Methode Electronics, Inc. (NYSE:MEI) Q1 2024 Earnings Call Transcript

Don Duda: Right. Center consoles are really not using the vehicles anymore. At least, the vehicles that we are on pickup trucks and SUVs are more discrete touchscreens. So, that product went end of life, not only from us but this is not used in auto.

Gary Prestopino: Okay.

Don Duda: They also have a lead frame for transmissions that was very high volume for them as well and that also has I don’t know that has gone totally end of life, but that is significantly down. Those products have been replaced by a number of smaller volumes and I don’t when I say smaller volumes, still 300,000 to 400,000 units. It is not a 1 million, that’s why we’re talking about the transition here. Your systems have to be — when you have a number of products going through the plant, your systems need to be quite good.

Gary Prestopino: Okay. So, this is Monterrey, Mexico, was there a Mexican national running that plant? Or did you have someone from the U.S. doing that?

Don Duda: What we’ve done and because of the launches and the transition, we brought in, probably our most seasoned operations later to oversee the plant, and then he will train other individuals to run the plant. So, he is not a small — he is not U.S., but he is essentially, and so [Multiple Speakers]

Gary Prestopino: I’m sorry.

Don Duda: I’m sorry. That also gives me confidence that these issues will be behind us.

Gary Prestopino: Well, I guess the question I would have is that out of the plant, can you replace the sales that you’ve lost from these programs that are going end of life or slowing down to the point where you get some kind of equilibrium or even growth by the progress or whatever we got producing on smaller volume?

Don Duda: Yes. The business — a lot of the EV business that has been won, is launching out of Monterrey. And the individual, as I said, those are — we’re seeing the plant now has made those products in the past. So, I’m very confident that they’re going to see an uptick in their business. And I know I’m not happy with what happened obviously but I’d much rather have it happen now than when we are cranking up production in 2025. But that — so that plant is — will have more volume through than it had even in the center console days.

Gary Prestopino: Okay. But a lot of the…

Don Duda: I don’t like the pain here, but one of the concerns I had even from day one when we booked the center console business that we were going to be dependent upon one large automaker and we saw that in our Qs and Ks through the years. And what I like that program to continue, of course, but it didn’t and we’re transitioning again to a lower volume, higher mix. I think that gives us a better diversification and yes, we’ve had a blip, I’ll deal with that. But I will sleep better knowing that we’re dependent upon a number of customers, not just one major one. And again if that customer came and gave us a $100 million worth of business, I take it but there’s some pain, but I do like the fact that we would be diversified and I think that makes us more superior.

Gary Prestopino: Right. But I guess the last question I would have in that regard is that most of what happened there was really an operational issue in terms of just the efficiencies at the plant caused by the shift from high volume to low volume mix, I mean that’s kind of the sense that I have. It wasn’t — the biggest issue was that it wasn’t the fact that the sales weren’t where you thought they were going to big?