Aptiv PLC J.P. Morgan Automotive Conference

No, Raj, thanks for having us.

Sure. Thanks everybody for joining us this morning. As you take a step back and you look at Aptiv and how we're positioned and how we think about the business and how we describe it, is we have advanced hardware solutions, that includes sensors, advanced compute, interconnect sort of solutions, a software tech stack. Those solutions enable, effectively, things to sense, think, act, and then we say optimize. And that matches our product portfolio. It's what we enable and have enabled in the automotive space for a very long period of time. And it's increasingly what we're working to enable across other industries as well, in spaces like the aerospace and defense sort of sectors, and other markets, and thus broader industrial markets. Unique set of assets, an opportunity to take those assets across multiple markets, and enable our customers to do what they're looking to do.

So maybe I'll start with a little bit of context on each one of those. As Varun walked investors through on our earnings call. The first piece relates to just ongoing weakness in the China market. China retail sales first quarter, second quarter, and I think even from reports earlier either today or yesterday, retail sales are down 20%. So it is a weak market. We saw weakness in schedules on platforms with local China OEMs where we have a considerable amount of business. We also saw a reduction in the schedules on programs that we'd been launching starting last year into this year. So the slope of those launch curves are actually down. So that's a big piece, China. The second piece is actually exports from European OEMs into China, more specifically in and around the German luxury OEMs.

We saw in July significant takedown in schedules relative to back half of the year on some of their platforms that they're manufacturing in Europe and exporting into China, just given the weakness in the overall market there. The second piece relates to the European market. There is a program that we're launching now for a large European OEM, where that launch was delayed by a quarter, effectively. So push out of the launch, so it impacted us in the quarter. There was an expectation that we had that as a part of the award of the program and the launch of the program, we were actually going to pick up incremental car lines in brands that that particular OEM manufactures, which we unfortunately did not have that opportunity. The last thing, that OEM decided to just stay with the existing system that they had.

That's what happened there. The last piece relates really to software and services and enterprise software. We sell cloud platform software to enterprise customers. It's just a lumpier business, and as we looked at the funnel, we saw some shifting there in the quarter. Those were the big drivers. When you talk about visibility, China is clearly the most dynamic market. I'd say we have visibility, but it is volatile. Where in North America and Europe, where we tend to get EDIs get locked in typically 30 days prior to production. In China, it's a shorter period of time, maybe it's two weeks, and just given the dynamics in the market, we saw more fluctuation near term than what we normally even would see in the China market.