Aptiv Q1 2022 Earnings Call Transcript

Participants

Corporate Executives

• Christopher Paul Tillett, Director of Investor Relations
• Kevin P. Clark, Chairman and Chief Executive Officer
• Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer

Analysts

• Emmanuel Rosner, Deutsche Bank Aktiengesellschaft
• John Joseph Murphy, BofA Securities
• Christopher Patrick McNally, Evercore ISI
• Mark Trevor Delaney, The Goldman Sachs Group, Inc.
• Joseph Robert Spak, RBC Capital
• Brian Arthur Johnson, Barclays Bank
• Ryan J. Brinkman, JPMorgan Chase & Co.
• David Lee Kelley, Jefferies Financial Group Inc.
• Itay Michaeli, Smith Barney Citigroup
• Dan Meir Levy, Credit Suisse Group AG

Presentation

[Operator]

Good day, and welcome to Aptiv's First Quarter 2022 Earnings Conference Call. My name is Marion, and I'll be your conference operator today. [Operator Instructions] Chris Tillett, Aptiv's Director of Investor Relations, you may begin your conference.

[Christopher Paul Tillett, Director of Investor Relations at Aptiv]

Thank you, Marion. Good morning, and thank you for joining Aptiv's First Quarter 2022 Earnings Conference Call. The press release and related tables, along with the slide presentation, can be found at the Investor Relations portion of our website at aptiv.com. Today's review of our financials exclude amortization, restructuring and other special items, and will address the continuing operations of Aptiv.

The reconciliations between GAAP and non-GAAP measures for our Q1 financials as well as our full year 2022 outlook are included at the back of the slide presentation and the earnings press release. During today's call, we will be providing certain forward-looking information which reflects Aptiv's current view of future financial performance and may be materially different for reasons that we cite in our Form 10-K and other SEC filing, including uncertainties posed by the COVID-19 pandemic, the ongoing supply chain disruptions and the conflict between Ukraine and Russia. Joining us today will be Kevin Clark, Aptiv's Chairman and CEO; and Joe Massaro, CFO and Senior Vice President of Business Operations. Kevin will provide a strategic update on the business and Joe will cover the financial results in more detail before we open the call to Q&A.

And with that, I'd like to turn the call over to Kevin Clark.

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Thank you, Chris, and thanks, everyone, for joining us this morning. Beginning on Slide three. Aptiv had a solid start to the year, showcasing our ability to continue to outperform in a volatile market. Revenues totaled $4.2 billion, up 4% from the prior year, driven by strong demand across our portfolio of safe, green and connected technologies. Operating income and earnings per share totaled $324 million and $0.63, respectively, reflecting continued revenue growth despite a decline in vehicle production in the quarter, more than offset by material inflation and increased operating costs associated with the ongoing supply chain disruptions.

Highlights for the quarter include 11 points of growth over underlying vehicle production, with all regions reporting strong growth over market, driven by continued growth in our key product line, which I'll touch on in more detail on the next slide. New business bookings reached $6.1 billion, the result of growing demand for our portfolio of industry-leading advanced technologies. As the world continues to grapple with the ongoing COVID-19 pandemic and the related supply chain challenges, Aptiv's business has not been immune to the effects of the various disruptions. We continue to monitor the situation in Ukraine and lockdowns in China, which will impact the balance of the year. But at this point in time, we remain confident in our full year outlook. Our team is doing an exceptional job executing in a very fluid environment, working to mitigate the challenges we're facing. And our sustainable double-digit growth over market and pace of new business bookings during the quarter are a testament to our ability to continue to deliver for our customers.

Turning to slide four. Revenue growth across our key product lines continue to outpace the market. In our ASUX segment, Aptiv safety revenue growth remained strong, up 9% during the quarter, driven by the continued penetration of advanced ADAS systems. And user experience revenues increased 10%, the result of the launch of key infotainment programs in Europe and North America. In our Signal and Power Solutions segment, high-voltage revenues increased 10% during the quarter, driven by the accelerated launch of electric vehicle programs, particularly in Asia and Europe. And our nonautomotive revenues, which now represent roughly 15% of Aptiv's sales, increased 5%, the result of strong growth in the general industrial, semiconductor and datacom markets. Our portfolio of advanced technologies aligned to the safe, green and connected megatrends has uniquely positioned Aptiv to solve our customers' biggest challenges, which we've capitalized on to increase our market share with new customers and expand our share of wallet with existing customers. Moving to slide five.

Consumer demand remains very strong, requiring us to proactively manage through the ongoing supply chain disruptions while also offsetting the increased material inflation. As I mentioned already, our team is doing an excellent job confronting these issues head on and have taken several actions to offset the headwinds related to macro factors, including further reducing overhead costs, while selectively investing in initiatives related to high-voltage electrification, smart vehicle architecture and software development. Our recently announced agreement to acquire Wind River, which we expect to close midyear, has translated into several direct OEM engagements, including the commercial agreement with Hyundai that was announced earlier this week.

We're also working closely with our supplier partners and our customers and several product redesign initiatives to both mitigate part shortages and offset material price increases, over 50% of which have and roughly another 50% will be implemented during the balance of the year. And lastly, we're making progress on other cost recovery initiatives, including price reductions from our suppliers and commercial recoveries from our customers, which have a more meaningful impact during the back half of the year. We continue to confront the supply chain and inflation challenges and are focused on strengthening the underlying resiliency of our business model and reaping the full benefits once these headwinds subside.

As shown on slide six, first quarter bookings totaled $6.1 billion, the highest first quarter level over the last several years. Advanced safety and user experience bookings totaled $800 million for the quarter, in line with our expectations, representing the timing of customer program awards during the year. Notable customer awards during the quarter include a central vehicle controller for a European OEM. A funnel for new business bookings for the ASUX segment for the balance of the year remains very strong, with several ADAS user experience and smart vehicle architecture program scheduled to be awarded. And the second quarter is off to a strong start, with over $3 billion of ADAS awards and a central vehicle control award with lifetime revenues totaling $1.5 billion. Bookings for our Signal and Power Solutions segment reached $5.3 billion during the quarter, including $1.2 billion in high-voltage electrification award.

The strength of our competitive position and the size of our funnel for high-voltage electrification programs gives us confidence in reaching over $4 billion of customer awards during 2022. Our strong track record of new business bookings is proof that our portfolio of advanced technologies is perfectly aligned to the areas of significant growth in vehicle content. And our unique position as the only provider of both the brain and nervous system of the vehicle is presenting Aptiv with opportunities to capitalize on the acceleration towards the electrified software-defined vehicle.

Turning to the highlights from our Advanced Safety and User Experience segment on slide seven. Revenues for the first quarter increased 7%, 14 points over underlying vehicle production, driven by strong product line growth in both active safety and user experience. As I referenced on the last slide, during the first quarter, we received a new business award from a leading German OEM for a central vehicle controller on the next wave of its leading EV platform. This award is another strategic win for our portfolio of smart vehicle architecture solution and is a key building block for this OEM's new electric vehicle platform, which is fully aligned with Aptiv's design for smart vehicle architecture.

Moving to slide eight. First quarter revenues in our Signal and Power Solutions segment rose 2%, nine points better than the decline in global vehicle production, reflecting increased demand for high-voltage architecture solutions and continued strong revenue growth in nonautomotive markets. Our industry-leading portfolio of power and data distribution, connectors, electrical centers and cable management solution, combined with our global scale, uniquely positions Aptiv to both design and manufacture optimized vehicle architecture systems for customers located virtually anywhere in the world. And as a proof point, a leading global electric vehicle OEM awarded Aptiv an additional vehicle architecture program to support their further expansion into Europe. In addition, we continue to support the growth of a German OEM's electric vehicle platform. And the award of this charging device underscores our strong market position in electric vehicle charging.

The first quarter's new business bookings validates the value we bring with our system-level approach to optimizing vehicle architecture, which reduces vehicle weight and mass, thereby reducing costs for our OEM customer. We remain confident that our competitive position, combined with the accelerating demand for electrified vehicles, positions Aptiv for profitable growth in the Signal and Power Solutions segment for the next several years. Turning to slide nine. Despite the current challenges, we remain focused on increasing the underlying resiliency of our business model to deliver sustainable value creation.

Although the macro environment remains very challenging and difficult to navigate, we continue to focus on increasing the flexibility of our operating model by leveraging our advanced technologies for both the brain and nervous system of the vehicle, providing more content for the software-defined vehicles of the future, deploying capital to further strengthen our portfolio of safe, green and connected technologies, including expanding our portfolio of software solutions, to meet the increasing needs of our customers and intelligently diversifying our revenue base into less cyclical nonautomotive markets, which will better position Aptiv for value creation from the acceleration of the trend towards the fully electrified software-defined vehicle, increased market share gains, and continued operational efficiency and cost structure optimization. This translates into revenue growth, margin expansion and cash flow generation, which can be reinvested in the business to create an even more resilient business model.

With that, I'll turn the call over to Joe, to go through the financial highlights in more detail.

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

Thanks, Kevin, and good morning, everyone. Starting with a recap of the quarter on slide 10. The business generated strong top line performance while successfully navigating through several industry-wide operating challenges. Revenues of $4.2 billion were up 4%, 11% ahead of vehicle production, which was down 7% in the quarter. Adjusted EBITDA and operating income were $478 million and $324 million, respectively, reflecting strong flow-through on higher volumes and the benefit of savings and cost reduction actions, price downs that were effectively flat year-over-year and the negative impact of supply chain disruption costs, FX and commodities and material inflation.

Earnings per share in the quarter were $0.63. Lastly, we had operating cash flows -- outflows of $202 million, driven primarily by our decision to maintain a higher working capital investment to help, in part, mitigate the impact of supply chain disruptions. Capital expenditures were $247 million, driven by investments to support program launches across our key product lines. Looking at the first quarter revenues in more detail on slide 11. We saw growth over market in all regions despite production disruptions in Europe, in the Russia-Ukrainian war, as well as COVID-related shutdowns in China, which impacted the final weeks of the quarter. The FX commodity impact on the top line was minimal as the pass-through of the higher copper prices for our customers offset the impact of the lower euro.

As I previously noted, the negative impact of price downs was minimal, almost flat on a year-over-year basis. From a regional perspective, North America revenue was up 7% on an adjusted basis or 8% above vehicle production, driven by our active safety, high-voltage and nonautomotive product line. European growth was -- European growth above market was 13% despite a contraction in vehicle production of 18% in the quarter, led by strength in our active safety and high-voltage product lines as well as the launch of several user experience programs. And lastly, in China, revenues were up 14% over a flat market as both segments posted strong double-digit growth despite the impact of COVID disruptions in late March. Moving to the segment recap on Slide 12. The Advanced Safety and User Experience revenues increased 7% in the quarter, reflecting 14% growth over underlying vehicle production, including growth in both active safety and user experience.

As we have discussed, the increase in material input costs, primarily semiconductors, has negatively impacted segment profitability. Segment adjusted operating income was $16 million in the quarter, down $52 million compared to Q1 of last year. Volume growth contributed approximately $25 million of adjusted OI in the period, reflecting flow-through of 35%. And annual price downs were effectively flat to prior year. A reduction in supply chain disruption costs and the benefit of higher performance and cost actions partially offset the impact of the previously mentioned material inflation. We are actively pursuing multiple paths to mitigate and/or offset the material inflation cost impacting ASUX. In addition to commercial and pricing negotiations with our customers, we are also pursuing product engineering and redesign. A number of these activities involve a redesign of products to open up multiple supplier sourcing opportunities, primarily as it relates to semiconductors, including the sourcing of semiconductors from newer market entrants in all regions where we operate. Signal and Power Solution revenues were up 2%, reflecting nine points of growth over market, with meaningful outgrowth in all regions. We continue to see strength in high voltage as well as our engineered components product lines.

And the segment's reported growth comes despite a difficult year-over-year comparison given the H1 2021 distribution channel replenishment we discussed last year. Adjusted operating income in the segment was down $98 million as the flow-through on incremental volumes and the benefits of improved performance and cost-saving actions were offset by COVID and supply chain disruption costs, as well as the impact of FX, commodity and material inflation, primarily copper pass-through timing and resins. The full year outlook included on Slide 13 remains unchanged from our original guidance provided in February. As noted in February, the full year outlook excludes Wind River, as that transaction is expected to close midyear. We expect the Wind River transaction to be neutral to 2022 earnings per share.

We believe the material inflation and continued supply chain constraints were substantially addressed in our original guidance. And although we are seeing current year increases to material costs, the actions we are taking with our customers, supply base and cost structure are helping to offset the impact of these additional increases. As it relates to the more recent 2022 disruptions, we believe the second quarter will be significantly impacted by the COVID-related lockdowns in China. We are not providing a formal guide for the second quarter. However, we do believe it is possible that the second quarter is at or slightly below the first quarter revenue and earnings levels. As it relates to China, assuming the COVID-related lockdowns eased during the second quarter, we currently expect that market to recover lost vehicle production in the second half of the year. With respect to Europe, as we have previously discussed, we have mitigated our direct production exposure to Ukraine.

And barring a broadening of the conflict, we do not expect our other European production facilities to be impacted. Although we have seen softening in European vehicle production to date, we believe that lost production will either be rescheduled for later in the year in Europe and/or offset by stronger North American production. Accordingly, we continue to expect revenue in the range of $17.75 billion to $18.15 billion, up 15% at the midpoint compared to 2021. This assumes global vehicle production growth of approximately 6%, with some shifting between regions from our original forecast. EBITDA and operating income are expected to be approximately $2.6 billion and $1.9 billion at the midpoint.

We continue to estimate adjusted earnings per share to be $4.35 for 2022, an increase of 42% over the comparable 2021 total. And we expect 2022 operating cash flows to be just over $2 billion, with capex at approximately 5% of sales. Moving to Slide 14. Before I turn the call back to Kevin, we have received several questions recently regarding the long-term 2022 forecast we provided at our 2019 Investor Day. And we thought it would be helpful to lay out the changes relative to where we are today. As you may recall, our long-term forecast provided in 2019 estimated 2022 revenues of $17.5 billion, a 14.2% adjusted operating margin and assumed global vehicle production of approximately 98 million units.

When adjusting for current vehicle production of 83 million units, the forecast would now be $15.2 billion of revenue, with an operating margin of 12.6%. Growth over market contribution was significantly higher than our 2019 forecast, driven by the strength of our key product lines, offsetting about 70% of the impact from the decrease in vehicle production. The combination of price, performance, labor economics and investment are also favorable to the original long-term forecast. As a result, after adjusting for the change in global vehicle production, the combined impact of COVID and supply chain disruption costs and recent material inflation total the difference between our current outlook and the prior long-term forecast for 2022. While we are proud of our disciplined revenue growth and operating performance over the past several years, we understand the importance of long-term margin expansion. We are confident that the COVID and supply chain disruption costs, currently estimated approximately $250 million, will abate as conditions normalize.

And as we have discussed, we are laser focused on developing offsets and mitigating the impact of material inflation over the next couple of years. In addition, we believe Aptiv's underlying cost structure is well situated to drive incremental margins from the recovery in global vehicle production over the coming years.

With that, I'd like to hand the call back to Kevin for his closing remarks.

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Thanks, Joe. I'll wrap up on Slide 15 before we open up for questions. Our commercial momentum is stronger than ever as we're able to leverage our unique brain and nervous system portfolio of advanced technologies to accelerate our customers' path to the fully electrified software-defined vehicle of the future. We continue to closely monitor the current macros, including supply chain disruptions and material inflation, as well as the more recent war in Ukraine and lockdowns in China. Our team is doing an excellent job executing in this challenging environment, keeping our customers' product -- production lines connected, while at the same time, implementing initiatives to optimize our cost structure to help offset the macro headwinds, all while we continue to invest in the development of advanced technologies, which we're confident will further enhance our competitive position and increase the resiliency of our business model. Thanks again for your time, and let's open up the line for Q&A.

Questions and Answers

[Operator]

[Operator Instructions] We will take the first question from Emmanuel Rosner from Deutsche Bank. Please go ahead.

[Emmanuel Rosner, Analyst at Deutsche Bank Aktiengesellschaft]

First one is on the materials side. Could you provide a little bit of some numbers and a little bit of color around what was the material pressure in the quarter on a net basis? What are you now expecting for the full year? And how that compares with previous expectation?

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

On the -- you're on the -- with inflation aspect of it, Emmanuel?

[Emmanuel Rosner, Analyst at Deutsche Bank Aktiengesellschaft]

Yes, please.

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

Yes. A total in the quarter, call it, right around $80 million for the entire business on a year-over-year basis. So that's the increase. Just the way the price increases started to come in over the course of last year, we really didn't see price increases in Q1. Those tended to start at the end of Q2 and then build through the balance of the year, right? So the year-over-year is going to be higher in Q1 just given that we -- in the Q1 of last year, it was more of a constraint issue than it was constraint in inflation that we saw in the back half of the year. As you can see, we're obviously doing a lot on a net basis to offset those costs. We talked about the original guide, there being about $200 million, a little over $205 million of net inflation that has sort of fallen through to the bottom of the guide that we were working to offset.

Round numbers, that is still really what we're dealing with. As I mentioned in my prepared comments, we have had some price increases flow through during the current period. But we've also been able to do a lot on the pricing side. So at the moment, we're still really dealing with that net number, which was some of the longer-term product redesign, ship swap-out type initiatives that we needed to do. So again, I think as Kevin mentioned in his comments, the team across the board, the sourcing, engineering team, the business team is doing a really good job of holding the line at this point.

[Emmanuel Rosner, Analyst at Deutsche Bank Aktiengesellschaft]

Okay. Great. And then looking forward, I guess, the -- your final slide comparing with the previous framework, even in 2019, seems to be somewhat optimistic around the ability to recover or eliminate or offset some of this pressure in the midterm. Are there -- I guess, what would be the process for this? Are there any additional recoveries you can have? Is some of it contractual? Is it negotiation? Is it mostly on the cost side? I guess what will be required to sort of eventually claw back this margin pressure?

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

Yes. No. Listen, I don't think it's exactly what we've been saying really for the past two or three quarters now. There's -- nothing has changed. There's obviously commercial discussions with our customers around recoveries and price, which you've seen us execute on in Q1, continual pushback on the supply base, just around the reasonableness of the overall cost increases and the availability of parts. That is now, I would say, moving in, as I just mentioned, to a redesign effort, where if we can't get to reasonable economics with a supplier, we are looking at how to swap them out or at least introduce competition into that sourcing. And I think there's a number of even -- in semiconductors, a number of what I'll call newer market entrants across the world that are going to provide some opportunity for that. And we're actively pursuing that on all fronts. And then a part of it -- and again, we've had this muscle in the company for the last -- as you know, for the past five or six years, where we're maniacal on the cost structure. And we're, again, continuing to look at the cost structure and find ways to -- if we can't directly mitigate the cost increases, find other ways through manufacturing or SG&A performance to help offset them. So I don't think those levers have changed really over the past three or four quarters. Kevin did I...?

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

You covered it. I guess, Emmanuel, the only thing I'd add to Joe's point is there's a portion of -- when you look at that performance inflation, there's a portion of the supply chain disruption, the COVID costs that as things loosen up a bit would normally fall away. To Joe's point, the more challenging area's in and around material inflation, and that's an area where we have a high level of confidence based on our competitive position and our capabilities to be able to offset whether that's be through negotiations or through product redesign efforts.

[Operator]

We will now take the next question from John Murphy from Bank of America

[John Joseph Murphy, Analyst at BofA Securities]

Just to maybe follow-up on this. I mean the idea that the headwinds have grown so dramatically since you last gave guidance, able to hold it. I understand that there's a lot of actions in negotiations that are going on with your partners below you and above you. Would this kind of lead to much higher incrementals or margins as the world normalizes and stabilizes over time? Or is there some of this that is somewhat temporary in dealing with the volatility at the moment?

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

John, I think it's going to evolve. As I said in my prepared comments, it's over the next couple of years as it relates to material inflation, right? It's not going to go away tomorrow. Well, I do think, at least on the material inflation side, the COVID and supply chain disruption costs, as we've talked about, those should abate as things normalize. So that will be helpful to margin. I quantify that at about $250 million. We bumped that up a little bit from the original just given some of the disruption in Q2 in China, but still within a manageable number.

And it's nonstructural. It's these types of sort of transaction costs that occur when you have to close plants quickly and such. So as those costs abate, and I think -- and when you take a step, and this is why we get a lot of questions on that Slide 14 in the deck and why we wanted to put the numbers out there. I think when you take -- have an appreciation for the fact that our original 2022 estimate was at 98 million units of production, and we're now operating at 83 million round numbers.

As we start to work our way back there, structurally, the business, I think, is set up very well from a footprint perspective, from a workforce cost perspective, to drive incrementals as volumes go up. You never want to be in business that's completely relying obviously on volumes to expand margins, but it's going to be a positive tailwind over the next couple of years as we start to get back into the 90s on vehicle production.

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

John, I think if you look at the mix of business and the flow on the mix of business, it's more profitable today when you exclude the material inflation and supply disruption than what it was back in 2019. So to the extent you get normalization from an inflation standpoint and stabilization of the supply chain, you should see improved incrementals and lower decrementals, quite frankly, to the extent you have weakness.

[John Joseph Murphy, Analyst at BofA Securities]

Yes, yes. It just seems like you might be more of a coiled spring, I wouldn't put those words in your mouth, and I might say that, that then we might be appreciated on the margin recovery. As the world normalizes, that's some time off, right? We all know that. Just a second question. I mean, on the business bookings, I mean, you kind of highlight their record levels. There's a lot going on in the world. This is kind of a similar question where everybody is a little bit distracted, but you're winning business like crazy, and that's even before Wind River comes on. I'm just curious, is this a tiny issue? Or is there just a surge of new programs coming, which it seems like it's the case? You're driving those wins. And then also, as we think about Wind River coming on, how do you think about the competitive set or who you'd be going up against when you put Wind River products and software in front of your customers? Is it other suppliers? Or is it internal? And really what's the competitive set as you go to market there?

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Yes. So it sounds like there's two parts to your question. So as you look at where we are from a funnel standpoint, new business opportunity standpoint, we did attribute it to a couple of factors. One, when you think about our product portfolio and what we refer to as a brain and nervous system of the vehicle, the industry is aligned and virtually all OEMs out there are rethinking vehicle architecture or -- on a path towards a software-defined vehicle. So we're seeing an acceleration of that trend that given the nature of our product portfolio we're benefiting from.

In addition to that, you're seeing the acceleration of battery electric vehicles, which, again, given our vehicle architecture capabilities and some of the other product areas that we're working on, that we're seeing significant benefit from. So the commercial momentum and the traditional portions of our business is stronger than it's ever been. And then you overlay on top of -- it a kind of second and third generation of advanced ADAS solutions, in-cabin sensing solutions, user experience solutions, that are more dependent on software capabilities, which inherently we have based on our legacy business, and then you overlay the incremental capabilities that Wind River has and that they'll ultimately bring when they're a part of Aptiv, there really isn't anyone out there with the same sort of competitive position.

And as we've talked about from a software standpoint, all of our customers are challenged by the level of software that's going into the vehicle. All of them are looking for help. And again, we feel like given the -- our capabilities and the nature of our product portfolio, we're perfectly positioned to benefit from that trend.

[Operator]

We will now take the next question from Chris McNally from Evercore.

[Christopher Patrick McNally, Analyst at Evercore ISI]

I wanted to focus in on maybe the implied second half margin versus first half. And obviously, I know you have a range. But given you sort of reiterated the full year, just the quick calc, if I look at the midpoint of your guidance, it implies sort of second half margins over first half are over 300 basis points better. And then the top end, which I think a lot of people would be curious since you kept, would be almost 150 to 200 basis points better. So 500 basis points more, which would imply margins in the 13%. Can you just walk us through that -- since you said Q2 looks like Q1, what is so different about second half? We obviously get better volumes. But how much of it is known price recoveries and the lag which is hurting first half? Just any more qualitative on that because it's so stark, second half versus first half.

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

Yes, Chris. It's Joe. I'll start, and then Kevin can obviously add. Listen, I think, you're right. Order of magnitude, I'd -- we'd agree with you. It's not a change from where we saw the year, to be honest with you, in February. Obviously didn't know about the war in the Ukraine and China COVID, but it was tilted to that. Some of it is comps. If you recall, just the back half of last year, August, September, October, COVID in Malaysia, those were the low points from a volume perspective. They were the high points from a cost disruption perspective. We had our EDS plants closed. The plants were closed for days at a time, week after week after week. So we're picking up that benefit. We're not assuming that's recurring. And in addition to that, you've got building volume growth as we go through, building volumes as we start to go through some of the launches, particularly around things like user experience. And there's some high-voltage launches in the back half of the year. And our price recovery, just the way the negotiations have worked with customers over the past three or four months are tend to be somewhat back-end loaded and that they start to pick up with the volume in the back half of the year. So not a surprise to us. Was in -- and appreciate -- just given we didn't give quarterly guidance, it was harder for folks to see. But that tilt was there in the existing guide. Now we've got a little bit more pressure on it. If you assume a rough Q2 in China, which we are, but that market has demonstrated several times now its ability to rebound quickly. And from everything we're seeing at the moment on the ground over there, that's what we're assuming.

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Yes. Chris, Maybe I'll add, just taking a step back from Joe's comments, if I could just make one comment. So we managed through COVID in 2020 and supply chain challenges in 2021 and Q1 of 2022, and at the same time, continued to advance our -- or strengthen our product portfolio. And all of that activity benefited our customers because we kept them connected. And quite frankly, our growth over market benefited our supply base, right? And all of that, as it relates to Aptiv, has created a tremendous amount of commercial momentum, which is in our bookings and our growth over market. And to Joe's point, as you think about it, we have some structural initiatives underway where we're, quite frankly, reengineering out alternatives and bringing in lower-cost alternatives. We're also leveraging the significant volume we have with the existing supply base. We're selectively pursuing business just given the strength of the funnel that's in front of us. We can be very selective about the business we pursue. And we're really focused on those customers where we have a much more strategic relationship with. And it's not a tactical relationship where we're fighting day-to-day about a price. And all of that has translated into significant improvement as we roll out through the balance of the year. Now we run into particular periods where like Q1 to keep customers connected. Maybe broker buys were higher than what we would like. But as we look at the balance of the year and how we sit from a supply chain standpoint, we think even those sorts of disruptions are reasonably manageable.

[Christopher Patrick McNally, Analyst at Evercore ISI]

Perfect. Kevin and Joe, I appreciate the vote of confidence. Can we talk about a little bit by division? You referenced a lot of SABS. But obviously, we've been waiting for sort of the margin uptick in ASUE. And if I think about it on a 2-year basis, your margins in second half of 2020 were in the, call it, 8% plus range for ASUE. That would seem to be implied again, if I just do the midpoint of your second half, because it's such a -- we've now been in the single digit -- low single digits for ASUE for six quarters. I just wanted to confirm that both divisions would see that uptick.

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

Yes. Both do, Chris. ASUX is a little bit more challenged, obviously, just given that is where a lot of the semiconductor spend is, right? So round numbers, when I give an inflation number I mentioned that $80 million to Emmanuel. 2/3 of that plus is hitting ASUX. And what does hit in SPS, some of that is copper timing, right, because we're indexed on the metals buy there. So would expect ASUX to finish the year, call it, back to mid-single digits. So just like it's bearing the cost, a lot of that semiconductor pain at the moment, it's going to receive the benefits of the commercial recoveries and price. So we are targeting mid-single digit for the full year in ASUX. So obviously, that would put us closer to high single digits in the back half. SPS, that's a bit more of a straighter trajectory. It's low double-digits now or just about low double-digits now, and it moves to sort of mid-double digits for the full year.

[Christopher Patrick McNally, Analyst at Evercore ISI]

Perfect. And just this is really super straightforward one. High voltage, the plus 30%. The industry looks like it's growing 50% or 60%. Again, you have tough comps because of the great year last year. Just any color you can talk about sort of the potential to have upside in high voltage.

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

Yes. It's growing really strong. It is a tough comp, what I don't know, was 128% or something last year growth. So you got a tough year-over-year. There's a couple of things there. Obviously, there was some European production disruption, which hits high voltage. There was some China disruption in the back half, which obviously now has hit high voltage. So those are sort of the transactional things in the quarter. There's two other things I'd probably highlight there. One, as Kevin has talked about and just referenced, we tend to be very selective, right, on who we're doing high-voltage with. We want to make sure they're going to build the cars, want to see them -- OEs that are going to transform their portfolio where we're committing long term to those platforms. So as you see, particularly in other parts of the world, in China, as you see some of the smaller OEs, you see some of the other platforms kick in, we're selecting not to be on every car there, obviously. But we've got great content. We're on about 50% of the launches over the next 3 years. So there -- that is what I'd sort of frame as the sort of the bigger picture item. But you did have some transactional things in the quarter that just, given the importance of high voltage in Europe and China, that's going to impact that number down.

[Operator]

We will now take the next question from Mark Delaney from Goldman Sachs.

[Mark Trevor Delaney, Analyst at The Goldman Sachs Group]

Just was wanting to better understand how the recoveries that you're seeing this year are being structured. And is it more about surcharges that are may be temporary or more -- perhaps a more sustainable change in price? And I'm asking to try to better understand the ability that Aptiv has to hold on for recoveries. You're expecting this to be in 2H as you head into 2023 and then hopefully make progress towards the 12% plus longer-term EBIT margin target.

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Yes. Mark, I'm sorry. You were a little bit faint from a question standpoint. I think you were asking about structurally how we see a path back to more normalized margins?

[Mark Trevor Delaney, Analyst at The Goldman Sachs Group]

Yes. I apologize if I did a bit of a cold. Yes. The recoveries you're seeing in the second half of the year, are those more surcharges that are maybe temporary or are you structuring these more as sustainable changes in how the products are being priced. Yes. I'm trying to get at -- to what extent, can you hold on to this price...

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

No. No. To the point that Joe made earlier when he walked through the several, they're all permanent structural initiatives that translate into either reduced cost from a permanent standpoint. And that could be done through price negotiations with suppliers or engineering and lower-cost solutions, which requires work between our engineering and sourcing organization or its price discussions, commercial recovery discussions with our customers, all of which would be permanent and structural in nature.

[Mark Trevor Delaney, Analyst at The Goldman Sachs Group]

Okay. That's helpful. And then I was hoping to follow up on was this redesigning of chip suppliers. You mentioned it several times on the call today. Maybe you can remind us what needs to happen to go ahead with that in terms of testing of the system with a new chip. What kind of software rewrites might be necessary? How long does that take? But then just give us a sense of how far along you are in this effort in 2022? Because, again, you spoke to it multiple times now in the call so it seems like something you're having some good success with.

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Yes. It's a great question. It really varies by the nature of the product. There are some situations, although rare, where it's a fairly easy switch with a minimal amount of validation. Given the nature of where we play, when you think about user experience, when you think about high-voltage electrification, advanced ADAS solutions, the bulk of what we do require some element of reengineering and validation activities that take place at Aptiv as well as with a customer, those can range anywhere between six months to a year plus. These have been initiatives that have been underway for really since kind of early to mid- 2021. So we're well underway. We have -- it's close to 100 engineers today who are solely focused on that hardware redesign as well as to the extent software needs to be changed, as you said, software redesign initiatives. I think we had a little over 100 programs, underway, 50, as I mentioned in my prepared comments that have already been implemented, and then another 50 which will be completed and implemented through the balance of the year. So most of it requires investment from an engineering standpoint, and some element of time, but it's something that's been underway for a fairly lengthy period of time.

[Operator]

We will now take the next question from Joseph Spak from RBC Capital Markets.

[Joseph Robert Spak, Analyst at RBC Capital]

I just want to go back to -- holistically, like to talk about some of the parts here. Because it sounds like there's more pricing recoveries assumed in your outlook than prior. And your light vehicle production -- or your vehicle production now look at 6% weighted to Aptiv is sort of unchanged. So it would seem like the -- to sort of hold the guidance, somewhat like the core or base outgrowth has to be a different assumption. So maybe you could just help us out with that sort of puzzle. And like how much of the recoveries is really helping the top line in your guidance now versus prior?

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

Yes. Not really changed, Joe. I mean, I -- we did talk about at the time of the guide, we've -- the economics were always in the guide. They weren't on the price line. And I think we've talked about the reasons why we did that because we're not necessarily sure all -- how all of the recoveries are going to come from. And -- but no, the economics remain fairly consistent with what was in the original guide, which is, in part, how we're holding it. Like I said, there are some increases we're seeing coming through during the current year, but we've obviously got activities and we're able to absorb a little bit more of that. So from a net economic basis, really, no change. Listen, on the top line assumption, we haven't moved. We're at approximately 6%. Understand there's a lot of movement. I think the world has effectively come down closer to 6%, right? We were, I think, probably a little bit more realistic at the start of the year. And listen, as I mentioned, there're most likely going to be some puts and takes in across regions. Our view was that we probably could -- the industry probably could have done more in North America, to begin with, if it wasn't for some of the supply chain constraints. So to the extent you get some softening in Europe, parts availability, chip availability goes up because of softness in Europe, we think North America could do -- potentially do more, at least based on what we're hearing from our customers. And then I said, our assumption around China, which is our assumption based on the feedback we're getting from our teams on the ground and our customers there, is they're expecting to recover pretty quickly from a -- what is now a prolonged lockdown going into sort of mid-second quarter. It started mid-March, right? So it's been going on for a while. And that's a region and a part of the industry that has demonstrated several times now their ability to come back pretty quickly and pretty robustly. So that's what we're currently assuming. But really, no changes in sort of net economics. We -- like I said, on the original guide and my sort of my prepared comments, we tried to think through what was realistically coming down, coming down on us in 2022 from an inflation perspective and what we're going to have to go do from a recovery perspective.

[Joseph Robert Spak, Analyst at RBC Capital]

Okay. And then, Kevin, you talked about Wind River a little bit. And obviously, all these automakers are undergoing big decisions about architecture and software. They want to make sure all the boxes can talk to each other. That's a refrain we hear quite often. I mean are you really -- even though it's sort of not closed, are you really able to have those discussions with the automakers? It sounds like you are. And again, like what -- maybe just a little bit more color on the receptivity to using a solution like Wind River, because it's obviously a very important and complex decision for the automakers.

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Yes. No. It's a great question, Joe. So let's start with how we work with Wind River. So as we mentioned when we announced the transaction, our first step with Wind River was really reaching a commercial arrangement where we were partnering on the development of middleware and a software tool chain. And today, we operate under the terms of that commercial agreement. So we jointly go to customers, discussing what we're developing and the capabilities that Aptiv brings as well as the capabilities that Wind River brings. So those commercial engagements have been extensive, with a very high level of interest. I would say separate from that, given our capabilities in ADAS and user experience, in the traditional areas of software kind of feature development, software building blocks where we have a legacy or history, there are separate discussions going on there as well, whether it's an OEM that we're also talking to about middleware and what we're doing with Wind River or we're not. There's increasing demand, a view of increasing need for support as it relates to their software activities. So it's -- as we talked about, Joe, it's a meaningful opportunity. The bulk of the industry is really struggling with it. And we feel like we're very well positioned to assist in the transition to the software-defined vehicle.

[Operator]

We will now take the next question from Brian Johnson from Barclays.

[Brian Arthur Johnson, Analyst at Barclays Bank]

Yes. Just want to follow up on to that related themes that out this morning. So first is around price recovery, and second, just further drilling down into the Tier two issue we see and just general price discussion. If I'm running an OEM, it seems like I've been assaulted by -- or excuse me, requested by every Tier one on earth for recovery, Tier two pressures coming through to the extent it's a direct to buy. So just at what level of the OEM are you having these discussions? And kind of related to that, as we've discussed over the years, to what extent does your C-suite access, you're talking about an autonomy, electrification, software-defined vehicle, facilitate those cost recovery discussions?

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Yes. Well, first, Brian, just to be clear. I mean, our focus is on both reducing the costs of the input. So there's a lot of activity. So with the supply base, there's a lot of focus on how do we continue to reduce our own cost structure as well. And then there are discussions with the OEM about price increases, especially in those areas where we're seeing a tremendous amount of price inflation. Semiconductor is a great area. Those discussions tend to take place at, to your point, the most senior levels within the OEM. I'd say we've had actually a fair amount of success in those discussions, especially with those OEMs where we have a more strategic long-term focused relationship. And the nature of what we do, whether it's battery electric vehicles, whether it's advanced ADAS systems or solutions, those tend to be programs or initiatives that are much more long term in nature and require alignment between supplier and customer. And I'd say we're having more success in -- with those particular customers we're -- those relationships.

[Brian Arthur Johnson, Analyst at Barclays Bank]

And second, a follow-on to the questions around semiconductor substitution and software. Is there actually a margin opportunity over the midterm to the extent you swap out a semiconductor supplier with embedded firmware and replace that with Aptiv software that could be in a domain or a zone or even a central computer unit.

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Yes. Yes, absolutely. And those are some of the initiatives that we're working on now. We don't have any in play or in place at this point in time. But that is a part of our whole SCA strategy and our whole software strategy.

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

Brian, it's Joe. You might recall as well, and this is a couple of years out, but we did talk about over $100 million of synergies from Wind River, which is, in part, taking out some of the middleware, the RTOS that we currently pay for from other suppliers, and start to leverage our -- the Wind River products once we own them. Now that's a couple of years out, but that is thematically consistent with what you're talking about as well.

[Operator]

The next question comes from Ryan Brinkman from JPMorgan.

[Ryan J. Brinkman, Analyst at JPMorgan Chase & Co.]

Which is on power electronics. Of course, the disposition of sulphide technology has materially increased your overall growth and margin profile. Although I've been noting over the past year that the power electronics piece of that spun Powertrain business, which was, I think, transferred from the just prior to the spin, it's been winning a ton of awards, and first for inverters and now yesterday for battery management system. So obviously, electric architecture is very attractively, we're levered, high voltage. Now you're getting into even higher margin, other areas like software, Wind River, etc. But just wanted to sort of gauge your appetite or ability to participate in some of these power electronics areas, which are high growth and were previously spun or -- I don't know, maybe there're noncompetes or other obstacles which could cause you to focus on other areas.

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

No, Ryan, and it's a great question. And I mentioned in my commentary is where we're investing. So a number of customers -- given our history and given our capabilities in software and even in high-voltage electrification have come to us with interest in the power electronics and battery management system space. And that's an area where we've built out teams that are actually in the process of, working with OEM customers and developing those product solution. So it's an incremental opportunity for us today. And we'd hope by the end of this year have more commercial activity to be discussing on calls like this. So that's something that's been underway for, quite frankly, the last couple of years.

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

Yes. Ryan, it's Joe. We're not precluded in any way from that space. And if you call back in 2017 -- I'm sorry, 2019 when we spun the Powertrain business, it was -- 2017, it was the right thing to do. I mean we were focused on making sure that business had the ability to grow beyond its internal combustion footprint. And power electronics made sense there just given at the time how it was sold into the customers. But not -- we're not precluded in any way from participating in that part of the market.

[Operator]

The next question comes from David Kelley from Jefferies.

[David Lee Kelley, Analyst at Jefferies Financial Group]

I think you mentioned nonauto is now 16% of revenues. You clearly have Wind River closing soon. The macro has changed quite a bit since 2019, but you've been targeting kind of nonauto revenue mix at 25%, I believe, by 2025. So I guess could you update us on that goal and how you're thinking about the organic and acquisition opportunities to bridge the 16% to the 25%?

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

David, it's Joe. I think over the next couple of years that -- we've got really good growth in that nonautomotive business. We think that closes the gap to, call it, almost 20%. Now we've got the other product lines growing faster so it doesn't quite get to 20% organically. It's probably good news in that the other product lines have -- things like high-voltage have continued to grow really fast. But still have some work to do on the inorganic side. We've talked consistently M&A strategy. We'll continue to include businesses like Winchester Interconnect, which was nonautomotive and a product line category that we understand really well or businesses like HellermannTyton that have a really good balance of industrial and aerospace and automotive. So continue to focus both on the organic and inorganic. As we've always said, that was a high-level target. That was an ambition. We're not going to take a big student bottom right just to hit that number, but we think we're on a really good trajectory to get there.

[David Lee Kelley, Analyst at Jefferies Financial Group]

Okay. Got it. And then maybe kind of one quick clarification on the auto business as well. I think you noted revenue growth up 5% in S&PS from nonautos. And I think you also mentioned CV and industrial product growth of 1% elsewhere in the deck. So I guess bridging that gap, is that all datacom? Or is there some other factor we should be considering there?.

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

No, no, no. That's -- it's a little bit of a -- 5% is total Aptiv, right? So ASUX has some commercial vehicle business and some recent launches that are growing quite nicely. So it's total Aptiv. S&PS was down one -- to 1% this quarter, which is low, but impacted by -- primarily, the China shutdowns impacted that commercial vehicle space in the quarter. Yes. The one other -- I made -- thanks, just reminded me. The one other comment just as I mentioned this, we did have that channel replenishment in Q1 last year in the engineered components business, connectors and HellermannTyton. And that -- a part of that falls into that nonautomotive business. Obviously, we're replenishing the distribution channel. So you got a little bit of a year-over-year comp that impacts non-auto as well.

[Operator]

We will now take the next question from Itay Michaeli from Citi.

[Itay Michaeli,, Analyst at Smith Barney Citigroup]

Just two questions from me. One, going back to the second half margin or implied margin, is that a good way to think about the go-forward margin beyond 2022? Are there any potential kind of onetime recoveries or benefits we should be thinking about in the bridge beyond 2022? And then maybe for Kevin, on the 50 projects for product redesigns, maybe talk a little bit about like what is like the cost savings from that? How big are those projects and I mean the timing for some of the savings from those?

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

Yes. Itay, it's Joe. Let me start with the question. Not going to quite at this point in the year get into sort of exit margins or sort of run rates coming out of the end of the year. The way I would think about it more for 2023 would be -- and what we're looking at is, obviously, how do the COVID and supply chain costs come down over the course of next year? And then obviously, over the next couple of years, addressing the material inflation. I think things are still a little choppy to sort of take one quarter or one period of time and try to extrapolate for a year. But the margin improvement that we talked about, first half to second half, we would expect to sustain that go forward. But I think it's a little choppy at the moment to sort of try to go out and take a stab at 2023 margin.

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Yes. And Itay, to your question about those initiatives, it varies, right? Some are longer term, as I mentioned and more complex. Some are shorter term and less complex. When you think about savings, you think about the offset to the material inflation that we're seeing -- that we saw late last year and this year, plus the benefit of incremental volume in the out years. So it's it's meaningful savings as the volume rolls out and the products replaced.

[Operator]

We'll now take the next question from Dan Levy from Credit Suisse.

[Dan Meir Levy, Analyst at Credit Suisse Group]

I want to ask a couple of questions on the disruptions you're seeing in Europe and China. So maybe we could just start with Europe. Maybe you could just be a bit more granular on the impact to S&PS in Europe. A, do you have any remaining operations in Europe? And I know you mentioned customers are paying for the move production. And maybe you can give us a sense of how much volume you've lost or whether there's other leakages. And is there any potential to take additional business from perhaps other competitors that are over-indexed to Ukraine.

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Yes. We have -- well, maybe let's break it down. So we have a facility in Russia. Russia, it's not operating at this point in time. At least if you believe customer schedules there production, they are picking up some time late this quarter. That's something that we'll watch closely. When you think of Ukraine, we've talked about this -- or you look at Ukraine, I think we talked about this in the past, we have four manufacturing facilities. In two of those facilities, production has been fully moved, again, paid for by the customer, up and running, whether it be in North Africa, Poland or Serbia, an existing footprint, so supporting Western European OEMs. We have two facilities in the very western part of the Ukraine that are operating at this point in time at very low production levels. But there's some production going on, supporting a one Western European OEM. A few OEMs have come to us, asking us to pick up volume or pick up programs from other suppliers who weren't able to move as quickly as we were able to move. Those weren't -- just given where we were, just given economics, those weren't situations we pursued. And my guess, as things continue to evolve, we'll have ongoing discussions with those OEMs, whether or not it makes sense for us to take over that business. But it has presented some potential incremental revenue opportunities.

[Dan Meir Levy, Analyst at Credit Suisse Group]

Okay. So now it sounds like the actual impacts from what's going on in Ukraine has actually been more limited? Is that a fair assumption?

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Yes. I mean, there's been a revenue and impact in the grand scheme of things. I wouldn't call it out separately. If we're in a situation where you have long-term China lockdowns and challenges in Ukraine, and Russia could be a bigger number. But at this point in time, I wouldn't get into specifics. We've managed through it. We started moving production before the conflict from where actually started. So we got ahead of it. As I said, we had a couple OEMs who were very focused on it, and we partnered with them. We had existing space. We're able to move production pretty easily. And they supported us from a cost and logistics standpoint in actually doing that.

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

And even the locations where we're in the western far, sort of along the Polish-Romanian border, we are -- that production will be moved. There is the ability to manufacture those products in other locations. Those customers were just a little bit slower to respond. And to Kevin's point, and one of the reasons we're not talking about this some other cost bucket, we just went with a -- if you want to move, this is what it's going to cost. And customers have effectively agreed to that and are paying it.

[Dan Meir Levy, Analyst at Credit Suisse Group]

Great. And maybe you could also give us a sense on -- more specifically, what is happening in China right now? To what extent has your production been and how right halted where it stands today? And I think what we've seen in the past, when your production hour halted, the decrementals start to get pretty ugly. So why isn't this more of a pressure to the business if you're having sort of outright production shutdown?

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Well, I think Joe said, it is a pressure near term depending on the length of the lockdowns. I'd say, at this point in time, all of our facilities are up and operating. Our engineered components facilities at a higher capacity utilization levels. We have several facilities that never shut down. We have a few in the Shanghai area from a wire harness standpoint that actually did -- those wire harness facilities are now on average operating at a 50% to 60% capacity utilization level. So there is an element of production that's actually taking place. The question is, does it -- how long does the situation stay as it is and we don't see ramp-up in production? Or does the situation deteriorate? And we're just watching that very closely.

[Joseph R. Massaro, Senior VP of Business Operations and Chief Financial Officer at Aptiv]

Yes. Dan, it's a kind of what we talked about last year, just different timing, right? China is -- as I said in my prepared comments, we do expect Q2 to be heavily impacted. That is a market, our business team, an industry, our customers that have recovered quickly in the past. There's time left in the year where -- we're talking about March, April, May, not a November, December type disruption. And it was a little bit of the same dialogue we had last year, if -- depending on when the disruption occurs, demand is still strong. Customers want to buy the cars, build the cars, inventory levels and the dealers are still low. So there is a desire by our customers to recover quickly. And just given where we are from a point in time in the year and from what we're seeing from customer desires and our capabilities, we think those -- we have the ability to -- if it is Q2 and sort of stays contained within Q2, we do have the ability to recover the balance of the year.

[Operator]

That will conclude today's question-and-answer session. I would now like to hand back to Kevin Clark for any closing remarks.

[Kevin P. Clark, Chairman and Chief Executive Officer at Aptiv]

Great. Thank you, everyone, for your time. We appreciate it. Have a nice rest of the day.

[Operator]

[Operator Closing Remarks]