Robert Wildeboer - Executive Chairman Pat D’Eramo - President and Chief Executive Officer Fred Di Tosto - Chief Financial Officer

Peter Sklar - BMO Capital Markets Justin Wu - GMP Securities David Tyerman - Canaccord Genuity Todd Coupland - CIBC Capital Markets Mark Neville - Scotiabank

Good morning, everyone. Thank you for joining us today.

We always look forward to talking with our shareholders and we hope to inform you well and answer your questions. With me this morning are Pat DEramo, Martinrea’s CEO and President; and our Chief Financial Officer, Fred Di Tosto.

Today, we will be discussing Martinrea’s results for the quarter ended September 30, 2015. I will make some brief remarks.

I will make some comments about our company and our operations. Fred will briefly review the financial results, and then I will finish up with some broader comments about our company.

Our press release with key financial information discussed on a fairly detailed basis has been released. Our MD&A and full financials have been filed on SEDAR and should be available, our AIF and annual report are on file These reports provide a detailed overview of our company, our operations and strategy, and our industry and the risks we face.

Given the detail in our press release and filed documents, our formal remarks on the call today will be generally overview in nature. We’re very open to discussing in our remarks and we hope in the Q&A some highlights of the quarter, and the state of the industry today, how we are addressing the challenges and progress in our operations.

As always, we want you to see how we see the world. As for our usual disclaimer, I should note that some of the information that we are sharing with you today may include forward-looking statements, even if qualitative.

We remind you that these statements are based on assumptions that are subject to significant risks and uncertainties. This is particularly the case given the present automotive and economic environment.

Although Martinrea believes that the expectations reflected in these forward-looking statements are reasonable, we obviously give no assurance of the expectations of any forward-looking statements will prove to be correct. Our public record, which includes an AIF and MD&A of operating results that I just mentioned is available on www.SEDAR.com, and you may look at a full disclosure record of the company there.

I also refer you to the disclaimers in our press release, or MD&A and our AIF. So without further ado, here is Pat.

Good morning. It was exactly a year ago when I participated in my first call with you I was new to the company, I made some general observations, including how much I look forward to working here.

And I can now confirm that, it was one of the smartest decisions that I ever made. I want to take a minute and comment on the successful year we’ve had to-date, along with some great things that are happening.

One, we have enjoyed a year-over-year improved financial performance each quarter so far. We’ve seen record quarterly sales and the record quarterly net earnings.

In the third quarter, it was no exception. I think there’s something to be applauded.

Our people deserve a lot of credit for these great results. Soon after I started, we indicated we would improve operating earnings 50%, or better by 2017, and I’m pleased to say we remain on track.

Our cash flow continues to improve, including our record third quarter from an EBITDA perspective. We expect EBITDA to exceed $300 million this year.

Based on this, 2015 will be a record year. We have announced a number of new business awards totaling over $500 million in incremental business year-to-date.

In addition, we continue to win our replacement business as expected. Of course, the year is not over and accordion activity remains in high gear.

The new business we’ve announced occurs in all of our product groups, including significant awards in aluminum, fluids and metallics. The new business is from a range of customers; GM, Ford, and Jaguar, Land Rover have been the volume leaders this year.

Customer relationships continue to strengthen through well thought out sales and business development activity. The new business awards reflect our customer relationships.

I’ve had the privilege of spending a lot of time with many people and our customers, who are very supportive of our direction and nothing shows that more than new business awards. This new business also covers a number of our geographies, Canada, U.S., Mexico, Germany, Spain, Slovakia, Brazil, and China have all won new incremental business in 2015.

This new business is from some great platforms, such as the large GM win noted in our press release on their truck. This includes both carryover and significant incremental business.

And, of course, we know being on the truck platforms as they tend to perform very well over time. We have a lot of metallics and fluids content on the GM trucks, as well as other great platforms.

Our aluminum win stretch over several programs in customers, continuing to diversify our Martinrea Honsel portfolio. As I look back on last year, I really feel good about the distance we traveled.

If you look at where we were, where we wanted to go, and we’ve created a strategy to get there. We constructed it in terms and action items that could be executed on a specific timeline with expected improvements in our business, as our results show, we’re inline with our plan.

Over the next month, the leadership team will reflect on our progress and update our go-forward strategy. We will develop our 2020 vision, as well as refine our 2016 guidance.

We’ll continue to focus on our talent pool and the development of our people. We will continue to construct in Martinrea manufacturing system, built on lean principles and disseminating it with our learn by fueling methodology, ultimately creating a culture, efficiency, and operational excellence.

We look forward ahead in our cost saving efforts to continue to educate our plant managing teams and lean thinking to continue to improve our margins. And as we said, our customers came.

We’ll continue to build strong relationships, improve products, and execute new launches with the best possible body on time. The team is coming together progress is materializing, as planned and frankly I feel great.

So with that, I would like to introduce Fred.

Thanks, Pat, and good morning, everyone. The third quarter was another strong quarter for us.

Sales grew year-over-year and operations continue to improve. Third quarter sales excluding $31 million, and tooling sales were $899 million, within the range of previously announced sales guidance.

Overall, production sales increased by 15% year-over-year, probably due to foreign exchange translation from the recent weakening of the Canadian dollar against the U.S. dollar.

In addition to foreign exchange translation, year-over-year production sales benefited from overall strong OEM light vehicle production in North America, and the launch of new programs, including the BMW X6, Ford Edge, aluminum knuckles and control arms for Jaguar and Land Rover, and the continued ramp up of our new operations in China. These positive factors were offset by lower production volumes in certain platforms late in their lifecycle, such as the current GM Malibu, Cruze and Camaro, and higher than normal roll off in our Martinrea Honsel German operations, which we have discussed in the past as a temporary lag in production.

From a bottom line perspective, the third quarter was a record third quarter for us. Adjusted net earnings per share in Q3 on a basic and diluted basis was $0.30, up year-over-year from $0.23 per share in Q3 of 2014.

The Q3 adjusted net earnings per share was within our previously announced earnings guidance. We do reports and adjustments for the quarter, as noted in our MD&A, including the small loss from the sale of our Soest facility in Germany and executive separation agreements and restructuring costs in our Martinrea Honsel German operations.

The restructuring cost in Germany ended up being higher than originally anticipated for Q3, as we push up some of the restructuring originally planned for 2016 into 2015. As I note on the last call, we’re planning the second round of cuts in 2016 that will now be significantly reduced, given a number of cuts we were able to achieve in Q3.

All of the good activity in progress in making Germany more competitive and more profitable when it comes back in this temporary lag in production. Third quarter operating income and EBITDA margins improved year-over-year, despite continuing pre-operating costs at new plants currently preparing for upcoming launches, which was slightly higher in Q3 compared to the first two quarters of the year.

Strengthening our operating income margins in North America and continued in the third quarter, as our U.S. metallic operation showed year-over-year improvement.

Our operating income margins in Europe were lower year-over-year, as anticipated, given the pre-operating and launch costs in Spain and Slovakia, as these plants ramp up and the year-over-year reduction in volumes in Germany due to the higher than normal roll off as noted. Our adjusted EBITDA for the quarter was $75.8 million, or 8.1% of total sales, representing a strong 21.6% year-over-year increase.

Looking forward to the fourth quarter, we’re expecting another solid quarter, as we end the year on a positive note. We expect sales for the quarter, excluding tooling sales in the range of $930 to $970 million, and net earnings per share in the range of $0.30 to $0.34 per share.

Q4 earnings guidance reflects the slightly higher tax rate as mix of earnings has driven the quarterly tax rate up for the course of the year. And customer shutdowns for retooling, in and above the typical December holiday shutdown, and particularly the shutdown of Chryslers Pentastar engine plant, as Chryslers moves the nextgeneration block on, which we not only maintained our existing casting business, but also incremented it with all the machining business, which was previously done by one of our competitors.

We expect the engine program to start ramping and back up in February and be back at full volume by the second quarter of next year. I also just wanted to quickly touch upon the balance sheet.

As you can see in our interim financial statements, net debt increased by $45.1 million quarter-over-quarter, due in large part to foreign exchange translation and to a lesser extent, an increase in working capital, driven mainly by tooling activity. Excluding the FX translation and tooling activity, net debt levels would have been generally flat quarter-over-quarter.

Our trialing net debt to EBITDA remains fairly consistent quarter-over-quarter at 2.35 times. Despite the increase in net debt in Q3, we’re on our way to our target, which still remains to be a 1.5 times net debt to EBITDA by 2017.

We expect net debt levels to decrease in Q4. Thank you.

And now I’ll turn it over to Rob.

Thanks, Fred. I’d like to make some general remarks.

Before I talk about our future, I would like to provide an update on some of the various litigation matters with which the company has been involved. On our view none of the litigation is material, we do get questions from time to time from some of you.

So here is where we’re at, I think, it’s all good news. First, as you know, over two years ago, Nat Rea brought an action against the company made some, in our view, an accurate allegations.

Later this proven after an investigation by our Board through a special committee of independent Directors advised Bayside Council [ph] and forensic experts, which supported the company’s litigation position that the claims were without merit. In addition, the company counter-planned to get Mr.

Rea, that the litigation was ease of process brought to obtain control of the company and the company side damages against them, within our claim does at merit. The coming whole position was announced in our press release announcing our annual results for 2013 on March 31, 2014, and I’ll refer you to that.

Where this litigation exist today is as follows; Mr. Rea and his co-plaintiffs have discontinued their action.

In other words, they dropped it. That is no more.

There’s no longer any claim against the company or any of the parties aimed in merit. At the present time, the company’s counterplan against Mr.

Rea remains outstanding, further, we’re preparing motion for costs. We believe Mr.

Rea and his co-plaintiffs will pay. We’ll see where this ends up.

Second, as you’re likely aware on the context of the company’s issues at the end of 2015, the class action was initiated against the company and certain past and present officers and directors, I’d like to invest representation of our financial statement disclaimer of our company, as well as our officers and directors supported by our auditors and outside experts all vigorously than I. While we remain at the early stage of the process, I know, if there has been an agreement to drop all plans as against all the predecessor in the company.

And any claims other than a claim of misrepresentation under the Securities Act, if this ever proceeds to trial, we’re supremely confident an outcome in the company’s favor. Third, as many of you are aware in part because of the circulation of the statement of plan against this platform and supplier of ours Gonzalez Systems, Gonzalez sued the company in connection with our determination not to pay them for certain work involving in our [indiscernible] facility, and we sued them for performance.

The case did proceed to trial before our Mexican-based jury. The outcome of that trial in the last couple of weeks was favorable to us.

As a result of the decision, Gonzalez Systems now with us $2 million bucks I’ll say that in general we do not sue our customers in this business or our suppliers generally move on try to use other suppliers in future. But we’re right on this one too solid as 3 for 3, all good news from Martinrea and our stakeholders.

I want to thank very much so many of our stakeholders, including shareholders, lenders, people we work with employees, customers, directors, and others for their support in the phase of these litigation claims, which has been great. You know who you are.

You have our commitment to continue to build this company in the right way with good people doing good things. And as I think you can see from our results and what Pat and further talked about things are coming along.

I would now like to focus on our future to some extent and give you a sense of what we see related to two current developments, the product wins and the sale of the source business. Pat mentioned, our product win total to-date this year is a record, and this gives us a glimpse into what we see is our future in terms of focus and growth.

What will Martinrea look like in 2020, for example, given what we know now assuming no one do acquisitions. We see a significantly larger Martinrea Honsel, as our expansions in Spain, Mexico, and China come online.

Martinrea Honsel has announced over $250 million in new incremental business this year, including work in Germany, Spain, Mexico, China and Brazil. You’ll also see the nature of the work we will do in these product wins.

The focus is on engine blocks and on structural products, such as sub-frames, knuckles, and control arms. The largest competitor in this sector is Nemak, which has publicly stated in its filing to the extent at which it believes these are growing markets.

Nemak is heading into current research as predicted that over the next five years, there will be an additional 20 million aluminum engine blocks annually to be built. This is a huge opportunity and we’ll win a chunk of this business.

In fact, our announcement show, we’re busy in this space. Similarly, studies have indicated that the structural parts market is also a growing market from $1 billion or so annual market to-date to $7 billion by 2020 to potentially $25 billion market by 2030.

Those numbers maybe aggressive and not all our aluminum products, but the reality is that this is a growing market and we’re going to grow in it. Our Martinrea Honsel business is now approximately $650 million, excluding the lost sourced revenues.

We see that business doubling over the next five years. We see opportunities for Hoover’s Group [ph] which is very strong in North America and growing organically in Slovakia and China.

We’re leaders in fuel fillers and have been for sometime. We’re involved with the first capless fuel filler producer in the industry for Ford several years ago.

I note that motor trend recently named the capless fuel filler one of its 11 grade underappreciated features of 2015, but we’re leaders in this field. Our recent fuel filler awards continue to strengthen us in this area.

At the same time, we will see a high number of accordion opportunities in our fluid business. We believe our fluids group will be significantly larger in 2020 than today based on our organic growth.

Today, this business is around $600 million, which is a reflection of significant growth over the past five years. The business has almost doubled organically.

This year we want approximately $30 million or so in new incremental business. And we believe there will be significant coating opportunity over the next two years.

We see opportunities for metallic group also. Although we believe our footprint in North America is largely in place.

We do not see large growth in this part of our business unless we do expand out of North America, something that has not planned at a present time. But we have some great plans and we’re seeing improvement in all over the group.

We believe that as operations improve and that is old work acquired in the past rolls off and is replaced by newer work and better margins. The profitability of this group will continue to improve.

We have won over $225 million in incremental business in this group this year and that is a very nice development for us. We also have an assembly group that helps complement our product offerings in other groups.

We see that group having opportunities going forward with new customers and potentially new product offerings. We continue to allocate resources to their best uses.

We see that in a product wins we announced, as they all met internal hurdle rates for investment. You can see from the product wins, we have opportunities in our key areas.

We’ll grow in areas that we can win work at the right margins. The result of this will be higher profits and profitability over time.

At the same time as we do this, we are assessing areas of our business that we’re not going to grow and then we’ll call reduce or get out of them, as the beauty of the sale of our Soest aluminum facility. Soest extrusion business faces heavy competition.

It is fairly low barriers to entry and was not achieving the margin hurdles on new business. Assets investments in the business, we would close and we would pay severance amounts that are significant, approximately 100,000 euros for employee.

So we sold both the business at book, do not have to invest further money, and aborted future severance costs, a nice result for us. And for the employees of the business who now hopefully got a good home with a strategic buyer who purchase the facility from us.

Along the same lines, we’re looking at other parts of our business. We’ve had some industrial work that’s been profitable in the past.

That is not likely to grow, at least, in Canada. We do have an industrial plants in Mexico that is doing very well and we support it.

In our metallic business, do we continue to focus on a broad range of metal forming technologies, or do we focus in areas that are more profitable for us? Do we invest in certain geographies?

Where do we have to be? Do we have an opportunity to partner instead and preserve capital?

With these principles in mind, we’ve gone through our budget process. I won’t get into details here, but we see Martinrea’s 2020 as a business that is larger, even assuming no acquisitions, significantly more profitable, and a leader in every aspect of our business.

In short, we’ll be on our way to developing our vision than our mission. We look forward to the journey.

We look forward to working with our people to get us there. Now, it’s time for questions.

We see we have shareholders, analysts, and competitors on the phone. So we may have to be a little careful with our answers or we’ll answer what we can.

Thank you all for calling.

Good morning, Pat. I’m just wondering if you could review the – if you wouldn’t just mind rolling through the four greenfield plants, the three Honsel plants, and then the one Martinrea plant that you’re ramping.

Just where you at once the period of maximum risk? What’s the timeline et cetera?

First off on the Riverside plant. It is beginning to launch next week, and frankly we’re in a very good condition.

I’ve been at the plant three times. And I think we’ll stay well ahead of the launch curve at GM and GM has been very supportive in the process.

So pleased with that. In Spain, the light – low pressure die cast plant, Jaguar and Land Rover is ramping up fast.

We’re keeping up. Overall it’s a new technology, but frankly we got an expert team there and they’re doing a great job.

I’ve just visited there with friend previous enough. So just to check on the launch and as you guys know that the team from other discussions is one of our strongest in the company.

So overall pretty pleased with what’s going on. Of course, like with any launch, we’ve had some challenges along the way.

But that’s on a relative scale a significantly better preparation than what we’ve seen in the past, and particularly notable in the Riverside plant, which is both the metallics in the module plant marry together on that project.

Okay. And then just lastly, do you have any insights into the three production schedules for the fourth quarter and how their schedules are shaping up?

I’m not going to say it’s much different than probably what’s then publicly available. There was some downtime in some customers based on some supply issues outside of our control.

And I believe anywhere where some of the OEs have lost some production in the third quarter, you’ll see, it picked up if at all possible in the fourth quarter, because certainly the need for the volume is still there. So I would expect, we’d see some gains that we’re not expecting as we walked into the fourth quarter, we’re just not aware what they look like yet?

Yes, I think, as noted in our remarks and Fred mentioned, we’re going to impacted by the Pentastar going down in North America in November, and that will head into Q1, that’s good new story for us. But in order to retool for the next version, we have to take our plant down, so that’s going to affect one of our plants.

Right. In the Pentastar, I believe, you cast in Mexico?

Yes, correct.

And sorry, Rob, I think, you said in early in your comments, you’re going to be doing more machining on the new blocks versus the old one?

Oh, yes. Yes, we like to machine as much as we can on the blocks we do even if the customer does a lot of machining in-house.

That is an award that was actually won by Honsel and they were in the process of getting ready to launch it in 2011, when we bought our majority stake in Honsel. Over time, the Chrysler volumes have done extremely well and there have been more and more Pentastars dealt.

And we’ve indicated to our customer from 2011 going on that we would be very appreciative of doing as much machining as we can on the volume ops, and then would be effectively retooling. We indicated that we’d happy to do even more machining.

So basically, what we’re casting, we will be machining going forward up until this time, while we’ve been machining more of the casting that we’ve done, we haven’t been doing all of it. And actually in 2011, I think, we were probably casting about 10% or machining about 10% of what we cast.

So that’s been a good new story for us in terms of that. We – we’ve offered to the customer in an essence a one-stop shop.

So we like to cast. We like to machine, and then it does enough to go to different places.

Okay. Thank you.

Thank you.

Yes, there’s definitely an element of that, Justin. So Germany, we’re starting to see that production revenue start rolling off.

And as I’ve noted in the past – in that business – our book of business will be booked backup, essentially on one business at the current time. So in the next 12 months you’re going to start seeing that decline more visible.

And then come – late 2016 early 2017, it will come backup. In terms of our North American business, we did have some new launch with their help, but we also have some aging platform.

So there’s a mix aspect there. And I highlighted a few in our MD&A in terms of people living their that are – we’re starting to see lower volumes so…

Okay. So in terms of the determined roll offs, is that when do you kind of expect the peak of those roll offs occurring?

Is it in the upcoming quarter, or Q1, you mentioned kind of ramp back up later in the year?

Yes, it’s going to be a gradual ramp down over the next three to four quarters. And then, again, it will come late 2016, you’ll start seeing that come backup.

Okay. Thank you.

And just in terms of the restructuring at that plant, can you give us a sense of what the cost saving this going forward will be different from these head count reductions?

As a general rule of thumb, the ones in Germany had been quite expensive. So we tried obviously warranty had a decision and get an adequate payback.

In this particular case, we’re – we usually look at about a one-year payback, this case is slightly higher. But nonetheless though necessity for the future so…

So how many people do we have there now?

We’re down to about 1,300, okay. Just to give you a sense when we bought the facility, it was about 2,200, and the volumes are not much different than it was back then.

So we’ve taken out a lot of people in order to streamline those operations.

Okay. And is it quite possible, can you comment on that?

Yes, yes.

Yes.

Okay. And with the head count reductions, I guess, yes, we’ll see pretty increment Do you think the profitability at that plant, when do you think the kind of troughs in that plant?

Well, I’ll comment on our full-year team business to give you a sense on margins there, and again, we’ve kind of highlighted this in the past. So we have Germany over the next few while doing with a temporary roll off with our Spanish, Slovakia bringing in around it.

So from a top line perspective you may see a little bit of growth. I think from a margin perspective, you’re going to probably see stable margin over the next 12 months, give or take some, of course, the ups and downs.

And then we’ll start seeing the margin pick back up, again, when Germany starts ramping up at the end of 2016, and once being Slovakia taking hold.

Okay. And you just said – just a general question there for Pat is, as you kind of look at your North American footprint on the aluminum side and you look at the various opportunities in terms of coating.

Do you see a need for another foundry, or do you think that you can manage all of the growth and future growth from your Mexico location?

I think that in the moment Mexico will be our primary for North America, certainly the I foresee changes in equipment and potential additions to that plant we have been spaced down there. So we can grow at where we will grow at, but at the moment it will stay focused in Mexico with that operation.

That, of course, can always change, as you know, but we’ve got in our future plan to grow it.

And in terms of capacity once you’ve kind of finished the expansion, do you have sufficient capacity to take on more business, or…?

Yes, I mean that would be – it’s a phased in approach. As we bring in business, we born – there’s certainly room for more that we can continue to add machines.

The – within an exceptional job in Honsel with the process technology, it’s duplicated throughout the world. And so we can pick things up from one part of world and put it on another rather easily now.

And so to add equipment and keep the process solid is very doable. So in other words, we can continue to grow it locally for quite a while before we would run into a situation, where we would need to build some place else.

Based on a way we laid the plant out in the beginning.

And we’ll follow-up there, and we have to expand and threshold then we’ll do that too, I mean…

We’ve got the space to do it. So it’s in a long-term plan is that we’re in pretty good shape.

Great team down there.

Okay, great. Thank you for your answers.

Thank you.

Yes. Good morning.

Perhaps we could get the same sort of run down as Fred gave on Europe for North America and also for the rest of world in terms of the puts and takes and how they flow through on the sales and the margin side?

Yes. So in terms of North America we’re expecting gradual growth in that margin and we just talked about our 2007 guidance and targets over 6% operating margin.

We’re on track for that. North America is a big component of that and you’ve seen that in the results of the most recent quarters.

So it’s come along. We expect that to continue into 2016.

In addition to that, if you look further out, we’re not putting a cap on that. We expect it to continue to grow as all the new projects that we won come online.

And they’ve all been subject to, it’s called, a higher hurdle rate. So we’re expecting higher margin business to come online and some of your lower margin business roll off over time.

So the North American margin will grow over the next while, heading into our 17 targets. In terms of the rest of the world, it’s sill relatively small to current time.

We have China that’s on the fluid side is ramping up. So that will improve over time.

You’ve got the headwinds from the property and cost in our aluminum facility. That program, as Pat noted, the mega plant has been delayed for a few months.

So that’s going to take a little while longer to kind of pickup. So, we also deal that.

And then in terms of Brazil, it’s anybody’s guess at this point what happens there. But in our business, they’re right now stable.

It’s not profitable. But it’s a long-term play for us.

We see some opportunities down the road n Brazil, so stay tuned on that. And over the next number of years, we should see Brazil start contributing.

And we’re helping some of our customers down in Brazil like we have in other places, so…

Right. Okay.

And just on North America, so you have improvements and you mentioned some of the things. Do you expect that the new facility launch will have any drag at any point along the way here, it sounds like, it’s going very well from what Pat said?

I think it will be mostly based on volume, how quickly the ramp up is certainly one position to keep up with it. I feel very good about it, but really it still goes down to how quickly GM launches the product and how quickly they can reach their volume target.

Okay.

I’d say coming into the first quarter, certainly, it won’t be at full volume yet. So we’ve got – we’ll have some extra spends, but I foresee that dissipating as we get out of the first quarter.

Right. So is that large enough that we would notice that in the consolidated North American numbers?

I would say, no. I mean total revenue wise, it’s about $40 million – between $40 million and $50 million, so it’s not that big in the grand scheme of things.

Right.

But, sorry, but it is there and…

Yes, I think, if they’re delayed for a couple of weeks or something that. I mean, it is going to affect – it’s going to affect us at the margin.

So the reality is that occasionally in 2015, we’ve seen this from time to time where you might have an unscheduled stoppage, because of maybe the customer do want an inventory adjustment or maybe they’re having some delivery problems. And we’ve got a few days or a few weeks to different places throughout the year, where the customer says, okay, we don’t want the product right now.

And the reality is that’s the time of cost of for us without profit. And I think that’s just a nature of the business.

With respect to the OEMs, they are changing platforms at an increasingly rapid rate. They’re always in the launch mode it seems and there are hiccups from time to time.

But even if you talk to Ford, or General Motors, or some other folks, they always talk about consistent refreshes. And when you have those things you put strain on the OEMs and the supply base.

And so we see a number of those things from time to time. And so you can head into a quarter.

We can be halfway through the quarter, I can say, here is what we think is going to happen. I think, you might have an unscheduled week off and that could cost about $0.5 million bucks, and we’ve had that from time to time, and you just deal with it.

The benefit is that, we’re in a robust market in North America, in particular, and as Pat said, they tend to try and make that up somewhere. And if you got the capacity in your system the whole system make up and allows you to make up the money too sometimes just constraints and you don’t make up the money, because we’re paying over time in a weekend, but ultimately, those are the realities of our business.

Sure, that make sense. And then just on the China for the aluminum facilities delayed, but you’re ramping the fluid.

The net of the two have negative margin implications early next year and maybe in Q4, and then you pick up from there, is that the way to think of it?

Yes. You’re correct in your thinking, David, and I’ll put it in the context the property and cost we talked about the property and cost in the four new facilities over the course of this year to quantify between $25 million with these delays.

They’re going to be extended into 2016. So there’s going to be element of that.

So early in the year you may see property and cost be a little higher than we originally anticipated, but coming down as the word comes online.

And last year, I think was at this time we said that these four plants would have pre-operating costs in a range of $20 million to $25 million, and looks like that’s – the range is going to be right.

Okay, perfect. Thanks very much, guys, very helpful.

Thank you.

Good morning, everyone.

Good morning.

I just wanted to – good morning. I just wanted to ask some revenue and margin question as well.

Do we just talk about Honsel for a second. So for 2016, if I heard you correctly extra sale, you think revenue is going to be roughly flat?

Roughly flat. You’re going to see a probably a little bit of growth with Spanish, Slovakia and that’s going to be essentially partially offset by the German roll off?

Okay. And just to take into this margin question a little bit, so for the fourth quarter...

What we not surprised Todd?

Gotcha. Don’t want to disturb, aren’t you?

Todd, margin circling.

Margin is circling exactly, hopefully, it helps a little bit.

Yes.

So do you think even if it’s a modest drag for whatever puts and takes happen as the launch roll then, can you hold North American margins year-over-year in the first couple of quarters?

We’re expecting an upper in the context a little overall. So we have our guidance some greater than 6% come 2017.

And we’ve said in the past that we see gradual progression to that. And in the first-half of the year maybe slightly lower than the back-half of the year next year, but on an overall basis, we’re trending towards that 6%, essentially on a fairly even basis over the course of the next couple of years.

Okay. And that should apply in terms of gradual improvement both to North America and to Europe next year?

But I think if you see on a year-over-year basis, you see North America up and then you’ll see Europe probably at the same levels that we’re seeing this year. And then, again, at the end of next year, we’ll start seeing Europe margin growing.

Okay. That’s great.

Thanks very much gentlemen.

Thank you.

But actually I add one other one follow-up if I could. How much of a drag is the Pentastar for the December quarter?

We can’t really say that. It’s a good plant and it’s profitable plant for us.

But if we would get into that that type of detail then people would have a sense of how much we do in a plant.

Okay. Thank you.

But it is a drag. Yes, it is a drag – right you will see a drag in Q1.

The good program is a profitable quarter.

Yes, and it’s compound a little bit with what we previously discussed on some of the other launches both delayed and planned. But in the long-term for next year, we feel very good about it.

Yes, okay. That’s great.

Thanks a lot.

Thanks.

Hi, good morning, guys.

Good morning.

I Just want to follow-up on David’s questions on China. So it sounds like losses in the rest of world will continue for the next couple of quarters with the launch.

But has that business sort of ramps? Is it reasonable to assume that rest of world could maybe hit break-even at some point next year, is that probably more likely be a 2017 event?

On the run rate basis at the current time, we’re looking at potentially being break-even by the end of the year.

Okay.

But, again, on the volume side there’s some risk there in China in terms of slowdowns and things of that nature. So, again, we’ve seen a delay on the loan side.

We’re seeing some thorough order reductions in our [indiscernible] side, as well. So we’ll keep a close eye on that.

But we believe that by the end of next year on a run rate basis, we can be positive. And also there’s the brazil aspect to it, that – it’s uncertain at this point so.

Okay. That was just fair.

And then Europe, it sounds like the launch cost sort of offset the cost takers for, at least, for next year, but then, I guess, expectations are once you ramp a pretty sizable improvement for margin for 2017 correct?

I would say, yes.

Yes.

But I would also say that it’s going to be somewhat gradual, because spending deep volume into 2018. So there’s going to be – we continue to ramp up as Jaguar, Land Rover continues to roll move vehicles into that program, the volume rents up.

So it’s not going to be kind of essential overnight both big volumes.

Yes. I mean, I’m very optimistic.

I think it’s got a great story there. I mean, Spain has won a lot of work.

It’s almost certainly doubling, increasing in size over time with work. It’s going to last probably more than a decade.

And we think we’re going to see year-over-year, year-over-year improvement there. And so it’s a very good place to do business.

We’re very competitive and we’re on some great program. So Spain is a good new story for long period of time.

Germany is a good new story, because we have made it more efficient and quite frankly the arbitrage in the room has been what to do with Soest, which is an extrusion business, which is not core to us. And we managed to take the care at people in way that doesn’t involve the severance, which we’re quite frankly we really happy about.

And we’re happy that we managed to – we think the right buyer that can provide them in the future, because this is their business and there are many places in Europe and so forth. And so that remove a bunch of that.

And we do think that our Mazda facility, which if you’ve heard us talking four years ago, we said that the right number of people that is going to purchase house, and we’re basically there. Now and we’ve got good work in for those of you who have seen the plants.

The Mazda of today is not even close to resembling what it was four years ago. These plants were doing a work of modern, efficient, state-of-the-art and got good work with good customers.

And Slovakia is a growth story for us much as anything China is. We’ve got work in a pipeline.

We’ve got our great product offering, and we’ve got a whole bunch of customers that we can tap in. So Europe to us is a growth story, it’s not a place that we have to be just in order to get North American worker something like that.

It’s a very good story for us. And as we look out two to three, four, ten years, we love the fact that we’re being ahead of the way over there.

Sure.

Anything, Mark, to is in terms of Germany, the slower ramp up in Spain also that same logic applies to Germany fill then back up its – some of those programs. We’ll ramp up fairly slow, and we’ll see we will even hit peak volume in some memento like 2019, in some case even 2020.

So it’s going to improve, it’s just going to be gradual.

Okay, good. And perhaps I misunderstood.

But did you say your North American EBIT progresses towards 6% in 2016, or that was a 2017 event?

No, I was referring to the overall 6% target for 2017.

Okay. And that 6%, it’s a consolidated – it’s a target for the consolidated business correct?

Correct.

Right. Okay.

All right. Thank you very much, guys.

Thanks.

Thank you.

Yes. So just one question.

Fred, do you said, I think that North America’s margin should improve through the year, I think.

Yes.

Is that surprising a little bit, in that you usually have a lot more volume in the first-half of the year, which gives you higher margin. So you think even with that normal pattern, you’ll still see progression through the year?

Yes. And there’s a couple of factors the Riverside delay that which was talked about right?

Yes.

So it’s going to be – and then there’s also the issue with the Pentastar program.

Okay.

I think the retooling there. So that would be an element there.

I mean, on seasonality, I haven’t really included seasonality in our comment. But the trend line is next year the North America would be up year-over-year.

Yes. We have launches going on when we’ll talk a lot about it, but we have launches going on our fluids group.

We have other launches going on, which we’re touched on in aluminum with the low pressure die casting all in the first quarter. So I would expect you would see continued improvement at a [brigade rate] [ph] as you go into the second quarter as well.

I think some of the stuff that we are talking about was carryover in the first quarter, but Q2 we have the opportunity for a bright quarter.

Okay. I look forward to it.

All right. So we…

Okay.

Thank you. Just Fred in terms of the free cash, I guess, specifically working capital is negative this quarter.

And you kind of mentioned tooling was part of that. Can you comment on how we should look at working capital in the fourth quarter and maybe in Q1, is that possible?

Yes, in the fourth quarter with the shutdown is like, our working capital tends to go down, so we’re expecting no difference this year. So, yes, I wish should come down in the fourth quarter.

What the complicates predicting the working capital is tooling activity. So, it all depends on customer acceptance and feedbacks and when you get paid and all that kind of stuff.

And this last quarter we saw an increase in our tooling inventory. So if you look at the balance sheet quarter-over-quarter, tooling inventory increased by $20 million, and also receivables increased.

So we had bunch of tooling in there as well. So over the next while obviously collect on that and then turn that inventory into cash.

But it’s hard to predict. And then heading into the first quarter seasonality, we’ll tell you that working capital come back up.

But overall, we expect working capital on our longer-term basis to decrease. I highlighted last quarter that we have working capital initiatives in particular and inventory optimization initiative that is starting to take hold then we’re starting to see some benefits there.

So it’s a process over a period, but we’re confident that working capital will get optimized.

As I have a tutor around the plants in the last few months, the low level activity on inventory reduction is substantially a greater focus than it has been the first part of the year or ever in the past. So obviously reiterate what Fred said.

As we go into next year and so forth, I think, you’re going to see continued improvement.

Okay.

We’ll take very noticeable on our metallics group with – was an improvement activity.

Okay. And it just sounds like it’s mostly inventory.

So do you guys care to comment on any internal targets you’ve got for inventory in terms of days or anything like that?

Not at the current time.

Okay. And the GM contract that you won, the large one, the truck platform, which truck platforms that relate to?

The Silverado…

GM Pickup…

And the GM, yes.

The GM Pickup, okay. And just maybe the last…

Which is an outstanding platform and we were extremely excited about that and that’s consistently a great seller for GM.

Yes, sue.

Question would not to believe where the point, but in terms of margin improvement, if we look at the North American margin increase year-over-year, is there a way you can kind of throw into buckets of where that’s been coming from. Is it the bulk of that coming from the improvement in the cost structure of the metallics operations or how much is that relate to volume and mix?

Yes. I won’t get into two most detail, but I can say is certainly the metallics turnaround has been the biggest contributor, and there’s still a lot more to go.

But they’ve done a great job of doing the things we had put in the plan, and they’re executing on them. I think we’re going to continue to see really good activity out of them in the coming year.

Okay, great. Thank you.

Thank you very much.

Thank you very much. Thank you all for being on the call.

If any of you have further questions, we’re always available 416-7490-314. Have a great day.