Good day, and welcome to the Aptiv Q4 2022 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jessica Kourakos, Vice President of Investor Relations and ESG. Please, go ahead.

Thank you, Lynnette. Good morning and thank you for joining Aptiv's fourth quarter 2022 earnings conference call. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at aptiv.com. Today's review of our financials exclude amortization, restructuring and other special items and we'll address the continuing operations of Aptiv. The reconciliations between GAAP and non-GAAP measures for our Q4 financials as well as our full year 2022 outlook are included at the back of the slide presentation and the earnings press release. During today's call, we will be providing certain forward-looking information, which reflects Aptiv's current view of future financial performance, and may be materially different for reasons that we cite in our Form 10-K and other SEC filings, including uncertainties posed by the COVID-19 pandemic, the ongoing supply chain disruptions and the conflict between Ukraine and Russia. Joining us today will be Kevin Clark, Aptiv's Chairman and CEO; and Joe Massaro, CFO and Senior Vice President of Business Operations. Kevin will provide a strategic update on the business, and Joe will cover the financial results in more detail before we open the call to Q&A. With that, I'd like to turn the call over to Kevin Clark.

Thanks, Jessica, and thanks, everyone, for joining us this morning. Let's begin on slide three. 2022 was another year with record new business bookings and strong growth over market, driven by our industry-leading portfolio of advanced technologies, as well as our continued flows execution that's kept our customers connected in this challenging environment. Highlights for 2022 included $32 billion of new business bookings, driven by significant active safety, high-voltage and smart vehicle architecture awards. $17.5 billion of revenues, representing 15 points of growth over vehicle production during the quarter, bringing our full year growth over market to 11 points. Operating income and earnings per share for the full year of just under $1.6 billion and $3.41, respectively, reflected the benefit of strong revenue growth and customer recoveries, partially offset by costs related to COVID and ongoing supply chain disruptions, which Joe will cover in greater detail a little later. We also enhanced our portfolio of safe, green and connected technologies with the additions of Wind River and Intercable Automotive, both of which closed during the fourth quarter. I'll expand on these, as well as our enhancements to our operating model on the next slide. As the industry transitions to fully electrified software-defined vehicles, we continue to enhance both our operating model and industry-leading portfolio to further strengthen our capabilities to solve our customers' toughest challenges. As legacy functional and domain-based architectures are increasingly replaced by approaches aligned after smart vehicle architecture, it impacts both the way we design and sell our solutions. This means further strengthening our One Aptiv account-based model, positioning us to engage earlier in the development process and, therefore, more effectively design, specify and deliver optimized solutions across our portfolio, resulting in stronger customer relationships and greater ability to capture value from all our full system solutions.…

Thanks, Kevin. Good morning, everyone. Starting with a recap of the fourth quarter on slide nine. As highlighted earlier, the business drove strong growth in the quarter, with revenues of $4.6 billion, up 19% over prior year and representing 15 points of growth above underlying vehicle production. The outgrowth was across both segments, despite continued semiconductor supply chain constraints and COVID disruptions in China that negatively impacted customer production. Adjusted EBITDA and operating income were $674 million and $523 million, respectively. OI margins expanded 380 basis points versus prior year, reflecting strong flow-through on incremental volumes, the benefit of customer recoveries of direct material cost increases and cost reduction actions taken earlier in 2022. Supply chain disruption costs were favorable by approximately $25 million from the prior year, and foreign exchange was negative in the quarter, reflecting approximately 20 basis points of headwind. EPS in the quarter was $1.27, an increase of 87% from the prior year, driven by overall earnings growth and interest income from higher cash balances maintained prior to the closing of Wind River, partially offset by interest expense and tax expense on higher earnings. The notional EPS impact was a loss of $0.29, an $0.08 increase over last year. Lastly, operating cash flow totaled $933 million and capital expenditures were $178 million for the quarter. Looking at the fourth quarter revenues in more detail on slide 10. Our growth was broad-based across all regions, despite the disruptions in China and continued supply chain constraints. Price downs net cost recoveries and commodities was favorable by approximately $100 million. Foreign exchange negatively impacted revenue by approximately $300 million in the quarter and late quarter shutdowns in China was a negative $60 million. From a regional perspective, North American revenues were up 21%, or 13% above market, driven by…

[Operator Instructions] And we'll take your first question from Rod Lache.

Good morning, Rod.

Yes. So, I guess my first question is on your bridge for 2023, you have $400 million of additional labor depreciation economics price. You offset that with $400 million of performance and it was either $135 million or $180 million of lower disruption costs. I'm just wondering about -- just in light of the still inflationary environment that we're seeing pricing is still negative. And at what point do you think you start to kind of get ahead of this and recover some of these disruption costs or headwinds.

Well, Rod, it's Joe. I'll start. I mean I think we have gotten ahead of it, to be honest with you. I mean, our business equation is working, right? Performance is offsetting labor inflation and the pricing and the material inflation, you see in that $100 million. We've vetted out from a top line perspective, customer recoveries this year, which are obviously benefiting from a full year effect or effectively offsetting price downs on the top line. So I think our view, and Kevin can jump in. I think our view is that the team has done a great job of pushing direct material costs through. And we've started to get performance up, including working hard to get the supply chain disruption costs out of the P&L.

Yes, I guess, to just maybe clarify my question, Joe. Like I think that you had talked about $295 million of disruption that you'd start to recover over six quarters. And when I say ahead of it, in my mind, at least that means the positives are greater than the negatives. It looks like they're sort of matching at least when optically, when you look at the bridge?

Certainly offsetting. Yes, we ended 2022 with about $330 million of supply chain disruption costs. We've taken that down to $180 million in the outlook. So we're still assuming $180 million of disruption costs. It continues to be a difficult operating environment for certain customers, and we're still seeing some disruptions, obviously, China in Q4, December, in particular, was heavily disrupted with COVID. So I think we continue to work through it. I think you're right. We had always talked about sort of four to six quarters. So we've got some to continue to work through, but feel like we've made a pretty big step here in 2023.

Yes. Maybe if I can add on, I think it's a great question. I think one of the challenges when you talk about getting full ahead of it, you need to have better predictability of what you're getting ahead of. I think Joe's point on the fourth quarter of 2022 in December, specifically to give you an example, roughly 90% of our employee base in China was suffering for COVID. That's tough to predict. Yet at the same time, we were able to keep our factories running and keep our customers connected, which has been our ultimate objective, right? So operating in a less efficient way and being somewhat reactive in an environment where we can't always predict what's going to happen from a supply chain standpoint or COVID stand.

Thanks for that. And just secondly, when you announced the closing of the Wind River deal, in your release, you talked about some recurring operating expenses and costs that led to changes in the terms. I was hoping you can maybe talk a little bit about what you meant by that? And what were the implications financially going forward?

Yes. I think the net results for Wind River from a revenue growth standpoint, a margin standpoint, accretion dilution standpoint remain largely unchanged. We're not going to get into all the specifics, but operationally, there were some changes that we needed to make. And in light of that, we are in a position to renegotiate the transaction.

Yes. Well, the only thing and it's a nuance, but I think it's important, particularly as it relates to the magnitude of the costs, the price reduction we said was in part due. So it's not a direct correlation between sort of the increase in expenses and the amount of the reduction. So to Kevin's point, it gave us an opportunity to talk to the sellers about pricing we did, but the deal remains accretive in this year. And again, as we said in our press release, it's no changes in sort of the strategic outlook or our view on the long-term – long-term opportunities Wind River.

Thank you.

We'll hear next from Adam Jonas from Morgan Stanley.

Hi, good morning, Adam.

Hi. Just wonder – I want to follow-up on Rod's question about production disruption because the guide for down 1% does seem -- it seems surprising to some people, given if you look at like the PMI shipping index back to pre-COVID levels in terms of implying logistics costs and shipping timing more back to normal chip companies are taking down supply because they've seen that kind of just in case channel buildup is kind of running its course. And so you are highlighting a couple of companies, and I respect that there's still some choppiness, but it seems like you're implying that production disruption in 2023 gets worse. I mean, you're implying net headwinds, right? So you're implying it gets worse than in 2022. Help me understand that because that's a pretty weak comp, pretty [indiscernible] comp in terms of how bad things were last year.

Yes. Adam, listen, as we've talked about in the past, when we provide our guidance and build our forecast, it's off customer schedules. And when you look at the nature of our business, especially our SPS business, we're on one in every 3, 3, 3.5 vehicles globally. So we get a very good view to the underlying market. We also, given the nature of our ASUX business get a very good view to what's going on from an overall semiconductor availability and supply chain standpoint. And I think when you look at the semiconductor challenges as they've evolved from 2021 to 2022, then 2022 to 2023, it's really much more focused on rather than a general supply constraint standpoint, specific suppliers who are causing constraints. And we expect that to continue into 2023. It certainly was the case in 2022. And those two factors are effectively, they're impacting our overall outlook for the full year, which again, as Joe said in the past, is based on the customer schedules that we received.

All right. Appreciate that. And just a follow-up. Imitation is the ultimate form of flattery. Qualcomm wants in on software defined and kind of the kinds of products you're doing in safe and connected. Mobileye wants to compete with you. I seem to recall you used to quote a 70% type win rate in ADAS and ASUS broadly. I think that sounds familiar, right. I always felt that was a bit too high, kind of a high watermark, but how has that trended in recent quarters now that you're seeing the competition may be creeping in on the forward X?

Yes. I think it depends on your baseline and what comparison you're trying to make, whether it's a full system solution, a platform solution or it's a unique to a perception system, as an example, a radar solution. Obviously, ADAS penetration has accelerated and continued to increase over the last several years. I haven't seen or we haven't done the math on the pursuit relative to win. I'd say, it's still relatively high on a platform basis. I would say we're very focused on investing our efforts in those areas where we have a high likelihood of winning. So based on that sort of approach to pursuing ADAS platforms, I would say, it would continue to be relatively high. I'm not sure if it's quite at 70%. But we still continue to have a very strong position. And again, it's reflected in our bookings in 2022, our outlook in bookings for 2023 and our revenue growth relative to market. And I mentioned in my comments, the next-gen Gen 6 ADAS platform, which we'll launch in 2025 will be available for SOPs in 2025. We've already had one customer award. It's an open system. It provides -- it's modularized. It provides a lot of flexibility for ourselves, as well as for our OEM customers. And importantly, it's very cost effective. So we believe we're going to continue to see significant demand.

Thanks, Kevin. See you guys on Valentine's Day. I'll bring the chocolate.

We’ll see you.

See you.

We'll hear next from John Murphy from Bank of America.

Good morning, guys. There's been a lot of price action recently by some of your customers on EVs that are probably going to drive significantly higher volume relative to initial expectations. I'm just curious how you think about that and what kind of opportunity there might be here in 2023.

Well, listen, we've been talking about high-voltage electrification and what we've been doing from a portfolio standpoint, bookings continue to be strong, right? Obviously, we had another year of record bookings, and it wouldn't surprise us if we had 2023 even stronger bookings from a high-voltage electrification standpoint. So, we'll see, we're optimistic. Having said that, as we've said in the past, we're very, very focused on pursuing opportunities with those OEMs who have battery electric vehicle platforms that they're taking globally, that we have a high confidence level that they're going to meet their schedules and effectively generate significant revenues over a platform, which ends up a better financial proposition for ourselves and obviously, lower risk.

Yes. John, it's Joe. I'll just add. We've talked a lot about being north of a 30% growth rate in high voltage. 2023 is as well north of 30%, based on the customer schedules we're seeing today and, obviously, got additional opportunities as we add in the Intercable portfolio. So continue to see a very strong schedules today to extent the price actions, sort of increase the mix or increase the take rates on that technology, I think, we'll be very well positioned to take advantage of it.

Got you. Okay. I mean, if you look at stuff like the Model 3 and the Y, I mean, it's kind of the here and now. I mean given the price cuts, I mean, those guys might be doing another 500,000 units relative to expectations. I mean are you thinking that's possible, and that's in your numbers at this point. And the action by the Chinese manufacturers well. I mean it's a real heavy stuff here. I mean we're not talking about like three to five years on backlogs. We're talking about like hundreds of thousands, I mean, if not millions more EVs this year than expected?

Yes. I think as you heard me say and Joe say in the past, our forecast is based on customer schedules. So to the extent those schedules go up, we'll benefit from a revenue standpoint, but when we pursue business, when we put initial capacity into the ground, obviously, there's some flexibility, it's based on what we see from a customer standpoint, customer schedule standpoint. And again, so if we see a big uptick in demand for players like Tesla and others, our volume will scale with them.

And to date, John, those actions have happened in the last couple of weeks, we have not seen big schedule moves yet. Not saying they won't happen, but haven't seen material changes at this point.

And then just one quick follow-up on the bridge. I mean on the recoveries, I mean, it does seem like some of the automakers have almost a little bit remorse that recoveries were a little bit high last year, whether it be for commercial sentiments around volatility on schedules or raws. I mean, what is your kind of expectation there in these customer discussions this year? Do you expect them to be a little bit tougher. I mean they were -- I wouldn't call them generous last year, but they were more realistic last year than I have been in decades. Do you think they're going to be a little bit tougher this year and there might be some reversal there? I mean what are those discussions like at the moment?

John, as you said, they're always tough. It's an industry with a tough pricing environment all the time. So those conversations are -- they're never easy. And what we've done in the past and what we are really focused on continuing to do is to bring value to our customers, one by keeping them connected; and then two, providing them with solutions that solve their toughest challenges that are cost-effective solutions. And to the extent you're able to do both of those, I would say those conversations are less difficult, but they're never not difficult. And our outlook -- the team did a great job. Joe mentioned, the team did an outstanding job in 2022, both having those discussions and negotiating those – those price increases and at the same time, delivering record bookings. And that's a process we'll continue to go through in 2023.

Great. Thank you very much, guys.

Thanks, John.

Emmanuel Rosner from Deutsche Bank. Your line is open.

Thank you very much. Good morning.

Hi, Emmanuel.

A couple of questions on margins, if I can. First one for the quarter. I think the margins were quite a bit softer than maybe we had anticipated, especially of very solid revenue outcome for the quarter. Can you please go back over some of the factors of this? I obviously heard you speak about COVID disruption in China, anything else? And specifically within us and U.S., it seems to be quite pronounced.

Yes, Emmanuel, it's Joe. You're right. I mean we continue to deliver on the top line, and I think this speaks to sort of a little bit around Rod's question. It just continues to be a very disruptive environment, right? So we're working through China, $20-plus million of impacts at the very near end of the quarter from both customer shutdowns as well as just us. As Kevin mentioned, we had 90% of our staff of 30,000 people come down with COVID in the fourth quarter. So it was a very disruptive production environment. We saw some of that in the US as well, as customers wrestle through the supply chain challenges, and we still got a lot of the stop-start production. So that, combined with sort of the FX impact call that, I think you mentioned 20 basis points, call that about $40 million in the quarter. And, again, some of those disruptions fall heavily into ASUX. So I think to some extent, it's more than the same. I think what you saw us be able to do this year, which, to some extent, compounds the disruption cost perspective, we were able to come back, run over time, run the businesses hard and push the revenue out at the end of the day, or most of the revenue out at the end of the day. But it's just an inefficient operating environment. And that's as part of the guide, again, north of $300 million of disruption costs for 2022. We left about -- we certainly don't think it will be as bad next year, right? We're hoping for sequential improvement. We're seeing sequential improvement. But we did leave $180 million of COVID and disruption costs in the P&L for 2023, just to give ourselves some room to continue to deal with this.

Okay. That's helpful color. And then, I guess, as a follow-up, I think one of the ways you, I think, encourage us to look at it, I guess, this upcoming year was, maybe, compare the performance versus the second half of 2022 to the extent that some of the price recoveries and commercial agreement you had with customers who are benefiting you more in the second half of 2022. I guess, what do you feel is sort of like a good clean base in terms of second half margin, for which to build off, as we try to understand your 2023 guidance? And what would sort of like the puts and takes versus that.

Yes. I think that's a good question, and we've spent time looking at that. I think the way to think about it, we talked about originally 10% to 10.5%, and then with some of the FX, 9.5% to 10%. So we think about probably 10 as a good jumping off point. I think what you see with -- you can -- and I think we've sort of captured it, quite honestly, within the range of the guide, right? You can sort of -- if you look at some of the benefits of pricing, if you look at the reduction in the COVID supply chain cost, you can get up to sort of that, call that, that 10.7%, 10.8% level. You then work down some of the FX and some of the volume changes, which is really how we sort of think about that sort of mid-10s, that 10.5%. I think we're sort of there. I think 10 sort of ended at the right jumping off point, and we sort of built back from there. And I think we have it covered generally speaking, within the guide.

Okay. Thank you, very much.

Yes. Thanks.

We'll hear next from Itay Michaeli from Citi.

Great. Thanks. Good morning, everyone. Just two questions for me. One, Joe, I was hoping you could share our expectations for margin cadence throughout the year. And secondly, on active safety. Maybe talk about what you're expecting this year for both top line growth, as well as if you talk about booking expectations after a very strong 2022.

Yes. Let me start with bookings. I'll work my way down. As Kevin mentioned, we think -- it was in Kevin's presentation, we see line of sight to, call it, another $32 million -- $32 billion of bookings in 2023. I would say mix should be generally consistent with 2022. They always can be a little lumpy, but continue to expect growth in SVA and active safety, obviously, in high voltage. But I think that profile, the sort of the current profile is probably a pretty good proxy. Again, bookings are lumpy. They always have been. But that, I think, is probably the best proxy, and we did want to provide a target, obviously, for next year, which is something new, but we've got a lot of confidence in what we're seeing. From a segment perspective, if you want to talk sort of growth or growth over market, full year, I'd have ASUX at around 12% growth over market full year. SPS at about 8% growth over market full year. And then I'll give you -- I'm not going to go quarter-by-quarter, obviously, on the margin cadence. But if you think about sort of full year margins by segment -- and again, we got to work through the disruption costs and some of the FX we've talked about. But I would think about SPS in that 11% to 12% range, and ASUX in that 8% to 9% range, full year OI margin.

Terrific. That’s all. Very helpful. Thanks so much.

[Operator Instructions] We'll move next to Mark Delaney from Goldman Sachs.

Yes, good morning. Thank you for taking the questions. First, on margins to the extent the stop start schedule volatility and the input cost inflation environment were to moderate. Do you think Aptiv could get back into that historical target of 12% to 14% type EBIT margins, or given how pricing discussions with customers have evolved in the last few years with more things now on pass-throughs. Do you think some of those lower costs may actually get passed out to the OEMs.

Listen, I think if the disruptions and the significant material inflation that's over the last couple of years goes away, we definitely get back to what our historical margin trajectory was. And then when you overlay what we've done from a portfolio standpoint, and where we sit, whether that's mix of more high-voltage electrification, more advanced ADAS solutions, the benefits of Wind River and Intercable actually have the ability to go above that. So it's a combination of both.

That's helpful. Thank you. My second question was on Wind River. You spoke a bit on this already in the prepared remarks, but could you elaborate more specifically on what Aptiv will do this year to help Wind River have improved customer dialogue with the automotive types of companies, in particular, given all of Aptiv's expertise and relationships with that industry. Thanks.

Sure. So in reality, going back, we signed a commercial agreement with Wind River over a year ago well and over a year ago. And in reality, our teams have been working closely together, both in terms of developing the final product for automotive applications as well as in commercial discussions. I'd say the traction we've hit over the last quarter or so has hit a significant level at this point in time. So a number of introductions across the various regions. I think as I mentioned in my prepared comments, there's a deep level of engagement with several OEMs in every region at this point in time. And we're very optimistic, and I'm very confident that you'll see meaningful announcements in 2023 with respect to Wind River's penetration of the automotive space.

Thank you.

We'll move next to Chris McNally from Evercore.

Thanks so much, team. Basically, follow-ups to what's been already asked. On the ADAS wins, $20 billion, could you talk about just the diversification of some of the Tier 2s? I think historically, you've been a majority installer of one perception compute system. But obviously, there's various out there. $20 billion is such a big number. It seems like you're probably winning business with multiple computer perception providers. I just want to confirm that.

Yes. Chris, just to be clear, our ADAS business, I put into kind of two buckets. One bucket is a platform solution, which to-date has traditionally been with the Mobileye vision solution. Then there's another bucket where our perception system -- perception systems are integrated into an ADAS solution. And in those particular cases, it could be a variety of vision providers and in fact, actually is. So it's a real mix. The Gen 6 ADAS platform is a platform that we've developed -- first, we've developed to be vision agnostic. So OEMs have the ability to select what vision provider they would like to utilize for the overall platform.

Yes. No, that's great. Is it fair to put the bucket one versus bucket two is sort of 70-30?

No, I would say, it's probably a little bit closer to 50-50. I'd say, it's 50-50. If you go back four years ago, we had roughly 14 ADAS customers. Today, we have 21 ADAS customers, and that's a mix of growth in that platform solution, as well as providing a portion of the overall ADAS solution to OEMs.

Okay. That's super helpful. And then, just on the production, question for Joe, and this is going to be a little bit of a nit pick. Just can you remind us how you guide global production? Is it a weighted average by your customers, by your revenue? One of the reasons, obviously, minus 1% looks maybe low to what we all think, but when I look at also 2022, you called production 4%. We look at a global average of 6% or weighted average of 5%. So I just wanted to sort of understand, if we get a 3% or 4% global production, am I able to flow through a full 4%, 5% type of revenue upside?

Yes. It's weighted towards our production. That basically means for us, Chris, high level, taking out Japan production basically and weighting it towards the markets where we're strong. We obviously don't do a lot on for Japanese OEs in Japan. So that -- and call that 20-plus million units, right, that we sort of weight away from that. And that's the same -- we've been calculating that the same way for -- since the IPO for 11 years now. Very consistent.

Yes No, that's very helpful. And I think that weighted number obviously is for most western suppliers who we don't have, the Japanese customers in the same way. Okay. Thanks so much, team. Appreciate it.

Thanks, Chris.

We'll hear next from David Kelley from Jefferies.

Hi. Good morning, guys. Also, a couple of follow-ups from my end and maybe starting with kind of the semiconductor discussion and impact on AS and UX. Curious if you're seeing any signs of plateauing pricing there or even potentially to take back some price from your suppliers. And obviously, timing is difficult to predict. But given your traction and value-add with customers, is there maybe an emerging opportunity where you could see some sticky pass-throughs for AS & UX as your own pricing starts to come down?

Yes. David, that's a great question. I'd say with respect to the level of bookings we were awarded in 2022, we've been put in the position to have discussions about no price increases and in some situations, that's been effective. I'd say we're not at a point though where we're actually seeing year-over-year productivity or lower price increases from the semiconductor players. We'll see how that plays out as based on volume outlook for automotive and the other places that those players play. But at this point in time, we're not seeing it, and it's not in our numbers.

Okay. Got it. And a quick follow-up on S&P. The product line margin expansion, you referenced, I think you mentioned kind of in high-growth areas. So a, can you confirm that that's high voltage or maybe it's kind of non-autos or CVs, or maybe just give us a bit more color on some of the specific product lines where you're seeing some nice movement.

Yes, I would sort of characterize, David, the margin profile in that business overall is very strong. But high voltage, the adjacent market, particularly commercial vehicle accretive. But also, we're very strong. If you think about engineered components, right, sort of the connect the interconnect type business. That business just has traditionally a very strong margin profile and – and certainly scales well with volume and is accretive with additional volume. So it's really a -- it's a pretty balanced portfolio in that business.

Okay. Got it. Thanks, guys.

Thanks, David.

Operator?

At this time, we have time for one more question. We'll move to James Picariello with BNP Paribas.

Hi, guys. Just a quick one on the key business vertical growth. So active safety, user experience, high-voltage electrification, non-auto, can you share what the growth rate expectations are for this year within the guide?

Yes, sure. No, generally very consistent, James. I mentioned high voltage to John. We still continue to see that north of 30%. That's excluding Intercable. As you mentioned at the time of the deal, Intercable we're -- obviously, the M&A deals aren't in the organic growth numbers at this point. But Intercable in and of itself grows well above 30% per year, so consistent with our high voltage business. We're actually seeing some active safety acceleration growth this year. It had been in, call it, the low to mid-20s over the last couple of years. We're actually seeing that accelerate close to 30% in 2023. As we launched to Kevin's comments, just launched a number of new number of new full systems. So I think those -- we've talked in the past about what the CAGRs, the multiyear CAGRs for those product lines are sort of high 20% to 30% for active safety, north of 30% for high voltage. Those continues to – that continues to be the case. Infotainment, we've talked about it, user experience. We are going through a product transition there. We expect that business to grow, sort of, high single digits this year, as we move from legacy systems to these more robust integrated cockpit solutions. And eventually, we see infotainment being sort of up integrated into the SVA systems, which is what we're working on with our customers now. So -- but again, continue to grow above market, and it's an important part of the business. But, obviously, the higher growth coming from active safety, high voltage.

Got it. That's super helpful. And then, just with respect to the $135 million in lower disruption costs for this year, can you confirm what that overall cumulative impact is entering this year? I believe the number was -- something like $295 million was the expectation as of last quarter. Seems as though the fourth quarter incurred some additional challenges tied to China. So, yes, if you could share maybe the time line to fully recapture this all-in bucket, what that is, that would be great.

Yes. I wish I could give you the full -- the time line of recapture. We've had $180 million in. We finished last year at a little over $300 million. So that's what's coming down from. We're taking the $135 million down to the $180 million._

Okay. And then, over time, this will -- these cost challenges are fully addressable?

Yes. No, listen. Rod in his comment was correct, right? We said at the -- we think four to six quarters from the beginning of 2023; we're going down over the next four quarters, that $135 million, working hard to get them down. Again, its things like premium freight, its things like plant downtime that are either COVID or supply chain disruption related. We're seeing sequential improvement. I would expect to continue to see sequential improvement. But it's what you saw in the fourth quarter this year, right? There are things that pop up that make it an expensive operating environment.

Yes, I think it's important to note, setting aside fourth quarter COVID, when you think about car and inputs to a car, supply chain disruption can start with just a shortage of one part. And the issues related to excess labor, premium shipments, manufacturing, loss of manufacturing productivity. And that's all it takes. And there's a ripple effect and those dollars, obviously, are those inefficiencies and costs obviously add up. So, although it does, to Joe's point, overall, the supply chain situation is improving. There are still continue to be some unique situations that were outstanding or occurred in 2022 that are going to continue in 2023, with specific semiconductor suppliers. And then periodically, there are surprises that affect the industry, the players like ourselves need to react to. And our real focus has been, how do we make sure we keep our customers connected. So we've consciously made the decision to absorb a portion of that cost near term, go back to the customer for relief once we've addressed the issue, and we've kept them connected. And we think that's translated into the -- quite frankly, the bookings that we've had in 2022, we expect to have in 2023. And, quite frankly, their posture on price recovers. So it's tough to predict.

Thank you.

Thanks, James.

That does conclude the Q&A portion of today's call. At this time, I would like to hand the conference back over to Kevin for any additional or closing remarks.

Thanks, operator, and thanks, everybody, for your participation today. Take care, and we'll see you on the 14.

That does conclude today's teleconference. We thank you all for your participation.