Lear Corp

NYSE:LEA

Earnings Call Transcript 2022-Q1

[Operator]

Good morning, everyone, and welcome to the Lear Corporation First Quarter Earnings Conference Call. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I would like to turn the conference call over to Ed Lowenfeld, Vice President Investor Relations. Sir, please go ahead.

[Ed Lowenfeld, Vice President Investor Relations]

Thanks Jamie. Good morning, everyone and thanks for joining us for Lear's First Quarter 2022 Earnings Call. Presenting today are Ray Scott, Lear President and CEO, and Jason Cardew, Senior Vice President and CFO. Other members of Lear's senior management team have also joined us on the call. Following prepared remarks, we will open the call for Q&A. You can find a copy of the presentation that accompanies these remarks at ir.lear.com. Before Ray begins, I'd like to take this opportunity to remind you that, as we conduct this call, we will be making forward-looking statements to assist you in understanding Lear's expectations for the future. As detailed in our safe harbor statement on slide 2, our actual results could differ materially from these forward-looking statements due to many factors discussed in our latest 10-Q and other periodic reports. I also want to remind you that during today's presentation, we will refer to non-GAAP financial metrics. You are directed to the slides in the appendix of our presentation for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. The agenda for today's call is on slide 3.

First, Ray will review highlights from the quarter and provide a business update. Next, Jason will provide an update on the progress we've made in electrification before reviewing our first quarter financial results and our full-year '22 outlook. Finally, Ray will offer some concluding remarks. Following the formal presentation, we will be happy to take your questions. Now I would like to invite Ray to begin.

[Ray Scott, President, Chief Executive Officer]

Thanks, Ed. Good morning, everyone. Before I begin, I want to take a brief moment to extend my sympathies to all those impacted by the devastating war in Ukraine. We've contributed to the Red Cross to support medical relief efforts and we'll continue to provide support for our employees impacted by this war. I am so proud of Lear team who have provided much needed support to many of those impacted by the war.

Now please turn to Slide 5, I will provide a brief overview of our first-quarter financial results. In a very challenging environment marked with significant production declines late in the quarter, cost inflation, and continued semiconductor disruptions, the Lear team posted solid results in the first quarter. Sales were $5.2 billion and core operating earnings were $184 million. Despite lower production volumes than in the fourth quarter of 2021, both Seating and E-Systems delivered better financial performance sequentially in the first quarter of 2022.

Slide 6 outlines key business highlights from the quarter. Once again, Lear sales outperformed the industry in the first quarter, with above-market growth in both seating and E-Systems. Year-to-date business awards totaled over $1.2 billion, which will support continued growth in both business segments. The pace of business wins is accelerating, and our awards this year have increased significantly from the same time last year. We also recently won another significant conquest award in seating that will launch in North America in 2024. In E-Systems, we won a significant new electrification award in connection systems for a battery module connector. Lear 's expertise in stampings, connection systems and electrical architecture, along with molding capabilities of M&N positioned us to win this award. This battering module connector is another example of our E-Systems in seating teams, working collaboratively to support our customers and create a value proposition. On February 28, we completed the previously announced Kongsberg interior comfort acquisition. This acquisition will further advance our seat component capabilities into specialized thermal comfort seating solutions that will further differentiate our product offerings and improve seat systems performance and packaging. We also continue to receive recognition across businesses from industry partners. Two recent awards highlighted here include GM Supplier of the Year, and Fortune Magazine's World's Most Admired Companies.

On Slide 7, I want to describe in more detail some of the factors that are impacting the industry and how we are proactively facing these challenges. Industry lost over 1.7 million units of vehicle production in the first quarter alone due to the semiconductor disruptions, the war in Ukraine, and the COVID lock-downs in China. As we look ahead, we expect that the volume recovery will be muted in the near term. And that industry conditions will continue to be challenging well into 2023. Other headwinds include elevated commodity costs, rising input costs, and the strengthening of the U.S. dollar. As we navigate through this more complex and volatile environment, we remain very focused on controlling what we can, including aggressive cash management and working collaboratively with our customers to reduce costs.

We have stepped up our restructuring spending this year to further streamline our business and improve efficiencies. This focus on operational excellence and process improvements runs deep in our DNA at Lear and we will continue to be a leader. A great example is in Brazil where we combined portions of our Seating and E-Systems operations into one location to create a more flexible and efficient environment, where taking what we learned in Brazil to other manufacturing facilities and we are now beginning to explore, future programs with our customers across our two segments. We have a unique advantage as there are certain manufacturing processes across our two businesses that can be co-located to lower our costs and flex our labor within one manufacturing plant. We're continuing on the path we started a couple of years ago to review each product in the portfolio. And to target our investment dollars in areas that provide the best returns. Consistent with this strategy, we have begun to exit certain product lines in E-Systems, including traction inverters, cord sets and audio on lighting.

When the industry recovers and volumes return to trend levels, we are confident that our focus on improving our cost structure today, coupled with the targeted investments in seating in these systems, will increase profitability and financial returns. Turning to our seating business on slide 8, we've had a great start to the year with new business wins in all regions, including multiple awards on SUVs, CUVs, and electric vehicles. And the conquest award, I mentioned earlier, supports our growing jet market share. Net conquest awards, so far this year, total about $200 million. Our key ongoing and upcoming launches over the next couple of months are all on track, including the Mercedes, EQE and EQS SUV, Range Rover Sport, and the BMW X5 and Seven series. Building upon our 2019 pace award winning configure plus technology, Lear was named as a finalist for an Automotive News PACEpilot award for our occupant safety system, which was co-developed with [Indiscernible].

It is the first ever safety system designed for removal seating. This system expands our Configure plus product offerings and enhances our overall capabilities. As the seat supplier with the most complete component capabilities, Lear has created a unique value proposition for our customers by designing and sourcing components that historically have been directed. We can build seats with better performance at a competitive cost. As a result, certain customers are increasingly willing to consider alternative designs and let Lear directly source more seat components. This will allow us to provide superior products for our customers, as well as protect our -- and expand our jet market share.

Slide 9 provides an update on our Kongsberg acquisition which was completed on February 28th. The integration is ahead of schedule and the business is already tracking above our initial estimates. In the short time we have owned the business, we have already won two new seat heat awards with the global electric vehicle manufacturer for vehicles produced in the United States and China. The Kongsberg acquisition puts us in a position to use our complete seat expertise to efficiently integrate massage, lumbar, heat, and ventilation components with unique foam and trim covers.

As the only Seating supplier with these capabilities, we can create a modular thermal comfort solution that achieves world-class performance and reduces in part complexity and cost. Today, the total addressable market for thermal conference solutions is expected to grow about two percentage points faster than the vehicle production. We are confident that this market will grow faster as Lear 's improvements to package and performance allow these luxury features to proliferate to the second row and into more mainstream high volume programs.

On Slide 10, I will provide a brief update on our E-Systems business, which continues to benefit from new business awards, strategic transactions we completed last year, and the industry shift to electrification and content increases. The battery disconnect unit we engineered and designed for General Motors battery electric truck platform is in production on the GMC Hammer and volumes are scaling as GM expands its product portfolio. Since we bought M&N last year, we have grown the business and identified product expanses using their technology. We continue to see additional growth and cost savings opportunities, and are expanding M&N operations internationally to support these efforts.

The joint venture with Hu Lane has accelerated growth and increased our capabilities in connection systems. We already have identified and implemented solutions to use Hu Lane connectors rather than buying from our competitors. We also recently won a new business award with Geely in China for a sub-assembly that includes a wire harness and a connector for our high-speed data solution. Key launches in E-Systems are on track, including new low voltage and high voltage wiring for global manufacturer of electric vehicles in the United States and Europe. Looking ahead, we expect that industry trends will continue to support the above market growth in E-Systems. Moving to slide 11, I will highlight products that support our rapid growth in electrification, as well as some of our key new product launches. The industry shift to electric vehicles is accelerating with traditional customers increasing their investment and racing to increase production, and new electric vehicle companies entering the automotive market. Our electrification business is growing rapidly, and we are busy quoting a robust pipeline of new products. The shift to electrification adds significant content opportunities for Lear. As electric vehicles require incremental high voltage wiring, high-voltage connection systems, and power electronics. Other than the content related to the engine, much of the low voltage wiring content on an ice vehicle is still required on electric vehicle. And we have also been very successful winning low voltage wiring on electric vehicles.

The products we are prioritizing and to support electrification include high voltage wire harnesses and connection systems, integrated power modules and battery disconnect units. Typical content per vehicle ranges are shown here, but actual CPVs can vary significantly based on the level of complexity and the size of the battery. Battery module connectors provide electrical and mechanical connections between the battery cells within the battery module. Battery packs consists of hundreds of cells packaged into a dozen or more modules with multiple battery module connectors required for each battery system. We see strong growth opportunities as electric vehicles adoptions accelerate. Integrated power modules combine onboard chargers, DC-DC converters and high voltage power distribution content in a single smaller package that saves cost and weight.

These parts are critical to manage power throughout the vehicle and efficient charging. Battery disconnect units control all power switching in and out the electric vehicle. The GMC Hummer pickup is one of the first full size trucks coming to market, and we learned a lot engineering and designing the battery disconnect unit on this brand new platform. We believe that the experience we gained over the last several years will be invaluable as we bid on other larger performance vehicles coming to market. Now, I'd like to turn the call over to Jason to provide more detail on the electrification business and review our first quarter financial results and discuss our 2022 outlook.

[Jason Cardew, Senior Vice President, Chief Financial Officer]

Thanks, Ray. Turning to Slide 13, let me take a moment to provide some additional detail on our progress in Electrification. As Ray just noted our E-Systems portfolio in wiring, connection systems, and power electronics, are all aligned to benefit from the industry's rapid shift to electrification. New business awards for electrification increased by almost 50% from 2020 to 2021 to $324 million. And for 2022, we're currently targeting $500 million and new awards more than twice what we achieved in 2020.

Our Quote Pipeline continues to grow and at $2 billion for 2022 was more than three times that of two years ago. The current Quote Pipeline is split roughly 65% power electronics and 35% high voltage electrical distribution systems. Historically, we have won approximately 30% to 35% of business via Quoting. Electrification revenue is expected to grow at a 37% average annual rate from 2020 through 2025. At last year's E-Systems product day, we had targeted a revenue of a billion dollars for 2025. As you can see from the chart, we've already achieved our original target and have now increased the 2025 target by 30% to $1.3 billion. Given the accelerating Quote Pipeline combined with our growing capabilities in Electrification Products we would anticipate additional profitable revenue growth of more than a billion dollars in this area between 2026 and 2030.

Slide 14 shows vehicle production and key exchange rates for the first quarter. Global production decreased by 4% compared to 2021. Industry volumes were again significantly impacted by semiconductor shortages. And to a lesser extent, by the war in Ukraine and COVID -related productions shutdowns in China. And as Lear sales weighted basis, global production decreased by 7% year-over-year. From a currency standpoint, the U.S. dollar weakened against the RMB, but strengthened against the Europe compared to 2021. Slide 15 highlights Lear's growth over market. For the first quarter, sales outperformed global industry production by four percentage points, driven primarily by the impact of new business in both segments, with the seating growing 5 points above market and E-Systems growing 1 above market. Growth over market in North America of 7 points reflected the benefit of new business in both segments, from Ford and General Motors, and strong production in seating on GMS mid-sized crossovers and full-size SUVs, as well as an ADI, Stellantis and Mercedes SUVs. In Europe, sales outperformed industry production by seven points, driven primarily by new business, strong performance in the luxury segment and seating, and above-market production in E-Systems across multiple OEMs, such as Ford, Volkswagen, Jaguar Land Rover and Renault. Our China business lagged industry growth estimates by 12 points due to unfavorable platform mix driven partially by customer production shutdowns that results from government mandated COVID lock-downs.

Slide 16 highlights our financial results for the first quarter of 2022 compared to 2021. Our sales declined 3% year-over-year to $5.2 billion. Excluding the impact of foreign exchange, commodities, and acquisitions, sales were down by the same 3%, reflecting primarily lower production on Lear platforms, partially offset by the addition of new business. Core operating earnings were $184 million compared to $336 million last year. The reduction in earnings resulted from the impact of lower production on Lear platforms and higher commodity costs, partially offset by a positive operating performance and the addition of new business. Adjusted earnings per share were $1.80 as compared to $3.73 a year ago. Operating cash flow generated in the quarter was $221 million compared to $248 million in 2021. The decrease in operating cash flow was due to lower earnings, partially offset by favorable working capital.

The improved working capital was driven primarily by our aggressive management of inventory levels in a difficult production environment, as well as the timing of customer receipts and supplier payments. Free cash flow was $90 million compared to $135 million last year as capital spending increased to support new launches. Slide 17 explains the variance in sales and adjusted operating margins in the seating segment. Sales for the first quarter were $3.9 billion, a decrease of $83 million or 2% from 2021, driven primarily by the lower volumes on Lear platforms, partially offset by the strong backlog. The increase in sales due to commodity increases in the Kongsberg acquisition was offset by the foreign exchange impact. Core operating earnings were $218 million, down $89 million from 2021 and adjusted operating margins were 5.6%. The decline in margins reflected primarily lower volumes on Lear platforms and higher commodity costs, partially offset by positive net operating performance in margin accretive backlog.

Slide 18 explains the variance in sales and adjusted operating margins in the E-Systems segment. Sales for the first quarter were $1.3 billion, a decrease of 5% from 2021. Excluding the impact of commodities, foreign exchange, and acquisitions, sales were down 7% driven primarily by lower volumes on key platforms, partially offset by a strong backlog. Our operating earnings were $42 million or 3.2% of sales compared to $95 million and 7% of sales in 2021. The decline in margins reflected primarily lower volumes on Lear platforms and higher commodity costs, partially offset by positive net operating performance in margin accretive backlog.

Now, shifting to our 2022 outlook, Slide 19 provides global vehicle production variance and currency assumptions that form the basis of our full year outlook. We base our production assumption on several sources, including internal estimates, customer production schedules, and IHS forecasts. At the midpoint of our guidance range, we assume that global industry production will be 3% higher than in 2021. This is lower than our prior guidance assumption of 6%.

The change in outlook is driven primarily by industry disruptions in Europe related to the war in Ukraine and recent and continuing production shutdowns in China due to increasing COVID-19 cases and government mandated lock-downs. The high-end of our outlook remains consistent with IHS forecasts for industry production of 5% compared to 2021. From a currency perspective, our 2022 outlook now assumes an average Euro exchange rate of $1.9 per Euro down from $1.12 per Euro in February. Our assumption for the average Chinese RMB exchange rate is 6.45 RMB to the dollar compared to our prior assumption of 6.35 RMB to the dollar.

Slide 20 compares our current outlook to our prior outlook for sales and core operating earnings. We are forecasting the midpoint of our 2022 sales outlook to be approximately $20.8 billion down $750 million from our February outlook reflecting the impact of the additional reductions in customer production schedules, continued elevated commodity costs, and changes in FX. The midpoint of our operating income outlook is approximately $865 million down $185 million from our prior outlook. The decline in the operating income outlook reflects the impact due to lower volumes, massive higher commodity costs, and a change in FX rates.

We have plans in place to offset the impact of higher commodity costs through a combination of performance improvements and additional commercial recoveries. We continue to take steps through restructuring actions to increase synergies between businesses and increase flexibility across our workforce, allowing us to improve our operating margins in an industry environment faced with ongoing supply constraints and uneven customer production schedules. Slide 21 provides more detail on our 2022 outlook. Key changes include the following. Our revenue outlook is now expected to be in the $20.4 billion to $21.2 billion range. Core operating earnings are expected to be in the range of $765 million to $965 million. We are increasing our restructuring costs by $25 million, from our prior guidance, to a $150 million. As I previously mentioned, these additional restructuring actions will provide long-term flexibility and improve efficiencies. Operating cash flow is expected to be in the range of $875 million to $1.125 billion. Now I will turn it back to Ray for some closing thoughts.

[Ray Scott, President, Chief Executive Officer]

Thanks Jason. Turning to slide 23, operating in this environment isn't easy. Lear's well equipped to handle these challenges as we have an experienced leadership team and extremely strong financial position. We have a long history of operational excellence and aggressively managing our cash flow. And we are leveraging these strengths to position the business, to optimize performance. In the past year, we have increased sales while reducing headcount, and we are aggressively implementing plans to further improve efficiencies across the enterprise. As we continue to review in the product portfolio, we will likely accelerate investment in certain areas while deemphasizing or winding down parts of our product portfolio that are underperforming. We are executing our strategic initiatives to properly grow our core Seating and E-Systems business. I am confident that the investments we are making today will position both businesses to benefit when the long anticipated industry recovery arrives. Our strong business business wins so far this year is evidence that our products are in high demand and that we have the right plan in place. In closing, I want to thank the Lear team for continuing to execute in a very extremely challenging environment. And now, we'd be happy to take your questions.

[Operator]

Ladies and gentlemen, at this time we'll begin the question-and-answer session. [Operator Instructions] At this time, we will pause momentarily to assemble the roster. And our first question today comes from Colin Langan from Wells Fargo. Please go ahead with your question.

[Colin Langan, Wells Fargo]

Great, thanks for taking my questions. Just for color, your raw material guidance actually only increased 10 basis points, that is surprising given how raw materials have performed. I mean, why the small change? Is it you're already baked in a lot, is it that you are just getting a lot more customer coverage, how should we be thinking about that?

[Jason Cardew, Senior Vice President, Chief Financial Officer]

Yeah, Colin. So there was a fairly meaningful change in the gross impact on commodities, and you see that in the revenue line. So there's about $130 million of additional total costs, most of which are recoverable given the contractual arrangements that we have in place and the negotiations that are ongoing, so the net impact was pretty modest. For us, the biggest driver of that increase in the gross exposure is really steel, which is a little less than $50 million higher for the full year. And then, supplier component costs increases, which are also about $50 million. To a lesser extent, we do see slightly higher cost for chemicals, utilities and freight. And if you look at the nature of our recovery agreements, particularly on steel, lots of most of the customers are now on some sort of indexing or pass through agreements there. And so in some of the component increases around directed content. And so there's a mechanical way to pass that through. And so, that's why the impact on the operating earnings is pretty modest relative to the gross impact.

[Colin Langan, Wells Fargo]

And that commodity bucket that also includes these other input costs. I mean, a lot of other suppliers are calling out labor, freight and energy. I think you mentioned freight, or is that just not that meaningful for you guys?

[Jason Cardew, Senior Vice President, Chief Financial Officer]

Yeah, for us we don't put all the inflationary costs in there. We don't have labor inflation in there, but we are including utilities and freight. We did see a meaningful increase in utility costs in the first quarter and we're assuming that that is going to continue particularly in Europe where there was essentially doubling of the costs there. And so that's also in that bucket, but it's largely just material-related adjustments.

[Colin Langan, Wells Fargo]

And just lastly, I will go back to commodities. It seems I think roughly 100 million headwind in Q1, or I think the guidance translates to about 160 for the year. How should we be thinking about the net margin impact that plays out as it starts in Q2 and then starts maybe being positive by Q4 or how should we think that the cadence of the commodity?

[Jason Cardew, Senior Vice President, Chief Financial Officer]

If you look at it on a year-over-year basis, the biggest impact is clearly in the first quarter, about a little more than $90 million, and as you progress through the year, second and third quarter would be roughly half that, a little more than $50 million in Q2, $40 million or so in the third quarter. Fourth quarter will actually be favorable year-over-year. You may recall that at the end of last year, we had -- we saw a significant run-up in steel and also higher copper costs, and we do see those moderating. For us the peak steel costs were in the fourth quarter of last year and the first quarter of this year. In North America, we have a contract that calls for an adjustment each quarter based on the trailing three months’ changes in the CRU index, and so as a result of that, our second quarter steel costs are actually quite a bit lower, 30% to 40% lower in North America than they were in the first quarter. And when we see that downward trend, not necessarily continuing into the second half of the year, but sort of somewhere in between the first and second quarter is what we would expect in the second half based on what we're seeing in the market right now. And then in Europe, on steel, just to give you some additional color there, we have a six month contract. And so the first half of the year, we're expecting to be a little bit higher than it was at the second half of last year and the second half of this year, given what's happening recently with the war in Ukraine, it's going to be a similar impact, maybe even slightly worse than in the second half of the year in Europe.

[Colin Langan, Wells Fargo]

Great, thank you for taking all my questions.

[Jason Cardew, Senior Vice President, Chief Financial Officer]

Yeah, no problem.

[Operator]

Our next question comes from Rod Lache from Wolfe Research. Please go ahead with your question.

[Rod Lache, Wolfe Research]

Hi, everybody. I was hoping you could just give us a sense from your perspective about the time-frame at this point for recovering the margin targets. At one point you were thinking that you can get back to 7% or so in the 2024 time-frame. And more specifically, if we look a little bit further back in terms of commodities, I think over the past two years you had like 150 basis points of margin pressure for commodities. What's realistic for regaining that and what's the time-frame and what's happening behind the scenes in negotiations?

[Ray Scott, President, Chief Executive Officer]

Right, I'm just go ahead and start. I'll let Jason fill in some of the numbers we're on, when we're going to get back, and how we're seeing the business financially. But let me take a step back to and I think you recall very clearly when we talked about what we're going to do as far as the E-Systems business was obviously set the organization of define it very clearly into product groups that we're focused on return on invested capital, and obviously that's all behind us. We also talked about making sure that we weren't working through long maybes but make a quick decisions on the product portfolio and where we had the right to play and where we can win and I think we've done an excellent job there and I think that is translating in the growth that we're seeing. We talked about the shift of wiring to electronics of more of a 60-40 relationship and we're on track there to continue to grow both business segments, but get a better balance between electronics in power distribution and connection systems. And so all those are moving in the right direction. I think what we've seen from our perspective is actually, some of those are even moving faster than we expect. I think the growth, looking at $2 billion of quoted activity in electronics is something that we didn't even anticipate. And if you just look at the doubling effect of the Quote Pipeline and that's because we're getting in and getting accepted in different quotes by different customers. And so we started with a very select customer base and we've been able to expand that, not just the traditional ways, but the new entrants as well in electrification. So that's really positive. And we've done a expense of my work on looking at the roll-on roll-off.

A lot of the programs that we launched -- we talked about, we're first-generation. And in some respects, over-engineered for the right intent to protect our customers and protect our reputation and make sure that we're delivering the most robust product. The next-generation of products are coming online in some cases, third or fourth are much more efficient, and we're seeing the margin expansion on those roll on programs really accretive to the backlog. So we're excited about that. And the connectors business, we talked about, and I think there's a lot of speculation on could we grow that business. And I will tell you, it's -- with the partnerships we've established with M&N plastics that we just acquired, The growth has been incredible and really supporting the vertical integration play to expand the margin. From a business strategy, we're on track and in some cases, I think we're ahead of where we would have thought. And I think one of the most exciting things as like we just mentioned is the $2 billion pipeline that we're seeing this year is significant higher than we've seen in any year. And we've been winning at a clip of 30% to 35%. And so we're very confident that we'll continue to grow and expand our electronics capabilities along with the vertical integration in wiring. And so please go ahead.

[Jason Cardew, Senior Vice President, Chief Financial Officer]

Rod, maybe before getting to reaffirming the 2024 operating margin targets for the company, talk a little bit about how we see margins progressing this year because I think it helps inform what the future looks like as well. So obviously we released the first quarter results today. As we look at the second quarter, we do expect to see continued pressure on lower volumes, particularly as a result of the COVID -related lockdowns in China, that have had a pretty significant impact on both segments, as well as weaker volumes in Europe impacting both segments and so we expect operating margins to be down slightly from the first quarter and second quarter. We expect revenues to be down slightly from the first quarter and second quarter in both segments. The first-quarter in seating had also benefited from the timing of commercial settlements. And so, you may recall when we guided to 2022 on the fourth quarter earnings call we talked about Seating margins declining from the fourth quarter to the first quarter, they actually came in slightly better than last year. And so there's about 40 basis points kind of timing benefit that's got pulled ahead from the second quarter into the first quarter. And so that'll weigh a little bit on Seating in the second quarter. As we look out at the second half of the year, we do see a modest improvement in industry volumes.

The bigger drivers are the pass-through of our commodity cost increases to customers. And in Seating it's more pronounced than in E-Systems in terms of the timing of that. In the second half we have the benefit of some of the mechanical and contractual agreements we have on leather and steel. The full effect of that shows itself in the second half of the year. And that coupled with modestly lower commodity costs in things like steel that we expect in the second half with leads of Seating margins to be up about 200 basis points from the first half to second half and in that 7% or maybe even slightly better in range as we exit the year. In E-Systems, we see the benefit of the backlog rolling on and higher volumes in the second half and they're in the 4% to 5% range as they exit the year. And so that's the launching pad number as you look out to next year in 2024. And so as you think about 2024 in the 7% target that we had previously communicated, that's based on three key drivers, one industry volumes. So if you look at IHS projections for '24, there are at around 90 million units, we're at 77.5 million units this year.

So is about 16% increase in industry volumes we would expect between now and '24 as the chip shortage and other issues in the supply chain resolve themselves. And in our key markets, North America, Europe, and China, that's more like 19%. And so due to that type of volume increase between now and then, that by itself gets the company back in that sort of 7% range. If you discount that somewhat, the second drivers, the commodity and inflationary cost pass - throughs, the cumulative of effect that on our results through the end of this year is 340 million. There's going to be some unwinding if that happens, again, mechanically and contractually next year. And then the remainder of it works its way into our pricing structure as new business rolls on and those contracts are adjusted to the current economics in the marketplace. And then the third driver is what we're doing in terms of our own net performance. You saw the positive net performance in both segments in the first quarter, you saw it all of last year. We expect that to continue, we expect positive net performance in both segments for the full year of this year. And as we continue to restructure the business, we see an opportunity to reduce both administrative costs through additional synergies between segments. And also, we see a chance to reduce labor and overhead costs longer-term as we combine certain operations. Building off of that, the first sort of pilot if you call it that in Brazil, where we combined chip and wiring in the facility. So all those things taken together give us a real high degree of confidence in that '24 outlook in addition to Ray 's comments about the strong growth that we're seeing particularly in electrification, and the profitability that new business it's rolling on.

[Rod Lache, Wolfe Research]

Okay, so when you say at the end of this year you'll still have $340 million that you've sort of absorbed of commodities and some of that unwinds next year, can you just unpack that a little bit for us? What's realistic for recoveries in the short-term? And I presume, when you are saying that the rest of it's going to require new contracts, that's presumably like another four years or so until it's fully recovered, or am I misinterpreting that?

[Jason Cardew, Senior Vice President, Chief Financial Officer]

Well, if you think about the backlog that's rolling on, it should be reflective of the new economics. And then as programs changeover, yes, that will take a little bit longer. We don't have a precise number, I think it's a little bit early, but I would expect to see a half to two-thirds of that go away over a two to three-year period, and then maybe that last third or so lags a little bit more in that four-year time horizon that you described as programs changeover.

[Rod Lache, Wolfe Research]

Okay. Thanks for clarifying that. And just lastly, this is sort of a recurring theme that you've got some conquest here. And now another piece of business, I presume it's $200 million a year or maybe $200,000 unit year kind of program. What's kind of driving that? Is there something that you're offering here from a product perspective or technical perspective, or is there some other factor that's at this point still resulting in these conquest.

[Jason Cardew, Senior Vice President, Chief Financial Officer]

Yes, I think in this case, it was our footprint and we had an advantage in where the customer was located in production of this product and we had an existing footprint that we were able to leverage and provide a more competitive cost offering. And I think it's also a result of the strong relationship that we've built with this customer and cultivated with this customer as a result of our strong quality performance and engineering performance with them, and we've executed well on programs that we have with this customer today and we were rewarded for that accordingly.

[Ray Scott, President, Chief Executive Officer]

And I'll just add to that everyone in the conquest wins are slightly different, but there does seem to be that value proposition, Rod, that we're able to. And I think it's very important, because the reason why we're vertically integrated to the level that we are and being able to manufacture our own components to create a value proposition that is, like I talked about with thermal management, it's a very important driver that we've been able to differentiate ourselves even early on right now, even in the most recent acquisition of Kongsberg, that when you walk in to a customer and you can tell them and talk to them about a value proposition that incorporates a number of different components. And I do believe the seat design when you pull it apart its inefficient. You create a modular solution that creates a better sensation for the customer, it's higher-quality and it's more efficient from a cost standpoint.

Jason in the example on the most recent one that was really a relationship that we had an outstanding reputation for delivering quality and built credibility around what we could do for them in longer term, but with other customers, this vertical integration does differentiate us and even into the extent like I said in my presentation, their willingness to open up the directed door is open and we're seeing, we're putting it in our contracts in some extent, more [Indiscernible] the business our ability to source our own components because you think about Seating. Seating is about 80% of the components in -- I think it'd be easier to get some of this pass-through right now when 80% is directed. But we're negotiating hard with them to get it all. But being able to open that door and be able to supply a solution that creates a value proposition is very unique and Frank and [Indiscernible] had taken off this afternoon to go meet with customers immediately to talk about what we can do with thermal management and how efficient it is and what we can do on future platforms. And we're last week with another customer talking to him about it. So they are very intrigued and interested in how we can help solve what is a problem today and differentiate, I believe, our brand to our customers and it's helped us.

[Rod Lache, Wolfe Research]

Interesting that's happening in Jet as well, at this point. Thanks for that.

[Operator]

Our next question comes from Emmanuel Rosner from Deutsche Bank. Please go ahead with your questions.

[Emmanuel Rosner, Deutsche Bank]

Thank you very much. Was hoping to follow-up on some of the numbers in the commodities, exposure, and the headwind for the year. So I think previously last quarter, you had said you are assuming $575 million gross impact, if I'm not mistaken, $140 million net. So what is the new, I guess, what is the -- what's newly embedded in the revised guidance? And I think you said $130 million higher on the growth side, is this not all locked in? It just seems fairly modest compared to the initial exposure, so is it not all locked in based on existing contract?

[Jason Cardew, Senior Vice President, Chief Financial Officer]

Yeah, so the gross impact now, Emmanuel, is $695 million. It's up $120 to $130 million from our prior outlook. And so that's largely driven by skill and either granted or anticipated component costs increases and then to a lesser extent what we're seeing in utilities particularly in Europe and then a little bit on the chemical side. Those are the four contributing factors driving that increase. You may recall, we had embedded everything that we were aware of plus some anticipated increases in the initial guidance. We had a significant assumption in there for that. And so I think maybe some other suppliers were a little maybe more aggressive than their initial assumptions and are seeing a bigger increase, but I think that at the $695 million we've captured the likely outcome of the gross impact for us this year.

[Emmanuel Rosner, Deutsche Bank]

Thanks, and then on the net basis, I think you were assuming 140 previously, is it now about 160?

[Jason Cardew, Senior Vice President, Chief Financial Officer]

It's 155 now, so it's up about 15, about a little less than 10 of that still, five it's utilities and then chemicals are at a balance.

[Emmanuel Rosner, Deutsche Bank]

Okay. Perfect. And then second question, gross over market. Could you maybe speak a little bit about how you see that play out for the year, by segment obviously. Because some of the geographical moves are having some impact yet 5% in seating this quarter, but only one in E-Systems. How would you see that plant for the year?

[Ray Scott, President, Chief Executive Officer]

So let me start by providing some additional color on the first quarter. We had really strong growth over market and Seating and in North America and Europe in particular. In China we had a pretty weak growth over market. In seating, we were actually negative 17%. And I think that was largely a result of the location of the premium German and OEM facilities and their supply base. So they were impacted earlier by the COVID mandated and lockdowns in China, and they are still impacted. So down to BMW, ADI, whereas the Chinese domestic suppliers actually saw 15% increase in production in the quarter. The premium German OEMs also saw double-digit reductions. And we do expect that to continue into the second quarter just based on the current restrictions in place. So that will weigh on seating growth over market, and to a lesser extent, E-Systems as well. In North America, in Seating, what we saw was the benefit of strong backlog with Ford, the Mavericks, Bronco rolling on and also recovery with GM on Equinox and Terrain which had a lot of downtime last year, and so that benefited us. And then the full-size SUVs were ramping up in the first quarter last year.

[Jason Cardew, Senior Vice President, Chief Financial Officer]

And now we're at full production, so that all helped us. Strong production from Audi on the Q5, Jeep Compass, Mercedes CLS, and Bronco Sport. So a lot of different drivers of that and we expect that to moderate as we progress through the balance of the year. So some of it was just kind of a leap comparison point in the first quarter of last year for those platforms. In E-Systems, kind of the opposite going on here. So we had negative growth over market in North America, and that's primarily driven by Ford's planned changeover of the Super Duty and the mid-cycle change on the Expedition Navigator. So they took some downtime that was planned in January, I think three weeks. And in addition to that, were impacted by the chip shortage. So those platforms were down between 30% and 50%, depending on the individual car line, and that really weighed on E-Systems growth over market. That corrects itself in the second and third quarter, we'd expect improvements there, but then again in the fourth quarter, those same platforms will be down year-over-year as Ford does in fact change over to the new Super Duty, and that launch impacts volume on all those platforms. In Europe, we saw strong growth over market in both segments. In Seating, we see the benefit of our backlog and a number of EV launches, BMW IX, the wagon version of the Taycan, Mercedes EQS and EQE. And we also saw strong volumes in Mercedes GLC, C-Class, and 911 were all up in weak markets. And so on E-Systems side, we saw the benefit of our strong backlog with Volvo, that benefited in the first quarter and also the full focus in Kluger, which had very weak production in the first quarter of last year.

And so we would expect that portion to moderate as we progress through the year where the comparisons will be a little tougher. And so we would expect based on our current set of assumptions embedded in the guidance that growth of our market will be lower in the next three quarters than it was in the first quarter. However, as I said on the fourth-quarter earnings call, to the extent customers are forced into an allocation and they prioritize their most profitable platform like we did last year, then that could benefit us particularly on the Seating side where our portfolio benefited throughout 2021 from that allocation process.

[Emmanuel Rosner, Deutsche Bank]

Okay. Great. Thanks for all the color.

[Jason Cardew, Senior Vice President, Chief Financial Officer]

No problem.

[Operator]

Our next question comes from Dan Levy from Credit Suisse. Please go ahead with your question.

[Dan Levy, Credit Suisse]

Hi. Good morning, and thank you for taking the questions. Wanted to just revisit the guidance and the revision. You're saying commodities doesn't sound like it's much worse than the prior outlook, maybe it's $15-20 million drag. I think what that implies is the decremental margin on the lost sales related purely to volume, excluding the extra costs and excluding the commodity pass - throughs. Something like 20%, which is actually not bad given what's happening in China and Europe. So is that a fair assessment that the decrementals just on that lost volume alone are maybe not as harsh as what one may have feared, and what's driving that?

[Jason Cardew, Senior Vice President, Chief Financial Officer]

Yeah, actually you have to break it down a little further than to look at foreign exchange and volumes. On the volume line itself, we did convert at 27% from the prior guidance. So it's a little higher than normal, mainly because of the waiting to E-Systems, so more than half of the production volume reduction is in E-Systems, despite the fact that it's 1/3 the size of the seat business. And so that normally converts between 25% and 30% and at this set of assumptions by program, it's just under 30%. And then in Seating, which typically converts at 15% to 20%, we're converting above 20% primarily because our China business does tend to run a little bit higher margin than the average in Seating that's the factor in just the mix of programs that in the level of vertical integration and the programs that are down in North America and Europe is also a factor that's driving that. So I would say, ordinarily the 20% to 22% average conversion rate on volume between the two segments is a good assumption to model, but it's a little bit higher, a little heavier, in this case, from our prior guidance.

[Dan Levy, Credit Suisse]

Okay, and on a go-forward basis if and I know you addressed some of this in a prior question, but if we just keep costs as it is, so the incremental margin on any volume recovery that's still going to be in that 20% to 22% range, call it 15% to 20% for Seating, 25% to 30% for E-Systems?

[Jason Cardew, Senior Vice President, Chief Financial Officer]

Yes, so I think it's important also to look at how that industry volume comes back online. To the extend its volume increases on existing platforms than you're spot on, Dan, that's the margin you should expect as that volume comes back. To the extend it comes through backlog, that it typically rolls on more in the 10% range, slightly at or above the segment margins in both segments. It depends, but it should largely be increasing volumes on existing platforms that would drive the volume increase that we expect over the next two years.

[Dan Levy, Credit Suisse]

Looks great, thank you. And for the follow-up, I want to go to Slide 7, your mitigation actions. Ray, maybe you could just give us a sense on the cost side, you are talking about some footprint consolidation, some restructuring. I guess we were under the impression that you were fairly optimize. So how much is there in terms of [Indiscernible] fruit versus stuff that needs real, you know, restructuring expenses can be a little tougher to execute. And then maybe you can also address the point on the exiting low return product lines. What products are those exactly? How much of that revenue do those account for the margin and what's the impetus for exiting these products now?

[Ray Scott, President, Chief Executive Officer]

Well, why don't -- I think there's been a lot that's changed. And you're right, we're a very efficient company, historically, obviously focused on operational excellence. And a crisis, where they say don't ever waste a good crisis. And what happened in South America, because of the volatility around volume production, changes in schedules, those types of things. We looked at how we could combine different administrative rules between these systems in Seating. And for example, engineering, purchasing logistics, right now, we have decentralized organization within Seating and E-Systems that are somewhat autonomous and independent. And so in South America, we found there were some real nice synergies between the group from application engineering, shared resources on logistics, administrative roles both sales and marketing, financials type of thing. We're able to get it some continuation of being more efficient in the manufacturing.

And I think the bulk of the opportunity really became clearer in manufacturing. We combined in some cases, like wiring has KSK, which is very similar to Just-in-Time on the wiring side. And our Just-in-Time manufacturing capabilities. We combine the two product groups together to really utilize and take full advantage of our efficiencies within our plant. One thing we recognized, yes, we were able to scale and gain efficiencies between the two product groups and it helped efficiency within the product itself, but then we're able to flex our labor. And I think it's something that's really important now and what we're seeing is our customers are definitely moving away from what used to be a global platform to a more localized, manufacturing footprint.

And so we're aggressively looking at how we can flex our footprint. You see we're always moving to facilities that can run both ice and electric vehicles and then switch between different platforms. What we're doing is very proactively saying, okay, we ran pilot, if that's what you want to call it in South America that worked extremely well for us. Can we take that, extrapolate that across our -- both our business segments? And so we're working aggressively, we brought in an outside consultant, Bain, who's helping us really organize some of the actions that we're going to be taking and we're going to analyze the data, study it, make sure that we're making the right decisions. But what we are finding with Frank and Collar here, that we're being called into a lot of meetings with our customers on how we can localize material close to their manufacturing facilities with the ultimate flexibility. Well, if you can take different product lines and flex your labor and build a drive efficiencies and get better utilization, it's a win-win, and so we're actually, in one case right now, we're quoting a customer with the idea of coupling these product lines together for our efficiencies with flexibility. And so they are very interested in it. We think that there is real opportunity here. We'll be the only company in the world that can flex our plans like this. When you talk about wiring in just in time and other components with trim, we have a global footprint that's setup. We just look at it, reshape it for localization and our customers needs, flex around their manufacturing plants. And so I think administratively, yeah there's some opportunities we can still drive and that's what we're doing. We're doing that right now, we've been working on it for several years. We continue along the process but operationally, I think we -- were studying right now but we think there's big opportunities there.

So Dan just building off of that, I think in particular to the point that Ray made around flexibility. If you think about the industry shift from EIS to electric vehicles, what we're seeing is typically lower volume platforms on these new electric vehicles and we think over time, there will be lower volumes on existing EIS platform. So having an ability to have a flexible manufacturing process that can service multiple customers, multiple programs in a flexible manner to move headcount between programs I think positions us to lower our costs and still service our customers over the coming three, four, five years. So this isn't something where you're going to see an immediate benefit. It's more anticipating the way the industry is evolving. In addition to that, we're now in our third year of lower industry volumes. And so part of this is just taking a bit of control of our own cost structure to adjust to the lower volume environment. And then in regards to your question about exiting product lines, so. The most significant of which is Audi on Lighting, that's about $200 million business for us today, and it's not an immediate exit, it's a harvesting of that business. And so it's a reallocation of the engineering talent to products and electrification

[Jason Cardew, Senior Vice President, Chief Financial Officer]

and other core electronic products in a way from audio and lighting, which will ramp down over a five-year time horizon. And there is some restructuring associated with that, mostly just the closure of one factory in Europe. The other assets around cord sets and inverters that revenue on those programs more modest. So the most significant is the audio and lighting exit.

[Ray Scott, President, Chief Executive Officer]

And I think just to, I mean, we've been very selective on where we're spending our engineering dollars and the world is changing extremely quick, particularly in the E-Systems business. And we've tried to highlight very specifically where we're focused on power electronics when we talked about in some of these engineered programs and we talked about the battery disconnect unit that we've been engineering and designing for last several years. We've gained extensive knowledge and patterns and expertise around that, and we see that accelerate, that scenario with our focus. Integrated pilot modules, that is something we're very good at with our thermal management, our efficiencies, our ability to deliver, our cost management. We've picked up some really nice wins in that area and we see that continuing to be an area of investment for us. And the battery module connectors we just recently won. A really good program and that's relatively new, but man, do we have great capabilities when we talk about across Lear and I mentioned it with our ability with structures and then the combination of the eminent acquisition in our own internal power management capabilities.

We hit a home run there and that couldn't be more proud of the team for what we won so we are being very selective. We understand the need to look at areas where we can grow profitably and what's exciting. Like I mentioned earlier, is the new business that's rolling on in the E-Systems, in particular, is accreative and is the next-generation of derivatives in engineering changes that we've made that are much more efficient. And so we're going to be selective. We have like Jason just mentioned, we've targeted the business, we're winding down and we're going to then focus on where we can grow the business profitably.

[Dan Levy, Credit Suisse]

If I could just clarify, I know you raised your restructuring costs here on based on what you're saying here. But what does this imply for go-forward restructuring costs beyond this year?

[Jason Cardew, Senior Vice President, Chief Financial Officer]

I wouldn't. I think it's too early to say, Dan, and it depends on the magnitude of the opportunity. And as we've said in the past, we typically target a one to two year payback on our restructuring investments. And so it depends on how much of this opportunity fits into that payback equation, but I wouldn't adjust your model at this stage for a meaningful change in restructuring without also adjusting the earnings that results from those same actions in that one to two year payback target range.

[Dan Levy, Credit Suisse]

Great, thank you.

[Jason Cardew, Senior Vice President, Chief Financial Officer]

You're welcome.

[Operator]

Ladies and gentlemen, our final question today comes from John Murphy from Bank of America. Please go ahead with your questions.

[John Murphy, Bank of America]

Good morning, guys. I'll just get to the first question, I mean, you haven't really addressed the fact that the schedules are incredibly volatile right now, and that's creating issues for you, but if you think about this in combination with raw spiking its antithetical to the beauty of the Seating model, that you have a variable cost structure and capacity to lot of your raw material costs. I mean you're getting caught with raw just on timing and you're getting caught on this volatility, which means that your variable costs essentially become fixed. I'm just curious Ray how you think about that. I mean, it sounds like you've got a lot of consultants running around telling you that things have changed, but they haven't, it's just these market conditions that are really creating a variable cost structure or making something look more fixed that it traditionally is. And as these things normalize, these issues will work out. I mean, how are you thinking about this? Because I mean, it seems like it's just at the moment that the model it seems a little bit wonky, but the model really is quite good when things normalize.

[Ray Scott, President, Chief Executive Officer]

Yeah. I don't disagree with you, I'm clarifying the consult. I think there's some areas where we can gain benefits and Jason alluded to it. It's going to be over time, but it does play into some of the requests from our customers on having more flexible manufacturing footprint. So set that aside. I do agree with you. And I look at this way though. I'm going to be very clear. I've told everyone we're not going to be a victim. I mean, I'm not going to sit here and hope that this this half is better than the next half for this year, but we got started operating in what's in front of us, and that's exactly what we're doing. And I do think there's opportunities within Seating to really rationalize what we're and how we're running. Our facilities, that it would be Seating is a good business when we look at it, we do have good customer relationships. And we're negotiating those settlements as far as inflationary costs, all customer first are slightly different than how they're handling it. But I do believe over time, we're going to get some reasonable agreement with each one of our customers on the jet model. And it is a bit of cost structure, we have in balancing the best of our ability right now. I hope you want to add something?

[Jason Cardew, Senior Vice President, Chief Financial Officer]

I think the only thing I would add, reason to bring in health is exposing our thought process to some outside expertise, it's really arms and legs to help us accelerate the plan and evaluate different alternatives. And this is being done, I think in a very proactive manner, trying to anticipate where the industry is going over the next five-years to make sure that our footprint in our approach to manufacturing puts us in a position to continue taking share in both segments and CNN and E-Systems where we are seeing significant growth in both cases.

[John Murphy, Bank of America]

Okay, good. That's helpful. And then just a second question on the vertical integration and you're going deeper in that direction. It seems like your customers are receptive to that. We've kind of, over the last few decades, heard this go back and forth right on vertical to not -- I'm just curious what do you think has changed here? I mean, and obviously you could get vertically integrated. You're going to want to make more money for more value-add, but the automakers have traditionally pulled the seat apart and tried the price pieces separately. I mean, why is this really kind of changing in this direction at the moment? I know you bring a lot up to the table. You can do a lot of the integration and the product work yourself. But I mean, traditionally they've gone in the other direction. I just -- are they just so tied up with AV and EV investments they're like -- they're finally saying here, you guys are very confident this. You take it or what's changed at the moment?

[Ray Scott, President, Chief Executive Officer]

Yeah. I've lived through all those cycles too, where it's gone up and down back and forth. We have control, we don't have control. I think what I'm seeing now and what I'm hearing from the customers is, one is your point. They have a tremendous amount of investment and work that they are focused it on other parts of the business. And so they're in need of resources, there need of redeploying their human capital in different ways to focus on some of the technologies and the changes within the vehicle. But I also think what is really important I think -- I talk about is creating that value proposition. You have to give them an appreciation for value proposition that works for both parties. And what we're doing. And I look at the Seating and I've been around long time where the seat has been layered on component, on component, on component, on component without a holistic look at how you really pull this all together in the most efficient manner. And I think the thermal comfort management system is a great example. And why we've gotten recently two customers that are willing to allow us to source those components. Obviously, you have to meet the specification, the quality requirements and costs and all that fun stuff, but it's the combination of foam and trim and plus pads and then you start taking the components that are the blowers and the bags and the heat modules and the electric harnesses. And you start looking at those, we can cut 50% of the part usage. I mean, obviously that ties into efficiency. That's the value proposition and it's from an efficiency standpoint for consumer standpoint and cost standpoint, much superior. And so that's what I'm seeing, is that if you give them a value proposition that says, listen, here's your targets, I can meet your targets and I can give you this value proposition which increased efficiency is more from a customer perspective, appealing. And that's what I'm saying. And so there is -- and I also think that they have other things they are focused on. I think coming in with the proposal that helps them say, okay, you go deal with that. There's a benefit there too, but I think it's the value proposition that we're offering them in combination with our expertise.

[John Murphy, Bank of America]

And then just lastly on E-Systems, and the rebalancing of the portfolio, sounds like you're getting more aggressive there and that makes a lot of sense. I'm just curious where you think this ultimately lands and who the competitive set is. I mean, you [Indiscernible]. I mean, you've been playing with all these these companies and going up against them for a long time. But it sounds like you're getting into heavier space. I'm just curious if you're running into new competitors in and how far you can take this in, what you're right to play is as you get into more high voltage and more complex or simplified architectures.

[Ray Scott, President, Chief Executive Officer]

Well, we've been going head-to-head against some of the traditional names that you mentioned in winning business. And so we can compete against those guys every day. And there are new entrants and new competitors coming into the space. And I think when we think it through, and let's just take it, break it down. We broke it down to power distribution and connectors. And we've done an incredible job competing against the traditionals. And that's more of a traditional space, I'm not seeing a lot of new entrants there, but the combination of us acquiring M&N, and then also partnering with some companies that allow us to use their library has accelerated our vertical integration play in wiring. And on the electronic side, I think what's important, I think before we were trying to be everything to everybody. And the world has changed with some of the technology innovation within electronics. And we've really honed in on what we believe is our core competencies and where we can deliver again that value proposition. And I mentioned in power electronics, it's really integrated power modules. We've been in that business back to the original volt days. We have tremendous experience on battery chargers, what we're doing with DC-DC inverters on our battery monitoring systems. Now those have all come together under an integrated power module. And so I think our vast knowledge and expertise over the years has helped us to continue to grow that business. And then really getting focused on where our core capabilities are, Like I mentioned, I don't think we're going to be everything to everybody, but where we participate, we're really damn good at it, and that's been successful for us. And so, the slide that I had on the deck on page 11 was really intended to really describe where we're focused. Battery disconnect units, we're doing a great job there, we see proliferation across customers and platforms within General Motors. Integrated power modules have done a nice job there.

We are a leader with the technologies, particularly around 22 kilowatt capabilities in our efficiencies and thermal management there. And this new battery module connectors business we just won was a combination of all of our expertise. And I think it put us in a very unique position. I think we can go up against anyone in those areas that we've been winning. And what's been great -- and I think it's important. When we talk about the backlog or Quote Pipeline, it's $2 billion. When we started talking about it was $200 million, it was $500 million, it was growing. But we weren't in on the ability to technically quote these capabilities with our customers. We've expanded the proliferation of customers. We started very selectively with Volvo Jag Land Rover, and we quickly expanded across multiple customers, and opened that Quoting Pipeline to get in, to participate in technical reviews in quotes. That's significant. And so, I'm pushing price, it's okay, if it's doubled every year then I'm expecting $4 billion next year. So he hasn't given me the green light on that. But I think it's just an example of how we've been able really to proliferate across customers with our technical expertise. But yeah, there's a lot of competitors out there, but we've done a remarkable job of growing that business.

[John Murphy, Bank of America]

Great. Thank you very much, guys.

[Ray Scott, President, Chief Executive Officer]

Thank you. Okay, so I think probably the only one left on the phone is the Lear's team. I just want to thank you for all your hard work its another tough quarter, but its really good results given what we're facing, and thank you for all your efforts and your hard work.

[Operator]

Ladies and gentlemen, the conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your line.