Good afternoon, 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 questions. We also note that we have many other stakeholders, including many employees on the call, and our remarks that are addressed to them as well as we disseminate our annual results and commentary through our network.

With me this morning are Pat D’Eramo, Martinrea’s CEO and President; and our CFO, Fred Di Tosto. Today we will discussing Martinrea’s results for the quarter and year ended December 31, 2019.

I will make some opening remarks. Pat will make operational and strategic comments and give you his perspective.

Fred will review the financial results. I will finish with some general closing comments and go over some of the great things that are happening here at Martinrea.

And then we will open the call for questions and we will endeavor to answer them. Our press release with key financial information discussed on a fairly detailed basis has been released.

Our MD&A, AIF and full financials have been filed on SEDAR and should be available. 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 are very open to discussing in our remarks, and we hope in the Q&A, some highlights of the quarter or year, 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 refer you to the disclaimers in our press release and filed documents.

Our public record, which includes the AIF and MD&A of operating results, is available on SEDAR and you may look at the full disclosure record of the company there. Welcome to 2020, a year which we look forward to with great anticipation.

As we intend to continue to develop and apply our One Martinrea culture in our business with a view to our financial performance, continuing to improve our leading safety and quality metrics, delighting our customers, satisfying our employees, performing for our shareholders and leading the way in good corporate citizenship in our communities, even in a challenging environment in terms of some of the geopolitical trade, coronavirus and economic issues we all face. In sum, we will continue to perform well as we did in 2019 and in the years before that.

And here to tell you all about it is Pat.

Thanks, Rob. Good afternoon everyone.

As you saw in our press release, our Q4 adjusted net earnings per share came in at $0.42, within our guidance. Q4 production sales came out within our guidance as well.

But we did not see as much of the increase as expected from General Motors post strike. Our adjusted operating income margin for the quarter was 5.6% lower year-over-year due to the effect of the GM strike, as well as higher normal tooling sales.

For the year, we achieved an operating income of 7.5% this despite the previously mentioned strike actually a very strong year. If we were to adjust out the strike and the higher tooling sales operating income margin would have landed at over 8% per our pre-strike plan.

For the full year 2019 we had our highest EPS to date coming in at $2.27. Our net debt excluding IFRS-16 ended the year at $663 million.

Our net debt to adjusted EBITDA ratio ended the year at 1.41 times, so we continue to stay within the 1.5 times range plus or minus and this despite the significant amount of share buybacks. Production sales for Q4 came in at $787 million within a range of $750 million to $810 million.

Though there continues to be volume pressure in Europe and China, North America trucks, CUVs and SUVs continue to have good sales levels, which is where we are heavier weighted. For Q1 our adjusted EPS is projected to be between $0.60 and $0.65 reflective of some volume softness in certain areas of Europe and including the impact the coronavirus is having on China vehicle production.

Actually given some of the headwinds, a good projection from an earnings perspective to kick off 2020. Q1 guidance also includes one month of results from our just closed acquisition of Metalsa Structural Components business, which I will discuss in more detail momentarily.

The business is expected to be slightly negative to earnings at the onset and transform into a positive earnings run rate by the end of the year, obviously subject to volumes, some restructuring that needs to be complete and we wrap our arms around the operations. Production sales are projected to be between $860 million and $910 million.

We have a good number of launches in 2020 though a number of programs were delayed as I discussed on the last call. This means more launches in the latter part of the year as well as into 2021.

New business wins for Q4, as noted in our press release, came in at $140 million at annualized revenue at peak volume. First, in our lightweight structures group, we continue to increase our book of business with Toyota.

This time we won control arms for the Toyota Tacoma pickup truck. This is our first win in the Toyota chassis space including engineering and design development, a great step forward with a new customer.

As previously announced in our lightweight structures group, we won approximately a $100 million in the body-in-white work on the new Daimler EVA II electric vehicle platform. We are very excited about this win due to the number of joining technologies the vehicle will employ with multiple materials.

This product will be built in our new Tuscaloosa plant near the Daimler U.S. location.

This is one of the facilities that will come with our recent acquisition. In our propulsion systems group we won $30 million of work with the ZF Group.

We’ll be machining one of the current transmission housings in both casting and machining the next generation model. Looking back on 2019 we successfully launched a number of products including the T1XX Silverado, Ford Explorer, Mercedes A-Class vehicle, Chevy Blazer, new Ford VI engine, Volvo I6 engine among many others.

The most recent, this past fall was the Ford Escape affecting four of our locations at various levels. At the current time the vehicle production numbers are lower than expected due to external factors unrelated to us, but including parts supply.

We expect this to be resolved and anticipate volumes to increase on this product in the near future. Launches and program management continue to be at the forefront.

And we continue to improve our ability to deliver quality on time. As we look back on 2019 the fifth year of our Martinrea 2.0 strategy, we have a lot of good news to reflect on, starting with safety, a 72% improvement over the last five years; in quality, 34% improvement in the same timeframe.

Annual adjusted EPS has grown from $0.98 EPS to $2.27 earnings per share. Net debt to adjusted EBITDA ratio from approximately 2.6 times down to 1.4 times, including a significant amount of share buybacks.

Our operating income margin from 4% to nearly 8% again it’s not for the GM strike in 2019. We will stay focused on our core and continue to improve at an even faster pace.

As we enter 2020 we will take the next steps to responsibly grow the enterprise, while continuing to improve our base business with our lean activity. We have taken a number of steps to support our project breakthrough strategy over the past year, including more engineering and soon to launch multi-material aluminum subframes, our first multi-material cradle and using joining technologies at a high volume for a multi-material body in white production product.

To accelerate this, we recently announced the acquisition of Metalsa’s Structural Components for Passenger Car business. We have previously noted some key points, but let me touch on a few benefits once again, maybe with slightly more granularity.

As we’ve discussed in the past, there are a number of things Martinrea wanted to accomplish with both our initial 2.0 plan as well as our recently shared project breakthrough strategy. Our first priority had been to take a young, fast-growing company and put systems in place to assure financial, technical and cultural strengths, and a business capability to engineer and flawlessly launch profitable quality products to our customers.

The journey to improve this quarter is not end. In fact, despite our consistent improvement, in my view, we are still just getting started.

The improvement has been consistent and strong and in the past few years we have formulated our next phase to continue to follow our operational improvement plan, while putting more emphasis on new product capability and technology in order to grow our customer base, revenue and support our plan to be a great long-term company. The acquisition of Metalsa’s Structural Components for Passenger Car business does a number of things to support this breakthrough thinking.

It diversifies our customer base, adding significant revenue of two key customers. Our steel metal forming group moves from a North American player to a global player with locations near a number of our aluminum plants, which in turn supports our multi-material aluminum and steel lightweight strategy.

We gained a strong reputable engineering group in the heart of Germany that only continue to support the European customers, but also some North American customers as well. Along with adding engineering capability, we will enhance our lightweight multi-material joining technology, in area of the facility in Germany has accelerated and has in some cases put into production.

As you can see, we’re excited about this acquisition. It’s much more than $400 million in additional revenue.

Of course, there’s always challenges with an acquisition; after all, many fail and taking full advantage of these opportunities. Martinrea is no stranger to acquisitions; after all, this is how he came into being.

We have developed a top-notch integration team using our strong program management thinking as our approach. Our strategy is to not take over blindly and miss potential opportunity, instead, we have and will continue to dig deep and assure we absorb the attributes as well as the revenue and capacity to strengthen our company as we grow it.

I’m really excited for 2020. Proud of the Martinrea’s team accomplishments and thankful to be part of it.

With that, I’ll pass it to Fred.

Thanks, Pat, and good afternoon. As Pat already noted, Q4 production sales and adjusted net earnings per share both came in within the range of our previously announced guidance, so very much in line with our expectations.

As reflected in our sales and earnings guidance, Q4 production sales and adjustment and earnings were both down year-over-year due largely to the impact of UAW strike that General Motors had on North American financial results for the quarter. This was partially offset by some very strong results in our Rest of the World operating segment, margins for which came in at a healthy level for the quarter, generally consistent with the third quarter due to a positive sales mix, lower launch-related costs and productivity and efficiency improvements across the operating facilities in the segment.

Operating margins and the Rest of the World segment are expected to normalize in 2020 as a product mix in the segment is expected to change. Customer pricing is adjusted to reflect competitive forces and volumes are challenged, in particular with the recent coronavirus matter and its direct impact on production in our facilities in China.

The coronavirus is clearly having an impact on Q1 production levels in China. Beyond Q1 it is unclear on how deep the impact gets and the extent to which it impacts global supply chains and production levels outside of China.

We are obviously keeping a close eye in the matter along with the Rest of the World and we’ll react accordingly. Now withstanding our operations in the Rest of the World, albeit, a relatively small portion of our business, perform well for us in 2019.

We definitely showed some nice progress this past year. As it relates to Europe, operating margins were down in the fourth quarter due largely to lost contribution from the volume headwinds we have been and are facing in that region in an overall negative sales mix.

Losing volume in Europe tends to translate into a more significant bottom line impact compared to other parts of the world as our ability to flex costs in Europe in particularly in a place like Germany is somewhat limited due to the fixed nature of the overall cost structure. As noted, the UAW-GM strike ended during the fourth quarter at the end of October, but ultimately it did end up having a relatively significant impact on our 2019 financial results.

As a result of the strike, we lost about $20 million in production sales in Q3 and another approximately $65 million in Q4. So as you can see, the impact was significant.

We had originally expected that most of the lost volume will be made up over time. However, that has not been the case to date as we have not yet seen much increased post-strike volume from GM as Pat already noted.

Outside of the strike, 2019 was a very good year for Martinrea. Overall, I’m very pleased with our 2019 financial performance, especially when you take into consideration some of the headwinds, we and the industry faced during the year.

Let me summarize some of the financial highlights for 2019. We recorded increased sales at just under $3.9 billion, inclusive of higher tooling sales, which inherently reflects a strong pipeline in a new and replacement business.

Our sales grew year-over-year, increasing approximately 5.5% when the overall industry was generally flat and down in some areas. But for the UAW-GM strike, we would have improved the adjusted net earnings for the 10th year in a row.

We generated adjusted net earnings of approximately $188 million or fully diluted adjusted net earnings per share of $2.27, the best adjusted EPS performance in the company’s history. But for the strike and higher tooling sales, our adjusted operating income margin would have increased again in 2019 to north of 8%, showing continued improvement from about 4% in 2014 as Pat already noted.

Our operating margin has progressed nicely over the past five years, outperforming most industry players. On an absolute basis, our operating margins are now higher than many of our direct competitors in the areas in which we compete in terms of general automotive parts suppliers.

Our balance sheet remains strong and in 2019 at a net debt to adjusted EBITDA ratio 1.41 times, excluding IFRS 16, very much within our targeted range despite paying dividends, funding a significant amount of share buybacks and increasing our investment in NanoXplore during 2019. We now own approximately 25% on NanoXplore and are very excited about its prospects.

We have a strong balance sheet for this industry and are committed to keeping it that way. Another important positive this past year was our free cash flow profile.

We’ve been very consistent with our messaging on this topic. We have said for quite some time they would see our free cash flow profile turn positive in 2019 and that is exactly what happened.

We generated free cash flow as defined and reconciled in our MD&A of $127 million in 2019, a very healthy number with $51 million of that generated in Q4, aided by a decrease in tooling related working capital with the cash generally used to pay dividends and buy back shares, make our incremental investments in NanoXplore and pay down debt. So overall, a very good result and very much consistent with what we have been saying.

Our company is clearly becoming a significant cash flow generator. As you can tell, we are very happy with the overall progress we are making as an organization, and our ability to deliver, and particularly, in this very volatile environment.

We keep getting stronger every year in 2019 with no exception. We expect to get even stronger in 2020 as we continued to progress as an organization including adding the structural components business of Metalsa through a portfolio, and tackle the challenge in front of us and the industry head on.

As a result of the Metalsa acquisition, and to some extent, the current volatile market outlook, we’re updating our 2021 targets as previously provided. With the addition of a new Metalsa business, we are projecting sales to approximately $4.4 billion in 2021 subject of course, to overall market volumes and while operating margins are anticipated to increase in 2020 from 2019, we are targeting an adjusted operating income margin of somewhere north of 8% in 2021 based on our anticipated new mix of business inclusive of Metalsa.

Well, I’d like to thank the Martinrea team for their hard work and dedication, as I said so many times before we are making a difference. I would also like to take this opportunity to welcome the employees from Metalsa to our family.

You are in good hands. We are very excited about this acquisition and its prospects for the future.

Thank you. With that and I’ll stay back over to Rob.

Thanks, Fred. Some comments on capital, our industry and culture.

Let me start with an update on capital allocation. As you can see from our press releases and past discussion, we have won a lot of new business over the past two years.

That’s a lot of new business to launch. Some of it is on new models; some of it is conquest business.

Of course, we continue to win repeat business too. That implies a few things.

First, our customers are rewarding us with new work, because of our product offering and performance in quality, delivery and competitiveness. Second, in terms of capital allocation investments we have been making in our business have been bearing fruit.

And further, we will continue to invest in our own business. This will continue to be our priority.

There’s clearly tremendous value to it. With the recent acquisition, we should have well over $4 billion in revenues this year and there will be more organic growth beyond 2020 with top-line growth given our discipline on financial return hurdle rates, our bottom-line will grow too.

Note that this growth is over an increasingly broad range of customers over many geographies, especially outside Canada and over a broad range of vehicles, internal combustion engine, electric hybrid. Opportunities about that is our primary focus as a use of cash.

Many people have asked us about the M&A opportunities for the past few years. We have stated, we have seen a lot of what I would call noise, but we are clearly not averse to M&A activity after all.

We’ve done it many times in our past. and now, we’ve just done it again.

We generally apply a build or buy scenario, and where it is cheaper and faster to buy the build, we do so. Especially, if there are cheaper assets available even if fixing to do, we have been fixing very well is our margin improvement at tests and we will do so too on the Metalsa assets over time.

Today, we certainly remain willing to look at opportunities, but we feel it is very important to be disciplined and to buy prudently. Note that we have always invested in and will invest in technologies or products that support our business.

We increased our investment in NanoXplore in 2019, for example, and we are excited about that and the future of graphene in our products and in general. In terms of our debt levels, we like and have a strong balance sheet.

This is helpful, not just from a funding perspective, but our customers frankly like companies with financial strength. They know we are there for the long-term.

Believe me, this industry has long memories and customers still don’t like overleveraged suppliers. So, we will maintain a strong balance sheet even as we fund our internal growth and make strategic investments or acquisitions.

In terms of returning capital to shareholders, as you recall, we increased our dividend in 2018 and that has represented some increased return. We are announcing increase to our dividend again today, reflecting our confidence in our business and our desire to increase shareholder return when we can.

The total increase is not large in dollar terms admittedly, but the percentage increase is over 10%. As well, we purchased about $4.8 million of our outstanding common shares are about 5.7% of our float in 2019.

We promise we would buy back some shares as a good investment of capital while still funding our growth, taking advantage of investment opportunities and maintaining a strong balance sheet. We have kept our promise on all accounts.

Since we started buying back shares in 2018, we have repurchased over 7 million shares, about 8% of our outstanding amount. This rewards our shareholders with a higher portion of ownership of our company, higher EPS and less dilution of earnings.

Our intention at this time is that subject to all the points I just made, we will be back in the market on our normal courses for a bid next week until the end of the first quarter when we enter blackout. We will likely be renewing our normal quarter issuer bid in August.

In terms of the industry, let me talk about that for a second. Volumes for the most part were fairly flat to negative across our markets over the past year and the times of robust year-over-year growth maybe, over at least in some areas.

Nevertheless, volumes are at a very healthy level today, in particular in North America, where the majority of our business resides. Volumes in Europe are off a bit, which should be flattish.

Right now, volumes are off in China, especially as the coronavirus has weighed on the industry. Not only has production slowed, but people aren’t buying cars.

We expect this crisis to be over at some point, but volumes will be off in China and the lack of China production has affected and will affect global production in varying degrees. There are many prognostications about overall volumes in 2020, but I think it is safe to say they may be flattish to down in 2020.

Many car companies and auto parts companies are tempering their guidance as a result. We only give specific guidance on a quarterly basis as Pat has done today and on an overall long-term basis.

We remain bullish that over time, our revenues, profits, cash flow, and margins will increase. Fred gave you our thoughts about 2021.

Longer-term, I believe the coronavirus event coupled with the trade disputes we have seen may call – cause all of us to review our supply chains. For example, I think this will add to a trend towards local in-sourcing or reassuring to North America, which frankly could be very good for us.

In addition to the usual industry challenges in 2019, we dealt with and are continuing to deal with some broader issues, but there have been some positive developments especially on trade. We are pleased with the signing and pending ratification by Canada of the USMCA is the updated form of NAFTA is generally termed.

We were very busy with a variety of governments and industry participants in the negotiations and we believe the signed agreement is a good one. With some potential opportunities for North American suppliers such as ourselves, because of the North American rules of origin provisions.

In terms of broader tariff and trade discussions involving the United States, China and others, there was a lot of negotiating in 2019, there seem to be some trade stability by year-end. Martinrea has a small presence in China overall, but there is opportunity there if the risks can be addressed.

on a positive note, as we have always stated, challenges present opportunities to nimble, entrepreneurial, lean and resilient companies with great people and we believe, we have shown an ability to take advantage of opportunities over the years. We get stronger through meeting challenges well, bring it on.

Finally, a couple of thoughts about culture. We talk about culture a lot at Martinrea.

Why? Because it matters.

It matters a lot. It matters to us, but most importantly, it matters to our people here at Martinrea.

Over 90% of our employees worldwide report in our employee surveys that they know our vision, mission and principles. That is a telling statistic.

The employees were from all of our plants in two major corporate offices in nine countries on four continents and included recent hires and those who have been with us for many years. Our culture is having a profound impact on our company and our people and on us.

So, we take it very seriously. Peter Drucker once said, culture eats strategy for breakfast and we think he is right.

I’m not going to repeat our vision, mission, and principles, but rest assured they are all over our company and public documents. I refer you to our report to shareholders we just filed.

We will post it on our website. We live these every day.

They are not just for show. Note that we don’t stop with the vision and mission to get 10 guiding principles.

We’ve articulated in a cohesive yet simple way. Our company culture comprise of entrepreneurship, lean manufacturing principles, and the golden rule philosophy core to our 10 guiding principles.

The company has been entrepreneurial in nature since inception. A company that has embraced characteristics of encouraging executives, general managers, and all employees to act and think like an owner with a stake in the enterprise supporting a can-do attitude, promoting an ability and willingness to urgently get things done, acting to avoid unnecessary bureaucracy, developing an ability to learn from mistakes openly and constructively, and the trust of working in a team.

As a company, we embrace new initiatives every day. We focus on new products, new technologies, new locations, and new ways of doing things consistently.

Our strategic investment in NanoXplore, our embracing of new technologies and our acquisitions in 2019 reflect our entrepreneurial character. The company embraces lean thinking as part of its culture too.

simply stated, the lean thinking way is a focus on eliminating waste in all aspects of the company’s business and operations. The elimination of waste allows us to take out unnecessary costs, thereby making us competitive.

It enables us to see problems that we can fix in our operations more easily. It allows us to simplify processes, so that we can have safer, cleaner, more efficient or more sustainable workplaces is a culture of continuous improvement in whatever we do.

Our improving quality and safety and our growth in margins are all products of lean thinking. At the core of our One Martinrea culture is a golden rule philosophy, based on treating others the way we want to be treated with dignity and respect, but more also, it means following our 10 guiding principles in our business and operations and in how we deal with our customers, employees, suppliers, stakeholders, which include lenders and shareholders and our communities.

Being lean or being entrepreneurial is not enough. These cultural elements overlap, but are tied together with our golden rule approach.

We make people’s lives better in what we do and we can only do that with a service-oriented approach to our work and our colleagues at work, and all those who we deal with in our work, it’s not about me, it’s about we. At Martinrea, we believe that our culture is and will be a sustainable competitive advantage for the company over the long-term and we believe it has driven the improving financial safety and quality performance over the past several years.

In order to be sustainable for the long-term, our company has to be profitable, safe, build great products, take care of its customers and people and have a culture that is embraced by the people. Sustainable companies with great cultures will be around for a long time regardless of industry changes, new technologies, disputes or potential pandemic issues.

We believe, we have a company poised to excel over the next decade and beyond, and we and our people are committed to that. We thank all our stakeholders for their support.

We will continue to do our best for you in 2020, the next decade and beyond. We will have a great future together.

Now, it’s time for questions. We see we have shareholders, analysts, and competitors on the phone, so they may have to be a little careful with their answers, but we’ll answer what we can.

Thank you all for calling.

Thanks and good evening, and thanks for taking my questions here. Maybe, just starting off with a clarification question.

It sounds like, I guess the post-strike volumes from GM came in lighter than you expected in Q4. Does that suggest as a little bit of a bleed into 2020, or are these volumes or these as volumes that I guess we shouldn’t expect to materialize at any point in time really?

Well, I think there’s two things. One, I believe they probably had built ahead in some anticipation of the strike last year, I mean more so than we recognize.

But in the outlook right now for those – for their key products is actually still pretty good. Their inventories are relatively low.

So, whether you call that overhang from 2019 or at least a decent outlook for volume this year? I think that the Silverado and the SUV platform that’s launching off of it relatively soon and the Equinox will continue to do very well this year.

So, some of that could be hangover from 2019 or just that the outlook is very positive right now.

Okay. That’s helpful.

And if memory serves me correct, your acquisition of Metalsa, I think it’s breakeven EBITDA this year and I think it’s $30 million EBITDA in 2021, is that it’s still – is that still the right way to think about it? And then if that is – if I have my numbers correct, in the longer term, can you get Metalsa’s margins similar to your corporate average prior to this acquisition?

Or is that a glass ceiling for that asset?

Yes, I’ll address the first part. So we outlined what our expectations from the Metalsa in our December press release.

So from that perspective, nothing has changed. So break even EBITDA in 20 million and 30 million positive in 2021, it still stands from our viewpoint.

At this point we just closed, so we’re obviously going to get into a little more detail as we jump in. So that is correct.

Okay. And as far as, it’s really improving to the level where we’re at?

I mean, even in our, inside our own company, we have variations from plant-to-plant and I’m sure that with Metalsa, will be some of that, but we don’t expect it over a long period of time to drag our average. Certainly this year and into next, there’ll be some work, but over time I would expect the plant’s performance to progress just like our plants have in Martinrea Classic.

Okay. And just last one for me and I appreciate the color on the balance sheets.

It’s in a great spot. You’ve obviously been aggressive on the buyback and you just raised the dividend and it sounds like you’ll be aggressive on the buyback, once this call is over.

But when I looked at what Continental gave last night or this morning for us, a pretty subdued outlook for the auto sector, especially in the first half. Given a lot of the stuff you mentioned coronavirus, just – maybe a weakening of the economy, even if it’s temporary given the outbreak, how do you think of balancing the balance sheet, the buyback, maintaining the strong balance sheet?

Given some of your – some of these other suppliers seem to have a much more bearish near-term outlook at least what global auto production looks like. And given some of the comments you made earlier around over capital allocation?

So I think we’ll all take a little piece of your question here. Relative to volumes, certainly as we said, we’re seeing slow down in certain mixes in Europe.

We expect that’ll continue in China. We expect that to continue to be lower-than it had been.

And this is kind of outside of the virus, because not sure where that whole thing is going to go, but regardless of that, keeping in mind, we’re still pretty heavy in North America, though the Metalsa acquisition gives us a better footprint. And when you still look at our volume, we’re in the high-70s in North America on platforms that are very popular.

So I think that regardless of what happens worldwide, North America’s going to probably do the best, whether it’s going to do as well as it’s been doing the last few years and not time will tell. But certainly I think it will perform better than the rest of the world again this year.

And the platforms that are going to be – perform are going to be trucks and SUVs. So from that point of view on our product, we still feel pretty good about it.

So a couple of things. Obviously we’re watching the Coronavirus along with everyone else, it’s a human issue.

We have people in different places, including in China, although we don’t have a big presence, we’re taking all the precautions, obviously we want that to have a good result for monitoring it and of course that lends an element of conservatism and caution to everything, having said that, at some point this is an industry that’s not going away. It’s got its challenges that come from time-to-time over the past two or three years.

I mean we’ve had apocalyptic comments on trade issues and the USMCA and all that type of stuff. I think that – I think we’ve got to put stuff in perspective here.

This is an industry that’s not going away, what we think is there’s going to be a working through of the Coronavirus issue. We do think that the trade issues, a lot of people have been rethinking, we think it’s a very good future for regional trade areas.

So our China plants in China for China, our North American plants in North America for North America for the most part and I think it’s a tremendous opportunity for North America in terms of rejigging of supply chains, especially through Mexico. And I think Europe’s going to do some rejigging of supply chains as well.

And that is perhaps the biggest long-term follow-up from what we’re going to see here. And I think that could be very healthy for the industry.

From our perspective, our focus, we’ve been through many challenges over the last 18, 19 years and if you are entrepreneurial, if you’re lean, if you’re looking for opportunities and so forth the question on all these things is who handles it best, because people are still going to buy vehicles, people are going to still make parts for vehicles and at the end of the day, some people in these circumstances are going to be challenged to meet the challenge and some people are going to be poised to take advantage and grow their business and that’s what we’ve always tried to do. I think we’ve done it pretty successfully.

That’s great color and then congrats on a solid quarter there.

Hi. Good evening.

Thanks for taking my questions. Maybe just to start off Fred, you talked about Asia operating profit, maybe normalizing next year.

Obviously margins were very high this year. Can you just give a little, would it be closer to Europe, close to North America next year?

Is that the sort of what we should be thinking about?

Yes, I think I’m not going to get too specific and we had a couple of really strong cores in the rest of the world we expect some pricing pressures into 2020, some mix differences and obviously some bottom headwinds in particularly as it relates to as coronavirus. So I outlined them in my opening remarks, so normalization was always envisioned in that region.

So it’s not necessarily unexpected from our perspective, but you’ll start seeing that in Q1 and going-forward. And in terms of longer term, it’s still a very small segment for us, its evolving swings quarter-over-quarter tend to be very noticeable.

But longer-term, we continue to grow the business we have some more coming online and particularly aluminum facility. We expect the margin profile, probably to be more consistent in North America and Europe and in potentially even a little higher.

So we’ll see how that plays-off, but it’ll be a healthy region for us longer term.

Okay. That’s great.

And then for the CapEx next year, did you guys provide a number what to expect?

So we were – prior to Metalsa acquisition, we were actually projecting to actually be down year-over-year. So we went through a business planning process within the last year and we made some adjustments and so forth.

But when you layer in the Metalsa, we’re going to probably be more consistent year-over-year. So I would say, again, very similar guidance in 2019, around 300 million of CapEx.

300 million. Okay.

And then Pat, when we’re thinking, when we’re looking at your business segments steel motor forming, fluid management, aluminum components, and we’re thinking, we see a lot of commentary, GM had a huge day yesterday describing their electric – fully electric future. When we think of your, those three business segments and what we’re hearing about some of the OEMs in terms of the evolution, how – obviously there’s some product in your mix that might see some pressure.

How do we think about each segment and where you see gains and maybe some losses as that market evolves?

Well, in our lightweight structures business, which is our largest business and where the Metalsa acquisition will go as well. I think we’re going to continue to see that perform well and even better as you go down the EV line.

The need for lightweighting becomes even more important because of the distance issues and so forth. A higher use of aluminum potentially mixed with high strength steels.

So that’s why we always are talking about joining technologies and with the purchase we just made with Metalsa. They have some unique joining technologies married with ours.

We think we’re going to really advance in our ability to build multi-material product, which we see as the future because in all aluminum vehicle is too expensive and an all steel vehicles, a lot less money, but too heavy. So we see a lot more mixing going forward.

So I think we’ll really see the best growth there. In our aluminum business as a whole, I think we’ll do well though.

I think you’ll see a shift away from engine blocks is much more into battery trays and engine or motor housings and more structural parts. And then there’s always been a debate about, well, what’s going to happen to the fluids business?

So the fluids businesses basically fuel and brake. Don’t see a huge impact on brake.

We sell brakes lines to Tesla now and they’ll apply in electric vehicles for some time. We are trying to emphasize more on thermal management in our fluids group.

We’ve picked up some new products over time and continue to focus more there. So as the fuel line portion of the business starts to decline, we would anticipate we’ll replace that with a lot more thermal management.

And you look at a lot of the battery technology, thermal management demands are much higher. So, I think the fluids business is a great business.

I certainly don’t see it dropping off the earth anytime soon. In fact I see many, many profitable years ahead, mostly in North America where, again, we’re very heavy with the fluids business.

So if any of them, you’ll see a change in that segment, more the aluminum in the lightweighting space. I think you’re going to see accelerate and in our strategy and our investment, the way we’re approaching it is we’re moving in our lightweight structures group very fast related to EVs and hybrid vehicles.

And we’re taking it a little slower in our propulsion group, mainly for that reason is understanding where things and how fast they’re going to go. There’s a lot of energy around, pardon the pun, energy around electric vehicles, but how fast and the volumes still very questionable.

And I think we need to be really smart of which ones we focus on and how fast we think they’re going to come. Because the investment levels, as you know, are extremely high.

And so far was maybe the exception of Tesla, nobody’s hit the mark on sales. So a lot of work to be done there and we were going to be smart about it, just like we’ve been benchmark in China, frankly as we go forward.

And we’re seeing a lot of companies talk about product, are you seeing opportunities yourself to participate in some of those EV launches…

Yes, absolutely. We’ve got product on electric vehicles now, some of the bigger programs we wonder in China there in the future, as Fred referred to, so Geely, we announced that a year or so ago.

And we expected electric vehicles in China will propagate the quickest, so it’s a good place to be. We announced and this announcement, the EVA2, which is the Daimler EV, it’s a global platform.

It’s going to be built in the United States. And we won some work on that.

That’s pretty complex multi-material, meet the unique joining technologies I talked about will be utilized there. So yes, and on the Mach-E that the Ford announced that we have some good work on there and that’s a multi-material subframe where we bring steel and hollow aluminum together.

That’s a very unique process. So we’re allowed to add a lot of what this lightweighting strategy is, that we’re bringing to the table on some of these new products.

But again, you’ve got to be choosy about, what is the volume really going to be and be smart about how much you’re going to invest in that. And so we’re so far, I think being pretty smart about it.

We have a good chart in our investor presentation, which we’ll be posting, which basically shows that our book of business is evolving with the market. So if you look at it just today or about 95% ICE platforms, about 5% hybrid platforms in five years, we project about 23% on that hybrid platforms based on what we’re winning, which follows the market.

So at the end of the day, if you’re looking at a revenue sense, you want to be along with the market. You don’t want a disproportion lot on our electric vehicles when they are only 10% of the market.

You don’t want 30% of your product on electric vehicles, when we’re only 10% of the market. So we’re actually being pretty careful to follow that.

And you got to follow the real numbers as opposed to the rhetoric.

Okay. And then in the regions in which, where those vehicles are produced and sold also very important because the world is going to go, as I said earlier, down the electric road at much different speeds, I believe.

Okay. That’s a great information.

Thanks for taking the questions.

You are welcome.

Pat, could you explain now what’s going on with these escape volumes? They’ve really been down at times.

So what exactly is going on the production of the vehicle?

Well, in the – there was a slow start up as you know, part of that was due to some engineering changes that were made not specifically on our part of the product, but in other areas. So the launch overall was put off till, later in the year than originally planned.

My understanding is there are some supply issues from another supplier. I don’t know which one, but it’s been inhibiting some of that production that was compounded.

We noticed this right away as a coronavirus got ugly in China that was compounded by that. So I think the primary issues, at least at this point, are our supply issues that and again influenced by the coronavirus.

But yes, we have not been satisfied with what we expected out of that car so far. But again, if you don’t have a part and only takes one, so I know they’re working hard at getting those supply lines corrected.

Where the virus goes, I guess we’ll wait and see. But our anticipation is that that volume will come back in the spring of this year.

Okay. And if you’ve been happy with your launch at Shelbyville?

With our launch, yes, I’m really happy with it. There was an all new line.

It’s one of our new flex lines, which I’ve talked a lot about. We can run four different models if you will of that base vehicle: electric, non-electric, hybrid and traditional, all on the same line.

So it’s pretty unique and in fact, I think that line helped us win some other business with some other customers soon after, because of it’s unique design. So yes, I’m pretty happy with it.

Okay. And then the other thing I wanted to ask you about is these new emission regulations that became effective in Europe this year.

I’m just wondering if you have any views on how that’s going to impact European vehicle production volumes, if at all.

Well, I can’t say I’m 100% familiar with what past where other than one of our customers believes and makes some sense. We talked with them last year about what was going on in Europe and the volumes as they said, simply we believe a lot of people in Europe are having trouble deciding what to buy, because the laws have fluctuated in some local areas where a city would say nothing except electric cars, and new government gets in and this is what happened in Madrid, in fact then they let the cars back in again.

So do I buy an electric car now and not lose the volume – value of my diesel and/or gas car or do I go ahead and buy another diesel or gas car believing that the electric vehicle is still a long way off? And basically what some believe is that everybody’s just kind of waiting to decide what to do and have a lot of anxiety about their purchase because they don’t want the car they have to lose all its value as things go electric.

We might see this happen in other parts of the world at some point when you go from one to the other. But certainly that would be – that story makes sense to me.

Whether that’s true or not, I don’t know. But there seems to be pent up demand in the market, but a lot of anxiety about what to get.

Right. Okay, thanks for your comments.

Thank you.

Yes. Thanks very much.

Fred, can you just break down the $400 million of revenue by geographic segment from Metalsa, be at North America and Europe and rest of world? And then maybe Pat, can you just talk about the key issues and the restruction initiatives that have to take place in Metalsa so they get it from breakeven to that $30 million target in 2021?

Yes. So it’s about 60% in Europe and about 25%, 30% North America and the rest would be China and South Africa roughly.

Thank you.

So what was the other half of the question again, please?

Yes, I was just wondering if you could – might just talk about the issues that are currently taking place in Metalsa. It’s got breakeven EBITDA and just the restructuring issues, what needs to take place to drive that $30 million over the next year?

Yes. It’s really early to get into anything specific because we’ve got it on Sunday – Monday morning, we basically sends our integration teams and we’re making that assessment now.

And of course during the due diligence phase, we spend time in the plants, but it’s a lot harder to understand what you need to do until you can dig into everything. And so that’s what we’re doing now.

Operationally just from my observations, I’ve been at two of the – the two major plants. There is a lot of good opportunity to improve the operation, improve the material flow.

The good news is they’ve made some wise investments in equipment. The equipment that, that they had bought over the last five years is pretty good.

But the layouts and material flow and the plants I think has a lot of opportunity that we can have a good influence on. So I think that’ll be one of our first steps to take a lot of the waste out.

And the biggest challenge is going to be Germany. But I think the rest of the plants and they’re a little smaller probably come along quicker.

Okay. And then just in terms of your 2020 operating margin, I think in the release it says you expected to improve from the 7.5% this year to – and I think that’s inclusive of Metalsa.

So I think that means your legacy operation should be around 8.25% plus in 2020. Is that correct?

And what are the North American volumes that you’re assuming in that guide?

Yes. So we base our projections and budgets on IHS, so they’re essentially projecting a fairly flat environment in North American next year.

So that’s kind of the baseline and I think you’re – you’re kind of in the ballpark. I mean, I think what dragged the margin in 2019 significantly was the strike.

And assuming that something like that doesn’t happen again in 2020, I mean, that in itself will create an uplift year-over-year. So I think your craving it’ll be driven by North America.

I think, Europe we’re dealing with some headwinds there, so we’ll see how that plays out. But now that there may be some drag there and also that there’s a big truck in Metalsa business coming there and I talked about the rest of the world already.

So I think you’re in the zip code and in your thinking.

And last one, Fred, maybe just in terms of the two in-sales that, I don’t know off the top of my head, it’s probably a little over $400 million this year. What are we thinking out for 2020?

Yes, I think next year it’ll be somewhat more normal. So if you look historically we’ve been somewhere between $200 million and $250 million.

So I’m thinking something in the range of $250 million. One caveat there is that it’s still volatile customers push out dates and milestones and PPAP’s get pushed out.

So I’m very cautious with providing firm guidance on there, but something around $250 million, I’m not expecting another $400 million next year, that’s for sure. But $250 million, maybe a little bit more, a little bit less in that ballpark.

And that’ll be a positive kick for margins...

Correct.

Thank you.

Thanks very much everyone for cutting into your dinner time. We thank you for your questions.

All of us are available at any time. Feel free to contact us and that’s on the press release in terms of our number and emails.

Have a great evening.