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spk05: existing capacity versus capacity we don't have, and a combined effort to be more competitive and be able to win at a higher rate. So that's the game plan. It's still, you know, we're winning right now in the quarter, and, you know, we're on track with our comments that we're making here. So it's, knock on wood, still gaining momentum.
spk04: Okay, excellent. That was a great overview. And then lastly, on the medical segment, you want to program there in good progress. How do you see that business developing over time? I think you said it was a 2025 sort of timeframe where that really kicks in, but maybe just help understand the steps that that segment takes to go here.
spk05: Yeah, it's a good question. It's been, it's one that, you know, it's the Shielding and Connector One, we were in it to a minor degree, as I mentioned, in our legacy business, and now we're basically upsizing something that was there. In the case of the new medical non-tool market, it's a startup, and so we had to hire a commercial leader, Willie Beach, who came from competition. We had to hire an engineering and quote leader, Tim Dunham, who came from a competitor. We had to hire a medical plant manager. Brian Barton, who came in operationally. So we had to generate a team from scratch, and then we had to focus in on what customers we were going to go call on and what products we were going to sell them and what plants we were going to make them in. We have medical certifications at four plants right now. We're expanding it to eight. And when we're getting into our RFQs, we're being careful to note Say it has seven processes, seven manufacturing processes, on the five where we are competitive and the two where we're not competitive, and then gathering this and having pattern recognition about what we want to do about it and what equipment we might want to consider buying. We have some initial thoughts. We know that we need to buy what's called gun drills, which are deep boring, high tolerance drills. We didn't need those so much in the automotive business, if you will, but it's a item in the medical arena. And then on the stamp products, it's about getting certifications and an expanded product line. So we have a weekly meeting. We're going logically. We're not trying to rush out and waste money or waste time. So we're trying to build up to a $50 million business. That's what we've all embraced our goals around, and we have an initial five-year plan to get there. So we don't think it's going to add too much to this year, Rob, in 24, unless something happens that we're not expecting. But we are beginning to win business, and you have to go through all the customer certifications. So it's a little bit longer lead time, and so I think that in our results, it'll start showing up in 25.
spk04: Okay, great. Thank you. I'll turn it over. Thank you, Rob.
spk00: Thank you. And our next question today comes from John Frangere with Cedonia Company. Please go ahead.
spk02: Good morning, everyone, and thanks for taking the questions. I'd like to start on the sales guidance for 2024, Harold. Can you talk a little bit of how much embedded in that outlook is repriced existing contracts and how much is in that outlook of assumed exited of existing contracts?
spk05: Yep. So on pricing for this year, we have about the same amount of activity on price up activities versus requested price down. So net price right now in this outlook is minimal, up or down. With regards to exiting business, we do have some of that in here. We have the seven plants, which I've nicknamed the group of seven, that are going through negotiations right now. We've already come to terms with a certain piece of business that was negative contribution margin that we're going to walk away from. Right now, John, I'd say the outlook is it's five to 10 million of sales losses from that. So it's not massive. It's not a massive reason. And so really we're being conservative and adopted third party outlooks on our end markets. And I think you probably know the commercial vehicle market in North America has a negative outlook for 24. And we participate in that market. It's about 10% of our business. So we're assuming a decline there. So Those are your pieces, not much on the price, $5 million to $10 million hit on volume that we'll walk away from as part of fixing the seven plants, and a slight hit in commercial vehicles and a slight lift primarily from ramping in new business.
spk02: Since you brought it up on the commercial vehicle side, have you seen that decline yet, or are you assuming that's a second half kind of
spk05: We haven't seen it yet. We haven't seen it yet, John. We believe it's going to be in the second half. And I still track the ACT and FTR data like you probably do also. And, you know, the build rates in the first half are still there. We're primarily serving into the engine market, into the engine market for those vehicles, John. So they're not a big supply chain. You don't build ahead those. Those are pretty much made to order. So, First half, we're not seeing much activity yet.
spk02: And a question on the new business wins. You know, you've got a good number last year, looking at a nice number this year, 55 to 70. Have you got a sense of, as you readdress the pricing environment, how the contribution margins are starting to change in the new business wins from what you used to record, what your company used to record, you know, two years ago or so?
spk05: Mike, you might be able to help me out on that one. I'm just going to say right now, John, we're spending money a little bit on ramping up these programs. So one of our largest ones that we won is in a prototype mode. And I don't want to say we're on the hairy edge of technology, but we're pushing the technology expansion here and capability expansion. We're kind of breaking even, I would say, initially on these these new business wins. We haven't set up budgets for it, so Tim's expensing the startup costs and the plant results as we go along. And that's why in my comment I said they're accretive at full run rate because we know right now we review every plant every week, and so we know some of these ramp-ups are costing us a little money. But the run rates that we do, we look at it when we do the CER, the capital requests, associated with the WINS, and as a group, they're accretive. I'm going to say it's three to five points better, John. It's not a miracle. It's just a few points better.
spk02: Okay. All right. Fair enough. And just one last question. You mentioned in your prepared remarks that you replaced roughly 40% of your plant managers. I'm curious how much of those were promoted internally and how much of those were brought in externally and any kind of initial feedback about the plant managers.
spk05: Tim, are you able to speak?
spk07: Yes, sir. For the majority of them, they are internal promotions. We have brought in two from the outside, one specifically that's running the medical side But for the most part, they are coming from internal promotions.
spk02: Any initial thoughts?
spk06: Initial thoughts regarding the group?
spk02: Correct.
spk05: Tim, you might want to say the big plan that you're putting in place on metrics and safety and quality and on time.
spk07: Well, exactly. Our big focus with the transformation plan is implementing the strategic KPIs within the facilities and driving the accountability down to the lowest level possible within the facilities. And the plant managers that we've selected are very in tune with the capabilities of the facilities and so far are adopting the new KPIs very well. Very good outlook so far.
spk04: That's what we've done.
spk02: Okay. All right. That's kind of what I was looking for. Thank you, gentlemen. Appreciate it.
spk04: Thank you, John. Thank you.
spk00: And, ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 at this time. Our next question today comes from Joe Gomes with Noble Capital. Please go ahead.
spk03: Good morning. Thanks for taking the question.
spk05: You bet, Joe.
spk03: So you just announced the sale-leaseback of three facilities. And I was wondering if those three facilities are those in the group of seven? If so, kind of what is the lease arrangement for those facilities, the length of the leases?
spk01: Yeah, you want to take that, Mike? Yeah. The three facilities are not in the group of seven. we expect the lease term will be an initial term of 20 years. So there's no plan to change the operations at those facilities that we're doing the transaction on.
spk03: Great. Thanks for taking that.
spk05: Appreciate it. Thank you, Joe.
spk00: Thank you. And our next question today comes from Tom Kerr at Zacks Investment Research. Please go ahead.
spk06: Good morning, guys. A couple quick questions. Back on the sale-leaseback issue, are there more opportunities for that, or is that kind of a one-and-done deal?
spk01: We've looked at both real estate and equipment. I think on the real estate side, that's probably what we're going to do in the near term, although we'll continue to evaluate it over time. And then on the equipment side, that's something that we're also looking at. So there is potential more opportunity for us to use leasing to pay down debt or finance capital.
spk06: Okay. Back on the 60 program awards mentioned, roughly 60, is that a concentrated customer base in those awards or is it a large number of customers?
spk05: It's a large number of customers, but we had a couple big wins, Tom. So just those data points, we had big wins with specific customers. So there were two big customers in there, and one was an existing customer and one was a new customer, and one was electrical stamped parts for shielding We announced that in the fourth quarter, and one was for diesel engines, high-end, off-road, heavy equipment engines, next generation. So two big customers and quite different products.
spk06: Got it. OK. A couple more quick ones. Can you refresh my memory on the Taunton and Irvine closures, the timing of that? In other words, how much did that carry into 2024? in terms of volume hits. Is it first and second quarter, or can you give me any color on that?
spk01: Yeah, Taunton was closed for the most part in Q1 of 23, and Irvine ran into Q2. They were both effectively closed by midyear last year.
spk06: Okay, so still a little bit of volume hit from that in the first half. Okay.
spk01: Correct, and we have some premium pricing at Irvine associated with the ramp down. So, yeah, there will be a little bit of sequential volume pressure still.
spk06: Great. Okay, that's all I have for now. Thanks.
spk05: Thank you, Tom.
spk00: Thank you. Thank you. And, ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to the management team for any closing remarks.
spk05: Yeah, thank you for spending time with us today and speaking about NN's performance. It's transformation plans and our value-adding focus areas. We're a committed global team, and we're pretty excited about 2024 and going forward, and we look forward to speaking with you again. Everyone have a great day. Thank you.
spk00: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
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