NYSE:ADNT Adient Q2 2025 Earnings Report $15.16 -0.34 (-2.16%) As of 12:15 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Adient EPS ResultsActual EPS$0.69Consensus EPS $0.36Beat/MissBeat by +$0.33One Year Ago EPS$0.54Adient Revenue ResultsActual Revenue$3.61 billionExpected Revenue$3.39 billionBeat/MissBeat by +$219.75 millionYoY Revenue Growth-3.70%Adient Announcement DetailsQuarterQ2 2025Date5/7/2025TimeBefore Market OpensConference Call DateWednesday, May 7, 2025Conference Call Time8:30AM ETUpcoming EarningsAdient's Q3 2025 earnings is scheduled for Tuesday, August 5, 2025, with a conference call scheduled at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Adient Q2 2025 Earnings Call TranscriptProvided by QuartrMay 7, 2025 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Welcome and thank you for standing by. At this time, all participants are in a listen only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the meeting over to Michael Heifler. Operator00:00:19Thank you, sir. You may begin. Speaker 100:00:22Thank you, Denise. Good morning, everyone, and thank you for joining us. The press release and presentation slides for our call today have been posted to the Investors section of our website at adient.com. This morning, I'm joined by Jerome Dorlak, Adient's President and Chief Executive Officer and Mark Oswald, our Executive Vice President and Chief Financial Officer. On today's call, Jerome will provide an update on the business. Speaker 100:00:50Mark will then review our Q2 financial results and our outlook for the second half of our fiscal year. After our prepared remarks, we will open the call to your questions. Before I turn the call over to Jerome and Mark, there are a few items I'd like to cover. First, today's conference call will include forward looking statements. These statements are based on the environment as we see it today and therefore involve risks and uncertainties. Speaker 100:01:18I would caution you that our actual results could differ materially from these forward looking statements made on the call. Please refer to Slide two of the presentation for our complete Safe Harbor statement. In addition to the financial results presented on a GAAP basis, we will be discussing non GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non GAAP measures to the closest GAAP equivalent can be found in the appendix of our full earnings release. And with that, it's my pleasure to turn the call over to Jerome. Speaker 200:01:54Thanks Mike. Good morning everyone and thank you for joining us today. Speaker 300:02:00We will review Speaker 200:02:00our strong second quarter results, share our perspectives and analysis on tariffs and explain how we are addressing the situation through leveraging our global footprint and working with our customers to add value. High level, the Adient business model is strong and resilient and our team has built positive momentum going into the second half of fiscal twenty twenty five. I will walk you through these topics in more detail and then turn it over to Mark to review the Q2 financials and dynamics for the balance of the year. Turning now to Slide four. Our positive momentum accelerated in Q2 with improved business performance versus a year ago across all regions allowing us to mitigate ongoing customer volume and mix headwinds in EMEA and Asia. Speaker 200:02:48In Americas, we outperformed industry volumes and saw strong year over year margin improvement as we drove additional efficiencies and had favorable comparisons with last year's heavy launch calendar. As a result, we were able to improve total company adjusted EBITDA margins by 40 basis points. We achieved $233,000,000 of adjusted EBITDA. Importantly, Q2 results underscore the Adient team's deep commitment to operational excellence and solid execution and demonstrate the resilience of our operating model during times of volume pressure and macro volatility. In fact, looking at our Q2 performance over a three year period, our EBITDA results have improved by $18,000,000 and our margins have expanded 90 basis points on $300,000,000 of lower sales. Speaker 200:03:46While lower customer volumes have played a significant role, we have also made a conscious decision to focus on more profitable business and to invest in innovation, automation, modularity and other efficiency measures. This strategy is paying off with a stronger more profitable business that is well positioned to take advantage of future volume improvements. Free cash flow in Q2 was in line with internal expectations reflecting normal seasonality and timing differences between Q1 and Q2. Importantly, we ended the quarter with a strong cash balance of $754,000,000 and $1,600,000,000 of liquidity. Excellence combined with innovative seat solutions are helping us win significant new business across all regions. Speaker 200:04:40I'll walk you through some of our new business wins in a few slides. External validation of the value we provide and how we operate the business speaks volumes and I'm proud that our team continues to win broad based customer and industry recognition. We are focused on delivering best in class quality, value and service to our customers. Notably, have earned our fourth consecutive GM Supplier of the Year award with GM recognizing our transparency and clear communications. We also won the excellent VA Achievement Award from Toyota Motor North America for excellence in optimizing value by improving performance and reducing costs. Speaker 200:05:24Hyundai Motor Group awarded Adient the best supplier award for ESG management. Also Adient China won 11 J. D. Power's seat quality awards. Mark will get into our outlook in more detail in a few minutes. Speaker 200:05:41Given our positive momentum and mitigating actions we are taking around tariffs, we are reiterating our fiscal year twenty twenty five guidance for revenue and adjusted EBITDA excluding potential tariff related volume impacts. That said, let's discuss the tariff landscape, Adient's exposure and our action plan. Beginning on Slide five, tariff rules and values continue to be fluid. But based on our current interpretation, Adient has multiple degrees of freedom to mitigate impacts through resourcing components, engaging with customers to find lower cost alternatives and where there is no alternative negotiating a resolution. We are targeting 100% cost offsets or recoveries with all customers. Speaker 200:06:36As we begin to look at our exposure, appreciate that we do not ship complete seats into The U. S. That would fall under Annex One. Our exposure arises from parts such as recliners, seat transmissions, headrests, electrical components, etcetera. Importantly, nearly 95% of Adient's parts produced in Mexico and Canada and shipped to The U. Speaker 200:07:00S. Are USMCA compliant and nearly all of those parts are not listed in Annex One and therefore not subject to those tariffs. Adient's key advantage is our unmatched global footprint, which provides us enormous value for our customers in these circumstances, as we're able to quickly resource parts from different locations to significantly reduce tariff exposure. As you can see in the chart on the upper right hand side, our largest exposure are from goods coming from China and Mexico. We believe based on current tariff interpretation, our gross monthly tariff exposure is approximately $12,000,000 9 million dollars excluding purchases that are directed by our customers. Speaker 200:07:48We have already resolved 75% of our gross position and have road mapped the remaining 25% and are working closely with our customers to close that gap. Turning now to Slide six. As I mentioned earlier, we are targeting 100% resolution. Our objective is to work with all our customers to create value for them and to reduce overall tariff exposure, in addition to providing long term sustainable solutions. Our general view is that historical shocks like the great financial crisis, COVID, supply chain shortages, etcetera were acute crises that the industry collectively worked through to get back to normal. Speaker 200:08:33But tariffs could drive a fundamental reset with definitive winners and losers. We see Adient as a winner through these changes and are looking for opportunities to grow our business. I would point you to our strengths including our resourcefulness as scrappy problem solvers, best in class global manufacturing footprint, our diversified customer relationships, our joint venture network that allows us to quickly help our customers pivot. By leveraging our global footprint, utilizing modularity and adding more value in the USMCA zone, we are significantly lowering our tariff exposure. For example, we are assembling a front seat back frame made in Mexico with an imported recliner mechanism and by adding to that a seat cushion frame produced within the USMCA zone, we are driving a favorable outcome for our customers. Speaker 200:09:31Some other examples of opportunities we are currently working on with customers include localizing headrest mechanisms currently coming from China, sourcing those into The U. S. And resource and recliner mechanisms from China to either Mexico or Germany. We're also in a strong position to support complete seats for certain of our Japan and German customers who are localizing production into The U. S. Speaker 200:09:56In summary, our tariff exposure appears to be manageable. The biggest uncertainty is the magnitude of the tariff impact on volumes. I'll talk more about that later. Next, let me walk you through some of the regional dynamics on Slide seven. First, in The Americas, we continue to expand margins and benefit from strong business performance. Speaker 200:10:24Our volume mix performance relative to the industry has been strong as key launches in 2024 are now at full run rate. As mentioned earlier, we are focused on navigating tariff dynamics and driving value for our customers. By doing so, we believe we will capitalize on growth opportunities. We are already seeing certain customers onshoring production. Finally, are realizing benefits from low margin business rolling off such as certain metal platforms and we expect further margin improvements in the future. Speaker 200:10:59In EMEA, we are gaining momentum and seeing improving business performance including realization of restructuring benefits. The region is winning key programs with European customers as well as developing opportunities with China based OEMs as they localize. With regards to FX, we have seen some headwinds from cross currency exposures primarily related to the Polish zloty. While production volumes in the quarter were lower, we are seeing more stable production schedules overall. As we have shared in previous quarters, we have been monitoring the situation closely in the region. Speaker 200:11:36Given industry headwinds in Europe combined with the decline in our share price, we have determined a triggering event has occurred and we have recorded a $333,000,000 non cash goodwill impairment this quarter. In Asia, the team continues to drive strong business performance, while we expect near term pressure on China revenue, we believe this to be temporary as new business with local China OEMs are expected to drive growth. Our strong relationships and footprint in China are helping us win more business this year and we expect to capitalize on China OEM growth abroad. In short, we see strong business performance mitigating near term volume mix and headwinds as well as macro uncertainty. Next, let me turn to new business wins and launches on Slide eight. Speaker 200:12:32We continue to prioritize winning the right business and executing successful launches. Our business awards this quarter demonstrate further growth with China local OEMs and enhancement to our global customer relationships. I would like to highlight the new business with FAW Hongqi H5, which is a complete seat system as well as the replacement complete seats for the Kia K5 midsize sedan and the replacement business on the Ram fifteen hundred for metals and foam. As you can see on the right hand side of the slide, we are launching on several key platforms around the globe. Underpinning our new business wins is our high level of execution on multiple launches. Speaker 200:13:18We continue to perform on safety, quality and on time delivery metrics for our customers. Turning to Slide nine, we are leveraging our emphasis on product innovation and automation to support our customers. This is a large enabler of growth with China OEMs globally. Our recent expansion of Adient's China Technical Center in Chongqing reinforces our leadership in electrification and smartification driving developments on innovation and automotive seating solutions. We're developing cutting edge automation equipment and processes utilized at Adient operations around the world including automated cobots, AI visual inspection, automated steaming and sewing and more. Speaker 200:14:07This is a key differentiator for Adient to support local China OEMs as they expand their footprint outside of China. Additionally, Adient's first mechanical massage system was successfully launched with GAC's Trumpy's new PHEV Model M8 during the twenty twenty five Shanghai Auto Show. The mechanical massage system is a first of its kind, innovative product that more effectively relieves occupant fatigue versus traditional pneumatic massage. We have a video embedded in our earnings deck that I would encourage you to watch. We believe these investments will strengthen our growth momentum with China based OEMs and enable business wins beyond China and Southeast Asia and European markets. Speaker 200:14:56We are also seeing significant BYD and export growth through our Kuiper joint venture today. We continue to win business with domestic and China OEMs, which represent approximately three quarters of our new book of business in China. And finally moving to our key takeaways on Slide 10. The team achieved strong Q2 results and we're seeing positive momentum, so there is significant certainty around volumes in H2 due to tariff policies, which I will speak to later. Tariff headwinds appear manageable and we have a comprehensive action plan to mitigate those headwinds with more than 75% already achieved. Speaker 200:15:42We are executing plans to drive value to our customers and capitalize on opportunities. We remain committed to driving higher levels of business performance to mitigate those headwinds and Adient has a solid track record of successfully managing through turbulent times and has a strong balance sheet and liquidity with no near term debt maturities. We intend to capitalize on opportunities arising from changing industry dynamics. Now I'd like to turn it over to Mark to take you through our financials and our outlook. Speaker 300:16:15Thanks, Jerome. Let's jump into the financials on Slide 12. Adhering to our typical format, the page shows our reported results on the left side and our adjusted results on the right side. We will focus our commentary on the adjusted results, which excludes special items that we view as either one time in nature or otherwise skew important trends in underlying performance. One item to note, as Jerome mentioned earlier, was a triggering event which occurred during the quarter, which required a quantitative impairment analysis, primarily due to the significant decline in the market value of Adient shares resulting from uncertainties surrounding vehicle production volumes amongst other factors. Speaker 300:16:59As a result of the quantitative assessment, a $333,000,000 non cash goodwill impairment was recorded in the EMEA reporting unit. Details of all adjustments for the quarter are included in the appendix of the presentation. Moving on, high level for the quarter. Adjusted EBITDA for the quarter was $233,000,000 up 3% year on year. We expanded EBITDA margins 40 basis points year over year to 6.5%. Speaker 300:17:29This improvement reflected outstanding business performance in the quarter despite $139,000,000 decrease in revenue from lower customer volumes and FX versus a year ago. As Jerome mentioned, we continue to demonstrate the resilience of the Adient operating model and ability to mitigate external pressures. Worth noting that our underlying equity income remains quite strong, particularly in our Asia Pacific segments despite this quarter's results being negatively impacted by $6,000,000 from the same period a year ago due to the restructured pricing agreement within Adient's Typer joint venture. Adient reported adjusted net income of $58,000,000 or $0.69 per share. I'll cover the next few slides rather quickly since details for the results are included on the slides. Speaker 300:18:22This should ensure we have adequate time for Q and A. Starting with revenue on slide 13, we reported consolidated sales of approximately $3,600,000,000 a decrease of 139,000,000 compared with Q2 fiscal year twenty twenty four. The primary driver of the year on year decrease was lower volumes of $90,000,000 resulting from lower customer production. FX was also a $49,000,000 headwind in the quarter. Focusing on the right hand side of the slide, Adient's consolidated sales were higher in Americas and lower in EMEA and Asia year on year. Speaker 300:19:00In The Americas, sales versus industry were driven by favorable comparisons with a year ago when many of our key customer programs were launching at low volumes such as GM's large three row crossover in the Toyota Tacoma. In Europe, we were negatively impacted by overall weaker market demand. Sales were in line with the market. And in our APAC region, sales in China underperformed industry production, primarily due to lower volumes from our traditional luxury OEM customers, including Volvo and GAC. We continue to outperform the industry in Asia outside of China due to new customer launches, which occurred in the second half of twenty twenty four, which are now reaching full run rate volumes. Speaker 300:19:50Regarding Adient's unconsolidated Seating revenue, year on year results were down 6% adjusted for FX. Revenue in North America was lower due to a joint venture rationalization, which was partially offset by growth in Europe of our Deniz joint venture in Turkey. Sales in China were up year on year, mainly due to growth with BYD and exports through our Kuiper joint venture as well as increased sales within the CFAA joint venture. Moving to slide 14, we provided a bridge of adjusted EBITDA to show the performance of our segments between periods. Adjusted EBITDA was up 3% at $233,000,000 The primary driver of the year on year comparison are detailed on the page. Speaker 300:20:39The Adient team drove improved business performance of $37,000,000 primarily resulting from better net material margin and reduced operating costs, including lower launch costs. The improved business performance was partially offset by volume and mix, which was a $6,000,000 headwind driven by lower customer vehicle production in EMEA and the Asia region, specifically in China. FX was a $10,000,000 headwind mostly from transactional impacts in EMEA and Americas. And finally, we incurred a net commodity headwind of $15,000,000 in Q2, primarily driven by the timing of recoveries. As in past quarters, we provided our detailed segment performance slides in the appendix of the presentation. Speaker 300:21:27High level, for The Americas, improved business performance of $15,000,000 in Q2 was primarily driven by favorable commercial actions, lower input costs and lower launch costs. Tariffs were a $9,000,000 headwind during the quarter, which we expect to mostly recover in the second half of twenty twenty five. Non recurrence of certain discretionary compensation measures, which occurred in fiscal year twenty twenty four adversely impacted the year on year comparison. Volume and mix was a tailwind of $13,000,000 benefiting from a stronger production of high content programs during the quarter consistent to what we saw in Q1 of this year. Production tracked as expected as we entered the quarter. Speaker 300:22:12Notably, we did not see any meaningful overtime or additional shifts added by our customers in our products that would point to the pull forward of production. Commodities were $9,000,000 headwind driven by the timing of recoveries. Specifically, absolute costs in 2025 resulted in less recoveries in Q2 of this year versus Q2 twenty twenty four. In EMEA, year over year results were influenced by lower volume mix, which negatively impacted the quarter by $9,000,000 FX was a $7,000,000 headwind, primarily driven by transactional exposure from the Polish zloty and commodities were a $6,000,000 headwind due to the timing of recoveries. Business performance accelerated to $16,000,000 in Q2, partially offsetting the headwinds and was driven by better net material margin and operating performance, including the benefits of restructuring actions. Speaker 300:23:11As we have previously outlined, we are taking significant steps to adjust our costs in Europe and are studying opportunities to pull forward some rationalization actions in a prudent manner. In EMEA, we continue to focus on driving additional operating efficiencies, restructuring and executing our plan, which includes the roll off of lower performing metals business in the start of production of better margin new business, which we believe will inflect positively in 2026. Moving on in Asia, our results were generally flat year on year with positive business performance being offset by lower volumes and mix. In summary, the company continues to drive improved business performance across all regions, which we expect to continue in the second half of twenty twenty five. Let me now shift to our cash, liquidity and capital structures on Slides fifteen and sixteen. Speaker 300:24:09Starting with cash on Slide 15. For the quarter, free cash flow defined as operating cash flow less CapEx was an outflow of $90,000,000 As Gerald mentioned earlier, this was in line with our expectations and reflects timing and normal first half seasonality as we typically have first half outflows and are cash generative in the second half of the year. H1 cash performance is consistent year over year after considering restructuring cash costs, particularly in Europe. In Q2, we incurred $33,000,000 of cash restructuring. During the quarter, we also spent $8,000,000 in consulting fees associated with strategic planning related to optimizing our business portfolio as we continue to consider actions to create shareholder value. Speaker 300:25:02I would note that while these fees are included in our cash flow, they are excluded from our adjusted EBITDA. We continue to expect solid free cash conversion in fiscal twenty twenty five. '1 last point and called out on the slide, Edding continues to utilize various factoring programs as a low cost source of liquidity. At 03/31/2025, we had $170,000,000 of factor receivables consistent with last year's second quarter. Flipping to slide 16, as noted on the right hand side of the slide, Edding continues to proactively manage its debt maturity profile with no near term maturities. Speaker 300:25:45We successfully refinanced $795,000,000 senior unsecured notes due 2026 during the quarter issuing new notes with a 02/1933 maturity, therefore extending our average maturity profile from four years to just over six years. Adient is committed to being good stewards of capital while maintaining a strong balance sheet, ensuring efficient allocation of resources and ample liquidity. Turning to our balance sheet. Adient's debt and net debt position totaled about 2,400,000,000.0 and $1,600,000,000 respectively at 03/31/2025. The company's net leverage at March 31 was 1.9 times within our targeted range of 1.5 times to two times. Speaker 300:26:36Total liquidity for the company was about $1,600,000,000 at March 31, comprised of $754,000,000 of cash on hand and $843,000,000 of undrawn capacity under Adient's revolving line of credit. Moving to slide 17, let's review our first half performance and expectations for the second half of fiscal twenty twenty five. In the first half, we exhibited strong momentum with only 5% Decorah margins. While market volumes have been lower, we saw more stability than last year, which helped us from an efficiency standpoint. I would note that the onset of tariffs, we incurred $9,000,000 of gross expense, which we expect to mostly recover in H2 of this year. Speaker 300:27:25The takeaway for Adient's first half is strong business performance significantly offset ongoing volume headwinds, resulting in solid results in line with internal expectations. Looking into second half of this year, while the impact of tariffs on market volumes remains uncertain, the company is committed to strong business performance and has solid momentum. Absent significant impacts from tariffs, we would expect H2 performance to be similar to H1. Assuming no significant incremental step down in global volumes, we expect volume headwinds to be manageable and mitigated by ongoing business performance and efficiencies. We expect tariff expenses to be offset by actions we are taking with our customers. Speaker 300:28:14And finally, with regard to our 2025 outlook on Slide 18, given our strong momentum going into the second half of the year, we are reaffirming our previous fiscal year twenty twenty five revenue and adjusted EBITDA outlook. Importantly, our guidance assumes no change to current tariff policies. Most tariff costs are resolved and no meaningful declines in previously forecasted volumes from tariffs. While we see some upside to our adjusted EBITDA in the second half of this year, it may be offset by timing of tariff related customer recoveries. Year over year volume headwinds are being offset by ongoing business performance and efficiencies. Speaker 300:28:57We expect this business performance to continue to mitigate macro headwinds and offset decremental margins and lower volumes. Our interest expense is now expected to be slightly higher, call it $190,000,000 versus the previous forecast of $185,000,000 due to the recent refinancing and maturity expansion of our senior unsecured notes. On cash flow, we see potentially accelerated European cash restructuring costs as well as some uncertainty around timing of customer recoveries at year end, leading us to adjust our free cash flow forecast to a range of between $150,000,000 and $170,000,000 from our previous guide of $180,000,000 To sum it up, based on Adient's solid performance throughout the first half of twenty twenty five, the company is well positioned to weather the macro challenges and the team continues to execute at a very high level. We remain focused on managing the business controllables such as delivering excellent results for our customers, lowering costs and generating free cash flow for the owners of our business, while maintaining a strong and flexible balance sheet. With that, I'll turn it back to Jerome for a few additional comments. Speaker 200:30:13Thanks Mark. With that, I wanted to give just a little bit of additional color on the guide and why we handled the guide the way we did. First, it was really enabled by a strong start to the year, which is driven by our 70,000 associates around the world, our customers and suppliers. So I want to thank them for allowing us to do that. Secondly, I think it's important to understand how Adient views the tariffs and how we break that down. Speaker 200:30:43And it's really, I'd say three orders of magnitude or three buckets. The first order is the direct impact that we see. And I think we've tried to lay out for you today with a level of transparency how that direct impact is flowing through to us, both in terms of where we see it coming in terms of the regions and how it's managing through Annex One, where we see Annex One exposure, where we have USMCA exposure, the fact that we're 95% covered out, where we see recovery, the fact we're already 75% recovery, we have 25% roadmap and then the fact that we can move through the rest of the year with action plans and drive that recovery. The second order then being what it means to our customers and how our customers have to manage that. They've gone through and made their announcements this week, we won't cover that off. Speaker 200:31:42But there is an element, whether that be through the 2.5% MSRP discount, we have to see what that means to us. But then in the midterm, as they start to re shore production, we're already engaged with certain Japanese customers and the German OE and there will be I think announcements to come, we just don't have anything today that allow Adient to leverage our best in class footprint to potentially see some net volume upside. And that I think is enabled by as we talk a lot E. T. Speaker 200:32:15Being close to our customers and providing solutions to them. And then the third order is what does it mean to the consumer and the macro economy and how resilient the consumer is. And that I think because we're a September filer, we already have six months behind us. We're operating on three months of EDI and we have some amount of visibility into that. And then you have kind of the last three months after EDI. Speaker 200:32:43We're running on March S and P right now. Mark already talked about we've assumed no meaningful change in our volume outlook. And we don't have anything today on EDI that would say there is any meaningful change to come. And I think we've tried to provide visibility into that. I think there's another thing to note. Speaker 200:33:01If you think about outside of The U. S, how dependent are we on export volume. So to give a little color on that, on an annualized basis, our European business has somewhere we'll range it between $350,000,000 to $450,000,000 of export volume in their annualized sales figures. And our Asia Pacific business has somewhere between 150,000,000 to $200,000,000 of annualized volume in their business that they're dependent upon. So as you think on an annualized basis, how dependent would we be if those exports were cut off, that kind of gives you a little bit of flavor there. Speaker 200:33:44But again, we're already six months into our year. And when you put all those factors and you kind of combine them, that's what's allowed us the confidence to kind of say, given six months are behind, we've done a good job mitigating tariffs, we're 95% USMCA compliant, we have this footprint that allows us to quickly rotate out of China leveraging our Kuiper JV that has a footprint in Mexico or we can use Rackenhausen, our footprint in Germany, we can do things with our customers or we can drive recovery has given us the confidence to say, here's our guide for the rest of the year. And so just wanted to provide additional color on that before we turn it over to the Q and A segment of the call. And with that, we'll open it up to Q and A. Speaker 100:34:36Thank Operator00:34:39Thank you. Our first question today comes from Joe Spak with UBS. Your line is open. Speaker 200:34:58Can you hear me? Speaker 300:35:01Hi, Joe. Yes. Speaker 400:35:03Thanks for all the additional color there. I guess just one quick one on tariffs. You've made good progress here, right, the Resolve versus the 75% roadmap 25%. I'm assuming Resolve means you basically have agreements for price recoveries or that's the majority of that. Is the roadmap portion more what you're talking about finding some cost offsets or resourcing? Speaker 400:35:35Or are there still some potential price negotiations involved in the roadmap portion as well? Speaker 200:35:41Yes. I'd say it's a mix of both, Joe, from that standpoint. So there's still ongoing price negotiations. There are certain customers have systems that require us to submit documentation given there still are things on boats coming over from China. Bill ladings haven't been delivered yet. Speaker 200:36:02And so we need to be in systems for recoveries without getting into too much minutiae from that standpoint. So there's things that need to be submitted and negotiated and just need to be rolled through. And so it's a mix of both. Still resourcing that needs to occur and also negotiations that need to be concluded. Speaker 400:36:24Okay. That's helpful. And then, just in EMEA, I Speaker 200:36:32think it was Speaker 400:36:34I know there's still some challenges there, but it looks like there was it was a pretty good quarter at least relative to some expectations and with some still some volume headwinds. And I know you called out some business performance. Is there anything unusual in that that sort of drove the quarter a little bit better, especially relative to maybe quarter over quarter? Speaker 300:36:57Yes, Joe. Good question, good observation. I'd say one quarter does not make a trend, right? So I wouldn't take that number and annualize it. I'd say that we are encouraged because we are seeing obviously business performance turn positive over there. Speaker 300:37:13We're getting the benefits of certain of the restructuring actions we've taken. But again, things are lumpy, especially as you think about commercial actions and recoveries with customers. So again, that lumpiness, I wouldn't peanut butter that 4% margin that we just printed across third or fourth quarter, right? So it's going to be some variability as we go through the rest of the year. Speaker 400:37:34Mark, I think you did mention last year that you thought the first half of this fiscal year would be sort of a bottoming event for profitability in that region. Is that still the case? So if you average you're saying the first half is a little bit over 3%, should we expect that it improves off that level from here? Speaker 300:37:56Yes. I wouldn't say that, Joe. I'd say that you're right. 3% was the average over the first half of the year, right. If you just remember last year I think we did about 3% just over 3%. Speaker 300:38:09When we came into this year we said hey listen this year is going to be pretty much similar to that right. You really don't see that inflection point until we get into 2026, which is when we start to see certain of the underperforming metals business roll off. We see the new business roll on. So I'd still frame it up in that piece. Okay. Speaker 300:38:29Thank you. Operator00:38:33Thank you. The next question comes from Emmanuel Rosner with Wolfe Research. Your line is open. Speaker 500:38:41Great. Thank you so much. First question is really around just on this making sure I understand your direct tariff exposure. So 95% of what you produced in Mexico and Canada is USMCA compliant. So that stuff would technically have tariffs, but I guess for now USMCA parts are not being tariffs. Speaker 500:39:07And then when you mentioned the add ins parts that are not listed in Annex One, this would relate to what geographies? Speaker 200:39:19So I think what we've said is roughly 95%, so don't hold us to exactly 95%, is of our parts that we import or move across the border from Canada and Mexico into The U. S. Are USMCA compliant. And so under current policy, that's correct, they're not subject to the 25% tariff rule. And if that were to change, then obviously, we'd have to deal with the issue. Speaker 200:39:50And then Annex I, the way Annex I is scoped out, Annex I basically carves out those parts and says even if they are USMCA compliant, they are subject to a 25% tariff. However, we don't have any parts that fall under that Annex I that we produce today and we have very little controlled material that would fall under Annex I. It's almost all directed. And so we would be covered off due to the directed nature and the nature of just the way seating is actually constructed from that standpoint. It is worth noting though, Emmanuel, that the Annex One tariffs that were supposed to go into effect May 3 actually have been delayed as the system is not steady at this point. Speaker 200:40:36Now I will say the disadvantage of having your components not falling under Annex One is that then they're subject to the stacking effect of IEPA and the reciprocal tariff, which is why we get hit with the 145% tariff out of China. And that's why China is our largest exposure region at the moment. And that's really why we tried to provide that visibility into our exposures. And you can see that monthly run rate on the graph of China being our largest exposure region. And again, we're not trying to overwhelm you with detail, but I do think it's important to understand that differentiation into just what is Annex One, what's USMCA, what's AIPO, what's two thirty two and reciprocal and all of that, so Speaker 500:41:30Yes. No, I appreciate the I appreciate all the detail. Then I guess taking a step back in terms of your margin outlook and then where it fits within the longer term goals and progression. Can you maybe just remind us how much more opportunity there is for some of these cost and efficiency actions? And how do you think about, I guess, the self help and the part that you control and timing of further benefits? Speaker 300:42:01Yes. So good question, Emmanuel. So we printed 6% last year total company. We said there's going to be puts and takes this year, right? We see Americas continuing to improve their margin profile. Speaker 300:42:15We just spoke about Europe for the next year or so kind of in that, call it 3% which we printed yesterday. And then obviously our APAC region continues to print double digit margins. We expect that to continue. When we look at what we're benchmarking and what we're targeting right, clearly, think there's significant opportunity in front of us. We've said in the past, whether or not that's 7.5%, eight %, that's typically what people are looking at. Speaker 300:42:43That's what we think we could achieve. Clearly, there is a lot that we could do to get there. Some of it's what we spoke about before, whether it's restructuring over in Europe, getting the benefits of that. I would caution people that the dollars that we spend over in Europe is not a one for one in terms of accretive to our EBITDA as certain of that just goes against lower volumes in the region. We do have the positive impact of balance in, balance out, especially with the lower margin metals business rolling out over there. Speaker 300:43:14We've got new products, new wins that are coming on over there that have higher margins. So when you add that all up, do I think that there's a couple of hundred basis points of opportunity versus where we were in 2024? Absolutely. And you could see that within our business performance so far in the first half of this year. And so that's really what the team is targeting and marching towards. Speaker 500:43:39Great. Thank you. Speaker 300:43:41Thank you. Operator00:43:43Thank you. The next question comes from James Picariello from BNP Paribas. Your line is open. Speaker 300:43:53Hey guys. Sorry if Speaker 600:43:55I missed this, but have you quantified the change in FX assumptions with your guidance? And just what you are assuming for the market and just the implied core sales relative to your market assumptions? Speaker 300:44:12Yes. So good question, James. So for FX, right, basically, there's been a lot of volatility around FX, obviously, over the last month, six weeks, etcetera. So what we did is we looked at our prior outlook, and I think for the euro, which is one of the bigger ones for us, we assumed somewhere we kept that constant somewhere in that 106, which is where we were last guide. Clearly, the euro trading around that 108 now, there could be some upside translational upside if we go through and rates hold. Speaker 300:44:42We just felt with the volatility around the rates at this point, it was prudent to keep it consistent with where our prior guide was. Speaker 600:44:52Got it. That's helpful. And then just, I think we probably have too many factors to focus on, given the environment, but it wasn't too long ago, we were asking Adi about capital allocation, whether it's share buybacks or participating in some form of industry consolidation. Just wondering what the mindset is at this point, understanding that I think we all have a lot of macro uncertainty to navigate very near term? Yes. Speaker 300:45:30So again, nothing has changed from our perspective just in terms of how we view capital allocation, right? We're going to take a measured approach. Clearly, we're going to continue to invest in the business. Certain of that capital is going to have to be allocated towards restructuring Europe. We've been very transparent about that. Speaker 300:45:47Clearly, we generate free cash flow. So we said that we'll return value to our shareholders through share repurchases. Obviously, we think about share repurchases, right, we've said all along that we'd look at a couple of elements to see whether or not it makes sense. We'd look at the overall macros to see whether or not we had clarity and certainty there. Clearly, this past quarter, right, there was a lot of uncertainty with vehicle builds, what could happen to vehicle builds in the future. Speaker 300:46:14And we also said that we'd look at Adient's cash generation, right? And so as I indicated in my prepared remarks, our cash typically comes in the second half of the year. And so again, as we go through the second half of this year, I think we'll look at the overall macros. We'll see whether or not there's any more clarity just in terms of vehicle demand production. We'll look at our cash generation and then we'll make the determination in terms of timing of repurchases and the magnitude of repurchases. Speaker 300:46:43But overall, nothing has changed with our philosophy when it comes to capital allocation. Speaker 200:46:48Yes. And just to follow on Mark's comments, think as it pertains to capital allocation and with the additional color given just on how Adient's what I call platform mix and regional mix stacks up, that allows us greater clarity when it comes to that capital allocation, just given our lesser dependency on export volume out of Europe and Asia, our USMCA compliance, the large amount of directed content we have lessened some of our dependency on customer recoveries. If we can reach a trade settlement with China, just it helps us add certainty in some of those capital allocation decisions we have to make. Hopefully that answers your question, James. Speaker 300:47:40Yes. Much appreciated. Thank you. Speaker 200:47:43Yes. Thank you for the questions. Operator00:47:45Thank you. The next question comes from Colin Langan with Wells Fargo. Your line is open. Speaker 700:47:53Great. Thanks for taking my questions. Just a follow-up on that. There was about a month ago media reports that you were considering acquiring ZF's LifeTech business or at least a better. I mean, don't know what you could comment on that. Speaker 700:48:09Any comment on that would be welcome. But just in general, do you think something like that, a passive safety does have strategic overlap? Would you be at this point given the market uncertainty willing to buy to a larger deal? Any color there? Speaker 200:48:28I mean, so we can't comment obviously on ongoing M and A transactions. This wouldn't be prudent to do so. In terms of the strategic overlap between Seating and Safety, a large amount of Safety content we're responsible for integrating today into our products. And certainly, the trends between the two we see migrating together in the future. That said, we have to see how the market develops. Speaker 200:48:56And our main goal is to add value for our shareholders and for our customers. And that's what we're singularly focused on from that standpoint. And that's how we view any potential acquisition is through that lens. Does it add value for our shareholders and does it add value for our customers? And that's how we look at things. Speaker 700:49:17Got it. And just circling back on the tariffs, and I was a little surprised by the comment on Annex One. I mean, does that mean for your parts? I think the slide says that you pay 145% on China. If you're not in Annex I, you what kind of tariff are you then looking at for parts coming out of Mexico? Speaker 700:49:42And why would a supplier like you not fit in to the qualification? Speaker 200:49:50So it's this is really some of the detail that I think gets lost if you just read some of the high level summaries. And I'm not keep in Colin, I'm not implying that the homework isn't being done. I just think it's some of the reports by some of the consulting firms necessarily aren't at the level of detail they need to be. So with Annex One, it lists out all of the different HS codes that are subject to Annex One parts. And in there, there's things that are covered off that Adient just simply doesn't ship across the border, which means that you're not subject to the Annex One tariffs then. Speaker 200:50:33So complete seats as an example are Annex One. They're covered off in Annex One, but we don't actually ship complete seats across the border. As you know, our business model is we have our jets close to our customers. So we don't actually ship complete seats across the border, we build seats if we're shipping seats to, I'll take as an example, Toyota in Kentucky, we build our seats by Toyota in Kentucky. And we're not shipping seats out of Mexico to Toyota in Kentucky. Speaker 200:51:02And so as a result, we're not shipping parts that are on Annex 1. Some of the components that we may procure are in Annex 1, but they're largely directed from that standpoint. So we would get 100% recovery due to the directed nature of them. And what that means then is that recliners as an example, the parts in the seat structure are not on Annex 1 and those parts come from China. And if you're not on Annex 1, you're then subject to the stacking effect, which means you get hit with the IEPA tariff, which is the fentanyl tariff and you get hit with the reciprocal tariff, which is the 125% tariff or the 120%, however that stacks up. Speaker 200:51:41So then you're hit with immediately 145% tariff. And that's why China is our largest exposure, because as you know, we have our joint venture with Kuiper and a couple of legacy parts there. And so prior to all of these tariffs being laid in, we had about, call it, somewhere between a just roughly a $60,000,000 buyout of China. If you think about our Americas business, our Americas business procures about $5,000,000,000 worth of stuff. I mean $60,000,000 on a $5,000,000,000 buy, it's not significant. Speaker 200:52:19But when you put 145% tariff on it, it becomes an issue that the Americas team needs to deal with and they're dealing with it in a very effective manner, but it becomes a number that needs to be dealt with from that standpoint. And that's the nuance between Annex one, not Annex one and then the stacking effect of IEPA with the reciprocal tariff. You really need to go HS code by HS code. Speaker 700:52:48Got it. And then for your parts coming out of Mexico, is Aiipa and the Section two thirty two are pretty similar. Is it the same tariff anyway? Or is it actually higher because of some of the stacking? Speaker 200:53:03No. They've largely removed the stacking effect now. There was I think last week, they got rid of the stacking effects. Our parts coming out of Mexico now would just largely be two thirty two from that standpoint. But given our USMCA compliance, we're generally pretty clear of that now, which is why USMCA is so critical. Speaker 700:53:25Okay. So your Annex one is mostly China, that's your that is where you're seeing the impact? Speaker 200:53:32Non Annex one, yes. Speaker 700:53:34Non Annex one, okay. All right. Well, thank you very much. Operator00:53:42Thank you. The next question comes from Dan Levy with Barclays. Your line is open. Speaker 600:53:49Hi, good morning. Thanks for taking the questions. I just want to follow-up on that. And I think you made some references on the China tariffs you are incurring. How easily can you make rotations? Speaker 600:54:06Is it just these mechanisms from recliners, headrests? What's the sourcing opportunity elsewhere? And then do you have a sense of how your competitors stack up on this? Is this something that others are incurring as far as importing these different mechanisms from China? Speaker 200:54:29I mean, would say if you break down our spend from China, there's about for better or worse 40 part numbers that make up about 80% of that exposure. And of those 40 part numbers, call it 20 of them, we have tangible plans that we're working through at the moment. The other 20, we will drive customer recovery or we have customer recovery on. And the timeline to deal with those 20 that we're moving is a, call it a six nine month window, maybe it prolongates to a year. And in the interim, there'll be customer recovery agreements. Speaker 200:55:18And then some of those actually die out, Dan, in the September timeframe as some programs expire. So there's a bleed down window just naturally as some programs die off. In terms of other customers, I can't really comment on that. I don't know what their exposure is. Some of them may have comfort systems, some of them may have wire harnesses, some of them may have tubes. Speaker 200:55:44I just don't know. Speaker 600:55:50Okay. Thank you. Second question is on restructuring. And just wanted to ask if you could provide an update on the European restructuring. It sounds like you're getting some benefits. Speaker 600:56:05I think some time ago you had said you're still talking you're talking about net savings of $50,000,000 a year. Is that still intact? And I think you're referencing here the opportunity to accelerate some of the restructuring. Maybe you could give us a sense of how much deeper you can go, you're willing to go because clearly, it seems like there is more opportunity on the European front. Speaker 300:56:33Yes, Dan, I'll start and then, Joe, you could jump in if needed. Do we think there's opportunity to accelerate? We're looking at it from a very prudent manner, Dan. We want to make sure we recognize that there is a cost of those R dollars that we're spending over there, right? And so we have to spend it in a prudent manner. Speaker 300:56:54If there is an opportunity for us to pull something ahead, if we think that it's going to give us benefit, right within a couple of year payback, we're going to take a look at that and do that. At this time, there is nothing to announce. We've indicated, obviously, what the restructuring charge that we took last year was. We've indicated cash restructuring this year is going to be north of $100,000,000 Most of that is in Europe. It could be slightly higher now that we're looking at accelerating certain of that. Speaker 300:57:25So does it go up to like 125,000,000 this year? Possibly, but we'll continue to look at that as we go through the back half of this year. And again, I'd just remind you the comments I made earlier is even though we take a charge, right, roughly about one third of that would be accretive to our EBITDA going forward. The other half, two thirds is really just holding serve with the lost volume over there, right? So that's really the way that we're looking at Europe right now in terms of restructuring dollars. Speaker 200:57:56Yes. I think, Mark, that's a very good summary. I mean there's just I think you just have to constantly look at Europe from the lens of used to build 20,000,000 vehicles, actually was an exporter. Now if you look $14,800,000 15 million dollars next year is importing vehicles. There's going to be just some amount of restructuring we have to put into that business that's just there to hold serve. Speaker 200:58:25It's just the reality of that business from that standpoint. Speaker 600:58:30Great. Thank you. Operator00:58:35Thank you. The next question comes from Edison Yu with Deutsche Bank. Your line is open. Speaker 600:58:43Hey, good morning. Thanks for squeezing me in. Just wanted to check two things real quick. One, on the China local OE mix, I know you're targeting 60% exiting fiscal twenty twenty seven. Did you disclose what it is for the current quarter? Speaker 300:59:00Yes. We didn't break it out. It's important the current quarter. We can get back to you. But literally, we were like, call it, around 40%, sixty % at the end of last year. Speaker 300:59:11Overall, it doesn't move by several basis points from quarter to quarter. So I'd say that we're still in that, call it, forty-forty five split local versus foreign. Speaker 600:59:26Okay. Just, second quick clarification. On the I guess on the walk, there was I think you said there was 9,000,000 tariff in the quarter. Is that basically just one month? Or is that a full representative of full quarter impact? Speaker 600:59:45I know it's getting recovered later, but I just want to check if that's the full impact? Or is it actually going to increase for the full Well, was Speaker 300:59:53impact for Q2. As we indicated on the slides, our gross exposure now on a monthly basis is $12,000,000 Speaker 601:00:04Okay. Got you. Thank you. Speaker 301:00:07Thank you. Thank you. Speaker 101:00:12Denise, I think we're going to close the call at this point. Operator01:00:16All right. Thank you. Speaker 101:00:21Well, I want to thank everyone for joining us and appreciate your interest in Navient. Speaker 201:00:27Thank you. You. Thanks everyone. Operator01:00:30Thank you everyone for dialing in for the conference today. We appreciate your participation. Have a great rest of your day and you may disconnect.Read morePowered by Key Takeaways Q2 financial resilience: Delivered adjusted EBITDA of $233 million (+3% YoY) and a 6.5% margin (+40 bps) despite $139 million lower sales, ending with $754 million in cash and $1.6 billion in liquidity. Tariff mitigation plan: Faces ~$12 million monthly gross tariff exposure (mainly from China), with 95% of Mexico/Canada parts USMCA-compliant and 75% of exposures already resolved, targeting full cost recovery through global sourcing shifts and customer agreements. Regional dynamics: Americas outperformed industry volumes and improved margins; EMEA posted operating gains but recorded a $333 million goodwill impairment; Asia sees near-term China revenue pressure offset by growth with local OEMs. Innovation and new awards: Won major seat programs (FAW Hongqi H5, Kia K5, Ram 1500), earned supplier awards from GM, Toyota, Hyundai and J.D. Power, and introduced automated manufacturing and a first-of-its-kind mechanical massage seat. FY25 outlook reaffirmed: Reiterated revenue and adjusted EBITDA guidance assuming stable tariff policies, with expected free cash flow of $150–$170 million (down from $180 million) and interest expense of ~$190 million. A.I. generated. May contain errors.Conference Call Audio Live Call not available Earnings Conference CallAdient Q2 202500:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Adient Earnings HeadlinesAdient (NYSE:ADNT) Price Target Cut to $16.00 by Analysts at Morgan StanleyMay 21 at 3:15 AM | americanbankingnews.comAdient (NYSE:ADNT) Stock Price Expected to Rise, Wells Fargo & Company Analyst SaysMay 21 at 2:19 AM | americanbankingnews.comMusk’s Project Colossus could mint millionairesI predict this single breakthrough could make Elon the world’s first trillionaire — and mint more new millionaires than any tech advance in history. And for a limited time, you have the chance to claim a stake in this project, even though it’s housed inside Elon’s private company, xAI.May 21, 2025 | Brownstone Research (Ad)Adient PLC (ADNT) Fell Along with Peers in Q1May 19 at 11:07 AM | insidermonkey.comAdient plc (NYSE:ADNT) Receives $18.00 Average Target Price from AnalystsMay 16, 2025 | americanbankingnews.comExpert Outlook: Adient Through The Eyes Of 6 AnalystsMay 10, 2025 | benzinga.comSee More Adient Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Adient? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Adient and other key companies, straight to your email. Email Address About AdientAdient (NYSE:ADNT) engages in the design, development, manufacture, and market of seating systems and components for passenger cars, commercial vehicles, and light trucks. The company's automotive seating solutions include complete seating systems, frames, mechanisms, foams, head restraints, armrests, and trim covers. It serves automotive original equipment manufacturers in North America and South America; Europe, Middle East, and Africa; and the Asia Pacific/China. 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There are 8 speakers on the call. Operator00:00:00Welcome and thank you for standing by. At this time, all participants are in a listen only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the meeting over to Michael Heifler. Operator00:00:19Thank you, sir. You may begin. Speaker 100:00:22Thank you, Denise. Good morning, everyone, and thank you for joining us. The press release and presentation slides for our call today have been posted to the Investors section of our website at adient.com. This morning, I'm joined by Jerome Dorlak, Adient's President and Chief Executive Officer and Mark Oswald, our Executive Vice President and Chief Financial Officer. On today's call, Jerome will provide an update on the business. Speaker 100:00:50Mark will then review our Q2 financial results and our outlook for the second half of our fiscal year. After our prepared remarks, we will open the call to your questions. Before I turn the call over to Jerome and Mark, there are a few items I'd like to cover. First, today's conference call will include forward looking statements. These statements are based on the environment as we see it today and therefore involve risks and uncertainties. Speaker 100:01:18I would caution you that our actual results could differ materially from these forward looking statements made on the call. Please refer to Slide two of the presentation for our complete Safe Harbor statement. In addition to the financial results presented on a GAAP basis, we will be discussing non GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non GAAP measures to the closest GAAP equivalent can be found in the appendix of our full earnings release. And with that, it's my pleasure to turn the call over to Jerome. Speaker 200:01:54Thanks Mike. Good morning everyone and thank you for joining us today. Speaker 300:02:00We will review Speaker 200:02:00our strong second quarter results, share our perspectives and analysis on tariffs and explain how we are addressing the situation through leveraging our global footprint and working with our customers to add value. High level, the Adient business model is strong and resilient and our team has built positive momentum going into the second half of fiscal twenty twenty five. I will walk you through these topics in more detail and then turn it over to Mark to review the Q2 financials and dynamics for the balance of the year. Turning now to Slide four. Our positive momentum accelerated in Q2 with improved business performance versus a year ago across all regions allowing us to mitigate ongoing customer volume and mix headwinds in EMEA and Asia. Speaker 200:02:48In Americas, we outperformed industry volumes and saw strong year over year margin improvement as we drove additional efficiencies and had favorable comparisons with last year's heavy launch calendar. As a result, we were able to improve total company adjusted EBITDA margins by 40 basis points. We achieved $233,000,000 of adjusted EBITDA. Importantly, Q2 results underscore the Adient team's deep commitment to operational excellence and solid execution and demonstrate the resilience of our operating model during times of volume pressure and macro volatility. In fact, looking at our Q2 performance over a three year period, our EBITDA results have improved by $18,000,000 and our margins have expanded 90 basis points on $300,000,000 of lower sales. Speaker 200:03:46While lower customer volumes have played a significant role, we have also made a conscious decision to focus on more profitable business and to invest in innovation, automation, modularity and other efficiency measures. This strategy is paying off with a stronger more profitable business that is well positioned to take advantage of future volume improvements. Free cash flow in Q2 was in line with internal expectations reflecting normal seasonality and timing differences between Q1 and Q2. Importantly, we ended the quarter with a strong cash balance of $754,000,000 and $1,600,000,000 of liquidity. Excellence combined with innovative seat solutions are helping us win significant new business across all regions. Speaker 200:04:40I'll walk you through some of our new business wins in a few slides. External validation of the value we provide and how we operate the business speaks volumes and I'm proud that our team continues to win broad based customer and industry recognition. We are focused on delivering best in class quality, value and service to our customers. Notably, have earned our fourth consecutive GM Supplier of the Year award with GM recognizing our transparency and clear communications. We also won the excellent VA Achievement Award from Toyota Motor North America for excellence in optimizing value by improving performance and reducing costs. Speaker 200:05:24Hyundai Motor Group awarded Adient the best supplier award for ESG management. Also Adient China won 11 J. D. Power's seat quality awards. Mark will get into our outlook in more detail in a few minutes. Speaker 200:05:41Given our positive momentum and mitigating actions we are taking around tariffs, we are reiterating our fiscal year twenty twenty five guidance for revenue and adjusted EBITDA excluding potential tariff related volume impacts. That said, let's discuss the tariff landscape, Adient's exposure and our action plan. Beginning on Slide five, tariff rules and values continue to be fluid. But based on our current interpretation, Adient has multiple degrees of freedom to mitigate impacts through resourcing components, engaging with customers to find lower cost alternatives and where there is no alternative negotiating a resolution. We are targeting 100% cost offsets or recoveries with all customers. Speaker 200:06:36As we begin to look at our exposure, appreciate that we do not ship complete seats into The U. S. That would fall under Annex One. Our exposure arises from parts such as recliners, seat transmissions, headrests, electrical components, etcetera. Importantly, nearly 95% of Adient's parts produced in Mexico and Canada and shipped to The U. Speaker 200:07:00S. Are USMCA compliant and nearly all of those parts are not listed in Annex One and therefore not subject to those tariffs. Adient's key advantage is our unmatched global footprint, which provides us enormous value for our customers in these circumstances, as we're able to quickly resource parts from different locations to significantly reduce tariff exposure. As you can see in the chart on the upper right hand side, our largest exposure are from goods coming from China and Mexico. We believe based on current tariff interpretation, our gross monthly tariff exposure is approximately $12,000,000 9 million dollars excluding purchases that are directed by our customers. Speaker 200:07:48We have already resolved 75% of our gross position and have road mapped the remaining 25% and are working closely with our customers to close that gap. Turning now to Slide six. As I mentioned earlier, we are targeting 100% resolution. Our objective is to work with all our customers to create value for them and to reduce overall tariff exposure, in addition to providing long term sustainable solutions. Our general view is that historical shocks like the great financial crisis, COVID, supply chain shortages, etcetera were acute crises that the industry collectively worked through to get back to normal. Speaker 200:08:33But tariffs could drive a fundamental reset with definitive winners and losers. We see Adient as a winner through these changes and are looking for opportunities to grow our business. I would point you to our strengths including our resourcefulness as scrappy problem solvers, best in class global manufacturing footprint, our diversified customer relationships, our joint venture network that allows us to quickly help our customers pivot. By leveraging our global footprint, utilizing modularity and adding more value in the USMCA zone, we are significantly lowering our tariff exposure. For example, we are assembling a front seat back frame made in Mexico with an imported recliner mechanism and by adding to that a seat cushion frame produced within the USMCA zone, we are driving a favorable outcome for our customers. Speaker 200:09:31Some other examples of opportunities we are currently working on with customers include localizing headrest mechanisms currently coming from China, sourcing those into The U. S. And resource and recliner mechanisms from China to either Mexico or Germany. We're also in a strong position to support complete seats for certain of our Japan and German customers who are localizing production into The U. S. Speaker 200:09:56In summary, our tariff exposure appears to be manageable. The biggest uncertainty is the magnitude of the tariff impact on volumes. I'll talk more about that later. Next, let me walk you through some of the regional dynamics on Slide seven. First, in The Americas, we continue to expand margins and benefit from strong business performance. Speaker 200:10:24Our volume mix performance relative to the industry has been strong as key launches in 2024 are now at full run rate. As mentioned earlier, we are focused on navigating tariff dynamics and driving value for our customers. By doing so, we believe we will capitalize on growth opportunities. We are already seeing certain customers onshoring production. Finally, are realizing benefits from low margin business rolling off such as certain metal platforms and we expect further margin improvements in the future. Speaker 200:10:59In EMEA, we are gaining momentum and seeing improving business performance including realization of restructuring benefits. The region is winning key programs with European customers as well as developing opportunities with China based OEMs as they localize. With regards to FX, we have seen some headwinds from cross currency exposures primarily related to the Polish zloty. While production volumes in the quarter were lower, we are seeing more stable production schedules overall. As we have shared in previous quarters, we have been monitoring the situation closely in the region. Speaker 200:11:36Given industry headwinds in Europe combined with the decline in our share price, we have determined a triggering event has occurred and we have recorded a $333,000,000 non cash goodwill impairment this quarter. In Asia, the team continues to drive strong business performance, while we expect near term pressure on China revenue, we believe this to be temporary as new business with local China OEMs are expected to drive growth. Our strong relationships and footprint in China are helping us win more business this year and we expect to capitalize on China OEM growth abroad. In short, we see strong business performance mitigating near term volume mix and headwinds as well as macro uncertainty. Next, let me turn to new business wins and launches on Slide eight. Speaker 200:12:32We continue to prioritize winning the right business and executing successful launches. Our business awards this quarter demonstrate further growth with China local OEMs and enhancement to our global customer relationships. I would like to highlight the new business with FAW Hongqi H5, which is a complete seat system as well as the replacement complete seats for the Kia K5 midsize sedan and the replacement business on the Ram fifteen hundred for metals and foam. As you can see on the right hand side of the slide, we are launching on several key platforms around the globe. Underpinning our new business wins is our high level of execution on multiple launches. Speaker 200:13:18We continue to perform on safety, quality and on time delivery metrics for our customers. Turning to Slide nine, we are leveraging our emphasis on product innovation and automation to support our customers. This is a large enabler of growth with China OEMs globally. Our recent expansion of Adient's China Technical Center in Chongqing reinforces our leadership in electrification and smartification driving developments on innovation and automotive seating solutions. We're developing cutting edge automation equipment and processes utilized at Adient operations around the world including automated cobots, AI visual inspection, automated steaming and sewing and more. Speaker 200:14:07This is a key differentiator for Adient to support local China OEMs as they expand their footprint outside of China. Additionally, Adient's first mechanical massage system was successfully launched with GAC's Trumpy's new PHEV Model M8 during the twenty twenty five Shanghai Auto Show. The mechanical massage system is a first of its kind, innovative product that more effectively relieves occupant fatigue versus traditional pneumatic massage. We have a video embedded in our earnings deck that I would encourage you to watch. We believe these investments will strengthen our growth momentum with China based OEMs and enable business wins beyond China and Southeast Asia and European markets. Speaker 200:14:56We are also seeing significant BYD and export growth through our Kuiper joint venture today. We continue to win business with domestic and China OEMs, which represent approximately three quarters of our new book of business in China. And finally moving to our key takeaways on Slide 10. The team achieved strong Q2 results and we're seeing positive momentum, so there is significant certainty around volumes in H2 due to tariff policies, which I will speak to later. Tariff headwinds appear manageable and we have a comprehensive action plan to mitigate those headwinds with more than 75% already achieved. Speaker 200:15:42We are executing plans to drive value to our customers and capitalize on opportunities. We remain committed to driving higher levels of business performance to mitigate those headwinds and Adient has a solid track record of successfully managing through turbulent times and has a strong balance sheet and liquidity with no near term debt maturities. We intend to capitalize on opportunities arising from changing industry dynamics. Now I'd like to turn it over to Mark to take you through our financials and our outlook. Speaker 300:16:15Thanks, Jerome. Let's jump into the financials on Slide 12. Adhering to our typical format, the page shows our reported results on the left side and our adjusted results on the right side. We will focus our commentary on the adjusted results, which excludes special items that we view as either one time in nature or otherwise skew important trends in underlying performance. One item to note, as Jerome mentioned earlier, was a triggering event which occurred during the quarter, which required a quantitative impairment analysis, primarily due to the significant decline in the market value of Adient shares resulting from uncertainties surrounding vehicle production volumes amongst other factors. Speaker 300:16:59As a result of the quantitative assessment, a $333,000,000 non cash goodwill impairment was recorded in the EMEA reporting unit. Details of all adjustments for the quarter are included in the appendix of the presentation. Moving on, high level for the quarter. Adjusted EBITDA for the quarter was $233,000,000 up 3% year on year. We expanded EBITDA margins 40 basis points year over year to 6.5%. Speaker 300:17:29This improvement reflected outstanding business performance in the quarter despite $139,000,000 decrease in revenue from lower customer volumes and FX versus a year ago. As Jerome mentioned, we continue to demonstrate the resilience of the Adient operating model and ability to mitigate external pressures. Worth noting that our underlying equity income remains quite strong, particularly in our Asia Pacific segments despite this quarter's results being negatively impacted by $6,000,000 from the same period a year ago due to the restructured pricing agreement within Adient's Typer joint venture. Adient reported adjusted net income of $58,000,000 or $0.69 per share. I'll cover the next few slides rather quickly since details for the results are included on the slides. Speaker 300:18:22This should ensure we have adequate time for Q and A. Starting with revenue on slide 13, we reported consolidated sales of approximately $3,600,000,000 a decrease of 139,000,000 compared with Q2 fiscal year twenty twenty four. The primary driver of the year on year decrease was lower volumes of $90,000,000 resulting from lower customer production. FX was also a $49,000,000 headwind in the quarter. Focusing on the right hand side of the slide, Adient's consolidated sales were higher in Americas and lower in EMEA and Asia year on year. Speaker 300:19:00In The Americas, sales versus industry were driven by favorable comparisons with a year ago when many of our key customer programs were launching at low volumes such as GM's large three row crossover in the Toyota Tacoma. In Europe, we were negatively impacted by overall weaker market demand. Sales were in line with the market. And in our APAC region, sales in China underperformed industry production, primarily due to lower volumes from our traditional luxury OEM customers, including Volvo and GAC. We continue to outperform the industry in Asia outside of China due to new customer launches, which occurred in the second half of twenty twenty four, which are now reaching full run rate volumes. Speaker 300:19:50Regarding Adient's unconsolidated Seating revenue, year on year results were down 6% adjusted for FX. Revenue in North America was lower due to a joint venture rationalization, which was partially offset by growth in Europe of our Deniz joint venture in Turkey. Sales in China were up year on year, mainly due to growth with BYD and exports through our Kuiper joint venture as well as increased sales within the CFAA joint venture. Moving to slide 14, we provided a bridge of adjusted EBITDA to show the performance of our segments between periods. Adjusted EBITDA was up 3% at $233,000,000 The primary driver of the year on year comparison are detailed on the page. Speaker 300:20:39The Adient team drove improved business performance of $37,000,000 primarily resulting from better net material margin and reduced operating costs, including lower launch costs. The improved business performance was partially offset by volume and mix, which was a $6,000,000 headwind driven by lower customer vehicle production in EMEA and the Asia region, specifically in China. FX was a $10,000,000 headwind mostly from transactional impacts in EMEA and Americas. And finally, we incurred a net commodity headwind of $15,000,000 in Q2, primarily driven by the timing of recoveries. As in past quarters, we provided our detailed segment performance slides in the appendix of the presentation. Speaker 300:21:27High level, for The Americas, improved business performance of $15,000,000 in Q2 was primarily driven by favorable commercial actions, lower input costs and lower launch costs. Tariffs were a $9,000,000 headwind during the quarter, which we expect to mostly recover in the second half of twenty twenty five. Non recurrence of certain discretionary compensation measures, which occurred in fiscal year twenty twenty four adversely impacted the year on year comparison. Volume and mix was a tailwind of $13,000,000 benefiting from a stronger production of high content programs during the quarter consistent to what we saw in Q1 of this year. Production tracked as expected as we entered the quarter. Speaker 300:22:12Notably, we did not see any meaningful overtime or additional shifts added by our customers in our products that would point to the pull forward of production. Commodities were $9,000,000 headwind driven by the timing of recoveries. Specifically, absolute costs in 2025 resulted in less recoveries in Q2 of this year versus Q2 twenty twenty four. In EMEA, year over year results were influenced by lower volume mix, which negatively impacted the quarter by $9,000,000 FX was a $7,000,000 headwind, primarily driven by transactional exposure from the Polish zloty and commodities were a $6,000,000 headwind due to the timing of recoveries. Business performance accelerated to $16,000,000 in Q2, partially offsetting the headwinds and was driven by better net material margin and operating performance, including the benefits of restructuring actions. Speaker 300:23:11As we have previously outlined, we are taking significant steps to adjust our costs in Europe and are studying opportunities to pull forward some rationalization actions in a prudent manner. In EMEA, we continue to focus on driving additional operating efficiencies, restructuring and executing our plan, which includes the roll off of lower performing metals business in the start of production of better margin new business, which we believe will inflect positively in 2026. Moving on in Asia, our results were generally flat year on year with positive business performance being offset by lower volumes and mix. In summary, the company continues to drive improved business performance across all regions, which we expect to continue in the second half of twenty twenty five. Let me now shift to our cash, liquidity and capital structures on Slides fifteen and sixteen. Speaker 300:24:09Starting with cash on Slide 15. For the quarter, free cash flow defined as operating cash flow less CapEx was an outflow of $90,000,000 As Gerald mentioned earlier, this was in line with our expectations and reflects timing and normal first half seasonality as we typically have first half outflows and are cash generative in the second half of the year. H1 cash performance is consistent year over year after considering restructuring cash costs, particularly in Europe. In Q2, we incurred $33,000,000 of cash restructuring. During the quarter, we also spent $8,000,000 in consulting fees associated with strategic planning related to optimizing our business portfolio as we continue to consider actions to create shareholder value. Speaker 300:25:02I would note that while these fees are included in our cash flow, they are excluded from our adjusted EBITDA. We continue to expect solid free cash conversion in fiscal twenty twenty five. '1 last point and called out on the slide, Edding continues to utilize various factoring programs as a low cost source of liquidity. At 03/31/2025, we had $170,000,000 of factor receivables consistent with last year's second quarter. Flipping to slide 16, as noted on the right hand side of the slide, Edding continues to proactively manage its debt maturity profile with no near term maturities. Speaker 300:25:45We successfully refinanced $795,000,000 senior unsecured notes due 2026 during the quarter issuing new notes with a 02/1933 maturity, therefore extending our average maturity profile from four years to just over six years. Adient is committed to being good stewards of capital while maintaining a strong balance sheet, ensuring efficient allocation of resources and ample liquidity. Turning to our balance sheet. Adient's debt and net debt position totaled about 2,400,000,000.0 and $1,600,000,000 respectively at 03/31/2025. The company's net leverage at March 31 was 1.9 times within our targeted range of 1.5 times to two times. Speaker 300:26:36Total liquidity for the company was about $1,600,000,000 at March 31, comprised of $754,000,000 of cash on hand and $843,000,000 of undrawn capacity under Adient's revolving line of credit. Moving to slide 17, let's review our first half performance and expectations for the second half of fiscal twenty twenty five. In the first half, we exhibited strong momentum with only 5% Decorah margins. While market volumes have been lower, we saw more stability than last year, which helped us from an efficiency standpoint. I would note that the onset of tariffs, we incurred $9,000,000 of gross expense, which we expect to mostly recover in H2 of this year. Speaker 300:27:25The takeaway for Adient's first half is strong business performance significantly offset ongoing volume headwinds, resulting in solid results in line with internal expectations. Looking into second half of this year, while the impact of tariffs on market volumes remains uncertain, the company is committed to strong business performance and has solid momentum. Absent significant impacts from tariffs, we would expect H2 performance to be similar to H1. Assuming no significant incremental step down in global volumes, we expect volume headwinds to be manageable and mitigated by ongoing business performance and efficiencies. We expect tariff expenses to be offset by actions we are taking with our customers. Speaker 300:28:14And finally, with regard to our 2025 outlook on Slide 18, given our strong momentum going into the second half of the year, we are reaffirming our previous fiscal year twenty twenty five revenue and adjusted EBITDA outlook. Importantly, our guidance assumes no change to current tariff policies. Most tariff costs are resolved and no meaningful declines in previously forecasted volumes from tariffs. While we see some upside to our adjusted EBITDA in the second half of this year, it may be offset by timing of tariff related customer recoveries. Year over year volume headwinds are being offset by ongoing business performance and efficiencies. Speaker 300:28:57We expect this business performance to continue to mitigate macro headwinds and offset decremental margins and lower volumes. Our interest expense is now expected to be slightly higher, call it $190,000,000 versus the previous forecast of $185,000,000 due to the recent refinancing and maturity expansion of our senior unsecured notes. On cash flow, we see potentially accelerated European cash restructuring costs as well as some uncertainty around timing of customer recoveries at year end, leading us to adjust our free cash flow forecast to a range of between $150,000,000 and $170,000,000 from our previous guide of $180,000,000 To sum it up, based on Adient's solid performance throughout the first half of twenty twenty five, the company is well positioned to weather the macro challenges and the team continues to execute at a very high level. We remain focused on managing the business controllables such as delivering excellent results for our customers, lowering costs and generating free cash flow for the owners of our business, while maintaining a strong and flexible balance sheet. With that, I'll turn it back to Jerome for a few additional comments. Speaker 200:30:13Thanks Mark. With that, I wanted to give just a little bit of additional color on the guide and why we handled the guide the way we did. First, it was really enabled by a strong start to the year, which is driven by our 70,000 associates around the world, our customers and suppliers. So I want to thank them for allowing us to do that. Secondly, I think it's important to understand how Adient views the tariffs and how we break that down. Speaker 200:30:43And it's really, I'd say three orders of magnitude or three buckets. The first order is the direct impact that we see. And I think we've tried to lay out for you today with a level of transparency how that direct impact is flowing through to us, both in terms of where we see it coming in terms of the regions and how it's managing through Annex One, where we see Annex One exposure, where we have USMCA exposure, the fact that we're 95% covered out, where we see recovery, the fact we're already 75% recovery, we have 25% roadmap and then the fact that we can move through the rest of the year with action plans and drive that recovery. The second order then being what it means to our customers and how our customers have to manage that. They've gone through and made their announcements this week, we won't cover that off. Speaker 200:31:42But there is an element, whether that be through the 2.5% MSRP discount, we have to see what that means to us. But then in the midterm, as they start to re shore production, we're already engaged with certain Japanese customers and the German OE and there will be I think announcements to come, we just don't have anything today that allow Adient to leverage our best in class footprint to potentially see some net volume upside. And that I think is enabled by as we talk a lot E. T. Speaker 200:32:15Being close to our customers and providing solutions to them. And then the third order is what does it mean to the consumer and the macro economy and how resilient the consumer is. And that I think because we're a September filer, we already have six months behind us. We're operating on three months of EDI and we have some amount of visibility into that. And then you have kind of the last three months after EDI. Speaker 200:32:43We're running on March S and P right now. Mark already talked about we've assumed no meaningful change in our volume outlook. And we don't have anything today on EDI that would say there is any meaningful change to come. And I think we've tried to provide visibility into that. I think there's another thing to note. Speaker 200:33:01If you think about outside of The U. S, how dependent are we on export volume. So to give a little color on that, on an annualized basis, our European business has somewhere we'll range it between $350,000,000 to $450,000,000 of export volume in their annualized sales figures. And our Asia Pacific business has somewhere between 150,000,000 to $200,000,000 of annualized volume in their business that they're dependent upon. So as you think on an annualized basis, how dependent would we be if those exports were cut off, that kind of gives you a little bit of flavor there. Speaker 200:33:44But again, we're already six months into our year. And when you put all those factors and you kind of combine them, that's what's allowed us the confidence to kind of say, given six months are behind, we've done a good job mitigating tariffs, we're 95% USMCA compliant, we have this footprint that allows us to quickly rotate out of China leveraging our Kuiper JV that has a footprint in Mexico or we can use Rackenhausen, our footprint in Germany, we can do things with our customers or we can drive recovery has given us the confidence to say, here's our guide for the rest of the year. And so just wanted to provide additional color on that before we turn it over to the Q and A segment of the call. And with that, we'll open it up to Q and A. Speaker 100:34:36Thank Operator00:34:39Thank you. Our first question today comes from Joe Spak with UBS. Your line is open. Speaker 200:34:58Can you hear me? Speaker 300:35:01Hi, Joe. Yes. Speaker 400:35:03Thanks for all the additional color there. I guess just one quick one on tariffs. You've made good progress here, right, the Resolve versus the 75% roadmap 25%. I'm assuming Resolve means you basically have agreements for price recoveries or that's the majority of that. Is the roadmap portion more what you're talking about finding some cost offsets or resourcing? Speaker 400:35:35Or are there still some potential price negotiations involved in the roadmap portion as well? Speaker 200:35:41Yes. I'd say it's a mix of both, Joe, from that standpoint. So there's still ongoing price negotiations. There are certain customers have systems that require us to submit documentation given there still are things on boats coming over from China. Bill ladings haven't been delivered yet. Speaker 200:36:02And so we need to be in systems for recoveries without getting into too much minutiae from that standpoint. So there's things that need to be submitted and negotiated and just need to be rolled through. And so it's a mix of both. Still resourcing that needs to occur and also negotiations that need to be concluded. Speaker 400:36:24Okay. That's helpful. And then, just in EMEA, I Speaker 200:36:32think it was Speaker 400:36:34I know there's still some challenges there, but it looks like there was it was a pretty good quarter at least relative to some expectations and with some still some volume headwinds. And I know you called out some business performance. Is there anything unusual in that that sort of drove the quarter a little bit better, especially relative to maybe quarter over quarter? Speaker 300:36:57Yes, Joe. Good question, good observation. I'd say one quarter does not make a trend, right? So I wouldn't take that number and annualize it. I'd say that we are encouraged because we are seeing obviously business performance turn positive over there. Speaker 300:37:13We're getting the benefits of certain of the restructuring actions we've taken. But again, things are lumpy, especially as you think about commercial actions and recoveries with customers. So again, that lumpiness, I wouldn't peanut butter that 4% margin that we just printed across third or fourth quarter, right? So it's going to be some variability as we go through the rest of the year. Speaker 400:37:34Mark, I think you did mention last year that you thought the first half of this fiscal year would be sort of a bottoming event for profitability in that region. Is that still the case? So if you average you're saying the first half is a little bit over 3%, should we expect that it improves off that level from here? Speaker 300:37:56Yes. I wouldn't say that, Joe. I'd say that you're right. 3% was the average over the first half of the year, right. If you just remember last year I think we did about 3% just over 3%. Speaker 300:38:09When we came into this year we said hey listen this year is going to be pretty much similar to that right. You really don't see that inflection point until we get into 2026, which is when we start to see certain of the underperforming metals business roll off. We see the new business roll on. So I'd still frame it up in that piece. Okay. Speaker 300:38:29Thank you. Operator00:38:33Thank you. The next question comes from Emmanuel Rosner with Wolfe Research. Your line is open. Speaker 500:38:41Great. Thank you so much. First question is really around just on this making sure I understand your direct tariff exposure. So 95% of what you produced in Mexico and Canada is USMCA compliant. So that stuff would technically have tariffs, but I guess for now USMCA parts are not being tariffs. Speaker 500:39:07And then when you mentioned the add ins parts that are not listed in Annex One, this would relate to what geographies? Speaker 200:39:19So I think what we've said is roughly 95%, so don't hold us to exactly 95%, is of our parts that we import or move across the border from Canada and Mexico into The U. S. Are USMCA compliant. And so under current policy, that's correct, they're not subject to the 25% tariff rule. And if that were to change, then obviously, we'd have to deal with the issue. Speaker 200:39:50And then Annex I, the way Annex I is scoped out, Annex I basically carves out those parts and says even if they are USMCA compliant, they are subject to a 25% tariff. However, we don't have any parts that fall under that Annex I that we produce today and we have very little controlled material that would fall under Annex I. It's almost all directed. And so we would be covered off due to the directed nature and the nature of just the way seating is actually constructed from that standpoint. It is worth noting though, Emmanuel, that the Annex One tariffs that were supposed to go into effect May 3 actually have been delayed as the system is not steady at this point. Speaker 200:40:36Now I will say the disadvantage of having your components not falling under Annex One is that then they're subject to the stacking effect of IEPA and the reciprocal tariff, which is why we get hit with the 145% tariff out of China. And that's why China is our largest exposure region at the moment. And that's really why we tried to provide that visibility into our exposures. And you can see that monthly run rate on the graph of China being our largest exposure region. And again, we're not trying to overwhelm you with detail, but I do think it's important to understand that differentiation into just what is Annex One, what's USMCA, what's AIPO, what's two thirty two and reciprocal and all of that, so Speaker 500:41:30Yes. No, I appreciate the I appreciate all the detail. Then I guess taking a step back in terms of your margin outlook and then where it fits within the longer term goals and progression. Can you maybe just remind us how much more opportunity there is for some of these cost and efficiency actions? And how do you think about, I guess, the self help and the part that you control and timing of further benefits? Speaker 300:42:01Yes. So good question, Emmanuel. So we printed 6% last year total company. We said there's going to be puts and takes this year, right? We see Americas continuing to improve their margin profile. Speaker 300:42:15We just spoke about Europe for the next year or so kind of in that, call it 3% which we printed yesterday. And then obviously our APAC region continues to print double digit margins. We expect that to continue. When we look at what we're benchmarking and what we're targeting right, clearly, think there's significant opportunity in front of us. We've said in the past, whether or not that's 7.5%, eight %, that's typically what people are looking at. Speaker 300:42:43That's what we think we could achieve. Clearly, there is a lot that we could do to get there. Some of it's what we spoke about before, whether it's restructuring over in Europe, getting the benefits of that. I would caution people that the dollars that we spend over in Europe is not a one for one in terms of accretive to our EBITDA as certain of that just goes against lower volumes in the region. We do have the positive impact of balance in, balance out, especially with the lower margin metals business rolling out over there. Speaker 300:43:14We've got new products, new wins that are coming on over there that have higher margins. So when you add that all up, do I think that there's a couple of hundred basis points of opportunity versus where we were in 2024? Absolutely. And you could see that within our business performance so far in the first half of this year. And so that's really what the team is targeting and marching towards. Speaker 500:43:39Great. Thank you. Speaker 300:43:41Thank you. Operator00:43:43Thank you. The next question comes from James Picariello from BNP Paribas. Your line is open. Speaker 300:43:53Hey guys. Sorry if Speaker 600:43:55I missed this, but have you quantified the change in FX assumptions with your guidance? And just what you are assuming for the market and just the implied core sales relative to your market assumptions? Speaker 300:44:12Yes. So good question, James. So for FX, right, basically, there's been a lot of volatility around FX, obviously, over the last month, six weeks, etcetera. So what we did is we looked at our prior outlook, and I think for the euro, which is one of the bigger ones for us, we assumed somewhere we kept that constant somewhere in that 106, which is where we were last guide. Clearly, the euro trading around that 108 now, there could be some upside translational upside if we go through and rates hold. Speaker 300:44:42We just felt with the volatility around the rates at this point, it was prudent to keep it consistent with where our prior guide was. Speaker 600:44:52Got it. That's helpful. And then just, I think we probably have too many factors to focus on, given the environment, but it wasn't too long ago, we were asking Adi about capital allocation, whether it's share buybacks or participating in some form of industry consolidation. Just wondering what the mindset is at this point, understanding that I think we all have a lot of macro uncertainty to navigate very near term? Yes. Speaker 300:45:30So again, nothing has changed from our perspective just in terms of how we view capital allocation, right? We're going to take a measured approach. Clearly, we're going to continue to invest in the business. Certain of that capital is going to have to be allocated towards restructuring Europe. We've been very transparent about that. Speaker 300:45:47Clearly, we generate free cash flow. So we said that we'll return value to our shareholders through share repurchases. Obviously, we think about share repurchases, right, we've said all along that we'd look at a couple of elements to see whether or not it makes sense. We'd look at the overall macros to see whether or not we had clarity and certainty there. Clearly, this past quarter, right, there was a lot of uncertainty with vehicle builds, what could happen to vehicle builds in the future. Speaker 300:46:14And we also said that we'd look at Adient's cash generation, right? And so as I indicated in my prepared remarks, our cash typically comes in the second half of the year. And so again, as we go through the second half of this year, I think we'll look at the overall macros. We'll see whether or not there's any more clarity just in terms of vehicle demand production. We'll look at our cash generation and then we'll make the determination in terms of timing of repurchases and the magnitude of repurchases. Speaker 300:46:43But overall, nothing has changed with our philosophy when it comes to capital allocation. Speaker 200:46:48Yes. And just to follow on Mark's comments, think as it pertains to capital allocation and with the additional color given just on how Adient's what I call platform mix and regional mix stacks up, that allows us greater clarity when it comes to that capital allocation, just given our lesser dependency on export volume out of Europe and Asia, our USMCA compliance, the large amount of directed content we have lessened some of our dependency on customer recoveries. If we can reach a trade settlement with China, just it helps us add certainty in some of those capital allocation decisions we have to make. Hopefully that answers your question, James. Speaker 300:47:40Yes. Much appreciated. Thank you. Speaker 200:47:43Yes. Thank you for the questions. Operator00:47:45Thank you. The next question comes from Colin Langan with Wells Fargo. Your line is open. Speaker 700:47:53Great. Thanks for taking my questions. Just a follow-up on that. There was about a month ago media reports that you were considering acquiring ZF's LifeTech business or at least a better. I mean, don't know what you could comment on that. Speaker 700:48:09Any comment on that would be welcome. But just in general, do you think something like that, a passive safety does have strategic overlap? Would you be at this point given the market uncertainty willing to buy to a larger deal? Any color there? Speaker 200:48:28I mean, so we can't comment obviously on ongoing M and A transactions. This wouldn't be prudent to do so. In terms of the strategic overlap between Seating and Safety, a large amount of Safety content we're responsible for integrating today into our products. And certainly, the trends between the two we see migrating together in the future. That said, we have to see how the market develops. Speaker 200:48:56And our main goal is to add value for our shareholders and for our customers. And that's what we're singularly focused on from that standpoint. And that's how we view any potential acquisition is through that lens. Does it add value for our shareholders and does it add value for our customers? And that's how we look at things. Speaker 700:49:17Got it. And just circling back on the tariffs, and I was a little surprised by the comment on Annex One. I mean, does that mean for your parts? I think the slide says that you pay 145% on China. If you're not in Annex I, you what kind of tariff are you then looking at for parts coming out of Mexico? Speaker 700:49:42And why would a supplier like you not fit in to the qualification? Speaker 200:49:50So it's this is really some of the detail that I think gets lost if you just read some of the high level summaries. And I'm not keep in Colin, I'm not implying that the homework isn't being done. I just think it's some of the reports by some of the consulting firms necessarily aren't at the level of detail they need to be. So with Annex One, it lists out all of the different HS codes that are subject to Annex One parts. And in there, there's things that are covered off that Adient just simply doesn't ship across the border, which means that you're not subject to the Annex One tariffs then. Speaker 200:50:33So complete seats as an example are Annex One. They're covered off in Annex One, but we don't actually ship complete seats across the border. As you know, our business model is we have our jets close to our customers. So we don't actually ship complete seats across the border, we build seats if we're shipping seats to, I'll take as an example, Toyota in Kentucky, we build our seats by Toyota in Kentucky. And we're not shipping seats out of Mexico to Toyota in Kentucky. Speaker 200:51:02And so as a result, we're not shipping parts that are on Annex 1. Some of the components that we may procure are in Annex 1, but they're largely directed from that standpoint. So we would get 100% recovery due to the directed nature of them. And what that means then is that recliners as an example, the parts in the seat structure are not on Annex 1 and those parts come from China. And if you're not on Annex 1, you're then subject to the stacking effect, which means you get hit with the IEPA tariff, which is the fentanyl tariff and you get hit with the reciprocal tariff, which is the 125% tariff or the 120%, however that stacks up. Speaker 200:51:41So then you're hit with immediately 145% tariff. And that's why China is our largest exposure, because as you know, we have our joint venture with Kuiper and a couple of legacy parts there. And so prior to all of these tariffs being laid in, we had about, call it, somewhere between a just roughly a $60,000,000 buyout of China. If you think about our Americas business, our Americas business procures about $5,000,000,000 worth of stuff. I mean $60,000,000 on a $5,000,000,000 buy, it's not significant. Speaker 200:52:19But when you put 145% tariff on it, it becomes an issue that the Americas team needs to deal with and they're dealing with it in a very effective manner, but it becomes a number that needs to be dealt with from that standpoint. And that's the nuance between Annex one, not Annex one and then the stacking effect of IEPA with the reciprocal tariff. You really need to go HS code by HS code. Speaker 700:52:48Got it. And then for your parts coming out of Mexico, is Aiipa and the Section two thirty two are pretty similar. Is it the same tariff anyway? Or is it actually higher because of some of the stacking? Speaker 200:53:03No. They've largely removed the stacking effect now. There was I think last week, they got rid of the stacking effects. Our parts coming out of Mexico now would just largely be two thirty two from that standpoint. But given our USMCA compliance, we're generally pretty clear of that now, which is why USMCA is so critical. Speaker 700:53:25Okay. So your Annex one is mostly China, that's your that is where you're seeing the impact? Speaker 200:53:32Non Annex one, yes. Speaker 700:53:34Non Annex one, okay. All right. Well, thank you very much. Operator00:53:42Thank you. The next question comes from Dan Levy with Barclays. Your line is open. Speaker 600:53:49Hi, good morning. Thanks for taking the questions. I just want to follow-up on that. And I think you made some references on the China tariffs you are incurring. How easily can you make rotations? Speaker 600:54:06Is it just these mechanisms from recliners, headrests? What's the sourcing opportunity elsewhere? And then do you have a sense of how your competitors stack up on this? Is this something that others are incurring as far as importing these different mechanisms from China? Speaker 200:54:29I mean, would say if you break down our spend from China, there's about for better or worse 40 part numbers that make up about 80% of that exposure. And of those 40 part numbers, call it 20 of them, we have tangible plans that we're working through at the moment. The other 20, we will drive customer recovery or we have customer recovery on. And the timeline to deal with those 20 that we're moving is a, call it a six nine month window, maybe it prolongates to a year. And in the interim, there'll be customer recovery agreements. Speaker 200:55:18And then some of those actually die out, Dan, in the September timeframe as some programs expire. So there's a bleed down window just naturally as some programs die off. In terms of other customers, I can't really comment on that. I don't know what their exposure is. Some of them may have comfort systems, some of them may have wire harnesses, some of them may have tubes. Speaker 200:55:44I just don't know. Speaker 600:55:50Okay. Thank you. Second question is on restructuring. And just wanted to ask if you could provide an update on the European restructuring. It sounds like you're getting some benefits. Speaker 600:56:05I think some time ago you had said you're still talking you're talking about net savings of $50,000,000 a year. Is that still intact? And I think you're referencing here the opportunity to accelerate some of the restructuring. Maybe you could give us a sense of how much deeper you can go, you're willing to go because clearly, it seems like there is more opportunity on the European front. Speaker 300:56:33Yes, Dan, I'll start and then, Joe, you could jump in if needed. Do we think there's opportunity to accelerate? We're looking at it from a very prudent manner, Dan. We want to make sure we recognize that there is a cost of those R dollars that we're spending over there, right? And so we have to spend it in a prudent manner. Speaker 300:56:54If there is an opportunity for us to pull something ahead, if we think that it's going to give us benefit, right within a couple of year payback, we're going to take a look at that and do that. At this time, there is nothing to announce. We've indicated, obviously, what the restructuring charge that we took last year was. We've indicated cash restructuring this year is going to be north of $100,000,000 Most of that is in Europe. It could be slightly higher now that we're looking at accelerating certain of that. Speaker 300:57:25So does it go up to like 125,000,000 this year? Possibly, but we'll continue to look at that as we go through the back half of this year. And again, I'd just remind you the comments I made earlier is even though we take a charge, right, roughly about one third of that would be accretive to our EBITDA going forward. The other half, two thirds is really just holding serve with the lost volume over there, right? So that's really the way that we're looking at Europe right now in terms of restructuring dollars. Speaker 200:57:56Yes. I think, Mark, that's a very good summary. I mean there's just I think you just have to constantly look at Europe from the lens of used to build 20,000,000 vehicles, actually was an exporter. Now if you look $14,800,000 15 million dollars next year is importing vehicles. There's going to be just some amount of restructuring we have to put into that business that's just there to hold serve. Speaker 200:58:25It's just the reality of that business from that standpoint. Speaker 600:58:30Great. Thank you. Operator00:58:35Thank you. The next question comes from Edison Yu with Deutsche Bank. Your line is open. Speaker 600:58:43Hey, good morning. Thanks for squeezing me in. Just wanted to check two things real quick. One, on the China local OE mix, I know you're targeting 60% exiting fiscal twenty twenty seven. Did you disclose what it is for the current quarter? Speaker 300:59:00Yes. We didn't break it out. It's important the current quarter. We can get back to you. But literally, we were like, call it, around 40%, sixty % at the end of last year. Speaker 300:59:11Overall, it doesn't move by several basis points from quarter to quarter. So I'd say that we're still in that, call it, forty-forty five split local versus foreign. Speaker 600:59:26Okay. Just, second quick clarification. On the I guess on the walk, there was I think you said there was 9,000,000 tariff in the quarter. Is that basically just one month? Or is that a full representative of full quarter impact? Speaker 600:59:45I know it's getting recovered later, but I just want to check if that's the full impact? Or is it actually going to increase for the full Well, was Speaker 300:59:53impact for Q2. As we indicated on the slides, our gross exposure now on a monthly basis is $12,000,000 Speaker 601:00:04Okay. Got you. Thank you. Speaker 301:00:07Thank you. Thank you. Speaker 101:00:12Denise, I think we're going to close the call at this point. Operator01:00:16All right. Thank you. Speaker 101:00:21Well, I want to thank everyone for joining us and appreciate your interest in Navient. Speaker 201:00:27Thank you. You. Thanks everyone. Operator01:00:30Thank you everyone for dialing in for the conference today. We appreciate your participation. Have a great rest of your day and you may disconnect.Read morePowered by