Martinrea International Inc. (MRE) Earnings Call Transcript & Summary

Good evening, everyone. Thank you for joining us for the Martinrea International conference call on the results for the first quarter of 2026. At this point I'll hand things over to Mr. Rob Wildeboer. Over to you.

Good evening, everyone, and thank you for joining us today. We always enjoy the opportunity to speak with our shareholders, bring you up to date on the business, and take your questions. We're also mindful that other stakeholders are listening, including a great many of our employees on this call, and our remarks are meant for them too, since we share our results and commentary across our network. Joining me this evening are Pat D'Eramo, Martinrea's CEO; Fred Di Tosto, our President; and Peter Cirulis, our CFO. Today's discussion will cover Martinrea's results for the first quarter ended March 31, 2026. I'd point you to the customary disclaimer in our press release and in our filed documents. During this call, Pat will go over operations and lay out some key highlights for the quarter, Fred will walk through our operating segments and call attention to some new business wins and growth opportunities, Peter will cover the financials and the 2026 outlook, and I'll wrap up with a few comments on trade, geopolitics, and capital allocation. To get us started, here's Pat.

Thank you, Rob. Good evening, everyone. Before I discuss the quarter, I'd like to spend a moment emphasizing what sets our company apart. To put it plainly, we are excellent operators. A number of our plants rank among the finest facilities I've witnessed during my career in the auto industry. Our results bear this out: our margin profile sits at the upper end of our peer group, we hold an industry-leading safety record, and the findings of our employee survey show that our people feel this is a great place to work. Customers see us as trusted partners with a strong reputation for delivery and quality, which is reflected in the many supplier awards we have earned, among them the GM Supplier of the Year Award. These outcomes stem from disciplined execution throughout the organization rather than one-time benefits. Innovation at Martinrea is practical and driven by execution. A great many initiatives begin on the plant floor and then get scaled across the network. Our advanced manufacturing team keeps deploying machine learning solutions, including adaptive welding, press health monitoring, and vision systems, and PolyML supplies the core intelligence underlying those solutions. We are scaling these solutions across multiple facilities and making solid progress. These initiatives are helping to improve operating efficiency and our margin profile.

We're also deploying advanced manufacturing in a targeted way across our core product categories. At an additive manufacturing trade show known as RAPID + TCT, held in Boston earlier this month, we recently earned an award for a product we developed together with Equispheres. Essentially, it's a heat exchanger that gets 3D printed into an electric motor housing. That stands as a strong illustration of the innovation happening within Martinrea Innovation Development that is strategic to our core business, with direct applications to existing products. A further illustration is a new business we call True North Kaizen, which we launched at the start of this year. Lean manufacturing was brought in 11 years ago as one of our key strategies to improve our operations and ultimately the bottom line. As you'll recall, before the pandemic, this initiative was pivotal in driving our adjusted operating income margin from 4% to just under 8%. I remember being asked on one of my early earnings calls, "How long will this lean thing take to implement?" My answer was, "About 10 years to become embedded in our culture." Part of that process involved bringing in expertise from my days at Toyota. As you'll recall, I was VP of manufacturing at Toyota's largest plant before I moved to the supplier side.

At Toyota, I collaborated with numerous colleagues who had spent 20 or 30 years with the company, and that gave me a deep appreciation for the Toyota Production System. In 2015, we carried that skill set into Martinrea, along with highly capable subject matter experts, and over the past 11 years lean has turned into the standard way we operate throughout the organization. Our lean journey is well advanced. We refer to it as MOS, the Martinrea Operating System. It is embedded so thoroughly in our plants that I can state confidently that our operations match or exceed those of any supplier in our space. What does that mean in practice? Roughly a year ago, a supplier approached us and asked whether we would be open to sharing our expertise, since they were having trouble keeping pace with their customer, which was also one of our customers, though a smaller one at that time. To make a long story short, after we built a roadmap and obtained the customer's blessing, the supplier asked whether we would buy the operation and fix it ourselves rather than assist them in fixing it. That operation was Lyseon North America, which is now called Martinrea Tulsa. Within just a few months, we have moved from running 7 days a week on four shifts to running 5 days a week on three shifts.

During this period, we achieved a 32% gain in throughput. Along the way, we also consolidated our footprint, and 50% of the plant is now available for future business. We're continuing to make further improvements. We came to see that we're quite skilled at this, and we don't depend anymore on former Toyota employees to instruct the broader workforce. That broader workforce has built up the internal capability to sustain lean practices at Martinrea on an ongoing basis. As this process matured, it enabled us to set up a lean consultancy serving customers beyond Martinrea. The name we gave it is True North Kaizen. Nearly right away, we secured our first contract with Valpell, a US-based supplier of complex, high-performance components, mainly for the aerospace industry. More recently, we managed to land a significant job with a large aerospace defense company in the US, centered on raising throughput of a key product. The good news here is that this new business will contribute to our bottom line in the first year. We're also confident that our success in this area could ultimately give us the inside track to manufacture aerospace or defense-related products in North America. I'm genuinely excited about the prospects for this business, and I believe that, with our strong track record of execution, we'll be able to create significant value for our shareholders over the long haul.

Turning to the quarter now. We feel good about how we did in Q1, on both the operational and financial fronts. Even with production sales coming in lower, our adjusted operating income margin rose compared with a year ago, because we kept pushing operating improvements across the whole organization. First quarter results marked a solid step up from Q4, with the adjusted operating income margin nearly a full percentage point better. On the previous call, we mentioned certain commercial settlements that we anticipated landing in the first half of this year. Talks with our customer have moved forward, and we anticipate finalizing them in Q2. We're still managing the effect of tariffs on our business successfully. As we've noted previously, the great majority of the parts we ship from Canada or Mexico into the United States meet USMCA requirements and so avoid tariffs. We do carry some exposure tied to Section 232 tariffs on derivative steel and aluminum products, which touch certain raw material inputs of ours. That negative effect is modest and is either absorbed by our customers or otherwise mitigated. Because of that, we anticipate no effect on our financial results stemming from recent tariff changes.

To sum up, the year has gotten off to a strong beginning, and we're still on course to hit the outlook we set for 2026. Peter is going to go into more detail on that outlook later in this call. So with that, I'd like to wrap up by expressing thanks to the Martinrea team for their hard work and their continued dedication to improving this business each and every day. Fred, over to you.

Thanks, Pat, and good evening, everyone. As Pat mentioned, we keep delivering both operationally and financially despite the industry forces at play right now around trade, tariffs, EV volumes, and the Iran conflict. Once again, we're handling very effectively the things we can control and offsetting those we can't by concentrating on continuous improvement, trimming overhead costs, capitalizing on our investments in automation and machine learning, and recovering tariff-related costs along with EV program volume shortfalls through commercial settlements with customers. Our team has our complete confidence, and I want to express appreciation to our people for their commitment and hard work in producing these results. Now to our segments, beginning with North America. For Q1, adjusted operating income margin was 7.5%, a rise of 50 basis points versus a year ago, even with production sales down 5%. That shows how well we offset reduced vehicle production volumes via outstanding operational execution, encompassing efficiency gains, cost cuts, and favorable commercial settlements. We kept posting excellent margins in North America, which is the primary growth engine for our business. Europe posted a $2 million operating loss for the quarter, an improvement over Q4 operating results, on sales that declined quarter-over-quarter.

We anticipate additional gains in the region as time goes on, depending on market volumes. Right now, as we discussed during the prior earnings call, Europe is operating at roughly breakeven, and variability from quarter to quarter is driven mainly by industry volumes, which reflects a volume environment still under expectations. If volumes were normalized, given the improvements we have implemented throughout our European operations, we would be positive in the region. In the past, when production volumes were far higher than today, we averaged adjusted operating income margins in the mid-single-digit range in Europe. We think it is possible to return to those historical margin levels in a better volume environment, especially considering the operating improvements and restructuring actions we have undertaken. Our approach in Europe continues to be disciplined. Growth for its own sake is not what we are after; our focus is on managing costs, capital, and risk. Although getting back to historical margin levels and improved industry volumes will take time, we remain comfortable with our footprint in the region. It is also important to recognize that having a presence in Europe, particularly in Germany, is essential for us, since it is a center of excellence for design and engineering that supports our ability to win business with German OEM customers, including for North American operations.

You've probably seen that we've recently secured a significant volume of new business with BMW, and a portion of that relates to North American operations. Results like this are hard to come by without both a presence and capabilities in Germany. Turning to our Rest of the World segment, it recorded positive operating income in the first quarter, though lower than a year earlier on weaker sales and reflecting a reduced level of favorable commercial settlements. As I've mentioned previously, this segment is small — it accounts for under 3% of our consolidated sales — and results can fluctuate from quarter to quarter. Our approach in this region is to keep only the footprint needed to support our global business. Moving along, I'm delighted to report that we've been awarded new business valued at $90 million in annualized sales at mature volumes, comprising various structural components within our lightweight structures commercial group with General Motors and BMW. New business awards over the last 12 months come to $370 million. As we've noted on earlier calls, we're quoting a great deal of business right now. We believe we have some solid momentum in this area. We've also recently won considerable work on program extensions with a range of customers, valued at well over $1 billion in annualized sales at mature volumes.

Extensions benefit our company since they typically need less capital for equivalent volume than fresh programs do, which helps our sales margin and free cash flow outlook. Out of the $370 million of new business won during the past year, roughly $150 million represents takeover work obtained from suppliers that are financially troubled or underperforming, mostly within our Lightweight Structures Commercial Group. That shows the trust customers have in us, grounded in our record for quality, on-time delivery, and innovation, along with our solid financial position and balance sheet. With that momentum, we anticipate a robust 2026 for new business awards, which will mostly begin launching in '27 and '28. OEMs localizing or onshoring production to North America represent a significant opportunity for us, and we are already gaining from it. As one example, we were awarded extra volumes on a vehicle intended for sale in the US market that had been built in both the US and abroad. The customer chose to localize part of that volume to the US, which let us fully utilize our assets dedicated to that program. We are holding discussions with additional customers about possible onshoring of production, including with Asian-based OEMs, and we will be ready to serve them if and when needed.

That brings me to a point I want to emphasize: in recent years, the mix of customers we serve has grown more and more varied. Back in 2018, just over 70% of our sales came from the Detroit Three OEMs, and these days that figure sits at just under 60%. The way we got there was by expanding our business with OEMs based outside North America, especially Mercedes-Benz. On top of that, we've achieved fast growth with Asian-based OEMs, Toyota among them, and we believe there are chances to deepen our penetration even further. I appreciate your time. At this point I'll hand things to Peter, who will walk you through our financial results and outlook in greater detail.

Thanks, Fred. Let me begin with a brief scorecard. For the first quarter, free cash flow came in at negative $35.2 million, driven by seasonal working capital movements. We bought back $11 million of stock, which works out to about 1.5% of the company's outstanding shares, and net debt-to-EBITDA finished the quarter at 1.6. Importantly, we are reaffirming our 2026 free cash flow outlook of $125 to $175 million and our overall 2026 guidance. In 2025 we generated a record level of free cash flow at just under $200 million, and in each of the last three years we delivered a consistently high level of free cash flow in the $150 to $200 million range. Our track record as a solid cash-generating business is well established at this point, and we expect that to continue. Now let me walk you through the puts and takes for the quarter. Operationally, quarter one reflected solid margin performance on lower production sales. This shows continued execution progress consistent with our full year objectives. Quarter one adjusted operating income was $61.6 million, consistent with quarter one of last year, on production sales that were down roughly 4%. This largely reflected the end of the Ford Escape program, partially offset by sales from the Lyseon acquisition, now Martinrea Tulsa.

Our adjusted operating income margin reached 5.5%, which is 20 basis points higher than a year ago, and the improvement was fueled by stronger margins in North America that reflect ongoing operating gains. On a quarter-over-quarter basis, that adjusted operating income margin rose by 90 basis points. We offset the sales headwind by means of operating efficiencies, reduced depreciation stemming from the quarter four impairment, lower equity-based compensation expense, and some favorable mix. Adjusted net earnings per share came to 45 cents, compared with 41 cents in quarter one 2025. That figure reflects the sales and margin drivers we just discussed, along with lower finance expense resulting from reduced debt and interest rates, a smaller net foreign exchange loss, and a modestly lower effective tax rate. The drivers are simple: execution is keeping margins intact, working capital unwinds as the year progresses, and we remain disciplined on capital while funding launches. Moving to our outlook, which we introduced on the last call, 2026 remains a story of strong operational execution in a relatively flat market. We are reaffirming our full year 2026 guidance: sales of $4.5 to $4.9 billion, adjusted operating income margin of 5.5 to 6%, and free cash flow of $125 to $175 million. Our outlook assumes a modest decline in sales compared to 2025, reflecting the end of the Ford Escape program and lower tooling sales.

This forecast doesn't factor in any potential negative effects from a drawn-out conflict with Iran. We're staying focused on the same things we always do — executing consistently and generating free cash flow across cycles, grounded in the parts of the business we control. At the midpoint, our adjusted operating income margin comes in above 2025. The hit from lower production sales gets offset by ongoing operational gains, including automation and machine learning investments, plus continued commercial recoveries tied to EV volume shortfalls in North America and Europe. Free cash flow stays robust and assumes roughly $300 million in capex, up from last year because of significant new business awards and certain capital items that moved out of quarter four 2025 and into 2026. Turning to the quarter, our margin performance in quarter one held up well in a tepid volume backdrop. In quarter two, EV volumes are coming in softer, and we're facing a temporary margin headwind from elevated aluminum costs tied to the Iran conflict. Our aluminum contracts carry pricing pass-through with a lag of roughly 90 days, so the margin effect is a timing issue and resets once the pass-through catches up. All told, we're well positioned to deliver our 2026 outlook, and we're reaffirming guidance. Beyond this year, we see meaningful organic growth opportunities in line with our 2028 outlook.

Our goal is to broaden the mix of customers we serve by bringing in European and Asian clients located in North America, and to deepen our presence in commercial vehicles. As we work toward a 6.5 to 7% margin, growth comes from higher sales, wider deployment of AI on the shop floor, MOS, and vertical integration projects. With that said, I'll hand things back to Rob now.

Thanks, Peter. During the previous call, I devoted some time to discussing our share price and how the company is performing, and I voiced optimism about both—particularly as we wrap up trade negotiations with the US. I pointed out that we're positioned well, that tariff effects will be quite limited, and that our exposure was minimal when it comes to shipping parts to Canadian assembly plants. Under 3% of shipments in our auto business head there. In fact, as things stand right now, our stock price has risen substantially compared with a year ago, when worries about tariffs peaked. I also brought up the Iran conflict, which is pushing energy prices up and might influence vehicle sales, yet we haven't observed any significant effect on volumes. Vehicles and the parts for them remain necessities for people. Let's move on now to longer-term performance. This chart illustrates where we stand today on several key metrics compared with our position in 2014, before we began the Martinrea 2.0 journey. The 2020s have been a turbulent period for our industry—COVID, chip and other supply shortages, inflation, the EV volume flop, and so forth. With Pat at the helm and our team putting in tremendous effort, our company has done well on practically every financial metric.

Starting in 2014, our sales have climbed by over $1.2 billion, which works out to roughly 30%. That sales increase by itself would be enough to rank a supplier among North America's top 100. Adjusted operating income has risen by more than 80%. Before the pandemic, our adjusted operating income margin had already improved substantially, and it now sits far above that level. Adjusted EBITDA has grown quite a bit. As Peter noted, we've turned into a steady generator of free cash flow. Our balance sheet is considerably stronger when measured by net debt-to-EBITDA. We have bought back more than 16% of the shares in our company, giving shareholders a larger ownership stake in the business without them having to write a check. Book value per share has grown to more than triple what it once was. Every one of these figures and trends is positive. My belief is that eventually a higher valuation and share price will reflect all of that positivity. Financial results matter, and they all stem from the outstanding efforts of our employees. This chart makes plain that the stock holds substantial embedded value. At an enterprise value to EBITDA multiple of four times, this company would be a $20-plus stock. A discounted cash flow analysis points to an even greater value. I genuinely believe we'll get through the USMCA renewal, and that our steadily improving performance as we head toward our 2028 guidance will reward shareholders — a group that includes every executive and many employees of our company.

Turning now to how we deploy capital. This slide lays out our framework, and as the following slide will demonstrate, we have applied it consistently through the years. To begin with, if you want to be profitable and sustainable over the long term, investment in your business is essential. Across the last decade, our growth has come organically, along with a modest amount of tuck-in acquisition activity. Part of our recent growth involves takeover work, as Fred mentioned. Consequently, our standing as a supplier within the industry is extremely strong. As Pat pointed out, we operate better today than we did in the early days. No large acquisitions have been made, but we have put money into our footprint and, frankly, elevated a number of the plants acquired over the years to a high standard. Our track record shows we have been very good at purchasing distressed assets and getting them fixed up. R&D has also received investment, and we have made some strategic investments. Venture capitalist is not what we are. The relationships we invest in are ones that sharpen our competitiveness and deliver something to us — graphene is one example, and additive manufacturing with Equispheres powder is another. We bring something to them as well: perhaps a customer relationship, know-how in scaling up, or customer access.

Keep in mind that we were once a startup ourselves, and a strongly entrepreneurial culture remains with us. By concentrating on running things better and applying cutting-edge technology across our operations, we've gained opportunities in consulting—as Pat noted—and also through a software business at Mindcan, which began by building tools for internal use and today sells those solutions to outside customers. Those investments have produced stronger operational results and are delivering returns. Next, we keep a solid balance sheet. That matters above all, and it's not something we would ever sacrifice. Customers care about it, and it lets us capture takeover business from rival suppliers and seize chances as they arise. Ours is an industry that swings up and down, so you need the agility we have. Over the years, plenty of competitors have watched their equity value erode because they carried too much debt. Finally, we give capital back to shareholders. As mentioned earlier, we repurchased more than 16% of the company across roughly the last decade, plus 1.5% so far this year. For many years we've kept a steady dividend. This chart is worth a look, since it displays how our free cash flow was allocated across the last three years and shows an approach that has stayed consistent and careful.

Like Peter mentioned, at this point we reliably generate free cash flow. Over the past three years, our free cash flow came to nearly $600 million. During that same period, we brought net debt down by more than $200 million, which made our balance sheet stronger through some difficult stretches, as you're aware. We've bought back roughly $100 million worth of our shares, which works out to 12% of the shares the company has outstanding. Dividends paid total $45 million. That's a balanced way to do things. As I'm sure you can understand, our shareholders hold differing opinions about how the cash ought to be used, but we engage with them and listen to what they say. The views out there are varied. So where do things stand right now? We're putting money into the business. Peter covered capital expenditures, and you have our outlook for this year through 2028. We're a growth story. Growing in a prudent and profitable way means we have to invest. Our intention is to keep leverage inside our target of 1.5 times net debt to EBITDA. Share repurchases will continue. As mentioned, last month we bought back 1.5% of our equity. We plan to be active on our normal course issuer bid next week. We'll renew that normal course issuer bid so we can buy 10% of our float over the coming year, and given what I just said about value and the tariff discussions, we intend to be quite active with it.

On that last item, keep in mind that we're a big supplier of parts in the US, and over there the administration is attempting to assist us. When it comes to allocating capital, we're engaged in certain asset sales that will produce cash to support our business and other capital priorities. As an example, we're currently selling a majority stake in our fluids plant in China to a partner, which will bring in cash and let us cut our spending there. We see additional opportunities I won't discuss right now, but naturally we'll do so at the right time, and those will generate cash that we'll put to work properly. My final slide covers trade and tariffs. I won't say much, but we're happy to take questions. As I've said all along, as a supplier things are turning out quite well for us. There are no tariffs on parts, which hardly make sense in North America. We'll work toward eliminating tariffs on vehicles assembled in North America, which is sensible in our view. North American rules of origin requirements benefit us. Tariffs on vehicles assembled outside North America push more assembly into North America, which helps us.

Restricting Chinese vehicles and parts strikes me as the right move. America’s goal is to protect and grow its car assembly and components sectors. That’s a positive thing. My final point: we’re deeply engaged in these talks — not only in Canada, but also in Mexico and the US. We’re present in the room, able to speak directly with the negotiators, and I believe our industry is coming around to our perspective. At this point, questions are open. Shareholders, analysts, employees, and even a few competitors are on the line. Welcome. We probably should be somewhat cautious in what we say, but we’ll answer whatever we can, and thanks to everyone for joining the call.

Okay, thanks. Everyone, we’re moving into the Q&A portion now. If you’d like to ask something, press star and then 1 on your phone’s keypad. When you’re on a speakerphone, lift the handset first before you press those keys. Should you want to take your question back, press star and then 2. Give us a moment while we take the first question. Our first question is from Ty Collin at CIBC. Go right ahead.

Good evening, and thanks for taking my question. To begin, I'd like to return to what was said about the Iran war and its effects. I appreciate the remarks that volumes have shown no impact so far, and that aluminum has been affected somewhat, but are there other cost pressures you're currently seeing, such as energy costs, resins, or any other petroleum derivative products? If you aren't seeing those today, how should we think about the risks should the conflict keep dragging on, and how that might evolve?

Sure. Thanks, Tye. This is Peter. Regarding the first part of your question, at present in Q1 we aren't observing those effects, though we would begin to notice them if the conflict drags on or were to drag on. One way to think about it is that it's mainly energy costs coming from Europe, correct? Our major aluminum products are manufactured there for the most part. Those differ in how energy intensive they are. For natural gas and for electricity, we would expect those to rise as they did several years back during the Ukraine war as well. As you likely know, we have the majority of those energy inputs hedged, approximately 70% or so. Depending on volumes, how they, let's say, matriculate over the remainder of the year, you may see a tail-end effect if the conflict is protracted through the next, let's say, several quarters, but for the most part, we're hedged, and again, it will be a tail effect depending on how volume moves. Primarily Europe-based. Not in North America. If it goes up, we probably seeing some diesel price going up on trucking costs, but it's an indirect impact to us. Let's say in the other way, maybe one more item just to tell you about, we did talk about aluminum in our comments.

At this moment, we aren't really seeing much of an effect there. As I said, there's a lag effect in play—when prices rise, we'll observe that for a while until pricing resets, somewhere between one month and three months, depending on which kind of contract we hold with the customer. Related to that, should the price drop sharply, we'd capture a benefit over the short term, and after that it would settle back to where price meets cost.

That's useful. If it turns out you do have to take on some elevated energy expenses in Europe, say, how confident are you that you could either pass those costs through to your customers or find other ways to offset them?

I'd say that, as I mentioned, we had a cooperative situation during the Ukraine conflict. With customers, we had various kinds of arrangements. They don't act on it right away; for us to enter into those sorts of commercial discussions, the conflict would need to be quite protracted. History would be my guide — we succeeded back then, and my expectation is that things would play out the same way.

Thanks. Let me squeeze in one more, if I can. Peter, I appreciate the specifics and the pluses and minuses you laid out regarding Q2 margins. What I'd like to know is whether you could help us frame how we ought to view Q2 margin compared with a year earlier, and also how we should consider the effect of the commercial settlement that you expect to finalize during the quarter. I'm not sure I caught you listing that among the factors in play.

Regarding the commercial deal Pat brought up that's almost final — I won't get into specifics since it isn't fully closed yet, and we wouldn't reveal our negotiating position at that level of detail. What I can do is help you think through how the shape of things looks as we move forward. Broadly speaking, across the year, for full-year guidance, the split between the first half and the second half is about even in terms of the profile. You'd likely observe what I'd describe as a mountain pattern — it begins somewhat lower in the first quarter, rises through the second and third, and then declines seasonally in the fourth. I realize that kind of pattern hasn't shown up for some time, but that's how it appears right now, barring, say, any prolonged impact from the Iran conflict. I'd expect — not a similar number, but, say, directionally — a strong second quarter. Like last year, Tye, if you remember, quarter two was quite good for us.

That’s useful—appreciate it. I’ll hand it over now. Thank you.

Thanks. Our next question is from Michael Glen at Raymond James. Go ahead, please.

Hey there. Rob, perhaps you already brought up how the trade situation is playing out. How do you view the possibility that auto parts might no longer be exempt from the cross-border trade situation?

My view is that won’t come to pass. A few days after the initial announcement—February 8th—I was at the White House. Kevin Hassett was there with me, and I told him, “You do understand that if tariffs are placed on auto parts, the industry gets shut down inside a week, right?” His answer was, “No.” I asked, “Well, what makes you say that?” I told him, “The reason is that the Tier 2 and 3 companies stop shipping, and that’s just how it works.” That’s how auto thinks about it. Later, when I was in Washington in April, I met Scott Bessent, who is a very sharp person. We discussed the USMCA situation, and in front of a room full of Canadian CEOs, he said, “We’ve reached the conclusion that tariffs on auto parts are a really bad idea.” I share his view, since it truly is a really bad idea. My expectation is that we won’t see tariffs on parts.

All right. Turning now to what's being said about the Chinese OEMs, have you considered pursuing alignment with any of the joint ventures or partnerships that may have been floated regarding Chinese OEMs coming into various regions of North America?

Just a few remarks. To start, we enjoy strong ties with a number of Chinese parties. We mentioned the Anting sale, where in fact we're taking a minority stake alongside a partner who will hold the majority — someone we've dealt with before. That transaction is moving through an escrow release and that sort of thing. It's remarkable how a sale process operates in China, but be that as it may, we're pushing ahead on it. We have Chinese OEM customers and so on. Regarding Chinese firms establishing themselves in North America, I'd point you to certain developments in the US Congress and to several presentations given within just the past week. Congress has just dispatched a letter to USTR basically stating that the American stance ought to be to bar OEMs and suppliers from the United States, and that conversation has evolved into one where, within the framework of USMCA talks, Mexico and Canada are expected to line up with the American view alongside the United States. That's the backdrop. I consider it a fluid situation, and I think it's unlikely we will, say, witness a Chinese OEM establishing itself in Canada.

That said, we do have conversations with folks now and then, and should an opportunity make sense, we'll pursue it. Such talks and the like are naturally kept private, and whenever we secure things such as contract wins, we make those public each quarter.

All right. Turning to Europe’s outlook for output returning to a more typical level — since you’re far nearer to developments in the European auto market than I am, and given the degree of Chinese competition there — is it an aggressive assumption that some legacy OEMs will manage to return to what we’d call normal production levels?

Speaking for myself, that view strikes me as reasonable, particularly when you consider who our customers are and how our mix breaks down. You really have to take stock of where things stand right now. The bulk of the volume headwinds hitting us sit on the EV side, correct? You could say it's more a matter of mix than anything else. Once that sorts itself out and we move onto next-generation platforms, what we're observing today is that many of our German OEMs — one in particular — are shifting toward a more flexible strategy for their lines. They're developing the next platform so they can respond to the market and produce ICE, plug-ins, or BEVs on the same lines, and that's a smart approach. So as that gets resolved, we do foresee a scenario in which certain core customers of ours might pick up a bit of volume. Not really market share gains as such, but working through some of the EV headwinds we face today.

Michael, Peter here to add something. One more favorable element for the outlook, I'd say, in Europe is fairly comparable to what we saw in the US, with certain carbon credit and other CO2, let's say, rules being relaxed for ICE engine vehicles. From the research we've conducted and from conversations with customers, the European Commission is considering reversing what they had planned, which was to ban combustion engines beginning in 2035. That could be beneficial too. We've likewise observed some renewed interest in engine block production, not just in North America but also for some of the smaller hybrid engine blocks in Europe.

One more point to tack on, I suppose, is that it follows from the discussion about Chinese OEMs — and you might assign a greater likelihood to them eventually establishing operations in Europe. We're open to working with them too. We can serve as suppliers and take part in that, should it come about.

In fact, we are being cited.

Yes, we do have certain initiatives underway with a few Chinese OEMs, and we maintain a presence in China—we conduct some business there with certain local OEMs. Those relationships serve as starting points for us to engage in conversations in other regions of the world, specifically Europe.