DANA Inc Q3 FY2023 Earnings Call

Good morning, and welcome to Dana Incorporated’s Third Quarter 2023 Financial Webcast and Conference Call. My name is Chris, and I’ll be your conference facilitator. Please be advised that our meeting today, both the speakers’ remarks and the Q&A session will be recorded for replay purposes. For those participants who would like to access the call from the webcast, please reference the URL on our website and sign in as a guest. There will be a question-and-answer period after the speakers’ remarks and we will take questions from the telephone only. At this time, I would like to begin the presentation by turning the call over to Dana’s Senior Director of Investor Relations and Strategic Planning, Craig Barber. Please go ahead, Mr. Barber.

Thank you, Chris and good morning everyone on the call. Thanks for joining us today for our third quarter 2023 earnings call. You will find this morning’s press release and presentation are now posted on our investor website. Today’s call is being recorded and the supporting materials are the property of Dana Incorporated. They may not be recorded copied or rebroadcast without our written consent. Allow me to remind you that today’s presentation includes forward-looking statements about our expectations for Dana’s future performance. Actual results could differ from those suggested by our comments today. Additional information about the factors that could affect future results are summarized in our Safe Harbor statement found in our public filings, including our reports with the SEC. On the call this morning are Jim Kamsickas, Chairman and Chief Executive Officer; and Timothy Kraus, Senior Vice President and Chief Financial Officer. My pleasure to turn the call over to Jim. Jim?

Good morning. And thank you for joining us today. First, please turn with me to page 4 where I will discuss our highlights for the third quarter of 2023. Starting on the left side, we are pleased to report that Dana achieved robust third quarter sales of $2.7 billion, a $134 million increase over the same period last year driven by continued strong customer demand, the rollout of our new business backlogs across all of our end markets including EV programs and our ongoing cost recovery efforts. Adjusted EBITDA for the quarter was $242 million, up $50 million or 150 basis points over the third quarter of last year driven by strong operational execution and improved efficiency. This is a tremendous accomplishment given the uncertainty the light vehicle market faced in the quarter. Free cash flow was a use of $5 million for the quarter, which is reflective of the higher seasonal working capital requirements to support our aggressive launch scheduled this year. Lastly, our results, adjusted earnings per share for the year, were $0.30, an improvement of $0.06 per share. Dana continues to execute well across our operations despite the impact of the UAW strike on our light vehicle North America business late in the quarter. The structural profitability improvements of the business are very much the product of the entire Dana team, progressively overcoming the 2020 to 2022 COVID-related costs that we had endured over the past few years. As you've witnessed throughout the first three quarters of the year, we have systematically implemented the core tenet of our enterprise strategy, that is, what we refer to as leveraging the core. What this means is that we have driven standardization and transformational change across the entire organization. While achieving countless improvements across the business, we are especially realizing exceptional operational efficiency and customer satisfaction while simultaneously launching a company record number of new programs throughout the year. Moving to the right side of the slide, I will provide you an update on the current operating environment as well as the impact of the UAW strike, which is affecting some of our key North America light vehicle programs. Next, I will discuss the end market trends for our wide-ranging business around the world. Finally, I will provide an update on a few of the key high-profile launches that are now underway or have been completed. Please turn with me to page five where I will walk you through an update on our operating environment. As we shared with you last quarter, we are seeing the overall operating environment improving as we go through the second half of 2023. Beginning with supply chain and currency impacts on the left side of the slide, steel prices are moderating compared with 2022, and we expect commodities to be a profit tailwind for the rest of the year. Commodity recoveries are leveling out as a result of lower input prices requiring fewer recoveries. This dynamic should continue to be a tailwind for the margin this year. As you can imagine, we have had many questions about the resiliency of the broader supply base, and we continue to closely monitor the health of our downstream suppliers. Needless to say, the longer the UAW strike continues, the greater financial stress there will be across the tier 2 through tier 4 supply base. We are very focused on ensuring that not only are we working collaboratively through these challenging times, but that production restarts are in place and actionable once the Detroit 3 customer facilities are back online and manufacturing vehicles again. Finally, for this section, foreign currencies as translated to the U.S. dollar, particularly the euro, have become a slight headwind as the relative strength of the dollar has strengthened. Moving to the center of the slide, cost inflation is moderating, and pricing actions continue to mute the impact of inflation. As we stated last quarter, we do not expect to completely offset inflation as we close the year, but we are moving in a positive direction. We have also seen sequential improvement in customer production volatility prior to the strike late in the quarter. In the third quarter and for the remainder of the year, we continued to successfully launch new business while systematically driving operational efficiency improvements through our integrated lean manufacturing processes and business systems. Moving to the right of the page, like everyone in the industry, our North America light vehicle business has been impacted by the UAW strike. For Dana, we have been largely affected by two of our key customers, and as of today, less than 10% of our Dana's manufacturing plants have been significantly affected. The Dana team has done an outstanding job rapidly responding to the uncertainty of this volatile situation by idling and flexing operations as needed to mitigate the cost impact. As a result of the strike, we saw $65 million lower sales in the third quarter. With the expansion of the strike earlier this month, we expect to see $185 million in lower sales in the month of October. While the UAW labor disputes remain volatile, we expect benefits from operational improvements and commodity costs as we close out the year. Let's turn to page six, where I'll talk about the global end market trends we are seeing across our light vehicle, commercial vehicle, and off-highway markets. As we have already stated this morning, light vehicle production in North America is being impacted by the UAW strike, which has affected some of Dana's largest and most prominent light truck programs, including Ford Super Duty, Ranger, and Bronco, as well as the Jeep Wrangler and Gladiator. Prior to the labor disruption, production volatility levels had stabilized, and inventory levels of key programs had shown some improvement, but remained below historical levels. Demand in Europe is slightly higher due to the strong backlog of orders and restocking of inventories, while Asia production is expected to be flat. Moving to the center of the slide, in the commercial vehicle segment, we expect the overall North America Class 8 medium-duty truck market to finish the year on a high note, with the full-year production expected to be around 7% for the year, compared with 2022. In Europe, the heavy truck production outlook remains strong, with production up 15%. Meanwhile, there has been a significant downturn in South America truck and bus market at around 30% due to the overall economic slowdown. The truck and bus market in India will be up slightly. For the off-highway market, on the far right of the slide, we anticipate infrastructure spending to support continued strong demand for construction equipment. Global agriculture equipment production is weakening a bit due to the farming commodity price decrease, while demand for mining machinery remains stable, as has been the case for most of the year. By region, North America is expected to remain stronger for the construction and agriculture equipment, while Europe shows some weakness throughout the end of the year. Asia will be slower, with China demand offsetting any growth expected in India. Overall, as we finish out the year, we see continued strong demand in our heavy vehicle markets, providing balance to the overall business. Please turn to slide 7, where I'll provide an update on some of Dana's key launch programs. When we began the year, I outlined Dana's extremely aggressive launch cadence for 2023, which has required significant capital investment and includes over 120 programs spanning both traditional and EV across all markets globally, including some very large and complex programs. We anticipate next year to be a more normalized cadence with several key launches across all segments. To date, I'm pleased to report that more than 70% of these programs are successfully completed and industrialized, including the Ford Super Duty and Ranger, as well as the Jeep Wrangler program. Once the UAW strike concludes, we anticipate these programs to be back up and running quickly as they remain some of the most sought-after vehicles in the market. While I won't walk you through each one on the slide, I will draw your attention to a few notable programs that are on track to launch in the next several months, including the Conquest business of the Fendt 700 Series Tractor, compact construction equipment with John Deere, and the Jeep Gladiator and Toyota Tacoma pickup trucks. All these launches spanning across all markets and regions are significant, but it's important to note that we have successfully completed or are near completing four of our largest programs, the Ford Super Duty, the Global Ranger, the Jeep Wrangler, and the Toyota Tacoma. Together, these account for more than $2 billion in sales per year. Thank you for your time today. Now I'd like to turn it over to Tim, who will walk you through the financials.

Thank you, Jim. Good morning. Please turn to slide nine for a look at Dana's third quarter 2023 results. Sales were $2.67 billion, a $134 million increase over last year, primarily driven by strong demand across all our segments, recoveries of cost inflation, and favorable currency translation partially offset by lower demand due to the UAW strike. Adjusted EBITDA was $242 million for a margin of 9.1%, an increase of $50 million and 150 basis points over last year's third quarter. Our profit improvement was driven by lower net manufacturing costs, beneficial mix, and better operating efficiencies resulting from strong operational execution. Net income attributable to Dana was $19 million compared with a loss of $88 million last year. The net loss last year was due to a non-cash goodwill impairment charge. Diluted adjusted earnings per share was $0.30, a $0.06 improvement over the third quarter of last year. Lastly, free cash flow was a use of $5 million, down $82 million from last year, driven primarily by higher working capital requirements to support our program launch cadence and higher capital spending. Please turn with me now to slide 10 for a closer look at the drivers of sales and profit change for the third quarter of 2023. Beginning on the left, traditional organic sales growth of $20 million was driven by higher demand and improved pricing, partially offset by the impact of the UAW strike on our light vehicle business. Adjusted EBITDA on higher sales was $35 million, which improved margins by 130 basis points. Cost inflation was partially offset by customer recoveries in the quarter, resulting in net inflation headwinds of about $14 million. Improved operational execution, beneficial mix, and fewer inefficiencies driven by less volatile customer production patterns was the primary driver of profit improvement in the quarter. EV organic sales were $81 million higher than last year, and adjusted EBITDA was $12 million higher, improving overall margins by 20 basis points. Margin contribution on the higher EV sales and the deferral of engineering investment drove higher EV organic profit. Foreign currency translation increased sales by about $42 million as the dollar weakened in value against several foreign currencies, but primarily the euro. However, due to regional mix and profit was up only $2 million for a slight negative margin impact of 10 basis points. Finally, due to falling commodity prices, commodity cost recoveries in the third quarter were $9 million lower than last year, but due to those same lower prices, there was a net profit benefit of $1 million. This resulted in a 10 basis points margin benefit. Next, I will turn to slide 11 for details of free cash flow for the third quarter. Free cash flow was a use of $5 million in the third quarter. Higher profit this quarter was offset by increased working capital requirements that were $115 million higher than last year. This was primarily driven by higher inventory requirements to support increased sales and support the large number of program launches. Capital spending was $23 million higher than last year to support our backlog of new business. Please turn with me now to slide 12 for an update of our guidance for 2023. We have modified our guidance to account for the uncertainty surrounding the duration and scope of the UAW strike. As our base case scenario, we are assuming that the strike remains at its current scale and is resolved by the end of October. Under this assumption, we are maintaining our prior sales and profit ranges. If the strike were to stretch to the end of the year, we anticipate it would lower sales by $500 million and adjusted EBITDA by $90 million. Allow me to walk you through this chart. Looking at the sales guidance range in the middle of the page, beginning at the upper end of the range on the right side of the scale, you will see that we expect sales to be $10.7 billion, assuming the strike ends at the end of October. This is in line with our prior outlook as higher sales in our off-highway markets are expected to offset the strike impact in light vehicle. Adjusted EBITDA is expected to be about $850 million in our base case scenario as cost-saving actions and lower incentive compensation offset the strike impact on profit. Profit margin is expected to be approximately 7.5% to 8% within the range of our prior guidance. Free cash flow is expected to be a use of approximately $20 million in the base case scenario. Higher inventory and lower sales due to the strike are causing an increase in working capital. We do expect this dynamic to reduce or reverse once the strike is concluded and we are able to utilize the inventory that is both on the plant floor or in transit. We also expect further cash flow impacts from additional supplier relief and restructuring actions. Diluted adjusted EPS remains unchanged at approximately $0.80 per share in our base case scenario. The resilience of our business to weather these external disruptions is a testament to the enterprise strategy and the ability of the team to perform in these difficult times.

Thank you. Our first question is from Noah Kaye with Oppenheimer. Your line is open.

Thanks for taking the questions and appreciate the range of scenarios provided. I actually want to pick up on one of Tim's last comments. Can you speak to what you're doing to support the health of your suppliers amid all going on over the last several weeks? How that has impacted cash conversion expectations for 4Q and what you would call out in terms of potentially that improving as we get into 2024?

Sure. The impacts on suppliers are both related to the specific UAW actions as well as actions that have happened previously. We have one particular supplier that's been of particular concern and we've been providing significant support to that supplier. So we expect to continue to have some of that into the fourth quarter. Then we will obviously do what we need to to make sure that as we go through the restart, we're able to support the supply base and make sure we can deliver for our customers.

And just I didn't catch it. You can possibly quantify that or dimension the impact that it's having on cash flow?

So the impact is in Q4. We don't expect it to be significant, but it's difficult to mention at this point as we know what the restart is going to be.

Okay. So the free cash flow conventions are headwinds are largely around the inventory bill that you've been having. Based off of the news flow that we've seen, it sounds like four workers for Super Duty, and other programs that are important to you are being asked to return. And so that may be a fairly near term event. Can you just talk about your capacity to ramp back up at some of these programs, your state of revenue and what you expect will happen as those programs start back up again?

Hey, good morning, Noah. Thanks for joining. Thanks for the question. This is Jim. I think the best way maybe to think about it is, it's almost like the audience is, it's almost like the COVID shutdown timeframe. I mean, any sophisticated manufacturing company had a playbook to kind of wind it down and also had one to wind it up as part of that. It's kind of the whole chain. Part of it's the whole supply base and what we're doing there, ensuring they have the raw material, labor availability, and so on and so forth. Internal operations are very much within our control and making sure there that we have inventory in place. We have soft, safe launch quality programs in place because you may have some new operators or operators that have to move around to different jobs or whatever the case may be. But from a standpoint, from our line of sight, our ability to ramp up will be, should not be difficult. We've run this play before. So I hope that answers your question. But as soon as they're ready, we're just hopeful. It's still a tentative agreement. So hopefully we're moving and we’re producing product back to where we were a few weeks back.

That's helpful. Thanks, Jim. Last question from me. There's some mixed message out of the light vehicle industry around the pace of EV investments. But of course, the majority of your programs to date have been in CV and off-highway. Can you speak to the pace of EV investments and RFP activity that you're seeing currently in those markets and your expectations for future awards activity related to electrification?

Yes. Again, thanks for the question. The way I think about it is it almost starts with when we have, I would say, a very equal balance in terms of, depending on if you put it on a revenue level of electrification wins across all of the end markets that we participate. Maybe we could dimension it differently or better in the future, but really good balance across all the end markets. So the way we've designed the company, most importantly, when we put complete in-house electrodynamic capability across the company, it was not with one end market, i.e., light vehicle centric, or it wasn't like one geographical market, like North America centric. It was to basically be able to scale our products, our processes, and our human capital across all of the respective end markets. So what am I getting at here? Yes, we can see that there may be some push out in some geographical markets or maybe some push out in some end markets like vehicle, commercial vehicle, whatever. But that isn't how we've designed the company. We scale our products as basically high torque, truck related products, truck and large vehicle products. So as the volume comes on, we're able to flex with that and only go up the curve on our spending as that comes. So not too worried about that. That's just how it works. Our light vehicle products work over in our commercial vehicles, commercial vehicle products work over in our highways, what I'm basically getting at. So in the punchline relative to new wins and so on and so forth, not here to announce anything. We've sprinkled the infield, as I like to say, throughout the course of the year. At the beginning of next year in February, we'll give you that standard backlog update and some new updates for you.

Okay, looking forward to it. Thank you.

Oh, great. Thanks for taking my questions. I appreciate the guidance. But any color on the low end, can you clarify whether that's with Ford strike ending or is that just assuming what was happening a couple of days ago continue to the end of the year? And any color on sort of the sales drag, if it's just GM and Solanas, how much like per week or something that, we should be kind of estimating? There is a good sort of guidepost.

Sure. Hey, Colin, thanks for the question. So our low end assumes that Ford would be out through the end of the year based on, before the announcement of the tentative agreement. So it's a fully down scenario. And if you want to think about it, right, the way to kind of dimension it, I think we're not going to give specifics, but about half of that change is probably Ford. The balance is everything else.

And any color on like a weekly pace of the balance at this point? I mean, Ford's over. So is it going to be 15?

All right, I think you could probably work through it. I think about the low and the high end. If it's about a half a million dollars, half of it's Ford. You can sort of figure out how you dimension it.

Okay, all right.

And of course, it always depends on some of it depends on the restart to in terms of Ford. So, how quickly they come up and which plants come up when.

Yes, that makes sense. If I look at the guidance and I look at the high end and I think about what's implied in Q4, it does imply and I feel like I'm nitpicking because it's look like pretty good guidance given all the strike issues. But if I go quarter-over-quarter, sales actually still at the high end look pretty flat. But EBIT falls off a bit, almost 80 million or so at the high end. What would drive that? Is there seasonal issues? Is that just sort of abnormal sort of drag from the strike? Why the big margin drop into Q4?

So our Q4 margins are generally lower. I mean, we just have a lot of down production days in the fourth quarter when you think about between the Christmas shutdown and Thanksgiving here in the States just makes the absorption on the fixed costs a little bit harder when you think about it. So it's definitely seasonality as you kind of go through that.

Got it. If I could just squeeze one more in. I think in your last presentation, you indicated sort of a 50 million full year inflation drag and a 20 million EV investment drag. Are those still the right numbers? Have they changed at all?

Yes, inflation on a net basis has moderated a little bit, but nothing significant. We're seeing a little bit lower overall EV investment. You saw that sort of in the quarter. We call out some of its deferral, but we are as we start to ramp these programs. We're getting much more efficient and better as we time and bring on resources, getting them up to speed and getting them really productive faster. So there's some efficiency built into that as well.

Great. All right. Thanks for taking my question.

Hi. Good morning. Thank you. Just wanted to follow up on Colin's line of questions, but maybe just a slightly different approach. Just if I'm looking at you, you're saying the upper end of your guide is equal to the midpoint of your prior guide, but that has within that, $250 million of revenue impact, at a 20% decremental, so that's 50 million EBITDA, but you're still holding the guide. So specifically, what is better, at least at the upper end of your guide that is offsetting the UAW headwinds that you've incurred so far? Is it the thing, inflation is sort of neutral, somewhat moderated? Is it EV that's holding in better?

So it's a couple of things. Number one, we continue to deliver and get the operational efficiencies back into the business. You saw that in Q2 and accelerated into Q3. So when you think about both from an operating and cost performance perspective, we're seeing that flow through the business. We're also continuing to see good work from a commercial recovery perspective around margin improvement, and then, the work that the teams continue to do on managed spend. So all of those really core things that drive increased conversion, we're seeing come through the business. And then, like I said, while inflation is net neutral or maybe a little better, we're but generally that's the big driver as to why we're not seeing or able to cover some of the downside from the strike.

Right. Thank you. And then just as far as, and I recognize you'll give a guide on 2024, on the 4th you call, but just conceptually as we're looking into next year, is it fair to say that there's more runway on flowing through these business efficiencies, maybe some inflation unwinds starting to hit, are those fair tailwinds to consider into 2024?

Yes, I mean, obviously we'll give guidance, we'll update guidance in February and we're watching all of those factors pretty closely. Obviously as we get through the restart and we get a better feel for how the customers are going to run and what the outlook for production is going to be, I think it'll be, we'll have a clear picture of what some of the impacts will be for 2024.

Okay. Thank you. As a follow-up, just wanted to ask Jim about the strategy on EV, this is a question that came up earlier, two-thirds of your last backlog update was EV. So presumably there is a fair amount of spend that you have on these programs. And I recognize, you'll give us an update on where the backlog is, but, to what extent do you have the ability to moderate your spend on EV or is it that if you have programs that are in place, this is spend that's occurring regardless, even if there's risk that the programs may not materialize? So maybe you could give us a sense of, we're hearing from automakers that are pulling back on spend. How are you thinking about your spend in light of this pullback?

Yes, that's a really good question, but a very broad question. So I hope I can get to a good point here so it's clear. But, the first thing I'd start with, any supplier, we're the tail on the dog, but tail on the dog in a good way from the standpoint, if they push out their spend, that means they're pushing out their programs, it pushes out their timing, which pushes out our spend. So that's kind of the first kind of high-level way I would think about it. The second thing I would tell you is just that, and it's hard to articulate and maybe even illustrate for you, but, when we think about the way we've set our company up, let's take motors or inverters, we set them up not to be a program-specific product. They are very much so, and obviously they have some exclusivity and specific designs to them by the customer, but the core of our products, that actually goes for the mechanicals as well, is all of those are scalable up the curve. So if we implement or we install the capacity, human capacity, equipment capacity, it's essentially all flexible and modular, and we're able to kind of pull that in. So long story short, as volumes on programs are pulled in, let's say for the sake of discussion slower, we just have to spend a little bit lesser depending on the volume pull through so on and so forth, but we still will need the products. I mean, none of us on this call are at all in denial that electrification is still coming at a very fast rate. Whatever it was last year, 1% of the North American market, this year 7% of the North American market, etcetera, we all know the stats. So there is going to be plenty of pull through market, maybe not as fast in North America as Europe, or maybe not as fast as Europe as in China, but the markets are going to be there. Our products are global products. We'll be able to scale up as the customer pull throughs come through and as the end markets come through.

Great. Thank you.

Thanks, everyone. Good morning. Maybe to sort of follow up on a couple of themes already here, and I guess Jim I'll just follow on with your most recent comments. So understand we'll have to wait to hear about the backlog, and that you can sort of push investment to better time what your customers are doing. You did note that in the quarter, you did some of that, and I think that sort of helped some of that EV profitability. So how should we think about this in relation to your existing target to hit a break even in 2025? Because if the volume's lower, but you're also sort of pulling back, does that still net out to be able to hit that target, or does that change the trajectory of it at all?

Hey, Joe, it's Tim. Yes, obviously, it's pretty dynamic. So we continue to, as Jim mentioned, a lot of the investment's fungible. So we're making it, and where we can push it around or defer it or become more efficient with it, we're doing so. In terms of 2025, I think based on where we're at today and the current run rate of programs, that's probably still where we see the EV business in 2025. Obviously, it is pretty dynamic. So we'll give an update on that in February as we continue to see the market develop and what new business is able to be secured between now and then.

Hi, good morning everyone. Regarding off-highway, the third quarter saw a decline, but historically, this has been consistent for this period. I'm interested in what you're observing in construction mining, and should we anticipate a seasonal increase in the fourth quarter? I'd appreciate an overview of the key factors affecting off-highway. Thanks.

I don't think we're seeing a significant increase from a fourth quarter perspective. We've done well in recovering funds from customers and maintaining our margins. However, we recognize that we will have to give some of that back, and we started to notice this trend in the third quarter, which may continue into the fourth. The end markets remain strong, and we will keep delivering in them. Nonetheless, with some of the pricing adjustments and a pullback in inflation, we will need to concede a little margin, which will impact both our top line and margins as we approach the fourth quarter.

Got it. And then just on the commodity front, as we think about next year, looking at current spot pricing, what would be kind of the set up the positioning on commodities? Would that be an additional or could that be an additional tailwind for you into next year?

I cannot comment on next year at this time. We are currently evaluating the situation and will make decisions based on our outlook for commodities and their impact. I don't anticipate a significant effect in either direction, but we are not yet prepared to provide insight into the expected commodity impact for the upcoming year.

Hi, thank you so much. The EV topic has been touched upon several times already, but I was just wondering how much of the EV backlog is actually for light vehicles? And are you hearing any of your customers talking about a slowdown potentially because we've been hearing that from sort of like the broader market? And then can you also maybe dimension for us what you're seeing in terms of other markets given the diversification factor?

Good morning. To provide an overview, I would note that the overall slowdown in the programs regarding timing and volumes is largely in line with our expectations, with perhaps a slight pullback but nothing significant. It's important to remember that we are not a Light Vehicle company; we operate in the bus market, which has strong demand for zero emissions and school buses. Thus, the pullback is not considerable. Regarding other markets, if there is a slowdown, for instance in the Light Vehicle sector like trucks, if they are not producing electric trucks, they will still manufacture internal combustion engine trucks, which benefits our business. Since the beginning of our enterprise strategy in 2016 and reiterated in 2018, we positioned the company to be flexible with energy sources. We are prepared to adapt as needed. Tim, do you have anything to add?

Yes, just on your specific question on LV in the backlog, it's pretty minor in terms of what's actually in the backlog for the Light Vehicle EV. Mostly because our EV, as we've mentioned, is really the last of our segments, our major segments to electrify Commercial vehicle was the first. So the programs we have run, they tend to have a longer run rate in development, and so they tend to fall outside of the current LV backlog or the current 3-year backlog.

Okay. That's really helpful. And then maybe asked another way, just because what we're thinking about sort of like 2024, from a modeling standpoint, do you think like Q3 or like yearly Q3 is a better way to sort of as a good base to start thinking about 2024, if there's any sort of seasonality factors we need to consider? Thanks.

Yes, there is definitely seasonality. As mentioned, the fourth quarter is typically slower, while the second and third quarters have historically been our strongest. I believe that trend will continue. However, as I noted earlier, we will provide an update on 2024 in February, and we can discuss it then. At this moment, I don’t have any specific insights on modeling for 2024.

Okay, this is Jim. I want to share a few concluding thoughts. Thank you for your time and attention; it is greatly appreciated. From my perspective, we are seeing consistent financial improvement across all our business units. There is some seasonality in the off-highway segment, particularly in Europe, and the third quarter can be somewhat slower with various factors at play. However, the overall numbers are strong and there's significant progress across all business units leading up to where we are now. The performance has been outstanding, which might be understated as not everyone sees the daily operations involved in launching 120 programs within one company. Each program requires winning the bid, securing financing, initiating the launch, and maintaining high quality. This is impressive, and there's no adverse impact visible; the financials reflect nothing but improvement without issues like excessive freight or labor costs. I want to express my gratitude to the entire Dana team and our customers. We are facing challenges together, including major launches and the impact of the UAW situation, which feels reminiscent of the COVID experience, yet we are managing it seamlessly. This will inevitably affect Q4 financials; however, in terms of business operations and delivering excellent products to consumers, we are well-positioned. Thank you once again for your time, and we look forward to speaking with you next year.

This concludes today's conference call. Thank you for participating. You may now disconnect.