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Good morning, and welcome to Dana Incorporated's Third Quarter 2025 Financial Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and Q&A session will be recorded for replay purposes. For those participants who would like to access the call from the webcast, please reference the URL on our website and sign in as a guest. There will be a question-and-answer period after the speakers' remarks, and we will take questions from the telephone only. [Operator Instructions]. At this time, I'd like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.

Thank you, Regina, and good morning, and welcome to Dana Incorporated's Earnings Call for the Third Quarter of 2025. Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from what we present here today. For more details about the factors that may affect future results, please refer to our safe harbor statement found in our public filings and our reports [indiscernible]. I encourage you to visit our investor website, where you'll find this morning's press release and presentation. As stated, today's call is being recorded and the supporting materials are the property of Dana Incorporated. They may not be recorded, copied or rebroadcast without our written consent. With me this morning is Bruce McDonald, Dana's Chairman and Executive Officer; and Timothy Kraus, Senior Vice President and Chief Financial Officer. Bruce, call is yours.

Thank you, Craig, and good morning, everyone, and thanks for joining Craig, Tim and I for a discussion here on Dana's Q3 earnings. Maybe just before I get into my slide here, just stepping back and talking about kind of the puts and takes in terms of the third quarter. I guess, here's what I sort of see as the highlights. First of all, I think you'll see improving business performance, and that's something that we expect to see accelerate as we get into our fourth quarter. And the driver for that would really be a few restructuring initiatives that have been completed or substantially complete and will start to turn from sort of headwinds that are in our numbers right now with tailwinds for us going forward. Secondly, on the volume side, even though we're down year-over-year, the comps are getting better. They're negative, but they're getting better and that drives improved financial performance. On the tariff side, less of a headwind. You'll see we have minimal impact here in Q3. Our full year charge in terms of tariffs is lower than we thought a quarter ago. And then cost savings, we're on track to deliver the $310 million we talked about last quarter, but we are realizing those quicker, and that's helping us with some of the uplift to our outlook here. In terms of negatives, I'd say we have some volume softness, particularly in CV North America and to a lesser extent in Brazil. We did have JLR down for about 5 weeks in the quarter. So those were headwinds against us. And then the last thing I'd sort of point out is we do have -- there has been some supplier or some EV program cancellations and we have some charges in the quarter that we took associated with that, that we expect will recover here in the fourth quarter. So just turning to the highlights in terms of the Off-Highway divestiture, that remains on track. We do expect to close here later in the fourth quarter. In terms of regulatory approvals, we've received almost all of them. We have 1 minor European country that we expect to wrap up here in the next week or so. I'd say the joint teams between ourselves and Allison are working hard to sort of all the plethora of work streams that we have in place to affect an orderly transition here in the quarter. In terms of our capital returns, you'll see in our note, we talked about buying between $100 million and $150 million of shares in the third quarter. We actually bought more than that $9.5 million or 7% of our shares outstanding. We have had a 10b5 plan in place throughout the quarter. And as we sit here today, we've bought nearly 30 million shares or just over 20% of our shares outstanding and we expect to complete the balance of the share repurchase here over the next month or so. As I said in my earlier remarks on cost savings side, really good number here in the quarter. We're almost up to our full year run rate of $73 million. We continue to look for other opportunities. I guess, really pleased with the progress our team has made on bringing these homes. Tariffs, the situation, I guess, is getting a little bit better. We continue to make progress getting USMCA compliance which reduces the sort of headwind both from an on-charge point of view, but also the margin deterioration that we see. And our outlook, our recovery rate is now up in the upper 80%. Then lastly, in terms of the balance of the year outlook, I'd say the light demand -- the light-truck demand remains relatively stable. We do have the odd production interruption here and there. But overall, Light Vehicle is looking good for the quarter. In terms of Commercial Vehicle, we continue to see deterioration in North America and to a lesser extent, Brazil. Nonetheless, the fact that we've got a better outlook in terms of tariffs, quicker realization of cost recovery, we are taking our full year guide up $15 million at the midpoint. I would note that within our guidance, we do have some volume catch-up factored in here JLR. We factored in the lower Commercial Vehicle outlook here in North America in line with like estimates out there. And then we've factored in the latest Super Duty schedule releases that we have as of this week. So with that, a good solid quarter. And Tim, I'll turn it over to you to go through the financials.

Thanks, Bruce, and good morning to everyone. Turning to Slide 6 now. Let's review our third quarter financial performance. First, a reminder, results are presented excluding the Off-Highway business, which is classified as discontinued operations. Sales for the quarter were $1.917 billion, up $20 million compared to Q3 of last year. This reflects recoveries in currency benefits offsetting the impact of lower demand. Adjusted EBITDA came in at $162 million, an improvement of $51 million year-over-year. Our margin expanded by 260 basis points to 8.5%, driven by cost-saving actions and operational efficiencies that help mitigate the profit impact of lower sales and tariffs. EBIT improved significantly to $53 million from a loss of $8 million in the prior period. Net interest expense increased $11 million to $44 million due to higher borrowings and modestly higher rates. Income tax was a benefit of $2 million. While this is down $16 million from last year, we continue to benefit from positive adjustments to the carrying value of our deferred tax assets. Net income attributable to Dana was $13 million compared with a loss of $21 million in Q3 of last year, a positive swing of $34 million. Overall, these results demonstrated an effect -- the effectiveness of our cost savings initiatives, operational improvements in offsetting market headwinds. Please turn with me now to Slide 7 for the drivers of the sales and profit change for the quarter. In line with the new reporting method, we have revised our walk presentation to include the impact of discontinued operations in the current -- for the current and prior periods. The $579 million in sales and $121 million of profit removed from 2024, represents the Off-Highway business being sold and the accounting treatment for discontinued operations. Beginning with sales this year's third quarter volume and mix were $66 million lower, driven by lower demand in Commercial Vehicle end markets, partially offset by higher sales in Light Vehicle. Production disruptions at certain customers had minimal impact on Light Vehicle System sales in the quarter. Performance drove sales higher by $8 million due to pricing actions, while tariff recoveries totaled $49 million. Currency translation, primarily the strength of the euro against the U.S. dollar, yielded $21 million in higher sales compared to last year. Moving to adjusted EBITDA. Volume mix lowered EBITDA by $35 million. This was a decremental margin of about 50%, higher than we typically expect, reflecting significant mix changes and continued operational impacts within our thermal products business, including battery cooling. But recall, we are breaking out performance, which includes efficiency gains in manufacturing separately. Performance increased profit by $11 million due to pricing and efficiency improvements across both segments. Cost savings added $73 million in profit through the actions we have taken across the company. This brings us to $183 million to date, and we are securing our increased target of $235 million in savings for the full year 2025. Tariff impact in the quarter was minimal at just $1 million. Due to the catch-up in tariff recoveries, we expect to see continuing profit headwind in the future, but we do expect recovery of majority of this impact this year. Next, I will turn to Slide 8 for details on our third quarter cash flow. As I discussed on Slide 6, the accounting for cash flow includes both continued and discontinued operations as shown here on [ Slide 9 ]. For the third quarter of 2025, we delivered adjusted free cash flow of $101 million which represents a $109 million improvement compared to the prior year. This strong performance was driven primarily by higher profitability and lower working capital requirements. Onetime costs primarily related to our cost savings program were $17 million, which is $8 million higher than the prior period. Net interest increased by $11 million, primarily due to higher borrowing costs associated with the capital return initiatives. Taxes were lower at $47 million compared to $72 million last year, driven by the timing of payments. Working capital improved significantly by $76 million, reflecting better management -- inventory management and timing of receivables and payables. Capital spending was $59 million, up $16 million year-over-year as we continue to invest in new programs to support our backlog. Overall, these factors combined to deliver a substantial improvement in free cash flow, positioning us well to achieve our full year target. Please turn with me now to Slide 9 for an updated guidance continuing operations. For all our targets, we have narrowed our ranges as we approach the end of the year as we remain confident in achieving our targets. We expect sales from continuing operations to be approximately $7.4 billion at the midpoint of the tightened range. Adjusted EBITDA from continuing operations is now expected to be about $590 million at the midpoint of the narrower range. This is approximately $15 million higher than previously anticipated, driven primarily by accelerated cost savings and performance improvements. Full year adjusted free cash flow is anticipated at $275 million at the midpoint of the tighter range for the year. The profit improvement in continuing operations is expected to be offset by lower profit from discontinued operations. Please turn with me now to Slide 10 for the drivers in sales and profit change for our full year guidance. As with the quarterly walk, we showed earlier, our full year guidance walk adjusts 2024 for estimated discontinued operations and walks forward our guidance for continuing operations. Beginning on the left, discontinued operations reduced 2024 sales by $2.5 billion, so we begin 2025 at $7.7 billion in sales for continuing operations. Adjusted EBITDA from discontinued operations was $490 million reducing adjusted EBITDA to $395 million, resulting in a 5.1% margin. In this presentation, we have combined the impact of sales from continuing ops in our Off-Highway business into the volume and mix category. We are expecting volume and mix to lower sales by approximately $600 million, driven by lower demand in traditional Commercial Vehicle markets as well as for electric Light Vehicles impacting our battery cooling business. Adjusted EBITDA from volume and mix is expected to be lower by $130 million. Performance is now expected to increase EBITDA by approximately $110 million, mostly through pricing improvements. Cost savings will add $235 million in profit, as I mentioned previously. The tariff impact for the full year is expected to add about $150 million to sales, and we now expect it to lower profit by about $20 million. The majority of this profit headwind will be recovered next year. Foreign currency translation is now expected to increase sales by $25 million, primarily driven by the strengthening euro compared to the U.S. dollar, offsetting some of these sales impacts of lower volume. Finally, commodity cost recovery should drive about $15 million in higher sales and now only about a $5 million headwind to profit. The net result will be about 290 basis point margin improvement in continuing operations compared to last year as performance and cost saving actions overcome market headwinds. Next, I will turn to Slide 11 for the details of our free cash flow guidance. As I mentioned, we anticipate full year 2025 adjusted free cash flow to be about $275 million at the midpoint of the guidance range. We expect about $105 million of higher free cash flow from increased adjusted EBITDA. Onetime costs will be about $30 million higher as we invest in our cost saving programs and restructuring. Working capital will be about $105 million lower as we continue to reduce the requirements to operate the business. And capital spending net is expected to be about $325 million this year, which is $45 million lower than last year. And finally, I will turn back over to Bruce for some closing comments on Slide 12.

Okay. Thanks, Tim. So this slide is really the same as we talked about last quarter, which kind of reflects the fact that I think the business is performing well, and we're delivering on our commitment. So cost savings for the year or so the run rate that we're targeting, the $310 million, we're solidly on track. And as we've discussed here earlier, we're realizing more of that benefit here in 2026 -- sorry, 2025. In terms of our margin outlook, we've been consistent for a year now that we were going to have 10% to 10.5% [Audio Gap] margins for 2026. And it's really nice to be giving guidance here for the fourth quarter that's in top or in that range or even slightly on top of. I'd say, overall, our team is doing a great job over delivering on the things that we can control, and it's helping us offset the things that we cannot control. In terms of our return of capital to shareholders, we're committed to the $600 million this year. And then lastly, I would say, in terms of our growth story, I think it's underappreciated by the market. We have had some deteroriation or backlog due to easy program cancellations, deferrals or lower volumes. But nonetheless, our team has done a nice job this year gaining share, winning incremental programs. And so we plan on having an analyst call here in January and going through our revised backlog. We continue to win new business. And I hope to add to our backlog between now and January. With that, we'll turn it over for Q&A.

[Operator Instructions] Our first question comes from the line of Tom Narayan with RBC Capital Markets.

Yes. My first one, it's kind of an OEM question, but it relates to you guys to -- the big story from this earnings season was the big policy change, the MSRP exemption or extension that included broadening the scope of parts. And you saw that 2 large OE -- U.S. OEMs, huge impacts on their tariff guidance and presumably their volume outlook. Conversely, earlier this morning, a large European OEM reported results. It had no positive impact from that. So I was just wondering if you were seeing some dynamic here where the U.S. OEMs, which you guys have more exposure to, maybe benefiting more from tariff policy changes than perhaps others, European or maybe even the Japanese and the Korean -- and I have a quick follow-up.

Yes. Yes. No, I think you're absolutely right. I mean the rebate is based on vehicles assembled in the U.S. and obviously, the big -- the Detroit 3 make more in the U.S. than the European or the other transplants. So I think to me, the most important thing in the recent announcement in that regard is, I think there's always been some concern around are customers going to have to pass along the higher prices that in the short-term, they are eating in their margins to the end customer. And to the extent that were to happen, then obviously, vehicle demand is going to drop. And so I think that risk has substantially diminished with the new guidelines that have come out. That's kind of the way I look at it.

Okay. And then my quick follow-up, the Commercial Vehicle side, it sounds like from your prepared commentary that, that situation is deteriorating. Just curious if you could give us the context of like how typically that cycle works? And are you seeing any kind of light at the end of the tunnel?

No. We're not seeing any light at the end of the tunnel. I would say -- I mean, if you look at kind of the run rate here -- I'll talk about North America specifically in the third quarter, we're running around a 200,000 unit annualized run rate. I know from talking to our customers that the backlogs that they all have, have really been run down. I think there's a lot of uncertainty in the marketplace. There's -- we would have expected maybe to start to see some signs of pre-buy in 2026 associated with some emissions legislation changes, and we're not seeing any of that. So I think it's going to be a fairly soft market here certainly for as long as we can see into mid-2026. And at this point in time, I don't see any green shoots that would suggest it's going to turn around. I also don't think we're going to have a heck of a lot of deterioration from here either. I mean, we're at pretty historically depressed levels.

Our next question comes from the line of Emmanuel Rosner with Wolfe Research.

My first question is on the implied outlook for the fourth quarter, which, as you pointed is, is pretty strong and with margins already basically above -- slightly above the high end of your margin outlook for next year. Just curious if you can help us out in terms of sequential drivers. So it's like it will be a 200 basis point margin improvement versus Q3 on what is essentially lower revenue at the midpoint. You flagged a few exogenous events such as some of the forward schedules and the impact potentially from the fire. So just curious how to think about the performance quarter-over-quarter into the fourth.

Yes. Emmanuel, this is Tim. So a couple of things. Obviously, we've got a continued improvement coming through from our cost savings initiative. We do see mix improving in the quarter. And then I think the other big driver and Bruce mentioned this in a couple -- in his opening comments, we are at the tail end of some restructuring actions that we believe -- well, which have some headwinds certainly through the third quarter that we think will also drive additional performance and better profitability into the fourth quarter, and that provides us a great springboard into 2026 as we get some of these actions behind us. And we did announce the closure of a battery cooling plant earlier in the quarter. So -- this is part of what we're seeing, and we're continuing to work to improve the cost base of the business across the board. So you'll see those come through in the fourth quarter as well as next year.

That's helpful. And then just honing in on the top line and the mix dynamics. So -- could you give us a little bit more color around what mix you're referring to in terms of improving in the fourth quarter? And also maybe sort of like any color around what's assumed for some of these potential indirect impact on your customers from the Novelis fire because IHS has one view around fourth schedule and then Ford obviously give their own guidance, which had a fairly massive amount of volume production of a loss. So just curious what's embedded in your -- the schedules that you have received.

Yes. So obviously, I don't want to get ahead of our customer, but we're fairly in line with what our customer has said publicly around those, how they ultimately run, we'll see. But certainly, from our perspective, we're fairly in line with where we see Ford's public statement. In terms of mix, some of this is really the mix of products as we're moving from plant to plant. So that's -- we do have a bit better mix on some of the products where we have better contribution margin quarter-to-quarter. But a lot of it is really getting some of the restructuring and the movement of some of the product around in the plant as we rationalize our production footprint.

Yes. Maybe just one other comment on that one, kind of going the other way is if you look at our third quarter, we were -- we are pretty constrained in terms of magnets. We have facilities in China, India and Europe, where we had difficulties getting magnets. And that log jam [ knock wood ] seems to broken free here. So we do -- we do expect to have some substantial catch-up in terms of frustrated orders, which are, for us, very high margin.

Correct.

Our next question will come from the line of Edison Yu with Deutsche Bank.

This is Winnie Dong on for Edison. My first question is on the $110 million performance. I think in your prepared remarks, you mentioned that it's mostly driven by pricing improvement. I'm just curious, is there sort of like bigger programs that are all going on at better pricing? And then what are some of the other drivers that might be embedded in this number?

Yes. So some of it is as we move through and bring new platforms and new programs in place that comes with revised pricing. So that's running through there. And then the teams -- the commercial teams have done a really nice job with the customers to go get recoveries both from an economic and for improvement. So a lot of that is real pure pricing that we see. And you see that falling through. I don't have the number in front of me, but I think there's about $80 million of top line that's flowing through, and that's what you're seeing in that $110 million. The balance of that is really productivity and performance improvement at the plant level, net of all of the inflationary impacts that flow through the business.

Got it. That's very helpful. And then maybe on both Light Vehicle and Commercial. You can maybe just provide some higher-level preliminary puts and takes that you're seeing or considering into 2026?

Yes. So I think Bruce mentioned we don't -- we're probably not seeing a lot, at least through the first half on the Commercial Vehicle side, especially in North America, that there'd be a whole lot of improvement. As we look through on the Light Vehicle side, we have a number of programs that are launching next year. That should be -- should help volume. But our core Light Vehicle program, especially on the driveline side, right, Super Duty, Bronco, Wrangler, Ranger, those are all still very strong runners, and we would continue to see those well into next year to continue to drive the volume side of this and Wrangler is going to come out and have some refreshments. So that should help as well.

Yes. And maybe just a couple of other color commentary on that. I mean, obviously, with oil prices being quite soft, that's a nice tailwind in terms of large SUV. Some of the short-term deterioration that we're seeing in Super Duty, Ford has already talked about uplifting their volume next year in the middle, I think it's August of next year, they're introducing incremental Super Duty production at their Oakville facility. So I would say the tailwinds in terms of ICE, large SUV our product exposure bodes well for us as we drift into 2026 year.

Got it. I'm just a little surprised to the question, I know I didn't mind before that you're just not seeing a lot of impact in Q4 itself from one of your larger customers. Is it just because like the original guidance was conservative and therefore, even if you're taking in some of the impact, you're still retaining a lot of it? Or are they not really flowing through that impact to you guys?

Yes, it's a bit of both, right? Winnie, it's a bit of both. So we had some of this in our forecast that we had back in August. So -- and then some of it's -- the view from the customers are going to make up some of this as we move through the back part of the quarter.

And I mean keep in mind, we're -- our exposure is Super Duty, not F-150. So when they -- when you're hearing the volumes, you're hearing kind of both. And I think just given the profitability of the Super Duty, they're kind of over-rotating to try and keep that running as strong as they can.

Our next question will come from the line of James Picariello with BNP Paribas.

Good morning, everyone. Just as we think about next year, are we at a point at all to quantify the next [ slot ] of cost savings beyond the $310 million program with respect to plant closures, which you touched on in your prepared remarks and just overall, I guess, stronger execution.

Yes. Thanks for that question. It's a good one. But yes, I would say, in terms of the opportunity we have to expand our margins, we still have a long way to go. If you think about the $310 million, it's heavily focused on things that we could implement quickly without investment. And so if I just look at that bucket of costs through standardization and some systems work, we would still say we probably have another $50 million, $75 million that we can get over the next few years. If I look at the cost base outside of where we've been focusing on in terms of our plants, for sure, we've got some footprint opportunities, and we announced 1 earlier this month. I would say just given the amount of investment that we've had to make in electric vehicle over the last few years, we've made those investments, you could think about at the expense of our core operations. And so if you looked at the level of automation that we have in our plants, it is well below what you would see at other well-capitalized suppliers. I think we've got other opportunities in terms of product line rationalization. We still have a lot of products where we make inadequate or negative returns, and we're working our way through that. And then I would say lastly would be on the EV side. We do expect to continue to refine our cost base there and get that business from being a drag on our margins to being accretive. And I expect that to sort of flip around here in the next 6 to 12 months. So there is still an awful lot of levers that we can pull. I don't see 10% or 10.5% as being our high watermark. I believe we've got opportunity to continue to grow it fairly significantly over the next couple of years.

Got it. That's really helpful. And my follow-on, maybe on the topic of plant automation. How are you thinking about the right run rate for CapEx as a percentage of sales next year? And then could you just remind us what's assumed or expected for the stranded costs capture for next year as well?

Yes, James, so about sort of think of CapEx in about the 4% of sales range. So that's probably where we'll end up plus or minus. In terms of stranded costs, it's -- it's probably $30 million to $40 million. We do expect to be able to start taking a good chunk of those costs out as once we close the -- we close the transaction and move into 2026. Now some of those costs will remain because we'll have some transitional services that will need to be provided, but they'll be offset with payments from Allison for that. But again, $30 million to $40 million, and we believe we'll be able to take all those out really as we get through and we exit 2026.

You'll see next year a fairly big -- within that number that Tim talked about a fairly big step-up in terms of automation expenditure next year. And I don't want anybody being misled you. Like we're not talking about humanoid robots and stuff like that. We're talking about basic automation, unloading and loading machines, AGVs moving material in our factories, we're way behind the automotive standard. And I view that as a huge opportunity for us.

Our next question will come from the line of Joe Spak with UBS.

I just wanted to maybe follow up on that last point. So -- it sounds like there's a big bucket of opportunity here, but it will require some investments. I just want to be clear, should we expect some of that investment to start next year? And then maybe savings and just say how quickly can savings come in after that investment?

Yes, we will -- I mean if you think about it, we've been spending pretty significantly on EV over the last few years. We'll -- the easy way to think about this is we plan to take some of those dollars and re-deploy them. As Bruce mentioned, we were investing in EV to some extent at the expense of some of the stuff in our normal old-school ICE plants, and we'll spend that capital to find areas. And by the way, it's a target-rich environment in terms of being able to improve the efficiency on the plant floor. I mean -- we do this every day, but this will be a bit more deliberate and accelerated as we go through and those dollars are freed up. Don't forget that as we come through the transaction, we'll free up a lot of cash flow -- operating cash flow from lower interest expense and lower taxes, and we intend to make sure that we're investing in the right places at the right returns for the business to drive shareholder value.

Yes. With that level of CapEx, we're still maintaining our 4% free cash flow guide.

Right. But some of it is redeployment and some of it's incremental is the right way to...

Yes. Yes, correct. That's correct. I mean, we're below that, obviously, today, but our view is that will have more -- given the improvement at the operating margin level, we're going to redeploy some of those dollars that we're delivering from increased profitability back into the business to kind of generate the snowball effect and continue to drive those margins higher over the next 2, 3 years.

Yes, this is fairly short payback stuff.

I guess the second question, I just want to make sure I heard correctly, Bruce, I think in your opening comments, you talked about some EV charges in the quarter, I think that related to sort of -- I don't know if that was sort of some of the plant actions you took. But then you sort of alluded to a recovery maybe from lower EV volumes in the fourth quarter. I guess, a, were those -- are those charges in the third quarter results? And then is the recovery in the guidance? And how much are we talking about here?

Yes. So we did take -- I mean, let's say, charges. We did have to book some additional costs related to some of the EV programs that were canceled during the quarter. It's a number of different OEMs. The total number is, you can call it, $10-ish million maybe plus or minus. It's not a massive number. But again, we are in active discussions with the customer over recovery of these amounts, and we expect to get those in the fourth quarter.

Yes, they just didn't match.

It just didn't match up. The accounting rules are a little different between what we got to book in terms of cost and what we have to book in terms of the recoveries and since they're noncontractual on the recoveries. But I don't want to get into specifics of programs or customers because obviously, we're actively engaged with those discussions with the customer today.

No, that's totally fine.

$8 million or $10 million in Q3 that we anticipate recovering in Q4.

Correct.

I guess what I wanted to make sure was that, that was actually in the results. You're not excluding that to...

It's included in the adjusted EBITDA number, Joe.

Our next question will come from the line of Ryan Brinkman with JPMorgan.

And I know we just had the discussion about what's next in terms of the additional opportunity to improve margin and cash flow beyond even the 10% to 10.5% and 4% of sales that you target, respectively, you continue to target for 2026. I don't think that's a premature discussion to have. I plan to ask that question myself. If you really are at 10% to 10.5% exit run rate at the end of the fourth quarter. But maybe just taking a step back, I mean, it's worth pointing out, I think consensus is at like 9.4% for next year for EBITDA margin. So maybe just review a little bit to your confidence in next year and the lack of incremental execution, I think, that may be needed to get there in on the free cash flow number too, are there like additional levers that you need to pull or you feel like you're pretty much going to be on track for that so long as the end markets are there by the end of this quarter?

So just -- so making your assumption on end markets as the premise. Bruce and I and the entire team are supremely confident in our ability to deliver what we've said for next year. In the fourth quarter, we think, is a good indication of that. Do I think there's opportunities above that. Absolutely, I do. We -- there's a lot of things can go right and a lot of things can go wrong over the course of a year. But yes, we think there are additional opportunities both in terms of margin and cash flow even in 2026. Right now, we're focused on closing out 2025, delivering the $310 million and really setting the company and the team up for delivering on next year. So like when you say the consensus is below that, Bruce and I share a bit of frustration. I mean we've been saying this here for the better part of the year, and we're really -- we're thinking that what we're going to deliver in fourth quarter will help cement the fact that we're going to deliver that 10% to 10.5% next year with potentially some upside.

Yes. I'd say, Ryan, in terms of -- here's how I look at it. We -- a year ago, we said we're going to be 10% to 10.5%. And our consensus has slowly moved up. The reason why we bought back our stock so aggressively is because we're highly confident in our number. And if you use our number, our stock price is significantly undervalued. And so it's almost like we're buying two and getting one free.

So on sale. Stock is on sale right now.

And congrats on the execution so far. Maybe just to finish on the end market point. I feel you have been -- well, others have been quicker to point out the headwinds that they were experiencing in the commercial vehicle market, both in North America and in Brazil. And I just wonder if you're situated a little bit differently relative to some of the competition. I don't know if it's a Class 5 through 7 relative to 8 or I'm not sure, but you are seeing the softening now. I mean others are saying the floor has fallen out on the new vehicle builds in North America. So just curious if maybe you've got a little bit different exposure, a little bit more on the aftermarket? I'm not sure.

Yes. So obviously, we have exposure to aftermarket, but I would assume most of the other players do as well. Look, vehicle fleets are aging. They're still up there. We do think that the run rate we're at now is still pretty low. Now we had some of this built in. So all others are calling it. I mean we were building a bit more conservative into the CV vehicle build when we came out 3 months ago. So that's part of the reason why we're not probably as calling it out as much now, and we're holding to the $7.4 billion. But I think as we move into next year, the first half is not going to be -- we're not going to see gains, but we don't see it going a whole lot lower than we are now. I just don't think even with the backdrop that the age of the fleet, they'll have to do some work to replace it.

Yes. I would maybe just adding to that one on the CV side, our business has gained share. If you look at kind of our share of wallet at our customers, we're -- we've done a lot of -- the team prior to when I got here, had done a lot of good work on re-footprinting that business. And I think we have a cost advantage model right now, and we are picking up share at our -- at the Big 3 customers that we have exposure to here in North America, which is helping to offset some of the market deterioration.

Yes, that's a really good point, right? Our share at some of these has increased significantly over the past 12 months, and we expect that to hold and continue to increase.

Our next question will come from the line of Dan Levy with Barclays.

Josh on for Dan today. First one. Just kind of trying to wonder how we should bridge the 4Q margin into 2026. I understand on the slides, it kind of shows the main drivers of increased margin. We're trying to figure out if there's anything weird in 4Q that wouldn't, I guess, imply like a larger step-up in margin in next year?

No. I mean these are really -- if you look at Page 12, right, those basis points are off of our total 2025 full year continuing ops basis financials. So they're not off of the fourth quarter. But obviously, when you look at the fourth quarter, it's highly indicative of what we -- why we believe the full year overall run rate bridges into that 10% to 10.5% next year.

Okay. So I guess we should assume that -- I mean, I guess a decent portion of those main drivers are included already within the 4Q margin?

Yes. Think about the cost saving. It's 100 basis points. We -- I mean our fourth quarter, when you look at the full run rate out of 2025, right, we're going to deliver $235 million. We had $10 million last year. That's already in $245 million off of sort of where we were at in 2024. So like that incremental $65 million of -- or $75 million of cost savings runs through next year, and we'll have a full run rate of $310 million. So that's 100 basis points-ish right there. And then stranded costs, right? We just talked about that. That adds some incremental margin in the business because right now, when you look at our continuing ops, it's burdened with the stranded costs that we expect to take out. So to say it modestly, I think from our perspective, moving from where we're at on a full average basis this year to 10% to 10.5% next year, we do not see -- assuming the markets hold up, that we're going to have any trouble getting to 10% to 10.5% next year. And again, our fourth quarter run rate supports that in a very strong manner.

Another follow-up. I know you mentioned some of your key platform volumes are holding in next year. I know some of your customers have mentioned that just given the regulatory environment, some of the platforms can go to, I guess, with your mix off-road performance trends. I was just wondering if you would have like -- I'm going to see a significant benefit from some of those [ power chain ] changes?

Yes. I mean, obviously, better mix. I mean, we're one of the original creators of the 4-wheel drive vehicle where we created the Wrangler or the Jeep for the government for World War II. So yes, richer mix, larger axles. So if you think of Wrangler, right, if that mix moves further to Rubicon, that's much better for us. We have more content on it. The same would be true for Bronco. And Bruce already mentioned Super Duty with Ford's plans to expand that capacity and build more trucks for us, that's a great program to have content on. And that content, if it gets richer, is better for us as it is for the OEM.

Our final question will come from the line of Colin Langan with Wells Fargo.

Great. I just want to follow up on the sequential margin increase of $220 million on lower sales. I mean, just to make sure I'm capturing all the factors, you have the incremental cost savings from Q3 to Q4. I think you mentioned like $20 million of EV headwinds and those will get recovered. So it's like -- sorry, $10 million of headwinds that will get recovered. So $20 million maybe swing quarter-over-quarter. And then I think mix. Are those the big factors? And then a little surprised by the -- I thought you said in the last quarter, you had taken most of the actions. So I'm a little surprised there's even more coming sequentially in Q3 and Q4.

When you say -- Colin, this is Tim. And when you say actions, what are you talking about for actions? You talked about the cost saving actions?

Yes, I thought that was the comment you made last...

Yes. No, I mean -- but I mean, we had a -- we still have additional actions coming through the third and into the fourth. Now I think the incremental or sequential savings will be lower in the fourth quarter. It's implied when you look at our $235 million. So they're obviously slowing down. But right, we're on track to have a run rate exit at 310 coming out. But we do have -- we do have those actions. There's also additional performance actions at the plant level that will come through in the fourth quarter. I mentioned, hey, we're in the middle of rationalizing some product, and that's been a headwind for us in our performance and in the volume and mix through the first 3 quarters of the year, we do see that improving as well. So that's -- all of that combined continues to drive that margin from quarter-to-quarter up.

Okay. Got it. And then I think in the past, you've mentioned that the backlog of $300 million for next year is still pretty much intact. Has that changed much with some of the EV cancellations that you just mentioned on the call. And in the past, it was like 70% EV or something. What are some of the ICE launches that are going to help as we think about next year? .

Yes. So I don't want to get into the specifics, but our backlog has been impacted by program delays and cancellations. I think what we want to do is we'll take you through a pretty fulsome review of backlog and how it looks and how it shakes out in January, probably mid-January so that you get a really full view. We're right in the middle of finalizing our plans for New Dana. And we want an opportunity to really have a -- give you the full information and be able to answer your questions then. So I think that's it. But we do see increases in ICE, no question about it from a backlog perspective.

There's EV in there, but the proportion will be more ICE.

Yes.

Okay. But nothing -- has anything changed since the last quarter with the comments on...

Yes, sure. I mean, obviously, we've had cancellations in EV. I mean like we talked about the [indiscernible]. Absolutely, that's impacting -- that will impact some of the backlog that we have out there.

And delays.

Yes.

Okay. Maybe with that, we'll sort of get into some closing comments here. So first of all, and it goes without saying, thanks to the Dana team for continuing to deliver on our commitments, like I said earlier in my comments, despite external headwinds, we're over delivering on the things that we can control, and I couldn't be prouder to be part of the team. A year ago, we committed to 3 things: one, selling our Off-Highway business, and we're very close to having that done. When that has been completed, we will have returned a substantial amount of capital to our shareholders and still be left with what we think is a best-in-class balance sheet in terms of our sector. We committed to $200 million of cost reduction, which we subsequently up to $310 million, and we're in great shape and basically at that run rate here this quarter. And then lastly and very importantly, we said we could get to double-digit margins in 2026, and we're exiting 2025 at that level. I know there was a healthy amount of skepticism around some of our -- some of these commitments last year, but hopefully, the market also recognize that the Dana team is delivering on its commitment. Despite some EV deterioration, we have an impressive backlog that we will talk about in January, it does have a combination of both ICE and EV. But as we said before, EV will be a smaller percent there. And we'll see a lot more details on our January call. Long-term, I continue to see a lot of upside in terms of our margin potential. I think a combination of us getting our margins up to the double digit and growing them beyond the 10% to 10.5% in 2026, combined with our balance sheet, we believe we're going to be rewarded with multiple expansion. And so I think we've got an extremely motivated management team here. I couldn't be prouder of the accomplishments year-to-date, and I think our best days are in front of us. And so with that, thanks for joining us on our call today.