Dana Incorporated

Good morning and welcome to Dana Incorporated's first quarter 2020 financial webcast and conference call. My name is Thea and I will be your conference facilitator. Please be advised that our meeting today, both the speaker's remarks and the Q&A session will be recorded for replay purposes. There will be a question and answer period after the speaker's remarks and we will take questions from the telephone only. If you would like to ask a question during this time, press star and the number one on your telephone keypad. To ensure that everyone has an opportunity to participate in today's Q&A, we ask that callers limit themselves to one question at a time. If you would like to ask an additional question, please return to the queue. At this time, I would like to begin the presentation by turning the call over to Dana, Senior Director of Investor Relations and Strategic Planning, Craig Barber. Please go ahead, Mr. Barber.

Thank you, Thea, and good morning to everyone on the call. Thank you for joining us today. You'll find this morning's press release and presentation are now posted on our investor website. 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. Allow me to remind you that today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from those suggested by our comments today. Additional information about the factors that could affect future results are summarized in our Safe Harbor Statement found in our public filings, including our reports with the SEC. Before we begin this morning's call, you may have noticed that our presentation cover image was not the usual product or market pictures, but highlighted what is the focus for Dana today, namely getting fully back to work safely and taking care of those around us. And we have fully embraced the separated together concept. So joining us remotely this morning are Jim Kamsiskis, Chairman and Chief Executive Officer, and also Jonathan Collins, Executive Vice President and Chief Financial Officer. Jim, would you please start us off?

Thank you, Craig. Good morning and thank all of you for joining us. I hope that all is well with you and your families. As we've been navigating through the coronavirus for three to four months now, starting in China earlier in the year, certainly everything has changed in the world since we last spoke with you in February. We knew that COVID-19 was serious, but that was before we understood it would become a global pandemic and have such an impact on our lives, businesses, and communities. While these are unprecedented times, I want to assure you that our business is strong and our priorities are to continue protecting the safety of our employees and communities, supporting our customers, and being prepared for the future. Our financial health is very good, in a very good condition, as our unique multi-market business approach allows for operational flexibility needed to be responsive during this difficult situation. Now turning to slide five, I'd like to share with you some of the measures we are taking to help ensure the safety of our most important asset, our employees around the world. Over the past several months, we have felt the power of the Dana family, not just from the formal actions implemented across the organization to navigate the crisis, but also the individual behaviors that have made a significant impact on the safety and welfare of our people. Together, everyone has done their part to ensure that we remain safe, and to act responsibly, whether on the job or in the communities that we call home. Through it all, we've communicated a regular cadence with our employees so that they can feel confident, whether they're working safely in a Dana facility or in their home. The sharing of information with our teams across the globe over the last months has helped us to make informed and quick decisions, instilling confidence, educating and enabling our global team to take quick and decisive action to protect our people while serving our customers. In the end, we are a manufacturing organization and the real action begins inside the factory premises. Accordingly, we've expanded our safety protocols, including implementing stringent disinfecting, social distancing, and hygiene practices in all facilities and asking employees who can do their job remotely to work from home. In addition to the many safety protocols we've implemented, our global purchasing Health, environmental and safety, and human resources teams have worked tirelessly to acquire the necessary PPE equipment as we work towards bringing more facilities safely back online. We will continue to follow government and health official guidelines globally to ensure that we are doing everything in our power to keep our employees safe. Now turning to slide six, I'd like to share with you some of the measures we are taking to help the communities where we do business around the world. One of the best ways to manage through crisis is to look for opportunity, and that is exactly what the Dana family is doing. As we all work to navigate the COVID-19 pandemic, I'm filled with tremendous pride at the efforts of Dana People Finding a Better Way, innovating and doing extraordinary things to help others in spite of such stressful circumstances. During the height of the pandemic, much of the world's health systems were, and sometimes still are, in dire need of protective equipment to protect healthcare workers. To respond, a number of manufacturers and suppliers in the mobility markets announced that they would utilize their world-class engineering and manufacturing capabilities to help meet that need. And I'm proud to say Dana has been part of this movement. At our Advanced Manufacturing Center in Maumee, Ohio, our engineers designed, tested, and produced 3D printed face shields for local healthcare professionals in less than a week. We used our engineering expertise to reduce the amount of material needed to produce a version that is strong, durable, and lightweight that can be sterilized and reused. To date, we've provided more than 3,000 face shields. But this was not done alone. We're proud to work alongside many frontline providers and great partners in our community. We also helped to develop plexiglass intubation, and extubation enclosures that allow doctors and nurses to have full visibility of and access to the patient and can be sanitized and used multiple times. Notably, in order to create more impact outside of Dana's local communities, we made the face shield and intubation enclosures open source by allowing designs to be freely downloaded on our Dana Cares website. As I'm sure you're aware, we have a large presence in Italy. we have been extremely impacted by the COVID-19. With hospitals and medical staff overwhelmed and a shortage of ventilators for critical patients, our team in Italy worked to do 3D printing and test components to convert CPAP breathing machines into ventilators. In addition, our global purchasing team served as a matchmaker for hospitals to help source critically needed personal protection equipment, such as gloves, shoe covers, glasses, and masks, to help protect medical professionals and first responders. In China, we donated 50,000 masks to the local governments in the Jinshu province. The Dana Charitable Foundation in the United States also donated financially to organizations such as the United Way and Red Cross that are on the front lines of fighting the COVID-19 pandemic. These are just a few examples of the extraordinary efforts made by the Dana team members around the world. We've also had countless individuals who are helping their local communities by giving blood, donating money, delivering food, or even making masks. In fact, in India, some of our colleagues pulled their personal resources to purchase N95 masks for local law enforcement officers in Pune. Whatever is needed to make a difference. Turning to slide seven, I want to talk to you about what we're doing to help our customers navigate this difficult time. Our customers have taken extraordinary precautions around the world to ensure that the manufacturing facilities are safe, including but not limited to, are doing their facilities when and where appropriate. Largely speaking, our customer plant closures across most of our end markets were gradually announced beginning in early March in Western Europe, and then on March 18th, our light vehicle customers in North America announced that they would halt production. Soon thereafter, essentially the balance of Dana's largest regions such as South America, India, South Africa, and Thailand ceased operations. Accordingly, these customer shutdowns triggered the need for Dana to either completely or near completely shut down well over 100 manufacturing facilities, which employed tens of thousands of employees. The efficient and effective planning, coordination, and execution to accomplish this around the globe by the Dana operating team was remarkable. My most sincere appreciation goes out to all the Dana team members that have executed through this incredibly challenging situation. However, this was certainly not the end of the challenges. At the same time that we were winding down facilities, the operating team was also maintaining production and supply for customers that remained open, such as the aftermarket, agriculture, and mining segments, as they were deemed essential businesses around the globe. Operating numerous facilities at the apex of the pandemic was extremely difficult, but supporting the essential business was critical to both our customers and the communities. Furthermore, supporting the customers does not stop at the supply of products. Dana also provides product engineering and program management services for critical components and systems to ensure that the successful launch of new vehicles across all of our markets. As a matter of simply updating today's audience, at this point, we've experienced very few customer new vehicle product development delays due to the pandemic. Of course, mobility customers also rely on sophisticated global suppliers to successfully manage a complex, shared supply base no matter the circumstance. Dana is no different. With nearly 3,000 serial production suppliers, this is no small feat for us, but we believe our supply risk management system and team members have done a good job handling the situation. We would deem our supplier status as stable and will work to continue to manage at-risk suppliers and implement risk mitigation plans as required. Lastly, manufacturing companies cannot underestimate the complexities of restarting operations. We certainly do not. Over the past week, we have restarted numerous facilities around the world at various levels of output, including many facilities in Italy where the pandemic took a terrible toll. Our supply base and Dana manufacturing facilities have done an outstanding job restarting and supporting our customers. Moving to slide eight, I'll walk you through some of the measures we're taking as we look to the future. So far, we've discussed protecting our people and protecting our customers. The third leg of the stool is to protect Dana's future. More specifically, protecting our strong balance sheet and financial health of the business. We have been accomplishing this through a series of critical actions. First, we have taken numerous what we call cost-flexing actions. It may sound straightforward, but by cost-flexing, we mean in addition to labor flexing in the form of temporary layoffs at our plants, we essentially either eliminated or flexed all of our discretional spending across the company. These actions were in addition to the compensation reductions that were enacted at the beginning of April for all salaried associates, and our Board of Directors from 20% up to 50% reduction in the Chief Executive Officer's compensation. Frankly, I could speak in greater detail regarding cost flexing. However, suffice it to say that having been a sitting CDO during the 2007 through 2009 Great Recession, the COVID-19 crisis has been very much like a do-over of the unprecedented actions that were required during that time. These cost flexing actions are aided are aiding us in aligning our cost structure with the reduced production volumes taking place across mobility markets. We also announced a new credit facility that will give us access to additional liquidity should the need arise. We took this action out of abundance of caution. This Jonathan will walk you through in a few minutes. We have abundant liquidity and the strength of our balance sheet and capital structure offers us flexibility and security as we navigate through these challenging times. We've also not lost sight of what will drive our future growth. We continue to invest in developing new technology, including advances in powertrain systems for commercial vehicle and off-highway vehicles, thermal management solutions for batteries and electronics, and electrified propulsion systems for automotive applications. As we look forward, we have assembled a global data task force that is working with various government, union, and health officials to determine protocols as we bring plants online as soon as it's safe to do so. This includes establishing pandemic control teams who oversee response plans in our facilities and to help establish preventative disinfection measures and employee health protocols. We know the world still confronts an enormous challenge, but it is encouraging that the global community now has a greater understanding of COVID-19 and can deploy lessons learned as we safely navigate our new normal. With great caution and deliberate actions to limit the risk of exposure, Together, we can begin to move forward. Turning to slide nine, I'd like to provide a business status update. As you know, mobility markets are currently very unstable. We're at the inflection point where some customers have been idle, are beginning to restart production where possible. I will take a few minutes to cover a few key points on the status of each of our markets. Starting on the left side in our light vehicle market, Our North America OE customers have been idle through April, while several of our U.S.-based customers have indicated publicly that they will restart production in May with various starting dates. A few of our European customers have remained operating with limited production, and others are planning to restart on a country-by-country basis. Most of our customers in India and South America have been idle through April. In China, production has restarted and demand for light vehicles is recovering. As we have mentioned, China represents a relatively small percentage of overall sales, but we learned valuable lessons from restarting these operations that we have been applying around the world. Moving to the center of the slide, the majority of our commercial vehicle customers in North America began idling production in late March, and we are expecting to see customers likely restart operations slightly sooner in May. While a smaller market for us, it's encouraging to see a few customers in Europe who have begun limited production. Like light vehicle, customers in India have been idle through April. Some customers in Brazil have commenced low-volume production as of today. And in China, commercial truck and bus production has restarted. In our off-highway operations, customer production in North America has been mixed. with operations supporting essential industries such as agriculture, mining, and a few other industrial sectors which remain in production. In Europe, Italy was particularly hard hit by COVID-19, and Dana has a strong presence in the country. In a positive sign, that many of the customers in Italy across the region are beginning to resume operations. While India has been idle through April, there is a limited production in South America. In China, production has restarted again, and our facilities serving the highway market in China, such as Wuxi and Yancheng, are running at near full capacity. Across all three of our end markets, our aftermarket operations have remained mostly operational, as service parts have been deemed essential, especially in the commercial vehicle markets, and we continue to see good demand, especially in Europe and North America. Through this all, our supply base has been stable and we continue to monitor our suppliers with the aid of our customers to ensure the uninterrupted supply chain. The big questions are what happens for the remainder of the year? And what about upcoming launches? As of now, we expect only minimal delays to new programs in the launch cycle, but we will continue to work with our customers as always to successfully deliver our backlog. As we look forward, production levels and end customer demand remains uncertain. However, we are encouraged that as most of the European customers are in restart mode, and we expect remaining customers to return to some amount of production in May. We are working closely with all of our customers to support them through this process. With this, I'll turn it over to Jonathan to walk you through our financials, and I'll return with a few closing comments after Q&A. Thank you, Jonathan.