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spk02: It's fine, thank you. I hope you guys are all well, too. A couple of questions here. You said that the large diameter wheels were about 52% of all wheels produced. What was that figure last year, Maggie, so we can get an idea of how the shift is going?
spk04: Last year, that was actually...
spk03: flat 52% so Gary keep in mind I think what you're going to find is that the comps in 2022 when you start looking at content and revenue are going to be challenging so if you look at the first half of this year okay we're flat actually in terms of growth over market but if you look at last year we actually we kind of like we were an outlier First half was 17% growth over market the entire year. Actually, the first half is 20%. The entire year was 17%. So all of that mix, that massive mix that came our way after the microchip issues has been actually, think of it as being sustained. We have, Gary, we have been consistent in our narrative on the portfolio. This is a company that will deliver 5% to 10% growth over market driven by lightweighting technology, larger wheels, premium finishes, that continues to play out. If you go back to 2019, that 52% figure you mentioned was 28%. So this year is a bit of an outlier. I think the measure, absent this comparison, is content per wheel. And you see that content per wheel has continued to grow 5%. 5% in this quarter and the same for last quarter as well. In fact, I have the numbers here.
spk02: Go ahead. I'm sorry. Go ahead, Maggie.
spk03: No, I was just giving you some stats. Content per wheel in Q1 of 2020 was $37. Content per wheel in Q1 of 21 was $42. And then content per wheel this quarter was 44. So that's the way to look at it.
spk02: Okay. And then this new program that you got with a Japanese OEM in North America, was that obviously a competitive takeaway, but was that a competitive takeaway from a a Japanese company, or was there some other company?
spk03: So that was with a customer, just orders of magnitude, Gary. We do about 8 million wheels in the U.S., 8 to 10 million. We had very little business over the last few years, maybe 20,000 wheels. So this was a major win for us. It is a conquest. It's really, I can't tell you which specific region. I know it comes from Asia. and I know it was a localization, and I know that that specific OEM had their sights set on de-risking their supply chain, and frankly, to their credit, they were very aggressive with it. They moved very fast, and this win is great in many ways for us. Obviously, it solidifies our position with another Japanese OEM in North America that's won. The type of wheels that we won are more base-level wheels, and You know, when you look at our capacity, the one area where we think we have capacity is in Plant 7 in Mexico, and it's all base level wheels. So, it goes a long way to normalizing and leveling out our capacity utilization.
spk02: Okay, and then just lastly, are you, in terms of this proliferation of electric vehicles, Would you say that because of your technological capabilities that are outlined on, I think, slide 10, that you're kind of winning new programs on these EVs at a fairly rapid rate? I guess my question would be, is there anybody else out there that has these capabilities that you have that can service the EV market?
spk03: Gary, there are others, but I think you would agree with me in the tier one space. It's about trust, longstanding relationships, technical capabilities, and we're in the forefront. The answer to your question is yes, we are winning our fair share more of EVs because of our well-established position. We're number one, two for the most part with most of the OEMs, maybe number three, so that is the starting point. In fact, this quarter, it's not on the charts. We launched... the Skoda electric vehicle in this quarter in Europe as well. You know, as to why we're more well positioned on EVs, again, the wheel needs to be stronger. The wheel needs to be lighter. There are other technologies maybe you could use to make a lighter wheel, slightly lighter on an SUV, but when you start thinking of sedans, you really need the technologies that we have. We call it a flow forming technology to strengthen the wheel for that application. So we're in a good position across the board.
spk02: Yeah, it looks like it. All right, thank you. You're welcome.
spk01: As a reminder, to ask a question at this time, please press star one. Please ensure the mute function on your telephone is switched off to allow your signal to reach your equipment. We will take our next question. from Mike Ward from Benchmark. Please go ahead.
spk00: Hi, Mike. Thanks. Good morning, Joanne. Good morning, Margie. Good morning, Tim. Good morning. Just to follow up on the question, Margie, that's the first I've heard of the local-for-local trend. Is that mostly the Japanese-based manufacturers doing that, and is that wheel-specific, or is it with other components as well?
spk03: No. No. I mean... Mike, you're familiar with our industry. I mean, 50% of wheels in North America come on ships, right? And that's a problem for our customers.
spk00: Huge problem.
spk03: And if you recall, we said we have, you know, we're number one market share-wise side with two and three and But ultimately, we have a big chunk of the capacity in this region. So the answer to your question, no, it's not Japanese. On the chart, you'll see another of North American customers, another North American customer that is accelerating localization as well. And actually, just about every, I want to say, even going to the European customers, some of the quotes we're getting, you know, when you get a quote for these businesses three years out, you get the conditions that the customers expect. And I'm right on top of the list. If you want a quote on this business, it needs to be made in the region where I manufacture my vehicle. It's a condition. So it's accelerating. This win here was actually exciting. And again, the nature of the win with a new customer, but also it goes in production next year, Mike.
spk00: Do you have room at your existing facilities, if you had to, to increase capacity? Is there room to build out at all?
spk03: Yeah, I mean, I think I would tell you our team in Mexico has done a phenomenal job on that dimension. And actually, maybe I'll talk about it later in operational performance. On the capacity side, Mike, you think about plants. They're not really one plant. Each plant is three plants in one. right? You have casting, you have machining, and you have paint. And within each one of these plants, you have a sub-process. So it's very hard to quantify capacities. I mean, the easiest way to look at it, you know, we're still 15% volume-wise from where we were not too long ago, so that's a good metric. But within the factory, I mean, you know, when you think of machining centers and adding more lightweighting capacity, we can bolt on capacities right there. Same thing with casting. Paint gets to be hard, and that was a problem for us, and that's why we invested $40 million in a paint line last year that's coming in production this year.
spk00: Okay. Well, that's good news.
spk03: Yeah. We feel very good about our capacity and readiness for the industry.
spk00: Now, is that – Is it one facility you're supplying? Can you tell us where it's based? Is it U.S., Canada, or Mexico? Based in the U.S. It's in the U.S., and has it already been producing? It's not a new startup facility. It's something that they're substituting an import into your local production.
spk03: That is correct.
spk00: Okay. On page 12, your second half outlook, especially in North America, seems to be well below what the companies are saying and what you're seeing from some of these outside data sources. What are your thoughts on that?
spk03: So, you know, when you think of our guys, Mike, you know, we, I mean, we have been consistent for three years now. We have been aggressive on execution and conservative in our outlook, right? We haven't, we go out with guys and we rarely change them and we hit our numbers. I mean, when you think of, you know, where volumes are going. We're very concerned about Europe. We're concerned about Ukraine. So volume-wise, we don't see it. IHS sees recovery in the second half. We're saying we don't see it. If we're wrong, we'll be happy about that. Because I'll tell you, if you make more wheels in this business, you know, the margin, the variable margin are not 35% to 40%. So we would like that, and we'll deliver on that. I think the second thing, as you look at our guide, When you think of customer recoveries, we've gotten what we need to get the balance right between cost and price so far. We have more work ahead of us, and there is uncertainty in pricing and what we think we're going to get in the second half. So we have taken a conservative approach to that. But again, the market comes back. We bode very, very well, and it'll be good for us.
spk00: Okay. Okay. And then on the recovery side, I hadn't seen that going back in the past. I don't know if you have with this disruption in production and getting recoveries from the vehicle manufacturers, but it sounds like it's a real thing, and it sounds like they're going to be along with some of the extra excess freight costs as well. Is that correct?
spk03: That is absolutely correct.
spk00: So there's some room on that side as well. Thank you very much. Appreciate it.
spk04: You're very welcome. Thank you.
spk01: We will take our next question from Gary Presapino from Barrington Research. Please go ahead.
spk02: Yeah, Maggie, just a follow-up on this new wheel program with the Japanese OEM. It's 1.6 million wheels. It starts in 2023. And you said it has a lifetime value of $100 million in revenue. Is that correct? That is correct. Okay. So does that mean in 2023 you're going to be doing exactly 1.6 million wheels, or does that gradually ramp throughout the year?
spk03: Gary, not at all. When we speak of lifetime revenue, we speak of, you know, a program life, if it's three years, four years, five years, we add up the volume in those years. In this case, it goes through 25. So it's three years worth of revenue.
spk02: Okay, so it's three years' worth of volume. Thank you.
spk04: You're welcome.
spk01: That concludes today's question and answer session. Maji, at this time, I would like to turn the conference back over to you for any additional or closing remarks.
spk03: Thank you. Thank you, Operator. We appreciate your participation in today's earnings call. Listen, to the superior team, thank you for an excellent quarter. that exceeded expectations. I know well, I know very well, that everyone around the globe worked hard to get to this point. I could not be more proud of this team. You have established a well-deserved reputation as a team and as a leadership team that delivers.
spk04: Clearly, we have more work ahead. For now, many thanks. That's it, Operator.
spk01: that will conclude today's conference call thank you for your participation ladies and gentlemen you may now disconnect
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