that can help meet the hybridization needs of this segment. We also have some interesting technology called the tire inflation system or a central tire inflation system. What this does is it inflates and deflates the tires. Why is that important is that when you're a off-road, having lower air pressure in your tires gets it better flotation, lets you perform better. You don't sink in the sand, and you can move a lot faster. And then when you get back on the road, you can inflate those tires and drive at highway speeds. It also has the capability that if somebody shoots a hole in your tire, you can actually keep the tires inflated enough to get away. So a very important technology for the military.

We have a very strong position in North America. We're on most of the wheeled platforms that exist today. So a very good fit for Dana.

This next page is, again, trying to look at product alignment. Along the left, you can see the type of platform, light duty, medium duty, heavy duty. And then on the right are all the different defense platforms, whether it's ISV or JLTV, all the way down to HEMTT. We have technologies and products in production that can be modified in order to meet their needs. So axles, driveshafts, and so on.

And to be a little more specific, I wanted to share a little bit on the GM Defense ISV. So this Infantry Squad Vehicle is a great platform where we're able to apply our OE products with some enhancements to meet the needs of the market. This program is one that initially started around 2020, and it is going through an uplift as the demand has peaked. We've got uplift that's supposed to start in September of 2026. And it's a very good reuse of our products and technologies. We were able to deliver these very quickly, very quickly ramp technology because we have capacity in order to meet the military requirements.

And then finally -- so in summary, we believe we have a very balanced growth strategy that is powertrain agnostic. I think you saw quite a few examples in this segment, as well as in Brian's and Byron's, of both applying traditional technology and -- sorry, traditional powertrain technology as well as EV powertrain technology. We believe that EV growth is very attractive, and we're targeting them very high-value segments, not just the mainstream pass car stuff, high-value segments that should be electrified because they create a better experience for the consumers. The total addressable market is going to be about $7.5 billion by 2030, and we've got over $1 billion of that secured already. We're pursuing an incremental $600 million in incremental growth in the EV space. And we believe our new strategy helps reduce the market and investment risk. And overall, we'll create more value for customers as well as shareholders.

The next is adjacent segments. I hope everyone found this as a very exciting space for us. We've been adding another $6 billion of a total addressable market for us to pursue by 2030. These segments, most of them are mature, kind of low-risk applications of existing technology. We're not putting somebody on the moon with this. This is using the capabilities that we have and redeploying them. We've got dedicated teams that focus on growth. Our expectation is that we're going to be able to deliver around $400 million of incremental revenue with a very attractive profit margin from the adjacent technologies here.

Okay. With that, the next section is going to be margin enhancement. But before we go into that, we wanted to give everybody a 15-minute break. So thank you.

[Break]

All right. Good morning, everybody. I'm Chris Clark, and I run global operations for Dana. And today, while there's a great deal inside of manufacturing excellence, I'm going to cover really 3 key strategies that we will focus on here over the next 3.5 years. The biggest is the automation piece, and I'll kind of cover some more detail about that over the next several slides. And then our make versus buy. Think about make versus buy is what is core and critical for us to produce inside that differentiates us from the market and obviously some things that are tied to intellectual properties, and that we're going to generate over $50 million of accretive value there. And then on the manufacturing footprint, we're going to keep that pretty high level. But a lot of activity has been going on there, and we will continue to work on that here over the next 3.5 years.

So as Bruce said, there's always priorities as you think about investing of capital. And really to get to an investment-grade manufacturing organization, you really have to focus on what you do for a living. And so now that we have really shifted our investment strategy here over the last year, we've really focused on these key areas. And automation is a big one for us, and I will share the 3 different technologies you see at the bottom of the screen.

Robots, they've been around for quite a long time, right? And many industries use them. But the next one is the cobot or collaborative robot. That really has something that's been coming on strong over the last several years. It's a great technology, and I'll kind of explain why that is. And then the last one is the autonomous mobile robot. Now, Bruce kind of mentioned the AGVs. And then we are really driving towards the AMR, which I referred to, because of its flexibility of moving things around the facility. And I will give an example of that and some of the investment that we're doing in that strategy as well.

Okay. This one here is a key one because we're always thinking about how do we protect our employees, right? It's all about ergonomics, and it's all about how we make sure that none of our employees can get injured, right? We want everyone as Byron said, we want them to go home the same way they came to work. We have a lot of heavy parts. We have a lot of high velocity plants, and we're moving a lot of stuff around and making things every single day.

If you see on the picture on the left, that is a machine load for a tube. And there's one individual there that they're working to make sure that we straighten that tube out. There's another person that also uses a lift because these parts can range anywhere from 60 pounds up to 900 pounds. So they need lift assist to move all of these components around the facility. And you can see that there's a ton of opportunities for them to pinch their hand, crush their hands. And obviously, we want to make sure that we prevent that.

So if you see on the right there is we were able to automate the cell, and we are setting that up with a robot, and you will see a video here shortly of how we physically move all of those products around with the robot. And what you see there in the background with the tubes where they're kind of off stacked, that's also going to tie into our AMR strategy as we continue to move forward.

Another area that I didn't really talk about but is a key focus area is ASRS or automated shipping and retrieval systems, which is really what we're working for with the aftermarket group. Again, all about speed, efficiency. And we're also in an agreement to work on the humanoid robot and evaluating the capability of those inside of our system.

And one of the key things I want to share with you that we've learned is we've really been driving towards these 3 technologies is the integration of our artificial intelligence or AI and machine learning that's drastically not only improved our efficiency, but our quality of product, which is critical in this business. Aaron, there it goes. So you can see it here that the robot is physically picking up. So think about the presentation of the part. It is not perfectly straight. So the robot is placing it into a gauge, and then it goes into the machine. And one of the things that we were able to integrate into that machine is the artificial intelligence piece. So as that tube is loading in, it is actually learning all of the characteristics of that tube. And it's determined based on the talents that engineering provides to make sure that tube is straight. And we were always doing that with manual gauges or by hand with people. Now we are utilizing all of that technology to drastically improve our efficiency.

In this particular cell, this is a multiple cell. We have this set up in three different areas inside the plant. We improved efficiency by 20%. And as you can see, the savings was quite significant. And again, the payback within 7 months. Our target for all of our automation projects is that we want to be 1.5 years or better as it relates to the cobots and the robots. And that's why we've really been driving the investment and the shift to really get this cost efficiency and effectiveness inside the business.

Okay. The next one here is we had a late engineering change that came through on the customer. And so you can see on the left, when I call them the magic markers, but they're basically a flux control. And you can see we had over 15,000 parts. We have multiple people that are tracing and having apply this material to a cold plate prevent leakage in any issues inside of an EV product. So introduced, we were able to work with the cobots, which is on the right-hand side. And utilizing the cobots, one got us the perfect repeatability. Same thing, utilizing a vision system that has AI integration into it to ensure the traceability and the repeatability is virtually perfect. And so you can see a drastic improvement in our scrap downstream, over 80%. And you'll see in the video, the efficiency.

The other thing I want to highlight about the cobot that's fantastic is that normally, a robot system, because it does not have the several controls, requires a significant amount of caging and investment to protect the robot and make sure there's no human interaction. The cobot, a person can stand directly next to it. And in many of our operations, we have people that are working directly with the cobots and doing assembly and manufacturing with that product. It's a huge technological move, and we've had heavy investment in that, and we will continue that over the next several years. And we're going to show you a video real quick and the capabilities.

So here, you can see that the magic markers are now located inside of the cobot. And you can see the speed and the movement that they make. And again, another AMR project which is coming up here shortly has already been developed to move those plates in and out and take them to line sight for usage. Our first time through or what we're always targeting for, an OEE is over 99.7% with these cobots. It's a great technology. And again, we've introduced and we have over 100 applications already globally that we're utilizing this technology. Three years ago, we had 6.

Okay. The AMR. So material movement. Why do we choose the AMR is because of its flexibility to move material all through the location. Back in the past, the AGVs or automated guided vehicles require drive by wire, putting tape on the floor, they have fixed paths. With the integration with our IT team, these things know what point A and point B is and they will figure out whatever path they can take through the location because it's all GPS-managed to get to the point of use, and then we track the time and make sure that we don't have any inefficiencies through the process. We have 50 of these applications going right now.

And then over the next 3.5 years, we want to get to 200. This is always a continuous process. This is where we'll be over the next 3.5 years, but our intent is to replace almost 80%. Because the technology to deal with, as you can see in the lower left picture here, heavier equipment, packaging and that has to be developed to make sure that we can continue to enhance that. And we're working very closely with our purchasing team and our suppliers to make sure that the packaging is developed so that we can move all this material through our facilities.

Here we go. So with all of that, right, and now we're thinking about what is it we should make and what should we buy. The key about the make for us is do we have process capabilities that differentiates us and gives us competitive advantage in the marketplace. We keep that in-house and we will continue. Gears is a perfect example. Other items that we produce and I'll give you an example of that are basically really a commodity that don't give us any special differentiation or, I guess, advantage inside of the marketplace. And I'm going to share some of those examples.

But as you can see down below, an entire cross-functional team worked across these 6 different pillars to identify every single product that we produce, every single component, what do we make, what do we buy. And then you can see some of the key considerations, right? Do we have the capacity? Is it point of use for the customer? Are there any logistics issues, right? Challenges with tariffs, right? And all of those things have to be incorporated in that decision before we actually go and make the decision or trigger to go either make the product in-house or are we going to go buy it, okay.

So a perfect example of a make that we have shifted towards, so castings. In North America, this has become a very distressed marketplace to produce these type of components. So as an organization, we did the full business case. We looked at tariffs, we looked at performance of our suppliers from a quality and delivery perspective, and now we've decided to in-source this. So we have a facility already down in Mexico, and we are going to reconfigure and then put in this extra line so that we can bring that capacity, that quality control and efficiency back inside of our 4 walls. And as you can see, it's a large capital investment and it will take several years to put in place, but you can see what the annual savings is, and that's built in run rate going forward. And that's really how we're thinking about how we invest in our business is how does it impact our run rate and how does it get accretive margin here for the shareholder value. And that's what we're always pursuing and chasing.

Here's an example of a buy. So currently, these what we would call end yoke or sleeve yokes. We've been producing these for a long time inside of our organization. We have very legacy assets that we produce these products on that drive some different challenges. So as we looked at this particular product, we made the decision that we are in fact going to outsource this. We already have started the process that's 90% complete, where you can see, one, it generates a better savings versus where we were producing the product. Two, it reduces our capital investment. So now we can use that money to go invest in, again, automation in some areas of the business. And as you can see, it's taken us about 1.5 years.

And as Byron mentioned, one of the key strategies that we are obviously working very closely with the commercial teams is de-proliferating our product. Because like all things, the more products and more part numbers that you're dealing with, the more changes you have to do, which drives inefficiency in the process. So we are working, again, as part of the whole 2030 strategy, it's all intertwined to make sure that we're driving the best value for the organization, and again, improving our margins, which also leads to, again, great shareholder value.

Okay. Last thing I want to touch on is our manufacturing footprint. So as you can see, this is what we look like from a Light Vehicle and Commercial Vehicle. You can see where we're pretty centric up in North America. We have a decent footprint in Mexico. And then, obviously, we're in Europe, and we're scattered there in India and China then. Over the next several years, we have already targeted 7 sites that we will be consolidating and/or idling, which will free up about another 1 million square feet for us while we will continue the growth. So all of this is in conjunction. So while we're improving our footprint while we're going through this growth over the next 3.5 years, we can still manage and contain that all within the footprint that we'll be as we move forward in the future. And you see the $25 million annual savings by 2030. Site consolidations and closures have a longer lead time. So as we go through that process, we'll see more of the return as we go past 2030. It's just -- again, closures can take several years to go through that whole process.

Okay. So in wrapping up, we have over 300 projects identified. We've already completed 50 projects that are already active and built in. We continue to learn and integrate artificial intelligence, utilizing inside of the cobots, the robots, the AMRs. And our make/buy decision-making is always a continuous process, no different than our automation strategy. And then obviously, the footprint optimization always comes with how we're evaluating new business and where are we going from a perspective of optimizing our capacity and being where our customers need to be. And it's all tied to the growth strategies that you guys heard about this morning.

So in closing, we're a manufacturing company. We design, manufacture and assemble product. We got to deliver great quality. We have to deliver it on time all the time. And one of the key values that we really push for, right, is play to win every hour, every shift, every day, and we've driven that down to the shop floor. And it's always about driving accretive margin, which, again, we've got $175 million that will be accretive to the business by 2030.

And with that, I pass it on to Mr. Tim.

How are you guys doing today? Everybody enjoying the time up here? So I'm going to wrap it up from a financial perspective. So over the last 1.5 hours, 2 hours, we've talked about our traditional growth avenues, Applied Technologies, aftermarket, all key pillars of our growth. And then we just heard from Chris about how much opportunity exists within the business from a pure margin improvement in terms of how we're thinking about our manufacturing.

So what I want to do is kind of lay out how we're thinking about this from a financial perspective. And as we went through the process of Dana 2030, we were laser-focused on the targets that we had set. And as Bruce mentioned in his opening comments, we thought -- what we thought were pretty lofty goals and targets for the teams, and they blew us away in terms of what they came back with.

So we know this is only the beginning. And as we continue to work the teams and find new areas, we're only going to be able to deliver better and better returns for the shareholder. But that was the real focus here, right? How do we continue to drive the business to become more efficient, more effective, higher returning so that we have the capital to invest in our people, our communities, our plants and deliver those returns to the shareholder.

So with that, quick snapshot. Most of you know this. $7.5 billion this year, 11 -- 10% to 11% EBITDA -- adjusted EBITDA margins and free cash flow of $250 million to $350 million. If you think about where we were last year, we had $311 million of adjusted free cash flow. That included the cash flow generated by Off-Highway. So when you think through the work that's been done just at the base of the business, we're going to generate just about the same amount of free cash flow on a business that's 20%, 25% less in terms of the top line and was our most profitable business unit.

Aftermarket, we're starting from a base of about $850 million, as Brian described, and we'll continue to be able to drive that. I think key thing here, we continue to think about our leverage. Our leverage will be about 1x on a net basis as we come through the year. We're laser-focused on maintaining our leverage at that manageable level as we kind of go through the cycle, talk a little bit about that more. Bruce mentioned this $300 million -- we're targeting $300 million of stock buybacks. We have already completed about $120 million of that, and we continue to go forward. And then dividends, we'll continue to maintain that dividend at $50 million.

So talking about this, this is the element wheel. So overall, what you heard today was about $2.5 billion of top line growth between 2025 and 2030. And if you think about how that breaks down, our traditional growth products, products, the things that we have made Dana great for over 120 years. That represents just under $2 billion of that $2.5 billion worth of growth. So we're not talking about -- I think Seth made the comment. We're not trying to put people on the moon here. We're not going into products that are far from where we're at in order to drive this growth. Almost $2 billion of it is in those core products.

Aftermarket, so we talked about it, it's about an $850 million business growing to just over $1 billion. Again, we're talking about a 30% growth rate over a business largely in North America that we haven't really participated in on the ceiling side for the last 15 years. And then Applied Technologies, where $6 billion or $7 billion of market available growth for us, and we're targeting in our plan, $400 million. Very achievable. And I think what we're going to find is a lot more opportunities as we move through the next few years on these programs.

So as I just described, if you think about our $750 million or $7.5 billion in 2020-2025 sales, our backlog that we came out with over the next 3 years is $750 million. And that's secured. And if you just took the same programs and you take it out to 2030, there's another $100 million that's already secured within the backlog. Incrementally, about $300 million, again, traditional products that we sell today, programs that we have high, high confidence in and being able to deliver adds another $300 million.

So we talked a little bit earlier on where the CV market is, right? We're at a trough last year. We had about $350 million of sales over the 5 years just from a recovery in the CV market. And this is not growing market share. This is really just the number of volumes of vehicles that are being produced by our customers in the markets in which we serve adds $350 million.

So then we got traditional products. So this is another $400 million. $200 million is market share gains that Brian spoke about with our CV customers, right? So this is field service. All those programs that we talk -- that he talked about in order to go and grow the share that we have in the CV market, largely in North America. The balance of that is $200 million of additional growth in our traditional markets, right? So not a huge number.

Then we got $200 million in the aftermarket and the Applied Technologies. So that's the road map we're following to grow from the $7.5 billion we are today to $10 billion in 2030, which basically puts the company back to the top line that we had prior to the sale of Off-Highway. That's a 6% CAGR.

So before I get into the bridge on earnings, I did want to take a moment to talk about the last element in the Dana 2030 strategy, which really is structural cost reduction. So as all of you are fully aware, we spent the last 15 months really working on the cost structure of the business, taking $325 million of cost out of the business. This is on top of that $325 million. And as Bruce mentioned, these are really elements of structural costs within the business that take a little bit longer to get out. We really focused on elements in our cost structure last year that we could take out quickly and at minimal cost. These are longer term.

So these are really base items that we need to work on in order to increase the efficiency inside of our system.

So think about our ERPs, how we order to cash, payroll system, we have disparate payroll systems. All of these systems need that foundation built in order to deliver those. But you think about it's back-end systems moving to low-cost countries for the types of repetitive data processing that we have, automating those processes, using AI in a productive way in order to take some of the repetitive data analytic type tasks out of the system. And some, we'll be just doing things that we do today, we're not going to do tomorrow. And that's $50 million over the next 5 years. So again, very, very, I think, a reasonable expectation given what we've been able to do over the last year with the $325 million.

So with that, if we move on. So it's not on the page, but I thought one thing to think about. If you look at the company that we have today that we're running, that company did about $7.7 billion in revenue in 2024 and had $395 million of adjusted EBITDA, 5% margins. Last year, on a like basis, we did $610 million. So a large improvement driven largely by increased efficiency and cost savings. And this year, we're targeting our $800 million. To walk the $800 million to our 14% to 15% margins, think about how this rolls out.

We're talking about adding in our traditional products, $1.9 billion worth of incremental revenue. That's if you think about the first 2 columns, right? So that $350 million basically comes through at about an 18% margin. So we're -- our plan assumes that we're going to be able to use our normalized margins to generate the incremental growth on profitability and largely use those systems to offset the inherent inflation that's in the business.

So we're not saying that every dollar that we're going to bring through over the next 5 years is going to come through at a high contribution margin rate. We're looking at a very reasonable 18%, 19% rate coming through. And some of that's due to the mix of the businesses, but also because we're really thinking about how we have to invest in some of these programs. So think about the field service program that comes with an OpEx investment that we're more than willing to make and still be able to generate good returns around the business.

Our aftermarket, so $200 million of aftermarket sales comes through at about 32.5%, generating $65 million. We would expect that coming out of our aftermarket business. That's a high profit margin business for us. And one of the reasons why it's a key part of our growth strategy.

Moving on, Applied Technologies. Again, these are -- while these are adjacent technology, we know we will have to add some incremental costs into the business to deliver those sales. Those sales, $400 million at 15%. So again, just our targeted margins. So we think there's certainly additional opportunity as we grow beyond 2030 in those Applied Technologies. And that's where we think we'll see that higher contribution margin dollars flowing through. But to get us to where we're going to be in 2030, just an easy 15% from our perspective in terms of being able to generate the profitability.

And then the balance, Chris just took you through $175 million of improvement -- pure margin improvement related to the manufacturing excellence. I mean, you really think about it, right? We're talking about the automation in our plants generating $100 million of additional adjusted EBITDA over this 5-year period. These are largely in plants where we make ICE products that we understand the volumes. We know how the plant operates. We have a very clear understanding of the demand cycles for those programs. And our ability to deliver that $100 million is at a very, very high confidence because we know the throughput is going to be in plants when we put the automation in. And then lastly, the structural costs that I just spoke of, an incremental $50 million.

So largely, our normal cost improvement actions are offsetting inflation over the plan period. Our new business is coming in at a moderately higher 18% or 19%. And then the rest is really self-help on the cost improvements and reasonable returns in terms of margin coming in through aftermarket and the Applied Technologies. So again, 6% of the growth on the top line, delivering a 17% compounded annual growth rate on our adjusted EBITDA line.

So what does that really mean? I think we've been very focused on cash flow over the last 15 months. We will continue to be very, very focused on cash flow. And while our cash flow doesn't rise quickly as either our sales or adjusted EBITDA, that's largely because over the same time period, we're investing a considerable amount of that cash, both in working capital around our aftermarket group as well as the CapEx to drive the manufacturing and other investments as well as some of the growth that we need. So we're willing to use those funds, the operating cash flow we generate over those next 4 years to really help support and generate the growth within the business. Still a very healthy 6% return on the top line. So we're talking about $600 million of free cash flow in 2030.

So I thought this would be interesting. So '21 to '25, where we were very, very focused on the EV growth that we had in front of us. We spent about $2 billion of our operating cash flow -- or generated about $2 billion on the operating cash flow. And we spent that largely on CapEx and a lot of that around EV and the growth prospects around that. We only spend about 16% on share repurchases. And just to be clear, that does not include the $650 million we bought back last year from the proceeds of the sale of Off-Highway. And then dividend and a little bit of M&A activity. But generally speaking, we did not return much of our free cash flow or our operating cash flow back to the shareholder over that time period. We reinvested in the business. But it was basically all of our cash flow.

Fast forward to '26 through '30. We expect our plan to generate operating cash flow of about $4 billion. So we've doubled the amount of operating cash flow generated in the business. And we plan to spend nearly half of that. So almost $2 billion on CapEx. So again, we're going to spend more on CapEx over the next 5 years than we did in the last 5 years, and we will still have over $2 billion available to invest -- to return to shareholders, to support the dividend and other aspects where we may want to invest in the business to drive the growth. But I think this really sets up the company very, very well for having a lot of flexibility and to demonstrate to our shareholders that we continue to be focused on cash flow generation and to returning the excess capital to our shareholders.

So what does this really mean? So again, we were talking before on -- a little while ago on our margins in 2024. Well, in 2024, our return on invested capital pretax and invested capital was 5%. So -- and in 2025, given the improved profitability, it was still only 12%. And where is that money going? Right? 2024, we were spending almost 8% of our sales on CapEx and R&D expense. You fast forward to 2030, we're going to spend $60 million more on CapEx and R&D. But it's now only -- it's less than 7% of sales. And while we're increasing from '26 by 23%, the effectiveness of those investments in terms of the return profile increase exponentially.

And so what you're seeing is a very, very focused team to deliver high returns on the capital that we're going to employ back into the business. So if we go back to this last slide, 45% CapEx, those CapEx investments, we are laser-focused on making sure that they deliver a return that's far in excess of our cost of capital. So 2026 is 15%, that's respectable. The target for 2030, based on the plan that we put in front of you, is we will be returning about 30% return on invested capital on a pretax basis. This, combined with the efficiency, the capital return policy, we believe is a recipe to drive the share price and the shareholder returns for the company.

So speaking to shareholder returns. Some of this was already covered, but I did want to re-hit. So we have a $2 billion authorization currently. And last year, we bought back $650 million, about 34 million shares. We're continuing to buy back. We'll do another $300 million this year. Last year, we returned over $700 million to our shareholders in the form of dividends and share repurchases. This is [ $115 million ], but it was [ $120 million ] as of last night. So we're in the market buying about $1 million worth of stock a day right now.

We expect those share repurchases to be at the high end of the range for the year and our current shares outstanding, about 109 million shares. And as you know, we increased the dividend by 20% earlier this year, really in line with -- as we continue to take down our share count, we'll continue to maintain about a $50 million dividend, and that will result in the per share amount of the quarterly dividend continuing to rise over the period.

So the 5 elements of our Dana 2030 strategy, right. Above-market rate growth, right, will be supported by the new business wins. So 6% CAGR on the top line, a 17% compounded annual growth on adjusted EBITDA and 11% for our free cash flow generation. So our free cash flow should rise from about $300 million today to $600 million in 2030. And this is really a fundamental improvement in operations, really those cost-outs and the types of business we're chasing to really drive top quartile margins in our business. We know that we have the products, the technologies and the leadership to deliver on what we believe is the ability to give top quartile returns to our shareholders.

Accelerated free cash flow generation. Again, we spent the last 5 years really thinking about the EV growth and spending money on that -- on chasing that growth. We are really focused on free cash flow generation and deploying that free cash flow generation in the most effective way possible. And again, the #1 focus for the team is to continue and to be relentless in increasing the shareholder value that we deliver.

So in summary, our targets. $10 billion in revenue by 2030, 14% to 15% adjusted EBITDA margins and 6% free cash flow. That, from our perspective, is a recipe to continue to drive the share price higher and higher. And with that, I think we're doing...

So while the guys are getting ready, we do -- because we're webcasting, we will have microphones here. I've got a question right here, [ Aaron ]. And then, we'll get to you next.

Tom Narayan, RBC. So a big part of the presentation had to do with growth. You have aftermarket, there's a piece of it, then you had adjacent markets. And I understand that historically, you haven't pursued that. Now there's an opportunity to do so. But presumably, some of those markets are already captured by legacy suppliers. So maybe in the aftermarket piece, I know it's sealants. And maybe you could talk about those big box retailers, who's already there, why you think you can capture that? And then on the adjacent markets, I know some of that's organic, but presumably, some of that is also -- you already have legacy players that are already there.

Yes. So let's let Brian take the aftermarket piece first.

Thank you, Bruce. For the aftermarket, what I can tell you, specifically, I think we highlighted our -- we see our biggest growth opportunity in North America, right? And that is truly in bringing the Victor Reinz brand to the North American market and expanding that product portfolio. Today, that space has got -- has got a very large piece of that market share is tied up with one specific competitor. That competitor is going through a number of changes, a number of disruptions into their business, leadership changes, so forth. And they have been falling down in performance, and the customers are opening up the opportunities. Customers need to diversify. They need to balance those buys. And what we are presenting today is not that we are going to go in and take over that entire market share, but it's truly buy, a balanced by a balanced market share between us and the competitive landscape across those big box retailers.

Yes. Maybe just another one on that one, Brian, is are very successful in this space in Europe because we are in the aftermarket selling an OE product. And we're competing here in North America with players that are making inferior quality products versus the OE specification. So when you think about a gasket like this when you're doing an engine rebuild, the cost is miniscule compared to the overall job. And people want the OE product. And so we just have not been in this space in North America. Seth, why don't you take...

I'd love to cover some of the Applied Technologies. I think the first 2 growth areas that we're looking at are with the refrigerant heat exchangers and the high performance kind of computing thermal management, those are all market growth. So it's the -- now is the time to get in on those because they're growing. They really aren't established players.

In the areas of, say, the material handling, powersports, defense, there's established players that we are taking share, I think as you described it. Talk through some of those. The kind of there's an interesting time right now for all of those on why it makes sense that we're going to take share.

Just look at material handling. There's 2 kind of main players that have a lot of that share today. They're both going through significant disruption for different reasons, themselves as companies. But also kind of industry-wide, there's a technology change. This drive for higher functional safety means it kind of levels the playing field for everybody to go after these. We were the first to develop the technologies that will address that demand because we've already done so in the light vehicle space. So in that case, using some of that capability lets us go in there and participate.

I think in the powersports segment, it's kind of a similar thing. A lot of the suppliers that are there today, they're really more industrial style. We're introducing automotive-grade components. And that's how we're going to take share. We're going to take share by delivering better quality, better power density, better efficiency than what they have. They're suitable suppliers today, but for the products that are going to be in the future, we don't think they're going to be.

And then in the defense space, again, it's kind of a similar story. The time is now where the technology is changing, where the OEMs want commercial off-the-shelf parts. And that drives demand really from the things that we make in our plants today, not these specialized bespoke portfolio of product that the competitors are offering today. Like they want to get out of those because they're hard to get parts. They're very expensive. They're built on old technology. They want the new technology that's going in cars and trucks.

Yes. I mean when Seth put up a slide kind of showing how we funneled their 300 projects down to the ones that we've taken. And clearly, a part of that screening process is, hey, how can Dana -- how can we be successful? Like if we got a technology, is there a competitive issue? Is it a new geography? And we've -- the ones that didn't sort of pass the muster on the cutting room floor.

If I could do a quick follow-up. A lot of the assumptions you have in the plan assumes kind of a status quo, auto world to some extent. One of the things we hear a lot about is Chinese OEMs, the Chinese automakers penetrating new markets. If they do penetrate the U.S. in some fashion, whether it be a JV or I don't know, acquiring brands, et cetera, one of the fears we heard is -- we hear about is they're very vertically integrated. This OEM in-sourcing topic kind of comes up. To what extent is this something you're actually concerned about at all? Is this some black swan thing we shouldn't be worried about? How do you think about that?

I can take that one real quick. I think there's a couple of things. One, I think this isn't too terribly different than sort of the early '80s when the Japanese OEMs came in. But I think the real differentiator for us is most of the Chinese entrants are going to be EV and they're going to be pass car. Largely, our market in North America are large trucks and SUVs for which the Chinese don't have an established product base to go from. So when you look at our product portfolio, it's relatively well insulated from the types of products that could be coming in from the Chinese.

So -- and I think if you think about also -- even on EV, we're not playing in the pass car space even today, largely from an EV perspective. So I think it's a valid concern to keep out there and one that we obviously think about it as a management team. We also think we're really well positioned from a product technology and customer perspective to be able to address that.

And look, there's probably some opportunities for us. BYD is a customer in China. We do have -- Chery is a customer in China. So we do have relationships with these OEMs. And so we do think that leads to some opportunities. I mean, a lot of it is light vehicle. So Byron, I don't know?

Yes, no. I think you hit it on the head. And as others have entered the North American market over time, I mean we're a key supplier to the Toyotas, the Nissans, the Hyundai, Kias. So should that need arise, we'll be there because, again, we bring a product and a set of capabilities to serve the segments that Tim talked about that even for new entrants, I think they would look to Dana to help if they wanted to enter those segments.

And kind of on the flip side, if you look at the -- our Light Vehicle Driveline products, like China is not a big market for us because they don't have those vehicles in the market. And so we have very little sales in Driveline. And we don't really -- none of our growth strategy is like try and sell our axles into China. That is -- we're a small player, and we will always be a small player unless the market changes to our product mix.

Winnie Dong from Deutsche Bank. My first question is on the kind of, I guess, market conditions you're sort of embedding into that 5-year growth period. And obviously, this year, we're seeing a lot of volatility, et cetera. And then tying to that, in terms of the cadence of that growth, do you expect that to be more back-end loaded in that 5-year period? Or is it more of a steady type of growth that we should be looking at?

Yes. I think from a -- in terms of our market expectations, so we would expect -- so think about North American light truck production to remain pretty consistent in our growth or our numbers are generally tied to what S&P is saying around our large platforms. Remember, we're not looking at the whole SAAR. We're looking at a couple of very key programs. And so even if you look at the North American light truck platform, it's still -- it doesn't tell the whole story.

So -- but our general view is that the market remains relatively consistent. You've got some model changeovers and things that change volume from year to year. But generally speaking, we do see obviously the recovery of the North American commercial vehicle market off of the lows to a more normalized position over that time period. That's $350 million of that growth.

For the Applied Technologies, aftermarket, it's a ramp in. Next year, sales are, in our plan, only less than $100 million of that. But as you go through, it starts to ramp more obviously on some of the Applied Technologies. The earlier winners are some of the things like powersports and some of the defense where we're taking off-the-shelf products. The adjacencies on some of the technologies around cooling and high performance. Those tend to be a little later in the plan.

But I would say it's pretty balanced. But obviously, we're starting to see some of the recoveries in the CV market today. And again, even on the market share, right? We see those market share gains coming in sooner rather than later. It's not all back in.

Got you. And then my follow-up is on EV. You have a slide there that demonstrates margin profiles growing from 4% from last year to your target at 10% in 2030. Just wanted to understand sort of the drivers of that? And then if EV at some point sort of comes back, let's just say, right, would you need to go back to another period of investment? Or is that largely done and behind us? And how would this maybe another wave of investment being different from the last one?

I mean, I think to take your first question in terms of -- it's largely contribution margin coming through with the added sales, along with some additional investment. As some of the programs get longer in the tooth, we need to invest a little bit more. But generally speaking, it's a moderate amount of contribution coming in. Some of our products do carry our lower volume and carry fairly strong contribution margins. We do see some of that pricing dissipating as we come over. So there's a bit of a headwind in the EV side relative to some of the larger high-voltage products that we sell today.

To answer your question on, hey, if the market were to come back, we've already developed the technologies and the capabilities to be able to serve both the CV and the LV market. So we wouldn't have to go through another large engineering investment cycle in order to get back there. In terms of the -- like in terms of capacity, on the assembly side, we would be able to make most of these products in the plants that we have within the footprint that we have today. Yes, we'd have tooling and some incremental investment on machine and equipment, but that would largely be incremental into the plan.

Our general view, though, is if a customer is coming to us today and telling us they're going to have a program where we're telling, look, you have to pay the CapEx upfront. So we're not going to go down the road again of build it and they will come. So I would tell you, we're going to be very, very disciplined around how we think about those programs and what we're willing to accept in terms of the risk. And quite frankly, if that's not something the OEM is really interested in, then we'll pass on the program there.

Colin Langan, Wells Fargo. Just first question is just a clarification. So if I go to Slide 73, you have additional backlog of $400 million. But on Slide 44, you have $175 million of EV wins. I assume those are already booked and then $200 million of -- on Slide 48 of the 2029 heavy-duty Rev pickup win. Wouldn't that all be then almost $400 million, wouldn't that all be secured, or are they in different buckets?

So the $750 million is what we laid out. That includes EV backlog. So there's $400 million of EV backlog sitting in the 2028 backlog. The $100 million of secured, if you look at the EV, there's $175 million of additional EV backlog. There are losses on the ICE side that are sitting inside of that net $100 million, which are not reflected in there because no new programs have come on. The $200 million that we're talking about, that's in -- of the truck, that's in -- already in that $850 million of secured backlog.

So $800 million or the $850 million...

$850 million is $750 million plus the $100 million of secured.

But it said 2029 launch on the slides.

Yes, the additional backlog goes through 2030.

Okay.

The first bucket is a 3-year look, the extra $100 million extended to 5, right?

The $750 million is what we showed last month when we released earnings.

Okay. I got the $750 million, I didn't look at the these lapping over and shrinking, but okay.

The way to think about it is like there's an additional $300 million of high confidence programs that we will be able to talk about here over the next 3, 6 months. Inside the $400 million, in the middle column there, there's $200 million sitting in there that is the market share growth on CV and then an additional $200 million of programs that we are identifying that are a little bit longer term to kind of to go after.

Which $400 million...

That's the $400 million in the middle.

The traditional.

Traditional product, sorry.

It's actually going to be I think -- kind of going to the first question of today. This is -- I mean, historically, especially on the heavy truck side, the business is like super sticky, particularly in North America. What gives you confidence that you could actually dislodge $400 million from what is like pretty rare? I can't even remember the last time that business actually switched among a major customer.

Well, we do -- I agree with your point, right? It tends to be pretty sticky. And I think we do see -- there's a number of competitors that have combined, we think, giving us some opportunities for customers to spread out their buy around some of those products. Also, don't forget, we have -- it's not only a driveline business that we own. We own sealing and thermal products that are included in our traditional products as well. I don't know, Byron, if you want to add anything to that?

Yes. No. I mean, there -- our customers are looking for alternatives and Dana solutions around several key programs that's in that bucket there, Colin. And they're also -- as they revisit their product portfolio, they're introducing new vehicles that they're going to add to their fleet, and that's creating opportunities for us to go gain as well. So some of it is new platform jump ball opportunities and others, to Tim's point, they're looking at their supplier strategy and where they have Dana position relative to others and looking at opportunities to have us play a larger role.

And Colin, if I can address your market share one on the commercial vehicle, you mentioned that being very sticky, right? But what you're really seeing out there right now is you've got a couple of the commercial vehicle manufacturers that have been heavily weighted towards one or the other of the driveline suppliers. And as the markets have been recovering or you've gone through other cycles, they found themselves very constrained on being able to produce trucks and be able to capture market share. So they themselves are balancing their buys. And we have -- with 2 of those customers, we have been working very, very closely to really rebuild those relationships and build that collaboration with them. And we have gotten preferred data book position with one of those manufacturers that puts us in a much better space to be able to go and grab that market share as this market recovers.

Dan Levy, Barclays. I wanted to just start, first of all, I know a lot of attention on the slide that's behind you here. And Tim, I think you sort of summarized it at the end that of the $2.5 billion of growth, roughly $2 billion of that is in the core products. But I just want to understand, I think we just went through the Off-Highway transaction last year, and I think the goal was to vastly simplify the exposure as to be maybe more North America focused. When you're looking at all of these growth opportunities that are out there, and I know that you said part of this is market growth or bidding, how much does this expand again some of the product areas? Or is this still focusing very much on the core product set. And so you're not necessarily going outside of your swim lane on products, customers, markets, et cetera. And so it's still a simplified...

Seth, I was just going to say you shouldn't.

Very much. So when we went through the filtering of these ideas, that was exactly what we didn't want to do. We didn't want to move into putting the man on the moon. We wanted to have things that we're going to continue to make the products. We can even reuse assets, we can reuse plants, we can use capabilities in order to address some of these new segments. Some of the new products, I mean, they come from existing technologies that, yes, is going to be a new product, but we can make it on the same kind of production equipment as we go forward. So that was really -- it was a very intentional part of our strategy that we're applying our technology rather than continuing to expand and proliferate because you're right. I mean, we've gotten very complex at a point, and we've seen a lot of benefits as we've reconsolidated, refocused just in light vehicle markets and commercial vehicle markets.

Yes. I'd say the purpose of this slide, this is a slide that we'll update on a periodic basis. And so as -- we have a couple of big programs that we're pretty close to securing to turn that first dual covered bar into blue. And as we start to win some applied technology business, we'll start to shade in that box, same thing on aftermarket and same thing on the other one. So this is not a slide that we're putting up and going to forget about. We will constantly remind people where this is going.

Great. And as a follow-up, Byron, earlier in your presentation, I think there was mention that there's a minimum 10% EBITDA margin, I think it was for all program and products. Maybe you can just give us a sense, within the portfolio, what percent of the revenue or directionally, how much of it is below that threshold that either needs to be repriced or that you would consider sort of rationalizing?

Yes, that's a good question. A lot of the -- our focus right now in terms of getting to those margin thresholds are -- is in our sealing and thermal business, which is about an $800 million business. And that business, on the OE side, is somewhere between breakeven and 5%. So that -- fixing that chunk of the revenue is maybe one way you could think about it. So somewhere between $800 million and $1 billion of business that we've got to get to those hurdles from relatively low margins today. Is that helpful?

Yes.

Okay.

James Picariello from BNP Paribas. I think it's Slide 77 where you talk about $4 billion in operating cash flow, and then you have the pie chart allocation. 48% is earmarked for share buybacks, which would imply about $1.9 billion versus the company's explicit commitment of $1.35 billion. So I just want to understand, is there -- depending on the success of this 2030 plan, is that to flex higher and toward that [ 1 point ]?

Yes. I mean we can put the slide up if someone's around. I mean I think the answer is, we'll have -- we believe we'll have excess capital that we'll be able to reinvest in the business or return to shareholders depending upon kind of where we're at. And if you think about it, we're talking about doing $300 million in capital returns this year. So we do think we're on pace to be able to finish that up sooner than 2030. But yes, I think we'll have an opportunity. And I think as we continue to -- the team continues to execute the plan and we stay ahead of the chains, we'll have that opportunity to make that decision in the future as to what we're going to do with those -- the excess...

I think if we -- if you look at -- I'm kind of trying to do the math. If we buy -- if we do the $2 billion and we pay out the $50 million a year of dividend and we follow this pie chart, we would also have no net debt, which is not going to be our strategy, but that's kind of the flex you could think about. If we said to 1 be 1 point 1x, then [indiscernible] $1.4 billion, $1.5 billion of EBITDA, that's kind of the missing gap.

Yes. I mean we don't have any assumed reduction in net debt in here, like that would be another opportunity you could get that down if wanted, but...

And then just rehitting on the electrification component of this growth strategy, right, doubling sales essentially over the next 5 years on electrification. Can you just share what's the approximate split between commercial versus light vehicle...

It's mostly light vehicles. There's some -- I mean, it's $200 million, but it's generally light vehicle focused. It's probably 2/3 light vehicle, maybe...

2/3 of the $575 million?

Maybe give or take, but yes, something like that.

Okay. And today, the $565 million in EV sales, that's predominantly commercial vehicle now?

Yes. Well, it's a mix because it's on -- you got motors inverters that are largely commercial vehicle, but we have obviously the thermal products business, which is substantial, so which would be in the light vehicle space. So it's a little more balanced today.

Yes. Maybe just on how do we get to the 10%, I would just remind folks that the current business has been priced on volumes that have not materialized. And you look at our backlog, we have volume essentially guarantees, I'll say, in terms of the price will flex with volumes and that protection we have not had in the past.

Anyone else?

Any further questions?

Okay. All right. Well, thanks, guys. I'll just -- a couple of slides and wrapping up. So we kind of went through a lot today fairly quickly and just a couple of slides to sort of closing things out. But if you sort of contrast prior Dana to what we're saying today, we were a very diverse company prior to the sale of our Off-Highway business. We're much more focused now on the core light vehicle commercial markets and again, largely in North America. We -- if you sort of go back in the past, we did have a lot of growth over the last 5 years, but it was not profitable growth, and it certainly didn't lead to high shareholder returns. We have a much, much leaner cost structure right now. Our margins that we've guided to this year, the 10% to 10.5% is a significant -- it's a double versus the last 2 years. So we've gone from 5% to 10.5% this year in 2 years. And so we're saying we're going to get from 10.5% to 14% to 15% over the plan period.

Sounds aspirational, I would say. But again, if you look at our margins versus our competition, we still lag where our competition is today, and we've got a higher aftermarket business -- a higher percentage of our business in aftermarket and a higher percent of our business is in commercial vehicle. And so our fair share in terms of what our margins ought to be is at least in the range that we're talking about today. So we're not -- and I don't view these as a moonshot. I think, in our presentation, we really strive to show we have very concrete road maps to get to where we want to get to. So it's not much pie in the sky. Every strategy doesn't have to deliver 100% to get there. Our internal targets are well in excess of the numbers that we're sharing here today.

We want to continue -- Byron touched on be accountable. I think, as an organization, we've done a nice job putting in aggressive targets out there, that there's a healthy level of skepticism, let's just say, 1.5 years ago. And if you look at the guidance that we gave here for 2026, people are sort of on top of it. And so we're putting out numbers that we know we can deliver, that growth that it's not back-end loaded. So our -- when we come up and talk about our 2027 guidance, it's going to be a path towards the 2030 objectives that we laid out here.

Shareholder value is a major, major focus for the organization. And because we believe so strongly in what we can do, that's why we are spending so much money on buybacks. And I think it's important that we continue to deliver strong free cash flow, keep a best-in-sector balance sheet, which we believe will be rewarded through higher multiple on our stock. If you sort of look at the multiples within our space, there's very high correlation to free cash flow generation and multiple. And we have moved, I'll say, from the basement up to the main floor, and now we're going to move from a nice neighborhood to a much better neighborhood if we can deliver a plan.

In terms of just closing out, I think we're very well positioned to grow profitably. I -- one of the things I like about our strategy is it's not reliant on 1 or 2 things. We have a quiver of growth arrows that we're firing at the bull's eye here. Some of them probably aren't going to work out, but there's lots of other ones that I think can overdeliver the numbers that we have here. Some of [indiscernible] adjacent market opportunities. We have RFQs in hand for more than the $400 million just in terms of powersports. So we're pretty excited about that we have enough growth opportunities to overcome setbacks as they may arise.

In terms of the margin expansion map, I touched on a 60 to 80 -- or sorry, 60 to 100 basis points a year of margin expansion. So you'll see that in '27 and beyond. Free cash flow is going to stay in the sort of 4%-ish here this year and next as we ramp up the investment in the margin-enhancing automation opportunities that Chris talked about. And then when we get to 2030, if you sort of factor in, and this assumes we buy back the $2 billion, we get our share count up in that number into the upper 80s, normalize our tax at a 30% rate, we see our EPS in 2030 as being about $8 a share, give or take.

And then lastly, we're going to continue to reinvest in our business. So as Chris identifies more opportunities to us to automate, that will certainly be a use of that surplus capital. We're not going to let our leverage go down to 0. So buyback -- up in the buyback is definitely a possibility as we get into the -- couple of years into this. And then as I talked about before, we will grow our dividend in line with the reduction in our share count.

So with that, I thank everybody for your attendance and interest in Dana. Have a good rest of your day.

Good morning, and welcome to Dana Incorporated's Fourth Quarter and Full Year 2025 Financial Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and Q&A session will be recorded for replay purposes. For those participants who would like to access the call from the webcast, please reference the URL on our website and sign in as a guest.

There will be a question-and-answer period after the speakers' remarks, and we will take questions from the telephone only. [Operator Instructions]. At this time, I'd like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.

Thank you, Regina. Good morning, and welcome, everyone. Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from what we discuss today. For more details about the factors that may affect future results, please refer to our safe harbor statement found in our public filings and in our reports with the SEC.

I encourage you to visit our investor website, where you'll find this morning's press release and presentation. As stated, today's call is being recorded and the supporting materials are the property of Dana Incorporated. They may not be recorded, copied or rebroadcast without our written consent. With us this morning is Bruce McDonald, Dana's Chairman and Chief Executive Officer; Byron Foster, Senior Vice President and President of Light Vehicle Systems Group; and Timothy Kraus, Senior Vice President and Chief Financial Officer.

Bruce, I'll now turn the call over to you.

Thanks, Craig. Good morning, everyone, and thanks for joining us on our Q4 earnings call. With us today, in addition to the usual cast of characters, we have Byron Foster, our incoming CEO with us. I've known Byron and worked with him for many years. He and the rest of the management team here at Dana have been instrumental in our cost reduction activities and our transformation plans as well as the development of our Dana 2030 strategy. And so I think the Board and myself have the utmost confidence in the team under Byron's leadership and I'm very confident in the team's ability to deliver on the financial objectives that we're going to share with you today.

Turning to the business overview. Our final results for the fourth quarter came in higher than our preliminary estimates. So you can see here for the fourth quarter, our margins at 11.% were $10 million -- 40 basis points higher, $10 million higher than the announced -- preannouncement numbers. In terms of full year cash flow, we came in at $331 million, which is $16 million higher. And I'd point out that, that cash flow is the highest the company has delivered since 2013. We completed the sale of the Off-Highway business on January 1 and used the most of the proceeds to repay down debt and Tim will take you through what our new debt profile looks like later on in the pack.

In terms of cost reduction, a great job by the team. We had originally committed to a $200 million run rate. We upped that to $300 million, and we delivered $248 million in the year and a run rate of $325 million going into 2026. We've talked before about our stranded costs post the sale of off-highway being about $40 million. We're very confident in our guidance. We're assuming that we're going to be able to substantially eliminate those in next year.

In terms of new business, we shared our backlog a couple of weeks ago at $750 million. So despite, I'd say, the turmoil in the EV side of our business, the teams secured a higher backlog than we had last year, of which $200 million is going to flow through in 2026.

And then I think if you look at our capital return, we returned just under -- just over $700 million for our shareholders last year, and we've grown our dividend. So I think where Dana sits exiting 2025, I think we're extremely well positioned. We have strong momentum, and I think we've got a strong plan going forward here.

Just a little bit more on the capital return plan, which we upped to $2 billion of share repurchase through 2030. And that really reflects our confidence in the delivery of the longer-term financial targets that we're going to share on the call later today.

For 2025, we bought back just a shade over 34 million share, winning at an average cost of $18.96 and paid $54 million in dividends. In the first quarter here, we've already bought back $100 million worth of share at a little bit over $27 a share. In the balance of the year, we forecast buying back another couple of hundred million, which at current price is $5 million, $6 million, something like that.

Lastly, on the dividend, we upped our dividend by 20% to $0.12 a quarter. And the way we're sort of thinking about this is we're going to grow our dividend as our share count declined. So we've got a lot of confidence in the value that we're creating. I think if you look at the company right now, we -- while we're able to accelerate growth investments and margin enhancement investments in our business, we're also deleveraging, growing our dividend and comfortably buying back a significant amount of stock every year.

So with that, Byron, I'll turn it over to you.

Okay. Thanks, Bruce, and good morning, everybody. So just to cover on Page 6, a little bit on the market outlook as we look at the 2026 plan. So on the light truck side, we continue to see the light truck market holding steady, and our plan is built around really kind of flat volume year-over-year from 2025 levels. And I would say we're seeing a consistent operating environment and volume from our customers, which is allowing us to run at a good steady clip.

On the commercial vehicle side, as well, we've built the plan around flat volumes to 2025 levels. However, I would say there is some optimism that towards the back half of the year, perhaps we'll see some improved volumes on the commercial vehicle side. And as Bruce mentioned, you can see on the right-hand side of this page, our 3-year net backlog of $750 million, of which is built into our 2026 plan, and you can see kind of how that matures through 2028.

If we go to Page 7, I thought it might be interesting to give you a bit of a view of how our new business pursuit activities have kind of evolve here over the last 7 or 8 years. You can see a really dramatic increase in business pursuit activity kind of in the early 2000s, really dominated by increasing EV activity.

And then you can see here more recently how that trend has really pivoted and reversed itself from kind of 80% EV level activity to now really heavy mix towards our more traditional or ICE powertrain types of vehicles. And we really expect that trend to continue as our customers are revisiting their product plans to adjust to consumer demand for more traditional ICE-type vehicles as well as hybrid and some old beds will still exist, but obviously, at a at lower rate than kind of what we saw a few years back. So we're encouraged by that. And as we talked about growth going forward, we expect that that's really going to play into our ability to capitalize on that opportunity.

So with that, I'll hand it over to Tim, and he'll take us through the numbers.

Thanks, Byron, and good morning to everyone. Please turn with me now to Slide 9 for a review of our fourth quarter and full year results for 2025. All results discussed this morning reflect continuing operations, except for adjusted free cash flow. Starting on the left side of the fourth quarter, sales were an increase of $93 million compared with last year. Improvement was driven primarily by customer recoveries and currency translation. .

Adjusted EBITDA for the quarter was $208 million, resulting in an 11.1% margin, that's a 640 basis points improvement over the prior year's fourth quarter, reflecting better mix and continued benefit of the company-wide cost improvement actions.

EBIT from continuing operations was $61 million compared with a loss of $117 million in last year's fourth quarter. Interest expense was $49 million, an increase of about $12 million from last year due to higher average borrowing costs tied to our accelerated capital return initiatives that we did last year. Operating cash flow was $406 million for the quarter, an increase of $104 million, driven by higher earnings and disciplined working capital management.

Turning now to the full year results on the right side of the slide, Sales for 2025 were $7.5 billion, down $234 million from 2024. As we noted earlier, this reflects weakening market demand across both light vehicle and commercial vehicle seculars, partially offset by customer recoveries.

Full year adjusted EBITDA was $610 million, an improvement of $215 million from the prior year, resulting in an 8.1% margin, up 300 basis points. The year-over-year improvement was driven by accelerated cost savings higher production efficiency and improved execution across the entire Dana organization. EBIT from continuing operations was $138 million compared with a loss of $176 million last year, -- interest expense was $171 million, up $26 million from last year. Note that we closed the off-highway divestiture on January 1 and began our delevering program in 2026. So this is not yet reflected in our 2025 results.

And finally, Operating cash flow was $512 million, a $62 million increase compared with last year, supported by improved earnings and continued working capital discipline.

Overall, 2025 delivered meaningful margin expansion and stronger free cash flow generation despite a challenging demand environment, underscoring the effectiveness of our cost action programs and operational execution.

Please turn with me now to Slide 10 for the drivers of the sales and profit change for the fourth quarter of 2025. As a reminder, results are presented excluding the off-highway business, which is classified as discontinuing operations. The removal of $561 million in sales and $102 million of profit from 2024 provides a comparable baseline for our continuing operations.

Starting with sales. Our fourth quarter 2024 continuing operations for the quarter was $1.774 billion. Year-over-year volume and mix increased sales modestly by $2 million with light vehicle growth largely offset by weaker demand in certain commercial vehicle markets.

Performance action contributed an additional $17 million driven by commercial recoveries and pricing initiatives implemented earlier in the year. Tariff recoveries were $27 million and currency translation added $31 million, largely due to the benefit of the euro against the U.S. dollars. Commodities provided a further $16 million benefit for the quarter. Altogether, these items resulted in Q4 2025 sales of $1.867 billion.

Moving to adjusted EBITDA. Starting from $84 million in Q4 of 2024, representing a 4.7% margin, volume and mix contributed $33 million of incremental profit in the quarter. This was driven primarily by a richer mix in light vehicle systems. Performance added $6 million, reflecting pricing and commercial actions, mostly offset by higher conversion costs.

Cost savings contributed $74 million tariffs provided an $8 million benefit while currency added $3 million. Commodity impacts were neutral year-over-year. Bringing these together, adjusted EBITDA for our continuing operations was $208 million, representing an 11.1% margin, a significant expansion from last year. This improvement reflects strong performance execution and the structural benefits realized from our cost action programs.

Next, I will turn to Slide 11 for the drivers of sales and profit change for the full year 2025. This slide shows full year sales and profit changes for 2025 on the same basis as the previous quarterly slide. Starting with sales, our 2024 continuing operations baseline is $7.734 billion. For 2025, year-over-year volume and mix reduced sales by $464 million primarily due to lower demand across both our end markets with commercial vehicle and light vehicle largely equal contributor to the lower sales.

Performance, which includes pricing and commercial actions, add $81 million of sales. Tariff recoveries were $102 million, representing the majority of our tariffs in the year. Currency translation provided a $28 million benefit, largely driven by strengthening euro against the U.S. dollar. Commodities added an additional $19 million supported by market stability and our structured recovery mechanisms with our customers. Taken together, these drivers result in 2025 sales of $8.4 billion for our continuing -- or $7.5 billion for our continuing operations.

Moving to adjusted EBITDA, starting from $395 million in 2024 and a 5.1% margin. Volume and mix reduces profit by $112 million, consistent with the reduced sales level and some unfavorable mix early in the year. Performance actions added $90 million, reflecting both pricing and ongoing efficiency improvements across our manufacturing footprint.

Cost savings remain a meaningful contributor, adding $248 million in 2025. These benefits more than offset the margin pressure created by lower volumes and continue to demonstrate the momentum behind our cost-saving programs as we enter 2026. Tariffs represented a $14 million headwind due to timing of recoveries. Together, adjusted EBITDA for our continuing operations was $610 million, representing an 8.1% margin. a 300 basis points improvement over last year. This improvement is driven primarily by operational efficiencies and our accelerated cost action program, which more than offset both the volume declines and the modest tariff impacts for the year.

Next, I will turn to Slide 12 in the detail of our fourth quarter -- our full year cash flows. Accounting for cash flow includes both continued and discontinued operations to align with the transaction structure. For 2025, we delivered adjusted free cash flow of $331 million, which represents a $250 million improvement over 2024. This significant step-up reflects higher profitability disciplined working capital management and a meaningful reduction in capital spending.

Starting at the top of the walk, adjusted EBITDA from continuing operations drove $215 million of improvement betting from stronger operational performance and structural cost actions executed over the past 2 years. This was partially offset by lower profit of $86 million from discontinued operations.

Onetime costs largely related to restructuring and ongoing strategic initiatives were $30 million higher year-over-year. Net interest expense increased by $16 million driven primarily by higher borrowing costs associated with funding our capital return initiatives ahead of the planned deleveraging in early 2026. Taxes were a modest headwind with $3 million with no material changes to our underlying tax structure. Working capital and other items contributed $57 million of improvement, reflecting disciplined inventory management and favorable timing across payables and receivables. Finally, capital spending decreased $113 million supported by lower program launch requirements as significant investments made over the last several years begin to taper.

Please turn with me now to Slide 13 for an update on our full year guidance. As we -- as we look ahead to this year, our outlook remains unchanged from our January call and reflect continued operational execution, accretive new business and ongoing benefit of our cost reduction initiatives. Overall, we expect results to be broadly consistent with 2025 on the top line with meaningful profit expansion, driven by improved mix and sustained cost management. Starting with sales, we expect 2026 revenue to be approximately $7.5 billion, consistent with this year.

Increased backlog and the benefit of higher margin new business are expected to largely offset a modestly softer market environment and changes in product mix. Adjusted EBITDA is expected to be around $800 million an increase of roughly $200 million compared with 2025. This improvement is driven by full year run rate of our cost savings program, continued operational improvements and incremental margin from business that carries higher profitability.

At the midpoint of the range, this represents an adjusted EBITDA margin of roughly 10% to 11%, an expansion of approximately 250 basis points year-over-year. We are reinstating our diluted adjusted EPS guidance for 2026. We expect diluted adjusted EPS this year to be $2.50 a share at the midpoint of the range.

For this calculation, we are using a share count of about 109 million shares and are not including future share repurchases in this target estimate. Adjustments for EPS are similar in nature to those made for adjusted EBITDA.

Adjusted free cash flow is expected to be around $300 million, in line with our 2025 performance. Adjusted free cash flow stability reflects disciplined working capital management, improved earnings and the normalization of capital spending as major investments over the past years began to table.

Our 2026 outlook demonstrates continued profit improvement drivers by new business, operational efficiencies and the structural benefit of cost actions, all while maintaining a consistent cash flow profile positioning us well as we launch new Dana.

Please turn with me now to Slide 14 for the driver of sales and profit for our full year guidance. Beginning with sales, volume and mix is expected to reduce revenue by approximately $95 million as lower demand in traditional commercial vehicle markets as well as ongoing softness in electric vehicle -- light vehicle platforms impacts our battery and electronics cooling business.

Performance is expected to be modestly lower, reducing sales by about $30 million, reflecting a more normalized pricing environment as we lap last year's commercial actions. Tariffs are expected to improve sales by roughly $50 million, largely due to the timing of recoveries and the impact of a full year's worth of tariff environment. Foreign currency translation adds approximately $60 million, primarily driven by the strengthening euro compared to the U.S. dollar. And commodities are expected to add about $15 million in sales due to the continuing effectiveness of our recovery mechanisms with which we recover approximately 75% of our commodity price changes. Together, these drivers result in 2026 sales of approximately $7.5 billion, in line with 2025 levels.

Let's turn now to adjusted EBITDA. Starting from the $610 million we generated in 2025, representing an 8.1% margin. Volume and mix is expected to add approximately $20 million. Favorable mix within will drive higher profit on slightly lower sales. Performance is expected to increase EBITDA by roughly $100 million, largely from continued operational efficiency. Please note that we are expecting to eliminate about $40 million of postage divestiture stranded cost, which is included in the performance line of our walk.

Cost savings in addition to the stranded cost reduction will remain a meaningful contributor, adding $65 million of profit for the year. Tariffs are expected to be a $10 million tailwind due to the timing of recoveries. Commodity cost recovery is expected to represent a $15 million headwind driven by timing of recoveries and expected material cost changes.

All combined, adjusted EBITDA for 2026 is expected to be approximately $800 million at the midpoint of our range or a 10.6% margin, representing an improvement of roughly 250 basis points over 2025. This step change in profitability is driven by our ongoing performance improvements and cost savings initiatives.

Next, I will turn to Slide 15 for details of adjusted free cash flow outlook for 2026. You will note on this slide that 2025 includes profit and free cash flow from discontinued operations that will not be included in 2026. Even without the discontinued operations contribution, we expect Full year 2026 adjusted free cash flow to be about $300 million at the midpoint of the guidance range. Onetime costs will be about $30 million lower than last year due to lower expected levels of restructuring as our cost-saving programs wind down.

Net interest will be about $70 million in 2026, about $95 million lower than last year due to our aggressive debt reduction that we executed earlier this year. Taxes will be about $100 million, about $75 million lower than 2025 due to lower taxable income and jurisdictional distribution of profits for New Dana.

Working capital will be a source of about $25 million in 2026, a $40 million improvement over last year. And finally, net capital spending is expected to be about $325 million this year which is about $70 million higher than last year as we invest in efficiency improvements at our operations and support the new business backlog.

Please turn to Slide 16 for a review of our balance sheet and debt reduction actions that we executed earlier this year. As a reminder, the off-highway divestiture closed on January 1, and we will be reporting at year-end without the benefit of the sale and subsequent deleveraging. So I thought it would be helpful to show our balance sheet post divestiture and after the debt reduction.

If you look on the left side of the page, we ended January of 2026 with $659 million of cash and a total liquidity of about $1.8 billion, including the revolver capacity of just over $1.1 billion. As we progress through the year, we expect our average cash balance to be approximately $400 million, consistent with our operating needs and lower liquidity requirements.

We are continuing to evaluate opportunities to optimize the balance sheet, including rightsizing of our revolver capacity and the examination of our real estate lease portfolio. while we also pursue additional divestitures of noncore operations where appropriate. We also continue to see positive response from our delevering actions from the rating agencies with upgrades from both Fitch and Standard & Poor's. This reflects the strength of our improved balance sheet and expanded margin and free cash flow profile.

Now turning to the right side of the page, you can see the impact of the meaningful deleveraging associated with the off-highway sale. Relative to our starting position, we have reduced total debt by approximately $1.9 billion, highlighted by the red boxes shown across the maturity ladder. This leaves us in an extremely strong capital structure position. Importantly, we now have no near-term maturities. Our first maturity is in 2029 at just over $200 million, the remaining debt on our balance sheet carries an average interest rate of around 6%, providing both predictability and flexibility as we continue to strengthen the business.

On the bottom right side, you can see that the deleveraging results in less than 1x net leverage through 2026. This enhanced financial strength positions us well to navigate a dynamic market environment while we continue to invest in growth and deliver value for our shareholders. Overall, our balance sheet is now significantly stronger with ample liquidity, reduced debt and a long-dated maturity profile that supports our strategic priorities moving forward.

I will now turn the call over to Byron for a sneak peek at our targets for the Dana 2030 on Page 17.

Okay. Great. Thank you, Tim. And hey, before I get into the targets here, I do want to take the opportunity to thank Bruce for his leadership through Dana's transformation here over the last 1.5 years or so. And as he mentioned, we will have a very seamless transition here through the end of Q2. And myself and the management team, we couldn't be more excited for the opportunities ahead for Dana.

So let's take a look at our long-term targets and our plans to continue to drive performance of the company to new levels. So if you look at the 2030 financial targets, starting with revenue, we're targeting close to $10 billion of sales, which would be 33% higher than the midpoint of the '26 guide that Tim just took us through. We expect margins to increase by close to 400 basis points to 14% to 15% at the EBITDA line and adjusted free cash flow at 6%, which would be about a 200 basis point improvement from our 26 guide.

In terms of returning capital to our shareholders, you can see that we plan to return $2 billion vis-a-vis stock buybacks and of which $650 million has been completed in 2025 with the remaining plan for '26 through '30. And specifically in 2026, we're targeting $300 million of buybacks. And that's on top of the 20% dividend increase that was previously announced.

In terms of our road map of how we plan to deliver that level of performance, it's really all under our strategy that we've called Dana 2030. And you can see the 5 pillars of that plan, 3 related to growth in our aftermarket business our traditional light vehicle and commercial vehicle business as well as our EV and Applied Technologies, which basically takes Dana's know-how and technology and explores opportunities for growth in new and adjacent markets.

In addition to those growth pillars, there's 2 pillars around efficiency and execution in everything we do, both at the manufacturing level as well as our structural cost and support of the business.

We look forward to sharing more details of our 2030 plan with you during our Capital Markets Day, which is planned for March 25, in New York at 9:00 a.m., and we're hoping to see you guys all there. So we can talk more about the future ahead for Dana.

So with that, I'll hand it back to Regina for Q&A.

[Operator Instructions] Our first question comes from the line of Colin Langan with Wells Fargo.

I just want to follow up on the target for sales of $10 billion by 2030. That's faster than we've seen growth historically from Dana. And particularly, you just gave a backlog, I think it's $550 million from coming. So where is the other almost $2 billion? Is that market factors? Is there M&A assumed in there?

I'll take that, Colin. So here's kind of the way you should think about it is it of the $2.5 billion that we're committing to grow over the next 5 years. Our backlog, as you said, for '27 and '28 is $550 million. We anticipate that a normalization in the North American CV markets worth another $200 million, $300 million. So that's kind of 1/3 of it.

Then we've got 5 growth strategies. One is the slide that Byron covered off around our quoting activity, really around -- ICE is going to be here for longer. Our customers are changing their product plans to reflect more SUVs and CUVs. So the market, we do expect to continue to win new business on new programs that our customers are introducing.

Secondly is in CV. We -- that business is very North American-centric. We have a very strong position in the market right now. We have a brand-new world-class low-cost manufacturing is greenfield sites that we opened up in Mexico. That plant is performing for us at a very high level and as a result of our delivery performance, our quality and our cost base, I think we're well positioned to gain share of wallet at our main North American customers.

Third, after market. It's an area that we haven't really focused on in the past. So we have several growth strategies within aftermarket, but one I would sort of point to as being front and center here is our North America ceiling and gasket opportunity. So this is a market where we've got 30%, 35% share in Europe, and we're just looking to enter North America we see that as being a $250 million opportunity that we're just starting to get our foot in the door this year.

Fourth, I would point to EV. We have adopted more rigid and commercially sensible, I'd say, quoting disciplines and there's still opportunities there. It's particularly as what we're seeing on the range extended products from our customers.

And then lastly, Byron touched on Applied Technologies, where we're looking to get into adjacent markets or areas that we've historically under-invested. And we've got 4 or 5 of those opportunities, but just a couple of examples I'd point to one power sports. So this is sort of the off-roading quad vehicles. Those vehicles are becoming larger and larger. The supply chain in terms of our products for those is largely Chinese and old technology. So we think we have a big opportunity to enter into that market.

And we have several hundred million dollars of RFQs as we put some resources into that business. So that's a good example of an adjacent opportunity. And then if I thought about something that I'll say, we've kind of neglected I'd point to defense. We got a very highly profitable, and we just have -- we haven't put the sales and technical resources into capturing growth in that market. So those applied technologies as a bucket, we think, are another $400 million, $500 million. So that's kind of the path to the $2.5 billion kind of a long answer. I apologize for that.

No, I appreciate all the color. And just as a second question would just be any help from -- we've seen pretty much all that the trade 3 have these big recovery programs for EV cancellations. Was any of that helping 25? Is that any of that baked into the guidance? And any help actually in cash flow as well?

Colin, this is Tim. As we mentioned in Q3, we took some charges that due to some of this. So we did get a little bit of recovery in the fourth quarter, but -- in terms of the recoveries, a lot of what we're seeing is really adjustments to ongoing sales prices because many of our programs haven't completely canceled. Many of them are just volume down.

But in terms of the other recoveries, it's really a net coverage of the cost that we've incurred and what we owe in terms of suppliers and other development costs. So it's largely not a big tailwind in terms of profit drivers for us in the short term. But it obviously avoids our necessity to continue to write amounts off like we had to do in the third quarter.

I would just add, if you look at -- Tim showed the volume mix slide and how it's a little bit strange that top line negative and bottom line positive. Some of the benefit of repricing EV programs is in that bar.

Our next question will come from the line of Tom Narayan with RBC Capital Markets.

This is Thomas Ito on for Tom. So you guys are guiding to this 14% to 15% EBITDA margins by 2030, which is about 400 basis points higher than your 26% guide. This might have to wait for the Capital Markets Day, but -- can you give us any sort of rough breakdown of the contributions you're expecting from those items listed to the right of $517 million?

We don't -- I don't really want to get into a lot of the detail. I mean, what I would tell you is if you think about margin enhancement, how do we get that 400 basis points, it's in 2 places. One, structural cost reduction. We cut $325 million out of our cost base this year. And if we look at the opportunities that we have that are longer term, or require systems investments, we think there's like $100 million there. And just a couple as an example, that would be putting our shared service, expanding our shared service center and a lot of ERP and other system standardization.

I think the -- like we encourage you to come see us in New York. We're going to lay out the walk in how we get there and why we're so confident. And so come to the Capital Markets Day, we'll lay it all out for you. But look, we're highly, highly confident. I think what you've seen from Bruce and the management team here over the last 14, 15 months is we're very bullish on what we can deliver and what we tell you we're going to deliver or we do.

And I think we have that same confidence as we start looking forward to the strategy to deliver the $10 billion and the 15% to 16% margins in 2030. So I encourage you guys to come down and we'll take you through it in March.

Okay. Got it. As a quick follow-up, it looks like your commercial vehicle margins expanded pretty significantly in Q4, those sales are down year-over-year.

It sounds like this is mostly a mix and a cost reduction story, but I was wondering if this is -- if you guys think that margin level is sustainable going into 2026 or whether there were any one-offs in the Q4 results?

Yes, not a lot of one-offs. I mean, obviously, this has been a part of the business over the last few years that we focused quite a bit on improving our operating efficiency, and you're starting to see some of that. Bruce mentioned, we did over the last few years, build a new plant, state-of-the-art and as we continue to ramp that plant up and have more production in there.

We are getting the benefits of that into the efficiency and the margins in that product. So we don't -- we're not done yet. We think we've got more opportunity to continue to improve margins in the CV business because they're not where we think they should be. So stay tuned. I think there's more good things to come when you think about our CV segment.

Yes. Maybe just to add to that, we the team in CV has done a great job this year, great job. But we've been fighting volumes falling against us all year long. And as we get into this year, we're going to start to see that flip around and how volume as a tailwind instead of chasing the year-over-year declines.

Our next question comes from the line of Edison Yu with Deutsche Bank.

This is James Mulholland on for Edison. A quick question on our part. So if we do just a bit of math, even with the share buyback and increased dividend that you've outlined with your sort of longer-term free cash flow guide, it looks like you're looking at a materially higher cash position than what you've historically maintained or even guiding to. So do you have any thoughts on to where you're going to put that to work? Would you consider further inorganic investments, shareholder returns? Just any thoughts you might have there?

Yes. I think, look, we've obviously laid out a pretty significant increase in the amount of capital that we would return to shareholders. As we move out, and we'll talk a little bit about this in March as well. As we move out beyond '26, and we think about our growth strategy. There certainly could be opportunities for some acquisitions or other investments that are inorganic in order to fill in the parts of the portfolio that we think can help accelerate the growth.

So I think -- but we're really focused right now in continuing to execute on the plan. But again, we do think that the business that we own and the management team that we have is going to be able to continue to drive the business forward and deliver superior returns for the shareholder.

Got it. That's helpful. And I guess on the flip side of my prior question, in the presentation, it sounds like you're thinking about other noncore operations that could either be sold or perhaps shuttered. Are there other parts of your business that can be as cleanly separated as the off-highway business? Or is there something that specifically you're thinking about that you can share with us now?

Yes. nothing, obviously, we can share with you now. But like we're talking about some of the smaller things that we only have a number of different smaller businesses, but nothing on the scale or size of off-highway. But to answer your question, yes, we believe that those are imminently separate. We did a few of them. We had a few of these last year where we sold a couple of interest we had in some joint ventures.

So we'll continue to look at the portfolio, whether that be individual JVs, plants or just product lines in some of the businesses. So I think as we continue to think through the portfolio, I think there's a number of opportunities where maybe we're not the best owner or they aren't the most profitable of product lines or part numbers, and we'll continue to sort of call through that and make those adjustments. So -- but we do think that there's some opportunities there for us on the portfolio side. Again, these are smaller type things.

Our next question comes from the line of James Picariello with BNP Paribas.

Sorry, just to clarify, what was the last answer regarding -- is there possibility for M&A within this revenue target? Or that would be in excess of the $10 billion?

There's no M&A in the $10 billion.

Okay. All right. That's what I thought. So Yes. When I think about the capital deployment out to 2030, right, if there is no M&A embedded in the target, which I think is a great thing, right? Free cash flow is slated to double over 2026 and 2030. If I just assume a linear annualized step-up, right, off the $300 million this year to the $600 million targeted for 2030, right? That cumulative free cash flow generation looks something like $2.2 billion to $2.3 billion, right, in that ZIP code.

Why would the -- we're looking at $250 million in dividends, right, $50 million a year over 5 years and you've got the $1.35 billion in buybacks, which leaves about $650 million left over in excess capital. Just curious how you're thinking about that, where you disagree or agree on how I laid that out. And just, yes, what are we doing with that additional $650 million or so?

Yes. I mean, look, I think I won't get into the specifics, obviously, leaves us some flexibility in what we use the cash flow for. Obviously, we have maturities coming due. So we can use it to reduce leverage on the business if we want and if we're in -- depending on where we are in the cycle, that may be something we do, otherwise, we have more opportunities to return capital to shareholders if that seems to be the best use of that capital. I mean 2, 3, 4, 5 years from now is a long time and a lot of things can happen.

But I think what we're planning for is having an exceedingly strong operating performance through the business cycle with a capital structure that allows us to continue to be exceedingly nimble in our ability to continue to invest in the business regardless of where the markets are. And I think that's really, really important to think about, given where we were in the high 2 turns leverage and what we're going to be able to do through the business cycle regardless of where the end markets are, going forward. So we're just leaving ourselves some flexibility. I think what we've said is, hey, we're going to continue to drive really high shareholder returns, and that's our intention.

Okay. Yes. That makes a lot of sense. My follow-up is a quick one. What's the assumed effective tax rate for this year to inform the adjusted EPS range of...

Yes, it's somewhere -- we've had some pretty strange ones. It's somewhere between 20% and 30%. It really depends on some of the jurisdictional mix, but that's kind of where we're targeting somewhere. That's a wide range. But given the val ounces that we have and how the income mix can change, it moves around. It happens to be a pretty reasonable rate this year just based on the jurisdictional mix and where the balances are. .

Our next question comes from the line of Joe Spak with UBS.

Good morning, everyone. Maybe just a question on CapEx, but with 2 flavors of you all. So looks like you're low 3s, 25, guidance calls for low 4s this year. I'm assuming that's just a step up to support some of these growth initiatives, but maybe you could add some color there. And then how should we think -- I know you gave the free cash margin guidance for the 2030 plan. But should we think about any material change in CapEx to sales to support that growth opportunity is 4% than you like right go-forward rate we should be thinking about?

Yes. I think 4% is probably a good number to kind of pencil in as you go forward. I think, look, we're -- we will have to spend both on growth initiatives and on the initiatives to drive margin expansion. Bruce mentioned our plant-level operational efficiency. We've taken a lot of costs out at a relatively modest investment.

The next step is we'll have to have a higher level of investment, which is largely CapEx in order to drive that next lock step change in our margin profile, especially at the plant level. So -- but that's -- that's built into our targets, both the 2030 target that we're giving you and the target that we have for CapEx in in 2026. So we've committed significant amounts of CapEx to help drive both growth and the efficiencies in the business.

Okay. You alluded to this a little bit earlier, but I was wondering if you could just sort of get a little bit more color. You're guiding 250 basis points of margin expansion this year. It sounds like we should be maybe above that level in CV given some of your comments, so maybe slightly a little bit below that in light vehicle to get to the number. But I was wondering if you could just sort of help us understand some of the profit drivers or margin drivers by segment for '26?

Yes. I mean I think you have it right. I mean, obviously, we're going to have a continued flow through on the cost savings, and then we will continue to get performance improvements, which is fairly -- I mean, it's fairly consistent on a relative basis in the segments, probably a little bit more in CV because we got a little more opportunity there. But generally, pretty balanced between the segments.

But I think the important thing to note here is that we continue to focus on our ability to expand margins through actions that are completely within our control and that are low risk and have high returns. So you think about some of the things we're doing with automation, with efficiencies within the plants. I mean, largely, those are implants that are on ICE programs. We know what the volumes are going to be, and we know what the investment and the returns look like. So -- we're highly confident in our ability to both make those investments and deliver the expanded margins that they will deliver.

And I sure get a lot of this, but as it's about Byron and Bruce and looking forward to learning more at the upcoming investor event.

We plan to put Byron out there so you guys can go right after mid-March, okay?

Our final question comes from the line of Emmanuel Rosner with Wolfe Research.

Great. Thanks so much. First question is on the -- I appreciate the sneak peek on the 2030 financial targets. So I wanted to ask you about the high-level drivers of the 400 bps in margin expansion. How much of it is growth driven versus cost savings. I think, Bruce, you mentioned maybe $100 million opportunity from the systems enhancement. I don't know if there was anything else you'd call out on the cost side. And what implication does it have in terms of potential cadence? 400 bps obviously averages at about 100 bps a year. But I would assume that the cost savings are maybe more front-end loaded or is like some of the growth initiatives may take a little bit longer. So anything you could share on that?

Yes. I think we come see us in March, I think, is the line of the day. I think you saw what you said makes some sense. But look, we're able -- given where we're at today, we're going to be able to invest in both the growth and the margin expansion initiatives and deliver them over time. But we'll lay it out in detail in a few weeks. So come down and see us. .

Yes. I wouldn't say though that the margin and getting to the 15 is not because it grow. In other words, we will expand our margin based on investments that we're making in cost actions, the growth will help out. But the main driver is the investments they're making in our manufacturing operations and automation, things like that.

Yes. I mean I wouldn't say the growth is coming through at super high rate like we still operate in the mobility business for goodness sake. So like -- and like I said before, a lot of what we're thinking about is things that are completely within our control and tied to programs that are tried and true. So high return, low risk things to drive margin improvement. .

I appreciate the color. If I could just follow up on this up on this based on what's disclosed in today's slides, obviously, revenues target of $10 billion, up from $7.5 billion, I guess, this year. So if you just have a I guess what is the right incremental margin on that kind of revenue increase? Because if you just apply that to $2.5 billion in revenue, you'd already have probably like $500 million of uplift in EBITDA. So -- just curious if there's -- how do you think about that piece just based on the numbers that you already shared with us?

Yes. I mean I think there's -- you also have to realize that there are some costs associated with with some of that growth. So it's not like we just go out and sell it and put it in the same plant like it isn't that simple. But I think the -- again, we'll give you a front row seat Emmanuel in March, and we'll take you all through it and answer all your questions. .

I look forward to that. And then maybe just on -- the -- on Slide 14, the walk to the 26% EBITDA by factor. Can you just remind us what goes inside the performance and the cost savings bucket in terms of...

Yes, think of cost savings as our $325 million that's all above the plants. -- okay? That's what's in that number. And that's the last piece of that $325 million, right? So -- and then if you think about performance, that is all the improvements that are going on at the -- really at the plant level. So this is material cost savings, engineering cost savings that's coming through as a result of design and whatnot updates, conversion cost savings.

And then we've also included in here about $40 million of the stranded cost avoidance that we're taking out this year. So that's 1 of the reason why that number looks pretty large. There's 40% of it $40 million is related to the structural cost takeout related to the stranded cost from the deal.

Okay. That's the last of the questions. So thanks, everybody, for joining us here this morning. Clearly, I want to have a big shout out to the Dana team. I know a lot of them are listening on this call. An incredible 2025, and I thank each and every one of our team members for how making it happen. Coming into 2025, we made some very bold commitments, and the teams delivered on all fronts. I'm very proud of them.

Looking ahead, the team is laser-focused on performance and delivering on our financial commitments. As I said earlier, right now, Dana is exceptionally well positioned. We have a strong balance sheet, [indiscernible] balance sheet. We have a strong top line growth story. We have a very clear plan and actions to deliver significant margin expansion. Our free cash flow is accelerating to the point what we can first grow our investment in our business.

Second, we turn a significant amount of capital to our shareholders via dividend. Third, grow our buyback. And right now, we can comfortably buy 8% to 9% of our shares per year, all while deleveraging. I love how Dana is positioned right now in the auto space, I wouldn't change places with anybody else. Thanks for joining us this morning.

This will conclude our call today. Thank you all for joining. You may now disconnect.

Good morning, and welcome to Dana Inc. Backlog Growth and Market Outlook Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and Q&A session will be recorded for replay purposes. [Operator Instructions] At this time, I would like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.

Good morning, and welcome to Dana's January Market Backlog Update Call. Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from what we've discussed today. For more details about the factors which may affect future results, please refer to our safe harbor statement filed in our public filings and our reports to the SEC. I encourage you to visit our investor website, where you'll find this morning's presentation and press release.

As stated, today's call is being recorded, and the supporting materials are the property of Dana Incorporated. They may not be recorded, copied or rebroadcast without our written consent.

This morning with me is Bruce McDonald, Dana's Chairman and Chief Executive Officer; and Timothy Kraus, Senior Vice President and Chief Financial Officer. Also joining us this morning to provide insights on our key markets, our Byron Foster, President of Dana's Light Vehicle Systems Group; and Brian Pour, President of our Commercial Vehicle Systems Group.

As we get started, we will cover our prepared remarks this morning. Then we will take questions from our coverage analysts on the phone. Note that the results we discussed this morning are preliminary, and we will be hosting our fourth quarter and full year 2025 earnings call in February as usual. Bruce, I'll now turn the call over to you.

Well, thanks, Craig, and good morning, everybody. Thanks for joining us here to talk about another update on Dana. Just turning to my first slide here. I thought it would -- it's important to sort of focus on what we -- when we had a call like this last year, a year ago. And I thought it was important to sort of remind people what we committed to deliver in 2025 and how we've subsequently done. So last year, we announced we were going to sell our off-highway business and focus on our core markets, the on-highway, both commercial vehicle and light vehicle. We committed to getting that done. We got it done. It took a little bit longer than we thought with the tariff turmoil, but I'm pleased to get that one in our rearview mirror.

We also talked about taking a more measured approach to EV market. I think we got in front of the curve here. We do expect to take a small noncash charge in the fourth quarter as we write down some of our assets. But I can tell you, as a result of the team's terrific work in terms of customer recoveries and negotiations, price increases, the damage for Dana in terms of the radically lower EV market is very manageable.

And then our cost reduction target, a year ago, on this call, we upped our target from $200 million to $300 million. We talked about merging our Power Technologies segment into our CV and LV segments, and that's behind us. In terms of achievements, a few noteworthy ones that are in the press release, and we'll touch on later in the discussion today. But in terms of our cost reduction target, as a result of the achievements in Q4 and as we put together our plans for 2025 -- 2026, I'm sorry, we expect our target to be about $15 million higher than we previously communicated at $325 million.

We feel really good about that. I would tell you that if you look at where that cost is coming out, it's a combination of R&D, SG&A as well as cost of goods sold. In terms of margins, we finished the year here. Tim will get into the details in his presentation, but we finished the year at 8%. This is looking at new Dana on a continuing operations basis. So 8%, 8.1%. We think the final number is going to come in that. And then in terms of 2026, we've always talked about a target of being 10% to 10.5%, and we're introducing here a range of 10% to 11%. So at the midpoint, we're at the high end of our range. We had a really good Q4. Our numbers came in very strong. Our EBITDA about 10% better than consensus estimates. And if you look at our free cash flow, it's the highest the company has delivered since 2013.

In terms of the balance sheet, the sale of the Off-Highway business closed on January 1. And again, Tim will go through kind of the pro forma cap structure, but we are sitting here well positioned with the balance sheet, less than 1x turn and that's a commitment that we're going to -- that new Dana is going to have going forward. We want to be the best-in-class, best in sector balance sheet, and we continue to believe that next year, our free cash flow will be in the 4% of sales.

And then lastly, just in terms of our backlog, despite, I would say, the deterioration that we saw in the EV side of our business, our 3-year backlog at $750 million is up versus the backlog that we reported a year ago. And so anyway, the team, I think, has done a terrific job this year. I really thank everybody in the Dana organization for the support that they've provided to me and their contributions in terms of making these numbers a reality. And obviously, it's not gone unnoticed that the market has certainly rewarded us. If you just look at our stock price performance since where we sat in January of last year, we've more than doubled.

Just in terms of business overview, I touched on the sale of Off-Highway, but just reminding folks, the price $2.7 billion, net of transaction costs and debt that the buyer assumed we got $2.4 billion. In terms of our returning capital to our shareholders, we bought back in 2025, about 112 -- sorry, 34 million shares or 23% of our shares outstanding. So at the end of the year, we had just over 112 million shares outstanding.

Total capital return to shareholders, inclusive of our dividend, just over $700 million. And in 2026, we expect our share repurchase to be in the $200 million to $300 million range, probably front-end loaded with more than half of that in Q1.

In terms of our balance sheet, I touched on that earlier, but $2 billion of the debt was paid back as a result of proceeds coming in here in January. Our cost reduction target that flowed through in 2025 was $260 million, which is up from the $235 million we guided to last quarter. And if you just look at the annualization and how much we expect to improve year-over-year as a result of the cost reduction program, it's an additional $65 million next year. We've -- I think we flagged for some time, we were in negotiations to buy out our TM4 joint venture from Hydro-Quebec. That was just completed actually yesterday for just under $200 million.

And I guess just the final comment I would say on our backlog is we have very robust quoting activity. And I would say within the 3-year window. So I do anticipate we will see further growth in our backlog here as we go through the early part of 2026. So anyway, I'd say a great start, a finish to 2025, and the team is executing, performing well, and we have strong momentum going into 2026.

And with that, Tim, I'll turn it over to you.

Thanks, Bruce. So if you just turn to Page 6, I'll just give you a quick overview of new Dana's business. So about $7.5 billion in sales split 70-30 between our light vehicle segment and in commercial vehicle.

From a regional perspective, the loss of the off-highway business or the post off-highway, we're predominantly focused from a North American perspective, about 60% of the business there with 20% being in Europe and the balance being in Asia and South America. If you look in the lower right-hand corner from a customer perspective, while we have strong focus in both Ford and Stellantis, we continue to have a very diverse customer base with strong showings with Toyota, Volkswagen, PACCAR and others.

If you look down in the lower left-hand corner, a new view. So we're giving -- what we're calling the channel business for the company. So this would be our light vehicle OE, our commercial vehicle OE and our aftermarket business. So this is a focus for new Dana with our aftermarket business representing about 12% of the overall company or about $900 million.

If we go to the next page, as Bruce mentioned, strong backlog with $200 million of growth coming in 2026 rising to $750 million by 2028. The backlog for 2026 is offsetting a slightly down market for us. And so we see our total volume and mix being about a down $75 million for the year. But that new backlog comes with better margins than the programs that are rolling off.

If you move to Page 8. So we've gone back to present market as we've done in the past. And so we've broken this down between full-frame truck on the light vehicle side, which is really the driver on our light vehicle business. And then on the commercial vehicle split between medium and heavy-duty and then by region. So Overall, full-frame truck and the CV market will be flat for Dana, if you look all the way over on the far right of the page. And in that, we see heavy-duty -- the heavy-duty market being down in North America with an uptick from medium duty.

And again, we do see continued share gains in our CV business that will offset some of the market share -- or excuse me, the market volume down that we see. Please keep in mind, just as I mentioned before, that our Light Vehicle segment includes the OEM thermal and sealing business that used to be part of Power Technologies. And that business is a bit more exposed to both small SUVs and passenger cars. So while full-frame truck in North America is shown as flat, we do have other exposure within that segment to non-full-frame truck programs.

Now if you turn to Page 9, I'll turn it over to Byron, and he'll take you through some of the particulars for the Light Vehicle segment.

Okay. Thanks, Tim, and good morning, everybody. So before I get into the backlog, I thought I'd level set the group on Dana's Light Vehicle Systems business. So if you look at Page 9, you can see about $5.2 billion of revenue here in 2025. And from a mix standpoint, in terms of customers, you can see, again, Ford is our largest customer, followed by Stellantis. And then we also participate with Toyota, Nissan. And then you can see 21% are what we say are other. That would be some smaller OEMs and some Tier 1s that we supply primarily out of our sealing and thermal product lines.

From a regional perspective, you can see obviously pretty dominant in North America, but we do have a really good business in Europe and Asia, where we supply customers like JLR and VW and our high-performance dual-clutch transmission business. From a product line perspective, you can see just over 80% is considered driveline. So that would be axles, prop shafts, our specialty transmission business as well as motors and inverters. And then our sealing and thermal business, as Tim mentioned, used to be part of our Power Technologies business is now part of Light Vehicle Systems. And there, you'll find products like gaskets, engine oil coolers and battery coolers.

If you go to Page 10, I won't spend a lot of time here, but just to give you a snapshot of some of the key nameplates that we participate. You can see names like Super Duty, Bronco, Ranger, obviously, Chief Wrangler and then with Toyota, the Tundra, Nissan Frontier, and the Land Rover truck nameplate. So you can see we're really a big player on really all of the key winning nameplates from a light truck perspective.

And then when you look at Sealing and Thermal, you'll see a broader kind of customer mix there. And you can see with GM pretty heavy on the EV side, where we supply battery cooling plates and then multiple engine platforms across Ford and Stellantis, where we're supplying, again, products like gaskets and engine oil coolers. So a really good, I would say, mix of product vehicle lines that we participate on.

And to that point, if you go to Page 11, just a week ago today, the North American Truck of the Year was announced at the Detroit Auto Show, the Ford Maverick Lobo, and we're very proud to be a key supply partner on this vehicle. You can see we've got a pretty diverse mix of products that we supply to the Ford Maverick, be it some of our thermal acoustic products, gaskets and ceiling products. And then you can see we're also supplying the rear drive unit, which is really a pretty high-tech product that we supply on this vehicle that has disconnecting all-wheel drive technologies as part of it. So very proud to participate on that program with Ford.

So now to the backlog. I think about it in kind of 3 categories, if you will. So first, there are a set of platforms that we participate on today that are in our base business, but we have been successful in extending those programs. And as part of that, those programs have come with added content or in the case of Super Duty, added volume. You've obviously read that Ford plans to expand the capacity on Super Duty. So we're excited to participate in that expansion, and we expect those volumes to begin to increase with the addition of the Oakville capacity close to Q4 this year. And then in the example of both the Jeep Wrangler as well as the Bronco Sport, we've been fortunate to add content -- Dana content to those vehicles. So we will enjoy that increased volume, and you'll see that in our backlog.

The second bucket is new programs. So we have several new programs that will begin to come online during the next 3-year period. The first I would highlight is the Jaguar vehicle. As you know, Jaguar has kind of redone their product strategy and will launch an all-new EV here later this year. We provide the electric drive unit as well as the battery cooling plates on that vehicle. Another one I would highlight is the Defender Sport, which will come out in an EV version. And again, we have the electric drive unit there. And then we put McLaren here as an example of our continued expansion of our high-performance transmission business, and that vehicle will launch here in the first half of this year.

And then the third category from a Sealing and Thermal perspective, that was going to be a big driver of growth for us relative to our battery cooling business. But with the pullback in EV, what we're seeing is the longer life, if you will, on the ICE side and many of our customers revisiting their engine strategies and creating new product lines. And that's perfect for us. It falls right into the category of many of our sealing and thermal product lines, and you'll see us expand across a number of vehicle nameplates as well as new engines from our customers. So excited about the growth going forward from a light vehicle perspective.

And with that, I'll hand it over to my colleague, Brian Porter, to talk about commercial vehicles.

Very good. Thank you, Byron. And good morning, everyone. I'm going to take you through our commercial vehicle landscape. We'll start on Slide 13. We'll talk through the -- how our split of business across our customers and regions. So let's first start with our customers.

PACCAR remains our largest customer right at about 50% of our global turnover. Coming behind that, about the next 42% is represented across the remaining 4 major commercial vehicle players, first being Volkswagen or the Traton Group, which is inclusive of the MAN, International, Scania and Volkswagen nameplates, then Volvo, Daimler and Ford. The remaining 7% of our global turnover does fall into the specialty vehicle market, which will be more of your refuse, concrete mixers, fire trucks and so forth. When we look at it from a region perspective, we are nicely balanced around the globe. About 40% of our turnover comes out of North America, 30% out of Europe. About 20% out of South America. And then the Asia Pacific piece, that 8% represents our electrification -- predominantly our electrification portfolio in China and India.

And then if we break out North America a little bit more, you'll see that it's a nice balance between our OE business being about 60% of the North American market between heavy-duty and medium duty and about 40% of that market is our installed base and independent aftermarket business.

If you turn to Slide 14, I'll talk also, as Byron did, I'll talk about our backlog in the commercial vehicle space. across the top, you see that we're driving share gains across our key customers. And this is really a function of leveraging the new investments we brought online over the past couple of years in low-cost manufacturing in Mexico. And with that new investment, we've been able to make noticeable share increases, market share increases with PACCAR, Volvo and international. We're also leveraging our existing portfolio of both traditional and electrification products across the medium-duty and bus markets. We've been able to expand some of our traditional product line with key customers. We expand into their new platforms in Blue Bird and Isuzu with incremental business on the Blue Bird walk-in van commercial chassis and the Isuzu medium duty.

We've also brought online now a new customer in Brazil, Agrale for their medium-duty line. And we continue to leverage our catalog electrification portfolio in the Asian markets where that adoption continue to grow. And this is a new business that we've been awarded with JSW.

And then across the bottom, you see we've got our aftermarket represented here. In Europe today, we have about 1/3 of the independent aftermarket gasket business with our Victor Reinz brand. And we've taken an effort to put the resources in place to be able to bring that brand into North America and expand our presence in North America. And we're excited to announce that we've secured 2 good -- 2 large contracts with 2 of the key big box stores in the retail space, both with AutoZone and Advance Auto Parts.

So also here, we're extremely excited about the growth and the future outlook in the in the commercial vehicle space. And from there, I'm going to hand it over to Tim.

Thanks, Brian. So just turn with me now to Page 16 and for a look at our preliminary results for Q4 and full year 2025. We delivered results at the high end of our ranges and above market consensus. So for the quarter, just under $1.9 billion in revenue, about $200 million in adjusted EBITDA for a margin of about 10.7%. Adjusted free cash flow for the quarter came in around $325 million. So when you think about the margin as we move into 2026, we're exceedingly well positioned to be able to deliver our margin and financial commitments for 2026, given we're exiting 2025 well within the range for next year.

And on that, so our full year preliminary results for 2025, about $7.5 billion in revenue, again, this is on a continuing ops basis. $600 million in adjusted EBITDA for a margin of about 8%. Adjusted free cash flow for the full year 350 -- about $315 million. Again, all of these were at the high end of the ranges that we put out back in October during our Q3 earnings call.

So -- and now with that, let's discuss 2026 outlook. So if you turn the page to 17, we expect sales to be flat to 2025, as I discussed earlier, at around $7.5 billion at the midpoint of the range, with EBITDA coming in at $800 million, again, at the midpoint of our guidance range for an implied margin of 10.5% -- that's up $200 million and 250 basis points from our full year preliminary results for 2025. Despite the sale of Off-Highway, we still expect $300 million of adjusted free cash flow. And really, this is being driven by better margins on our sales conversion as well as lower interest and cash taxes as a result of the balance sheet delevering that we've done.

With that, please turn with me now to Page 18. So speaking of lower interest, given the Off-Highway transaction closed January 1, I thought it would be great to lay out our improved capital structure looks like. We'll be reporting at year-end without the benefit of the delevering from the Off-Highway sale. So you look on the left side of the page, we're going to end the year with the capital structure we've had in place for some time. And as you look across our current capital structure, so if we look at it today, we've reduced debt by about $1.9 billion. And the red squares are the bits of debt that we have paid off to date. And so we'll be exiting the transaction with an extremely strong capital structure, right? No near-term debt. Our first maturity is in 2029, just over $200 million and with small maturities out until 2031. The capital that we have or the debt we have in the books has an average interest rate of right around 6%.

So again, -- with that, I will turn it back to Bruce for some closing remarks.

Okay. Thanks, guys. Obviously, you can tell the team and I are very excited about Dana's accomplishments this year, but I'd say more excited about the future that's in front of us. And if you look at what we think -- what we've achieved over this past year, I think we've set consistently what have been seen externally as aggressive targets and consistently beat them. Cost reduction targets have put us in an exceptional position in terms of our margins. And as Tim said, up 250 basis points next year. We have a strong balance sheet. We've taken actions to focus on shareholder value creation with the sale of the Off-Highway business. In the course of the last year and a bit, we've created over $2 billion for our shareholders. And so we're incredibly proud of that.

Looking forward, Dana is positioned to win. We see ongoing margin expansion. We have top line growth, not next year as a result of sort of the weak market. But I think with the commercial vehicle market being kind of in the near next year, I think we're exceptionally well positioned to continue to grow as we see some -- our backlog flow through and to get some tailwind from the markets for a change, which I think you'll see in '27 and beyond. So anyway, we got margin expansion growth, good cash flow generation. And I think that the new news today is our backlog is improving, and we expect to see top line growth as well.

Then just finally, want to save the date out there. We plan on hosting a Capital Markets Day here on March 25 in New York, probably at the stock exchange. And here, what we're going to go through is our longer-term aspirations. I mean we continue to believe we've got an awful lot of opportunity for further margin expansion, and we'll go through our key strategies there as well as growth. We have several areas of growth that we want to -- that we're excited about that we want to share with the investment community, and we'll have a deep dive and be able to go through that in March. So please hold that date.

With that, we'll open it up for questions, I think, Regina.

[Operator Instructions] Our first question will come from the line of Tom Narayan with RBC.

I just wanted to drill down a bit on the EBITDA guidance for 2026. As it relates to the performance you guys did in 2025. So it looks like it goes up by $200 million of EBITDA sales are kind of relatively flattish. I know you have the $75 million in cost sales saves that leaves $125 million of kind of other. Now I know the exit margins were higher in Q4. In the past, you've called out like automation, EV cost alignment, standardization. And then you have this higher-margin business called out in Slide 17. Presumably, that's this aftermarket stuff. Just love some more details on the confidence in that other $125 million? And kind of what makes that up?

Okay. I'll turn it over to Tim. I mean, first of all, I'd say the confidence is off the charts. So Tim, I'll let you sort of give the walk.

Bruce and Tom, I would agree. Look, our confidence is exceedingly high. I think we had high confidence when we were here a year ago about what we're going to do for '25 and I think we're equally bullish on what we can do for '26.

But really a couple of things. One, we've got stranded costs sitting in the $600 million we delivered this year that are going to come out. We've got accretive new business coming on that will also add margin to the business, both in terms of dollars and margin percentage. And I think the operating performance of the business, right? We continue to -- we think about our cost saving program, that's above the plants. We really see a lot of opportunities, and we continue to drive those opportunities on the plant operating performance. And then we believe we still have more options or more availability to go and get pricing and look at the portfolio and really optimize it to deliver that growth.

So highly confident. I mean, I think if you go back, right, we kind of laid out those four areas. Cost savings, accretive new business, eliminating stranded costs and our operating performance, and that's what the team is focused on. And we're highly confident we'll be able to deliver the extra $200 million or the additional $200 million in EBITDA for 2026.

Just a quick follow-up. Is that aftermarket business new? Is that why it's incrementally new that maybe you weren't capturing that before?

No, the business is always -- we always had the aftermarket business. And what I think what you're seeing now is and Brian touched on this, is a renewed focus of the -- we've now put all of our aftermarket business into the CV segment and Brian is running that. And maybe I'll let Brian, if you got a couple of comments on aftermarket. But it is a renewed focus and really front and center for us.

I think -- thank you, Tim. I think really for the aftermarket business for us, it's about looking at our portfolio, understanding from not only a portfolio but a region is where are we underrepresented. And making sure that we're leveraging our -- the brands that we have. We have two very, very strong brands out there in the market being our Spicer brand and our Victor Reinz brand. And we're putting the incremental support investments into our aftermarket business to make sure that we can capitalize on those opportunities.

I would put it, Tom, in the -- as we've sort of challenged the team to how we're going to grow ex off-highway here. I would put aftermarket, and there's other examples that we'll touch on in our Analyst Day areas where markets that we're in that we haven't prioritized as growth opportunities, aftermarkets one, I would -- another example in defense. We have a small presence in the defense market in CV, very high-margin business, and we've never really allocated a significant amount of new resources there. So as we go forward, we're going to be increasing our investment in some of these growth areas that are highly accretive to our margins.

Our next question comes from the line of James Picariello with BNP Paribas.

Good morning, everybody. I'd like to better understand the pro forma balance sheet and just the known movements in cash. So I guess, first off, can you confirm what the year-end cash balance is after the proceeds, your reported free cash flow, all that stuff. With the year-end cash balance that hopefully a number that you could share right now.

Then just to confirm, in the first quarter, you've got the $1.9 billion in total debt reduction and maybe another $190 million regarding the TM4 buyout. Are those the two major known pieces?

Yes, that's correct. So if you think through it. So from a cash perspective, we tend to carry $400 million to $450 million in cash on the balance sheet. We expect that to be a bit higher than that coming out, so somewhere between $450 million and $500 million, probably at the higher end of that range in terms of where we'll end the year. Obviously, we had a really good fourth quarter in terms of our free cash flow generation. So there -- and then yes. So we -- of the proceeds we received, we used $1.9 billion of those to pay down debt immediately, did that a couple of weeks ago. And then yesterday, we spent about a little less than $200 million to buy out our joint venture with Hydro-Quebec.

Okay. So excluding the proceeds at year-end, you finished towards the high end of $500 million.

High end of $450 million, $500 million, correct.

Thing I keep in mind there is we did buy back -- our stock buyback was $650 million instead of $600 million that we guided to it. So I'd just point that out.

So think about the year-end cash -- just James , our year-end cash number is inclusive of the stock buybacks. That's where we ended the year.

Inclusive of the buybacks, but exclusive of the proceeds? .

Correct. We didn't get the proceeds until '26.

Yes. Okay. Understood. I appreciate that. So then as I think about -- what drives the -- I mean, I know you've touched on it already, but just for better clarity. What drives the 1% implied core sales decline? Because if I look at your end market table, right, the matrix. I mean, every region slightly up with the exception of North America and solely driven by North America heavy duty. So can you just kind of double-click on what informs that core sales?

Yes. So some is mix. But again, if you look at the table you're referring to on Page 8, and I tried to cover this off in my comments, but I probably didn't do a very good job. We're just showing full frame truck. Don't forget, we've got inside of the light vehicle segment, we have more than just full frame trucks. So there, we've got a mix of pass car and small SUV. So there are other volume impacts as well as mix issues that are driving some of that additional lower top line sales.

Yes. Maybe, James, the other thing is, I mean, obviously, we've taken our -- we put together our plan a few months ago. And so I would say, look, we want to plan on a conservative market assumption basis. I think if you, if we were starting again today, we would say, you know what, there's maybe some more green shoots than we have factored into our plan. But I would rather plan on a conservative volume basis. So could it be $100 million or something million stronger? Sure thing.

Yes, which is why our top line sales are -- our band is plus or minus $200 million to account for that. But what you're seeing is the difference between like full-frame trucks and the overall light vehicle segment and what the Light Vehicle segment sells into, which is more than just full frame truck as well as mix.

And then just slip one more in here. The $200 million to $300 million of buybacks for this year, is it safe to assume that the March Analyst Day will be the platform for Dana to really touch on the future capital allocation, shareholder return?

Yes, absolutely. I mean we'll talk about all of it, right? Where we see the business, where our growth vectors are, how we see the business performing and what we're going to do with the capital we're generating. Correct.

Our next question will come from the line of Edison Yu with Deutsche Bank.

This is Winnie Yan for Edison. Maybe just sticking to the last question or the one before last question. Drilling down on your assumptions for North America heavy duty, I do see that it's -- you're assuming about like more than 10% decline. If we just look at some of the forecast changes from [ App Research ], I think it's roughly flat to down low single digits. So I'm wondering if you can maybe provide some context for that assumption within the outlook? And then I have a follow-up.

Yes. I mean -- so Bruce mentioned, obviously, we put the plan together a bit ago. So some of these have moved a little bit. Some of it's just dependent upon hey, where in the heavy truck segment are things going to move around. But again, I think we could see some green shoots and maybe a little bit better than where we're predicting, but this is where we've built the plan at this point. So again, that's the reason we have couple of hundred million dollars of upside when you think about the plan because there could be some movements in the market and heavy duty certainly could be one of them.

Okay. Got it. That's very clear. And then maybe you can give us a flavor of what you might be reviewing on the Capital Markets Day. It looks like you'd be able to generate stronger cash over the next few years. So is it going to be more share buyback, more dividend or inorganic opportunities? Maybe just like a preliminary...

I can take that. So at our Analyst Day, we're going to focus on the bulk of presentation is on our growth strategy because I think we don't really get any credit for the fact that I think we've got an exceptionally strong growth pipeline, and it's not something that people are focused on. So we're going to spend a lot of time on that.

We're going to be sharing our margin aspirations over the next 5 years in the glide path. And in terms of capital allocation, the plan that we're going to share is an organic growth plan. So we'll touch on what we see as being sort of slightly higher in organic -- sorry, organic reinvestment in our business, which will use some of that free cash flow. And then our call on capital is going to be -- continue to be returning it to the shareholders. How we do that is 100% dependent on how we see the market view on our share price versus our view on its intrinsic value. And we've talked on these calls before, how I've been pretty consistent that I don't think we're getting credit for the opportunities that lay ahead for Dana. And as a result of that, we're backing up the truck and buying back stock. And that's how we think about it.

I think going forward, as we continue to demonstrate to the Street that we're meeting our commitments and we maybe start to get some credit for our longer-term strategies, we'll start to maybe turn the page and look for areas inorganically where we can accelerate our growth. Anyway, that's kind of an early discussion that we're starting to have with our Board. But I think that's about as clear as I can be in terms of how we think about it.

Our next question comes from the line of Joe Spak with UBS.

Maybe just one quick housekeeping question. Just of the $750 million total 3-year backlog, roughly how much is light trucks versus commercial vehicle?

Yes, the majority is going to be light truck, right? I mean if you think about the rest of the business, it's -- they're not large programs and program specific. So a big chunk of that backlog is light truck. [indiscernible] I mean I don't want to -- it's not [indiscernible]. It's majority, yes -- yes, it's well north of 50%, obviously. But yes, I mean, it's a big...

Okay. And then -- I mean maybe just to sort of help square the circle, if you will, just on some of the expectations for '26 sales. Like you're saying in your market outlook, heavy-duty down more than 10%, medium-duty up. This is North America up 3% to 5%. Like is aftermarket included in that? Or are you thinking about that separately? Because as you highlighted, that's 43% of the business, and it sounded like there were some good opportunities there. So it seems like there could be some decent growth for a pretty chunky part of the business.

Yes. So the market side is on the OE. Generally like -- and we have a sizable aftermarket business in the CV part of that business in terms of the market side, but those sales flow through, generally, we're talking about 5-plus years later when you think about the sales, right? But yes, there's certainly some improvement there from what's rolling through from an aftermarket perspective on their traditional light vehicle sealing part of the business.

And keep in mind, Joe, as Tim said in his comments, like we don't count increasing share at our current customers in our backlog, and we do expect that. So our sales will do better than the market outlook as a result of that.

Okay. But sorry, but just separating backlog from just the '26 sales outlook, do you expect aftermarket maybe even broadly just to grow in '26 versus '25?

We do. Correct. And it's built into our plan.

Okay. Last one, and sorry if I missed this. Anything we should think about -- it sounds like CapEx is going higher next year. I know it's a little bit difficult to compare like new Dana versus sort of old Dana. But how should we think about CapEx, working capital -- for your free cash flow guidance...

Yes. I mean working capital should be an improvement, and we're calling somewhere in the 4% range for CapEx for new data for 2026.

Our next question comes from the line of Ryan Brinkman with JPMorgan.

Congrats on the continued transformation. I'd like to ask on TM4. Over the years, we've heard from various executives, literally not from you Bruce, but from various other executives at Dana and at American Axle and Magna that it is maybe not so important that the separate electric motor gearbox and power electronic components of an integrated 3-in-, 4-in-1 and a 5-in-1 system now that they necessarily be developed in-house and manufactured under a single corporate roof, whereas BorgWarner, which I think has got a successful offering here is always maintained the opposite saying it does confer an advantage. So I'm curious if you view the TM4 consolidation as something that just made good financial sense when considering the purchase price paid relative to the additional JV income retained? Or does it potentially confer important strategic or commercial benefits do you think?

Yes. I would say -- I wouldn't read into this anything around our strategy like we had a joint venture, our partner had put option, and they exercised it. And they got into this as purely an investor, Hydro-Quebec. They're not in the automotive industry. So we've been in discussions with them since a year ago, May. We just concluded the valuation work and all that stuff. And so buying them out is not any indication of -- there's nothing around our strategy. It was just contractual.

I think the -- is there -- you talked about some of our competitors in the supply base saying there's strategic value in having it in-house and others have a different view. We made the decision some time ago it need to be in-house back when the market opportunity was much, much higher. I guess I would sit here and say, listen, I certainly understand both sides of that argument. We have the assets. They're performing well. Now we own 100% of them. And it's something that we're -- it's a question -- it's a very good question, and it's one that we're asking ourselves internally, but we haven't got an answer for you right now.

Okay. Great. And then just lastly, I wanted to ask if maybe with all these big portfolio moves behind you, and you now have an emerged with the leaner corporate structure and haven't been so aggressive already on return of capital to shareholders and debt paydown, if maybe there might be a focus on investing more internally in the operations. It sounds like today already, you're talking about to support these conquest wins and maybe appetite for more. Also other things, I don't know, bolt-on, other consolidation opportunities or maybe does it require the next step for improving the margin of the business to spend to make money by consolidating facilities or investing in restructuring? Or what are you looking to -- what opportunities are there for internally investing that you're weighing against more return of capital or further...

Yes, Ryan, I think that's a great question. And we've covered this, I think, a couple of times. But yes, we -- one of the reasons we'll spend a bit more from a CapEx perspective going into this year is we're turning our attention to investing into the business from an automation perspective, an efficiency perspective.

Earlier in the call, we talked about, hey, how do you generate the extra 250 basis points of margin going into -- from '25 to '26. Part of it is efficiency at the plant level, and that's exactly what we're going to do.

Over the last 3, 4, 5, 6 years, we've been spending a lot of our free cash flow building out what we thought was going to be a $4 billion or $5 billion EV business. And we don't -- that's not where that business is, and we're now able to spend more of our operating free cash flow on places that like the plant floor and improvements from an operating perspective to be able to drive better margins.

But again, in March, we'll lay out that in a bunch more detail, but we are going to continue to increase our investments internally to drive better returns in the business. And if you think about those invested dollars. Like they're in plants, generally ICE plants that we have known platforms. We know what the sales are basically going to be, and we know what those returns. So high confidence, high-return type investments. And yes, that's going to -- those are where we're going to spend some dollars and continue to drive that efficiency.

But it's going to be -- Ryan, it's going to be both. So we're not going to fall back into this like as we generate more cash, it's all going to get reinvested in the business. It's going to be a balanced approach to growing our margins so that we can increase the investment in our business and increase the amount of capital that we have available to return to our shareholders or potentially invest in inorganic opportunities if and only if they can accelerate some of our growth strategies. That's the way we think about it.

Yes. It is a very good point, right? We're not going to go back to the days of investing -- reinvesting every single dollar we generate.

And our final question will come from the line of Dan Levy with Barclays.

First, I wanted to maybe drill down on the margin dynamics for this year. And I know you talked about incremental cost saves and saves that are going on in the factory floor. But maybe you could just address a few items and how that looks within the bridge. One is tariffs. I think you exited last year with roughly $20 million unrecovered. Do you get that back? Second is commodities, how that might look? And then the third piece is if you could just talk about any recoveries on EV programs where you made investments, but the volumes never materialized because they were canceled or delayed.

Yes. Yes. I'll let -- why don't you touch on the first part of that number?

Yes, yes. So the answer to your question is, yes, we do believe we're going to get most of the under-recoveries from a tariff perspective back in this year. So that will help a bit. Obviously, there's a lot of other things going on with tariffs right now. So we're obviously keeping a close eye on that in general. Commodities is a slight headwind in 2026 versus 2025. So those are the -- a couple of those. And then I'm sorry, your last point was on...

Well, EV...

Maybe I'll let Byron on customer recoveries and pricing.

Yes, for sure, on the EV front, as you guys have all seen, right, our customers are all revisiting their EV strategies and either delaying programs or canceling programs or significantly reducing volumes. And in each of those cases, we've been successful, I would say, in working with our customers on various forms of recovery. Some of that is behind us and some is ongoing. But we see a path towards, let's say, rightsizing that business and getting commercial recoveries accordingly.

Yes. And I think one thing to think about is like Bruce mentioned we're taking a small charge, so -- which is reflective of the fact that we've been pretty successful, one, in not putting down capital too early in the process. So we just don't have a lot that we have to go after.

And the second side, both Bruce and Brian and the teams have been successful from a recovery perspective. Bear in mind that for a lot of the programs where it's just volume related, that recovery generally comes in the form of better pricing on products that are going to be sold in the future. So there isn't a lot flowing through the P&L on a short-term basis. And if you do think -- if you go back to our third quarter call, we called out $8 million or $10 million that we had to take for a charge related to canceled programs and sort of how much of that do we get back, we're able to get most of that back. So it's a great story. The teams have done a really good job of going and working with the customers to get those -- to get the economic recoveries we need to on both ongoing programs and anything that's been canceled.

Great. As a follow-up, I want to touch on a thread of questions that you've addressed here on sort of your overall revenue composition. And I think with the Off-Highway sale, you're going to a much more concentrated structure, much more heavy on North America light vehicles, much heavier customer composition. And this is maybe a bit different than what we've seen from some of your competitors who have sort of tried to go into more non-auto. And I just want to understand the efforts to get more aftermarket or some of these other end markets, should we view right now your current revenue mix as more of a placeholder as you're going to start to maybe rediversify? Or is the focus still going to be much more heavily on North America ICE light vehicle with a few key customers that are the dominant piece of the customer mix?

I think -- well, first of all, our mix is as of today. And CVs in a very depressed market level. So I think as the CV market recovers, that will help us a little bit. But no, our strategy is -- will be more of a diversification. We do see aftermarket becoming a bigger piece of the pie. We've got tremendous opportunities to gain share in commercial vehicle. And so I think that's going to be a story that you got to focus on in 2026. Obviously, because our light vehicle business is large and biggest piece today, it's sort of two-pronged -- 2-headed dragon, I guess. On one hand, the market is shifting into our sweet spot. Our customers are growing ICE with fuel prices coming down. They're prioritizing SUV and larger trucks. And that is a positive for us.

You can see we're underrepresented in Asia. That's -- and on the LV side, that's probably because there is no Super Duty in Asia. It's more of a passenger car market. So I would expect our diversification is going to improve, but not meaningfully from an organic perspective just because for all the growth opportunities that we have outside LV, we've got an awful lot inside LV.

So anyway, hey, with that, I'm going to have to wrap things up because we're running out of time. We really appreciate the questions. As you know, Tim and Craig are available for follow-up calls. Again, thank you, everybody, for your interest in Dana. Thank you, especially to the Dana team for making 2025 happen, and our best days are ahead of us. And thank you very much.

This will conclude today's call. Thank you all for joining. You may now disconnect.

Welcome back, everyone. I hope you enjoyed the lunch break. We're going to continue on the track right now and very pleased to have with us Tim Kraus, CFO from Dana Inc. Dana has been one of our favorite names here for a while as they've been undergoing a transformation really by selling their Off-Highway business and recapitalizing the balance sheet with the proceeds. So Tim, thanks for joining us today to sort of talk more about the story.

I do want to sort of get into the sale of Off-Highway, what new Dana sort of can look like from here. But just because we are here sort of with 3 weeks left in the year, you gave some guidance that looks pretty reasonable, I'd say, sort of for the implied fourth quarter, but maybe you could give us a little bit of a level set as sort of how the quarter has played out thus far?

Yes. So we're 8 weeks in, really not much left for the year when you really think about the holidays coming up. But I think we're on track for the quarter. So we feel very confident that the implied guidance we had for the fourth quarter is where we'll end up. And despite some of the headwinds with, obviously, the fire at Novelis for Ford, but I think we're -- we had that in our forecast when we came out. So I think we're in really good shape.

And can you remind us roughly sort of what you assume for that? And has the downtime associated with that roughly played out as...

Yes. I mean we were pretty much in line with what Ford was saying. We've seen -- we saw -- definitely saw volume decreases in October and then -- which is what we were expecting. And I think it's -- we're getting -- the good news is, I think Ford is running less from a volume differential, but they're running consistently, which is always better for our perspective in terms of the efficiency that we can run our plants at. So we're pretty pleased where we're at. They've done a nice job of getting units out, and we're obviously supplying them as they need it.

And then I know it's still fairly early. I don't expect you to sort of give a '26 view here right now. But I was wondering if you could sort of talk at a high level, how you're sort of thinking about some of the end markets that Dana remains in? And even maybe more than that, especially on the light vehicle side, you're fairly program specific, right? So even if we think about Ford, for instance, right, not only are you sort of lapping against some of the downtime, specifically in the fourth quarter, but they have also sort of talking about adding capacity and shifts. So it seems like it could be a pretty good year for Ford on the Super Duty side next year. And then, of course, late in the year, you get the Canadian capacity coming on. But I wanted to get your sense of maybe the markets and some of the customers, how you think?

Yes. I think Ford is obviously, on the light vehicle side, the largest customer. I think you -- Joe, you said it right. I think we see relatively flat overall for the market. I think we do probably have a little bit of upside with Ford if they're able to get some of the issues behind them and run better, which is really great for us. I mean we're on really, really good programs, really with all the customers, but certainly with Ford, Super Duty, Ranger and Bronco. So those are great vehicles, and we're really proud to be the driveline supplier of choice for Ford. So...

With the -- it's been -- it's public information that Ford is sort of adding this capacity for the Super Duty up in Canada. Can you give us a sense of sort of what type of work you need to do in order to sort of help prepare the supply for that? Or where are you supplying that?

Yes. So we're not adding any concrete for supply out of it. So we produce the Super Duty axles in Dry Ridge, Kentucky today. So not far from Kentucky truck. We'll continue to produce the axles there for the production they're going to have in Canada. In terms of -- we've had to increase run rate for the lines and then some of the capacity we have on some components. But generally, with that exception, we haven't had to add any concrete, just some capacity in assembly and components.

That will help them with U.S. content requirements?

Correct.

Okay. So the sale of Off-Highway, I know we -- I think a week ago, maybe 2, we sort of saw that you got sort of final approval. We were just sort of chatting a little bit there outside. Just I know you sort of said close by the end of the year. As you sort of mentioned, we're getting pretty close. Like what sort of really needs to happen here now that you sort of have approval to sort of finish the close?

Yes, it's really separation, right? I mean, while the business was a separate segment and ran relatively separately from a sales organization and whatnot, there's a lot of systems that are integrated, especially on the IT side, on aftermarket. So we're just completing those separations. We also have physical separations that have to be completed. So that's all being.

There were no shared facilities or anything like that?

There's no shared physical facilities. There's shared campuses. There's some built in things like that. But generally speaking, no shared facilities. So it's really the real nitty-gritty of getting to the business separated so that when we do close, it's in the best possible position for Allison to run the business without any issues.

Now the TSAs all set up.

The TSAs are all set up. I mean, we're in really, really good shape overall. It's really just making sure -- I mean, it's a big transaction for us from a divestiture, it's a big transaction for Allison, obviously. We -- on both sides, both us and Allison, we just want to make sure we're in the best shape and make sure that our customers, the operations, the suppliers, our employees, it's 10,000 or 11,000 employees that have been with us for some of them for a very, very long time. We want to make sure that transition happens really, really well, and it really gets off to a great start. So that's really what we're doing. I don't really have any concerns that we won't get there by the end of the year.

Yes. And one of the things I think I maybe sort of failed to appreciate, obviously, we knew the workers, the facility workers, the final work is sort of going over. But as you sort of indicated, there's a decent amount of sort of staff, right, that goes over with the deal as well to Allison.

Yes. I mean you think about like the Off-Highway business for our European business was the bulk of our European business. A lot of the sort of non-off-highway specific people really did support by and large, the Off-Highway problem. So many of those people are going over with the transaction, and they have to move legal entities and get reset up. And so there's a lot of really detailed oriented things that have to get completed to make sure we don't -- the last thing we want to do is not be able to deliver a part to a customer or pay one of our employees after the deal. So those are the things we're really focused on today.

But there will still be some stranded cost or headcount post the deal?

Of course. I mean just think -- I mean, part of my salary gets allocated and obviously, it gets absorbed by like they can't cut 30% of me off. I think my boss sometimes things he'd like to. But -- so yes, of course, there's some of those costs. I think we'll -- we've called out it's about $40 million. We think we get $20 million of that taken care of next year. And then by the end of the year, we'll be able to take the vast majority of that or offset it in some other way. But we're very confident in our ability to eliminate the impact of those stranded costs on the remaining margin of the business.

So with the cash coming in, you've been very clear, right, that a lot of that will be returned. There will be some sort of deleveraging. I think one of the things that early this year sort of surprised us a little bit was you did say you would sort of buy back some stock in advance. I think you bought back maybe a little bit more than sort of we anticipated. So can you just, again, remind us and sort of level set where you are with the cash that will come in, what can still be returned, what sort of goes towards deleveraging?

Yes. I mean we've called out about $2 billion of deleveraging on the growth side. That's obviously still where we'll be. We also announced a $1 billion capital return as part of what we announced over the last year. We've largely done -- we said we'd do $500 million to $600 million. We're largely on track for this year. We have bought back stock probably more quickly than we were originally anticipating.

Some of that's obviously, one of our largest shareholders was Carl Icahn or the Icahn Group. We completed that transaction in the early summer. So that kind of kick started it. But our view of the stock has been undervalued and continues to be undervalued. And so we have a $1 billion authorization if the stock is on sale, might as well buy it back ahead of time. We have a lot of confidence. Obviously, we're going to get to closing. And so that's the reason we accelerated that. We still have about $400 million on the authorization, and we anticipate using that over the next 2 years through '27 to continue to buy back stock.

Okay. So let's talk a little bit, I guess, about sort of what new Dana looks like, right? So it is, I'd say, sort of a little bit more simplified, right? You've got the light vehicle driveline, which as we sort of discussed earlier, is -- has a couple of sort of very key customers and programs. And then you've got the commercial vehicle side. How would you describe the strategy for each of those sort of end markets from a growth or margin or a profitability perspective?

Yes. I mean I think the light vehicle business largely has the old light vehicle driveline business and the vast majority of old Power Technologies group, so which was the sealing and the thermal business, which primarily serves light vehicle, not in its entirety. There's still a little bit that goes to off-highway or commercial vehicle customers, but that's largely what's in the light vehicle segment, and those are pretty traditional products.

So you mentioned the driveline, the 4 big programs that we serve here in North America, and then we do various sealing and then thermal products, which is really classic oil and transmission coolers, but also contains our battery and electronics cooling, which continues to be a growth area, not the kind of growth we were expecting or had planned for a couple of years ago, but it's an application of technologies that we've developed for ICE that are completely applicable to the EV segment. So while that growth is a bit slower, still a great opportunity for us to continue to grow as the market for electric or hybrid vehicles continues to develop.

And when Power Technologies was its own segment, that was one area where we did see sort of margins languish a little bit. And do you think we bottomed there in that specific business? And where are we in sort of the ramp?

Yes. I think we're -- we've had a couple of things. Obviously, there's quite a bit of volume that came out, especially on the EV side. So we've managed through that. I think it's been a process, but a good one. We've had some plant optimization that we went through, like launches that we struggled with a little bit over the last year. That's largely behind us. So I think those margins improve as we move into '26, part of the margin improvement story that we've been talking about.

And I think largely, the other part of this is the number of SKUs in that business, the number of part numbers that we sell in -- especially in the ceiling side of the business is pretty significant, especially on the OEM side, not just for light vehicle, but commercial vehicle off-highway. There's an industrial component of that relatively small. But we're evaluating that business now in terms of what parts are profitable, which ones aren't as profitable as they need to be and really evaluating those and going through and saying, look, if that part doesn't meet our profitability or our return thresholds, we're going to go to the customer and get a price increase. And if they don't want the price increase, they'll tell them, "Hey, you're happy to take the business elsewhere. And I think that leads to maybe a shrinking on the top line, but a much more profitable business going forward for what was the Power Technologies segment.

And by the way, I think when you think through that, that gives us opportunities as we go through, we end up with plants that are less than utilized. We've got some opportunities to maybe rationalize some of the manufacturing and take additional fixed cost out of the business. So I think there's a lot of opportunities for us as we come through both for margin expansion and for growth.

I want to get back to that point on margins and rationalization in a second. But just to sort of close loop on that on the commercial vehicle side, Bruce sounded pretty despondent, I think, on the hopes for recovery there, which has obviously been a market that sort of struggled. I mean what's your sort of latest and greatest sort of view on commercial vehicle market heading into '26? And are there growth opportunities in that market? Or is it just sort of with the ebbs and flows of the cyclical?

Yes. From a market perspective, we're talking about North America. Yes, Bruce -- it hasn't changed from what Bruce said. We don't see much recovery certainly in the first half. We don't see it getting any worse. So it's not in a great position from a total volume perspective, but it seems to have stabilized. As we look out into the back half of next year, maybe there's some opportunities. We haven't seen that yet. Our customers -- the order books don't seem to suggest it. But that would be sort of, I think, the first opportunity. I think the only bright spot there is the year-over-year comparables like aren't going to be -- could be better just because this year has been -- especially in the back half of this year has been pretty tough.

And I know there are other geographies in that business, Europe, South America, China. So it's a little bit difficult. But by our measure, it does seem like you've probably been outperforming the markets even though we sort of try to blend that, which suggests that there's either share gains or some sort of pricing or something. So what do you think?

It's both, right? So we have -- like that's really part of the offset we have next year as we continue to gain share with customers that historically have been pretty small for us. And that continues to be an opportunity for us as we compete and from an end market customer demand for that -- for our products. On the CV side, we have an opportunity with customers like Navistar, like Volvo, who are -- which have a much smaller share, picking that share up to offset some of the weakness in the macro volume is pretty helpful. So I think that's our area we kind of...

That's to sort of get as -- because I know the customers can ultimately choose their sort of axle drive, but that would be sort of like as the standard or recommended fit.

Yes, I think there's a couple of parts there. One is where we sit in the book. That's really how we work with the OEM themselves. And the other side is on the end market fleet customer and making sure that they understand the value proposition of having a Dana axle and driveshaft in their truck and then using that as a pull-through with the OEMs to push the product or pull the product through the supply chain. So it's really a combination of the 2. And then as more customers really want that in the order book, our position in the order book and the pricing in the order book gets better and that should lead to better market share.

Yes. So I think you sort of talked about -- you typically do sort of a backlog update. I think you indicated you might do that at some point in January ahead of reporting earnings. What -- obviously, you're still sort of working through that, you might still get some business. You're not going to give us a number today. But like again, broadly, like how should we think about what drivers really are for that business? Because I think historically, on the commercial vehicle side, backlogs a little bit of a funny concept because it is sort of more built to order, right, as opposed to sort of orders in advance.

Yes. Our backlog, when you break down, if you look at the backlog from a year ago, right, the amount of backlog related to either Off-Highway or CV is relatively small, especially on traditional. A lot of the backlog is in CV.

Was EV.

It was EV because that's brand new -- those were brand-new programs. So obviously, those are going to be lower tomorrow than they were yesterday because of just what we're seeing in the market.

So then when we think about on the light vehicle side, right, like, I mean, it's a pretty unique set of product for a very specific segment of the light vehicle market. So how do we think about sort of continued wins in that business?

Well, I think there's a couple of things. One, we still have significant EV business coming online, albeit at lower volumes, but still incremental sales dollars that flow through that we didn't have in the past. And that's true on driveline and on battery cooling and electronics cooling. I think the other is, as the customers start to rethink their product plans, we are seeing renewed opportunities in -- for ICE programs or new variants within the programs that we're already on. So we are seeing a change, whereas if you went back 2 years ago, there was virtually no RFQs for new ICE platforms or significant adjustments to those platforms. That's changed quite a bit today, and we're seeing a lot more of that interest from our customers in terms of those platforms or new platforms that they might be considering.

Would something like the expanded volume for the Super Duty and kind of be considered backlog is that we spend...

We would -- typically, we wouldn't consider volume uptick to be backlog. In this case, we do because it's a brand-new plant, incremental volume. So yes, we are -- we would consider that. The other things that would go through volume is where we've got additional content on the vehicles, right? So where they -- the customer may have added variants that weren't there before and those come with additional content because of different gear ratios or options, then that goes through backlog when it's a renewed program.

And to the extent -- one of the things like Ford has alluded to is sort of maybe some richer mix of, let's say, performance vehicles, right? And I think we typically think of engine when we hear that. But the same can be said for the axle. So to the extent there's more Bronco Raptors...

Right? Those are great vehicles for both us and quite frankly, obviously, for our customer. But those are great because they do, they come with significantly better content and the OEM gets to sell it for a premium price. So yes, more of those types of vehicles are always helpful from our perspective. And the nice part there is it's not a variant that they run one-off. They tend to run them in a set. So you can set up run and the profitability is really quite good on those programs.

I guess final question on the backlog. I mean, I think if I recall correctly, almost 3/4 of less backlog seem to be tied to EV, and you just sort of alluded that it's not going away, but there's definitely been sort of a pushout or to the right or the area end of the curve looks a little bit different. So how should we think about that in the context of sort of what you've already reported for that 3-year backlog and then as you sort of roll on?

Yes, I think we'll talk about this next month. But there's going to be a number of components. There'll be some clearly canceled programs that will affect backlog. There's volume decrease assumptions that will affect backlog and then some delays in the program that will move backlog around in the year. So like I mean, our backlog on EV is going to be a little bit -- if you just look at '27 from before and '27 tomorrow, it will obviously look a little bit different. But we still expect a good chunk of the backlog to be EV. It just isn't going to be as large as we once thought it would be. But again, that comes with less investment, too.

Well, I was just going to say, with that business, which you sort of won, how has sort of the conversation with the customer sort of changed in order to sort of take that?

I would -- I mean, the conversations with our customers are -- I never put them in the easy category. But I think they've been very, very constructive. And I would say that they've been we got to where we need to be with many of the programs.

When you say less investment, is that because you're leveraging investments already made or because they're shouldering more of the investment.

It's a bit of both, where we hadn't put capital on the ground yet, that capital is coming in smaller because the volumes are down. So some of it's like, hey, we hadn't ordered the programs. And some of this is true also because they delayed it. Now they've actually taken the volume down. So because of the delay, we hadn't ordered capital and then we can put it in.

The other is where we do have opportunities, and I think this is to go back to the growth conversation, we're offering a lot more to the customer now saying, "Hey, look, if you -- especially like on the CV, if you -- we have an off-the-shelf product, we can make it fit what you want. If you want that, you can have it at x price, and it's great. If you want something that's bespoke, you're paying the full bill. And what we're seeing is a lot more acceptance of something that, that's less bespoke and more off-the-shelf with some adjustments, which the customer then is willing to pay for.

And don't forget these systems, we're on a mechanical system, you have to change the mechanical aspect of the axle to get a different drive. On an EV, you can change ride characteristic with software. So you could have principally the same motor inverter and hard parts and change that ride dynamic and how the customer feels in that vehicle by changing the way the software runs. So there's a lot of opportunities. And I think more of the customers are -- as volumes just aren't going to be there, are rethinking kind of do they really need something that's special or bespoke to them.

Maybe going back to the cost side and the margin side, where you sort of talked about $310 million, I think, of cost out, right? You've done -- I think you're probably ahead of plan basically to date. Does that -- as you sort of work through that, have you sort of uncovered additional opportunities where I'm not saying you're -- I'm not going to sort of hold you to this as saying like it's for sure, but does -- as you sort of evaluate and see what you've been able to do, do you see more opportunities for even more cost outs down the line.

Think about the $310 million, right? We started out with $200 million, went to $300 million, now it's $310 million. I think the team has done just an absolutely fantastic job, not only identifying the cost out, but really getting more efficient, right? Here's the things we're not going to do. Here's how we're going to do the things we need to do more efficiently. And that's why we have such confidence. One, the costs are going to go out and the costs are going to stay out.

I think as you move forward -- and a lot of that was -- that was all above the plants, right? So you're talking about a lot of corporate back office, right? It's a lot of engineering that like -- and by the way, the reduction in EV really helped drive a lot of that because we put a lot of infrastructure into the business for that growth that's now not coming and that cost has been taken out, not just engineering, but I think program management purchasing, right? This is going to be a $3 billion, $4 billion, $5 billion business comes with a lot of other costs. I think now are there still some additional opportunities? Yes, I mean, is it...

But more in the plants, right?

Definitely in the plant. So as we've been sort of down this EV journey over the last 4, 5, 6 years, we spent most of our time and effort maintaining the business we had and then developing the products that we needed for EV. That's been done. But what we didn't do is spend as much time or capital, mostly because we didn't have it because we were spending it on EV on really trying to improve the -- really supercharge the efficiencies in the plants. And that's the opportunity that we see over the next year, 2, 3 years is really at the plant level, being able to do consolidation or automation, other efficiency within the plant that really will help take that profitability to that next level.

Is there also internal benchmarking? Like do you think some plants are just inefficient relative to other areas of other plants you have within the organization?

We certainly have a gradation, right? A newer plant is obviously more efficient than the one that's been around for 60 years. I think the more important thing is we're behind on base automation. If you just look at a typical auto industrial type manufacturing. And that's where we've really, I think, going to be concentrating. It comes with investment. But that was investment that would have gone into EV, which will now go to these types of activities.

And the great part here is the returns are excellent, right? And there are a lot -- from a risk-adjusted basis, far, far easier to understand. As long as the volume on, say, an ICE program is going to be there, like that additional profitability and savings are going to flow through because we know what variable costs or fixed costs we've taken out of the business.

And that's not just labor savings, right, where I know at times, like labor has been a little bit of a challenge. But is it also sort of are there also -- one would imagine efficiency savings, quality savings, right, from automation?

Yes, I'll give you a great example. So this is -- so when you build the center section on an axle, right, you put a gear set, right, a hypoid gear set in. The hypoid gear set is made, and there's some movement inside that. There's a shim that gets put in there. And there's varying sizes to reduce gear wrap, noise, vibration, right? Historically, right, you had Bob or Mary who would like would be, oh, I think I need #3. Well, what's going on now is, as you think about automation is there's an automated camera that's looking at it and then calculating and say, hey, like your best choice is shim #3.

And the number of times that, that's correct goes up. So OEE comes through and starts to go up. That's not really automation in the sense of a robot, but it is a -- in terms of our OEE and the amount of throughput we can have on the same type of machine, maybe we don't need to run 3 cells. We only need to run 2 cells and get the same output. So those are the things that I think when you think about how we can continue to invest in the -- on the plant floor to really improve the productivity, but also to your point, quality, right? You're less likely to make the wrong choice and end up with a gear that doesn't pass NVH at the end of the line. So...

So it's not just automation, right? It's also the use of more AI and other software technologies to help get that quality up. So you mentioned there would be some investment, but that's otherwise investment that would have gone to EV. As we think about -- you've given some free cash flow margin color for the company on a go-forward basis. CapEx, I know it could be variable from year-to-year depending on program launches, but how should we think about CapEx as a percent of sales on...

Yes, it's like -- I mean, I think next year is probably 4%. So in the 4-ish, 4.5%, it probably is a reasonable number. Like you say, it will move around depending on where we are in the refresh cycles. But I think generally, 4% to 4.5%, I think, is where we're at. We have a 4% of sales free cash flow number for next year. I think that is not an issue at all because you think about it, right, we're at 10% to 10.5% EBITDA margin and with a better capital structure, obviously, lower tax base, we continue to see some efficiencies from a working capital. But even without that and with a 4% free cash flow or CapEx, like getting to a 4% free cash flow is -- the walk is pretty easy to understand from my perspective.

Can we talk about the working capital part for a second because I think -- I don't know whether this is true or not, but please correct me like when I thought about the Off-Highway business, right, great business, good margin business. But generally, lower volumes and a more diverse array of SKUs, if you will, right? So that seems like it probably was a working capital headwind relative to the rest of the business, but I'm not sure whether that's true. But maybe just some color on how you could see working capital for new Dana emerging relative to old Dana without the Off-Highway business.

Yes. I mean, certainly, it was our highest working capital-intensive business, right, for exactly right. And it's an Italian, largely or a large portion of it is in Italian. And those customers tend to live off the old fiat 90-day terms, 100-day terms. So yes, even outside of inventory, you see that on the -- or the receivable side, get a little help on the payable side, but even still absolutely less intensive. And by the way, one of the things in that business is when sales fall off pretty quickly, you end up with pretty long supply lines and you do end up with bubbles in working capital until you can kind of work that out. So that will be certainly helpful to new Dana as we go through.

I think for the rest of the business, we've -- this year, we had obviously a pretty significant falloff in the commercial vehicle, which does have a bit longer supply chain metrics than our light vehicle business. So we think some of that will come back next year as well as we kind of work through. Well, it stopped falling. And of course, now we're kind of working through what's already been ordered and come into the plant. So we do think there's a bit of help there. And we still have some work to do on some of the other aspects, but I think that will be helpful next year as well.

Okay. I forgot to mention this, but to anyone in the audience has a question, if you scan the QR code, it will pop up here on the iPad, and I'm happy to ask a question on your behalf if you have one. So I'll be on the lookout for that if there is anything. Metals pricing. We've seen the price of metals sort of fluctuate a little bit. I know SBQ is a big input as well to you, and that's a market that is quite frankly, a little bit more sort of opaque to us. So maybe you could just remind us sort of what -- or tell us what you're seeing on metals pricing heading into '26 and then remind us sort of how that works its way through the year.

Yes. I mean we're not seeing any -- we're not anticipating any drastic changes in the core metals. So I think SBQ. Another one that's a core piece for us is really North American scrap pricing, right, because that's really an input for a lot of the steel we buy. What we've seen as the commodity prices have sort of swung and moved quite a bit over the last 2, 3, 4 years is our commodity recovery mechanisms that are contractual have worked very, very well. We tend to be able to recover somewhere in the 75%, 80% range. It depends on the customer and the program, and we tend to be on a 90% to...

How much higher is that than it was, let's say, 5 years ago?

It's really not unchanged. Like that aspect changed many, many years ago. I think what we learned through the last 2, 3 years of these swings is some of the indexing that we had worked fine when metal prices were relatively mirrored. Now that there's been some [ discrepancy ], we found that some of the indexes that we were using no longer really estimate the impacts. And so we've gone back over the last few years and actually improved those and had the customer agree because it doesn't help either one of us if the index were marked off of isn't working. But -- and you can see that like the impacts on -- when you look at the walks, it hasn't been dramatic other than the impacts you have from a lag perspective.

And that lag is still generally a quarter or so?

It's a quarter, maybe again, it depends. It could be 90 days. It could be 120 days depending on the...

And any material differences between the businesses that you retain control of versus Off-Highway?

Yes, Off-Highway had very little contractual commodity adjustments. Those were all negotiated other than with some of the very large, the Deere's, the AGCO's of the world. The rest of them were all -- you had to go in and negotiate. So in that respect, I think the percentage of the business that is covered by contractual obligations will actually increase after the sale of Off-Highway. That said, I mean, the one thing in the Off-Highway business was very adept at was going in and getting those -- that pricing from the customer when that happened. And you saw that over the last few years when margins in that business actually improved despite inflation and commodity prices increasing.

I'm curious sort of how you think about opportunities in the China market. I know it's not a large portion of the business, but it is a large market, the largest market in the world. And some of those players will undoubtedly exercise more influence on the global automotive industry. So what's sort of the strategy there?

Yes. So we're selling a large chunk of our Chinese business along with Off-Highway. That was a large.

I was talking about on RemainCo, yes.

Yes, on RemainCo, if you think about it -- so on the commercial vehicle side, from pure ICE, we have a joint venture with Dongfeng on it. So we -- it's nonconsolidated. So that's how we play in the ICE commercial vehicle market. The part of the commercial vehicle market where we have a really good position is in the EV. So they're very early adopters from an EV even in the truck and bus market. We continue to see while that market has been reduced, still very supportive and adoptive of our EV technology. So we'll continue to be able to plan there.

On the light vehicle side, it's not a light truck -- it's not a full-frame truck and SUV market. So we have some business through joint ventures with a number of the OEMs, but it's relatively modest. So we'll continue to look at opportunities, especially in the CV market. And the LV market, the place where we play is really in the old Power Tech stuff. So in thermal, and we'll continue to see growth and work to grow those -- that part of the business in China as we move forward. But our core light vehicle driveline business just isn't really -- it just doesn't have the market products that really match up well with ours.

On the light vehicle, the commercial vehicle side of the business, are you comfortable with where the portfolio is at either from a -- are there holes where you sort of want to fill in either organically or inorganically? Maybe that could be sort of a -- potential sort of use of cash going forward? Or conversely, are there still some areas that as you sort of continue to go through the business, evaluate what you have, where you may realize this business doesn't make sense for us to be the owners of the products.

Yes, if you look -- I mean, we've sold a couple of small joint ventures that we've had that were nonconsolidated this year. There's...

Well, just not even China, just overall.

No, no. I'm not talking about China. I'm talking about overall. I think on use of proceeds for acquisitions, like we're really focused on the business. We love the businesses we own. In terms of what -- do we have any holes, I think the place where we see a lot of growth, and we're spending a lot of time, and this is really around our aftermarket business, especially on the ceiling side, really in North America.

We have a very strong position in Europe, really trying to replicate that here and going after some of the big box retailers to get that done, I think, is a great spot to be in. But generally speaking, we love the businesses we're in. We like where we're positioned and we like the technologies that we have.

Great. Well, with that, Tim, I think we've timed it perfectly. Stark zero.

Thanks, Joe.

Thanks for having us. All right. Thanks for being here.

Thanks, everyone, as we continue day 1 of the Barclays Global Autos Mobility Conference. I'm Dan Levy, lead U.S. autos research coverage. Very pleased to have with us Dana. I think the way you've described is power -- focusing on power conveyance. But going through actually a very transformational transaction as you're changing your end market mix quite dramatically with the sale of your off-highway business.

So we have here Tim Kraus, the company's CFO; Craig Barber, who leads IR. So we're going to go through a series of fireside chat questions. Anyone has a question, please feel free to raise your hand. You can answer at the end. And then if you have e-mails, please e-mail one of my colleagues, Joshua, [email protected].

With that, Tim, Craig, thank you. I want to just start off with a big picture question. Off-highway is if I can recall, probably this sale is probably the largest transaction I can ever recall in the years that I've been following your company, and you've done a number of transactions. So help us appreciate just broadly how this is going to transform Dana, not only in terms of segments or end market, product, but more so in terms of business strategy. How does this change the picture?

Yes. I think the way to think about this is, we've historically operated in light vehicle, commercial vehicle and what we call the off-highway segment, which is really construction, mining, forestry. We have an industrial business that's in that segment. So it's a broad-based business. So I think the way to really think about this is it's really a simplification, right? We're going to radically simplify the business with 2 end markets, much more limited group of customers and a product portfolio which is really identical to what we have today. But again, very focused and on those end markets, which even for light vehicle for us is primarily on the driveline, large trucks and SUVs. So I think that's the big part.

Obviously, it's -- as you mentioned, it's a milestone event for Dana. We've had the off-highway business for a very, very, very long time. I think it's the right time to make that change in strategy. So we'll be nimbler. We're going to focus on a great group of customers, products, technologies that we think are going to be able to really drive the company and help grow the company in the future.

Great. Let's pivot to the near term. There's a lot of -- there's a number of supply chain disruptions that we're seeing right now, Ford Novelis, Nexperia. You don't really have much in the way of JLR exposure. But maybe you could just talk about what you're seeing on the near term on the supply chain disruptions and how that maybe influences the upper versus lower end of the guide?

Yes. I mean, obviously, we're always subject to various supply chain disruptions. If you go back a few years, we had a lot of issues around chips. I think we're managing through it. It's really limited, at least right now for Novelis to Ford. The good news, I think, for us is the products that we're on tend to be some of Ford's more popular and higher profit margin products I think Super Duty. So from our perspective, much like the chip side, we think that -- and what we would expect is that they'll allocate what they do have to the products that are highest demand and highest profit. And I think that really bodes well for us. If you think about low end, high end of the range, I mean, we've -- in our forecast for the balance of the year, we have assumed what we think the impacts from those disruptions will be and are largely in line with what our customers have been saying publicly.

Okay. And then just as far as the margins in the fourth quarter, which are a pretty material step up versus what we saw in the first 3 quarters, roughly almost 11% in the fourth quarter. You've been running 8.5% in 3Q talk about a number of things in terms of incremental cost saves, some EV cost recoveries, performance mix. Maybe just unpack those points and what's the line of sight to that large step-up in margins?

Yes. I mean I think if you unpack it. So the biggest one is cost savings. We have complete finally. Most of that's been completed as we kind of come through the quarter to get those savings. So I would put a 0 risk on our cost savings for the year and for the quarter.

So -- and then you think about recovery, we took a small charge in the third quarter. We don't see much risk in recovering that in the fourth. Those discussions with the customer are well down the path, and we fully expect that, that's going to happen.

The last one is really mix. And as we sit here today, 2/3 -- almost 2/3 of the way through the quarter, much of what we thought was going to happen relative to mix is occurring. And if that continues, we have a fairly high confidence that we'll have good line of sight to deliver the quarter that we forecasted during the earnings call last month.

Okay. Related, I think the number that is most surprising and interesting to people is your margin target for next year, 10% to 10.5%. And it's just -- it's really a reflection of -- I mean, you're on track for, I think it's 8% this year. And even that is a sharp improvement versus where RemainCo previously was, that was like a 5%, 6% margin. So you've listed a number of drivers, cost saves, stranded cost elimination, ops preview business, let's maybe unpack those. And let's just start with the cost saves. So $310 million is the target. You're going to exit with the full run rate. What else needs to be done in '26 and especially around eliminating the stranded costs, which I think you said is like $35 million, $40 million.

Yes. I think for the -- so you're right, $310 million, most of that's done. We'll get the run rate flowing through as we move into next year. So we have exceedingly high confidence, not going to be an issue. On the stranded cost side, it's a mix. So we have some transitional services agreements with Allison. So we'll be providing some of that. Some of those costs that are going to go away will need to be kept and will be covered through charges for those services.

And as we move through the year, we're going to be able to take those down. Some of our contracts that we've -- that we're going to be exiting because of the smaller business. Other is just natural reductions as we've sold the business that will come out. So think of insurance or audit fees, those are natural things that end up coming out of the business as we just shrink the business.

So -- but yes, I mean I think the -- our ability to cut that down and then really exit and get into next year and really have those out of the business we have a really -- a really high confidence in a playbook that will run. We know where the costs are. We know what we have to do to get them out. And if there's some that just can't go out, we have other levers we'll pull to make sure we have those offsets.

Okay. Next bucket is the operating performance. And I think that was what perhaps caught people by surprise is that even after all of these $300 million of cost saves, you talked about extra cost levers, more so, I think, on the factory level. So how long dated are these? What needs to be done to unlock those saves? How much runway is there?

So I think there's a lot of runway here. When we think about next year, we have an ongoing cost improvement plan that's on the plant floor. We do it every day. And usually, the way to think about this is those are the improvements that are offsetting the natural inflation and price downs that are in the business. And so what we -- from what we've done over the history and now with this better focus on the business, we do see additional improvements that we can make on the factory floor, and those should start flowing through as we get into really sort of the latter part of the first half and then in the back half of 2026.

So you can think of opportunities on efficiency on the plant floor, some automation. I mean there's a lot that we haven't done yet to improve the operating performance at the plant level.

And our ops guys, I mean, they're kind of chomping at the bit to have us give them the capital and the dollars that they need to go get it, and we're really excited about what we think we can do with the business from a plant floor efficiency perspective going forward, not just in '26, but out into '27, '28 as we sort of move through the back half of the decade and through the long-range plan period.

Can you talk about automation because I think this is coming up a lot amongst your supplier peers, where are you right now in automation? What's the opportunity? What's the cost to get that opportunity?

Yes. I would say the way to think about automation, and we're not talking about big complicated. This is really tried-and-true robot, cobot type stuff. But from an industrial perspective, it's really been around for the last 15 years. We're just -- we're behind a level of automation and really use of efficiency in our plants relative to general industrial players. And some of that's because over the last 5, 6, 7 years, we've been really focused on the EV space in developing and growing that portfolio. And didn't really have that focus or the capital really to spend on it and now we do. And so we're going after that with a lot of speed and diligence.

Look, it comes with CapEx, absolutely. I think we've said, look, we're going to spend about 4% of sales next year. That's still a good target from our perspective, plus or minus. But we think within that view, we can allocate the capital that we need in order to push the efficiencies on the plant floor forward.

And then maybe just another point within that bucket. Restructuring, I think you said has been a -- there's some initial drag because of the cost. Maybe just talk about what's going on with restructuring and then when that flips?

So I think like if you look at us this year from a restructuring perspective, our cost-out program is probably going to end up costing us, I don't know, $70 million, $80 million. When you go into next year, there's going to be a meaningful reduction in that.

Now we'll have to still spend some restructuring dollars to take some of the stranded cost out. So we won't get the full benefit of the price down, but it will be meaningfully lower tens of millions of dollars lower next year than we have this year, at least as we see it today.

Okay. Third bucket here, and I know we're going through each of these buckets, but like these are all -- I think we've gotten a lot of questions about sort of the path to these ambitious targets. So the backlog, right? And you said 60 basis points here. So maybe we could just level set. I don't know you'll give your update in January on where the backlog stands. The last update was, I believe, $300 million for 2026.

Maybe just conceptually walk us through the pluses and minuses that we could be seeing? Because I think we just had S&P up earlier and they had a slide. EV is all obviously delayed. You've seen a lot of ICE extension. This has changed the way maybe automakers are thinking about the cadence of their programs. How much does this impact you?

So absolutely, it impacts us. About 70%, 75% of our backlog was EV related. With lower volumes, delay in programs, it certainly will have an impact on the backlog. I think on the flip side of that, we're also seeing pickup. So a good one is the expansion of Super Duty production into Canada. That's going to be a tailwind for us relative to backlog. I think as we sort of think through our CV business, we continue to -- our growth is not just backlog, right? It's also a market. So we continue to gain market share on the commercial vehicle side of the business. So we see that being able to contribute to our margin expansion next year as we come out of and exit this very transitional year in 2025 and get into a bit more stable and new Dana realm for '26.

How does reshoring change the picture on the backlog? And when does that business more so started? Is that more of a '27 opportunity?

I think it's a little bit longer. I mean you think about the products that we supply, they're safety important products, right? They require testing, repeat [indiscernible] from the customers. Obviously, what the customers do relative to platforms if they want to reshore, that's a longer-term item. So I don't see reassuring as a big story in terms of Dana for 2026. Sure, there's going to be some of our components we might be able to do something with. But large scale, either customer-driven or from our own, that's probably a bit further out.

But certainly, something we're looking at and given our footprint have the ability to provide more domestic production for our customers that if so needed.

Okay. A couple of items that aren't in that list, but I think that you've probably been asked in the past. So the compensation environment, right? So let's just start. You obviously have a lot of EV programs that you are on and the volumes haven't materialized. How much runway is there to get commercial recovery. So I think you've done at least more broadly on inflation, you've done well. This one is a little different. How do you look at that?

Yes, look, I mean -- we have really good relationships with our customer. We have high-quality products, technologies that they want and need for their products. We're -- it's obviously not easy to have a pricing discussion with your customer. I think we're at different stages on different programs. And really, some of it depends on, is it a delay? Is it a cancellation? Is it a volume drop? So they all have a different situation that we have to deal with, with the customer.

But I think the customers are very much open and understand that we built a business and made investments based on volume assumptions. And while they don't guarantee volume, some of these delays and drop-offs obviously coming back for recovery from a price perspective is not unexpected from their side.

And on the tariff side, I think you're exiting this year with a $20 million net drag line of sight to recovering that?

Yes. I think we believe we're going to be able to recover meaningfully almost all of that. I mean, some of it's timing differences. It depends on the customer. But generally speaking, we think we'll recover most of that on a timing basis as we move into next year. I think longer term for tariffs, like is my concern, I think, is if more of these tariffs start getting passed through to consumers, how does that affect demand and that's probably a bigger impact long term that could be on all of our businesses if consumer demand for cars and trucks ends up being muted because of pricing.

Okay. Related, so the EV environment is obviously weaker. How does this affect, maybe the resource allocation on EVs, the R&D profile? How do we think about that?

I think the easier way to think about this is over the last 5, 6, 7 years, we've invested a considerable amount developing the products and the technologies for electric vehicles. That's largely behind us. We have the portfolio. And so now -- and that's a big part of the cost savings. We took a lot of costs out of the business related to EV programs.

Now our view is, hey, if you -- we have programs and products that are on the shelf if you want us to incorporate that into your vehicle, whether it's a commercial vehicle, light vehicle, our expectation is that the customer is going to either guarantee volume, pay for the engineering upfront and/or the CapEX. So I think we're taking a much more pragmatic view of the amount of risk we're willing to take in the EV programs.

But the good news is we have the technologies and the products off the shelf. So if you think about commercial vehicle, whereas many of these OEMs were looking for bespoke products or products that were really fit their needs. We're now saying, "Hey, look, we have a product, a very capable products on the shelf. We can tailor it to your needs. You can pay for that incremental relatively small amount of dollars for engineering. But if you want something that's completely unique, you're going to have to pay for it.

And I think that lowers the risk profile for us. And also gives the OEM an opportunity where we're in this much slower ramp to get a product, get a vehicle out into the market. And if he wants a different driving experience, we can change software and make it differentiated form that way at a much lower cost. And that seems to be -- really be attractive to a lot of the OEMs as we kind of go through this changing in terms of the EV market and outlook.

I would gather because a number of the automakers are talking about improved mix -- opportunities to improve mix, not necessarily on more trucks, but the variance. I'd imagine that, that's the type of thing where some of these larger vehicles or different engine variants that probably come with a different driveline variant that could be accretive to you?

Yes. I mean we were talking about mix in the fourth quarter. That -- those are some of the things we're exactly talking about. As we build a specialty vehicle or a limited run, think of things like the Raptor or Stellantis and [indiscernible]. Jeep is famous for this with the Wrangler. They come out with the Barbie Wrangler or the Beach Wrangler, these all come with specialty axles, different engine configurations. Those are always an opportunity for -- and they get -- they obviously charge a higher price, and we look to do the same thing with our product to them. So absolutely is an opportunity for us across the entire product line.

Because those CPVs have probably got to be pretty elevated.

Yes, they are.

Can you unpack what's going on in the CV market and how that's -- because obviously, it's been very difficult, and I think you've said no green shoots through mid-2026. So how are you managing this challenging environment in CV? Maybe you could just unpack because I think people are maybe a little less aware that people think CV and they think, okay, this is all just North America Class 8, but you have some aftermarket, you have some medium duty. So just unpack the different dynamics within CV.

Yes. I mean half our business in CV -- I mean, we are -- I mean most of our CV business is in North America. We have a decent-sized business in South America and a much smaller business in Europe. But from a North American perspective, our Class 8 aftermarket is about half the business. The rest is vocational medium duty. So it's a bit of a mixed bag.

And our largest customer is PACCAR. We also supply Volvo and Navistar, and we also supply into the commercial vehicle variance on, say, like the Ford F-Series. So they're 650, 550 and the 650.

Yes, it's been a pretty difficult year in terms of volume across that business. And again, we don't see that really improving as we kind of move into next year. We don't see it getting any worse. Maybe if we think about the back half of next year, we'll start to see a little bit better. But I mean, right now, we're not seeing really anything. So to answer your question, how we think about it? Well, we're going after -- we're still going after cost. We're making sure we're running the factories where we need them to be, making sure that we have the programs we need to, to take those costs out to limit the downside on the contribution margin that comes with, obviously, the lower sales. So it's not easy. It certainly has an impact on us. You can't lose that kind of -- those kind of units and not have some impact.

But certainly, if we can't get it out of the direct, we'll find other places to go flex and offset the impact of that volume loss.

And so the decremental margin on that immediate lost business, is it fair to say that absent the -- absent whatever cost actions you're taking, because there's maybe some flexing that you can do that those are more muted? How do we think about...

Yes, they're muted. I mean we obviously aren't going to just stand by and let the contribution margin flow through. We'll absolutely go through and do what we can to mute that. But there's obviously an impact to margin. You can't offset all of it. But the guys, look, we -- this is what we do every day. The teams are really good at it. And we just continue to drive to take the cost out that we can and make sure we have the downside as muted as possible.

Okay. So even taking into account some weakness in CV, you still have line of sight to that 10% to 10.5% level.

Absolutely. Don't forget, like while the broader market may be down in CV, we're also gaining share across many of our customers. So while it's not one for one, while the overall market is down, if we gain more of that share, we actually make up some of those units just on a market share basis.

Yes. Okay. Speaking of the competitive dynamics, one of your competitors on the light vehicle side is obviously making a very large piece of M&A. Do you see the competitive balance or dynamics changing at all? Do you think -- where do you think you are from a cost perspective versus your competition?

Look, I don't measure myself or the company against our competitors. I certainly do from a profitability perspective, right? We're obviously marching towards a much more profitable base. I don't think bigger means better. I'm really happy with the businesses that we're going to own when we finalize the sale of the off-highway business. I love the products we have. I especially love the platforms that we're on. You think about our light vehicle business, our 4 largest platform Super Duty, Bronco, Ranger and Wrangler, right? I mean those are 4 of the most iconic nameplates you have in North America, and they have our content on them.

So we're going to continue to execute and continue to drive cost out of our business and really get the profitability to where it needs to be so that our shareholders and our customers and our employees are all really satisfied at what we're able to do. So I'm really excited. I think that I love the size of the business. I'm looking forward to growing the business and growing it profitably and really seeing what we can do with this much more focused business that we're going to own.

Okay. Let's talk about free cash flow, capital allocation. Maybe we just start with the portfolio. You're obviously doing a very large change. But I think even on -- maybe it was 2 calls ago, Bruce had alluded, there's maybe more pruning and trimming that's going on. How do we think of maybe other changes to the portfolio that may need to occur?

Yes. So the way to think about the pruning, so we have a lot of different parts that we sell within the business. So you think of us as axles and driveshafts, but we have a full range of thermal products, sealing products, and we sell them not only into the light vehicle and commercial vehicle but in industrial and in off-highway, which we will still continue to own. I think as we, again, have got more focus on the businesses that we're going to retain, one of the things that became very clear is like we've got groups of products where we make very little money or might lose money. And we're really going through a very orderly and deliberate process and deciding, hey, is that a product I'm still going to sell? I mean, is that a part number that I'm still going to sell to my ABC customer.

And if he doesn't want to pay to make that part profitable, then he can take his business elsewhere or he can do a last time buy and that will be fine. But what you're going to see is our ability to maybe have a little bit of shrinkage on the top line, but the rest of the business becomes far more profitable. I'm happy to have a slightly smaller top line and a much more robust cash flow and margin profile going forward.

And look, we free up enough space, fine, we can fill that up with more profitable business. We could restructure and take fixed cost out of the business. So we've got a lot of other options. But really, the key here is -- let's focus on the products and the customers where we can make money and really get a return that's acceptable to us and to our shareholders.

I know I told you I was doing capital allocation, but then you just triggered another margin question, which is how much room is there to reprice certain contracts that maybe previously hadn't been priced at appropriate economics. Is that another opportunity in addition to...

Absolutely. I mean this is kind of what we're going through now, especially on the smaller side of the customers, right? Most of these customers, we don't have LTAs with on some of the -- especially the nonautomotive customers. So this is going to be the new price. And if you want to go someplace else, that's okay. If you want us to work with you and how do we deal with that works for us too. But we're not going to continue to make under our hurdle rate or lose money on product. It's just not where we're going to spend the time or energy. So yes, absolutely. I mean I think there's a lot of room past '26 to continue to grow the margin in the business across the board.

Okay. I'll flip it around. Is there any appetite for bolt-on M&A?

I think -- as we look in the near term, so if you're going to get into '26, I really don't think that -- you never say never. I mean, who knows what could happen. But we're really focused on the business that we're going to have. So our light vehicle and our commercial vehicle business, really making sure that we are 100% focused on that business. And if we move through '26 and we deliver that, I think if there's some opportunities to use our technologies and find adjacent products and if that requires some M&A, sure, we certainly look at it.

But right now, I mean, we're really, really focused on the new Dana, the businesses that we're going to own and making them as profitable and as dynamic as we can for the customer and for our employees. And that's really the focus for Bruce and myself and the entire management team. And if you think about some of the stuff we were talking about on the plant floor, right, that's a really exciting part. I know our Head of Operations, Chris Clark, he's chopping at the bit to have us let them loose and really see what we can do. So we're really focused on the business, on our customers and on our employees to really make new Dana, the absolute best it can be.

Okay. Can you talk about the free cash flow profile? And specifically, I know you've given this target, roughly 4% of sales. So that implies next year roughly $300 million if your revenue is flattish. But we also know that off-highway, the last few years has really been the lion's share of your free cash flow. So what gives you the line of sight that I know there's a large margin expansion and EBITDA expansion of the base business, but that you can get that cash flow conversion. And maybe if you can just remind us, I know you're going to give us a number that's adjusted, so to speak. How much is that going to be weighed down by maybe a lot of onetime costs or restructuring?

So first thing. So typically, we -- our adjusted EBITDA would have restructuring pulled out. We usually historically have not adjusted free cash flow. So we always have the cost of the restructuring in our free cash flow number. So we gave you the 4%. That includes a deduct for any of the restructuring costs that we may need. So that's number one.

Number two, if you think through this, you're right, we're going to lose the contribution from free cash flow on the off-highway business, but that's going to be more than made up for in terms of the couple of hundred basis points expansion in the margin. Don't forget, we're going to have significantly less interest -- cash interest. We're going to pay it down $2 billion worth of debt. We're also going to have a much lower cash tax bill because we're selling the most profitable business that we have and the business that we continue to own, primarily North America, where we have large NOLs and credits.

So our cash taxes and cash interest are going to come down. When you take all those puts and takes and we'll obviously have slightly lower restructuring costs, the math works pretty easily to get to 4% free cash flow on the business.

Can you talk about the CapEx profile going forward? Because you're at 3% this year. You said 4% for next year, but why would the CapEx pick up? What's the right way to think that happens?

Yes. So we've got some program renewals. I mean, our program CapEx tends to be -- can be lumpy depending on where we are in refresh cycles for the [indiscernible]. We are going to make investments, as we talked about on the plant floor. So that will have some of that. And then we've been through a pretty sizable investment cycle for EV, and we think there's probably some delayed maintenance CapEx that's in there as well. So we'll have to spend some more just to make sure we've got what we need and that the plants are operating where they need to be. So the net of all that gets you somewhere around 4%.

What should we be thinking about the cash tax rate then?

It's a hard one to answer. I mean it will be low relative to -- I mean, because we're -- our North American business isn't going to have much of the [indiscernible] NOLs. Yes, that's probably decent. I mean we have to kind of get through and sort of...

That's couple of years.

Yes, it should be, absolutely.

Second quick one is what's the incrementals on your commercial vehicle revenue? Because as you mentioned, that is at very low production levels now, and it's going to have a nice upturn at some point, maybe second half. What's the incrementals on that recovery?

They're fairly typical for what our contribution is 20-ish percent, 25%, depending on the I mean it differs depending on which part of the market gets recovering and where it comes through. But somewhere in the 20-ish percent on the contribution up is...

And last quick one is, with all the automation and improvement, it sounds efficiency, productivity give you some throughput to really leverage that on your light vehicle exposure? And I'm -- as Dan mentioned, we've seen the guys from Cox, S&P Global, and they're all saying there's no growth in the North American market next couple of years, maybe even lower volumes. Do you -- these programs are fantastic, but they're already doing quite well. The F-Series, the Wrangler, the Bronco, are you guys expecting those to grow volume in the next 3 years? Or are there other platforms you're targeting that you're going to get?

There's a couple of things. So Super Duty has got volume expansion, right, coming. I think the other thing, and Dan mentioned this as well, is there's a lot more content, like the OEMs want a different mix, which comes with more content. So even without any volume increase, that content differential can really help add. And when you're thinking about better content across a couple of hundred thousand units on the light vehicle side, it adds up pretty quickly. So those are the things we're thinking about.

And look, we are seeing extensions, new RFQs coming in for products from customers on the ICE side. So we're really excited about the opportunities that we might be able to have as we kind of move through the remainder of this year and through '26 in terms of new business that we can win.

Super Duty is going to be more expensive?

Well, it depends on what they make. But Super Duty is probably not a good one because I mean, it's really a work truck at the end of the day. But think of special variants or new variants for Wrangler. Wrangler comes out, we've got better content, right? They wanted -- it's a bit of an arms, right. They wanted more content to that -- like we have on the Bronco, that comes with a more expensive axle same number of units or probably a bit more units because they weren't running particularly well. So there's that. But -- it's really that kind of thing that comes through and really is helpful in terms of driving some sales growth.

Okay. I think we'll leave it there. Tim and Craig, thank you so much.

Thanks.

Good morning, and welcome to Dana Incorporated's Third Quarter 2025 Financial Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and Q&A session will be recorded for replay purposes. For those participants who would like to access the call from the webcast, please reference the URL on our website and sign in as a guest. There will be a question-and-answer period after the speakers' remarks, and we will take questions from the telephone only. [Operator Instructions]. At this time, I'd like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.

Thank you, Regina, and good morning, and welcome to Dana Incorporated's Earnings Call for the Third Quarter of 2025. Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from what we present here today. For more details about the factors that may affect future results, please refer to our safe harbor statement found in our public filings and our reports to PAE. .

I encourage you to visit our investor website, where you'll find this morning's press release and presentation -- as stated, today's call is being recorded and the supporting materials are the property of Dana Incorporated. They may not be recorded, copied or rebroadcast without our written consent. With me this morning is Bruce McDonald, Dana's Chairman, Executive Officer; and Timothy Kraus, Senior Vice President and Chief Financial Officer. Bruce? .

Thank you, Craig, and good morning, everyone, and thanks for joining Craig, Tim and I for a discussion here on Dana's Q3 earnings. Maybe just before I get into my slide here, just stepping back and talking about kind of the puts and takes in terms of the third quarter. I guess, here's what I sort of see as the highlights.

First of all, I think you'll see improving business performance, and that's something that we expect to see accelerate as we get into our fourth quarter. And the driver for that would really be a few restructuring initiatives that have been completed or are substantially complete and will start to turn from sort of headwinds that are in our numbers right now to tailwinds for us going forward. Secondly, on the volume side, even though we're down year-over-year, the comps are getting better.

They're negative, but they're getting better and that drives improved financial performance. On the tariff side, less of a headwind. You'll see we have minimal impact here in our full year charge in terms of tariffs is lower than we thought a quarter ago.

And then cost savings, we're on track to deliver the $310 million we talked about last quarter, but we are realizing those quicker, and that's helping us with some of the uplift to our outlook here. In terms of negatives, I'd say we have some volume softness, particularly in CV North America and to a lesser extent, in Brazil. We did have JLR down for about 5 weeks in the quarter. So those were headwinds against us. And then the last thing I'd sort of point out is we do have -- there has been some supplier or some EV program cancellations -- and we have some charges in the quarter that we took associated with that, that we expect will recover here in the fourth quarter.

So just turning to the highlights in terms of the off-highway divestiture, that remains on track. We do expect to close here later in the fourth quarter. In terms of regulatory approvals, we've received almost all of them. We have 1 minor European countries that we expect to wrap up here in the next week or so. I'd say the joint teams between ourselves and us and are working hard to sort of all the plethora of work streams that we have in place to affect an orderly transition here in the quarter.

In terms of our capital returns, you'll see in our note, we talked about buying between $100 million and $150 million of shares in the third quarter. We actually bought more than that $9.5 million or 7% of our shares outstanding. We have had a 10b5 plan in place throughout the quarter. And as we sit here today, we've bought nearly 30 million shares or just over 20% of our shares outstanding and we expect to complete the balance of the share repurchase here over the next month or so.

As I said in my earlier remarks on cost savings side, really good number here in the quarter. We're almost up to our our full year run rate of $73 million. We continue to look for other opportunities. I guess, really pleased with the progress our team has made on bringing these homes. Tariffs, the situation, I guess, is getting a little bit better.

We continue to make progress getting USMCA compliance which reduces the sort of headwind both from an on charge point of view, but also the margin deterioration that we see. And our outlook, our recovery rate is now up in the upper 80% -- then lastly, in terms of the balance of the year outlook. I'd say the light demand -- or the light truck demand remains relatively stable. We do have the odd production interruption here and there. But overall, light vehicle is looking good for the quarter.

In terms of commercial vehicle, we continue to see deterioration in North America and to a lesser extent, Brazil. Nonetheless, the fact that we've got a better outlook in terms of tariffs, quicker realization of cost recovery, we are taking our full year guide up $15 million at the midpoint. I would note that within our guidance, we do have some volume catch-up factored in here JLR -- we factored in the lower commercial vehicle outlook here in North America in line with like estimates out there. And then we've factored in the latest Super Duty schedule releases that we have as of this week.

So with that, a good solid quarter. And Tim, I'll turn it over to you to go through the financials.

Thanks, Bruce, and good morning to everyone. Turning to Slide 6 now. Let's review our third quarter financial performance. First, a reminder, results are presented excluding the off-highway business, which is classified as discontinued operations. Sales for the quarter were $1.97 billion, up $20 million compared to Q3 of last year. This reflects recoveries in currency benefits offsetting the impact of lower demand. Adjusted EBITDA came in at $162 million, an improvement of $51 million year-over-year. Our margin expanded by 260 basis points to 8.5%, driven by cost-saving actions and operational efficiencies that help mitigate the profit impact of lower sales and tariffs.

EBIT improved significantly to $53 million from a loss of $8 million in the prior period. Net interest expense increased $11 million to $44 million due to higher borrowings and modestly higher rates. Income tax was a benefit of $2 million. While this is down $16 million from last year, we continue to benefit from positive adjustments to the carrying value of our deferred tax assets. Net income attributable to Dana was $13 million compared with a loss of $21 million in Q3 of last year, a positive swing of $34 million.

Overall, these results demonstrated an effect -- the effectiveness of our cost savings initiatives, operational improvements in offsetting market headwinds. Please turn with me now to Slide 7 for the drivers of the sales and profit change for the quarter. In line with the new reporting method, we have revised our walk presentation to include the impact of discontinued operations in the current -- for the current and prior periods.

The $579 million in sales and $121 million of profit removed from 2024, represents the off-highway business being sold and the accounting treatment for discontinued operations. Beginning with sales this year's third quarter volume and mix were $66 million lower, driven by lower demand in commercial vehicle end markets, partially offset by higher sales in Light Vehicle.

Production disruptions at certain customers had minimal impact on light vehicle system sales in the quarter. Performance drove sales higher by $8 million due to pricing actions, while tariff recoveries totaled $49 million. Currency translation, primarily the strength of the euro against the U.S. dollar yielded $21 million in higher sales compared to last year. Moving to adjusted EBITDA. Volume mix lowered EBITDA by $35 million. This was a decremental margin of about 50%, higher than we typically expect, reflecting significant mix changes and continued operational impacts within our Thermal Products business, including battery cooling.

But recall, we are breaking out performance, which includes efficiency gains in manufacturing separately. Performance increased profit by $11 million due to pricing and efficiency improvements across both segments. Cost savings added $73 million in profit through the actions we have taken across the company. This brings us to $183 million to date, and we are securing our increased target of $235 million in savings for the full year 2025.

Tariff impact in the quarter was minimal at just $1 million. Due to the catch-up in tariff recoveries, we expect to see continuing profit headwind on in the future, but we do expect recovery of majority of this impact this year. Next, I will turn to Slide 8 for details on our third quarter cash flow.

As I discussed on Slide 6, the accounting for cash flow includes both continued and discontinued operations as shown here on Slide 9. For the third quarter of 2025, we delivered adjusted free cash flow of $101 million which represents a $109 million improvement compared to the prior year. This strong performance was driven primarily by higher profitability and lower working capital requirements.

Onetime costs primarily related to our cost savings program were $17 million, which is $8 million higher than the prior period. Net interest increased by $11 million, primarily due to higher borrowing costs associated with the capital return initiatives. Taxes were lower at $47 million compared to $72 million last year, driven by the timing of payments. Working capital improved significantly by $76 million, reflecting better management -- inventory management and timing of receivables and payables.

Capital spending was $59 million, up $16 million year-over-year as we continue to invest in new programs to support our backlog. Overall, these factors combined to deliver a substantial improvement in free cash flow, positioning us well to achieve our full year target. Please turn with me now to Slide 9 for an updated guidance continuing operations. .

For all our targets, we have narrowed our ranges as we approach the end of the year as we remain confident in achieving our targets. We expect sales from continuing operations to be approximately $7.4 billion at the midpoint of the tightened range. Adjusted EBITDA from continuing operations is now expected to be about $590 million at the midpoint of the narrower range. This is approximately $15 million higher than previously anticipated, driven primarily by accelerated cost savings and performance improvements.

Full year adjusted free cash flow is anticipated at $275 million at the midpoint of the tighter range for the year. The profit improvement in continuing operations is expected to be offset by lower profit from discontinued operations.

Please turn with me now to Slide 10 for the drivers in sales and profit change for our full year guidance. As with the quarterly walk, we showed earlier, our full year guidance walk adjusts 2024 for estimated discontinued operations and walks forward our guidance for continuing operations. Beginning on the left, discontinued operations reduced 2024 sales by $2.5 billion, so we begin 2025 at $7.7 billion in sales for continuing operations.

Adjusted EBITDA from discontinued operations was $490 million reducing adjusted EBITDA to $395 million, resulting in a 5.1% margin. In this presentation, we have combined the impact of sales from continuing ops in our off-highway business into the volume and mix category. We are expecting volume and mix to lower sales by approximately $600 million, driven by lower demand in traditional commercial vehicle markets as well as for electric light vehicles impacting our battery cooling business.

Adjusted EBITDA from volume and mix is expected to be lower by $130 million. Performance is now expected to increase EBITDA by approximately $110 million, mostly through pricing improvements. Cost savings will add $235 million in profit, as I mentioned previously. The tariff impact for the full year is expected to add about $150 million to sales, and we now expect it to lower profit by about $20 million.

The majority of this profit headwind will be recovered next year. Foreign currency translation is now expected to increase sales by $25 million, primarily driven by the strengthening euro compared to the U.S. dollar, offsetting some of these sales impacts of lower volume. Finally, commodity cost recovery should drive about $15 million in higher sales and now only about a $5 million headwind to profit.

The net result will be about a 90 basis point margin improvement in continuing operations compared to last year as performance and cost saving actions overcome market headwinds. Next, I will turn to Slide 11 for the details of our free cash flow guidance. As I mentioned, we anticipate full year 2025 adjusted free cash flow to be about $275 million at the midpoint of the guidance range.

We expect about $105 million of higher free cash flow from increased adjusted EBITDA. Onetime costs will be about $30 million higher as we invest in our cost saving programs and restructuring. Working capital will be about $105 million lower as we continue to reduce the requirements to operate the business. And capital spending net is expected to be about $325 million this year, which is $45 million lower than last year.

And finally, I will turn back over to Bruce for some closing comments on Slide 12.

Okay. Thanks, Tim. So this slide is really the same as we talked about last quarter, which kind of reflects the fact that I think the business is performing well, and we're delivering on our commitment. So cost savings for the year or so the run rate that we're targeting, the $310 million, we're solidly on track.

And as we've discussed here earlier, we're realizing more of that benefit here in 2026 -- sorry, 2025. In terms of our margin outlook, we've been consistent for a year now. that we were going to have 10% to 10.5% margins for 2026. And it's really nice to be giving guidance here for the fourth quarter that's in top or in that range or even slightly on top of.

I'd say, overall, our team is doing a great job over delivering on the things that we can control, and it's helping us offset the things that we cannot control. In terms of our return of capital to shareholders, we're committed to the $600 million this year. And then lastly, I would say, in terms of our growth story, I think it's underappreciated by the market. We have had some deteroriation or backlog due to easy program cancellations, deferrals or lower volumes.

But nonetheless, our team has done a nice job this year gaining share, winning incremental programs. And so we plan on having an analyst call here in January and going through our revised backlog. We continue to win new business. And I hope to add to our backlog between now and January. With that, we'll turn it over for Q&A.

[Operator Instructions] Our first question comes from the line of Tom Narayan with RBC Capital Markets.

Yes. My first one, it's kind of an OEM question, but it relates to you guys to the big story from this earnings season was the big policy change, the MSRP exemption or extension that included broadening the scope of parts -- and you saw that 2 large OE U.S. OEMs huge impacts on their tariff guidance and presumably their volume outlook. Conversely, earlier this morning, a large European OEM reported results.

It had no positive impact from that. So I was just wondering if you were seeing some dynamic here where the U.S. OEMs, which you guys have more exposure to maybe benefiting more from tariff policy changes than perhaps others, European or maybe even the Japanese and the Korean -- and I have a quick follow-up.

Yes. Yes. No, I think you're absolutely right. I mean the rebate is based on vehicles assembled in the U.S. and obviously, the big -- the Detroit make more in the U.S. than the European or the other transplants. So I think to me, the most important thing in the recent announcement in that regard is I think there's always been some concern around are customers going to have to pass along the higher prices.

In the short term, they are eating in their margins to the end customer. And to the extent that were to happen, then obviously, vehicle demand is going to drop. And so I think that risk has substantially diminished with the new guidelines that have come out. That's kind of the way I look at it.

Okay. And then my quick follow-up, the commercial vehicle side, it sounds like from your prepared commentary that, that situation is deteriorating. Just curious if you could give us context of like how typically that cycle works? And are you seeing any kind of light at the end of the tunnel?

No. We're not seeing any light at the end of the tunnel. I would say -- I mean, -- if you look at kind of the run rate here, I'll talk about North America specifically in the third quarter, we're running around a 200,000 unit annualized run rate. I know from talking to our customers that the backlogs that they all have, have really been run down. I think there's a lot of uncertainty in the marketplace.

There's -- we would have expected maybe to start to see some signs of pre-buy in 2026 associated with some emissions legislation changes, and we're not seeing any of that. So I think it's going to be a fairly soft market here certainly for as long as we can see into mid-2026.

And at this point in time, I don't see any green shoots that would suggest it's going to turn around. I also don't think we're going to have a heck of a lot of deterioration from here either. I mean we're at pretty historically depressed levels.

Okay. Our next question comes from the line of Emmanuel Rosner with Wolfe Research.

My first question is on the implied outlook for the fourth quarter, which, as you pointed, is is pretty strong and with margins already basically above -- slightly above the high end of your margin outlook for next year. Just curious if you can help us out in terms of sequential drivers. So it's like it will be a 200 basis point margin improvement versus Q3 on what is essentially lower revenue at the midpoint.

You flagged a few exogenous events such as some of the forward schedules and the impact potentially from the fire. So just curious how to think about the performance quarter-over-quarter into the fourth.

Yes. Emmanuel, this is Tim. So a couple of things. Obviously, we've got a continued improvement coming through from our cost savings initiative. We do see mix improving in the quarter. And then I think the other big driver and Bruce mentioned this in a couple -- in his opening comments, we are at the tail end of some restructuring actions that we believe -- well, which have some headwinds certainly through the through the third quarter that we think will also drive additional performance and better profitability into the fourth quarter, and that provides us a great springboard into into 2026 as we get some of these actions behind us.

And we did announce the closure of a battery cooling plant earlier in the quarter. So -- this is part of what we're seeing, and we're continuing to work to improve the cost base of the business across the board. So you'll see those come through in the fourth quarter as well as next year.

That's helpful. And then just honing in on the top line and the mix dynamics. So -- could you give us a little bit more color around what mix you're referring to in terms of improving in the fourth quarter? And also maybe sort of like any color around what's assumed for some of these potential indirect impact on your customers from the Novelis fire because IHS has 1 view around fourth schedule and then Ford obviously give their own guidance, which had a fairly massive amount of volume production of a loss. So just curious what's embedded in your -- the schedules that you have received. .

Yes. So obviously, I don't want to get ahead of our customer, but we're fairly in line with what our customer has said publicly around those, how they ultimately run, we'll see. But certainly, from our perspective, we're fairly in line with where we see Fords public statements. In terms of mix, some of this is really the mix of products as we're moving from plant to plant. So that's -- we do have a bit better mix on some of the products where we have better contribution margin quarter-to-quarter.

But a lot of it is really getting some of the restructuring and the movement of some of the product around in the plant as we rationalize our production footprint.

Yes. Maybe just 1 other comment on that one, kind of going the other way is if you look at our our third quarter, we were pretty constrained in terms of magnets. We have facilities in China, India, in Europe, where we had difficulties getting magnets. And that log jam stock word seems to broken free here. So we do expect to have some substantial catch-up in terms of frustrated orders, which are, for us, very high margin.

Correct.

Our next question will come from the line of Edison Yu with Deutsche Bank.

This is Winnie Yan on for Edison. My first question is on the 110 performance. I think in your prepared remarks, you mentioned that it's mostly driven by pricing improvement. I'm just curious, is there sort of like bigger programs that are all going on at better pricing? And then what are some of the other drivers that might be in be number .

Yes. So some of it is as we move through and bring new platforms and new programs in place that comes with revised pricing. So that's running through there. And then the teams -- the commercial teams have done a really nice job with the customers to go get recoveries both from an economic and for improvement.

So a lot of that is real pure pricing that we see. And you see that falling through. I don't have the number in front of me, but I think there's about $80 million of top line that's flowing through, and that's what you're seeing in that $110 million. The balance of that is really productivity and performance improvement at the plant level, net of all of the inflationary impacts that flow through the business.

Got it. That's very helpful. And then maybe on both light vehicle and commercial. You can maybe just provide some higher-level preliminary puts and takes that you're seeing or considering into 2026. .

Yes. So I think Bruce mentioned we don't -- we're probably not seeing a lot, at least through the first half on the commercial vehicle side, especially in North America, that there'd be a whole lot of improvement. As we look through on the light vehicle side, we have a number of programs that are launching next year. That should be -- should help volume. But our core light vehicle program, especially on the driveline side, right, Super Duty, Bronco, Wrangler, Ranger, those are all still very strong runners, and we would continue to see those well into next year to continue to drive the volume side of this and Wrangler is going to come out and have some refreshments. So that should help as well. .

Yes. And maybe just a couple of other color commentary on that. I mean, obviously, with oil prices being quite soft, that's a nice tailwind in terms of large -- some of the short-term deterioration that we're seeing in Super Duty, Ford has already talked about uplifting their volume next year in the middle, I think it's August of next year, they're introducing incremental Super Duty production at their Oaksville facility. So I would say the tailwinds in terms of ICE, large SUV our product exposure bodes well for us as we drift into 2026 year.

Got it. I'm just a little surprised to the question, I didn't mind before that you're just not seeing a lot of impact in Q4 itself from 1 of your larger customers. Is it just because like the original guidance was conservative and therefore, even if you're taking some of the impact to retaining a little bit or are they not really flowing good that, that impact to you guys? .

Yes, it's a bit of a, right? Winnie, it's a bit of both. So we had some of this in our forecast that we had back in August. So -- and then some of it's -- the view from the customers are going to make up some of this as we move through the back part of the quarter. .

And I mean keep in mind, we're -- our exposure is super duty not F-150. So when you're here in the volumes, you're hearing kind of both and I think just given the profitability of the Super Duty, they're kind of over rotating to try and keep that running as strong as they can.

Our next question will come from the line of James Picariello with BNP Paribas. .

Good morning, everyone. Just as we think about next year, are we at a point at all to quantify the next site of cost savings beyond the $310 million program with respect to plant closures, which you touched on in your prepared remarks and just overall, I guess, stronger execution. .

Yes. Thanks for that question. It's a good one. But yes, I would say, in terms of the opportunity we have to expand our margins, we still have a long way to go. If you think about the $310 million, it's heavily focused on things that we could implement quickly without investment. And so if I just look at that bucket of costs through standardization and some systems work, we would still say we probably have another $50 million, $75 million that we can get over the next few years.

If I look at the cost base outside of where we've been focusing on in terms of our plans, for sure, we've got some footprint opportunities, and we announced 1 earlier this month. I would say just given the amount of investment that we've had to make in electric vehicle over the last few years, we've made those investments, you could think about at the expense of our core operations.

And so if you looked at the level of automation that we have in our plants, it is well below what you would see at other well-capitalized suppliers. I think we've got other opportunities in terms of product line rationalization. We still have a lot of products where we make inadequate or negative returns, and we're working our way through that. And then I would say lastly would be on the EV side. We do expect to continue to refine our cost base there and get that business from being a drag on our margins to being accretive.

And I expect that to sort of flip around here in the next 6 to 12 months. So there is still an awful lot of levers that we can pull. I don't see 10 or 10.5 as being a high watermark. I believe we've got opportunity to continue to grow it fairly significantly over the next couple of years.

Got it. That's really helpful. And my follow-on, maybe on the topic of plant automation. How are you thinking about the right run rate for CapEx as a percentage of sales next year? And then could you just remind us what's assumed or expected for the stranded costs capture for next year as well? .

Yes, James, so about sort of think of CapEx in about the 4% of sales range. So that's probably where we'll end up plus or minus. In terms of stranded costs, it's -- it's probably $30 million to $40 million. We do expect to be able to start taking a good chunk of those costs out as once we close the -- we closed the transaction and move into 2026.

Now some of those costs will remain because we'll have some transitional services that will need to be provided, but they'll be offset with payments from Alison for that. But again, $30 million to $40 million, and we believe we'll be able to take all those out really as we get through and we exit 2020.

You'll see next year a fairly big -- within that number that Tim talked about a fairly big step-up in terms of automation expenditure next year. And I don't want anybody being misled you. Like we're not talking about human-like robots and stuff like that. We're talking about basic automation unloading and loading machines, AGVs moving material in our factories, we're way behind the automotive standard. And I view that as a huge opportunity for us.

Our next question will come from the line of Joe Spak with UBS.

I just wanted to maybe follow up on that last point. So -- it sounds like there's a big bucket of opportunity here, but it will require some investments. I just want to be clear, should we expect some of that investment to start next year? And then maybe savings and just say how quickly can savings come in after that investment?

Yes, we will -- I mean if you think about it, we've been spending pretty significantly on EV over the last few years. We'll -- the easy way to think about this is we plan to take some of those dollars and redeploy them. As Bruce mentioned, we were investing in EV to some extent at the expense of some of the stuff in our normal old-school ice plants, and we'll spend that capital to to find areas -- and by the way, it's a target-rich environment in terms of being able to improve the efficiency on the plant floor. I mean it -- we do this every day, but this will be a bit more deliberate and accelerated as we go through and those dollars are freed up.

Don't forget that as we we come through the transaction, we'll free up a lot of cash flow -- operating cash flow from lower interest expense and lower taxes, and we intend to to make sure that we're investing in the right places at the right returns for the business to drive shareholder value.

Yes. With that level of CapEx, we're still maintaining our 4% free cash flow gain.

Right. But some of it is redeployment and some of it's incremental is the right way to .

Yes. Yes, correct. That's correct. I mean, we're below that, obviously, today, but our view is that will have more -- given the improvement at the operating margin level, we're going to redeploy some of those dollars that we're delivering from increased profitability back into the business to kind of generate the snowball effect and continue to drive those margins higher over the next 2, 3 years. .

Yes, this is fairly short payback stuff.

I guess a second question, I just want to make sure I heard correctly, Bruce, I think in your opening comments, you talked about some EV charges in the quarter, I think that related to sort of -- I don't know if that was sort of some of the plant actions you took. But then you sort of alluded to a recovery maybe from lower EV volumes in the fourth quarter. I guess, a, were those -- are those charges in the third quarter results? And then is the recovery in the guidance? And how much are we talking about here?

Yes. So we did take -- I mean, let's say, charges, we did have to book some additional costs related to some of the EV programs that were canceled during the quarter. It's a number of different OEMs. The total number is you can call it, 10-ish million maybe plus or minus. It's not a massive number. But again, we are in active discussions with the customer over recovery of these amounts, and we expect to get those in the fourth quarter. Yes, they just didn't match .

It just didn't match up. The accounting rules are a little different between what we got to book in terms of cost and what we have to book in terms of the recoveries and since they're noncontractual on the recoveries. Okay. But I don't want to get into specifics of programs or customers because obviously, we're actively engaged with those discussions with the customer today. .

No, that's totally fine.

$8 million or $10 million in Q3 that we anticipate recovering in Q4.

I guess what I wanted to make sure was that, that was actually in the results. You're not expecting .

It's included in the adjusted EBITDA number, Joe. .

Our next question will come from the line of Ryan Brinkman with JPMorgan. .

And I know we just had the discussion about what's next in terms of the additional opportunity to improve margin and cash flow beyond even the 10% to 10.5% and 4% of sales that you target, respectively, you continue to target for 2026. I don't think that's a premature discussion to have. I plan to ask that question myself. If you really are at 10% to 10.5% exit run rate at the end of the fourth quarter. But maybe just taking a step back, I mean, it's worth pointing out, I think consensus is at like 9.4% for next year for EBITDA margin.

So maybe just review a little bit to your confidence in next year and the lack of incremental execution, I think, that may be needed to get there in on the free cash flow number to, are there like additional levers that you need to pull or you feel like you're pretty much going to be on track for that so long as the end markets are there by the end of this quarter?

So making your assumption on end markets as the premise. Bruce and I and the entire team are supremely confident in our ability to deliver what we've said for next year. In the fourth quarter, we think, is a good indication of that. Do I think there's opportunities above that. Absolutely, I do. We -- there's a lot of things can go right and a lot of things can go wrong over the course of a year. But yes, we think there are additional opportunities both in terms of margin and cash flow even in 2026.

Right now, we're focused on closing out 2025, delivering the $310 million and really setting the company and the team up for delivering on next year. So like when you say the consensus is below that, Bruce and I share a bit of frustration. I mean we've been saying this here for the better part of the year, and we're really we're thinking that what we're going to deliver in fourth quarter will help cement the fact that we're going to deliver that 10% to 10.5% next year with potentially some upside.

Yes. I'd say, Ryan, in terms of Here's how we look at it. We -- a year ago, we said we're going to be 10% to 10.5%. And our consensus has slowly moved up -- the reason why we bought back our stock so aggressively is because we're highly confident in our number. And if you use our number, our stock price is significantly undervalued. And so it's almost like we're buying two and getting one free.

And congrats on the execution so far. Maybe just to finish on the end market point I feel you have been -- well, others have been quicker to point out the headwinds that they were experiencing in the commercial vehicle market, both in North America and in Brazil. And I just wonder if you're situated a little bit differently relative to some of the competition. I don't know if it's a class relative to I'm not sure. But you are seeing the softening now. I mean others are saying the floor is falling out of the new vehicle builds in North America. So just curious if if maybe you've got a little bit different exposure a little bit more on the aftermarket? I'm not sure. .

Yes. So obviously, we have exposure to aftermarket, but I would assume most of the other players do as well. Look, vehicle fleets are aging. They're still up there. We do think that the run rate we're at now is still pretty low. Now we had some of this built in. So all others are calling it. I mean we were building a bit more conservative into the CV vehicle build when we came out 3 months ago. So that's part of the reason why we're not probably as calling it out as much now, and we're holding to the $7.4 billion. But I think as we move into next year, the first half is not going to be -- we're not going to see gains, but we don't see it going a whole lot lower than we are now. I just don't think even with the backdrop that the age of the fleet, they'll have to do some work to replace it.

Yes. Maybe just adding to that 1 on the CV side, our business has gained share. If you look at kind of our share of wallet at our customers, we're we've done a lot of the team or when I got here, had done a lot of good work on refoot printing that business. And I think we have a cost advantage model right now, and we are picking up share at our -- at the big 3 customers that we have exposure to here in North America, which is helping to offset some of the market deterioration.

Yes, that's a really good point, right? Our share at some of these has increased significantly over the past 12 months, and we expect that to hold and continue to increase. .

Our next question will come from the line of Dan Levy with Barclays. .

Josh on for Dan today. First one. Just kind of trying to wonder how we should bridge the Q margin into 2026. I understand on the slides that kind of says the main drivers of increased margin. We're trying to figure out if anything we were in 4Q that would I guess imply like a larger step of the margin in the next year? .

No. I mean these are really -- if you look at Page 12, right, those basis points are off of our total 2025. Full year continuing ops basis financials. So they're not off of the fourth quarter. But obviously, when you look at the fourth quarter, it's highly indicative of what we -- why we leave the full year overall run rate bridges into that 10% to 10.5% next year. .

Okay. So I guess we should assume that I mean, I guess a decent portion of those main drivers are included already within the 4Q margin?

Yes. Think about the cost saving. It's 100 basis points. We -- I mean our fourth quarter, when you look at the full run rate out of 2025 right? We deliver $235 million. We had 10 last year. That's already in $245 million off of sort of where we were at in 2024. So like that incremental $65 million of -- or $75 million of cost savings runs through next year, and we'll have a full run rate of 310.

So that's 100 basis points-ish right there. And then stranded costs, right? We just talked about that. That adds some incremental margin in the business because right now, when you look at our continuing ops, it's burdened with the stranded costs that we expect to take out -- so to say it modestly, I think from our perspective, moving from where we're at on a full average basis this year to 10% to 10.5% next year, we do not see -- assuming the markets hold up, that we're going to have any trouble getting to 10% to 10.5% next year. And again, our fourth quarter run rate supports that in a very strong manner.

Good. Another follow-up. I know you mentioned some of your key platform volumes are holding in next year. I know some of your customers have mentioned that just given the regulatory environment, some of the platforms can go to, I guess, with your mix off-road performance trends. I was just wondering if you would have like on see a significant benefit from some of those power chain changes.

Yes. I mean, obviously, better mix. I mean we're 1 of the original creators of the 4-wheel drive vehicle where we created the Wrangler or the Jeep for the government and for World War too. So yes, richer mix larger axles. So if you think at Wrangler, right, if that mix moves further to Rubicon, that's much better for us. We have more content on it. The same would be true for Bronco. And Bruce already mentioned Super Duty with Ford's plans to expand that capacity and build more trucks. .

For us, that's a great program to have content on. And that content, if it gets richer, is better for us as it is for the OEM.

Our final question will come from the line of Colin Langan with Wells Fargo. .

Great. I just want to follow up on the sequential margin increase of 220 on lower sales. I mean, just being you're capturing all the factors, you have the incremental cost savings from Q3 to Q4 and I think you mentioned like $20 million of EV headwinds, and those will get recovered. So it's like -- sorry, $10 million of headwinds. So that recovers or $20 million maybe doing quarter-over-quarter and then I think mix. Are those the big factors? And then I'm a little surprised by the -- I thought you said in the last quarter, you had taken most of the actions. So a little surprised there's even more coming sequentially in Q3 and Q4.

When you say -- Colin, this is Tim. And when you say actions, what are you talking about for actions? You talked about the cost saving actions. .

Yes, I thought that was the comment you made last...

I mean -- but I mean, we had a -- we still have additional actions coming through the third and into the fourth. Now I think the incremental or sequential savings will be lower in the fourth quarter. It's implied when you look at our $235. So they're obviously slowing down. But right, we're on track to have a run rate exit at 310 coming out.

But we do have we do have those actions. There's also additional performance actions at the plant level that will come through in the fourth quarter. I mentioned, hey, we're in the middle of rationalizing some product, and that's been a headwind for us in our performance and in the volume and mix through the first 3 quarters of the year, we do see that improving as well. So that's -- all of that combined continues to drive that margin from quarter-to-quarter up.

Okay. Got it. And then I think in the past, you've mentioned that the backlog of $300 million for next year is still pretty much intact. Has that changed much with some of the EV cancellations that you just mentioned on the call. And in the past, it was like 70% EV or something -- what are some of the ICE launches that are going to help as we think about next year?

Yes. So I don't want to get into the specifics, but our backlog has been impacted by program delays and cancellations. I think what we want to do is we'll take you through a pretty fulsome review of backlog and how it looks and how it shakes out in January probably mid-January so that you get a really full view.

We're right in the middle of finalizing our plans for new Dana. And we want an opportunity to really have a -- give you the full information and be able to answer your questions then. So I think that's it. But we do see increases in ICE, no question about it from a backlog perspective.

There'll be in there, but the proportion there will be more ICE Yes. .

Okay. But nothing -- has anything changed since the last quarter with the comments on .

Yes, sure. I mean I mean, obviously, we had cancellations in EV. I mean like we talked about the entire. Absolutely, that's impacting -- that will impact some of the backlog that we have out there. .

And delays. Okay. Maybe with that, we'll sort of get into some closing comments here. So first of all, and it goes without saying, thanks to the Dana team for continuing to deliver on our commitments -- like I said earlier in my comments, despite external headwinds, we're over delivering on the things that we can control, and I couldn't be prouder to be part of the team.

A year ago, we committed to 3 things: one, selling our off-highway business, and we're very close to having that done. When that has been completed, we will have returned a substantial amount of capital to our shareholders and still be left with what we think is a best-in-class balance sheet in terms of our sector. We committed to $200 million of cost reduction, which we subsequently up to $310 million, and we're in great shape and basically at that run rate here this quarter.

And then lastly and very importantly, we said we could get to double-digit margins in 2026, and we're exiting 2025 at that level. I know there was a healthy amount of skepticism around some of our -- some of these commitments last year, but hopefully, the market will sort of recognize that the Dana team is delivering on its commitment. Despite some EV deterioration, we have an impressive backlog that we will talk about in January, it does have a combination of both ICE and EV.

But as we said before, EV will be a smaller percent there. And we'll sell a lot more details on our January call. Long term, I continue to see a lot of upside in terms of our margin potential. I think a combination of us getting our margins up to the double digit and growing them beyond the 10% to 10.5% in 2026, combined with our balance sheet, we believe we're going to be rewarded with multiple expansion. And so I think we've got an extremely motivated management team here. I couldn't be prouder of the accomplishments year-to-date, and I think our best days are in front of us. And so with that, thanks for joining us on our call today.

This will conclude today's call. Thank you all for joining. You may now disconnect.

So we're going to get going with the next presentation. Once again, I'm Ryan Brinkman, the U.S. automotive equity research analyst at JPMorgan. Very excited to get started with Dana, including their new CEO, Bruce McDonald; and Craig Barber, Vice President, Investor Relations. Bruce and Craig, thanks so much for coming to the conference.

Thank you.

Okay. Look, since you became CEO in November last year, it seems there have been 2 major things happening at the same time. Number one, the off-highway sale. And number two, a massive materially margin-enhancing cost-cutting program. There are a few drivers of the cost cutting, including less spending to support growth areas and old-fashioned execution.

But maybe to start, I'd love to get your sense on the degree to which the 2 major things may be linked. The simpler corporate structure in conjunction with off-highway sale allows you to become leaner and more efficient with less overhead. Where are you finding the overhead savings? And how much of it has been catalyzed by the decision to sell off-highway?

Okay. So there's a lot to unpack in that one. But I guess I'll maybe start with the decision to sell off-highway was really triggered by the fact that we are trading at an automotive, I'll say, maybe even automotive light type multiple, even though we had an accretive off-highway business. So it just wasn't being reflected in our stock price.

And so when you ran the sort of sum of the parts analysis of Dana, on what we could sell the off-highway business for. It was materially accretive, like 40%, 50%. And so when my appointment was announced last November, we came out and we said, "Hey, we're selling this business." We'd already made that decision, but we came out of the closet, I'll say, said we were going to do it. And we got a fairly significant run up in our stock price because people kind of got it, like we're trading at 4.5x or 5x and this is a 7 or 8 type multiple business. Times a pretty big number, right?

So we accreted higher as the uncertainty around that transaction diminished. Then the cost reduction side, Ryan, was really around kind of backed into the number a little bit in the sense that we said, "Hey, if we do sell the off-highway business and capture that value unless we can maintain our margins and improve our cash generation. It's going to be kind of a one and done event, and we're just going to be in a situation where significantly deleverage, we have a capital return and then we kind of have nowhere to go."

So when we ran all the numbers, we said, "Hey, we need to pull out $300 million -- at least to $200 million, at which we layer up to $300 million." And I was kind of fortunate in that being on the Board previously, I did some access to our cost structure. And when I went in there, the Board sort of said to me, well, "How comfortable are you that you can cut the $300 million?" And I said, "I'm highly confident." And the savings really came in 3 areas.

First, you made a characteristic about cutting some growth investments. I wouldn't characterize it like that. I would say we were overinvesting in light of the risk in EV. And so the -- Dana for the last 3 years, and I'm part of this because I was on the Board and approved the strategy is there is a huge opportunity for the company. We pushed all our chips and went for it.

And if you went and go back, say, 24, 30 months ago, we would have been here saying, "Hey, we've got a huge content per vehicle growth story, $4 billion, $5 billion of growth opportunity." If the market would have moved in the direction that we all thought at the time.

And this, by the way, is not a Dana unique issue, obviously. Where when I came in is, look, we were still investing a lot of our free cash flow, like all of it. And a lot of our engineering resource in pursuing electrification businesses that were inherently higher risk and the market wasn't -- was basically voted with their feet.

We don't like it. You're taking all of our money, investing it in long tail, high-risk projects. So I had to sort of reverse that coming in. So about roughly speaking, 1/3 of the $300 million we cut is investments that we're making in electrification. And not to say we aren't making any. It's just right now, we've got the customers co-investing in it or upfronting the engineering, whereas before we are taking it all 100%.

The other 2/3 has really been just radically simplifying our structure, we're going to be much more North American centric. So there's a lot of corporate expenses that we had in Europe, Asia and South America that we've eliminated or pushed into our businesses. We deleted our Power Technologies segment and combine that with Large and Light Vehicle.

We had aftermarket split in 2 different businesses. We put all that together and had a corporate piece. And then if you just look at the corporate overhead that we had as a company, it was probably sized for a business that was going to grow to $12 billion, $13 billion and not a business that's going to be -- sort of $7 billion, $8 billion, so a pretty radical reduction in, I'll say, the manager and above level in the company.

So it's been the quick wins, I'll say, there's more opportunity, but the $300 million of stuff that we could kind of recognize quickly and focusing on what I would say is about $1 billion of our $7 billion cost base.

And to follow up on that comment. You're not one and done. I think it's a great analogy. You're not one and done because you still have the restructuring program to go. But what about the degree to which the transaction itself can continue to provide benefit? I mean, the stock's up 98% since November 25. 91 points better than the S&P, up 7%. And the average auto parts flyers underperformed that by quite a bit.

But what about the share repurchase? Because if you're not one and done, you've got the restructuring savings, the share repurchase enabled by the transaction can really amplify that. Maybe just scope out the magnitude there? And then also the benefit to valuation for new Dana from delevering the balance sheet. What could happen?

Yes. Yes. So again, a longer answer than a question, I guess, here on this one. But I guess a few things. So first of all, the way we've positioned new Dana here and Dana post off-highway. And by the way, just the transaction, we expect to close probably at the end of November, but in the fourth quarter for sure. For those of you who may be not familiar with it, it's $2.4 billion of net proceeds, of which we will take a big chunk of that and reduce our debt so that our net debt post the transaction is about 0.7x EBITDA. And then we've announced that we will return $600 million or approximately 25% of our market cap by way of buybacks this -- before the end of this year.

We've done -- we did just a little bit over $250 million last quarter. We've guided to another $100 million, $150 million this quarter and we'll do the balance of that $600 million over the course of the fourth quarter. For next year, we're going to be -- we've guided and we've talked consistently about being 10% to 10.5% margins for next year and 4% free cash flow.

We walked through on our earnings call kind of how do we get to next year because some of the commentary has been around it seems, I'll say, aspirational, I think, as a quote somebody said. I view it as a tap-in putt. If you just think about this year, we're guiding to be around 7.5% you annualize our cost savings. In other words, the $300 million, the $310 million, about $225 million of that flows through this year. So another $75 million to $80 million next year. That's 1 point. So it takes you from 7.5% to 8.5%. If you look at stranded costs that we have, we think we can take out conservatively -- that's another 40, 50 basis points. So that gets us to the 9s.

And then a combination of some new business that we have coming on stream from our backlog, which is about $300 million. And I'll say, a very conservative view in terms of what we've been able to do from an operational improvement perspective, it gets us into the 10.5% type range comfortably. On the cash flow side, we've done a little bit more work on this one since our call. Because there's some question about like we gave sort of a total cash guide for the year, inclusive of both continuing and discontinued ops.

So if you sort of take our $275 million at the midpoint, and you think about what -- how much of it is off-highway and how much of it is Dana on a go-forward basis. About $125 million is off-highway. And the way on calculating that is taking their EBITDA, their change in working capital there, taxes and then also attaching the interest savings that we will get next year to that business. That lays them with cash for about $125 million. The rest of the company, which then reflects like the ongoing interest expense and the cash taxes, which are lower for the ongoing part of Dana. Our free cash flow for this year is $150 million or about 2% of sales.

So how do we get to the 4%? We got 200, 300 points of margin expansion. That falls right to the bottom line. We've talked about lower onetime cost next year because we've had to do some restructuring around the off-highway sale. And then we will have slightly higher CapEx next year as we capacitize for increased volume on the Super Duty and the next-generation Super Duty launch, which is in late 2028.

Great. And the benefits of the off-highway sell are obvious, but just wanted to check in, though, on the potential for any dissynergies and if there may be ways to mitigate those. Starting on the cost side. I'm not sure there were a ton, maybe in purchasing.

Can you just confirm, are the cost-cutting targets you've given inclusive of any headwinds? And then on the revenue side, I'm guessing what synergies there are between the various segments is more between light and commercial vehicle driveline or the Class 4 through 7 kind of meets together. But just checking if there's anything to consider there, too, or just how you're thinking about dissynergies generally?

Yes. I would say the dissynergies are very manageable. I would say the only area is in the purchasing side of things. And from so far what we've seen, I don't see it being overly problematic. On the revenue side, I would say the only area where there is some benefit in us being combined with maybe on the motor inverter part of our business, the light, the low-voltage side. The low voltage sale of our motors and inverters did not go with Allison's sale.

That's something that they're interested in. But because we haven't bought that business back from Hydro-Quebec yet, we couldn't include it in the transaction. So as things stand right now, we still have that. So I would say it's not really going to affect us in any material way.

Great. Thank you. And of course, while there's a valuation benefit to delevering the new Dana balance sheet in terms of the multiple. Just curious if there could also be potential commercial benefits to -- in the past, management has talked about wanting to drive toward 1x net leverage, given that it could be helpful in securing business in the electrification space, where you might be competing against non-levered technology companies or it might be helpful in winning business with certain foreign automakers here the Japanese referenced is preferring supply lower leverage.

Just given you're likely to be well below 1.0x here, very soon, 0.6x, something like that. How are you thinking about the potential for any commercial benefits?

I'd say a couple of different ways. I mean, we want to be at 1x through the cycle. That's kind of the number that we've talked about. As it relates to new business, I would say 2 things about Dana that we hear a lot. One is our leverage target. And obviously, we're in a product that people have to source many years in advance that's highly engineered, so switching costs are difficult.

So to the extent we have a safer balance sheet, definitely makes us -- we're not going in there with one arm tied behind your back. Also, they don't like having agitators in there. So the fact that we were able to buy out Carl Icahn from his position and hence, sort of reposition ourselves as a normal type supplier. That will be helpful. I don't expect a year from now, we're going to say, "Hey, we're growing way quicker than we could have before because of our balance sheet." I think it helps at the edge.

We do have -- I would say we do have more opportunities to reinvest in our business to both grow it, but more importantly, expand our margins because we starved our business of some things that we otherwise shouldn't have because we were chasing growth. And I'll just -- I can give you kind of a few examples.

If you look at our manufacturing footprint, we need to do more restructuring, and that will lead to a significant benefit in our cost base. If you look at -- if you went into our factories and went into an investment-grade BorgWarner, [ AV Leader ] or something like that, you would see a radically different level of automation. And I'm not talking about Tesla robots manufacturing things.

I'm just talking about basic AMRs, AGVs moving material around, basic robotic arms, unloading and loading machines or unstacking pallets and things like that. We've got hardly any of that as a company. And there's just I'd say, $100 million type opportunity just from low-level automation. Same thing on -- if you just look at what we manufacture, and take a look at our true manufacturing cost from an activity-based costing point of view.

In other words, like how much of our overhead is directly attributable to specific functions instead of just smearing it across based on sales. We've probably got over $100 million of things that we make that we lose money on. So I still see even though I think you said breathtaking the amount of cost that we've taken out of our business, I still think the opportunity in front of us is even larger than it's behind us here.

Interesting. And just to follow up on that point, we've all been very surprised, right? You started with $200 million in November. You said The Street called it aspirational. I think I used the word ambitious. Look, it was over 20% of total company EBITDA. It was over 40% of pro forma new Dana EBITDA at the time. And also as a company that had really struggled to restore its margin to pre-pandemic levels after most of the supply base already had.

So buck it out again, where are you getting these savings? And the relative -- I heard one-tap putt earlier, but some of these must be easier to achieve than others. Some of them are more in the bag than others. How much sits down at the plant level? It seems like not a ton actually. It's a little bit more --

It's largely -- it's very little at the plant. There is some plant level SG&A, but a minor amount. It's like just -- may just help you out here. So let's just take -- just call it the $300 million. Roughly speaking, 1/3 of it is what we are spending, like I said, on electrification. So if you think about our CV, commercial vehicle side of our business. It is a -- and same thing with motor and adverse.

It is a -- you could sort of think about catalog type business. We spent a bunch of money over the last 2 years developing a suite of products that will then be application engineered tailored to a specific need at a relatively minor cost. On the -- so that -- the investments behind us, we have the full suite of products. So even without me coming here, that would have dropped down this year anyway.

On the light vehicle side of the business, we were chasing business, a lot of upfront investment, both in capital and engineering on programs that -- with the benefit of hindsight, were far too risky. And if you look at, I'll say, of the 20 or so electric vehicle programs that we have in flight right now, ranging from big to small, every single one of them is financially challenged either customers in financial distress or bankrupt, the volumes are a fraction of themselves.

The program has been canceled. The job one date has been deferred, et cetera, et cetera, et cetera. And so we've unpacked that, renegotiated the way we go to the market. Not to say we're not investing in electrification because we are. But it is upfront in terms of engineering. It is customers putting their money into the capital.

It is having volume -- I won't say volume guarantees, but a volume pricing matrix so that we make sure we uncover our investment and we've been very successful. So that's like $100 million of the $300 million, just the quoting disciplines not continuing to invest in new products for the marketplace because we're just not seeing the demand.

The other 2/3 are -- it's really span and control. It's $25 million, $30 million is eliminating the Power Technologies segment, probably $25 million or so is combining our aftermarket operations between some corporate, some in CV and some in Power Technologies. There's probably $30 million, $40 million of reduced corporate costs outside of North America.

And then I would just say, if you just looked at our general corporate overhead costs as a comparator to what I would say is normal. We are on the high end, and we've trimmed that back. And a lot of those cuts have been in the Senior Manager Director Vice President level.

Very helpful. Turning to your North America driveline business. Given that light vehicle really, it's largely North America electric entirely, but -- what impact do you see from -- on the specific programs or type of programs that you supply, like Ford Super Duty, some of the Jeeps and SUVs, from the relaxation of the federal greenhouse gas and corporate average fuel economy standards that Congress passed in July?

Yes. So for our light vehicle business, the best way to think about it is it's really 5 or 6 programs. It's Ford Super Duty, it's Wrangler. It's Gladiator. It's Bronco, it's Ranger, maybe Maverick to some extent. I mean that's the bulk of our business. It's almost all of those are assembled in North America, high USMCA compliant from a tariff point of view. Some cases, they are advantaged -- our customers are advantaged versus their competitors, particularly, say, on Super Duty from a tariff perspective.

These are Super Duty being our biggest single platform, over 10% of our sales. It's a work vehicle. The decision to go electric is going to be economic. So it's going to be, "Hey, it's dollars, it cents. Is it worth it?" Help -- there are some -- because of that's the way the Super Duty truck is graded, reducing the CAFE requirements could be helpful in terms of some of our customers are still planning on electric variant to that vehicle, not just Ford but GM and Stellantis as well. And so if there's a relaxation, these are going to be programs that they electrify because they need credits, not because the underlying economics are favorable. And so to the extent some of that stuff goes away, it will be helpful.

Great. Next, I wanted to ask on electrification to follow some of the earlier comments about the $100 million of savings. Obviously, there's a headwind to your electrified driveline portfolio, but a tailwind from all of the savings and with what we just talked about the tailwind to those programs on the ICE side. When you net it all together, I feel like for most of the companies at the conference, there's like a silver lining to the EV slowdown, which is we have to spend less. But for you, would you say it's actually a large net tailwind?

Yes, for sure. Just because of the amount of cash flow and P&L that we're invested in it and the payback being so far out. Now I'd say if you look at our electric vehicle business overall today, and this would include like things we have on the thermal like the battery, cooling plates and things like that.

Like it's still a several hundred million business for us. And I would say we're at the point now where without there being this massive investment in the growth side, we can -- that business will start to turn accretive as opposed to being -- I mean you've sort of seen in our earnings call over the last 2 or 3 years like electrification on our bridges was a negative kind of quarter after quarter after quarter.

That business will turn positive for us. We still have good electrification growth in our backlog. It's just not as much as the several billion that we thought it was before. It's more like in the few hundreds of millions.

Very helpful. Wanted to ask on near-term capital allocation, including the change recently between the time of the off-highway sale announcement in June and the 2Q earnings call in August, you upped your targeted return of capital this year beyond the ordinary cash dividend from $550 million to $600 million.

And you also went from saying that the $550 million could consist of some undetermined combination of buyback and special dividend to just entirely buyback. So firstly, could you talk about the decision to increase the payout? And then secondly, what drove the preference for buyback over dividend?

Yes. So I'm glad you asked that. It's probably the most important question. So first of all, as we generate more cash and we upped our guidance here in terms of cash flow and earnings. And as we continue to do well on our -- on generating cash, it will go all towards returning capital to shareholders as well as on a go-forward basis because we'll be appropriately levered post the transaction.

And so all free cash flow in the intermediate term, the way we've seen it right now, will go back to shareholders. You're right in terms of our original announcement sort of said TBD based and really based on what's the underlying financial value of our stock. And do we see our stock as trading -- how is our stock trade versus its intrinsic value?

And I guess the way I would look at that is we've guided towards how we get to our 10%, 10.5%. So when we calculate the intrinsic value of our stock, we're using our number. If you look at where I think the consensus is for margins next year based on the reports that I've seen so far. It's more like in the lower 9s and based on that, including your note, you get to a stock price in the 24 or 26 range. Well, our math is at a higher number. So right now, it's very simple. We're buying 2 shares and getting on free from my perspective and hence, all the money is going to buy back.

All right. I love the confidence. What are your thoughts on some of the recent on-shoring announcements by automakers as a result of tariffs? For example, we've seen GM investing $4 billion to bring back a number of body on frame pickups and SUVs, crossovers, beds from Mexico to Michigan, Kansas, Tennessee, Nissan is bringing more road crossovers from Japan to Tennessee. Honda's moving the CRV from Canada to, I don't know, Indiana or Ohio, I imagine.

It looks like a lot of your light vehicle driveline facilities are clustered around the Midwestern United States, more so than Canada or Mexico. Are you in a position to benefit from this onshoring trend? Have you maybe had any preliminary discussions with automakers about supporting their onshoring activities?

Yes. I mean, not really because for -- again, when I sort of say where our exposure is, they're almost all made here Maverick is an exception, but almost all of them are assembled in North America. And so we don't -- it's not like they're bad. It's just -- they're already well positioned. So there's not an opportunity reposition.

Maybe with the one exception, I know you have this later on your questions on Super Duty volume uplift. And so that is something that is a goal program for Ford. They're uplifting their capacity by, I think, it's just a shade over 20% by introducing into Oakville. And that kicks in next August and ramps up to full -- a full run rate of just under 60,000 by October.