Good morning and welcome to Dana Holding Corporation's Second Quarter 2016 Financial Webcast and Conference Call. My name is Brent, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and Q&A session will be recorded for replay purposes. There will be a question-and-answer period after the speakers' remarks, and we will take questions from the telephone only. [Operator Instructions] At this time, I would like to begin the presentation by turning the call over to Dana's Director of Investor Relations, Craig Barber. Please go ahead, Mr. Barber.

Thanks Brent. And thank you to everyone on the call for joining us today for Dana’s second quarter 2016 earnings call. Copies of our press release and presentation have been posted on Dana's Investor website. Today's call is being recorded, and the supporting materials are the property of Dana Holding Corporation. They may not be recorded, copied or rebroadcast without our written consent. Today's call will include a Q&A session. In order to allow as many questions as possible, please keep your questions brief. Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from those suggested by our comments today. Additional information about the factors that could affect future results are summarized in our Safe Harbor statement. These risk factors are also detailed in our public filings, including our reports with the SEC. Presenting this morning is Jim Kamsickas, President and Chief Executive Officer and Jonathan Collins, Senior Vice President and Chief Financial Officer. With that I'd like to turn the call over to Jim.

Thank you Craig, good morning everyone thank you for joining us. The second quarter of 2016 was another solid quarter as a result of continued team working by Dana teams and their execution on our operational and strategic priorities. In terms of financial results for the quarter, sales were $1.55 billion, a decline of 4% from the second quarter of last year largely as a result of currency headwinds. While we continue to experience weakness in market demand in the commercial vehicle and off-highway segments, our light vehicle-related businesses specifically our key market of light trucks are doing quite well with double-digit organic growth. Our earnings for the quarter came in strong with diluted adjusted EPS up $0.05 per share over last year and adjusted EBIT margin of 11.5%, driven by strong light vehicle markets and very effective cost management across the Company. We have continued our drive for profitable growth and exceptional customer satisfaction. And I will highlight this morning we have had some real successes including securing significant replacement business in light vehicle driveline leading to continued backlog growth. We also completed a strategic bond refinancing that allowed us to achieve three key improvements in our capital structure. The new issues extend our maturity into the next decade, lower our overall interest rate and increase our available liquidity. Jonathan will provide more details on this in just a few moments. And finally, we continued the execution on our $1.7 billion share repurchase program returning $53 million to our shareholders in the second quarter. Turning to slide five, let's take a moment to update you on what we’re seeing in the end markets around the world. Starting in North America, our outlook for the year is positive as the overall economy remained stable. More importantly for us, fuel prices…

Thank you, Jim. Please turn with me to slide 9 for an overview of the second quarter financial results. Second quarter sales of 1.55 billion were down 63 million from the same period last year, with 44 million of the decline attributable to foreign exchange as the US dollar continued to appreciate against foreign currencies. The remainder of the decline was due to lower volumes and strong growth in our light vehicle driveline and power technology segments was offset by lower end market demand in the off-highway driveline and the impact of last year's share shift in commercial vehicle driveline. Adjusted EBITDA for the quarter was 178 million, essentially flat to last year, yielding 11.5% adjusted EBITDA margin which is 30 basis points higher than last year and 130 basis points higher than the prior quarter as our cost performance improved significantly. Net income was $53 million, $6 million lower than last second quarter. The second quarter of this year included a $17 million loss on extinguishment of debt due to the bond refinancing we completed in June. This was partially offset by lower tax and restructuring expenses. Capital expenditures were $77 million, $17 million higher than last year as we continue our investment to support our growth through program launches and delivering our growing backlog. Free cash flow for the quarter was $108 million, $20 million higher than last year, primarily due to improved working capital efficiency which more than offset higher capital spending and the timing of cash interest as a result of the aforementioned bond financing. Slide ten provides some additional color around the changes in sales and adjusted EBITDA versus last year. Sales of $1.55 billion, while down 4% from last year represent a 7% sequential improvement over the first quarter. Adjusted EBITDA of $178 million…

And at this time we would like to begin the Q&A session. [Operator Instructions] Your first question comes from the line of Colin Langan with UBS. Please go ahead.

Any color on, you know, it seems like from your presentation that there are some weakness in North American truck and other markets will remain very challenged. What is your confidence in holding the full-year guidance as it seems like markets have been deteriorated a bit from how you started the year or [indiscernible]?

Hey Colin, this is Jonathan, relative to second-half and first half comparison, our original plan that we had in our guidance did contemplate lower volumes in the second half versus the first half. There has been some softening as we noted from the 248 to 260 range, down to the 230 to 240 range. However, our medium duty segment is performing better which is helping to offset some of that, not all of that was contemplated in our original guidance. And candidly, light vehicle volumes which affect both our light vehicle driveline business and power technologies are slightly better which are helping to ameliorate some of that impact. So on balance, we are able to maintain but the commercial vehicle business will be a little bit softer than we originally anticipated.

Got it. And how is the off-highway market trending, is there any signs that market is starting to bottom out or possibly even turn, any color there?

Good morning, I appreciate the question, who knows of course, but we feel - we kind of feel like it’s at the bottom, who knows but it doesn't mean it's going to come back up anytime soon but we do feel it's closer to the bottom then not. As you know although its largely manufactured out of Europe for Dana, we have a significant amount of our product is out is supplied overseas. So we do have that geographical balance, so we're continuing to work through it as you know. And 30% of our off-highway is export. So, anyway I think we're okay with where we are at, but I think it’s just going to continue to bump around the bottom for a while here Colin.

Collin, this is Jonathan, just one thing I would add to that, a lot of the work even though to Jim’s point we’re uncertain when it’s going to come back. A lot of the work that we’ve done on that business in the cost structure and the engineering of our products has really positioned us well for when that market does come back. So we expect very attractive margin conversion when we start to see an improvement in the global off-highway markets.

And just lastly, any color on how we should think about the cadence of light vehicle driveline in Q3 and Q4? I know the super duty is a pretty big platform within that business, is that going to create a little volatility in Q3 and then a stronger Q4, sounds like you’re pretty confident about the margins there?

Yes, we feel pretty good about light vehicle margins from first half to second half. The timing of the launch ramping up certainly helps us. The factors some of the business when we look at on a year over year basis that was within commercial vehicle last year, we've moved that platform to the light vehicle business, it’s an overall margin improvement for Dana in the aggregate as we are able to utilize some existing assets for both platforms. And then the final pieces just due to the timing of our commercial recoveries, so remember in our business customers pay for the engineering work based on program milestones. This year those milestones are weighted towards the second half of the year. So with those three factors, we’re feeling quite confident about the light vehicle's performance in H2.

Your next question comes from the line of Brian Johnson with Barclays. Please go ahead.

A couple of questions, first around commercial vehicle driveline, you call that last quarter that you expected the margins to decline due to volume shifting from CV to LV, one could you may be re-explain that and two is, is that what's behind your posting 8.5% this first half but guiding to 7% in the second half and for the next year or is that 7% something that given these cost saves, given some of the mix you might be looking to race?

Brian, this is Jonathan, just on the first-half second-half for commercial vehicle, there are a couple of factors. The one that you noted that I can give you a little additional color on is the program shift. We had mentioned this in our April call at the end of the first quarter and what's happening is we have a platform when you get into the Class 5, 6 range, those vehicles can be either a commercial vehicle or a light vehicle, in this case we were able to leverage some existing technology and manufacturing processes for both platforms for one of our customers. And what we did is those sales and margins are moving from the commercial vehicle business to the light vehicle business in the second half of this year. So that is a headwind for the commercial vehicle business puts pressure on the top and bottom line and obviously on margins as that business moves over. What we did highlight is the reason we did it as its better for Dana in the aggregate and it's part of light vehicle’s improvement from the first half to the second half. The other factor I point to within commercial vehicle as you’ll note that the Class 8 volumes in North America are weakening throughout the balance of the year, right now we see them finishing in the 230 to 240 in that range, which is a lower run rate in that in the balance of the year. So that's putting pressure on the top line and it's also going to put some pressure on margins. So those two factors are really the key driver as to why you see some margin decline in commercial vehicle on the second half of the year.

Okay. And within commercial vehicle, is there a significant margin difference between the heavy duty business and the medium duty business?

We’ve highlighted...

Content per vehicle.

It's very difficult for us to provide just specifics on content per vehicle because there are so many mixed variations, we would indicate that we have said in the past that growth in medium duty is good for us that's very good business for us. So generally speaking those margins are good, so when those products are going up that's a benefit to Dana.

Okay. And then over on the light vehicle driveline, we certainly get the sort of the underlying segment shift going on towards light trucks but within that there is an 8 million tailwind to revenue and EBITDA from pricing and recovery. Usually we are conditioned to think about price downs and whilst still is up from its bottom, commodity costs are still historically low, which would seem recoveries would go the other way. Can you kind of give us a little more color as to what the drivers of that are and then how long would you expect positive pricing recoveries to continue?

I think in the case of light vehicle driveline one of the things that we are able to do is we get some recovery in other parts of the world as a result of inflation. So some of that is what you’re seeing coming through. There is also some timing of engineering recovery that’s reflected there as well too. But when you think about this, those are really the drivers more so than the productivity or the price downs that you would traditionally think of in the category.

Okay. And then finally, there is couple of things going on at GM, they’re freeing up Wentzville for more mid-sized pickup trucks and then they are doing some business with Navistar. Can you give us a sense of, first I guess that the Wentzville, how - what you’re content per vehicle is, how you could participate in that. And then, given you have relationships on both side, does the Navistar deal mean anything for you and is that maybe part of what you’re flagging in LV to CV shift?

Hey Brian, this is Jim. I can’t really give you a content per vehicle specifically, but I will for you and the audience reinforce that as many of you know, you know we are on the Colorado Canyon, it’s a big platform for us, it’s a big successful platform for General Motors. I can’t comment on what their manufacturing strategy is, but obviously they are very well positioned not to get a little bit off tangent on that but our facility that supplies a good piece of that is out in that region and it was just last quarter was recognized as a - albeit Ford was recognized as one of their world excellence award winning plant. So we’re in good shape to continue to support General Motors or whoever in that area. Relative to your question on the Navistar news so on and so forth, certainly Navistar is an important customer of ours, General Motors is an important customer of ours, we’re in good condition with both of those two successful companies and we’ll certainly be in play for anything that continues to come our way with the GM Navistar relationship.

Your next question comes from the line of Patrick Nolan with Deutsche Bank. Please go ahead.

Two quick questions, so just a follow-up on the pricing and recovery question for the light vehicle driveline business. So it sounds like for the full year, for 2016 that will be a positive to the EBITDA line. On a go forward basis, does that swing back to kind of the traditional price downs or negative impact EBITDA or is that kind of a net neutral on a go forward basis in your mind?

Patrick, on a go forward basis that should be relatively neutral.

That's helpful. And can you maybe also elaborate on the commercial vehicle driveline, the market share losses that were incurred. What's the path to potentially get some of that share back over time?

Great question, good morning Patrick. The path was - we know the path that went - I went the other way, you’re aware of that, we kind of hit a bump in the road there, stepped on our toe, call it what you want. First and foremost it's performing and we are absolutely performing extremely well with that customer and all of our customers for that matter as it relates to quality delivery, warranty all the important ingredients it seem cliché but their impact what drives the business. The other one is certainly the technology roadmaps and the things we're doing and again we’re driving those for all the customers. So although I can't commit to tell you, we are here today and we're going to be there tomorrow and we don't have a crystal ball in terms of what the customers are going to do. I would tell you that I'm bullish on our commercial - I'm bullish on all of our segments but commercial vehicle and we are in very good standing with all of the commercial vehicle customers. So, we’ve been growing you know that, we've been talking about growth every quarter and we are not faking it and we are going to, we expect to certainly grow in the commercial vehicle group as well.

That's helpful. And Jonathan, just quickly on the working capital line, what's your expectation for what the full year working capital usage or source looks like?

As you can see when you look at the full-year free cash flow guidance, we anticipate that working capital on a full-year basis will be a modest source of cash flow, well I think we’re in the approximately $30 million range to get you to the midpoint of our guidance range. So, there are obviously a number of factors there but we are actively managing our inventories, and our disbursements and receipts to make sure that we deliver that but that’s the approximate range.

Your next question comes from the line of Brian Sponheimer with Gabelli & Company. Please go ahead.

Hi Jim and Jonathan, congratulations on a good quarter.

Thank you very much.

Jim, if I'm thinking even on certainly less than a year but you got a good sense of the businesses now and the changes to the balance sheet to increase liquidity, should we take that possibly as a more aggressive stance towards looking to expand the portfolio from an inorganic standpoint?

I'm going to answer that in two-part, but first of all thank you for the call and for joining in the question. I wouldn't read into it that way necessarily. Jonathan will give you some more color commentary outside of his scripted remarks on why we did it. I think for one before I overcook it a little bit, I think the timing by the Dana team, financial accounting team was fantastic in terms of everything else that happened in recent times with BREXIT and everything else. But from our standpoint, we certainly, we want to always be in a position to pull any lever if that lever is going to be inorganic, if that lever is share buyback or whatever, but the thing that’s most important for us as you can see by our organic, which is our most preferred avenue for growth. We are growing sizably and we need to make sure that we’re in a position to support that. And as the industry is going more and more global, the customers want to go with the same design, same engineering, same people to talk with, same products. We need to make sure that we’re in a strong position to do that, not just here in ’16, but for years to come. So from an operating standpoint, from a customer standpoint, that's what's important to me. Jonathan, I'll ask you to add some color.

Sure. Brian, to Jim's point, it does give us some flexibility strategically and we’ll continue to look at organic priorities first, but then also at our inorganic opportunities. We were pretty opportunistic about this when you look at the refinancing of the bond, which generated a comparable amount of liquidity. The economics were quite attractive, given our ability to swap that to euro. So it’s an NPV positive trade, allowed us to extend maturities by five years. So that one is pretty opportunistic. On the revolver, we had an asset base facility and due to efficiently managing our working capital and some structural changes of our legal entities, we had less available under that facility. So when we did the bond, we felt that it was the right time to get the cash flow revolver in place and have access to the full 500 million. So that was somewhat opportunistic as well too. So hopefully that gives you a little bit of additional insight on how we're thinking about it.

That's good, thank you. And maybe just a step back from how you look at your standing with investors. You’ve got a power technologies business that's bumping up against 20% EBITDA margins, which you put it up with really any in the industry, how do you strategize as to how to get investors aware or more aware of this business that Dana is really a technology leader and not necessarily just thought of as an old axle company?

Great question again. No surprise, Brian. Great question. What I would tell you, it actually, I’ll toggle it back to your opening comments that I am coming up on a year, not quite a year yet. Jonathan has been in the saddle here for two or three months now, getting his feet on the ground and the team is doing a great job. So what does that mean? It means we, also as part of our responsibilities and the thing we work on is really developing our go forward strategy. I can tell you in the last couple of months, that's been kind of a key point of what we have been working on and I would tell the audience today, not just yourself, but the audience today, you should expect more on that in the near term, maybe the October timeframe, but certainly by the end of the year.

Thank you very much.

Your next question comes from the line of Irina Hodakovsky with KeyBanc. Please go ahead.

Thank you. Good morning, everyone. Thank you for taking the question. Wanted to ask about your Brazilian exposure. The market there continues to decline, cost reduction would eventually hit limits at some point. If we are looking for 20%, up to 20% [indiscernible] just wondering where are you in terms of limits on cost reductions and then you only really have 5% exposure there, if you do begin -- if operations hit unprofitable levels, use the material to your bottom line?

Sure. Thanks for the question, Irina. This is Jonathan. Just relative to where we are with Brazil right now from an outlook standpoint, we're generally of a view that we are pretty close to the bottom in Brazil from a demand standpoint. Certainly, there is a lot happening that Jim mentioned in his comments earlier in the call, relative to the political environment and we're hopeful that some of the changes there will catalyze some economic growth. Broadly speaking, we are bullish on Brazil. We have a very strong presence, we have taken a little bit of a different approach in the past few months. We have been able to, as suppliers in the region, undergo financial stress due to the low volumes, we had the opportunity to pick up business. We’ve also addressed the cost structure very aggressively. We’ve worked to put the programs in place to get arrangements with the union to be able to address lower labor costs as demand is lower, which has positioned us really well. From a financial perspective, we're hovering right around breakeven in that market. We’ll continue to watch demand carefully. There are some additional opportunities for us to improve the operations and trim costs to stay at or near that level, but certainly Jim will probably want to add something to this, but we have a very good outlook on Brazil and we remain committed to that market.

Yes. Irina, I can only just paint a picture for you, none of us can be there, but if -- we are very vertical in Brazil. We have a very talented team in Brazil, long-standing foundation there. Anybody that’s ever done business in Brazil recognizes probably the most from a vertical standpoint, probably the most important country in the world with all of the taxation and other challenges that come along with it. So the team has done a very good job of kind of holding the line and not being a big drag on the company. So we’re going to stay due course there and I think it's going to turn out very good for us, especially back to my other comments as it relates to global platforms and I think everybody in the call gets it. You're not going to, in the long haul, if you're not in a position to be able to support the same platforms around the world, you're going to be at a significant disadvantage. We're in a very bullish and a very strong position in there from a manufacturing footprint.

Thank you very much. Congratulations on a great quarter.

Next question comes from the line of Justin Long with Stephens. Please go ahead.

Hey, guys. This is actually Brian Colley on the line for Justin this morning. Congrats on the quarter first off. Just wondering if you could give an update on what you're seeing in terms of acquisition opportunities, and any color on the size and which end markets or geographies you’re seeing opportunities in?

Thanks for the question, Brian and thanks for the comments. Appreciate that very much. As I often say, not to overcook it, but as I often say, there is always the M&A opportunities that are circulating through. We always keep a keen eye on those. I won’t try to hint towards anything too much, but typically, I’ve had a tendency like anybody as an investor in anything, and that's an investment, of course, is to kind of look for the buy low, sell high type of thing. And there are certainly some targets out there. There are some weaknesses in the various geographic markets. There is some weakness in particular product and end markets. So we are very keen on keeping a close eye to that. We’ve done some structuring internally here recently to make sure that we’re efficient and effective at definitely phishing and looking and making sure we do a quick assessment, get in, get out and know where we’re at, as it relates to if we should do something on the M&A front.

All right, thanks for that. And I also wanted to ask about separately from you guys, looking at acquisitions, looking at alternatives, strategic options for the business and you have a diverse business model serving multiple end markets and multiple geographies, yet you guys don't really seem to be getting much credit for that diversity seemingly just because of some of the end market headwinds you’ve been facing, but at the right price, would you guys ever consider divesting one or more of your divisions and also have you seen any interest from potential buyers?

This is Jim again. From my point of view, just less than a year on the job, I've said this a couple of times, but the Dana team over multiple years has done a very good job of synthesizing and aligning the product. I mean, we are largely a driveline company with our power technologies group, not only supporting the engineering, but supporting our driveline products. So they’re very connected. We’re not a company that’s got some legacy history. It's trying to do bumpers and tires and seats and all sorts of other stuff. So we are very core to our products. I feel pretty good about it from a product standpoints, from a synergy standpoint, from a value proposition standpoint for our customers, our ability to grow, our leverage off of the footprint, et cetera. We ever -- say never to some type of play where we would move something out. Sure, you are always open-minded to it, but I would tell you that we are much more on I would call, we’re more slanted towards being a buyer side than we would be looking to move something out. There is a very powerful engine here, as it relates to Dana hovering and we’re interconnected with our power technologies group, along with our three driveline businesses.

Understood, that's helpful. And lastly, I just wanted to ask about the new light vehicle driveline facility you guys announced in Toledo, could you guys just kind of talk about that, the returns you’re expecting on that investment, do you expect something in the range of at least mid-teens on a return basis. And then secondly, when would you expect a top line impact from that investment to become meaningful?

Sure. Brian, this is Jonathan. I’ll just touch on the numbers and then let Jim talk you through the rational and the strategy associated with the facility. As far as returns are concerned, the project most certainly met our internal hurdles of requirements. We look at ROIC. We target in the mid to high-teens in that category and this project absolutely met that criteria. In terms of the sales coming on supporting new program launches, that will be coming to market towards the end of next year. So we are actively engaged in getting that facility up and running and ready to launch well for our customer.

Yes. I would only add to it, I don't expect anybody on the call to know our complete manufacturing footprint, but it means, it’s still what happens with suppliers or companies in general, just for one thing happened after another and it ended up the way it did, but if you looked at the Dana footprint for our light vehicle business, we didn't have a facility near the Toledo slash metropolitan, Detroit slash area where there is a lot, obviously needless to say, there is a lot of light vehicle production. So it was a necessity for us to take care of our customer and be in a position and win. And so, as announced, we’re going to support two customers and then on beyond that, hopefully more. But we needed from a bull's-eye manufacturing strategy standpoint, we needed that footprint here and so that's why we’re moving forward, but we’re very bullish on the facility for sure.

Great. That's helpful. Well, that's all I have. Thanks for the time and congrats again on the quarter.

Your next question comes from the line of Christopher Van Horn with FBR & Company. Please go ahead.

Good morning. Thanks for taking my call and congrats on the quarter. Just a question on the backlog as well as your pipeline coming up, could you give us a sense of what the mix is between new customer opportunities as well as maybe some program extensions or program rebates. And then secondly within that, within that pie, I guess, could you break out regionally where you’re seeing that opportunities or kind of end market wise, where you’re kind of slanted?

Sure. Christopher, this is Jonathan. Just a couple of comments on the backlog. I will just remind your relative to some of your points about how, what that's composed of, keep in mind our backlog takes into account or nets any lost business, which is why Jim emphasized today, the securing of our major replacement business in our light vehicle driveline business through the end of the decade, that’s really significant, it provides a really strong basis for growth. So this does not include any of those replacement business, but if we weren't to give on, it would count against us. So this is truly incremental business. Relative to the customer and segment and geographic dispersion, the backlog, all four groups are contributing to the backlog. So, all of them have positive backlog. The majority of it is coming from the light vehicle group. So they are a major contributor. We’ve had a lot of success with new business. Most of it is coming from existing customer relationships. So we have a strong relationship with our major customers and the growth is spread across that customer base. From a geographic standpoint, again, all regions are contributing to the backlog around the world, but the majority of the concentration is within North America. So we see a heavy weighting to growth within the North American geographic segment.

Got it. Could you just comment on maybe some of the opportunities or what your mix is within Asia-Pacific, specifically China, are you levered more on the light vehicle side, is it commercial side and then where is your opportunity, what's your opportunity set there from a pipeline perspective?

Thanks for the question, Chris. Just a quick snapshot to that. What we seldom talk about, but it’s important to us of course is because it’s unconsolidated, let's take commercial vehicle first, we have a joint venture with Dongfeng over there. It's a very sizeable business, so we are a big player there, just doesn’t rollup in to the consolidated numbers. So that's where we are at there. So we’ll continue to be relatively strong from that standpoint in the commercial vehicle side going further in China and US more specifically for Asia. That's actually where our strongest growth on a percentage basis is certainly in the China market. Last year, I believe we reported that overall consolidated business, it’s only about -- China only about 3% of our sales, but that’s headed north quite a bit and over the next couple of years and heading north because of some -- actually the technology side of our business is that where there is not as much truck vehicle production there as you know. Our products, we made some pretty significant moves in different, our rear disconnecting unit type of products, our power technology products as well as our PTU business, our other products in the all-wheel drive market are heading really nicely in the China and Asia market.

Okay, great. And then just one last one if you don't mind. I noticed that buybacks were down year to date compared with last year. Could you just comment on your strategy for that going forward, and maybe just why they were down year-over-year?

Yes. We’re operating under a different authorization. Also, we have a 3 million -- 300 million authorization to purchase this year and next year. We actually accelerated the rate of purchase in the second quarter, given where the stock price is. We bumped up our purchase levels. Just relative to our approach going forward, I think we've been pretty clear that our primary place where we want to invest capital is in growing the business organically and supporting this growing backlog. We’ll continue to look at inorganic opportunities as well too and at the right price for assets that will add technology that will help us grow our business profitably, we’ll certainly be willing to deploy it there. And then finally, we will repatriate it to shareholders in the event that those don't materialize. So it does hit, if you will, at the bottom of the priorities, relative to the other alternatives, but the answer compared to last year is we’re operating under a program that’s a little bit lower because of the growth phase that we’re in, but just seasonally we actually did step up the rate in the second quarter due to our conviction on the price of the stock.

Your final question comes from the line of Joseph Spak with RBC Capital Markets. Please go ahead.

Thanks for squeezing me in here and congrats. Jonathan, maybe, just a quick clarification, I thought in the prepared comments, so let me take it back, talking about the recovery in LVD, again I thought in the prepared comments, I heard you mention you thought margins would continue to improve in the second half as you launch the new business and there is going to be some corresponding commercial recoveries. Then later on, I thought you implied that the recoveries implied in the back half were basically neutral. So did I mishear something, did I misinterpret something, maybe just could you just clarify that?

Sure. No problem. The comment early on was relative to the light vehicle business. Light vehicle is expected to improve from first half to second half and on a half-over-half basis, the recoveries in the second half for both light vehicle and all of Dana will help to improve margins. I think the comment I made relative to flat margins is I just wanted to signal that our third and fourth quarter margins, we expect to be in line with second quarter margins, which is unique from what you've seen seasonally from us in the past couple of years. Typically, the second and third quarter, our peak margins and margins taper off in the fourth quarter, but the issue here in the fourth quarter is that because of the timing of recoveries, we expect on an aggregate basis for Dana that margins will be in 11.5% range in both quarters. So I think I apologize if that was a little bit confusing, but the intent was to just give you some feel on cadence for the third and fourth quarter there.

Got it. So just with staying within LVD, the recovery is plus 8 million this quarter, can you give us a sense as to how much it can help the back half within LVD?

So the 8 million is a year-over-year variance. We do expect them to be positive relative to the second half of the year, but the 8 million is on a year-over-year basis, it's slightly more than that in the back half of the year compared to prior year, but that's both the third and fourth quarter.

Okay, thanks. And then you talked a lot about how the mix on commercial vehicle in North America is moving more towards 5 through 7 versus 8, so maybe, just and sort of I missed this, but of the 66 or two-thirds roughly percent of CVD in North America, what is the breakout between class 8 and class 5 through 7?

Yeah. Joe, at this point for competitive reasons, we've chosen not to disclose that specifically. What I can indicate or what we have been talking about is that the medium duty vehicle growth combined with the fact that we lost some share in class 8 in North America last year has become a much more meaningful portion, but we have opted not to give the specific percentages for competitive purposes.

Okay. And the last one, and this is more, I guess a little bit of housekeeping, so commercial vehicle margins in the back half. I know if you look on a year-over-year basis, in the fourth quarter ‘15, there was a big impact from the warranty expense. So that's I think was 16 million [indiscernible]. That would still get you -- that would still sort of imply a good improvement in sort of efficiencies or can you just remind us on a year-over-year basis, was there something beyond warranty that was more punitive from an efficiency perspective that sort of reverses in the fourth quarter this year?

Yes. So a couple of things, you will remember, we did incur some premium costs associated with the supply chain in the back half of last year, which will be a help on a year-over-year basis. The other factor is that volumes took a pretty steep decline in the fourth quarter in class 8 in North America. We've talked about the fact before that, while we are generally very good at responding to changes in market demand, when they happen very rapidly, we sometimes get caught there for a period, and that's what you saw happen in the fourth quarter. So it's really a combination of those two factors that add to the fourth quarter improvement compared to last year in CV.

Okay, thanks a lot.

Okay. This is Jim. Just to close it out, thank you for joining the call. I hope it’s obvious that we continue to execute on our strategic priorities for this year. Again those, that is the enhancing of our competitive position, growing our core business by winning new business, protecting our base business, driving customer satisfaction through operating performance and solution providing innovation. We’re continuing to drive profit margin improvement by focusing on manufacturing excellence and cost management and of course we’re continuing to maintain a strong balance sheet by managing the capital structure. Thank you all for your questions, attention, and have a great day.

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