Dauch Corporation Conference

Yeah. No, maybe I'll give a few opening comments. I think we'll address that perfectly. First of all, good morning to everybody. Thank you, Vanessa, for hosting us here today, and thank you to Jefferies for having this event. It's been a great, productive day so far, and I look forward to some continued dialogue here. Before we begin our comments, though, I do refer everybody to our forward-looking statements and disclosures. You can find those at www.dauch.com. Getting used to saying that. Look, in terms of some maybe opening remarks, the highlight of the year for us, and you mentioned that a little bit, Vanessa, is our Dana acquisition. Then, of course, the integration that we've been on this journey really for the last six or so months. We're quite pleased with our progress.

Our objective was by the end of the first year to achieve a run rate of $100 million of synergies. At our last earnings call, we provided an update, and we're pacing towards $70 million at this point in time. So we're making great progress. We've got the rest of the year to go to continue to deliver and meet our objectives. We've been highly focused in the areas of SG&A and product engineering, and those results are translating into the run rate numbers that I shared with you. Our ultimate goal, though, is to get to $300 million of run rate objective by the end of year 3. Again, with $180 million at the end of year 2, and then to the full rate of the 300 by the end of year 3.

As we stated on our earnings call, again, good progress on the SG&A, good progress on the product engineering. We'll continue to drive in those areas for the balance of this year and into next year. Starting to work on some of the purchasing elements, both the indirect and the direct side of our purchasing. The indirect, we're making some good progress there back half of the year and into next year. The direct, as our CEO said on the call, given the macro environment of some of the pressures there, it's going to take us into 2027 and into 2028 to realize some of those savings. But again, pacing towards our overall objectives. So certainly excited about that, and we'll continue to drive performance in that area. As it relates to overall 2026, the first half of the year, we were quite pleased with our performance.

The macro environment was solid. Our volumes were steady and consistent, and that's really where you see our company shine in terms of the ability to deliver performance. You saw that in the first quarter, and you also saw that inside of the second quarter. As we transition now into the second half of the year, we will start to go through some key changeovers and new platforms with our customers, in particular with the full-size light-duty truck with General Motors, who are starting to experience downtime here in September, early part of October, as planned. That'll impact us here in the third quarter, as it relates to a little bit of revenue and the contribution margin associated with that. But it's a beautiful vehicle. Hope to sell very well for that as we enter into 2027.

I would also say inside of the quarter for third quarter, we continue to see some, I would say, elevated launch costs associated with that platform, as well as some other launch activity have been going on, in particular driven by some challenged suppliers. As some of that stressed macro environment is pushing some pressure on some weaker suppliers, we're encountering a little bit of some challenges there. Working through that through the course of the quarter. Again, driven by some of those macro events of oil and pressures and fuel surcharges and things of the like. But that's where we sit here in terms of the quarter. Overall volumes have been steady. We have seen a little bit of softness in some other heavy-duty platforms inside the quarter, but big picture-wise, you see the releases by S&P Global. The market is overall relatively flat and steady.

With that, maybe that's a nice introduction for Dana integration as well as where we stand for 2026.

Yeah. In terms of some of the seasonality, you are exactly right. Inside of North America, seasonality generally is a little bit in the front end of July as you go through some model changeovers. Of course, really globally at U.S. and Europe in the deep part of December is seasonal. As we have increased our European exposure this year, we have experienced a little bit more of that August dynamic as it relates to seasonality. So we have absolutely experienced that, so we have been planning for that. We generally plan our schedules and staffing around that, as well as our cost structures around that. But in terms of offsets, our focus has really been on our synergy deliveries and our integration of the two companies outside of the seasonality of the business, which really do not impact, per se, those elements.

Sure. Well, if we take our $300 million of synergies and sort of break them down into the three buckets, it is how we think about it, that is how we manage them inside the company. 30% of that is SG&A, 50% of that is really in the purchasing area, and the last 20% is in the operational side. So if you think about the, I would say, main elements in the SG&A section, it would be things such as duplicate public company costs, duplicate departments. From an SG&A perspective, the ability to optimize your SG&A footprint as well as optimize our engineering spend. So all well within our control. These are areas where we have gotten at right out of the chute. That is why we have seen the great progress that we have so far this year.

We still have more work to do in that area to drive performance, so we are excited to continue to work through that piece. The second element, the largest bulk would be the purchasing piece of our savings or 50% of our goal. I would think about that from really three perspectives. You have a direct purchasing spend that we have, so think of where we go out and buy parts that end up in our parts. We have an indirect spend, so think of service contracts, or maybe we are buying gloves for the factory workers to use inside of the production methods, things of that type of nature.

The third piece is vertical integration, where we have an opportunity, given our strong Metal Forming footprint, both on powdered metal as well as our forging, to insource components that we buy on the outside and really bring in that margin capture associated with that. Each one of these three take a different timeline and have different types of end parties you have to deal with. On the indirect side, for example, is something where we've started to work our way through. You're negotiating with service providers, et cetera. You're combining services on the outside to optimize spend. That's going quite well, and we see that continuing tracking on the timeframe that we thought. I made some comments as it relates to the direct side in some of my opening remarks.

That's where you have to negotiate with a counterparty, but also, at times, our customers involved as it relates to approval to resource or move product around. We knew and planned for that, but it's just a timing perspective as that stands. The last piece is vertical integration, and quite frankly, it's one of the things we're most excited about because we leverage really the skills that we have in the company. We'll insource powder that we buy, raw powder, we now can insource to ourself, as well as raw forgings we can insource to ourself. We're well underway of that process. Again, some of these just simply take time. You have to validate and move suppliers or bring it in-house. Again, all in line with what we expected.