Good morning. My name is Albert, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Aptiv Q3 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Elena Rosman, Aptiv’s, Vice President of Investor Relations. Elena, you may begin your conference.

Thank you, Albert. Good morning, and thank you to everyone for joining Aptiv’s third quarter 2018 earnings conference call. To follow along with today’s presentation, our slides can be found at ir.aptiv.com. Consistent with prior calls, today’s review of our actual and forecasted financials exclude restructuring and other special items and will address the continuing operations of Aptiv. The reconciliation between GAAP and non-GAAP measures for both our Q3 financials, as well as our outlook for the fourth quarter and full year are included at the back of the presentation and in the earnings press release. Please see slide two for disclosure on forward-looking statements, which reflects Aptiv’s current view of future financial performance, which may materially be different from our actual performance for reasons that we cite in our Form 10-K and other SEC filings. Joining us today will be Kevin Clark, Aptiv’s President and CEO; and Joe Massaro, CFO and Senior Vice President. Kevin will provide a strategic update on the business and then Joe will cover the financial results on our outlook for 2018 in more detail. With that, I would like to turn the call over to Kevin Clark.

I'm going to begin by providing an overview of the third quarter. I'll highlight some of the key new customer awards and cover recent developments across the business. Joe will then take you through our detailed financial results for the third quarter as well as our outlook for the fourth quarter. Our strong third quarter results reflect our ability to consistently drive sustained outperformance. We delivered 11% revenue growth. That represents a record 13 points over market; the result of double-digit growth over market in both our Advanced Safety and User Experience, and Signal and Power Solutions segments. Operating income totaled $420 million, that's up 7%, while earnings per share reached $1.24, an increase of 8% over the prior year. Operating margins declined 40 basis points, driven by unfavorable FX rates and commodity prices. Excluding the impact of FX and commodities, margins increased 30 basis points. In the face of softening global vehicle production, achieving the revenue, operating income and earnings guidance we provided back in July reflects the strong demand for our portfolio of technologies aligned to the safe, green and connected mega trends, as well as our flexible cost structure. We believe it's prudent, given both the weakening of customer schedules that began late in the third quarter and the significant change in FX rates to adjust our financial outlook for the fourth quarter to reflect a more choppy macro environment. Joe will take you through the details in a moment, but we now expect global vehicle production to be down roughly 0.5 point for the full year. Moving to the right side of the slide, we continued our record pace of new business awards totaling almost $16 billion year-to-date, and putting us solidly on track to exceed our prior year record of over $19 billion. Our recent…

Thanks, Kevin, and good morning, everyone. Starting with a recap of the third quarter financials on Slide 9. Revenue, income and earnings came in right in line with the guidance we gave back in July. We saw strong sales growth in the quarter. Revenue was $3.5 billion, up 11% or 13 points above vehicle production, reflecting the continued ramp of new program launches in both Advanced Safety and User Experience, and Signal and Power Solutions. EBITDA and operating income increased 10% and 7%, respectively, and adjusted for FX and commodities, EBITDA and operating income were up 15% and 13%, while funding incremental investments in future growth. Earnings per share of $1.24 was up 8%, which included $0.11 impact from our mobility investments. Lastly, operating cash flow was $138 million, reflecting increased working capital to support the acceleration of growth. Turning to Slide 10. The continued strong launch volume we've had over the past year drove double-digit growth over market in both segments, which helped to offset a decline in vehicle production, unfavorable price and the FX and commodities headwinds. From a regional perspective, we saw accelerated growth over market in all major regions of the world, despite weakness in Europe from WLTP regulations and lower than expected volumes. North America sales were up 18 points over market, benefiting from multiple new platform launches, more than offsetting the continued weakness in passenger car volumes. Europe and China saw 9 points and 7 points of growth over market, respectively, more than offsetting lower production volumes in both regions. Slide 11 walks our operating income performance year-over-year. Operating income of $420 million was up 7%, or 13% when adjusted for FX and commodities. Our operational performance continues to fund investments in our key growth areas, including high-voltage electrification, active safety, infotainment and mobility.…

Thanks, Joe. I'm going to wrap up on Slide 19 before opening it up for Q&A. We delivered another strong quarter with record revenue growth over market and robust new business awards, while at the same time, delivering on our commitments for revenue, operating income and earnings per share. Despite the need to remain prudent in our planning in the current macro environment, we remain very optimistic in our outlook for continued revenue and earnings growth in 2019 and beyond. Through increased vehicle content, excuse me, and market share gains, in addition to the benefits of our more balanced customer, regional and end-market exposure, and our relentless focus on optimizing our cost structure, enabling us to both increase earnings and reinvest for the future. As Joe just reviewed, we remain disciplined and balanced in our capital allocation strategy, investing in both organic and inorganic growth. Our latest acquisitions of KUM and Winchester Interconnect reflect our focus on accretive bolt-on opportunities. And we continue to leverage our strong balance sheet to take advantage of market disconnects to opportunistically buyback shares. In summary, we remain well positioned to continue to execute and outperform in what has been a more dynamic macro environment. So with that, let's open up the call for questions.

Thanks. Albert, we'll take our first question.

[Operator Instructions] Your first question comes from the line of Mr. Chris McNally from Evercore. Your line is now open.

Hi, guys.

Hey, good morning.

Good morning, Chris.

First question is around - it's around China in Q4. So, you discuss a little bit about your production environment assumption for down 10% [ph] in China in Q4. Could you maybe discuss the actual EBIT impact that you also disclosed? How much of that is from China and how much is from Europe and the continued issues on WLTP? I guess, that's the first question. And then the second is just more qualitative. How are you reacting to this slowdown? We had a similar situation in 2015, where you aggressively had to reduce employees, and then we quickly had stimulus after, and that was sort of some pain for the next two quarters. We could be in a similar situation now, given all the news about a potential stimulus. So maybe just a little bit about how you are reacting from an operational standpoint to prepare for sort of this uncertain environment where we could quickly have a change in course in the beginning of 2019?

Yes. Chris, that's a great question. So, listen, we start with -- Joe and I both highlighted. We're continuously focused on making our cost structure more competitive, so that is an ongoing activity. As we look at slower growth in Europe and China, we're pruning where it's appropriate. However, we're also balancing that with significant growth over market in both regions. So we're trying to balance that with incremental launches the balance of this year as we head into next year, so that we don't -- so that we ensure that we don't put ourselves in a whipsaw sort of a position. I'll let Joe comment on the numbers.

Yes. Chris, if you look, it depends on what you want to walk off of, but if you want to walk off sort of the implied guide from last quarter, you're probably talking down total volume roughly $185 million, about $130 million of that - $135 million of that's going to be the volume take down. That's split between all regions a little bit more - not evenly but more in China and Europe and in North America obviously. And it flows just given the - it's coming down relatively quickly, call that flowing in 25% to 30%. There's another 50 coming out for FX and commodities. And I think that's probably - as I mentioned in my prepared remarks, we are seeing a fairly significant impact on FX and commodities on things like margin rates. And taking the RMB to 7 obviously, is one of the key drivers there as well. Positively offsetting that on the volume line, you'll have Winchester coming in for round numbers about $50 million of revenue in Q4. So those are the big moving pieces on the volume side.

Okay, that's very helpful. So, I think we can kind of make the walk for the margin on Q4, if we were to ex out some of the extreme speed of FX and commodities. Last one from me just on this China stimulus. Can I put you guys on the spot to what you're hearing specifically in terms of the potential, the proposals maybe sort of in the works for some version of a repeat of the stimulus that we saw in 2016 and 2017?

Yes. There is a lot of discussion about it. The government has yet to formalize and approve. As you know, it is a country and a government, where, to the extent you see economic slowdown, there is an incentive to drive growth or to do things that drive growth. But as of now, a lot of discussion, nothing has been implemented. So it's something that we're watching -- something we're watching very, very closely.

Great. Thanks so much.

Your next question comes from the line of Dan Galves from Wolfe Research. Your line is now open.

Hey, thanks. Good morning, guys.

Good morning, Dan.

So, growth over market has been running kind of in the 9-point range through Q3, and I think you're expecting something relatively similar in Q4. It's well above the 4-point to 6-point growth over market outlook you provided late last year. Maybe talk about was 2018 above your expectations, kind of what were some of the key drivers? And is there any reason that we should expect growth over market can't stay above the 4-point to 6-point range in 2019?

Yes. I - listen, we'll - we're going through our 2019 process. So to give the specifics at that point in time, our planning processes, I think would be a bit premature, right. 2018 has been a strong -- it's been a strong year from a revenue standpoint, Dan; a big piece of that being driven by things like active safety, with 60-plus percent growth, so continued strong growth there. Infotainment mid-teens, kind of in PH the vehicle electrification north of 60%. So those are the real big drivers in addition to what I'd say some underlying volume growth related to launch activity. So from a year-over-year standpoint, we got critical launches that are up roughly 50% year-over-year. So, a significant tailwind as it relates to that. Listen, we're highly confident in our framework for revenue growth over market. I think it's fair to say it's -- we're probably toward the top end of that range relative -- versus the bottom end of that range as we head into 2019. But that's something that will give more visibility and -- visibility to when we comment on 2019 guidance back in early next year.

Okay. Great. Thanks. And just one additional, I know plug-in hybrids and EVs got a lot of the press, but we've been hearing from some other suppliers that kind of traditional hybrid there's just -- there's been an inflection point in kind of the size and number of contracts out there for bid this year. Are you guys seeing the same thing and maybe talk a little bit about kind of what's your competitive position in terms of winning high-voltage business in hybrids?

Yeah. We've definitely seen an inflection point as it relates to powertrain electrification. And listen, I think we would tell you it's really in every category, from hybrids to plug-ins to, quite frankly, battery electrics, and battery electrics specifically. Our outlook for mix of battery electrics in 2025 are probably twice what they were a year or two ago. So we've seen a tremendous ramp up in interest from our OE customers. We think we're very well positioned from a vehicle architecture standpoint, both connectors as well as wire harness, and it's been reflected in our bookings in the revenue growth that I talked about. As I mentioned, we're off a relatively small base today, roughly $300 million of revenues, that will grow to north of $1 billion in a couple of years.

Okay, great. Thanks a lot.

Your next question comes from the line of Joseph Spak from RBC Capital Markets. Your line is now open.

Thanks. Good morning, everyone.

Good morning, Joe.

Hey, Joe.

Just to circle back to China, and as we begin to think a little bit about '19, I recognize you're going to give more color later like, are you seeing anything of slower ramps or push out of programs that would deter your outgrowth? Like, you still outgrew that market high-single digits this quarter. Is that something we should still expect, even if the overall market is lower?

Yeah. Joe, it's Joe. Yes, listen. We are -- it's more vehicle production in China, it really is. I mean, our outgrowth is strong right now. We, call it, eight -- we expect to grow, call it, 8 points in China in Q4 based on what we're seeing. So the outgrowth is fairly significant and continues to be. Now that outgrowth doesn't always -- doesn't shoot straight on a quarterly basis, it can be a little lumpy. So I sort of wouldn't take the 18 points of outgrowth and run with it. But it's not from an Aptiv perspective, we're really seeing it much more on the vehicle production side, particularly things like active safety and high voltage continue to be very strong product lines, and we expect that to continue well into '19.

Yeah. Joe, it's Kevin. So, we -- I mean, just a little bit color on vehicle production. So we really didn't -- we saw schedules change, schedules, underlying vehicle production, so not penetration rates, really the last week of the third quarter. And it was relatively significant over a short period of time. And that's continued into October and it's -- a significant portion of it is in the China market, but in reality, we're seeing it in Europe and North America as well. So, that's why -- that's what our guidance for the fourth quarter reflects.

Okay. Thank you. And then just on the free cash flow guidance slowed $150 million. I know you noted working capital -- some higher working capital to support the growth, you raised the CapEx. So just wondering, Joe, if you could dive a little bit deeper into those two? Like, specifically within working capital, is it really -- is it inventory, are you seeing anything on payments getting pushed and then also just why the higher CapEx, I guess, so late in the year that you're seeing to support that growth?

Yeah. Joe, on the working capital side, it's -- there is some inventory that's more in the system, given what we were seeing on our revenue growth. Nothing structural within accounts receivable in terms of payment terms, just more of it at quarter-end than originally expected, again, with the volume. So no structural changes, just more riding the volume. Listen, CapEx, where -- we work hard to spread that number constantly. I'd call this more of a -- a bit of a '19 pull forward particularly to support some of the growth in the ASUX [ph] business. We want to -- we're careful with it obviously. We understand the nature of the business we're in. But just given the growth we're seeing in those product lines, we want to be ready for it, and this is one where we're going to be, I think, on the front end of making some of those investments. So, not a surprise or a problem, but just really looking across that business and making sure we're ready to go.

Okay, thank you.

Your next question comes from the line of David Leiker from Baird. Your line is now open.

Hi, good morning. This is Joe Vruwink for David.

Hey, Joe.

I just want to follow-up on the China questions, and this is more thinking about Aptiv back in 2015. So, I think it's fair that you guys called the market better than most in 2015. But when stimulus happened, it ended up kind of hand-strapping you or bottlenecking you from a margin standpoint. And I'm thinking if the stimulus this time around is successful, are you going to have trouble rehiring people, or do you feel like if China is maybe flat in Q4 and Q1 relative to down double-digits, a lot of that volume is going to flow through at very high incremental margin?

Yeah, Joe. The question was asked earlier. We've tried to be very balanced as it relates to what we do from a near-term cost reduction action in China. We have significant growth in areas like active safety, electrification, infotainment, our connector business, as well as within EVR. So we've tried to be balanced. Having said that, we're not waiting for government incentives to drive growth. So, we're very focused on managing the cost structure, doing it in a prudent way, doing it in a way that it doesn't interfere with our current very strong growth over market in each one of our businesses, and making sure that we're not in a position where we need to respond aggressively one way or another if stimulus comes into play or it doesn't.

Yeah. And Joe, I -- and I'm not clear with your words. But I -- we dealt with that impact in a single quarter as well, right, in Q4 '15. That wasn't something that impaired margins long term. You're absolutely right, we did have to hire back, and there's some inefficiencies when you hire fast, but that was contained within a quarter as well. So these are -- these could be somewhat episodic and certainly not long-term challenges, one way or the other. And to Kevin's point, we're working hard. Lessons learned a little bit from last time, so trying to stay balanced, and again with the -- with a, call it, 18% growth above market. For us, anyway, it's more about making sure we're satisfying our customers' needs at this point than just necessarily worried about vehicle production.

And if I can ask one more, the acceleration in active safety growth going from 48% last quarter to 68% this quarter, is that step up a function of new platforms you're launching content on? And so we should almost think about this elevated base continuing for three more quarters?

Yeah. Listen, I think Joe made the comment earlier. I wouldn't look quarter-to-quarter from a growth rate standpoint. I mean, we've been running pretty consistently over the last couple of years at roughly 60% growth in that product line. And I think over the last couple of years, we've gone from five customers to -- I believe, we have roughly 18 customers today. So it's expansion of our customer base, its further penetration within those customers, with significant opportunity to go. And we think we're going to continue to have very, very strong growth as we bring on the bookings from the last couple of years, including some of the Level 2 plus, Level 3 minus programs that we've won over the last, call it, 12 months or so.

Great. Thank you very much.

Your next question comes from the line of John Murphy from Bank of America Merrill Lynch. Your line is now open.

Good morning, guys.

John. How are you?

Just a first question on the mobility investments. I mean, there's obviously a big step up this year. But I'm just curious as we think about 2019 and beyond, what will happen with that. Is that the kind of thing, where, as revenue comes in, this will be absorbed and you're just kind of calling it out for now, or is there may be a reason that might fade to some degree in the near term?

Yeah. I -- sorry, John. We get a lot of questions on it, so we always just felt it was easier to sort of put it right out there than sort of in constant follow up. And it's -- we're not, we're mindful that it is a big number. You won't see the step up next year that you saw this year certainly. We've talked publicly before, could you see it at the 180 [ph] level next year, that type of step up? Sure. But it's not the same order of magnitude as you saw from '17 to '18. And I think we'll continue to provide transparency on that number again. That is just the spend related to the automated driving and mobility, right. There's no spend in there for active safety development or Level 2. I mean, all of that is within the ASUX segment, where it belongs. So this is really a call out on sort of the greenfield automated driving business. So I would expect us to be talking about that to one -- to want to talk about it, if they have to talk about it for a while, particularly as the commercial engagement start to develop and come through.

Got it. Okay, that's helpful. And then second on North America, the 18% growth above market, what were the key programs they drove that? I mean, was it -- a lot of that -- was that GM trucks, or is there something else there that really kind of spiked that, it's driving that high number?

Yeah, it was a mix of programs, principally around pickups and SUVs across not only the North American OEs but some launches of some European and Asian OEs in the US market or North American market.

Okay, that's helpful. Then on the fourth quarter, and this is kind of a micro focus and maybe we can extrapolate off of this. But I mean, when we look at 6% growth above market and we adjust for the FX and commodity headwind, the 6% growth above market is still leading to a small 50 basis point decline in margins. And I know it's an oversimplification, but I'm trying to understand, if we see sort of this mid-single digit growth above market, is it tough for you to maintain margins, right, even when we ex out the headwinds from FX and commodities? And how should we think about sort of the very simplistic maybe formula of, if you hit 5% growth above market, you might be able to maintain margins; 10% above market, you're going to -- in absolute terms, you're going to be able to expand margins? Is there a rough way to think about that?

Yeah. As we talked -- we've talked before about some frameworks there. I think the difference this year is really the FX and commodity impacts significant. Just to correct though, we're -- that 6% growth in Q4, our market assumption is 2.5% down, so the outgrowth is closer to 8.5%. I think, on the decremental margin, you take out volume at 25% to 30% is the way to think about it. From a guide perspective, FX and commodities in Q4 is costing us a little over $10 million of OI. So again, stepping up to the RMB7 is meaningful. We've got about five or so of tariffs in there. The tariff impact that's going to come in Q4 and then the rest we talked about it in the fourth -- in the second quarter call about having about $40 million of operating inefficiencies in the back half, $20 million and $20 million. For Q4, that's -- we're stepping that up by about $50 million, so $35 million of inefficiencies, and that's our forecast. What we're seeing, and I think you've heard others talk about it, the volume shifts in customers are fairly choppy, sporadic. We're seeing a plant close here for a week or a plant forecasted to close for two weeks in November. And that's just on a short term, it's just harder to adjust the cost structure for that. So you just don't run as well as you'd want to run in times like that. So, we've increased sort of our outlook for those inefficiencies by about $50 million in the fourth quarter.

Got it. Okay, that's incredibly helpful. And then just lastly on ROS. I mean, you're saying that there are headwinds in the near term. That's really just a question of timing. I mean, the bulk of that then is going to be reworked back up to the -- your automaker customers. Is that correct, or is that…

Yeah. Copper -- yeah, the model hasn't changed for us, on mostly copper at this point. I mean, our steel and aluminum buy is down less than $10 million a year. So it's all about copper, and it's just a little bit of catch-up on the pass-throughs and then it's FX primarily. The RMB is not insignificant for us. When it resets, we pick up. In a quarter where it resets, we obviously pick up the balance sheet remeasurement as well, or assuming we do when we forecast the run rate for a currency like that.

Right. But the copper doesn't catch-up soon in the next couple of quarters, right? I mean…

Yeah. Catch-up -- yeah, sorry, copper usually catches up in 12 to 15 weeks.

Yeah. Just wanted to make sure. Cool. Thank you very much.

Yeah.

Your next question comes from the line of the David Tamberrino from Goldman Sachs. Your line is now open.

Great. Good morning, guys.

Good morning, David.

Good morning, David.

Further into your mobility spend, I think it's been a little bit of time since maybe we got an update on your CSLP. I believe that was supposed to be production-ready for 2019. How are you tracking for that and how is the commercial receptivity potential to see bookings --

Yeah. Continue to remain on track. Having a number of discussions with a number of OEs, and hopefully be in a -- hope to be in a position to announce something relatively soon.

But on the product itself, is it production-ready for 2019?

Yeah, it would be production-ready for late 2019. Yeah.

Okay. And then on the active safety booking space. I think, we're seeing it step down a little bit sequentially from about $1 billion won [ph] in 2Q to only about $500 million in 3Q. Anything to read into that? Is there…

No. David, yeah. Listen, we'll -- we're very confident we'll book well over $3 billion of active safety bookings this year and that compares to roughly $3.7 billion last year. So, no, there's no trend there quarter-to-quarter.

Okay. And then lastly for me, with the close of Winchester, I believe that communication was just going to be a platform for you to really build off of. Is there a backlog or a good funnel of smaller connector businesses outside of the automotive space that you've kind of been targeted and you could see some pretty good traction and some acquisitions closing in '19, or is it more got to come underneath the Aptiv business and then you'll start to see what's out there, what can we add to this?

No, no. It's -- we're off and running on that, David. We actually closed -- they closed on a very small deal actually between our sign and close. And we see potential for certainly for '19 to see a number of smaller deals like that. They brought with them a very robust funnel. And as we've talked about, there were other ones that we would have liked to have done but really had no place to plug them into within broader Aptiv without the platform. So, I'd expect '19 to be very active on that front.

Okay. And that $0.02 per quarter's money good for adding to your, call it, EPS next year with the closure, or is there any…

Yeah. Listen, we've talked -- we initially talked about Winchester and we'll come out with 2019 guidance and break that out in January. We initially talked about Winchester being just little more neutral, because we do have to make some investments there to make a sort of the platform that we need. So we'll come out with that in January, but just as we plugged it into the fourth quarter obviously, adding $0.02 for the quarter.

Okay. Thank you very much, gentlemen.

Your next question comes from the line of Rich Kwas from Wells Fargo. Your line is now open.

Hi. Good morning, all.

Hey, Rich.

Just a couple from me. Just on the 10% for China, that includes commercial as well? Is that both commercial and like mind on the production?

Yeah. That's everything for us, we put everything into our numbers.

And my recollection is that your schedule is not using third party, right, for the current quarter?

Yeah. At this point, it schedules, yeah.

Good. Okay, good. And then just on putting a finer point on the 2019 considerations. On the global production, with the arrow down, is that actual down global production year-over-year or is that down versus where kind of industry expectations are, which is -- has a little bit of growth factor there?

Yeah. From a planning standpoint, our outlook now would be flat to down as you look at 2019 vehicle production. That's our assumption from a planning standpoint. That's our view of the market as we sit here today.

Okay. And then real quick, just on Signal and Power at $300 million, is that -- as we think about '19 from a margin standpoint, should that start to be contributory in terms of relative to the overall?

High voltage…

High voltage of $300 million, sorry?

Yeah, high voltage. Sorry, sorry.

Yeah, no problem. Yeah. Now listen, that business is running at or slightly above segment margins now that -- you're right, Rich. We typically have said that a product line for us breaks even at $350 million and hit segment margins at $750 million to $1 billion. That business for us was actually basically a segment margin out of the gates, because it's just more of what we do, it's the same plant, the same people building higher voltage, higher value add parts for high voltage systems versus low voltage. So that's been contributing in this year, and will continue to grow.

Okay, great. Thanks. I'll pass it on.

Thanks.

Your next question comes from the line of Itay Michaeli from Citi. Your line is now open.

Great, thank you. Good morning, everybody.

Good morning, Itay.

Just a first question, I apologize if I missed this, but just hoping we talk a little about launch costs this year and really more into next year on launch activity. Just update, Kevin, your thoughts from the Q2 call, and really just getting incremental margins broadly as we think about '19.

Yeah. Listen, I'll let Joe walk you through the numbers. I mean, launch activity this year, critical launch activity were up 50% year-on-year. So, it's been a significant launch year, especially in the Signal and Power Solutions business. As we head into the next year, we have an increase, but it isn't close to that sort of a year-over-year increase. So I think you have some stability from a launch standpoint. I'll let Joe walk you through the numbers.

Yeah. Itay, I think, as we think through the inefficiencies we're calling out, it's hard to know exactly where they come from, right, the plants. We get some shutdowns, we get some temporary holds. At the same time, we're launching. So I sort of think of those inefficiencies, including the incremental launch costs that we're seeing, and obviously it's -- with more going on in the plant, it's just harder to offset in a given quarter. But to really reinforce Kevin's point, particularly -- because mostly inefficiencies are in Signal and Power Solutions at this point. If you compare -- if you just baseline 2016 critical launches, so that's programs over $50 million of revenue is the way to think about them. '18 and '19, we're going to be up 250% off the '16 baseline in Signal and Power Solutions in both '18 and '19. So to Kevin's point, it stabilizes in '19 but it stabilizes at a very high level. And we'll make improvements in '19, certainly in the back half of '19 on some of these inefficiencies as the plants get accustomed to running at those volumes. But it's -- the increase has been very significant and it's really what you see driving that business with 7 plus points of growth over market for a year. And that's obviously, a very large business. We're growing a big business at mid- to high-single digits in a given quarter. So, there's a lot of activity. The volume activity is really significant at this point.

Appreciate the detail there. And then just secondly, going back to mobility, just two questions there. First, any update on the Vegas development and the timeline to remove the driver? And secondly, is Aptiv involved with the recent Volkswagen-Mobileye mobility-as-a-service announcement that's happening in Israel?

Yeah. So I'll start on Las Vegas and then move in to your second piece. So, Vegas, we're running about 1,000 rides per week. We're at about 1 million miles. We have a route point-to-point that includes three locations, and we're expanding that. So that's going extremely well. We're collecting revenues. So that's very much a positive. In terms of getting the driver out of the vehicle, that's late 2019, early 2020, is our current time frame from pulling the driver out of those vehicles. So on our schedule, as it relates to the VW-Mobileye announcement, I guess, we have a non-exclusive relationship with them as it relates to CSLP. Since being acquired by Intel, they've been developing their own platform as well. So that's a separate program that they're doing with VW in Israel.

That's very helpful. Thanks so much.

Your next question comes from the line of Brian Johnson from Barclays. Your line is now open.

Good morning.

Hey, Brian.

Sorry for coming back -- yes. Sorry to keep coming back to China. Two things. One, as we think about your exposure, how exposed are you to the lower end of the local OEMs? The sub - engines in China?

So, -- yeah. So -- I don't know, 75% of our revenues in China are with the multinational JVs, 25% local, and 95% of the revenues are with the Top 10.

Okay. So is the way to interpret your growth over market in China in 4Q is, even though the market is down, even though your platforms are erratic, your weighted kind of customer production isn't quite as bad as it could be, just given where the weakness is?

Yeah. I guess, in theory, that's the case. I think, the other pieces is you're -- we're seeing significant ramp up in growth and things like active safety for that market, which is driving strong outgrowth versus market, similar with infotainment and user experience.

Second, do you have exposure, either in production or in backlog, to the battery electric vehicle, the NAV market in China? And with that up about 50% last quarter, can you have any sort of meaningful offset there?

Yeah. So we do. I don't have an exact [indiscernible] in terms of a meaningful offset. I think our growth relative to market somewhat speaks for itself and that's included in the numbers that Joe walked you through.

Third, you talked about the tariff impact. Could you just recap the number that could be a pressure for 2019? What steps you could take to mitigate that in -- either in terms of moving production into NAFTA, or discussing things with customers?

Yeah. So, Brian, it's Joe. So, post list 3, that late September list, what I'll call unmitigated exposure is $75 million. So, it bumped up significantly from us -- for us on list 3. List 3 captured couple of -- mostly in the connection systems business, a couple of products that we manufacture globally in one location or the other and ship, and that was a decision we made, that was a capital deployment decision at the time, we could build global capacity in one place and build for the world that we did. So, mitigation activity, it's really come in a couple of ways. One, it's moving production, and that obviously is going to take a little bit of time. We need to do that with help from the customers as, obviously, validation and such that needs to take place. Pushing the costs, either up or down in the supply chain, to customers or to suppliers is another lever we have. And then we are spending some time, particularly with the Chinese government on, at least, the products that are made there globally, if there's some way to offset those tariff costs, working with them as a means of keeping the jobs in China. So we're, I would say, at this point, turning over all rocks. We'll clearly mitigate some of that exposure in '19. At this point, just given where we are in the planning process and work under mitigation, I can't give you the exact number that will mitigate, so that's why we went with the total worst cases for '19 to $75 million. But I would expect some of that to be mitigated during -- either before, but more likely during the course of 2019.

Yeah. Brian, I would tell you, I think this is one where the -- as an industry, the industry is focused on the incremental costs and recognizes that that's not a good thing for OEs, for -- and customers' OEs or supply base. I would say there's a fairly active effort between the suppliers and the OEs to evaluate supply chain, evaluate manufacturing alternatives to reduce the overall impact. But to Joe's point, I think the pressing point is just revalidation of new facilities, and that's just a matter of resources. But it does have everybody's focus, and the North American OEs are very, very focused on it, and actually doing a very good job working with the supply base.

Okay, thanks.

Your next question comes from the line of Maynard Um from Macquarie. Your line is now open.

Thank you.

Hi, Maynard.

I just have one question regarding your diversification strategy. And I'm just wondering if the pullback in market valuations opens up the opportunity for you and whether you think this could help accelerate your strategy. Just wondering if you have any color around the environment and how that changes, or doesn't change your strategy.

Are you talking about the M&A environment or…

The M&A environment.

Listen, I mean, it's -- Joe should come in detail. Very, very focused especially in and around the engineered components space from an M&A standpoint to diversify revenues. As Joe mentioned, we had an outstanding asset in Winchester and a great management team with a great platform to do some of the transactions that, from a size standpoint, historically, we're unable to do. So, we're excited about it. Joe, you can.

Yeah. As I mentioned earlier, Maynard, the funnel is strong. I think a little bit of -- and this is going to be a case, particularly as you guys know in the M&A world, a little bit of success begets success, right. So, a year ago, we weren't known as an acquirer of assets in the non-auto connector side. Following Winchester, we're -- probably we are, and we've got a knowledgeable management team and a platform now. So, just more opportunities actually open up once you've done something like Winchester. And like I said, we had a funnel, they had a funnel, and you combine those. And we're -- we do think there's an opportunity certainly to achieve our goal of 25% by '25. And to the extent we can beat that by making intelligent deals, we just won't buy something to beat it. But in terms of finding assets that we like and can accelerate that, we'll certainly will.

And Maynard, it's -- one thing is important to note. We have a very concerted effort. It takes a little bit longer to execute on, but a very concerted effort of taking our existing product portfolio and expanding into adjacent markets like commercial vehicle. It's very analogous where they weren't -- there was not quite as much focus historically as what we have today. So we have a dedicated sales team building a dedicated engineering team to penetrate markets like commercial vehicle.

Great, thank you.

Your next question comes from the line of Mr. Steven Fox from Cross Research. Your line is now open.

Thanks. Good morning. Two quick questions from me. Not to beat a dead horse on the margins, but if I go back to sort of the spin-out, you talked about how, as these programs mature, there's some incremental margins to be had. So I'm kind of curious how much you're factoring in a possible double whammy as production is lower, but it's tied to some of your newer programs. And then secondly, I appreciate the color on Porsche with the new win there. I was wondering if you could maybe give us a little further detail on why you were able to win that business from a technology standpoint. Thanks.

Sure. Why don't I take the first. This is Joe, I'll take the first part and then Kevin can talk about Porsche. Listen, I think, for us, the margin expansion at the product line level is really going to come from the outgrowth, right. So as long as we continue to grow these product lines with that sort of 4% to 6% above market at the rates you're seeing, very comfortable in terms of earnings growth. Again, I probably sound like a broken record a bit, I would just caution folks on the margin rate expansion gets significantly impacted by FX and commodities. So if you look at -- just by way of example, if you look at either Q3 or Q4 year-over-year, the margin rate expansion is actually negatively impacted by 70 basis points in each quarter, which is just a lot. And certainly when we talked about profit growth and expanding margin rate last September, obviously, didn't have the knowledge of the coming moves in FX rates. So I think the profit growth equation continues to hold it at these revenue growth levels. The margin rate itself is going to be offset a bit by the FX and commodity moves to the extent they continue. So that would be my only sort of caveat on that. But again, the profit growth, we feel very comfortable with as these product lines grow.

As it relates to the first part of your program, we've won roughly 10 central compute programs over the last couple of years. And why, we think, we've been so successful is really is bringing the full strength of Aptiv. And you've heard us talk about the brain and nervous system, and leveraging the -- our capabilities in software, as well as leveraging our capabilities in hardware, whether it's signal distribution or compute power, bringing those -- bringing both of those capabilities to play. It's a big differentiator from a capability standpoint relative to the rest of our competitors, and it's translated into significant wins on the central compute side. And quite frankly, I think it also translates into significant wins on the active safety side, certainly the advanced active safety solutions, as well as some of the advanced infotainment awards we've had.

Great. Thank you so much.

So, Kevin, that concludes our Q&A. If you would you like to just have any closing remarks.

All right. Well, listen, thank you, everybody, for your time. We really appreciate it. Have a good day.

All right. Thank you.

This concludes today's conference call. You may now disconnect.