Good day, and welcome to the Superior Industries' Second Quarter 2019 Earnings Teleconference. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. Troy Ford. Please go ahead..

Thank you. Good morning, everyone, and welcome to our second quarter 2019 earnings call. During our discussion today, we will be referring to our earnings presentation, which, along with the earnings release are available on the Investor Relations section of Superior's website.

This morning, I'm joined by Majdi Abulaban, our President and Chief Executive Officer; and Matti Masanovich, our Executive Vice President and Chief Financial Officer.Before I turn the call over to Majdi, I would like to remind everyone that any forward-looking statements contained in this presentation or commented on today are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Please refer to Slide 2 of this presentation for the full safe harbor statement and to the Company's SEC filings, including the Company's annual report on Form 10-K for a more complete discussion of forward-looking statements and risk factors. We also will be discussing non-GAAP measures today, including value-added sales and adjusted EBITDA.

These non-GAAP measures exclude the impact of certain items and therefore are not calculated in accordance with US GAAP. Reconciliations of these measures to the most directly comparable US GAAP measures can be found in the appendix of this presentation.With that, I'll turn the call over to Majdi..

Thanks, Troy, and good morning, everyone. Thank you for joining us today to review our second quarter results. I look forward to working with all of you as we move forward.Let me first start by saying how pleased I am to have joined the Superior team.

Actually, even before joining I was very familiar with the Company, a business with a rich history as a Tier 1 automotive supplier that has clearly differentiated itself. I appreciate the opportunity to be here and to lead this team. Before moving on to the financials, a few points on Slide 3.

I've spent 35 years in automotive space in a variety of leadership positions and capacities around the globe. I have seen a lot in this sector, from restructuring to growth. And I have seen this over multiple economic cycles. My experience has been operationally focused, looking at the entire value chain from manufacturing to commercial activities.

I have a proven track record of implementing successful strategies, operating systems, and spoke structures that drive performance.As I look at Superior today, I feel I have a solid understanding at this stage of where the gaps are, and what we need to do to close them. I'll speak directly to these items in a moment.

Before doing that, let's review the second quarter financials on Slide 4. During the quarter, we continued to experience production softness in both of our regions. Industry production in North America and Europe was down 2.1% and 7.5% respectively. Looking a layer deeper. Actually our primary customers in North America were down 6%.

Additionally, in North America, we saw take rate challenges and reduced share, which were only partially offset by OEM share gains in Europe.Finally, with respect to volume, we saw overall weakness in our European aftermarket business. This was driven by high aftermarket inventory levels at our customers and lower production of vehicles.

As a result, our global unit volume declined 12% compared to last year. However, despite these volume declines, we continued to see the content growth story play out. Actually, 19-inch and larger wheels represented nearly 30% of our business during the quarter.

In fact, this improvement in mix delivered an 11% year-over-year increase in value-added sales per wheel, excluding FX. In terms of our overall value-added sales, we saw a decline of 5.3% or just 2.1% on an FX-adjusted basis. This is compared to a 5% market decline.

This highlights the relevance of our content growth and the secular trends of our business. We expect this to continue through 2019. Net sales and value-added sales for the second quarter of 2019 were $353 million and $194 million, respectively.

Our revenue was impacted by lower volumes and weaker euro, partially offset by favorable mix, the one I just mentioned earlier.Adjusted EBITDA was $49 million. This reflects lower volumes, higher energy costs globally, partially offset by the favorable mix.

In line with volume declines, we have pursued cost reduction initiatives that have delivered savings in the quarter. We have also significantly reduced our global SG&A year-to-date. We're actively pursuing other initiatives to optimize production and deliver manufacturing savings.

Our overriding priority in the near-term is, generating cash flow and reducing leverage. During the second quarter, we generated significant cash flow and reduced debt by $26 million.

In the first half of 2019, we improved our net debt position by $37 million, a great result compared to the first half of 2018, when our net debt increased by $16 million. This represents a $52 million improvement year-over-year.

Given the softer production in North America and in Europe, we are revising our full year outlook, including for units and adjusted EBITDA. Matti, will walk you through the details shortly.In light of the focus on cash, we are reducing our capital expenditures. We are maintaining our outlook for cash flow from operations.

This implies increased net debt reduction, which is a positive. We are going to continue targeting further improvements in cash.Moving on to Slide 5; I won't go through all of these points.

Overall, my immediate focus after joining Superior in mid-May, was to undertake a thorough evaluation of the business, to understand the key challenges, how we need to operate in the short term, and how we can position ourselves for future.

I felt it was important for me to immediately visit every one of our plant on operations and to meet face-to-face with most of our customers in North America and in Europe. This is what I did.

After a deep dive of the 2019 plan, the underlying assumptions, volumes, and actions required to deliver the plan, I spent most of my time with on-site reviews at each of our facilities on the ground with the team. Quite, quite a bit of time in Mexico, time at our facility in the US, and several visits to our operations in Germany and Poland.

This with special focus on our global operational challenges and opportunities.I also met with our engineering teams, reviewing our portfolio of exciting technologies and capabilities, with focus on our most critical development initiatives.

Recognizing that we need to be prudent with capital in our business, I spent a lot of time reviewing our capital investment plan, making adjustments where necessary. Finally, I held regular reviews of our most critical launches and reallocated resources where necessary.

Through all of this, I came away with a picture of where we are today and where we need to go to create value for our shareholders.Turning to Slide 6; after these reviews, here are my observations and reactions to what I have seen. Superior is a great company, differentiated on technology and customer intimacy.

We have a great portfolio of technologies to offer. It is impressive to see what we have today and what we are developing versus what was available five years ago. I was also impressed with the passion this team has for our customers and the technical depth of our talent across the globe.

My customer visit confirms the outstanding level of customer intimacy, Superior has built over 60 years, solidifying our position as a trusted strategic supplier. Finally, while I'm encouraged by the foundation that was built, we have significant work ahead of us to improve our performance.Turning to Slide 7; I have laid out our near-term priorities.

Our overriding focus is on expanding profitability and growing cash flow, especially in the near term.First, an accelerated focus on operational excellence. This includes improving our North American profitability, rightsizing production capacity, and defining a clear operating system with cadence and metrics.

Included in the North America improvement plan is foundry excellence, mocha, mill, and casting. This is a pillar of our entire manufacturing process. We need to improve first-time yields of the casting decks. Here, we have an opportunity to leverage our capabilities in Europe.

We also need to improve our scrap rates at time of launch through robust product and process designs.Second, strengthening our team and aligning our culture. We are focused on quickly closing the gaps on key leadership positions, and we have a strong pipeline of candidates.

Further, we need to establish a culture of accountability and collaboration and strengthen our direct manufacturing team in Mexico. We have struggled there due to high attrition rate over the past couple of years.

While attrition has come down, we need to improve it further.Third, we must create a profit-minded organization where we deliver value throughout the chain. Specifically, we're looking at VAVE activities and commercial discipline to enhance the bottom line.

We also have an opportunity to expand into new customers and deepen relationships with existing customers. We actually have several OEMs in North America, where we really have no volume today. We need to develop the capability to serve them.

We are in a production environment where volume is declining, so we are focused on growing our book of business across a balanced portfolio. It can't be all premium. Historically, the Company chose to pass on base level, lower-content wheels in favor of moving up the value stream, larger diameters, and premium finishes.

What we really would like to see in the numbers is, ongoing improvement in value-added sales, but also a solid book of base level volume business.

This translates into a balanced portfolio.Fourth, strengthening our portfolio, which includes commercializing and expanding finishing capabilities in North America.Fifth, and finally, improving working capital and making capital investments that have clearly defined paybacks and add value to our customers.

As I mentioned before, we are reducing our capital expenditures for this year by $10 million, as we use this guiding principle for all of our investments.Before I turn it to Matti, let me just finish by saying that I am excited for what lies ahead for Superior, in many ways. We have to get back to basics in managing our business.

We understand our challenges, and we are tackling them head on. We have a great team and a strong product offering. We are very well positioned to capitalize on the secular trends as our industry continues to evolve.With that, here's Matti, who will do a deeper review of the financials.

Matti?.

Thanks, Majdi. I'll now provide a more detailed overview of our financial performance for the second quarter and first half of 2019.Starting on Slide 8; as Majdi mentioned, ongoing mix improvement from our strategic focus on higher content wheels, partially offset unit declines, with value-added sales per wheel up 11%, excluding the impacts of FX.

That said, our North America shipments in the second quarter declined ahead of the overall market and were impacted by softer production levels. Industry production was largely supported in the region by OEMs with whom Superior has a little of no share. whereas production in our key customers was down more than market year-over-year.

We are also impacted by reduced share on base level wheels and reduced take rates.

We continue to expect these factors to impact our North America volumes and anticipate our shipments in the region to be down more than 10% in 2019 compared to 2018.Looking at Europe, our shipments declined year-over-year, mainly due to softer production environment, although the European shipments for the quarter were favorable compared to the overall market, as we continue to take share in the region.

With respect to the aftermarket, we saw a sizable decrease year-over-year following a strong second quarter 2018 and a record full year 2018, due to the softer market conditions and excess inventory in the marketplace carried by the European aftermarket distribution network. Altogether, our global volume for the quarter was down 12% year-on-year.

Despite the softer global production environment, our results continue to demonstrate our ability to capitalize on the shift towards larger, premium wheels, supporting continued growth in value-added sales per wheel.

As a percentage of our total wheels sold, the volume of 19-inch and greater wheels improved substantially, increasing nine percentage points to nearly 30%.

We expect this trend to continue to -- continue through 2019 when compared to 2018.Across our regions, these trends supported growth in value-added sales of 5.3%, essentially in line with market -- the market decline of 5%.

If you look at the change in value-added sales year-over-year excluding FX, it was down 2.1%, which is actually ahead of the market decline of 5%.Moving to Slide 9; we have provided a breakdown of unit shipments, net sales, and value-added sales by region for the second quarter of 2019 as compared to the prior year period.

Wheel unit shipments were 4.9 million units for the second quarter compared to 5.6 million for the prior-year period.

Year-to-date, wheel shipments were $9.9 million for the first half of 2019 compared to $11.1 million in the prior year period.I'll provide a more detailed review of net sales, value-added sales, and adjusted EBITDA for the quarter and the year-to-date period in a moment.

We reported net income of $7.3 million or a loss of $0.04 per diluted share for the second quarter of 2019, compared to net income of $8.1 million or a loss of $0.02 of earnings per diluted share for the second quarter of 2018.

We are reporting positive net income and negative EPS due to the impact of the accretion of the preferred and the preferred dividends as accounted for under US GAAP. Please see the table in the appendix for the reconciliation of net income and earnings per share.

From a year-to-date perspective, net income for the first half of 2019 was $9.2 million or a loss of $0.27 per diluted share compared to $18.4 million or income of $0.05 per diluted share in the prior-year period.The provision for income taxes for the second quarter of 2019 was $7.5 million, resulting in an effective tax rate of approx. 51%.

The tax provision amount is primarily because of US taxation on foreign earnings and a valuation allowance on non-deductible interest, partially offset by a benefit due to the mix of earnings amongst tax jurisdictions.

The income tax provision for the first half of 2019 was $12.5 million and pretax income of $21.7 million, representing an effective tax rate of approximately 58%. The first half rate was due to the previously mentioned factors impacting the second quarter.

It is likely the effective tax rate for the year will remain elevated due to the same factors as mentioned regarding Q2.

Cash taxes are expected to be approximately $10 million for the full year 2019, which is included in our cash flow from operations outlook.Slide 10 gives us a closer look at sales for the quarter, which were $352.5 million, a $36.5 million decrease from the prior-year period. Value-added sales decreased $10.7 million year-over-year to $193.6 million.

The reduction in value-added sales was driven by reduced volumes, partially offset by favorable mix, which resulted in a net impact of approximately $4 million, and a weaker euro, which had an impact of approximately $6 million.Turning to Slide 11; adjusted EBITDA for the second quarter of 2019 was $49.2 million compared to adjusted EBITDA of $57.2 million in the prior year.

The decrease was largely driven by lower sales and higher energy costs, partially offset by improved product mix of larger wheels and more complex finishes, SG&A reductions, and procurement savings. SG&A expenses for the second quarter of 2019 were $16 million or 4.5% of net sales compared to $22.3 million in the prior-year period.

The decrease is partially due to a reduction in acquisition and integration expenses and the alignment of reporting for SG&A between our two regions, which shifted $3 million from SG&A to cost of goods sold during the quarter.

Excluding these impacts, SG&A was down approximately 7% compared to the prior year, primarily as a result of our efforts to align costs with current industry production levels.Slide 12 provides an overview of net sales for the first half of 2019, which were $710.2 million compared to net sales of $775 million for the same period in 2018.

Over the same period, value-added sales decreased $25.4 million year-over-year to $386.4 million.

The reduction was driven by lower volumes, partially offset by favorable mix, which resulted in a net impact of approximately $11 million, and a weaker euro which had an impact of approximately $14 million.Moving to Slide 13; adjusted EBITDA was $92.4 million for the first half of 2019 compared to $109.4 million for the prior-year period.

Like the second quarter, the decrease in adjusted EBITDA was driven by volume and energy expense, partially offset by mix, SG&A and procurement savings. SG&A expenses for the first half of 2019 were $30.4 million or 4.3% of net sales compared to $44.6 million in the prior-year period.

The decrease is partially due to a reduction in acquisition and integration expenses and the alignment of reporting for SG&A.

Excluding these impacts, year-to-date SG&A is down by approximately 6% compared to the prior year, primarily as a result of our efforts to align costs with current industry production levels.Let's move to Slide 14; where I'll spend some time talking about cash flow and our capital structure.

During the quarter, net cash from operating and investing activities available for debt reduction and dividend payments was $33.8 million, a very strong result compared to $1 million in the same period in 2018.

We generated $14.9 million of cash from operating activities in the second quarter of 2019 compared to $16.4 million in the prior-year period.

The increase was mainly due to improved working capital management, including significant improvements in days inventory and days payable, which was a result of the focus and initiatives that Majdi just spoke about.Net cash used for investing activities was $7.1 million, including capital expenditures during the quarter to support expansion and enhancement of the Company's portfolio of products and technologies, as well as ongoing maintenance of $15.3 million.

These investments were partially offset by the sale of other assets for $8.2 million.During the second quarter we paid dividends of $6.8 million, which includes preferred dividends, dividends to common shareholders, and dividends to minority shareholders of our European subsidiary.

Also during the quarter, Superior opportunistically repurchased EUR20 million base value of its 6% senior notes on the open market for EUR17.4 million, resulting in a net book gain of $2.4 million, which is included in other income. Given the non-recurring nature of this gain, this has been deducted to arrive at adjusted EBITDA.

The bond repurchases and other debt payments during the quarter resulted in debt principal reduction of $26.1 million, again, a very solid result.I'd also like to add that this is the first time the company has proactively repaid incremental debt beyond the required amortization since closing the acquisition more than two years ago.

In terms of liquidity management, we continue to have significant borrowing capacity under our US and European revolvers.

During the quarter, we sought and received approval from our European Bank group to up-size our European revolving credit facility by EUR15 million to EUR45 million and extend the maturity to 2022, which provides even more flexibility and availability to our existing capital structure.Our total available liquidity, inclusive of cash on hand and the unused portions of our committed revolving credit facilities, was $264 million at the end of the quarter.

Net debt at quarter end was $601 million down from $638 million at year-end. We also had significant additional availability to sell receivables under our accounts receivable program as of June 30th.

With respect to covenants on our debt, we have a 4.5 times net debt to adjusted EBITDA leverage test on our US revolver, that is -- that is tested if we are more than 35% drawn, which represents $56 million on our US revolver. As of the quarter-end, we had no borrowings under the revolver and therefore we're not required to test.

In terms of net-debt-to-adjusted EBITDA, we currently sit at approximately 3.6 times net debt to trailing 12-month adjusted EBITDA.Now let me provide a review of our 2019 outlook on Slide 15, which has some revisions.

For full year 2019, we now expect unit shipments to be in the range of 19.5 million to 19.9 million units, with net sales in the range of $1.39 billion to $1.44 billion. The decrease in net sales is a combination of volume and lower aluminum prices compared to the prior outlook.

While mix has improved even from the last time we provided guidance, we are revising down our outlook for value-added sales to the range of $755 million to $795 million due to lower volumes, partially offset by further improvement in our mix.

We are also revising down our adjusted EBITDA outlook to the range of $165 million to $180 million, commensurate with the lower volumes. Cash flow from operations is still expected to be in the range of $125 million to $145 million.

And as Majdi said, we are going to continue to look for ways to improve this target, but are not changing this range at this point in time, given we still have improvements built into this number that to be -- that we need to achieve including additional working capital actions in Europe.Finally, we are lowering our CapEx -- our capital expenditures guidance to approximately $75 million from $85 million, due to the focus on paybacks and rightsizing the spend relative to our volume outlook for the year.And with that, I now like to turn the call back to the operator and open up for questions..

Thank you, sir. [Operator Instructions] And our first question comes from Vahid Khorsand of DWS Financial. Please go ahead..

Good morning. Thanks for taking my call, Majdi, and welcome to Superior..

Thanks, Vahid..

My first question is -- like a lot of the things you're saying it goes in line with some of the things we brought up on previous calls. But I have a question for you on your focus to bring in more of the baseline -- business.

Does that mean you are -- you believe that being -- bringing maintenance wheels lower than 30% is the future of Superior?.

That's a great question, Vahid. Actually, if you think of the strategy and moving up the value chain to premium -- to premium and to content, it's a good strategy, it worked for us and it served us well. What I think needs to happen is, we need to continue to focus on premium, we need to continue to focus on content.

And this is -- this is really a competitive advantage for us. We just cannot walk away from the rest of the portfolio. We need a balanced portfolio. And what that would do for us, Vahid is, it basically allows us to respond as -- the market is volatile and all of the box -- fluctuations in our schedules..

Okay. Along the same lines there were lot of reports that Chinese auto sales were going down. And I know there's tariffs on Chinese wheels.

But is there some type of -- any level of fear or threat that Chinese wheel manufacturers will just start dumping wheels in the United States?.

Listen, I mean, Chinese and the competitive environment in our industry has been there for many years and we've been able to respond and respond well. The current tariff -- the current tariff situation did present an opportunity for us, we won some short-term wins.

But frankly, it remains to be seen how it plays out and how long the current situation remains. We remain focused on our customers and our overriding priority, as I mentioned, has grown our profitability and grown our cash flow..

And then to Matti, I see you got the overall EBITDA margin back up to 25%, is that something that we should expect to continue for Q3 and Q4? Or will it just level out at 22%?.

I think we had some great performance. I mentioned some procurement savings, etc. Look, we're going to try to hold the line on margin coming off of Q2. Clearly, that's going to be our goal. If you look at our guidance range though, you'd see that it's going to be a cautious -- it's a cautious guidance range down.

We have a lot of launches in the second half, clearly and just historically we've underperformed in the second half of the Company. So taking a bit of a prudent approach as we give guidance here. But we are going to try that, we are going to maximize EBITDA. Thanks..

Perfect. Thank you..

Thanks, Vahid..

Thank you. [Operator Instructions] We will next go to Gary Prestopino of Barrington Research. Please go ahead..

Good morning, everyone. A couple of questions here. Just a thought that came to my mind. I mean, obviously, you're still having issues in Mexico, right, with producing more of the higher-end product.

Do you see the scenario, Majdi, if you start going into more of the lower-end wheels, would you be able to switch some of that higher-end production to the plant in Fayetteville, Arkansas in the United States and then have Mexico do more of the basic wheels?.

Yes. Listen, and I think the refocus on the entire portfolio from a wheal size and content standpoint. My view and I've been through the plant for days and it doesn't really present a challenge for us, I view it as an opportunity.

As you look at our footprint and what our teams have been able to do in North America to flex and adjust for market fluctuations and product changes, they've done just a fantastic job. Fayetteville for us is an absolutely outstanding capability that helps us absorb complexity, it helps us absorb volatility.

And as you -- specific to your question, switching from higher-contented wheels to more lower-end wheels, the manufacturing process is flexible. I have no concerns there..

Just to add a little bit of color on that, Gary. You know, not all of the wheels we generated at Mexico are 19-inch and bigger. We have dedicated lines, casting decks, machining cells, et cetera, that are focused on lower end as well.

I think what we need to do is balance the portfolio, maximize capacity to the extent we can in all product lines, and that's this balanced portfolio that Majdi is speaking about. So, we're not walking away from the strategy at all. Quite frankly, we'd love to continue to penetrate like we have in the greater than 19-inch wheels.

And we -- and our forecast looks like we are going to continue to penetrate 19-inch wheels. So that -- that it should be improving as we go throughout this year and into next. But just from a capacity standpoint, not all of our capacity is designed to build 19-inch or bigger. Quite frankly, we've got capacity by wheel size if you will.

We don't share that with outsiders, but we do have capacity by wheel size. So we need to maximize all of our capacity to generate as many possible wheels as we can and I think that's what Majdi is getting at..

And then, glad to see your capital expenditures coming down this year versus your prior guidance.

I mean what is -- what would be -- if you could share this with us, maybe a minimum amount of capital expenditures that you would have to make every year, such as maintenance capex? Or is there such a thing there considering you've got to buy molds things like that?.

Yes. So, Gary, I think we've talked about this in the past. It's Matti. But essentially, it costs us about -- between $4 million and $5 million per facility for repairs and maintenance CapEx, that to keep the machines in good working condition, in good working order and extend their useful lives.

So I think that's a good number to use as you look at our footprint..

Okay..

So in theory, if you had to cut all costs and I think -- I'll just tell you, if the market was to dramatically decline, we've talked about this before as well, if the market was to dramatically decline, we wouldn't have to spend that repairs and maintenance capex. That's for kind of a step standard capacity and utilization rates.

I'll tell you that, if there's a massive shift like going back to 2008, 2009, if you look at the capital, the capex history of this Company, you see it was de minimis in those years..

Okay.

And then, Majdi, as you look at what you have to do here at the Company, how -- what -- can you kind of give us a time frame of where you think you will get Superior firing on all eight cylinders? Is it a two year or three year process?.

Listen, what I will tell you, having been here for 90 days, it's actually a tremendous opportunity. We've not -- so we've not laid out the time line of -- I've walked you through what we're looking at. We do have operating challenges, and we have operating challenges in Mexico.

But we have operating challenges and opportunity across the entire value stream. And now all of them are really under the umbrella of -- again, the entire team is totally focused on profitability and improving cash. And as you look at what we're trying to do, focusing on North America, there volume is our biggest challenge, optimizing our footprint.

When I talk about the entire value stream, Gary, I'm talking about outside of operations and manufacturing. The commercial discipline, working with our customers on the ABES and recoveries where necessary. Launch discipline, we deliver product to our customers, and we do okay. We have some challenges in launches, we do okay.

But, launching right with the right level of scrap. You can't launch a program at 50% scrap and feed it for one year.

So getting the right product design, process design to do it right.Operating efficiency, everything in our manufacturing, Gary, it happens actually at the foundry, at the mill and at the casting, and there we've -- we know -- I'm not a wheel guy, but I'm an engineer, and I've been through our plants.

And I would tell you, that we know how to make wheels better than anybody. And I'm not talking about machines and processes. I'm talking about know-how and people. So we need to bring that more to our foundry in Mexico, we need to help them with managing attrition, but there is more to do there.

And there is opportunity across the balance of the value stream. Procurement, just for one example is where we also see opportunity there. So we're looking at it holistically and we have clarity and we have a plan..

Thank you so much..

Thank you. We will go to our next question coming from Chris Van Horn with B. Riley FBR. Please go ahead..

Good morning, and thanks for taking my call, and welcome, Majdi..

Thanks, Chris..

So, I guess I just have a question on the guidance for value-added sales. What gets you to that $795 million number? Is it more dependent on underlying volume? Is there a mix benefit that gets you to that high end? I just need any clarity there..

Yes, it's really just volume. When we look at the second half there's less production in the second half versus first half, Chris. There's also just -- what I'll say volume weakness, production weakness. Right now you look -- we have really good visibility for 16-weeks that leads us through the end of Q3 and a little bit into Q4.

But Q4 back -- Q4 I think is going to be a weak quarter in general based on what we're seeing and what we're hearing. So I think it's just -- it's really on the back of volume..

Okay, got it.

And then, would you be able to disclose your passenger car exposure maybe today? And then any sort of idea of what your passenger car exposure looks like from a program launch perspective?.

Yes, give me a moment. So right now, 2019, our passenger car exposure on a global basis is 35%..

Okay, got it.

And if you look out in your launch schedule, is there any -- does it look kind of similar to that or is it -- I imagine it's probably a little bit less just given the OEMs are shifting more towards truck and SUV?.

Yes, it certainly is less. I'd say Europe is -- Europe is probably pretty much even keeled. I think it's more of a North America phenomenon where the SUVs, crossovers, and pickups are for -- continuing to penetrate. But as you know our business is heavily skewed in North America, the SUVs, crossovers and pickups.

Our passenger car exposure in North America is about 20%..

Got it. Perfect. Thank you for that. And then Majdi, I guess, lastly from me. I imagine you had a perception of -- you had an idea of what to expect when you came in.

I'm just curious as -- what may be surprised you after your fist 90 days you weren't really thinking about, as you came in or that was different than your first impression?.

Actually, Chris, no big surprises. I came in with a rather clear view and a positive eye. I -- we had the same customers in my prior life. So I knew that Superior had just an outstanding reputation with customers and customer intimacy. I knew the technology was good.

A pleasant finding reaffirmed those things, but also pleasantly I discovered that we are very much differentiated on technology. And as you know, to win in a tough Tier 1 automotive business you really have to have two things going in, customer intimacy is one and you got to be differentiated on technology, and this is really our foundation.

Further, I have -- I would say, I spend 75% of my time with the teams on-site in the plant. And I would tell you just a fantastic level of commitment to customers and passion for the business.

Very, very pleasant.The operating challenges, I came in -- I will listen to some of the calls and the operating challenges we're facing in North America and the specific focus on manufacturing, that was reaffirmed. But I also learned that we needed a holistic approach. We have challenges and opportunities outside of manufacturing and operations.

And I talked about those -- about the entire value stream and on the commercial side, on the launch side, on the product portfolio side. So it's across the Board, and I think we have a crystal clear understanding of them and we're tackling each of them head on..

Okay, great. Thank you so much for the time guys..

Great, thanks..

Thank you. And with no further questions, I would like to turn the conference back to Mr. Ford..

Thank you, everyone. That's the end for our conference today..

Thank you, sir. And thank you all for your attention. This concludes today's conference. All participants may now disconnect..