Swamy Kotagiri: We still have growth of our market in Seating through that ’23 to ’26 period. So just ’24 is a blip, but we still see it going back there.
Tom Narayan: Got it. And then my next one, we heard some inventory build chatter from a particular supplier in 2023 that impacted their 2024 kind of guidance that company is basically in their own market. So — but just curious if that — is that something you guys were seeing at all on your guys and just inventory build that might be impacting your 2024 outlook? Or are you not seeing that? Thanks.
Patrick McCann: Go ahead, Swamy.
Swamy Kotagiri: I think, Tom, for us, I would say the simple answer is no, we don’t see that impact. And the other way of looking — we even looked at, I would say, safety stock last year versus going into this year. If anything, that’s even reducing. We were kind of in the magnitude of $200 million. We see it now towards the $100 million. So short answer materially we don’t see that happening in our case.
Tom Narayan: Okay, great. Thanks.
Patrick McCann: We don’t have the ability to do what they’re doing. We’re on a pull system. So we only — we’re only able to sell to our customers what they call off. So we don’t have an ability to push stuff into the supply into our customers compared to that company you’re referring to.
Tom Narayan: Got it. Maybe I’ll just do a quick follow-up at CES, you guys showcased some really impressive ADAS capabilities. We met folks from Veoneer, et cetera. Just curious as you see things evolve with, with autonomy, Level 3, et cetera. We met with some Tier 2s with LiDAR makers 2 at CES who are kind of, I don’t know, lack of better word in trouble. It seems like the Tier 1s like you guys are really well positioned in ADAS as the time horizon for things like Level 4 get pushed out farther and farther. Do you guys view these Tier 2 LiDAR players potential acquisition targets for you guys? Or is that something you would potentially do organically if and when we ever get to Level 4 happening? Thanks.
Swamy Kotagiri: Tom, I think we have been pretty consistent in saying our focus is very much on what I call the drug assist systems away from autonomy to a high degree of driver assist systems, as I call it, right, because there’s so much ambiguity on what we call L2+ and L3. That’s why I use the term driver assist functions. So given that, we believe we are in a good position from sensor capabilities, the software associated and the integration capabilities during all the sensors together the compute, call it an ECU or a domain controller of all types. So I think we’re really focused on getting through the integration process that we have, which is going on track, and we are happy to report that — so we want to get that through and there is a lot of interest from the customers and programs, and that’s launching.
So as you look into the future, the way you talked about we are really focused now on getting the market share and launching the programs and getting the growth that we talked about. On the ADAS towards the , Louis, I think we were in the $4.25 billion range. So we are on track, and we are focused on that. So will we be obviously looking at some building blocks of the future, yes. But that remains to see. I think we can give more color as we get towards the end of the year.
Operator: Our next question is from the line of Itay Michaeli with Citigroup. Please go ahead.
Itay Michaeli: Great. Thanks. Good morning, everybody. Just a couple of questions for me. First, just going back to the margin bridge this year. I just want to ask a question on the operational excellence activities? Just curious how much line of sight you have on those initiatives, how much you’ve already identified? And then kind of just remind us what you’re seeing in terms of broader production stability and kind of what you’re assuming for production volatility or stability for 2024?
Swamy Kotagiri: Good morning, Itay. If you just look at the prepared comments, I talked about achieving 75 basis points this year, which we achieved. We have good line of sight for achieving the 75 basis points in ’24 and ’25. Typically, we have continuous improvement activities and on top initiatives that we work through our operational excellence initiatives, I should say that we work through. They’re very, very granular. There is very defined streams of work that are champion by executive team all the way into the divisions. So we feel pretty good about the visibility of those going forward. But again at the beginning of the call, I made a few comments on given the volume volatility and whatever else is happening in terms of programs being pushed out and so on, we are not stopping there, right?
We’ll continue to look at any dollar spend. Does it provide the value and at what time. And maybe it’s not right now and if we attach value in the future, we’ll go back to it. But we’re looking at all of that aspect. We feel pretty comfortable from a visibility perspective for the 75 basis points coming up or adding to the bottom line in ’24, ’25.
Patrick McCann: That’s ’24, ’25 collectively. It’s not each year. It’s over a two-year period.
Swamy Kotagiri: Over a two-year period.
Itay Michaeli: That’s helpful. Just as a quick follow-up on the megatrends outlook for 2026. So just curious what portion of the revenue outlook is already booked? And maybe broadly Swamy, if you can just comment on what you’re seeing along the pace of ADAS bookings and penetration there?
Swamy Kotagiri: Yes. I think I just mentioned a little bit — a little while ago that looking at 2027, right, we were talking about the $4.25 billion roughly. And I think we are on track to that, right? That’s what we had talked about during our Investor Day. In the megatrend areas, we have talked about battery enclosures in addition to ADAS and Powertrain. Again, looking at the 2027 time frame, we were over 4.5 or $4 billion in the powertrain electrification managed sales. I think we are still on track to that. Battery enclosures, we talked in the range of $2 billion to $2.5 billion. Again, we are on track to that. We have to keep in mind that if the volumes on certain programs changed drastically, obviously, we’ll have to come back and talk about it. But we are working through those. I feel pretty comfortable to numbers we talked about in 2027. Louis, I don’t know.
Louis Tonelli: Yeah.
Itay Michaeli: Yes, that’s very helpful. Thank you.
Swamy Kotagiri: And just to add, maybe for 2026, 90% of our sales is booked.
Itay Michaeli: 90%. Great. That’s very helpful. Thank you.
Operator: Our next question is from the line of Krista Friesen with CIBC. Please go ahead.
Krista Friesen: Hi. Thanks for taking my question. Just one here on the margin guide. So for 2026, 7% to 7.7%. And then looking back to the Investor Day, the 2025 guide, I believe the top end was 7.8%. So 2026 is about 10 bps lower at the top end. Can you just walk us through what’s led you to this? And is it mostly the megatrends or a lower production environment?
Patrick McCann: Good morning, Krista. Big, big picture. When you look at the puts and takes in ’25 itself, we just look where we are today, projecting for ’25 and compared to last year. We do have a lower volume assumptions as we go through the plan. And we have some higher launch and new facility costs just because of the book business increasing, but offsetting that is some operational improvements that Swamy touched on earlier. So the net effect of those at the midpoint, we were previously at 7.35%. The impact of those is about 30 basis points. And then the last piece, again, I’m going to come back to this Mercedes-Benz G Wagon in the impact in ’25 as we into ’26 is 20 basis points alone on it. So apples-to-apples, I would say we’re in line with the midpoint of our range.
