Summary of Dana Incorporated FY Conference Call Company Overview - **Company**: Dana Incorporated (NYSE:DAN) - **Industry**: Manufacturing of driveline systems, power conveyance, sealing, and thermal systems - **Market Capitalization**: Approximately $2.8 billion with around 130 million shares trading at about $21 [1][1] - **Recent Performance**: Stock price increased by 80% over the past year [1][1] Key Business Segments - **Sales**: Just over $10 billion [5][5] - **Segments**: - Light vehicle driveline (largest segment, focused on North America) - Commercial vehicle segment (products for class 6 and above trucks) - Off-highway axle business (recently sold to Allison Transmission) [5][6] Strategic Decisions - **Sale of Off-Highway Business**: - Decision driven by the need to fund electrification opportunities, estimated at $4 billion-$5 billion [8][8] - Sale was strategic despite being the highest margin business [7][9] - Anticipated closure of the sale in the current quarter [9][9] Financial Performance and Projections - **Debt Position**: Post-transaction, Dana will be nearly net debt neutral with about $100 million in net debt [1][1] - **Margin Goals**: Targeting 10-10.5% margins by 2026, with current margins around 10% for the on-highway business [12][12] - **Cost Reduction Initiatives**: - Initial target of $300 million in cost cuts, now increased to $310 million, with $235 million expected in the current fiscal year [14][14] Market Conditions - **Commercial Vehicle Market**: - Forecasted decline from 225,000 units to around 200,000 units in North America for the next year [16][16] - No signs of recovery or prebuy activity anticipated for 2026 [15][15] Electrification and EV Strategy - **Current EV Business**: Approximately $700 million [18][18] - **Market Stagnation**: North American SUV electrification has stalled, with significant reductions in program volumes [18][19] - **Strategic Shift**: Focus on existing customers with internal combustion engine (ICE) exposure to mitigate risks associated with EV investments [19][19] Growth Opportunities - **Aftermarket Business**: $800 million business with potential for margin improvement [22][22] - **Manufacturing Operations**: Plans for rationalizing plants and increasing automation, with an estimated $70-$80 million opportunity in automation alone [35][35] - **Defense Business**: Potential growth in military applications, leveraging existing technology [39][39] Future Outlook - **M&A Considerations**: With minimal net debt, Dana is open to exploring M&A opportunities but focuses on rebuilding investor credibility first [29][29] - **Long-term Growth**: Emphasis on underappreciated growth opportunities beyond 2026, including niche products and aftermarket expansions [31][31][32][32] Conclusion - Dana Incorporated is undergoing significant transformation with strategic divestitures and a focus on cost reduction and margin improvement. The company is navigating a challenging commercial vehicle market while positioning itself for future growth in electrification and aftermarket services.

Strategic Rationale - Sona Comstar aims to increase focus on eastern world markets through a JV with JNT to enter the Chinese market[9, 11] - The JV aims to become a key supplier of driveline systems in China by combining the strengths of both companies and leveraging confirmed customer orders[9, 22] - Sona Comstar will hold a controlling 60% stake in the JV, while JNT will take over operational responsibilities[9, 26] Market Opportunity - The China EV market is the largest and fastest-growing EV market globally, with 113 million units sold in 2024, representing 66% of the global EV market share[9, 14, 15] - China's EV market is expected to have an 11% CAGR till 2030[15] - Chinese brands dominated 76% of global EV sales in 2024[15] JV Partner - JNT Strengths - JNT has a strong technology orientation with high-end complex casting and molding production, holding 63 patents and 36 proprietary technologies[18, 19] - JNT has a global customer base across various mobility segments, including automotive, off-highway vehicles, and railway, supplying to both Chinese and global OEMs[20, 21] - JNT is recognized as a National-level specialized and innovative "Little Giant" in China[21] Financial Investment - Sona Comstar will invest $12 million, and JNT will invest $8 million in the JV[27] - The JV is expected to generate revenue from H2FY26 from JNT's existing customer base[24] Sona Comstar's Growth Strategy - Sona Comstar has grown 10x in the last 10 years by focusing on key strategic decisions[11] - Sona Comstar's FY25 revenue is ₹35550 million, compared to ₹3450 million in FY15[12]

Financial Data and Key Metrics Changes - AAM's Q1 2025 sales were $1.41 billion, down from $1.61 billion in Q1 2024 [20] - Adjusted EBITDA for Q1 2025 was $177.3 million, with an adjusted EBITDA margin of 12.6%, compared to $205.6 million and 12.8% in the previous year [22] - GAAP net income was $7.1 million or $0.06 per share in Q1 2025, down from $20.5 million or $0.17 per share in Q1 2024 [26] - Adjusted free cash flow was a use of $3.9 million in Q1 2025, an improvement from the prior year [26][27] Business Line Data and Key Metrics Changes - North American production decreased approximately 5% year-over-year [8] - The Metal Form business unit showed improved EBITDA margins, increasing by 150 basis points year-over-year [22] Market Data and Key Metrics Changes - AAM's sales were impacted by a lower volume mix, resulting in a decrease of $166 million primarily due to lower overall volumes in North America [21] - Foreign exchange fluctuations, particularly from a weaker Brazilian real, contributed to a sales reduction of approximately $28 million [21] Company Strategy and Development Direction - AAM exited its joint ventures in China, collecting approximately $30 million in cash, as part of a strategy to focus on core businesses and capital allocation [9] - The company is on track to close the transformational transaction with Dali by Q4 2025, which is expected to yield significant synergies of approximately $300 million [11][12] - AAM aims to enhance its EV portfolio and maintain a balanced capital allocation policy post-acquisition [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macro uncertainties due to new trade policies but emphasized a strategy of local sourcing, with 90% of products produced in North America being USMCA compliant [13] - The company updated its 2025 guidance, targeting sales between $5.65 billion and $5.95 billion, with adjusted EBITDA expected to be between $665 million and $745 million [17][32] - Management expressed confidence in navigating tariff impacts and leveraging opportunities presented by onshoring trends [34] Other Important Information - AAM's net debt stood at $2.1 billion with a net leverage ratio of 2.9x as of March 31, 2025 [27] - The company maintained a strong cash position of over $500 million due to operational performance and proceeds from joint venture sales [27] Q&A Session Summary Question: Thoughts on future contingencies and utilization of excess capacity - Management indicated that they have open capacity in several facilities and are willing to make adjustments based on customer needs [40][41] Question: Tariff exposure for Dali - Management noted that Dali has a similar production footprint and is managing tariff exposure similarly to AAM [44] Question: GM's volume outlook and its impact on guidance - Management confirmed that the guidance incorporates GM's strong demand for full-size trucks, expecting production in the range of 1.3 million to 1.4 million units [47][48] Question: Impact of macro volatility on the Dali transaction - Management stated that macro volatility has not complicated the process and both companies are focused on local sourcing [50] Question: Near-term production schedules - Management acknowledged some volatility in customer schedules but noted strong performance in core platforms [56][58] Question: Tariff policies and their impact - Management confirmed that under current USMCA policies, tariff impacts are limited, and they are working to ensure compliance [64][65] Question: Long-term implications of ICE and EV market changes - Management expressed that continued ICE production is beneficial for cash flow, while EV growth will be slower than previously projected [102][104]