Tom Narayan: Hi, guys.
David Dauch: Good morning, Tom.
Tom Narayan: Follow-ups on some of the questions that just got asked. So in the event there is this like snapback post UAW production. Just curious as to your guys’ production capacity. Presumably, you’re not obviously operating at kind of 100% or whatever, but like – I mean, there’s clearly a limitation as far as how much can be produced. Just curious if there’s any color on that dynamic. Like can you – or are you at all seeing enough inertia to kind of overproduce or do weekends or et cetera that you ordinarily not do. Are you seeing this like sharp snapback potential? That’s the first question.
David Dauch: Remember, many of us were running heavy prior to the strike taking place as OEMs were trying to build some strike bank protection. So we’ve got experience of doing that and running it at the higher capacity levels based on our installed capacity. I expect, as I said earlier, that the customers are going to try to make up lost units because of the work stoppage. Therefore, they’ll be pushing the supply base, not just AAM, but the full supply base to those maximum capacity levels. The question is for how long and how sustainable is that because we all need to be able to do maintenance on our equipment and be able to give our people a break. But at the same time, wherever we can provide a product to support our customers, we’re going to do that.
And so there will be stress on the system. There’s no doubt about it, but it’s a design stress by the OEMs. And I think they’re going to push the system as hard as they can, and they’ll find out which suppliers aren’t capable of keeping up and that will be the limiting factor for the industry.
Tom Narayan: Great. Next one on the EV backlog, you just said that you gave that at CES and you give one again next year. Is there any commentary on that backlog? Are you seeing any vulnerability there? Or can you – is it safe to say that that’s pretty secure as of now to any cancellations? Any kind of color on that backlog? Thanks.
Christopher May: Yes. As it relates to our backlog, we disclosed earlier in the year, no significant cancellations at this point in time.
Tom Narayan: Okay. Great. Thanks a lot.
Operator: Our next question comes from Joe Spak from UBS. Please go ahead with your question.
Joseph Spak: Hi, everyone. A couple of questions here. One, on the operational challenges you listed, which – and you know this sort of chart with the circle is helpful. But what – like what would be the factors that would cause either an acceleration or a delay versus getting things back in order by that second quarter 2024 timeframe? Is it really labor or – which is a little bit outside of your control, especially if it’s sort of further down the supply chain to your suppliers? Or is it more stuff under your control that would cause it to lean one way versus the other?
David Dauch: Joe, this is David. Clearly, the biggest issue for us is just the labor availability side of things. We had some major shortfalls on labor availability or labor scarcity in a couple of our critical metal forming plants. We’ve now dealt with that. The bigger issue that we’re dealing with now is we’ve got the bodies. Some of the bodies don’t have the same experience level or a skill set level. Therefore, it takes us a little bit longer, and we lose some efficiency or we drive inefficiencies into our operation that also lead to scrap and other premium costs. So now that we have the bodies, it’s a matter for us to getting them trained and up to our standards which will then help us alleviate those premium costs that we’re incurring right now.
So I think the biggest issue was just labor availability. I think we’ve addressed that between permanent hires as well as contractor temporary hires, but the biggest thing now is going to be within our control with respect to getting them up the learning curve and then minimizing the premium costs that we’re incurring.
Joseph Spak: If I could just follow up there, and maybe I misunderstood, but I thought you were sort of implying that there’s labor challenges even broader through the supply chain maybe to your suppliers. Is that not the case? And if your suppliers continue to have some issues or challenges could that, in turn, impact you upstream?
David Dauch: Joe, there’s still labor availability or scarcity issues in the marketplace across the supply base. So we all run the risk, not just AAM, we all run the risk of that. I mean, clearly, we’re working with our various tiers to try to understand where we have risk and mitigate that risk wherever possible. Over the last couple of years, AAM has in-sourced a lot of work. So it’s within our control in many cases. But we do run some risk, and we are monitoring several suppliers right now that have labor scarcity issues.
Joseph Spak: Okay. And then second question, and I think you sort of touched on this a little bit earlier, but maybe to ask it a different way. Like you mentioned some of the recoveries were maybe pushed as you had some customers that were somewhat distracted this quarter. Maybe if you could quantify that one, that would be helpful. But two, obviously, the – your customers are facing increased costs next year and the year after as well. So it seems like maybe those negotiations if they are pushed, get a little bit tougher. And I’m just wondering if you have any early insight into how you go after what is rightfully yours, whether that is lump sum payments or maybe it sort of takes the form of piece price adjustments or maybe even securing future business.
David Dauch: Yes. Like I said in my remarks, many of our negotiations in the third quarter where we expected to bring resolution got postponed or pushed into the fourth quarter and understandably so because of the focus on work stoppage and the labor negotiations. We’ve been in earnest discussion with them. We continue – as I mentioned here in the fourth quarter, there’s always dynamic tension that there’s there. We’ve got to find a solution that’s mutually beneficial to both of us. We can’t just absorb all the economic inflationary issues that are going on. You know what I’m talking about there. At the same time, it’s going to be – it won’t be the same solution, I don’t think for every customer, and we’ll do our best to do that.
But at the same time, it could be lump sum could be piece price, could be a number of different ways that things can get ultimately resolved. Ultimately, what we need is relief to the inflated costs that we’re incurring across the board for material to wages or labor to utilities and freight other things that we’ve encouraged – encountered over the years. We are being respectful of the fact that, and we are seeing some trends in the right direction from a macro standpoint where some of these costs are coming down. So we’ve taken some of those issues off the table, but there’s still a large number that needs to be dealt with these customers.
Joseph Spak: And any sense of the magnitude of recoveries you were expecting in the quarter that got delayed?
