Core Insights - APEC CEOs are focusing on transforming uncertainty into opportunity by building "proactive resilience" to gain momentum amid turbulent conditions [1] - Nearly half of the surveyed APEC CEOs view geopolitical instability as the biggest threat to growth over the next three years, with only 45% holding a positive outlook on the global economy [1] Group 1: Growth Strategies - Growth remains the core priority for APEC CEOs, but the pathways to achieve it are being reshaped [1] - 52% of APEC CEOs plan to expand or diversify their supply chains in the coming year, with many establishing regional hubs and seeking alternative suppliers [1] - Only 17% of respondents intend to maintain their current supply chains unchanged [1] Group 2: Technology and AI - 53% of APEC business leaders prioritize AI and automation technologies this year, indicating a significant shift towards technological resilience [2] - The demand for data center computing power is expected to drive hardware infrastructure upgrades, with the proportion of leaders prioritizing this rising from 19% to 30% over three years [2] - A key challenge identified is how to effectively harness AI while understanding the associated costs [2] Group 3: Sustainability - The importance of sustainability is increasing, moving from the eighth to the third position in factors influencing corporate strategy over the next three years [2] - 59% of surveyed CEOs plan to increase investments in sustainability this year, up from 29% last year [2] - Companies have differing strategies for sustainability investments, with some focusing on energy transition and infrastructure, while others emphasize customer-facing innovations [2] Group 4: Regional Insights - China leads in sustainable development, particularly in clean technology supply chains such as solar, wind, and batteries [3] - 76% of Latin American business leaders consider sustainability crucial to their capital strategies, recognizing its role in attracting funding and meeting customer expectations [3] - In Southeast Asia and Northeast Asia, 69% and 68% of respondents, respectively, share the same view on the importance of sustainability [3] Group 5: Survey Overview - The Deloitte APEC CEO Survey reflects the views of 1,252 business leaders across 18 economies and multiple major industries [3] - The survey focuses on key issues of concern for CEOs and senior executives, with 43% of respondents being leaders from multinational and regional companies [3]

Group 1 - The core issue highlighted is the increasing material shortages faced by German electronics and optics manufacturers due to tightening global regulations on rare earth elements, with 10.4% of companies reporting supply bottlenecks in October, up from 7.0% in July and 3.8% in April [1] - The Ifo Institute indicates that only 5.5% of companies in the entire manufacturing sector reported supply issues, suggesting that the problem is more acute in the electronics and optics sectors [1] - The German automotive industry is experiencing significant supply chain disruptions, with Volkswagen warning of potential production halts due to ongoing supply chain issues, although current chip shortages have not yet impacted production [1] Group 2 - The semiconductor and raw material issues are occurring in a year marked by plummeting industry profits and frequent layoffs, highlighting the broader challenges faced by European suppliers reliant on internal combustion engine technologies [2] - The disparity in supply chains for electric vehicle components, such as magnets, chips, and batteries, poses a significant threat to Germany's automotive industry and its overall prosperity [2] - Despite efforts to diversify procurement in the semiconductor sector following the 2021 chip shortage, risks remain, as the complexity of modern vehicles now requires thousands of different semiconductors [2]

Financial Data and Key Metrics Changes - Consolidated net sales for Q3 2025 were $544 million, representing a 7.9% year-over-year increase, primarily driven by tariff-related pricing actions [4][15] - Adjusted operating margin for Q3 2025 was 20.5%, a 340 basis point increase compared to the same period last year [6][16] - Adjusted diluted EPS grew 34% year-over-year to $2.62, supported by growth, margin expansion, and timing dynamics related to tariffs [6][16] - Operating cash flow was $12 million, and free cash flow was $2 million, showing slight improvement over Q2 but still impacted by higher tariff costs [7][17] Business Line Data and Key Metrics Changes - Light-duty business net sales increased 9% year-over-year in Q3, driven by tariff-related pricing actions and solid POS growth [7][8] - Heavy-duty business net sales grew 6% year-over-year, although margins remained flat due to lower manufacturing productivity [10] - Specialty vehicle segment experienced flat top-line growth year-over-year, with operating margin impacted by lower manufacturing productivity [12][13] Market Data and Key Metrics Changes - Vehicle miles traveled increased year-over-year, contributing to positive macro trends in the light-duty market [8] - Mixed signals were observed in the heavy-duty market, with some signs of improvement but continued pressure on margins [10][11] - Consumer sentiment remained weak in the specialty vehicle segment due to tariffs and high-interest rates, although ridership for UTV and ATV remained strong [12][14] Company Strategy and Development Direction - The company aims to reduce overall supply from China to 30%-40% by the end of 2025, enhancing supplier diversification [15][18] - Focus on innovation and new product development across all segments, with recent launches such as an electronic power steering rack for Ram trucks [9][10] - The company is exploring M&A opportunities, particularly in light-duty and specialty vehicle segments, to enhance technology and geographic expansion [68][70] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to drive long-term growth despite tariff-related uncertainties and inflationary pressures [8][25] - The company expects a reduction in gross margin in Q4 due to the impact of tariffs on cost of goods sold [20] - Guidance for 2025 includes net sales growth of 7%-9% and adjusted diluted EPS in the range of $8.60-$8.90, reflecting a 21%-25% increase compared to the previous year [19][20] Other Important Information - The company maintained a pause on share repurchases due to tariff and trade uncertainties but remains well-positioned to fund strategic growth initiatives [17][18] - The liquidity position at the end of the quarter was $654 million, up from $642 million at the end of 2024, indicating strong financial health [18] Q&A Session Summary Question: Elasticity issues on the DIY side - Management noted solid growth in light-duty and POS, emphasizing the non-discretionary nature of their parts which typically perform well during inflationary periods [25][26] Question: Margin outlook with price increases - Management expects some margin compression in Q4 due to tariffs impacting COGS but remains optimistic about long-term margin potential [29] Question: Light-duty sales growth trajectory - Management indicated that light-duty sales growth of 9% is consistent with previous quarters, driven by new products and favorable macro conditions [34][36] Question: Supply chain diversification - Management confirmed a current supply chain mix of approximately 30%-40% from China, with a robust and diversified supply chain in place [60][61] Question: Share position across segments - Management believes they are gaining market share in light-duty and specialty vehicle segments, despite flat sales growth in specialty vehicles [66] Question: M&A appetite and pipeline - Management expressed a strong pipeline for potential acquisitions, particularly in light-duty and specialty vehicle segments, although activity has slowed due to tariff uncertainties [69][70]

Financial Data and Key Metrics Changes - Consolidated net sales for Q3 2025 were $544 million, representing a 7.9% year-over-year increase, primarily driven by tariff-related pricing actions [4][15] - Adjusted operating margin for Q3 2025 was 20.5%, a 340 basis point increase compared to the same period last year [6][16] - Adjusted diluted EPS grew 34% year-over-year to $2.62, supported by growth, margin expansion, and timing dynamics related to tariffs [6][16] - Operating cash flow was $12 million, and free cash flow was $2 million, showing slight improvement over Q2 but still impacted by higher tariff costs [7][17] Business Segment Data and Key Metrics Changes - Light-duty business net sales increased 9% year-over-year in Q3, driven by tariff-related pricing actions, with POS growth up mid-single digits [7][8] - Heavy-duty business net sales grew 6% year-over-year, although margins remained flat due to lower manufacturing productivity [10] - Specialty vehicle segment experienced flat top-line growth year-over-year, with operating margin impacted by lower manufacturing productivity [12][13] Market Data and Key Metrics Changes - Positive macro trends in the light-duty market, with vehicle miles traveled increasing year-over-year [8] - Specialty vehicle market continues to show strong UTV and ATV ridership, despite weak consumer sentiment due to tariffs and high interest rates [13][14] Company Strategy and Development Direction - The company aims to reduce overall supply from China to 30% to 40% by the end of 2025, enhancing supplier diversification [15][16] - Focus on innovation and new product development across all segments, with recent launches such as an electronic power steering rack for Ram trucks [9][10] - The company is positioning itself for future growth in the heavy-duty segment, despite current market pressures [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to drive long-term growth, citing the non-discretionary nature of repair parts [8][25] - Anticipated lower gross margin in Q4 due to the impact of tariffs on cost of goods sold [20] - The company reaffirmed its net sales growth guidance for 2025 in the range of 7% to 9% and adjusted diluted EPS guidance of $8.60 to $8.90, reflecting a 21% to 25% increase compared to last year [19][20] Other Important Information - The company maintained a pause on share repurchases due to tariff and trade uncertainties but remains well-positioned to fund strategic growth initiatives [17][18] - Total liquidity at the end of September was $654 million, up from $642 million at the end of 2024 [18] Q&A Session Summary Question: Elasticity issues on the DIY side - Management noted that their portfolio is largely non-discretionary, which tends to be inelastic and performs well during inflationary periods [25][26] Question: Margin outlook with price increases - Management expects some margin compression in Q4 due to tariffs impacting COGS but remains optimistic about long-term margin potential [29] Question: Light-duty sales growth trajectory - Management indicated that light-duty sales growth of 9% is solid and consistent with previous quarters, driven by new products and favorable macro conditions [34][36] Question: Supply chain diversification - Management confirmed that they are currently about 30% to 40% reliant on China, with a robust supply chain that can adapt to changes [60][61] Question: Share position across segments - Management believes they are gaining share in light-duty and specialty vehicle segments, despite flat sales growth in specialty vehicles [66] Question: M&A appetite and pipeline - Management expressed a strong interest in M&A opportunities across segments, particularly in light-duty and specialty vehicles, although the current tariff situation has slowed potential seller activity [68][70]

Core Points - The article discusses the trade agreements signed by the United States with Malaysia, Thailand, Cambodia, and Vietnam during President Trump's visit to the ASEAN Summit, focusing on tariffs, supply chain diversification, labor protection, and environmental cooperation [1][2] - The agreements are perceived as more flexible and less legally binding, leading to potential uncertainties in their implementation [3] Trade Agreements - The U.S. has committed to maintaining a 19% tariff rate on exports to Malaysia, Thailand, and Cambodia, and a 20% tariff rate on exports to Vietnam, consistent with previous "reciprocal tariff" rates [1] - Malaysia has received tariff exemptions on 1,711 items, amounting to approximately $5.2 billion, which represents 12% of its total exports to the U.S. [1] Economic Cooperation - Malaysia is expected to invest $70 billion in the U.S. over the next decade, while Vietnam and Thailand have agreed to reduce nearly all import tariffs on U.S. goods [2] - The agreements include cooperation in critical minerals, with Malaysia committing not to ban exports of these minerals to the U.S. [2] Regional Dynamics - Southeast Asian leaders express caution regarding the agreements, emphasizing that the terms are better than previous commitments but do not compromise national sovereignty [2] - The agreements are largely viewed as part of the U.S. strategy to compete with China in the region, as China remains ASEAN's largest trading partner with a projected trade volume of $982.3 billion in 2024 [3]

Core Points - The agreements signed by President Trump during the ASEAN summit aim to deepen economic ties and diversify supply chains while addressing trade imbalances [1] Group 1: Key Mineral Cooperation - The agreements with Malaysia and Thailand focus on the construction of diversified supply chains, particularly in critical minerals [3] - Malaysia has committed not to impose export bans or quota restrictions on critical minerals and rare earth elements to the U.S., despite previously banning rare earth exports to develop downstream industries [4] Group 2: Tariffs and Market Access - The trade agreements include tariff adjustments, with the U.S. maintaining a 19% base tariff rate on exports to Malaysia, Cambodia, and Thailand, while some products will see tariffs reduced to zero [5] - Vietnam has agreed to a framework that imposes a 20% tariff on U.S. products, while committing to significantly increase purchases of U.S. goods to reduce the trade surplus, which is projected to reach $123 billion in 2024 [5] - All four countries have pledged to eliminate trade barriers and provide preferential market access for U.S. goods, with Thailand agreeing to remove tariffs on approximately 99% of goods [5] Group 3: Practical Cooperation and Trade Orders - The agreements resulted in substantial trade commitments, with Thailand promising to purchase 80 aircraft from the U.S. annually, valued at $18.8 billion, along with $5.4 billion in energy products and $2.6 billion in agricultural products each year [6] - The agreements also encompass cooperation in digital trade, service investment, labor rights protection, and environmental protection [7] - Malaysia's role as a global leader in halal certification will facilitate the entry of U.S. products into its market, creating opportunities for specialized trade [7]

Group 1 - The core issue of the current China-US competition is not only at the negotiation table but also in the agricultural sector, particularly with soybeans, as Brazil raises its soybean prices significantly, making it more expensive than US soybeans, leading to a pause in Chinese purchases [2] - The American Soybean Association (ASA) expresses strong concerns regarding China's halt in purchasing US soybeans, noting that this is the first time since 1999 that China has made nearly zero purchases of new season US soybeans, indicating China's strong negotiating position [3] - The ASA highlights that the reduction of Chinese orders by 1.8 million tons has created uncertainty in the US soybean export market, as it is unclear where these soybeans will be sold if China does not buy [3][4] Group 2 - The possibility of renewed cooperation between the US and China regarding soybean purchases depends on the outcomes of the upcoming APEC meeting, as the quality of US soybeans remains a consideration for China [6] - Argentina is identified as a strategic alternative for soybean sourcing, providing a way for China to diversify its supply risks, although logistical costs may affect the overall pricing [6] - The importance of food security is emphasized as a strategic issue, with the need for a diversified supply chain involving the US, Brazil, and Argentina to ensure stability in domestic supply and mitigate external pressures [7] Group 3 - Food security is closely linked to diplomatic negotiations, with strategic resources like soybeans being used as leverage in international relations, allowing China to maintain a strong position in negotiations [9] - The procurement strategies of China reflect a broader understanding that food security is not just about availability but also involves economic, political, and strategic dimensions [9]

Core Viewpoint - China's recent regulation on rare earth exports has triggered significant concern in Europe, highlighting the continent's dependency on Chinese rare earth elements for various critical technologies and industries [1][3]. Group 1: European Concerns - Rare earth elements are essential for the production of electric vehicles, wind turbines, and advanced military technology, making them vital for Europe's future [3]. - China processes over 80% of the world's rare earths, meaning that even if raw materials are sourced from other countries, they must be refined in China [3]. - The new export regulation requires any product containing Chinese rare earth elements to obtain a permit, raising fears in Europe about potential production halts [1][3]. Group 2: EU's Response - French President Macron labeled China's actions as "economic coercion" and proposed activating the EU's "Anti-Coercion Instrument," which could impose tariffs on Chinese goods and restrict Chinese companies from participating in EU government contracts [5]. - Despite the threats, the Anti-Coercion Instrument has never been used since its introduction in 2023, indicating the potential for mutual harm in such actions [5][7]. Group 3: China's Position - China's Ministry of Commerce stated that the new regulations are part of a lawful export control system aimed at enhancing global supply chain security, not an attempt to target any specific country [9]. - China emphasized that it would expedite approval for export applications from European companies to minimize disruption to normal business operations [9]. Group 4: Future Considerations for Europe - The underlying issue for Europe is its heavy reliance on China for rare earth processing, despite claims of seeking supply chain diversification [9]. - Europe lacks its own rare earth processing facilities and recycling systems, which has led to vulnerability when faced with China's regulatory changes [9]. - Instead of focusing on sanctions against China, Europe should consider developing its own mining and processing capabilities, as well as improving recycling efforts for rare earth materials [9][11].

Core Viewpoint - The article discusses China's strategic response to the significant increase in U.S. tariffs, highlighting a shift in trade focus and the resilience of China's foreign trade despite challenges posed by the tariffs [1][3][25]. Trade Performance - In the first three quarters of 2025, China's total goods trade reached 33.6 trillion yuan, showing positive growth that exceeded expectations [3]. - The share of exports to the U.S. has decreased from a peak of 10.4% in 2018, indicating a significant reduction in reliance on the U.S. market [3][11]. Market Diversification - ASEAN and the EU have become crucial markets for China, with exports to these regions increasing and accounting for over 20% of total exports, effectively offsetting the decline in U.S. exports [7]. - Trade facilitation under the RCEP framework has contributed to this diversification, allowing for zero-tariff trade on many products within the region [7]. Emerging Markets - China's exports to emerging markets, particularly in Africa, have seen substantial growth, with countries like Tanzania and Kenya rapidly increasing imports of Chinese machinery and electrical products [9]. - By July 2025, China was among the top three import sources for 166 countries and regions, reflecting its growing significance in global trade [11]. Product Transition - There has been a strategic shift in the types of products exported, moving from labor-intensive goods to high-value products such as machinery, integrated circuits, and electric vehicles [14][16]. - The share of high-end manufacturing products in exports has increased, with significant growth in sectors like automotive and lithium batteries [16][18]. Supply Chain Strategy - China has diversified its supply chains, particularly in strategic resources like food and energy, reducing dependence on single sources such as U.S. soybeans [21][25]. - The shift in soybean imports from the U.S. to South American countries like Argentina and Brazil illustrates a broader strategy to enhance supply chain security [23]. Long-term Strategy - The adjustments in trade strategy are not reactive but rather the result of long-term planning, focusing on quality improvement and technological advancement in exports [19][30]. - The article emphasizes that China's approach to trade is evolving from price competition to leveraging technology and brand strength, enhancing its competitive edge in the global market [19][27]. Global Trade Dynamics - The article concludes that China's actions reflect a broader trend towards a decentralized and regionalized global trade structure, promoting open cooperation as a path to mutual benefit [29][32].

Core Viewpoint - The new Chinese regulations on rare earth exports have prompted strong reactions from the U.S. and the EU, with the U.S. threatening to impose 100% tariffs while the EU seeks a coordinated response among G7 nations to address the potential global supply issues caused by these regulations [1][2]. Group 1: New Regulations and Their Implications - China's new regulations require approval for the export of products containing more than 0.1% rare earth elements and mandate export licenses for foreign companies producing rare earth magnets or related technologies in China [2][4]. - The EU views these regulations as unreasonable and believes they have already impacted European businesses, prompting a push to reduce dependency on China and accelerate the development of rare earth production projects within G7 countries [2][4]. Group 2: Global Supply Chain Concerns - The EU officials assert that China's actions constitute economic coercion, severely damaging global supply chains, particularly affecting the production of electric vehicles, defense technologies, and consumer electronics [4][6]. - China controls over 90% of global rare earth metal and magnet production, leading to a situation where Western countries feel "choked" due to their reliance on Chinese supplies [4][6]. Group 3: Historical Context and Challenges - Historical attempts by the U.S. and Europe to develop their own rare earth resources have faced challenges due to high energy consumption, low added value, and lack of profitability, leading to a retreat from investment in this sector [6][7]. - The global rare earth consumption is only 230,000 tons annually, and the industry requires substantial government subsidies to remain viable, complicating long-term support for these projects in Western countries [6][7]. Group 4: G7 Coordination and Future Actions - G7 nations are discussing potential measures such as setting price floors or imposing taxes on Chinese exports to encourage more investment in rare earth projects [6][9]. - The urgency for a unified G7 response is emphasized, with plans for a video conference to align strategies against China's new regulations [9].