Dauch Corporation (DCH) Q3 2018 Earnings Report, Transcript and Summary

Good morning. My name is Crystal and I will be your conference facilitator today. At this time, I would like to welcome everyone to the American Axle & Manufacturing Third Quarter 2018 Earnings Conference Call. All the lines have been placed on mute to prevent any background noise. And after the speakers' remarks, there will be a question-and-answer period. As a reminder, today's call is being recorded. I would now like to turn the call over to Mr. Jason Parsons, Director of Investor Relations. Please go ahead, Mr. Parsons. Jason P. Parsons - American Axle & Manufacturing Holdings, Inc.: Thank you, Crystal, and good morning. I would like to welcome everyone who is joining us on the AAM's third quarter 2018 earnings Call. Earlier this morning, we released our third quarter 2018 earnings announcement. You can access this announcement on the Investor Relations page of our website, www.aam.com, and through the PR Newswire services. You can also find supplemental slides of this conference call on the investor page of our website as well. To listen to a replay of this call, you can dial 1-855-859-2056. Reservation number 3086665. This replay will be available beginning at 1:00 p.m. today through 10:59 p.m. Eastern Time, November 9. Before we begin, I would like to remind everyone that the matters discussed in this call may contain comments and forward-looking statements subject to risks and uncertainties, which cannot be predicted or quantified, and which may cause future activities and results of operations to differ materially from those discussed. For additional information, we ask that you refer to our filings with the Securities and Exchange Commission. Also, during this call, we will refer to certain non-GAAP financial measures. Information regarding these non-GAAP measures, as well a reconciliation of these non-GAAP measures to GAAP financial information is available on our website. Over the next few months, we will participate in the following conferences. The Barclays Global Automotive Conference on November 15, the Credit Suisse Industrials Conference on November 29 and Bank of America Merrill Lynch Leveraged Finance Conference on December 5. In addition, we are always happy to host investors at any of our facilities. Please feel free to contact me to schedule a visit. With that, let me turn things over to AAM's Chairman and Chief Executive Officer, David Dauch. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Thank you, Jason, and good morning, everyone. Joining me on the call today are Mike Simonte, AAM's President; and Chris May, AAM's Vice President and Chief Financial Officer. To begin my comments today, I'll provide some color on AAM's third quarter results. AAM sales were approximately $1.82 billion for the third quarter of 2018, about $100 million higher compared to $1.72 billion in the third quarter of 2017. Adjusted EBITDA for the third quarter of 2018 was $275 million or 15.1% of sales. This compared to adjusted EBITDA of $297.8 million in the third quarter of 2017. Adjusted earnings per share for the third quarter of 2018 was $0.63 compared to $0.86 in the third quarter of 2017. From a cash flow perspective, AAM generated over $120 million of adjusted free cash flow in the third quarter of 2018 compared to $88 million in the third quarter of 2017, clearly the bright spot for this quarter. AAM's net leverage ratio was 2.8 times at September 30 of 2018. We recently announced an accelerated debt pay down of $100 million that is scheduled to take place in mid-November. As planned, we continue to utilize our strong free cash flow generation to reduce debt and strengthen our balance sheet. We expect this to be a key source of value creation for our shareholders. That was a quick financial summary of the quarter, but now let's get to the punch line. This quarter fell well short of my expectations for AAM's financial performance. All of our key profit metrics in the quarter were significantly lower than our performance in the recent quarters and also lower than our long-term expectations for the business. We're going to address many pertinent details in our comments this morning as well as in the Q&A session, but I wanted to start by saying nothing about this quarter changes our confidence in achieving our long-term goal and objectives for the business. We don't believe the operating challenges and the launch issues we faced this quarter are systemic or cannot be corrected in short order. Some people may describe this as the perfect storm. I'm not sure if that's the right way to say it. We ran into a number of situational challenges and different areas of the business that were compounded by shortcomings in our own operating performance. Nobody is more disappointed by our third quarter 2018 performance than me and our management team. We can and will overcome these challenges. We own it and we will fix it. We have the systems, the processes and the will to quickly get this turned around. Some of the issues we faced in the third quarter were caused by the historical lack of mature operating system in our new AAM facilities. We're moving as fast as we can to correct this situation and ensure a full robust deployment of the AAM operating system, including all the key safety, quality and program management systems that are put into place. We have the full support of our associates, our customers and our suppliers to close the gap to rebuild the positive momentum. It was a tough quarter no doubt, but it does not offer the fundamental value creation opportunity that we have here at AAM. Having said that, let me anticipate some questions and review three major issues that affected our operating performance for the quarter. These issues are first inflationary pressures affecting certain manufacturing costs. Second an increase in project and launch related expenses and third performance in our core business unrelated to launch. First let me address the inflationary pressures affecting certain manufacturing costs. Like many global manufacturing businesses, we are starting to experience a higher rate of inflation associated with the strong economy. We have recently incurred freight rate increases and increased fuel charges, significant utility rate increases in foreign regulated markets, think of Mexico, wage rate increases necessary to attract to retain hourly associates in a tight U.S. labor market, and material cost increases triggered by these same inflationary pressures as well as tariffs and supplier capacity constraints. While there's some indication of mounting inflationary pressures in the first half of the year, these issues started to impact the business much more than expected in the third quarter of 2018. For instance, our primary freight carrier arrangements were contractually set through the middle of the third quarter, when it was time to renew the contracted time, we were exposed to marked competitive freight rates that were higher than our previously contracted rates. Another example is the cost of utilities needed to support our operations in Mexico as a series of unanticipated, federally regulated electricity rate increases were unilaterally imposed on our requirements in Mexico. Trust us that we are taking actions to mitigate these inflationary cost increases through conservation measures, commercial actions and productivity initiatives, but we expect that these issues will be headwinds for the business in the second half of 2018 and into 2019. The second major cost headwind affecting our third quarter results was project and launch related expenses. As a result of significant ongoing new product and program launches across the globe, we incurred greater than expected project and launch related costs in the third quarter of 2018. First, I want to make clear is that we did not have significant launch issues or any significant project and launch related overruns associated with the next-generation GM full-size truck program in the third quarter of 2018. We supported our customer in this first phase of their major launch over multiple calendar years in a flawless and anonymous manner. The project and launch related expenses that we did incur included premium freight, both inbound and outbound, outside processing costs, extra manpower, unplanned overtime and shift premiums, scrap and the excess consumption of supplies and tools. We incurred all these types of cost overruns in the third quarter of 2018. In some cases, we incurred these cost due to issues in our own in-house component or assembly operations, and in other cases, it was caused by unanticipated supply disruptions or unexpected changes in customer schedule. Project and launch cost in the third quarter include the impact of some unanticipated challenges in our Powertrain facilities that resulted in equipment availability and readiness issues, OEE and FTQ gaps and capacity shortfall. The root cause of these issues were poor planning and program management weaknesses. Cost drivers associated with supplier and customer performance issues were prevalent on our Driveline business in the third quarter of 2018, specifically affecting our preparation for the next-generation heavy-duty Ram program in Guanajuato, Mexico and our first e-Drive product launch in Swidnica, Poland. As always, we did whatever we could do to overcome these challenges and get product out the door to satisfy our customers. As a result, these actions to meet the needs of our customers drove cost overruns that were more than we expected. The third major headwind we encountered in the third quarter was performance in our core operations unrelated to launch. In the Driveline business unit, we were adversely impacted by suppliers of aluminum castings, tubes, rotors and powdered-metal components who were unable to keep up with strong customer schedules for full-size light truck and SUV programs. As a result of these supply disruptions, we experienced increased cost in the third quarter for premium freight, overtime and shift premiums and other inefficiencies associated with excess changeovers including low OEE and FTQ. Sales in a few key product lines were limited by these supply shortages, which in turn lowered capacity utilization and reduced the amount of contribution margin to be able to cover our fixed cost in these affected facilities. We are working with the affected suppliers and our customers to improve this situation. We have AAM associates working in the supplier operations and we are in-sourcing and resourcing components where appropriate. In addition to these supplier disruptions, customer production volumes in China and certain programs in North America were down in the third quarter versus pre-existing customer plans. Our Driveline and Powertrain facilities that support this production were impacted by the shortfall, which led to adverse mix and lower capacity utilization and ultimately, resulted in lower profits. The silver lining for us is that many of the cost headwinds that unfavorably impacted us in the quarter are controllable. You can be assured that we are laser focused on resolving the launch related challenges and other operation performance issues that impacted us this quarter. We're also working to recover and otherwise mitigate these cost headwinds through price increases, supplier cost recoveries and an internal productivity initiatives. Some of these issues will take a few quarters to resolve, but we are confident in our ability to do so diligently and effectively. Let's now discuss our business unit segment performance. The Driveline business unit recorded sales of $1.07 billion in the third quarter of 2018 compared to $1.01 billion in the third quarter of 2017. Segment adjusted EBITDA for the third quarter of 2018 was $159.3 million, compared to $181.5 million in 2017. While the Driveline business unit benefited from new business backlog and strong Ram HD volumes in the quarter, it was favorably impacted by higher material, freight and utility costs, higher than expected project and launch related expenses and operational performance and supplier capacity issues unrelated to launch. The Metal Forming business unit recorded sales of $382.2 million in the third quarter of 2018, compared to $368.2 million in the third quarter of 2017. Segment adjusted EBITDA for the quarter was $66.9 million for 2018 compared to $70.7 million in 2017. The Metal Forming business unit was impacted in the quarter by inflationary pressures affecting manufacturing costs along with unfavorable foreign exchange. Overall, the Metal Forming business unit performed relatively well in the quarter. AAM's Powertrain business unit recorded sales of $285.3 million in the third quarter of 2018 compared to $260.9 million in the third quarter of 2017. Segment adjusted EBITDA in the quarter was $34.3 million in 2018, compared to $36.8 million in 2017. The Powertrain business unit was impacted by a significantly higher than expected project and launch related expenses in the quarter. A significant portion of this business unit's performance shortfall in the quarter can clearly be linked to program management weaknesses. The epicenter of the Powertrain launch challenges lies in our Bluffton, Indiana and Twinsburg, Ohio manufacturing facilities. These facilities supply aluminum casting and machine transmission components and subassemblies to Ford, GM and other customers. We acquired these and other Powertrain Metal Forming and Casting facilities from MPG in 2017. Since that time, we have been working to install the AAM operating system in all of these new AAM facilities with a special focus on safety, quality and program management systems. With respect to Bluffton and Twinsburg specifically, we discovered significant program management weaknesses related to program sourced to these facilities before our ownership. These weaknesses manifest themselves into oversold capacity conditions, laid equipment sourcing, manpower hiring and training delays, and equipment readiness and capability issues. The Powertrain business unit was ill prepared to handle an expanded backlog of new business, particularly in the transmission technologies product line. While we had some challenges early in the year, the depth of these issues became more evident during the third quarter of 2018. We are now doing everything we can to recover and meet our customer requirements and launch commitments. We dismissed the previous transmission technologies leadership team and assigned seasoned AAM veterans to work around the clock to address these pertinent issues. We are verifying installed capacity throughout the entire operation. And we are working with our equipment suppliers to ensure that new machines operate at or above the source production requirements. We are confident that the AAM systems being installed throughout the business will protect us from reoccurrence of these issues and the financial premiums we are currently incurring. AAM's Casting business unit recorded $219.1 million of sales in the third quarter of 2018 compared to $226.6 million in 2017. Segment adjusted EBITDA in the quarter was $14.5 million in 2018 compared to $8.8 million in 2017. While we did see year-over-year EBITDA improvement in the Casting business unit, we have taken a step back from the double-digit margin performance we achieved in the second quarter of 2018 and our goal for the full year. This was partly attributable to adverse impact of lower sales volumes as well as operational inefficiencies and inflationary pressures. We continue to face operating challenge in this segment due to hourly labor constraints and operational efficiencies related to attrition. We are focused on addressing the labor shortfall to stabilize our operations and improve performance. Chris will have more to say about the financial impact to this issue and challenges that I just described in a few minutes. If you have any questions about these matters, we can address them in the Q&A session. Let me now provide a brief update on our synergy attainment progress, which you can see on slide 5 of the earnings call presentation. We have now implemented synergies with an annual run rate of approximately $102 million. In addition to purchase and overhead cost reduction initiatives, we are gaining momentum on manufacturing and capacity optimization initiatives, most notably in our Metal Forming business unit. We have begun to optimize and rationalize our existing manufacturing footprint. We will continue to push these and other cost reduction initiatives over the near term with the objective of meeting and/or exceeding our revised guidance for synergy attainment. Let me now review our revised 2018 financial outlook. Earlier this morning, we provided an update to our 2018 financial outlook in our third quarter earnings release. In that update, we revised our full year 2018 sales target to approximately $7.25 billion, the high end of the range of our previously disclosed sales target. We continue to see strength in our core markets and the key product segments that we support. As a result of the matters that we just covered, we are now targeting adjusted EBITDA margin between 16.25% and 16.5% for the full year of 2018. From a cash flow perspective, after factoring in the lower adjusted EBITDA target, we are now adjusting the adjusted free cash flow to approximately 4% of sales. AAM's updated profit and cash flow guidance we are providing today is lower than the previous guidance due primarily to the impact associated with our second half of the year weaker performance, mainly attributable to the launch challenges and the operating issues that I just covered earlier. We have also provided a bit of color in our guidance for the full year 2019 expectation. We do believe sales will remain strong in 2019, and based on a U.S. dollar of 16.5 million unit to 17 million unit, we are targeting our 2019 sales in the range of being flat to 2% growth when compared to that of 2018. As it relates to profitability, we expect our adjusted EBITDA for the full year 2019 to be approximately 17% of sales. The next few months will be very important to AAM, as we expect to make significant improvements and track progress to our goals. Once we see where we stand at the end of 2018, we will provide more details in the early 2019 as customary regarding our specific sales, profitability and cash flow targets for the full-year. Before I turn things over to Chris, I'd like to reiterate that the operating challenge that we face are temporary. We are focused on delivering value to our customers and launching several key programs across the globe. (20:01) At the same time, we are taking the necessary actions to improve our performance, generate significant free cash flow and further strengthen our balance sheet. We have plans in place and are fully committed to driving the required improvements through the operation across every business unit. This concludes my comments for this morning. I'll now turn it over to Chris. Chris? Christopher John May - American Axle & Manufacturing Holdings, Inc.: Thank you, David, and good morning, everyone. I will cover the financial details of our third quarter of 2018 results with you today. I will also refer to the earnings slide deck as part of my prepared comments. So let's go ahead and start with sales. Sales increased nearly $93 million or over 5% on a year-over-year basis to $1.82 billion. Slide 9 shows a walk-down of third quarter 2017 sales to the third quarter 2018 sales. In the quarter, our sales were impacted by lower GM full-sized truck production and the impact of GM sourcing on their latest generation of light-duty trucks that launched in the third quarter. However, we more than offset that impact through the realization of our backlog and other volume and mix factors. As has been a consistent theme in our results, as well as many of our peers over the last couple of quarter, increases in metal market indices and related customer pass-throughs and FX have impacted our sales for the quarter. The net impact of these items for the quarter was an increase of $13 million of revenue on a year-over-year basis. All in all, from a sales perspective, our key markets in vehicle segments continued to be strong and we are being positively impacted by the realization of our new business backlog. Now, let's move on to profitability. And David covered with you, our profitability in the third quarter of 2018 did not meet our expectations. Gross profit was $267.4 million or 14.7% of sales in the third quarter of 2018. Adjusted EBITDA was $275 million in the third quarter of 2018, or 15.1% of sales. This compares to $297.8 million in the third quarter of 2017 or 17.3% of sales. You can see a year-over-year walk down of adjusted EBITDA on slide 10. EBITDA grew $19 million as a result of our new business backlog, volume and mix factors. Our new business continues to come in at healthy profit levels and our content on the new GM full-sized trucks is also coming on as expected contribution margins. As you would expect in a rising metal environment, we had a slight profit impact related to metal market and foreign currency related items for the quarter. However, on a year-over-year basis, we are most significantly impacted by unfavorable increases in manufacturing costs. On a macro level, we experienced higher material, freight and tariff costs in the third quarter of 2018 compared to 2017 of about $12 million, with higher freight and logistics making up the largest portion of this increase year-over-year. Tariffs accounted for just under $2 million impact for the quarter. The largest variance for the third quarter of 2018 relates to project and launch related expenses. We had previously expected these to be substantially lower. However, due to certain launch challenges we faced in the quarter, we saw these expenses increase by approximately $30 million. These included such expenses as premium freight, labor inefficiency and scrap costs. As you know, our number one objective during the period of our launch is to meet our customers' expectations and we incurred more cost than we had initially planned. David has shared with you the pertinent details and the cost drivers in this area, but given the nature of our industry and the dynamics of high volume launches, the speed of onset of many of these issues can be fast. While we had a sight line to some of the potential challenges and cost increases, many of these issues worsened throughout the quarter and hit us much harder and more quickly than we expected. Most of these costs are controllable and we are focused on reducing these over the next few quarters. Lastly, we are subject to some general operating underperformance across our business units. We experienced higher labor cost inflation, in particular, in the United States. We incurred additional expenses related to supplier capacity restraints. However, we see the potential for this to significantly improve over the next few quarters. There are positives in the quarter. In addition to our revenue growth, we did continue to realize the benefits of our integration activities as cost reduction synergies improved our performance by $13 million in the quarter compared to the third quarter of 2017. We experienced benefits in the area of AAM's purchasing power and overhead reductions. For this quarter, we've also included a sequential walk that helps explain the decrease in EBITDA from the second quarter of 2018 to the third quarter of 2018, and you can see that on slide 11. A sizable portion of this decrease is due to normal seasonal volume and mix as there were less production days in the third quarter compared to the second quarter due mainly to the July holiday shutdowns. We also experienced a significant unfavorable impact of foreign exchange in the third quarter compared to the second, mainly due to the strengthening of the Mexican peso during the third quarter of 2018. As you can see in the sequential walk, our issues are similar to the year-over-year comparison. As it relates to restructuring and acquisition related costs, in the third quarter of 2018, we incurred $11.7 million of restructuring and acquisition related costs. These costs have been excluded from adjusted EBITDA and adjusted EPS. Let's take a look at SG&A expense. SG&A, which includes R&D, in the third quarter of 2018 was $96.3 million or 5.3% of sales. This compares to $102.3 million or 6% of sales in the third quarter of 2017. R&D spending for the third quarter of 2018 was $38 million compared to $41 million in the third quarter of 2017. Maintaining our focus on SG&A cost management is very important considering some of the operational challenges we are currently facing, and we had another good quarter in that regard. Now, let me cover interest and taxes. Net interest expense in the third quarter of 2018 was $54.3 million as compared to $56.7 million in the third quarter of 2017. The decrease in our interest expense is primarily a result of our gross debt paydowns over the last 12 months. At the end of the third quarter, AAM maintained an 80% fixed interest rate structure and our weighted average interest rate for the third quarter of 2018 was 5.9%. Income tax expense was $11.5 million in the third quarter of 2018 as compared to $5.7 million in the third quarter 2017. Our effective income tax rate when adjusted for special items was approximately 16% in the third quarter of 2018 and 15% year-to-date in 2018. This is in line with the lower end of our range we provided at the beginning of the year of 15% to 20%. Taking all these sales and cost drivers into account, GAAP net income was $63.8 million or $0.55 per share in the third quarter of 2018 compared to $86.2 million or $0.75 per share in the third quarter of 2017. Adjusted earnings per share, which excludes the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, gain on the sale of business and nonrecurring items, including the tax effect, was $0.63 per share in the third quarter of 2018 compared to $0.86 per share in the third quarter of 2017. Now, let's move on to cash flow and the balance sheet. We define free cash flow to be net cash provided by operating activity, less CapEx, net of proceeds received from the sale of PP&E. AAM defined adjusted free cash flow to be free cash flow, excluding the impact of cash payments for restructuring and acquisition-related costs, and settlements of preexisting accounts payable balances with an interest expense payable for acquired entities. Net cash generated by operating activities in the third quarter of 2018 was $223.8 million. Capital spending, net of proceeds from the sale of property, plant and equipment was $116.5 million in the third quarter of 2018. Cash payments for restructuring and acquisition-related costs for the third quarter were $14 million. We expect to spend between $60 million to $75 million of these payments during the full year of 2018. Reflecting these activities, AAM's adjusted free cash flow in the third quarter of 2018 was $121.3 million. The third quarter was a strong free cash flow generating quarter for AAM. From a debt leverage perspective, we ended the quarter with a net debt to LTM adjusted EBITDA or net leverage ratio at 2.8 times at the end of the third quarter. Liquidity at the end of September was over $1.4 billion and we announced today another early prepayment of $100 million of our senior notes due in 2019 that will take place later this month. That action reduces the highest coupon debt in our capital structure. Before we turn it over to Q&A, let me cover the updated 2018 guidance and other forward-looking information we noted in our earnings release. As a result of continued strength in our key end markets and vehicle programs that we support along with increased metal market pass-throughs, we have increased our 2018 full year sales target to the high end of our previous range of $7.25 billion. We have revised our 2018 adjusted EBITDA target to account for the higher manufacturing cost that we incurred in the third quarter and anticipate in the fourth quarter. We are now targeting full year 2018 adjusted EBITDA margins of 16.25% and $16.5%. Driven primarily by our lower absolute EBITDA, we also see free cash flow coming in a little softer than we initially expected as well, revising our target to approximately 4% of sales and adjusted free cash flow for the full year of 2018. On slide 13, you can see a high level walk from the third quarter adjusted EBITDA to the implied fourth quarter adjusted EBITDA based on the updated targets we just provided. As is typically the case in the fourth quarter, you will see lower sales in the third quarter due to less production days as a result of extended holiday shutdowns. We do expect to see initial reductions in our launch related expenses and improved operational performance having a positive impact in the fourth quarter. I would also expect to see continued improvement over the next couple of quarters aligned with the comments David made earlier. We also provided some guidance for 2019 and we would expect to provide more details on this as we usually do in the January timeframe. First, we expect another strong year of revenues for the full year of 2019 and expect estimated revenues to range from flat to 2% growth compared to 2018. This is based on a U.S. SAAR projection in 2019 of 16.5 million units to 17 million units and a relatively constant metal market environment. We also estimate our adjusted EBITDA margin to be approximately 17% in 2019. But as I mentioned earlier, I would expect to see the early part of 2019 to be lower than the later part as we deliver on our sequential improvements and launch the heavy-duty Ram, heavy-duty General Motors' products and critical Powertrain transmission component launches at that time in the early part of the year. As we expect our adjusted free cash flow for the cumulative four year period from 2017 to 2020 to be approximately $1.5 billion. We're nearly halfway through this free cash flow generation period and see a great opportunity to continue to grow free cash flow in the next two years as we reduce capital expenditures, more interest payments and continue to grow profitably. We have multiple levers to manage cash flow generation and we'll continue to focus on that delivery. Lastly, as it pertains to guidance, we've previously discussed our goal of reaching approximately 2 times net debt to adjusted EBITDA leverage ratio by the end of 2019. Back at the time of our acquisition of MPG, we effectively set an objective to reduce leverage a quarter to half a turn per year and we have been tracking to that goal. Our objective to reduce leverage remains. However, with the revised EBITDA targets, this modifies the timing of this glide path. We're still targeting to reduce our net leverage ratio by about a quarter to a half a turn annually based on our current projections after we work through the next couple of quarters. To close things up, I would like to emphasize a few points. First, our sales base is strong. We are on the right products and in the right markets. Two, our contribution margin on new business and key replacement business like the new GM full-size truck program is solid and coming in at expected levels. We are also achieving the macro business objectives we set forth for our MPG acquisition, including scale, diversification and synergy attainment. And lastly, AAM has tackled previous operational issues with intensity, with drive and with success, and maybe most importantly to our investors, with transparency. This time will be no different. Thank you for your time and participation on the call today. I'm going to turn it back over to Jason so we can start the Q&A. Jason P. Parsons - American Axle & Manufacturing Holdings, Inc.: Thanks, Chris and David. We have reserved some time to take questions. I would ask that you please limit your questions to no more than two. So at this time, please feel free to proceed with any questions you may have.

Your first question comes from the line of Rod Lache with Wolfe Research.

Hi. I had a couple of questions. One is just help us, if you can, bridge from the margins that you're doing now to what your objectives are for next year? So your EBITDA margins right now are roughly 15%. You're talking about 17% for next year. So presumably there's 200 basis points or on your revenue base maybe $145 million of net improvement that you need to get. And I would imagine that gross performance needs to be better since presumably you have another $50 million of freight and labor cost inflation into next year. So, can you just give us a little bit more color on how visible the specific actions are that get you to that 17%? Christopher John May - American Axle & Manufacturing Holdings, Inc.: Yeah. Rod, this is Chris. Good morning. I would tell you if you think about the full year of 2018 from a midpoint perspective the guidance we just gave lands you at sort of around 16% – between 16.25% and 16.5%. We're going to...

Right, right. But, Chris, you're not at 16% now, you're at 15%. Christopher John May - American Axle & Manufacturing Holdings, Inc.: Right, right.

From where we are right now, that's what we're all looking at. So can you just help us from where we are right now to the levels that you're talking about next year? Christopher John May - American Axle & Manufacturing Holdings, Inc.: Sure. If you look, for example, at our sequential adjusted EBITDA walk that we have in our earnings deck, we have approximately $38 million of, call it, launch and project related costs and operational inefficiencies. Substantially, all that will dissipate in the fourth quarter of this year, first quarter and second quarter of next year on a trajectory where it diminishes each quarter. You clear through those, that will get you very close to 17%. Yes, we have some tariff inflation next year that will go up. Yes, we have some material inflation that will go up, but some of this already in the numbers that you're seeing today. Those are your primary drivers...

Okay. Christopher John May - American Axle & Manufacturing Holdings, Inc.: ...plus you'll have some contribution margin on some additional volume and mix that comes into play. (35:49)

So the $38 million you're saying of launch and synergies and – just repeat that. How do I get that $38 million back? What are the specific things that you're changing; launch, premium freight? Christopher John May - American Axle & Manufacturing Holdings, Inc.: You have premium freight, you have some premium material cost associated with supplier cost, you have excessive scrap, you have excessive inefficiencies with our labor and our overhead. And as we fix those and correct those issues over the next couple of quarters, those will dissipate and go away.

Okay. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Hey, Rod, this is David. From an operating performance standpoint, we encountered lower OEE and FTQ performance at some of our business units. We also incurred incremental scrap than if we were normally dialed into a normal production launch. We had overtime, we had some outside processing. We're going to drive all those premium costs out of our business in the next several quarters here. In addition, as I covered with you earlier, program management was poor with respect to our Powertrain business unit, specifically the transmission technology side. We'll get all those issues fixed over several quarters. And then, we also were significantly impacted by a number of supplier disruptions, both on current production today where reputable suppliers can't keep up with the volumes they're (37:14) now impacting us, causing additional changeovers. At the same time, we had some supplier issues in regards to some of the new launches. So we've got the right teams deployed working with ourselves and the customers to get those issues taken care of. That also drove a lot of premium freight issue as extra cost both inbound and outbound. And then, and we're also – we're dealing with some – volumes were down a little bit with respect to our pass car and our CUV's program. We're making the necessary adjustments to right size our business to the new market demand there. And then, clearly, as you said, we'll deal with some of these inflationary and economic issues as part of our cost structure and the actions we need to take to address that going forward.

Okay. Christopher John May - American Axle & Manufacturing Holdings, Inc.: Rod, I would also add two other elements, one particular for this quarter. We had an FX loss of our balance sheet mark that I referred to in my prepared comments. That was $5 million alone in the quarter. And then secondly, as it relates to our synergies, we will continue through our final step up of or synergy run rate to $120 million, moving to $140 million by 2020. So that also contributes to that margin enhancement.

Okay. And just two things, one is, did you say that the launch issues were unrelated to the K2 to T1, it's new plant. And secondly, the free cash flow that you're talking about, $1.5 billion from 2017 to 2020. You did $340 million in 2017. At 4% of sales, you'll do $290 million this year, so that's $870 million left, over $400 million a year still. Is that inaccurate in terms of your trajectory or are you thinking that that's more of a – is a much larger number in 2020 than 2019 because it sounds like you're slowing the rate of deleveraging? Christopher John May - American Axle & Manufacturing Holdings, Inc.: No, I would expect 2020 to be a little larger than 2019, but both years will be significant.

Okay. But the math is right in terms of what I'm subtracting in your adjusted free cash. So you still have $870 million of adjusted free cash over the next two years. Christopher John May - American Axle & Manufacturing Holdings, Inc.: Yes. Your math is correct.

All right. Thank you. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Yeah. Thanks, Rod.

Our next question comes from the line of Brian Johnson with Barclays Capital.

Yeah. I think we're going to beat the same horse. So want to talk a bit about, again, back to getting kind of granular what dissipates, but maybe start because it gives a sense of just kind of how deep some of these operational issues. How did the quarter unwind for you? When did you become aware of these? Did you think of doing a prerelease around some of these numbers? And then I'll kind of drill into some of the walks you talked about. Christopher John May - American Axle & Manufacturing Holdings, Inc.: Yeah. Good morning, Brian, this is Chris. Look, did we know 90 days ago? No. If we did, we certainly would have told you that. And as always when we provide guidance and outlook, we try to give you our best estimate in a timely fashion. And as I mentioned in some of my prepared remarks, given the size of some of these launches, given the speed and the high volume they are, they happened very quickly through the quarter. Obviously, as we worked through it, we had mitigation efforts. And ultimately, by the quarter, we're still working through a lot of issues and some of which we thought could resolve one way or the other. The obviously didn't. And we didn't know until the end of the quarter.

Okay. If you kind of drill into some of those drivers. So if I go again the year-over-year walk on page 10, material, freight and tariffs, is that just the raw inflation there or is it the premium freight due to launch and project and supplier issues in that $12 billion? Christopher John May - American Axle & Manufacturing Holdings, Inc.: So I would think about that $12 million, we have tariffs of about $2 million in that number. Material and freights would be more – think about it as economics related. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: And rate issues. Christopher John May - American Axle & Manufacturing Holdings, Inc.: And so freight rates, some...

Right, rate issues. That's what I was getting at. Christopher John May - American Axle & Manufacturing Holdings, Inc.: Premium freight and call it expedited freight and abnormal freight associated with our launches over some of our operational inefficiencies would be in the two columns to the right. So, for example, in the $30 million project and launch related costs, material, premium, freight associated, things like that, were almost a third of that.

Okay. And in terms of the launch cadence through first – the cadence for next year, how does that get better and how do you assume that you won't have on next year's launches similar issues? David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Yeah. This is David. We're taking immediate action right now with respect to the program management side of things, especially on the legacy MPG facilities, particularly transmission technologies that I mentioned to you. So we're getting all the suppliers in to review what needs to be done, what capacity needs to be put in place and we'll get those issues taken care of, but it will take us a few quarters. And as Chris said, we'll grow into that performance over the next two to three quarters. With respect to the Driveline side of things, the biggest thing that we've got to do is just finalized with FCA, what the build out is of the 2018 program, what the startup is of the 2019 program, so we can ultimately plan our operations properly. They're obviously running at a very high demand right now. Want to get as many trucks out as they can. We're trying to satisfy that, while also trying to move equipment around, which is causing a little bit of disruption and extra cost in the overall business. So those are the bigger issues. And then, the other side of things is suppliers. We've got a number of suppliers that are negatively impacting our current production today that we've got to get resolved with our customers to get those addressed. And we also have a couple of suppliers that are impacting us with respect to launches. And we're looking, as I said in my earlier comments, about resourcing or in-sourcing some of that work to protect our continuity of supply and our supply chains going forward. But we're highly confident that we can turn these things around and turn them around quickly. It's unfortunate what happened here in the third quarter. No one is more disappointed than myself and our team, like I said earlier, but we're also convicted and focused on what we need to do to get these things fixed. And you guys know us as a strong operating team. We'll deliver the results. We just unfortunately had a bad hiccup or hurdle here in the third quarter and they'll sequentially get better as we go forward here.

And about the Twinsburg, Bluffton, how do you get comfort that given those program management deficiencies, the business that came in wasn't just structurally underpriced even for an operation that could be run more efficiently. I mean how do you kind of parse it between we just didn't execute versus we priced it inappropriately, given even solid execution? David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Yeah. The issues in Twinsburg are really capacity related. In regards to – the proper capacity was not put in the place to satisfy the various customers' demands that are there. So, we've already taken action to offload some work or add incremental capacity and equipment where it need be. I think those issues will take care of themselves relatively quickly as we implement the plans we've already got in place. So that's really Twinsburg. With respect to Bluffton, Bluffton really started with a leadership issue. And as I mentioned in my earlier comments, we ultimately released the entire management team associated with the transmission technologies business. We also released plant manager and some of the staff at the facility itself, because they were not forthright in regards to how they were planning the business and what the commitments were or were not to customers. And we've now faired it all that out. We've got the right AAM team with experience and they're fixing those operations right now around the clock. We've got suppliers and they're helping us deal with these matters as well. So I'm highly confident that we can get these issues resolved. There's nothing there that scares us or bothers us. The most important thing that we've done is, we worked with our customers to protect their schedules unfortunately at our expense, but at the same time, we've got an obligation and responsibility to our customers. And that's what we did.

And I guess just to get similar to this micro level, which is helpful. So over on the RAM HD program, there is some talk that they might leave some operations in Mexico. RAM HD overall is gaining share in the market, good for Fiat Chrysler, but how much clarity do you need around where the volumes are and then actually where they're going to be produced before you can iron out some of the inefficiencies in Driveline related to that program? And then I have one more question. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Yeah. Brian, two separate issues there. The inefficiencies that we're incurring right now on the operations are largely because of the increased demand they have in their current 2018 program and the lack of clarity that we have with respect to the build-out and the startup of the 2019 program. There's also some engineering changes, late engineering changes that we're managing our way through that's created some inefficiencies. But those are all things between us and FCA that we can get those resolved relatively quickly.

Okay. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Your first part of your question dealt with...

Relocations (46:39) David C. Dauch - American Axle & Manufacturing Holdings, Inc.: ... the relocation, yeah, right now, the direction that we received from FCA is for us to continue with our plans. We've already installed the incremental capacity and volume and mix into our Mexican operations, and we plan on continue to supply that program out of Mexico. FCA is also revisiting their earlier announcement about do they move that heavy-duty to the U.S. or not because they're also looking to expand the total RAM program, both light-duty and heavy-duty, on volume. And Mexico is going to be an important part of that incremental production. So we still got to get clarity from FCA and what their final plans are, but in the meantime, they've been very clear to us that we're going to keep our business in Mexico.

Final question is around Casting and maybe this was just our model, but we actually had a $14 million EBITDA shortfall in Casting. You've talked a lot about the operational issues in Driveline and Powertrain. What's going on in Casting? And how do you – back to the first question, how do you kind of walk that, what looks to me like a $20-plus million drag over next year? Christopher John May - American Axle & Manufacturing Holdings, Inc.: Yeah. We had made sequential improvement the last several quarters, but unfortunately we took a step back. The most important thing that drove the step back was just labor availability and shortages and then the attrition that goes with that labor. So we do not have what I would like to be a stable operating environment largely attributable to the lack of manpower that we need to properly run the business. We've covered with you guys earlier that there were some deficiencies earlier in regards to some of the maintenance activities. We've addressed a lot of that. There's still some of that that's lingering out there that we're dealing with, but most of that's behind us. The biggest issue that we're really dealing with is labor and then just some of the inflationary and economic issues associated with the business as well. So Mike, I don't know (48:38) Michael K. Simonte - American Axle & Manufacturing Holdings, Inc.: Yeah. Brian, this is Mike. I think one of the other key elements that David – what it leads from what David just commented on is commercial positioning. And we have negotiated significant price increases throughout our portfolio of business in the Casting business unit. This was a critical action taken during the third quarter and you'll begin to see some improvement in the fourth quarter relative to pricing. By the time we get to the first quarter of 2019, we'll be able to push ourselves back into double-digits on the back of operational improvements, but also and importantly pricing to address these inflationary pressures that we don't see abating in that portion of our business.

Okay, okay thanks. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Thanks, Brain.

Our next question comes from the line of Joseph Spak with RBC.

Thanks. Maybe just to sort of summarize some of the comments, particularly in the last round of questions. It sounds like what you're saying of the $50 some odd million year-over-year headwind, only about $10 million of it was what you call sort of economics related. So is your view that basically the rest of that through your internal actions is what you'll be able to offset over time? Christopher John May - American Axle & Manufacturing Holdings, Inc.: Yes. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Joe, yes. Absolutely.

Okay. And then, maybe the disclosure and sort of the way you broke us down was the (50:15) is helpful between the three factors, but versus your expectations what was the biggest delta that showed up late? Was it the project and launch related costs? Christopher John May - American Axle & Manufacturing Holdings, Inc.: You mean versus our expectation coming into the quarter?

Yeah, sort of on a year-over-year basis like what – versus sort of what – because you're going to have the launch cost anyway, right. So I guess versus what you thought earlier in the quarter. Christopher John May - American Axle & Manufacturing Holdings, Inc.: So if you think about, Joe, more from a sequential basis, as we are coming into the third quarter, you may recall, we were expecting that some of our project expense cost to go down and it completely moved the opposite direction. So those two markets that we put on walk, our project and launch related costs and our labor performance from our core business would be not that we expect to come in into the quarter. Those are kind of the unexpected elements.

Okay. Christopher John May - American Axle & Manufacturing Holdings, Inc.: And we knew we had some material inflation, some volume mix. It's normal for the quarter.

All right. Maybe just on the brighter side of ledger, like on the 2019, the revenue guidance of plus up 1% at the midpoint and The Streets I think modeling down 1.5%. So I sort of hate to ask this question, but like we can all see the IHS numbers on K2 and T1 and can do the math. So would you attribute your better top line outlook to something that you think is wrong in those schedules or is it more from the backlog and the diversification away from GM trucks? Christopher John May - American Axle & Manufacturing Holdings, Inc.: It would be the latter. And keep in mind next year is a big backlog year for AAM. It's $600 million gross new business backlog. So we anticipate it to continue to grow our business. We still see that today.

Okay. And then last one, the T1 launch is sort of starting in Fort Wayne, where I think GM is doing more of in-sourcing. I know for the overall program, you thought you get 65% of those pickups, but presumably we're below that at the start of the launch. So by when do you expect to sort of get up to that 65% ratio that that you've mentioned in the past? Christopher John May - American Axle & Manufacturing Holdings, Inc.: Yeah, that 65% transitions through all three of their platforms if they've got light-duty, heavy-duty and the SUV. So that will – specifically related to the light-duty, that will transition here over the next couple of months and quarters. And then, the heavy-duty, as you know, is ours in its entirety with the SUV.

Okay. So the light-duty – your share of light-duty, if you will, sort of gets better here over the next couple of quarters as they launch some of the other plans and then the heavy-duty's come on and that's all you. Christopher John May - American Axle & Manufacturing Holdings, Inc.: Correct.

Okay. Thank you.

Our next question comes from the line of Itay Michaeli with Citi.

Good morning. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Good morning.

Just going back to 2019 and trying to get a sense of the level of confidence you have in the step up of margins, so, maybe two questions to get at that. The first is, you mentioned that it will take us several quarters. So maybe just give us a little bit of a sense of the cadence in 2019. Is there some step up in Q1 versus the second half of 2018? And the second question to that is to what extent some of the fixes that you're expecting dependent on commercial negotiations, whether it's your customers or suppliers that have yet to take place? Christopher John May - American Axle & Manufacturing Holdings, Inc.: So, Itay, this is Chris. So, if you look at our earnings slide deck, this might (53:40) provide a little bit of insight into that, the last slide we have where we're depicting the fourth quarter. So if you think about sequentially third quarter versus the second quarter, we had issues of around $38 million associated with our project launch, performance and labor. We show in the fourth quarter that we are improving those or stepping those down, if you will, $10 million to $20 million in that quarter. I would expect as we get into the first quarter of 2019, we would then improve an additional $5 million to $15 million and in the second quarter, call it, another $5 million to $10 million. So where we dissipate that down to what is left with some residual inflationary items that we talk about such as utilities, some wage increases, et cetera. That's a high-level cadence in the first half of next year.

Okay. That's helpful. And then on the commercial negotiations, is there some kind of a dependence on new agreements and economic transfers from suppliers or OEMs that you're kind of waiting on at this point or relying upon? David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Itay, this is David. With respect to the Casting business, most of those contracts are already secured, agreements have been reached on all of them. We're just waiting for some final contracts, but those will be coming in. So those are pretty well done. In regards to any of the auto or the light vehicle side of things, we've just got to go back and review where we are with some of the economic issues around the tariff side, some of the utility issues, but those aren't completed at this time but there's dialog taking place.

That's helpful. Just maybe I could sneak one last one in on free cash flow. I think the cash restructuring outlook for 2018 went up from the prior guidance. As we think about 2019 and some of the operational setbacks, should we expect more restructuring in 2019 in terms of how we think about the adjusted free cash flow and then kind of the GAAP cash flow? Christopher John May - American Axle & Manufacturing Holdings, Inc.: No. First, for 2018, at the beginning (55:39) guidance, $50 million to $75 million, we just tight that range to $60 million to $75 million, so it didn't – in our view, didn't go up. It's in line with what we expected. And then, for next year, as you know, we need to work through kind of the balance of our synergy piece as we're consolidating some of our facilities. And we've always said, look, we'll be about $1 for $1 in terms of synergy payment, so gross over that period $140 million through the whole integration phase. And as we complete – I think we had about $40 million last year and then what – we just talked about what we have this year. So that would put you somewhere in the range of $30 million to $50 million for next year.

Got it. That's helpful. Thank you. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Yeah. Thanks, Itay.

Our next question comes from the line of Armintas Sinkevicius with Morgan Stanley. Armintas Sinkevicius - Morgan Stanley & Co. LLC: Good morning. Thank you for taking the question. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Good morning. Armintas Sinkevicius - Morgan Stanley & Co. LLC: If I look at your leverage at 2.8 times and adjust for the fourth quarter, think about the amount we could see over the next two years, I'm getting to, call it, 2 – roughly 2 times by the end of 2020. So is it right that you're effectively pushing out your leverage target by a year? Christopher John May - American Axle & Manufacturing Holdings, Inc.: I mean that effectively aligns with the fact that it's our EBITDA – absolute EBITDA change here in the second-half of the year and as we build that back in the first half of next year, effectively that's what it does. So I sort of indicated that with our quarter to half a turn leverage reduction once we stabilize. So that's pretty much aligns us (57:08). Armintas Sinkevicius - Morgan Stanley & Co. LLC: Okay. And then, you mentioned with the e-Drive, that sort of fell in the bucket of launch costs and challenges there. Maybe you could talk to us about the launch of that e-Drive product and then discussions how they're progressing for future e-Drive awards? David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Yes. Armintas, this is David. The demand for the vehicles is very, very strong. Right now, there's supplier constraints with the OEM as well as with us. We are not the constraint to the OEM. We're working to break our own bottlenecks. We do have a couple of supplier issues that we're taking action to strengthen their performance in the area of castings. At the same time, we're looking at taking some further actions to protect continuity of supply. Our customer is also talking to us about increasing the volume on that program as well going forward. So overall, we'll be fine when it's all said and done. We've managed a challenging supply base and then we're down to just one or two issues now. We'll have those behind us here relatively shortly. Armintas Sinkevicius - Morgan Stanley & Co. LLC: Okay. And what about discussions for future awards? David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Nothing to announce at this time, but we're active in the marketplace. Armintas Sinkevicius - Morgan Stanley & Co. LLC: Okay. And then with the – once we do get to that 2 times leverage – or maybe before that, just what are you thinking with regards to the potential for share buybacks? Are you set on getting to that 2 times first or would you think about introducing some of that earlier? David C. Dauch - American Axle & Manufacturing Holdings, Inc.: I mean, obviously, we'll be opportunistic if the right situation presents itself, but our focus like we've said all along is support the organic growth and the debt paydown and we need to be committed to supporting and strengthening the balance sheet. We have been, we are and we're demonstrating that based on the actions we've taken in the last couple of quarters to redeem some of our notes and bonds. Armintas Sinkevicius - Morgan Stanley & Co. LLC: Got it. That's helpful. Thank you. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Thank you. Christopher John May - American Axle & Manufacturing Holdings, Inc.: Thank you.

Our next question comes from the line of Ryan Brinkman with JPMorgan.

Great, thanks. It sounds like a good portion of the underperformance in 3Q was driven by softer execution at acquired Metaldyne facility, particularly Powertrain facilities. And I think manufacturing savings at the acquired plants were – a pretty good portion of the $140 million of synergies that you expect from the integration. So does the slippage in performance at some of the acquired facilities make you feel any differently about the synergy potential over time? David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Not at all, Ryan. We feel very confident in our ability to hit the synergies that we communicated to you both at the $120 million level by the April 1 of 2019 calendar year time and $140 million level by the 2020 calendar year period of time. Clearly, there's work to do in some of those legacy MPG facilities, especially the transmission technologies on program management and operational systems, quality system, safety systems, other things. You guys know us as being a very good operating company. We just got to read the legacy – or the AAM operating system completely into the legacy MPG facilities and we'll get that done here. A good portion will be done by the end of this year, but all of it should be done by the middle of next year.

I see. And then, just given that your fourth quarter outlook is well below the Street with a fairly large portion of the issues that arose in 3Q seemingly continuing into 4Q. And given also that you're introducing 2019 today that has an outlook that is above consensus and I don't know that you need such a strong outlook, but I think it would be great if you could share some examples of what gives you the confidence in the timing of sort of the sunset of some of these issues that arose in 3Q such that they won't prevent you from meeting the strong 2019 outlook. So for example, could you talk about maybe some of the issues that have already been resolved or what insight you have into them being resolved over what timeframe, et cetera? David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Ryan, this is David. We're highly confident that we can resolve these issues by the end of the second quarter of 2019. As Chris indicated earlier, we're already making some improvements immediately and we'll see some of that benefit in the fourth quarter. We'll continue to make improvements in the first quarter. And then, we should be wrapping up the final changes that we need to do in the second quarter. So that's kind of the cadence. So we've guided at 17% for the full-year of 2019 and we'll grow into that with lower in the first half of the year and stronger in the second-half of the year 2019.

Okay. And then just a very final question. I know (01:01:56) given the large decline in the shares today and I know you're totally committed to delevering and that's very important, is there any thoughts and is there any flexibility that you might have – given I know you have high leverage, but a lot of the debt you're doing – you're paying down $100 million of the 2019 today. It isn't due until well into the next decade. Is there any thought to maybe allocating some portion of the free cash flow that you're guiding to over the next couple of years to perhaps share repurchase in addition or in balance with primary focus on debt paydown, of course? David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Ryan, it's Chris. I'd first like to clarify, the notes that we redeemed are 2019 notes. They're due in basically 12 months. We had to take care of those one way or another within the next 12 months. This allowed us to capture some interest save through the process, reduce some of interest cost. But in the short term, we're continuing to be focused on deleveraging this company.

Okay. Thank you.

Our final question comes from the line of John Murphy with Bank of America.

Good morning, guys. I just wanted to follow up on Ryan's question just on sort of the fungibility of some of the pressures you're seeing being included in your synergy numbers. I mean does that kind of mean – I mean because a lot of this sounds like it's focused in the MPG acquisition and some issues with controls and management there, but you're still saying you're hitting these the synergy numbers. I mean is there a potential significant upside in synergies? I mean as you think about sort of whipsawing back through these near-term issues and then still achieving what you're achieving there. I'm just trying to understand is there some double counting going on. Michael K. Simonte - American Axle & Manufacturing Holdings, Inc.: Hey, John. Good morning. This is Mike. No, there's no double counting. Let me remind you that of the synergies that we are accomplishing and have accomplished, roughly 25% of it was overhead and public company costs, which are long baked into the cake in terms of our run rate activity. The second largest amount of activity relates to the merging and bringing together of our forging businesses, which is performing quite well. David made the comment that our third quarter results, while there's some pressure around the edges on inflation and things of this nature, generally speaking, they hung in there and did a very nice job for us in that quarter. So it's really not the synergies per se that are the issues, it's the core operated performance in these facilities. It's the preparation for launch, the program management activities that exposed some of the operations to situations where they simply could not meet their commitments to the customers without premium freight, without outside premiums. And what we mean by outside premiums is going somewhere else to make portions of the product that we are due to shift to our customers that we should be making ourselves. These types of activities are what drove the premium costs. A number of the drivers of excess scrap, and this is responsive to your question as it is Ryan's question, a number of the drivers of excess scrap have been resolved. We track scrap on a daily basis, John. So we have a significant daily feedback on those operations and things are clearly improving there. So what David says and Chris says and now I'm saying that we have confidence that we're going to have a chance to turn this thing around and show meaningful improvement as early as the fourth quarter. It's because we're getting daily feedback on these operations.

And when you talked about oversold capacity, I mean how do you deal with something like that? That sounds a lot more sort of structural, that's not just sort of a surprise. I mean I was surprised for you guys, because the MPG guys in transmission seem like they oversold capacity. I mean how do you deal with that? I mean, do you just got to throw capacity in or can you outsource that to somebody else? David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Yeah. There's three ways, John. First is to try to improve the throughput of the existing capacity that's already installed. There's definitely some opportunities for us to do that. Second is – short-term is to offload some of that work or find supplemental supply that tends to be premiums associated with that or work that out constructively with our customers. And then third is to put incremental capacity in place, which tend to (01:06:01) take a little bit longer to do, but we're working on all three of those things right now.

And then just lastly, as we think about the GM truck launch. I mean it's traditionally been a two year launch, so you get the benefit of your sort of expense in R&D and capacity shifts maybe more quickly, but it sounds like it's going to be spread over three years now. I mean they're doing something that's very good for their product cadence, but it might be a little bit deleterious to sort of the payback on your investment. Is that the right way to think about it or is it actually an easier thing for you to deal with and actually potentially a real positive for you. Trying to understand which way this cuts? David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Their launch cadence is not much different than what it's been historically in the past. As we said, we are not having any issues on our T1XX launch. It's actually a bright spot and positive for us. GM is having a flawless and anonymous launch as well as starting at Fort Wayne and then they expand into (01:06:56) and other facilities going forward. We see it as being a positive for us and at the same time, we're seeing that they are getting positive reviews in the marketplace for the truck as well. And we hope they continue to just sell at or above the volumes that we've all forecasted and planned for.

Great. Thank you very much, guys. David C. Dauch - American Axle & Manufacturing Holdings, Inc.: Okay. Christopher John May - American Axle & Manufacturing Holdings, Inc.: Thank, John.

First of all, let me thank you all for joining us here this morning. Clearly, the third quarter 2018 was a challenging quarter for AAM. This is the first time in years that we have not met our expectations. And as you all know, our company is rooted in integrity and operational excellence and we're making the appropriate corrective actions to stabilize our operation to the levels that you know and expect. While this will take us some time, a few quarters, I'm fully confident we will recover these issues and continue to make progress on achieving our long-term goals. We look forward to providing you an update on our progress in the upcoming months. And I'd like to thank all of you for your continued interest in AAM. Thank you.

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