Ladies and gentlemen, thank you for standing by and welcome to Axalta’s First Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. A question-and-answer session will follow the presentation by management. Today’s call is being recorded, and replays will be available through May 14. Those listening after today’s call, should please take note that the information provided in the recording will not be updated and therefore may no longer be current. I will now turn the call over to Chris Mecray. Please go ahead, sir.

Thank you, and good morning. This is Chris Mecray, VP of Investor Relations. We appreciate your continued interest in Axalta and welcome you to our first quarter 2020 financial results conference call. Joining me today are Robert Bryant, CEO, and Sean Lannon, CFO. This morning, we released our quarterly financial results and posted a slide presentation along with commentary to the Investor Relations section of our website at axalta.com, which we will be referencing during this call. Both our prepared remarks and discussion today may contain forward-looking statements reflecting the Company’s current view and -- of future events and their potential effect on Axalta’s operating and financial performance including those related to the expected or potential impact to COVID-19. These statements involve uncertainties and risks and actual results may differ materially from those forward-looking statements. Please note that the Company is under no obligation to provide updates to these forward-looking statements. This presentation also contains various non-GAAP financial measures. In the appendix we’ve included reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information regarding forward-looking statements and non-GAAP financial measures, please refer to our filings with the SEC. I’ll now turn the call over to Robert.

Thank you, Chris, and good morning, everyone. We appreciate you joining us. Today we will provide an update on our first quarter results, the impact of COVID-19 on Axalta's operations and the actions we are taking in response, as well as touch on the conclusion of our strategic review. I'd like to start today by wishing everyone well, and I hope that you and your loved ones remain safe. The health of our colleagues and friends around the world always remains top of mind for all of us at Axalta. We spent significant time and energy taking steps to ensure the continued safe operation of our company, while adhering to social distancing guidelines everywhere we operate. We're all very proud of the hard work that has gone into preparing and executing plans for this safe operation. And I want to thank all of my Axalta colleagues around the world for this extraordinary effort. We're also proud that a number of our sites have converted production to provide critical needed products such as hand sanitizer and personal protective equipment in many countries as a way to give back to the communities where we live and operate. I'm pleased to report that for the most part, our facilities globally have remained operational through the coronavirus period, and we have continued to serve customers without interruption where possible. Our first quarter was, of course, quickly overshadowed by the emergence of the coronavirus pandemic. We're navigating this challenging business environment with a thoughtful, proactive and aggressive approach as it relates to both safe operation as well as the company's financial health. Our top priority remains the safety and well-being of our employees as we continue to serve those customers with critical requirements. We're not taking a one size fits all operating approach, but rather…

Thank you, Robert, and good morning. I'd like to briefly touch on our balance sheet, our first quarter highlights and conclude with a few comments on our financial outlook. Axalta continues to maintain a very solid balance sheet and liquidity profile. Our net leverage ratio was 3.1x at March 31 versus 3.0x at year-end. The nearest debt maturities on both our term loans and our unsecured notes are 2024. We have no affirmative financial covenants on our current outstanding indebtedness and we ended the first quarter with an interest coverage ratio of 5.9x. In January, as a reminder, we prepaid $300 million of our U.S dollar term loan, which lowered our full-year cash interest expense by over $10 million. With $657 million of cash on the balance sheet at March 31 and $361 million of available capacity in our undrawn revolver, we had over a $1 billion in total liquidity available at first quarter end. As we mentioned, we also expect to capture incremental cash exceeding $225 million from reduced CapEx, discretionary working capital reductions and the cash benefit associated with the cost action plans we have already instituted. Our final decisions on any capital decisions will be updated at least monthly, based on the pacing of recovery of our end markets. In terms of first quarter results, I'd highlight just a few things. As Robert noted, organic constant currency net sales decreased 8.5% overall for the quarter, and most of that was by our estimation, due to the coronavirus impacts of 8% in the period. We were pleased to see ongoing positive price mix contributions from both segments in the period, but led by Performance Coatings. The COVID-19 impact on first quarter results to net sales and adjusted EBIT were estimated at $90 million and $40 million, respectively. The…

Thanks, Sean. We are clearly in an unprecedented and dynamic time for our markets and our business. I'd like to emphasize that at Axalta we're taking proactive and aggressive steps to address this crisis. You can see that in our immediate actions around reduced discretionary spending and capital investments, our shift to focus on balance sheet liquidity and cash flow, our immediate adjustments at an operating level to ensure plant and operating health in the COVID-19 climate. And certainly in our double down focus on employees, customers and communities. We are proud to be supporting our communities with both hand sanitizer and personal protective equipment across many countries in which we operate as a way to give back. To conclude, I'd like to thank each and every one of our global employees for their dedication and hard work, particularly over recent weeks as we’ve had to rapidly pivot to address a global health and economic crisis. We're very proud that our employees were able to transform some of our manufacturing capacity to support our communities. Our team has stepped up even beyond our high expectations. And this gives me confidence in saying that Axalta will not only get through this period, but it will become stronger because of it. Our strength comes from our passion to serve our customers, our passion to innovate and create some of the world's best coatings and our passion to execute everyday and be considered the best at what we do. To see our global team exhibiting these qualities even in a phase of today’s unprecedented challenges and even while working remotely for many, it's truly amazing. With that, we will be pleased to answer any questions. Operator, please open the lines for Q&A.

Certainly. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Ghansham Panjabi with Baird. Please go ahead.

Hey, guys. Good morning. Hope everybody is doing well.

Hey, good morning, Ghansham.

Good morning. I guess, first off, what sort of lag is there typically between any inflection in miles driven, and let's call it demand variability for auto Refinish? Are there any sort of historical payrolls that you can share with us? And maybe take us through on that sort of same vantage point in terms of what you saw in China throughout the first quarter and so far in auto Refinish specifically in April as well.

Miles driven is a pretty good indicator for our business, Ghansham, as well as accident rates. There's typically not that much of a lag as we see people get out and drive more. We would expect to see body shop activity pick up pretty quickly. In China, we saw our Refinish business down about 46% in the first quarter. The good news is in April, it was up 14% in constant currency. So that business has recovered pretty quickly and is now trending to the positive. If we look at, overall, kind of some of the elements here in particular just for Refinish globally, obviously, if there are fewer cars on the road, there's fewer miles being driven, fewer accidents, so body shops will need to sort of refill their demand pipe to speak, but we expect that to occur pretty quickly. Once it's filled, we expect demand should recover gradually to normal. And I think we're actually cautiously optimistic about the Refinish business. We've seen U.S. gasoline consumption declined about 50% in the last two weeks of March, but it's already up slightly in the first week of April. The CCC claims that they report the period to have bottomed at about 49% down in April. And then we also have an additional perspective, which is our body shop management system software, where we could actually measure how frequently the scales are being used to weigh in mixed paint. And that was down about 48% in the U.S. and Europe in April, but has since been rising. So we have data from a multitude of perspectives to give insight into our view.

Okay. That's helpful. And then just my second question in terms of decremental margins by segment, how should we think about that? Sean, made some comments on EBITDA specific to the second quarter, but just by segment how should we think about decremental margin?

By and large, it's -- I mean, fairly similar cost structures. Obviously, it's a higher margin business on the Performance side. But I think, the guidance Robert gave in his opening comments and we think about gross margins, specifically COGS, roughly 60% is variable. So you can think about the drop through from that perspective. Clearly, looking at what we've quantified around the COVID impact, $90 million in sales, $40 million EBIT impacts. It's about -- slightly over 40% EBIT margin. Clearly, we didn't have the opportunity to start taking costs out, similar to what we're actually doing in the second quarter and what we implemented. So I think that margin construct as far as decremental is sort of a worst case, just for perspective there.

Thanks so much.

Our next question comes from Vincent Andrews with Morgan Stanley. Please go ahead.

Hi, guys. This is actually Steve on for Vincent. Just curious if you could talk a little bit more about some of the discussions you're having with your Refinish customers in regards to inventory levels and appreciate the color and the answer to the previous question, but just maybe a little bit more color on the discussions there.

I think our -- in terms of our Refinish customers, our goal is to make sure that we have that, that we have paint available for them as they restart operations. So we've been focusing on as they've looked at concentrating and have concentrated some of their body shops regionally into fewer shops during the corona period, making sure that we have product available for them. And as we toggle and manage our supply chain and our raw materials and inventory management overall, that we're making sure that we've got product availability for them. I think that's one key element. The other element is we have been working virtually with a number of our Refinish customers to the extent that they've encountered any daily just kind of run of the mill technical issues. So we haven't let the coronavirus get in our way in terms of providing top notch service to our customers. So I think, all in all, we've been doing a good job in making sure that they get what they need.

And just one incremental point. Certainly, we don't have perfect line of sight into distribution, but inventories, by and large, are pretty thin, I think similar to what we're doing as manufacturer and focusing on liquidity and working capital efficiencies. I think you're also seeing that in the middle of the channel. So to the extent we are to see a rebound, you could expect a slight restocking just given out then the inventory layers are sitting in distribution today.

Okay. Thanks, guys. Appreciate it.

Our next question comes from Mike Harrison with Seaport Global Securities. Please go ahead.

Hi. Good morning.

Good morning.

Looking at the Refinish business, this downturn is potentially going to be harder on some of the smaller body shops than on MSOs. Can you comment on maybe how much your business could be at credit risk? And if the potential share gain by MSOs could be a positive for you guys in the long run?

Yes. So much of our actual credit exposure is actually with distribution, just giving the sales model and risk of title that's actually borne by distribution. So just, I guess, one point as far as the credit risk perspective, I guess, there could be an expectation that you could see some of that mom-and-pop body shops go under, which would be a net benefit if that hypothetical situation was to occur, just given our broader exposure to the MSO space. So if you were to see those body shops be sold on the road or just that inventory, as far as cars coming from insurers going to the MSOs versus that bankrupt body shop, again, it's a net benefit for Axalta overall.

All right. And then in terms of the strategic review, I was just curious, at any point have you been exploring selling a part of the company? In other words, are there other pieces of the portfolio as you look at it now that maybe you view as noncore or less core or more valuable in another owner's hands?

Over the course of a 9-month review, the board explored a full range of alternatives to increase shareholder value and that included, of course, a comprehensive sale process. Looking at ideas like you're talking about now in terms of the sale of specific assets or businesses, change in capital allocation, along with a full evaluation of Axalta's operating strategies, core underlying business and standalone value creation potential. And at the end of that concluded that the execution of our strategic plan was what had the opportunity to create the most value. That being said, although the process has concluded, our Board will continue to evaluate of course all opportunities to increase shareholder value.

All right. Thanks very much.

Our next question comes from Steve Byrne with Bank of America. Please go ahead. Q - Steve Byrne Yes. Thank you. And thank you for the monthly data you provided in the slide deck, given the magnitude of the swings right now, it's really helpful to have that. And I might suggest an updated another month with April and May data would be very helpful just given how significant these moves are. I wanted to ask you about that …

We appreciate that feedback. And that’s actually one of the reasons that we pushed out when we would normally report earnings by a week so that we could have that April sales data and be able to provide our investors, as well as the analyst community with the most up to date view of what we're seeing in the markets. And we do plan on doing a mid-quarter update sometime in June for the trends that we're seeing in May. We also think that would be beneficial.

Glad to hear that. And the general comments made about 60% volume in -- down in April and 40% in May, can you differentiate that by end market? Which are the ones that you think might do better versus worse?

Well, I'll give you a broad brush response to that. I think what you're seeing in April light vehicle is clearly an outlier. I think what you're seeing in the press is indicative, kind of what we're seeing. You are seeing, a nice recovery with most of the OEMs actually signaling they'll be up in the middle of May. And as far as the utilization from that point forward, I think that's still a question. But I do see kind of that catalyst for a jump from a light vehicle perspective. Robert's comments on Refinish are obviously helpful. We're starting to see really nice trends in Refinish. China is a great example where we're back to normal and actually slightly above April as far as normal levels. But Industrial wasn't hit that hard in the first quarter. We are seeing a little bit of slowing as far as some of the end markets as it relates to wood. We're seeing new housing starts to be a little slow. But by and large, the other end markets, the trajectory is heading in the right direction. But again, calling out kind of light vehicle is the single biggest jump from March to April to May as far as the OEMs coming up.

Then the $100 million of cost cuts is a fairly significant percentage of SG&A. It seems to be relatively large compared to some actions of your peers. It's not like we would have thought of Axalta as being one with lots of fat to cut. So it's certainly commendable. Anything in there that's more than just discretionary and temporary, anything that is in there that is potentially a learnings that could continue post the pandemic?

Yes, I think one of the misconceptions that's been out there for a long time is related to the overall cost structure of the company and that significant cost has been taken out of the company. And while that's true, over the last many years, there's also been a fair amount of costs put back into the company, particularly in the 2015 to 2017 time period. So as we go forward, the cost opportunity for us in terms of getting to competitive levels in our cost structure, both to enable greater profitability of the business, but also to permit growing in lower margin segments, which could become higher margin if we adjusted our cost structure, that opportunity is actually quite large and continues to be quite large.

And Steve, just as far as SG&A, it's not entirely coming on SG&A. We've sort of looked under every rock, but operations is a contributor as well. So we looked across operations, we looked across the commercial teams, as well as all the commercial areas for reducing discretionary spend, as well as temporary labor reductions that we commented on in our opening remarks.

Very good. Thank you.

Our next question comes from Don Roberts with UBS. Please go ahead.

Thank you. This is Don Roberts on for Josh Spector this morning. Are you seeing a wide dispersion in your raw material decline given the rapid drop in oil prices? Maybe you could comment on what's down the most and what's down the least in the raw material basket?

So if we think about on a category basis, Don, and then I'll give you some comments where we see headwinds and where we see tailwinds. One would expect the overall raw material basket to be down as the COVID-19 situation has eroded demand across various markets. Lower oil prices will also aid in pushing feedstocks down. And fortunately, we actually expect to realize very little of that potential benefit given how little we are buying currently at the moment. So I think in terms of seeing savings, kind of the earliest that we would expect to see savings, could be in the third quarter and those savings, we would expect to actually be fairly modest. In terms of headwinds, just to call out a few, epoxy resins would be an area where we continue to see headwinds just because of the tightness of certain feedstocks due to outages. White and black pigments. So if you think about TiO2 and also carbon black, just lower capacity in some cases as well as IMO increases in black. And then it's certain pigments, red, yellow and blue in particular. Some of the Chinese regulation has limited feedstock capacity. It hasn't been an issue, but could become more of an issue as we go forward. And then in terms of tailwinds in isocyanates, we are seeing pricing for HDNI come down. Some of the specialty monomers that we buy, we expect to also continue to come down. Solvents, of course, being so closely correlated and linked, we will see those come down and then additives just given the drop in the overall demand environment have also come down.

Then general industrial finishes is one of the most fragmented markets. Is the stability there related to share gain, or is the mix of your customers tilted towards things that were okay like personal computers or tilted away from large ticket items. You mentioned wood, but maybe give us a little more color on the mix within that general industrial?

So in Industrial, we have such a diversity of end markets and many of those end markets, essentially our products went into industries that were considered critical products and continued operating. Kind of the star, you might say, at the moment amongst our various industrial businesses is our energy solutions business. It appears to be the most resilient of all of our industrial end markets. We're seeing strong demand there from motor manufacturers. And we're also gaining share with innovation in all our energy solutions products, be it wire enamels and impregnating resins or core sheet varnishes. And I'm sure you've seen the many innovation awards are products in this business segment in particular have won over the last couple of years. In coil, we are seeing a slowdown in commercial construction projects. There are some projects that are on hold for now, but we remain optimistic for the potential for the direction of that business. And then in wood where, of course, we sell into furniture, cabinetry, building products and then also distribution, return to work and low interest rates should put this business on a good trajectory once the crisis passes. But as Sean mentioned, the business is largely based on new housing starts, repair, remodel spend, so consumer sentiment there is quite important. And then lastly, powder. Powder is more of a technology as opposed to an end customer segment. There we are seeing the agricultural construction equipment market down, architectural market down, oil and gas obviously down for the moment. But in infrastructure related demand for end products like rebar and some other powder products, we're seeing those much less affected, at least in Q1 and in April than in other parts of the business.

Okay. Thank you.

Our next question comes from Jeff Zekauskas with J.P. Morgan. Please go ahead.

Good morning. It's Silke Kueck for Jeff. How are you?

Good morning, Silke. We are great. How are you?

Good. Thank you. I have two questions. I was wondering, given the currency headwinds, I was wondering whether you can discuss what level of currency type pricing you might be able to push through in the coming quarter? And my second question is on cost savings. I was wondering if the $100 million cost savings you're targeting is in addition to like the $50 [ph] million for the Axalta -- from the Axalta Way II cost savings? And if you had to guess, I was wondering if you can quantify what the headwinds could be next year, given that one of the cost savings this year are one-time in nature. Thanks very much.

I will take your first question. I think on FX related pricing, it does depend on which segment of the Business Performance versus Transportation Coatings to some extent. However, in general, we follow the principle of trying to recuperate any FX exposure or material devaluation or in-country inflation that we see through our pricing mechanisms.

And as far as the cost savings question, we are still committed to the Axalta Way targets. So the $50 million -- the $18.5 million severance charge that we took in the quarter, that's a continuation of the Axalta Way progress. And that's unrelated to the $100 million that we called out in the opening remarks. On the $100 million, I mean, most of that is more temporary in nature, given its short weeks, giving it its furlough, given its 20% pay reductions. The hope is that we will actually be able to hold on to some of that discretionary change kind of how we go to go-to-market. But as far as incremental $50 million as we get in the 2021, we aren't necessarily seeing any headwinds. I think, coming out of a strategic review, I think we actually have a better line of sight into some of the opportunities. And again, when we come out of this pandemic we are going to be delighted to share some of that information.

Thanks.

Our next question comes from Chris Parkinson with Credit Suisse. Please go ahead.

Great. Thank you. Just as a corollary of the cost questions. Just an extension of the $125 million cash flow improvement efforts. Can you just remind us of your general long-term projected cash flow conversion metric targets, working capital targets, once we're out of this mess, just how should we be thinking about kind of the normalized environment, hopefully in '21 and '22? Thank you very much.

Yes. Chris, cash flow conversion has historically been a sort of 45% to 50% EBITDA range. And you know that that's something that's a couple of years old now in terms of the way we used to talk about that. I think there are a number of elements there. One is normalizing and whatever period that's going to take, but once we get through that and we do normalize, we are continuously working towards working capital improvement overall. And we do expect to see structural working capital improvement across the business, over a 2 to 3 year period. It's probably a little premature to put out a definitive target. But we've always said that from a low teens working capital to sales type of metric, that we thought there was opportunity to be in high single digits. And we have trended in an improving trend through 2019 over recent years. So we have made progress. But I think it's clear that there is more opportunity there over time. And that's one of the things that Sean referred to that that we'd like to talk more about once we get through the current period and once those numbers kind of become more relevant again.

Great. Thank you. And then just a very quick question, just in terms of Refinish inventories. It seems though the industry over the last several years in terms of the larger distributors have really taking down inventories, going back to, I guess, 2017, can you just comment on your confidence level that your businesses should basically track miles driven and there's nothing else really else in the channel. And if you could extend that question to body shops as well, I'd be curious on your thoughts. Thank you very much.

Chris, with regard to the end consumer, we believe that the drivers continue to be the same. Miles driven accident rates and the size of the car park. The data and the trends out for that is pretty clear. So we have pretty good visibility into what's happening at the end body shop level also just given our body shop management software and how that's used and so forth throughout the operation of the body shop gives us pretty good insight. Then in between with distribution, as you mentioned, there has been consolidation within the distribution channel, which has had the impact of bringing down overall industry level inventory levels in the channel. So in terms of the sales into distribution, it will be a function of how distribution continues to evolve in the ensuing quarters in the next couple of years.

Thank you. Stay safe.

Thank you, Chris.

Our next question comes from Alex Yefremov with KeyBanc. Please go ahead.

Thank you. Good morning, everyone. I just want to clarify something Sean have said in prepared remarks. Do you expect your total EBITDA to be slightly positive in the second quarter?

Yes, that's the comment I made, Alex.

Okay, got it. Thank you. And then the second question, in Refinish you have a lot of small customers. Do you have an insight how they are coping financially with the current crisis? And for that segment of your Refinish business, for smaller customers, to what degree the credit risk is borne by Axalta versus third-party distributors?

So in terms of the activity that we're seeing, in particular, the smaller, the mom-and-pop body shop segment, of course, many of those shops have been closed. We won't really have full insight into the full state or the full status of those body shops until we start to see some more recovery and things come back online. So it's a little early for us to give you much of a read at this point. And then in terms of the credit risk, as Sean has mentioned, in the U.S., we don't have a direct ship model. So everything that eventually ends up in the hands of a body shop goes through distribution. So with the exception of MSO customers, where we have a direct credit risk exposure. For all the other body shops, that credit risk is borne entirely by the distributor.

Outside of the U.S., if I may follow-up.

Yes, in Europe, in some countries, we do have a direct distribution and a direct sales relationship. It varies a little bit by country, but it is not the majority of our sales.

Thanks a lot.

Thanks, Aleksey.

Our next question comes from Kevin McCarthy with Vertical Research Partners. Please go ahead.

Yes. Good morning, gentlemen. I hope you all well.

Good morning.

My question relates to decremental margins in the second quarter. If I think about the notion that your EBITDA could be slightly positive and kind of marry that to the sales guidance that you gave, that seems to imply decremental margin, maybe close to 40%, which is a lot larger, obviously, than the March quarter. Is that consistent with what you're meaning to convey?

I think -- I mean, what we're trying to get across is just an appreciation for ultimately the cash flow use. I think we are -- we've only signaled April, May. This is obviously a very dynamic environment. But the current expectation is June should be better than May as long as there's not any big surprises. And what we wanted to do is provide a little comfort that we're still expected to be positive at the EBITDA line. Certainly when you think about decremental margins, of the $100 million cash benefit as it relates to cost actions, or as it relates to the actual cash -- cost actions themselves, roughly 50% of that benefit is actually going to accrue in the second quarter with a lot of the temporary reductions going into effect.

I see. That's helpful. And then second question, if I may, is on the subject of CapEx, a 50% reduction is obviously quite substantial and yet the new level of $80 million is still somewhat materially above the maintenance CapEx level that you indicated. Can you speak to that as well as, which growth projects, if any, have survived this haircut to the capital budget? And any early thoughts on what the trajectory could look like into next year? Thank you.

So the big project that relates to growth above and beyond the maintenance CapEx actually relates to our S/4HANA SAP project that we had communicated back in January. So we're keeping that project on track. And that's making out essentially the vast majority of the difference between the maintenance and the total CapEx now expected for 2020. As we think about longer term, I think we've historically spent anywhere from $140 million to $160 million. We've not provided any forward looking information as it relates to CapEx. But generally, the historical levels should be somewhat indicative of going forward.

Okay. Thank you so much. Be well.

Our next question comes from Bob Koort with Goldman Sachs. Please go ahead.

Thanks, guys. This is Anthony Walker on for Bob. Just had a quick follow-up on the free cash flow. So you've obviously taken a number of actions to improve working capital. Can you help us through the other bridge items to getting to cash from Ops. I think historically you've had a decently sized rebates to Refinish customers. Can you just help us think through what those look like relative to prior years in 2020?

Yes. So historically outside of the 2018 year, we've spent $80 million to $90 million annually. That certainly is one of the cash levers that we're executing on. When you think about the $125 million we quoted, $80 million is coming from CapEx and roughly $40 million is coming from these business incentive payments. But we think about cash levers, we said a minimum of $125 million. We're going after and looking at everything from a working capital perspective to drive even further improvement. The target is well beyond $125 million. But where we sit today, we are comfortable with the $125 million level as far as incremental levers we've already executed on.

Great. And then just one follow-up on that. In reducing the cash incentives, does that have any implication for the likelihood of winning that business on a go-forward basis or getting the volumes from those customers once volumes recover? Or is that simply to take into account the lower volumes that you're expecting in the first two quarters? Thanks.

Yes, it's largely a function of what we're seeing in the market. Obviously, in this type of environment, body shops -- which typically body shops that are using to -- looking to acquire other body shops or upgrade their spray booths or make material investments, that's typically where you see this type of customer investment utilized. So because of the demand environment, there's simply less demand for that type of customer investment from our customers. So it's just following from a normal flow of what we're seeing in the market as opposed to being any type of a deliberate action by the company. We will continue to invest alongside of our customers in strategic ways where it makes sense.

Our next question comes from P.J. Juvekar with Citigroup. Please go ahead.

Yes. Good morning, Robert, Sean and Chris. Good to hear from you. Hey, Robert, I’ve a question on the Refinish. There is two schools of thought. One of your competitors was saying that Refinish will lag because you need more traffic and morning rush hour and congestion and so that will like the recovery. The other school of thought is, consumers will rather drive than take mass transit. And so maybe auto demand will go up as a result of that. How do you think about those two things?

Well, I think the argument that you may see some people prefer to drive is supposed to take public transport. There could be some -- I think some validity in that perspective. And we may see that. However, I think, for the majority of people that take mass transit, it's more of an economic or personal financial decision as opposed to being necessarily a choice having one option or the other. That's part of the population. Another part of the population are people that actually have the choice, take public transport or drive their own vehicles. So when you start to slice it up into the different kind of types of person and situation, it feels like, yes, that could be a tailwind, but it's nowhere near as large as the impact that we could see from the resumption of driving. I think different than the '08, '09 crisis where people were still driving and were still getting into accidents. This crisis is different. So because people haven't been driving, we're less likely to see a lot of pent-up demand that's suddenly going to be released into the market. But I think as people do begin to resume driving, we will see the market snap back. And we have seen that as we talked about in China, where we've gone from being down quite a bit in Q1 to kind of a snap back -- to a snap back here in April. So I think the trajectory will be upward and strong, but not quite as strong as perhaps what we've seen in '08, '09 just because you haven't had a build-up and pent-up demand of people driving during the crisis, getting into accidents, but not getting their vehicles repaired because there wasn't consumer confidence to do so.

Great. Thank you.

Our next question comes from Laurence Alexander with Jefferies. Please go ahead.

Just a quick one. If you look at what you've seen in Europe and Asia, how important is the recovery in congestion relative to the improvement in miles driven for driving Refinish rates?

Laurence, I think we'll be able to discern -- perhaps discern some of those variables and be able to comment someone that in the future. At the moment, since we haven't seen a recovery, with the exception of China and even there, it's only kind of one month really. We just don't have enough data to be able to give your question, the answer that it deserves.

Thank you.

Our next question comes from Arun Viswanathan with RBC Capital Markets. Please go ahead.

Good morning. Hope you're well.

Good morning.

I just wanted to go back to the raw material question. When you look at price cost, you've been making some headway on the OEM side, I guess, recently. How does that look like in this current environment, especially with the decline in rise as well? And then maybe you can just comment on Refinish price mix as well. Thanks.

From a pricing perspective, we fully expect to capture price in 2020. We still have price that we need to capture to make up for the dramatic increase in raw material costs that we experienced during 2017 and 2018. We've captured some of that price to offset this, but we still have a long, long way to go. And then in terms of Refinish, overall, I wouldn't expect to see any material changes in terms of how we think about how we approach that market and the value that we continue to deliver for our customers there, again, that we don't really see any changes in that equation.

Thanks.

This concludes the question-and-answer session. I would like to turn the conference back over to the presenters for any closing remarks.

Yes, it's Chris. Thanks everybody for joining and hope you have a great day and good luck with all your other earnings calls today. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.