Dana Incorporated

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 speaker's remarks, and we will take questions from the telephone only. 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's Senior Director of Investor Relations and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.

Good morning, and welcome to Dana Incorporated's first quarter 2025 earnings call. Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from what we discussed here today. For more details about the factors that could 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. And as Regina said, the call today is being recorded, and supporting materials are the property of Dana Incorporated. They may not be reported, copied, or rebroadcast without our written consent. With me this morning is Bruce McDonald, Dana Chairman and Chief Executive Officer, and Timothy Krause, Senior Vice President and Chief Financial Officer. Bruce, now I'll turn the call over to you to get us started.

All right. Thank you, Craig, and good morning, everybody. I'll just start on slide four here in terms of some highlights for the first quarter. I know there was a lot of interest in the off-highway divestiture process, and we're really not in a position where we can say a lot. What I would tell you is the process continues to be underway. We're pleased with the progress that we've made. It's been competitive, and we have multiple bidders. If you look at the quarter, I would say pleased with Q1. Our results came in, generally speaking, in line with expectations. I would note that we did have a little bit of a headwind on tariffs of $6 million in the quarter. Absent that, we would have had comparable margins to last Q1, despite a pretty big reduction on the top line. So good result there. And we see that $6 million coming back. We just couldn't get the paperwork into our customers to get the recovery in the quarter. Real importantly for us, and we talked about this on our last earnings call, is we said we're going to look at our cost reduction plans and see what we can do to bring those forward. So I'm pleased to announce that we're accelerating the realization of our cost program here in 2025 what was $175 million to $225 million. We completed the integration of our former power technology segment and aftermarket business into light vehicle and CV, respectively. That's gone real well. Of the $300 million cost reduction, this integration is worth about $30 to $35 million of that. I think we're going to see further benefits, not sort of SG&A related benefits, as we leverage best practices across our aftermarket businesses. And I think as we bring some of the operational rigor and processes that we have in light vehicle to power technologies, I see operational improvements falling through in the back half of this year. So more to come on that. Then lastly, in free cash flow, Q1 is always a seasonal outflow, but we had a good start despite lower revenues and profitability on an absolute basis. Our Q1 cash outflow was an improvement year over year of $67 million. We continue to focus on opportunities to reduce our CapEx, and I'm hoping that we can squeeze some money out of that in the back half of the year. And then, you know, not that it's in free cash flow, but we are focused on a portfolio of non-core, non-strategic assets and things like that. We expect to deliver 50 million here in the second quarter and could see our way maybe to another 50 million in the back half of the year. Generally, a good start to the year. In terms of the outlook and what we're seeing, I guess I would start with a very dynamic situation that especially on the tariff front, changes significantly on a daily basis. But based on what we see right now, I guess I would just say our tariff situation is manageable. We can get into a lot more detail in some of the questions, but it's a manageable issue for Dana. Several mitigation actions have been completed. We've got recoveries into our customers with the right level of detail. to support our claims being processed. And I guess the other thing I would note, if you look at the steel and aluminum tariffs, we've seen North America indices move up such that we expect we substantially recover the steel and aluminum through already negotiated mechanisms that we have in place with our customers. Could be some timing issues, because those tend to work in a little bit of a lag. I would say the impact of steel and limo tariffs with the way the indices have moved would be kind of a non-issue for us as we see things right now. In terms of what we're seeing in the market, the first, I guess, thing what we are seeing is a reduction in schedules for our North American commercial vehicle customers. And you see that in some of the calls that have come out before us with people taking their assumptions for North America down. And we've reflected that in our outlook. So that's sort of been a bit of a headwind for us. And off highway, we're seeing a little bit of pre-buy interest here in the second quarter. Nothing significant, but it's nice to see we're getting a little bit of that. And we are starting to see outside of North America some green shoots in terms of improvements and orders in the second half of the year. In North America, We aren't seeing anything in terms of LV schedules, any deterioration at this point in time. If you look at the mix of vehicles that we're exposed to, you guys all know where our money is made. We feel pretty good about our customers gaining share in our space. And while we acknowledge there's some risk in the back half of the year, We're just being cautious right now. We don't see it reflected up in our schedules. We talked earlier about the $50 million of incremental cost reduction. And then I guess I would just say, absent tariffs, we'd be sitting here this morning raising our guidance by about $50 million to reflect the acceleration on the cost reduction side. We're just holding back until we get a little bit more clarity on what happens in LV, particularly in the second half. And lastly, just a little bit of a something to brag about here, but we want our 10th pace awards quite an honor and the industry this for us as a. This this hybrid transmission is kind of a niche product spoke 20 $25,000,000 of sales this year. It's product that we that we're we're we've rolled out across the highest end of the automotive spectrum. So customers like Aston Martin, Lamborghini, McLaren. We see this as a business opportunity to grow to 200, 250, maybe even up to 300 million over the next few years at a highly accretive EBITDA margin. This product pushes 20%. So not a huge item, but it's an important, I think, margin expansion arrow in our quiver. And I congratulate the technical team for winning the award. So with that, Tim, I'll turn it over to you.

Thank you, Bruce, and good morning to everyone. Please turn to slide eight for review of our first quarter results. Sales were $2.4 billion, $383 million lower than last year, driven by lower demand across all of our end markets. Adjusted EBITDA was $188 million for a profit margin of 8%, just 20 basis points lower than last year on lower sales as the benefits of our cost improvement actions begin to take hold. Net income attributable to Dana was $25 million in the first quarter of 2025, compared with $3 million last year. The difference was primarily due to the proposed divestiture of our non-core hydraulics business in 2024. A $29 million loss was recorded to adjust the carrying value of net assets to fair value in last year's first quarter. Income taxes for the first quarter of 2025 were $29 million lower due to jurisdictional mix of profits and timing of payments. Finally, operating cash flow was a use, as is normally the case in the first quarter, of $37 million. This was an improvement of $65 million over the first quarter of last year due to lower working capital requirements. Please turn with me now to slide 9 for the drivers of the sales and profit change. Beginning this quarter, we have revised our walk presentation to better detail the impacts of volume mix and performance of the operations. Previously, these two drivers were combined. We continue to show the benefit of our cost saving initiative, and we have added the actual impact of tariffs as part of our walk. Beginning with volume and mix on the left, we saw $345 million lower sales driven by lower demand in all of our end marketers, specifically When compared to Q1 of last year, when light vehicle production increased dramatically coming off of the UAW strike at the end of 2023. This year, we are seeing a slowdown in production as vehicle inventories remain high. We did not see any distinct change in order patterns from our key customers on key programs related to tariffs during the quarter. Adjusted EBITDA from sales volume and mix was lowered by $90 million. This was a decremental margin of about 25%. We are breaking out performance which includes efficiency gains in our manufacturing separately. Performance increased sales by $27 million, mostly through commercial actions, while profit increased by $35 million due to efficiency improvements across the company. For the first quarter of 2025, cost savings added $41 million in profit to the various actions we have taken. As Bruce mentioned, We have accelerated some actions. We now expect to realize about $50 million more of our $300 million in total cost savings this year. To the left of the slide, we included a breakdown of where the permanent cost savings are coming from. You can see it's well distributed across the cost structure. The tariff impact in the quarter was just $6 million. Since our tariff recoveries will have a lag associated with them, we did not immediately recover the tariffs in the quarter, but we expect to receive recoveries throughout the year. Foreign currency translation decreased sales by $53 million, primarily driven by the lower value of the Euro, Real, and Rupee compared to the U.S. dollar. Profit was lower by $4 million with no impact to margin. Finally, commodity cost recoveries in the first quarter was $10 million lower than last year due to the timing of cost mechanisms within the commodity recovery agreements with our customers. Profit was $11 million lower as the prices fall through to profits. Next, I will turn to slide 10, the details of the first quarter adjusted free cash flow. Adjusted free cash flow in the first quarter of 2025 was a use of $101 million, which is $67 million higher than the first quarter last year. Lower adjusted EBITDA and higher one-time costs related to cost-saving actions and the sale of the off-highway business were offset by lower working capital requirements. Finally, capital spending, net of proceeds of sales of fixed assets, was about the same as last year. Please turn with me now to slide 11 for our guidance for 2025. Our 2025 full-year guidance ranges remain unchanged. As a reminder, our guidance includes the off-highway business for the full year and includes the estimated impact of disclosed tariffs. First thing you will note is that we are expecting sales to be above the midpoint of our range. The higher sales expectations are taking into account some of the softening in commercial vehicle end markets offset by the recovery of expected tariffs that will flow through sales and the improved outlook on currency translation. To date, we've not seen a change in the volume expectations of our major light vehicle programs. Our initial expectations were for slightly weaker in-market demand for light trucks. If that market weakens further, we will adjust our outlook. Adjusted EBITDA is still expected to be $975 million at the midpoint of the range. This is approximately $90 million higher than 2024 and implies a profit margin of about 10%. 140 basis points increase over 2024. Full year adjusted free cash flow is expected to be $225 million at the midpoint of the range for the year. This is approximately $155 million higher than last year. Our adjusted EPS guidance is expected to be $1.40 per share at the midpoint of the range. This is down from our previous estimate solely due to the change in expected tax sense driven by our expected regional mix of profits. Lastly, please turn with me to slide 12 for an outlook of our adjusted free cash flow for 2025. We anticipate full year 2025 adjusted free cash flow to be about $225 million at the midpoint of the guidance range. We expect about $90 million of higher free cash flow from increased adjusted EBITDA. One-time costs will be about $20 million higher as we invest in our cost savings program, and we work to finalize the off-highway divestiture. Working capital requirements will be about $50 million lower, and capital spending net is expected to be about $325 million this year, which is $45 million lower than 2024. Thank you, and I'll now ask Regina to open the call for questions.

At this time, if you would like to ask a question, press star, then 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'd like to ask an additional question, please return to the queue. Our first question comes from the line of Joe Spack with UBS. Please go ahead.

Thanks. Good morning, everyone. Maybe just to start on the guidance, I know you listed a number of things, you know, some tariff headwinds and some negative market assumptions in what is, I guess, going to be new data but then cost savings. And then in the off-highway business, you mentioned some of that pre-buy commentary. I guess the question is, back in the beginning of the year, you provided some guidance for new data versus the off-highway. And with all those factors you listed, is there any meaningful change to those assumptions we should consider?

Yeah. So commercial vehicle is going to be a bit lower than what we had anticipated. had seen just a couple of months ago, that's largely being offset by amounts in light vehicle and in a little bit in off-highway. And then, obviously, the balance of that is coming from what we believe will be additional revenue from tariff offsets.

Yeah, and I guess maybe just a couple other things. The three that the incremental cost reduction target is all relates to corporate, so you know, get sort of smeared based on sales. I would say you know in off in off highway. You know we are benefit if in our outlook we we are picking up some some translation on the Euro, so that would be disproportionate to to off highway, correct? And. But, I mean, generally speaking, if you sort of, you know, $50 million cost reduction is a pull for, but if you think about when we gave sort of guidance around new Dana post off-highway sale in 2026, I think the message is, look, Q1, you know, new Dana is up year over year in margins. and off highways on a year-over-year basis down. So the path to get new data in 2026 to the type of number that we commit to, the 10, 10 and a half, is thoroughly on track.

Okay. And then just for 25, again, I know you provided some ranges and it seems like some moving parts, but generally those ranges are still valid?

Yeah, they're generally valid. I mean, the sales are going to move around, as Bruce mentioned, right? Between tariffs and translation, we're going to have some tailwind on the top line. And that's largely going to offset the headwinds that we're seeing in commercial vehicle from a volume perspective.

Yeah, and I guess if you think about tariffs overall, we don't bring in an awful lot of product from Europe into North America. So when we talk about our tariff headwind, the commercial, I'm sorry, the off-highway impact is relatively small.

That business is primarily European. We do have a bit of business here in North America, but that's a relatively small portion of the overall business.

Okay. And then, Bruce, I appreciate your limited and what you could say about about the process. I think it's some relatively encouraging commentary, but maybe you could just sort of indicate to us if sort of any of this market uncertainty has had any impact on the process, even in terms of sort of potential management distraction for potential buyers or anything there, or are things sort of mostly on track with what you thought?

Yeah, I mean, I I guess I would say obviously. You know if you if you if you look at the the last 90 days, I think the tariff situation is becoming clear. You know he was swinging around pretty wildly. When some of the IEPA stuff was coming up and the China thing was escalating and things like that, I think I think now some of the rules. We've had a little bit of stability. We're getting clarification in terms of what's in and out, how we handle USMCA, non USMCA. So we're so we're I I would say we've definitely had maximum uncertainty and and you know in that environment. Yeah, people are nervous and want to understand things. So spending a little bit more time with our with our teams. So I'd say I really can't say say a lot, but we're, we're, we're a few weeks, I guess we've sort of talked about being in a position to say something, come to a resolution here in, in early in the, in the, in the second quarter. Now, I guess I would just say that's, that's probably our timing is probably more like late in the quarter. Okay. Appreciate that. I mean, I wish I could say more, but the guys probably want to, you know, the room already. So.

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

Hi. Thank you for taking our question. I just want to come back on the tariff. Can you share, I guess, what is the exposure at the moment in terms of the timing of recovery? How long do you think that will take on average?

So I don't want to get into the overall exposure, mostly because I don't really want to negotiate you know with uh with my customers uh in in public but what what i can say is from a from a from a recovery perspective we we expect it's it's probably going to be less than a quarter on a lag and of course that depends on on the customer and the end market uh that we're dealing with but uh you know most of our largest customers have set up a regimented process so um and as uh As Bruce mentioned, we've already started to provide invoices and the detail backup that's required by our customers in order to obtain recovery. So that process is well underway, and we see it working well given the level of detail that we're providing the customer. But I'm guessing it's Probably when they get through it, you know, obviously the customers are going to be pretty inundated. We're looking at, you know, somewhere probably not longer than a quarter, but I think it'll end up being a little bit less given the impact that this will have across the supply base.

Yeah, I mean, I'd expect us to be a cash flow timing issue in the quarter. I think by the time we're here three months' time, we will know what our recoveries and have that process nailed down. So we'll be accruing the impact. But the cash associated with it, like we have to pay that out much sooner than we're going to get it back. I don't think that's going to be a major bridge item for us, but I feel pretty comfortable that it's not going to be a problem for us.

In terms of the amount, is it baked in that you would recover essentially 100% or is there some wiggle room or haircut to the recovery?

Our view is that we're going to be recovering 100% of the tariffs.

I think maybe just a little bit of help there is, first of all, if you think about our our commercial vehicle business and our off highway business, we have very little risk of 100% recovery. So that part of it we're not worried about at all. I mentioned that the aluminum and steel will be recovered through normal indices that we already have in place. So once you sort of back out those three things and some mitigation actions that we've taken where We were the importer of record of finished goods. So like we bring some axles up from Mexico to North America and they're picked up at a warehouse in Laredo. We've renegotiated those exposures away. So now you're left with a fairly minor amount in the scheme of the $10 billion company. Um, we have all the documentation submitted, uh, to, to our light vehicle customers. And, um, they have, they've, they've brought in external resource to process our claims. And in one case, we know our, our claim has been processed and approved. Um, but I haven't seen the check yet. So we'll see where we end up.

Understood. And just one last thing to clarify. So is the I really not quantifying the exposure, but in terms of the the the mechanics, is it basically the the non USMCA part that you're assuming for the that gets exempt? Or are you assuming that that there's more there's more or the USMCA actually goes away?

Well, so we're What we've put out in terms of our guidance now is based on what we see coming out of Washington as of today. That will change tomorrow, I have no doubt. It changed last night. But the way that the mechanisms are working with our customers are that we need to be able to prove the actual amount of tariffs that we've incurred and be able to trace them back by part number. And that's the documentation that we're providing. And our expectation is that level of detail will allow us to recover the tariffs from our customers.

And it's a little bit more nuanced than your question. Let me just give an example. So everything that we're talking about is for auto parts. It does not include are part the way the definition and the hts uh hts codes are written it does not include things like our off-highway and commercial vehicle products nor does it even include some of our super duty uh business um so they aren't in this whole 232 switch that happened yesterday they're still into the other buckets aipa reciprocals things like that

Gotcha. Very much appreciated. Thank you. Yeah.

Our next question comes from the line of Colin Langan with Wells Fargo. Please go ahead.

Oh, great. Thanks for taking my questions. Any way to frame what you're assuming for light vehicle production? Is it very in line with the recent S&P forecast? Is there any way to frame that? Because obviously a lot of uncertainty with tariffs.

Yeah, I think the way – obviously, when you think about the light vehicle outlook, we try to steer everybody back to the light truck production. We currently aren't seeing any substantial change from where we were when we – We came out in February, so that's what's currently baked into our forecast for North American light truck. And if that changes in any material way, we'll have to revisit, you know, our outlook. But right now, we haven't seen anything and don't have anything from our customers on the horizon. That doesn't mean it won't change, but at this point, that's currently, we're looking at it largely the same as we did two months ago.

And the only thing I'd add to that, Colin, is we acknowledge there's a risk there, and that's why we're not up in our guide.

Got it. But on the S&P side, I mean, is it consistent with what S&P just provided or more optimistic, less optimistic?

I would say the latest S&P data, which we don't think is accurate, especially here in the short term in some of it, but If you looked at the latest S&P information and we were to factor that in, we'd have more than enough coverage in the extra cost saved to hold our guide.

Got it. That's helpful. And then, you know, if I look at, I think you said earlier you didn't want to provide like a number on the tariff impact, but I mean, in the EBIT walk, it's $6 million. I mean, is that not a runway we should think about?

Well, you have to, I mean, the tariffs were not for the entire quarter. They were staged in. You can't use the first quarter as sort of a viewpoint for the tariffs. They've also changed from week to week. And so depending on when we imported the material and how it was classified determines what we ended up, what the impact was in the quarter. That's going to be different going forward. So you cannot use the first quarter and try to do some sort of extrapolation. The rules and how these things are classified have changed dramatically from week to week.

Four million of the six million, Colin, is related to where Dana was the import of record. The example I gave in the previous color and and we've already remediate that and build it and we were not at all worried about getting that 4 million back. But yeah, like Tim said, there's there's things that have come on and come off. There's there's bucketing issues except there's HTS code issues, etc, etc, etc.

Yeah, you have to remember, right, that a lot of this stuff is coming out in either an executive order or in a press release or a press conference. It then gets published in the commercial register, and then that's then translated by the Commerce Department into – and at the customs and border to determine how and what HTS codes are going to collect what tariffs on which. So it is exceedingly complex and is changing as both the rules get more clarification and the rules change.

Maybe just a few sort of scene setters on it. Maybe you can. kind of get your feel get your understanding a bit better overall our our flow of goods from mexico back up here to the united states is 7 800 million and our canada flow of goods is like 100 and so you know that that split um 55 ish percent is usmc compliant some of that is also doesn't have anything to do with It's 232 because it relates to our commercial vehicle business. Our other exposure that we have is reciprocal tariffs on castings and things like that that us, like everybody else, buys from Korea and particularly India. So those are the headlines of where our exposures come from and kind of magnitude.

Yeah, and I'll also point out that some of the material that's coming in that's non-USMCA compliant is directed source by the customer. So we don't have a choice on where we're bringing in some of the parts based on the customer requirement. So, again, that is, you know, recover dollar one right away because, you know, we don't have any choice.

And you said $700 million, $800 million, Mexico, $100 million, Canada. Any number on that? what's from the rest of the world brought into the United States?

Yeah, we're talking, you know, a few hundred millions more. I mean, it obviously depends on production and where we're at, but largely those sorts of numbers.

Got it. All right. Thank you very much. Thanks for taking my question.

Thank you. Our next question comes from the line of James Picriello with BNP Paribas. Please go ahead.

Good morning, everybody. Just as we think about the off-highway sale, and if we just consider the tariff exposure, the tariff exposure for the off-highway business, we know off-highway, as was mentioned, does not fall under the Section 232 auto's tariffs. It would be subject to the broader Liberation Day tariffs. That's a question just to confirm. And then just regarding off-highways regional sales mix, We know about 65% of total sales get produced in Europe. Can you just size up what portion of that or what portion, you know, properly constitutes North America, U.S. sales for off-highway, and what portion gets imported to understand the trade flow there? Thanks.

Yeah, you know, North America is a few hundred million dollars. You know, a portion of that gets imported. It's... I mean, I'd have to go look at the specifics and we can get you that. But the tariff, overall U.S. tariff exposure for off-highway is very small and is 100% recoverable from the customer. You know, we've already proactively actioned with those customers to get recovery. So it's... The tariff impact is not the issue around off-highway. I think the broader issue, and this is true for tariff generally, is, hey, how does this affect the macroeconomic environment, and how might it affect volume, you know, in all the end markets at the end of the day? That, and especially for off-highway, that's probably the bigger issue, right, as they and they pass these things through, how is it going to affect the various end markets within off-highway? To date, we're not seeing, we haven't seen anything, and we've seen a little bit of pre-buy. And, you know, when you look out at the back half of the year, we are starting to see the green shoots we were expecting. So right now, you know, things are holding up well. pretty well, but it's a pretty fluid situation and we're monitoring it pretty closely.

And then that's really helpful. And just my follow up. I know there's a sensitive question, sensitive answer. Previous timing of the off highway sale did point to like something around the second quarter. Just curious if you could share any thoughts there. And then just within the revenue guidance, you know, two things that are not tied to tariffs, right, FX and commodities in your revenue. Can you just confirm what those guidance assumptions, those guidance updates are?

Thanks. So I won't, I'm not going to provide the update because then you can sort of back into what the tariff assumptions are. But they're, you know, in terms of commodities, we would expect to be up a little bit. And obviously the FX is going to be an additional tailwind, but I don't want to get into specifics. We'll obviously be able to show that to you when we bring out second quarter. On the off-highway sales, as Bruce mentioned earlier, we were expecting early to mid-second quarter, given the amount of work that's being done by the bidders, We would expect that to move a little bit and probably be later in the second quarter.

Thank you.

Our next question comes from the line of Ryan Brinkman with JP Morgan. Please go ahead.

Hi. Thanks for taking my question, which is in regard to the cost savings, including after following the acceleration this quarter, the $225 million you're looking for this year. It's now up to 25% of last year's EBITDA. So that's really just a huge step change in cost. So I wanted to check in again on the source of those savings, including the incremental savings. I think I heard you say largely corporate in nature. Also your confidence and the ability to achieve the savings. Last quarter, you were very confident. And then finally, just like whether the costs are sustainable or don't have any associated drawbacks. So for example, are you mostly cutting through corporate bureaucracy or layers of management discretionary study, not R and D I I'm asking only because the magnitude of savings is so impressive that it sort of begs the question of like, if there really was all this fat to cut, you know, why had it maybe not been targeted before? Thanks, Ry.

That's a lot. I'll try to unpack it in some reasonable manner. But so I'll take the one that I like the most. In terms of our confidence, we are absolutely confident that we will, one, deliver the 225, and two, deliver the 300 million on a run rate basis. So if you just look at the first quarter, right, it's 41 million of incremental save. We had 10 million of savings in the fourth quarter. So if you just take that, that's $51 million, multiply that by four, that's 200 of the 225 when you think about it, right? On a run rate base already. And we took costs out all through the first quarter. So our run rate action number is already trending to where we need to be to deliver the 225. We've got additional actions that happen throughout the year, but we are in very, very good shape to deliver the 225. We wouldn't be here telling you we're going to deliver the 225 if we weren't absolutely positive we're going to deliver it. To give you some idea, and we broke out a little bit on the slide, you know, sort of the percentages, but the really big buckets that if you want to think about the 300 million, 70% of that number is coming from headcount and engineering. alone. And then an additional about 10% is related to the consolidation actions around the segments. So if you just get through that, that's 80% of the number in those buckets. We look at the headcount, we've actioned over 70% of the headcount that we have slated to reduce within the organization has already been actioned. The balance of that will be done through the rest of the year with a large chunk of that coming out late in the second quarter. So we have visibility to where these costs are coming out and what are driving and our ability to deliver them. When you think about it, you know, what's really, you know, to get your question, hey, was there a lot of fat? What was it? Well, If you think about engineering and even some of the headcount, a lot of that's related to the change in how we're addressing the EV business and where we think we need to be sized for where the EV business is today and where it's likely to go. So it's a big part of that cost reduction is coming from the shift in strategy and expectation around our EV business. The balance is, yeah, we took a really hard look at what we need to run the business and how we can get better at how we're running the business, especially around the corporate and overhead functions, whether they be physically here at corporate or in the business units themselves.

Very helpful. Thank you. And then just maybe on the segmentation change, I see also the power technology is being absorbed into the various different driveline motion segments. uh previously you'd explored uh the sailor not explored but you know contemplated and and i think you've been moving away from that already because of the growing importance of power technologies and you know uh thermal regulation for electrification etc but does this kind of definitively kind of close the door on that and uh or does it sort of reflect the how you go to market or what was some of the thought process behind that yeah it definitely closes the door on it power technologies is not for sale um it it's it's a

it's a good business. And it was really just a reflection of we think we can run leaner by having one less segment. Like I mentioned earlier, that alone is worth 30, 35 million in terms of doing the consolidation. And I expect that we will get further improvement, not SG&A, so we won't be counting it in our 300 million. But I do expect we're going to see significant opportunities to drive our margins as we leverage best practices across aftermarket and we bring in some of the rigor that we have in light vehicles that was not as strong in our power technologies operations.

Very helpful. Thank you.

Okay, thanks.

Thanks, Ron.

Our next question comes from the line of Dan Levy with Barclays. Please go ahead.

Hi, good morning. Thanks for taking the question. Bruce, in your prepared remarks, you mentioned some actions around non-core assets and getting some proceeds in the second quarter, another $50 million in the back half of the year. Could you maybe just talk about what some of those assets are and maybe how deep is the set of assets out there that you view to be non-core at Dana?

i'll let i'll let tim tim take it on but i i mean you know this is really you know with me coming in saying hey what what are what are some bits and pieces of non-core minority jvs et cetera et cetera et cetera surplus assets land you know those types of things and there's not a lot of i wouldn't say there's hundreds of millions but you know there's lots of things one, two, five million that we can action, a couple in the 30, 40 million range, but go ahead and give a couple.

Yeah, I'll just give you the best example. So we had a non-consolidated joint venture in India that was in the commercial vehicle space. We own 48% of the business. It's non-core. It's a supplier both to us and to others. We sold that in the quarter for over 40 or in the second quarter for over $40 million. That is an asset that is sitting on the books at a far lower value than that and doesn't change anything related to how we run the business. So I think those types of assets and we have A handful of those types of things where, you know, if you go back over time, we felt it was important to have equity interests in some of these types of operations. We don't think that that's true anymore. And some of that's just because, hey, these joint ventures have grown and matured, and we don't need to be that close to them. And valuations in some of these places are pretty high, and so we're using the opportunity to – to divest them and, you know, to the extent they're a supplier, put a supply agreement in that gives us preferential supply and then take the capital and redeploy it into something that has a far better return from our perspective.

Yeah. And just like, you know, our dividends from that joint venture, less than a million a year. And like Tim said, we got, I think it was just in the low 40s pre-tax earlier this week. So, Just looking at things like that.

Okay, thank you. As a follow-up, Kim, you had mentioned that obviously a piece of the cost, Dave, relates to EVs and maybe changes in the program schedules. But we actually haven't even seen yet any modifications to OEM plans. So I understand that some of this is maybe proactive, but wondering if The cancellations or delays or shifts start to come in. Is there maybe further opportunity to pull back on? Yeah, I'll take that one. Thank you.

Yeah, I'll take that one here. It's not really what you just said. It is when we changed our strategy, what we said was where we have ICE business and EV, You know we we want to be a partners technology of choice and therefore we're willing to invest our our capital and our engineering to to to chase that type of business and. But making sure we get the right level of risk sharing where we don't have any ice business and we're chasing incremental volumes or we're dealing with customers where. We're in the next generation investment, and the first generation that has volumes that are 5% or 10% of what we thought, we are saying it needs to be 100% funded. Otherwise, we're just not willing to bear the risk. So it's more a question of us lowering our pursuit of new electric business to reflect the massive increase in risk.

Yeah, and I think that it's that, and then, you know, our engineering has always shown net, right? We, you know, and so to the extent programs are continuing, so they haven't been canceled, but now instead of us outflowing the engineering dollars, you know, the customer is responsible for that on a pay-as-you-go basis. So that's some of it, and then there is a big chunk where we had a lot of development plans where we were developing products and technologies that, you know, given the slowdown in the market, we don't need to create the second, third, you know, the third generation of a product today. Our customers are more than happy to continue to use the the first or the second generation of those products for a much longer period of time, and that's allowed us to reduce the amount of engineering dollars we have to spend on those next-gen programs.

And I guess kind of your question of where you're going is, as our customers look at their product plans, because I'm sure they're leaving no stone unturned in terms of what actions they can take to mitigate the impact of tariffs, I'm sure looking at some of their easy pipeline is going to be on the table, and to the extent they decide to push some programs, I would say there's one or two that could, if they were to push them out, would have a favorable impact on mainly our capital, but it wouldn't be a 2025 savings. It would be a 26 and 7 type. that would come down.

Great. Thank you. Very helpful.

Our next question comes from the line of Emmanuel Rosner with Wolf Research. Please go ahead.

Thank you. Good morning. I was hoping you can help us with how to think about cadence of, you know, revenue and earnings for the rest of the year. What's assumed in your reiterated guidance and in particular, sort of like, you know, back half versus first half?

Yeah, I mean, largely the same as we talked about, Emmanuel, a couple of months ago. We do expect the first half to be weaker, first quarter to be the weakest, and then we would expect to see, again, under our current volume assumptions, to see a recovery in the back half of the year, then that's still our expectation for revenue.

I guess as we go out, though, the sort of headwind that we saw in revenue starts to decline sequentially.

Correct. Okay. And so that's a volume assumption around the back half, and... I guess in terms of the headwind you're describing, you're talking about some of the destocking?

It's not so much our volume assumption. We're going against easier comps. If you think about Q1 of last year, volumes were up because customers were rebuilding from the strike. We had off-highway hadn't started to slow down. As we go through into the second quarter there's less of a year over your headwind on on on off highway um and and on same thing on lv so so when you know this quarter we're down 300 and something million that that delta drops um sequentially quarter on quarter here yeah exactly i mean that's in the big

The big drivers, you know, when we were having this conversation a couple months ago, were really around light vehicle and off-highway. You know, we're seeing a little bit of additional weakness from a CV perspective, but that's more than being offset by, from a top line anyway, from tariffs and our expected gains on the FX, assuming the FX stays kind of where we're seeing today, especially around the euro.

Got it. And then on the tariff side, it's obviously encouraging to see that you expect to recover everything from your customers. Have there been some discussions with them around longer-term moves that will be needed to address some of where the capacity is? Will there be need for reshoring? Do you need to move anything?

Yeah, I mean, it's a good question. And what I would tell you is, there's been so much volatility in what the rules are that as an industry we have not had enough time to to to know what the rule is to start to do exactly what you just said um and and i think right now you know some of the information that came out last night um you know we'll have to snorkel through that But we're definitely now in a position, and we're having early discussions about, okay, what are the types of things that we can do to mitigate the issue from either reshoring or changing some suppliers, flipping things that aren't USMCA compliant, etc., etc., etc. But what is 100% clear, though, is there some things that if you take a two-year window, are not going to be addressed. So it used to use castings as an example. Everybody buys castings from India. And in the next two years, we're not going to be in a position where we can reassure that. So, you know, they're subject to the 10% reciprocals right now. You know, before, there was a higher list of additional reciprocal tariffs, so we're just going to have to wait and see how those play out as the administration negotiates some of these trade deals. Hey, we're running against our time, so I'm going to have to wrap it up right now. Do we have one more question? Oh, I'm sorry.

Yeah, we'll take our final question from the line of Doug Carson at Bank of America. Please go ahead.

Great, guys. Thanks for letting me in on the last question here. I really appreciate it. You know, bondholders have been pretty excited about... the future of debt reduction and leverage coming down. I know we can't talk about the sale of off-highway. Could you just refresh us or just reconfirm that balance sheet delevering is still a focus and we could see a meaningful reduction in debt. Is that still the game plan? That is. Absolutely. All right. That's helpful for us. And I think the last target we had was leverage being in like the one to two turn kind of range through the cycle? I'm not going to pin you down on that, but is that still kind of directionally?

Yeah, we've been talking about sort of one turn through the cycle on a net basis. Net basis, okay. All right, that's good. So again, through the cycle, so, you know, different points it might be a little lower, different points it might be higher, but on a net basis, one turn.

And I mean, again, just to help you out, we believe, that upon the sale of us i would be required to tender our bonds yeah helpful thank you okay all right maybe with that i'll just um you know first of all obviously a big thank you to the dana global team i mean we have a lot going on um and tariffs was something that we certainly weren't thinking was gonna thrown at us three months ago and so I just couldn't be prouder of the results our teams have delivered in the environment that we're in here. We feel really good about the things that we have control on. We're 100% certain on our cost reduction savings that we can bring those forward. I think from an overall point of view, the things that we can control and manage, our teams are doing a great job. We look forward to sharing further progress on things in 90 days. Thank you everybody.

Thanks guys.

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