What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-20 · 116 added, 142 removed, 374 unchanged (41% of the section changed)

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Operational and Strategic Initiatives

Our enterprise strategy builds on our strong technology foundation and leverages our resources across the organization while driving a customer-centric focus, expanding our global markets, and delivering innovative solutions as we evolve into the era of vehicle electrification.

Our strategy builds on our strong technology foundation and leverages our resources across the organization while driving a customer-centric focus, expanding our global markets, and delivering innovative solutions for the mobility markets we serve.

Central to our strategy is leveraging our core operations.

This foundational element enables us to infuse strong operational disciplines throughout the strategy, making it practical, actionable, and effective.

It enables us to capitalize on being a major drive systems supplier across all three end mobility markets.

We are achieving improved profitability by actively seeking synergies across our engineering, purchasing, and manufacturing base.

We have strengthened the portfolio by acquiring critical assets, and we are utilizing our physical and intellectual capital to amplify innovation across the enterprise.

Leveraging these core elements can further expand the cost efficiencies of our common technologies and deliver a sustainable competitive advantage for Dana.

Driving customer centricity continues to be at the heart of who we are.

Putting our customers at the center of our value system is firmly embedded in our culture and is driving growth by focusing on customer relationships and providing value to our customers.

These relationships are strengthened as we are physically located where we need to be in order to provide unparalleled service, and we are prioritizing our customers’ needs as we engineer solutions that differentiate their products, while making it easier to do business with Dana by digitizing their experience.

We are achieving improved profitability by actively improving our cost structure and gaining efficiencies across all of our operations and functions.

Our customers remain at the center of our value system.

These relationships are strengthened as we are physically located where we need to be in order to provide unparalleled service.

We prioritize our customers’ needs as we engineer solutions that differentiate their products while making it easier to do business by streamlining our commercial organization.

Our customer-centric focus has uniquely positioned us to win more than our fair share of new business and capitalize on future customer outsourcing initiatives.

Expanding global markets means utilizing our global capabilities and presence to further penetrate growth markets, focusing on Asia due to its position as the largest mobility market in the world with the highest market growth rate as well as its lead in the adoption of new energy vehicles.

We are investing across various avenues to increase our presence in Asia Pacific by forging new partnerships, expanding inorganically, and growing organically.

We continue to operate in this region through wholly owned and joint ventures with local market partners.

We have recently made acquisitions that have augmented our footprint in the region, specifically in India and China.

All the while, we have been making meaningful organic investments to grow with existing and new customers, primarily in Thailand, India, and China.

These added capabilities have enabled us to target the domestic Asia Pacific markets and utilize the capacity for export to other global markets.

We continue to enhance and expand our global footprint, optimizing it to capture growth across all of our end markets.

Delivering innovative solutions enables us to capitalize on market growth trends as we evolve our core technology capabilities.

We are also focused on enhancing our physical products with digital content to provide smart systems, and we see an opportunity to become a digital systems provider by delivering software as a service to our traditional end customers.

This focus on delivering solutions based on our core technology is leading to new business wins and increasing our content per vehicle.

We have made significant investments - both organically and inorganically - allowing us to move to the next phase, which is to Lead electric propulsion .

We continue to deliver on our goal to accelerate vehicle electrification through both core Dana technologies and targeted strategic acquisitions and are positioned today to lead the market.

Our investments in electrodynamic expertise and technologies combined with Dana’s longstanding mechatronics capabilities has allowed us to develop and deliver fully integrated e-Propulsion systems that are power-dense and achieve optimal efficiency through the integration of the components that we offer due to our mechatronics capabilities.

With recent electric vehicle program awards, we are well on our way to achieving our growth objectives in this emerging market.

The development and implementation of our enterprise strategy is positioning Dana to grow profitably due to increased customer focus as we leverage our core capabilities, expand into new markets, develop and commercialize new technologies, including for electric vehicles.

Dana has embarked on a strategic plan to focus on core on-highway markets and accelerate value creation by improving its cost structure, increasing its efficiency, and creating a more focused and nimble Dana through the planned divestiture of our Off-Highway business.

Capital Structure Initiatives

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We also utilize share repurchases to provide returns to our shareholders.

We repurchased $25 and $23 of common shares in 2022 and 2021, respectively.

We repurchased $25 common shares in 2022.

Financing initiatives — Our current portfolio of unsecured senior notes is structured such that no more than $440 of senior notes comes due in any calendar year, with no maturities until the second quarter of 2025.

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Any potential acquisition will be evaluated in the same manner we currently consider customer program opportunities and other uses of capital – with a disciplined financial approach designed to ensure profitable growth and increased shareholder value.

We have actively grown our electric vehicle capabilities through multiple acquisitions, positioning us to deliver complete e-Propulsion systems with in-house electrodynamics.

Our acquisitions of TM4 Inc.

(TM4), S.M.E.

(SME), Prestolite E-Propulsion Systems (Beijing) Limited (PEPS), Ashwoods Innovations Limited (Ashwoods), Oerlikon Drive Systems, Nordresa Motors, Inc., Rational Motion GmbH and Pi Innovo Holding Limited have enhanced our portfolio of core technologies including e-motors, power inverters, software and controls, and advance mechatronics.

Our strategic partner, Hydro-Québec, owns 45% redeemable noncontrolling interests in the Dana TM4 joint venture entities.

See Note 9 to our consolidated financial statements in Item 8 for additional information.

We manage our operations globally through four operating segments.

Through December 2024, we managed our operations globally through four operating segments.

Our Light Vehicle and Power Technologies segments primarily support light vehicle original equipment manufacturers (OEMs) with products for light trucks, SUVs, CUVs, vans and passenger cars.

The Commercial Vehicle segment supports the OEMs of on-highway commercial vehicles (primarily trucks and buses), while our Off-Highway segment supports OEMs of off-highway vehicles (primarily wheeled vehicles used in construction, mining and agricultural applications).

Our Commercial Vehicle segment supports the OEMs of on-highway commercial vehicles (primarily trucks and buses), while our Off-Highway segment supports OEMs of off-highway vehicles (primarily wheeled vehicles used in construction, mining and agricultural applications).

In the first quarter of 2025, our Power Technologies segment will be integrated into our Light Vehicle and Commercial Vehicle segments, streamlining the business, enhancing our go-to-market approach and serving our customers more efficiently.

The OEM-facing business will be integrated into our Light Vehicle segment while the aftermarket business will be integrated into our Commercial Vehicle segment.

Trends in Our Markets

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Our multi-market coverage and broad customer base help provide stability across the cycles while mitigating secular variability.

In 2020, all of our end-markets were impacted to varying degrees by the COVID pandemic, which initially resulted in lower demand driven by production shutdowns related to virus mitigation efforts in the regions we serve.

During 2021, we generally saw improvement across all of our end markets despite production levels being muted by global supply chain disruptions driven in part by transportation inefficiencies and labor, commodity and semiconductor chip shortages.

During 2022 and 2023, we continued to see incremental improvement across our end markets despite continuing, but lessening, global supply chain disruptions.

Light vehicle markets — Our driveline business is weighted more heavily to the truck and SUV segments of the light-vehicle market versus the passenger-car segment.

Our vehicle content is greater on rear-wheel drive, four-wheel drive, and all-wheel drive vehicles, as well as hybrid and electric vehicles.

During 2023, light-truck markets improved across all regions except North America, which was negatively impacted by labor strikes during the fourth quarter of 2024 at the U.S.

operations of several original equipment manufacturers.

The outlook for the full year of 2024 reflects global light-truck production being relatively stable across all regions in comparison with the prior year.

During 2024, light-truck markets showed marginal improvement across all regions except Europe, which was down slightly from 2023.

The outlook for 2025 reflects global light-truck production being relatively stable across all regions in comparison with the prior year.

Commercial vehicle markets — Our primary business is driveline systems for medium and heavy-duty trucks and busses, including the emerging market for hybrid and electric vehicles.

Key regional markets are North America, South America (primarily Brazil) and Asia Pacific.

During 2023, production of Class-8 trucks in North America increased 8% over 2022 reflecting increased demand driven by higher freight volumes and rates during the first half of 2023, with demand tapering during the second half of 2023 as freight volumes and rates trended downward.

The outlook for 2024 is for weakening demand with production down moderately from 2023 levels driven by lower year-over-year freight volumes and rates.

During 2024, production of Class-8 trucks in North America decreased 3% from 2023 reflecting lower demand driven by lower freight volumes and rates.

Medium-duty truck production in North America experienced a modest 4% year-over-year increase from 2023.

The outlook for 2024 is for a modest decrease in production over the prior year.

Outside of North America, production of medium- and heavy-duty trucks in South America declined 32% in 2023 reflecting weak economic conditions in the region.

The 2024 outlook for South America is for a modest increase in production from 2023 as local economic conditions are expected to somewhat improve.

Production of medium- and heavy-duty trucks in Asia Pacific, driven by China and India, increased 18% in 2023.

The outlook for 2025 is for a moderate decrease in production from the prior year.

Outside of North America, production of medium- and heavy-duty trucks in South America increased 41% over 2023, reflecting improved economic conditions in the region.

The 2025 outlook for South America reflects a modest decrease in production from the prior year.

Production of medium- and heavy-duty trucks in Asia Pacific, driven by China and India, decreased 5% in 2024.

The 2025 outlook for Asia Pacific is for a modest increase in production from the prior year.

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The construction equipment segment of the off-highway market is closely related to global economic growth and infrastructure investment.

The global construction equipment market continued to rebound in 2023 with production up 5% over the prior year.

The outlook for 2024 is for modest growth in North America, South America and Asia Pacific, partially offset by moderately lower production levels in Europe.

The global construction equipment market softened in 2024 with production declining 5% from 2023.

The outlook for 2025 is for continued market weakness, with moderate production declines in North America and Europe and relative stability in Asia Pacific compared to the prior year.

End-user investment in the mining equipment segment is driven by prices for commodity products produced by underground mining.

The global mining equipment market has been mostly stable over the past several years as industry participants have maintained vehicle inventory levels to match commodity output, and this trend is expected to continue in 2024.

The global mining equipment market has been mostly stable over the past several years as industry participants have maintained vehicle inventory levels to match commodity output.

The outlook for 2025 is for a modest decline in global production from the prior year.

The agriculture equipment market is the third of our key off-highway segments.

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Farm commodity price decreases in 2024 spurred a 8% decrease in agriculture equipment production.

The outlook for 2024 is for global end-market demand to remain relatively flat with the prior year.

The outlook for 2025 is for a moderate decrease in global end-market demand relative to the prior year.

Foreign currency — With 55% of our 2024 sales coming from outside the U.S., international currency movements can have a significant effect on our sales and results of operations.

The euro zone countries and India accounted for 47% and 10% of our 2024 non-U.S.

sales, respectively, while Brazil and China both accounted for 8%.

sales, respectively, while Brazil and China accounted for 9% and 8%, respectively.

Although sales in South Africa are less than 5% of our non-U.S.

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dollar in 2024, decreasing 2024 sales by $49.

A weaker Indian rupee, South African rand and Chinese renminbi were partially offset by a stronger euro and Brazilian real.

A weaker Brazilian real, Chinese renminbi and Indian rupee, were partially offset by a stronger euro.

Argentina has experienced significant inflationary pressures the past several years, contributing to significant devaluation of its currency among other economic challenges.

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Adjusted EBITDA

$925 - $1,025

Net cash provided by operating activities

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The accompanying reconciliations of these non-GAAP measures with the most comparable GAAP measures for the historical periods presented are indicative of the reconciliations that will be prepared upon completion of the periods covered by the non-GAAP guidance.

Our 2024 sales outlook is $10,650 to $11,150, reflecting a modest improvement in global market demand and $350 of net new business backlog.

Based on our current sales and exchange rate outlook for 2023, we expect overall stability in international currencies with a modest headwind to sales primarily due to a weaker euro, Chinese renminbi and Thai baht.

On November 25, 2024, we announced that we are pursuing a sale of our Off-Highway business.

While the sale process continues to advance, there can be no assurance that it will result in a transaction.

Our 2025 outlook includes a full twelve months of operations for our Off-Highway business.

Our 2025 sales outlook is $9,525 to $10,025, reflecting declining global market demand and currency headwinds, partially offset by $150 of net new business backlog.

Based on our current sales and exchange rate outlook for 2025, we expect international currencies to be a modest headwind to sales primarily due to a weaker euro.

At sales levels in our current outlook for 2025, a 5% movement on the euro would impact our annual sales by approximately $120.

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At our current sales outlook for 2025, we expect full year 2025 adjusted EBITDA to approximate $925 to $1,025.

Adjusted EBITDA Margin is expected to be 8.5% at the midpoint of our guidance range, a 50 basis-point improvement over 2023, reflecting higher margin net new business and improving operational performance being partially offset by the benefit of the material cost recovery tailwind experienced in 2023 dissipating in 2024, as commodity prices stabilize, and increased investment to support our electrification strategy.

We expect to generate free cash flow of approximately $50 at the midpoint of our guidance range reflecting the benefit of higher year-over-year adjusted EBITDA and lower capital spending being largely offset by higher year-over-year cash paid for interest and income taxes and increased working capital to support higher sales levels.

Among our operational and strategic initiatives are increased focus on and investment in product technology – delivering products and technology that are key to bringing solutions to issues of paramount importance to our customers.

Adjusted EBITDA margin is expected to be 10.0% at the midpoint of our guidance range, a 140 basis-point improvement over 2024, reflecting the impact of significant cost savings actions and improved operational performance, partially offset by the impact of lower end-market demand and net material cost recoveries.

With commodity costs continuing to abate during 2025, Adjusted EBITDA margin will be negatively impacted by net material cost recoveries on both a dollar and percentage basis.

We expect to generate free cash flow of $225 at the midpoint of our guidance range reflecting the benefit of higher year-over-year adjusted EBITDA, lower capital spending and improved working capital efficiency.

Among our operational and strategic initiatives is continued focus on and investment in product technology – delivering products and technology that are key to bringing solutions to issues of paramount importance to our customers.

Our success on this front is measured, in part, by our sales backlog – net new business awarded that will be launching over the next three years, adding to our base annual sales.

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At December 31, 2024, our sales backlog of net new business for the 2025 through 2027 period was $650.

We expect to realize $350 of our sales backlog in 2024, with incremental sales backlog of $300 being realized in both 2025 and 2026.

Our sales backlog is approximately 75% attributable to electric-vehicle content with the balance attributable to traditional ICE-vehicle content.

Our sales backlog is balanced across all of our end markets.

We expect to realize $150 of our sales backlog in 2025, with incremental sales backlog of $300 and $200 being realized in 2026 and 2027, respectively.

Our sales backlog is primarily attributable to our on-highway end markets.

Consolidated Results of Operations

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Restructuring charges, net

Impairment of goodwill

Loss on disposal group previously held for sale

Other income (expense), net

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Interest expense

Earnings (loss) before income taxes

Earnings before income taxes

Income tax expense

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Amount of Change Due To

(Divestitures)

North America

South America

Sales in 2023 were $399 higher than in 2022.

Weaker international currencies reduced sales by $9, principally due to a weaker Indian rupee, South African rand and Chinese renminbi, partially offset by a stronger euro and Brazilian real.

The organic sales increase of $408, or 4%, resulted from improved overall market demand and the conversion of sales backlog.

Pricing actions, including material commodity price and inflationary cost adjustments, increased sales by $409.

The North America organic sales decrease of 3% was driven principally by a full-frame light-truck customer program that ended in 2022, labor strikes during the fourth quarter of 2023 by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) at the U.S.

operations of certain of our customers, and lower light-truck production levels, partially offset by stronger medium/heavy-truck production volumes, higher light-vehicle engine production levels and the conversion of sales backlog.

Year-over-year full-frame light-truck production was down 2% while light vehicle engine production was up 12% compared with 2022.

Year-over-year Class 8 truck production was up 8% while Classes 5-7 truck production was up 9%.

Excluding currency effects, sales in Europe were up 15% compared with 2022.

With our significant Off-Highway presence in the region, a stronger construction/mining equipment market was a major factor.

The year-over-year organic sales increase in Europe for this operating segment was 10% compared with 2022.

Sales in Europe also benefited from higher year-over-year light-truck and medium/heavy-truck production of 16% and 17%, respectively.

Excluding currency effects, sales in South America were 9% lower than 2022 reflecting lower medium/heavy-truck production.

Year-over-year South America medium/heavy-truck production was 32% lower than 2022.

Excluding currency effects, sales in Asia Pacific increased 13% compared to 2022 due to stronger light-truck and medium/heavy-truck production levels compared with 2022.

Year-over-year light-truck production was up 13% while medium/heavy-truck production was up 18%.

Cost of sales and gross margin — Cost of sales for 2023 increased $262, or 3%, when compared to 2022.

Cost of sales as a percent of sales was 100 basis points lower than in the previous year.

Incremental margins provided by increased sales volumes, material cost savings of $114, lower commodity costs of $51 and lower premium freight of $48 were partially offset by non-material inflationary cost impacts of $296, higher warranty expense of $14, higher program launch costs of $21 and operational inefficiencies primarily attributed to continued global supply chain disruptions and frequent customer order changes made with little to no advance

notification.

Commodity cost are primarily driven by certain grades of steel and aluminum.

Sales in 2024 were $271 lower than in 2023.

Weaker international currencies decreased sales by $49, principally due to a weaker Brazilian real, Chinese renminbi and Indian rupee, partially offset by a stronger euro.

The organic sales decrease of $217, or 2%, resulted from declining global construction/mining and agricultural equipment markets, which were partially offset by having a full year of production on a full-frame light-truck customer program that launched and was ramping up production in the first quarter of last year and the conversion of sales backlog.

Pricing actions and recoveries, including material commodity price and inflationary cost adjustments, increased sales by $94.

The North America organic sales increase of 5% was driven principally by having a full year of production on a full-frame light-truck customer program that launched and was ramping up production in the first quarter of last year, the conversion of sales backlog and net customer pricing and cost recovery actions.

Excluding currency effects, sales in Europe were down 12% compared with 2023.

With our significant Off-Highway presence in the region, weaker construction/mining and agricultural equipment markets were a major factor.

Organic sales in this operating segment were down 13% compared with 2023.

Excluding currency effects, sales in South America were up 12% compared with 2023, reflecting improved medium- and heavy-duty truck production volumes.

Excluding currency effects, sales in Asia Pacific decreased 8% compared to 2023, reflecting lower electric vehicle related product sales.

Cost of sales and gross margin — Cost of sales for 2024 decreased $247, or 3%, when compared to 2023.

Cost of sales as a percent of sales was flat with the previous year.

Incremental margins resulting from higher material cost savings of $132, operational efficiencies of $72, lower premium freight costs of $32, lower incentive compensation expense of $16, lower commodity costs of $13, lower program launch costs of $9 and lower spending on electrification initiatives of $5 were offset by unfavorable product mix, non-material inflation of $165 and higher warranty expense of $5.

Commodity costs are primarily driven by certain grades of steel and aluminum.

Non-material inflation includes higher labor, energy and transportation rates.

Gross margin of $900 for 2023 increased $137 from 2022.

Gross margin as a percent of sales was 8.5% in 2023, 100 basis points higher than in 2022.

The improvement in gross margin as a percent of sales was driven principally by the cost of sales factors referenced above.

Gross margin of $876 for 2024 decreased $24 from 2023.

Gross margin as a percent of sales was 8.5% in both 2024 and 2023.

The gross margin as a percent of sales was driven principally by the cost of sales factors referenced above.

Material cost recovery mechanisms with our customers lag material cost changes by our suppliers by approximately 90 days.

With commodity costs abating slightly during 2023, gross margin was positively impacted by net material cost recoveries on both a dollar and percentage basis.

With commodity costs abating during 2024, gross margin was negatively impacted by net material cost recoveries on both a dollar and percentage basis.

The recovery of non-material inflation is not specifically provided for in our current contracts with customers resulting in prolonged negotiations and indeterminate recoveries.

Selling, general and administrative expenses (SG&A) — SG&A expenses in 2024 were $524 (5.1% of sales) as compared to $549 (5.2% of sales) in 2023.

SG&A expenses were $54 higher in 2023 primarily due to higher salaried employee wages and incentive compensation, increased software technology investments and travel expenses.

Amortization of intangibles — Amortization expense was $13 in 2023 and $14 in 2022.

Restructuring charges, net — Net restructuring charges were $25 in 2023 and ($1) in 2022.

SG&A expenses were $25 lower in 2024 due to lower incentive compensation and lower professional services and consulting costs, partially offset by increased information technology expenses.

Amortization of intangibles — Amortization expense was $13 in both 2024 and 2023.

See Note 2 of our consolidated financial statements in Item 8 for additional information.

Impairment of goodwill — During the third quarter of 2022, we recorded a $191 goodwill impairment charge.

Restructuring charges, net — Net restructuring charges were $76 in 2024 and $25 in 2023.

See Note 3 of our consolidated financial statements in Item 8 for additional information.

Loss on disposal group previously held for sale — In February 2024, we entered into a definitive agreement to sell our European hydraulics business to HPIH S.à r.l.

We classified the disposal group as held for sale, recognizing a $26 loss to date to adjust the carrying value of net assets to fair value less estimated costs to sell.

The transaction was not completed by the date set forth in the definitive agreement.

The assets of the European hydraulics business are no longer held for sale and have been reclassified as held and used at the lower of their adjusted carrying value or fair value at the date the held for sale criteria was no longer met.

Other income (expense), net — The following table shows the major components of other income (expense), net.

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Strategic transaction expenses

Loss on sale of property, plant and equipment

Other income (expense), net

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The foreign exchange loss in 2023 was primarily due to the Argentine government significantly devaluing the Argentine peso during the fourth quarter of 2023.

Strategic transaction expenses relate primarily to costs incurred in connection with acquisition and divestiture related activities, including costs to complete the transaction and post-closing integration costs.

Strategic transaction expenses in 2023 and 2022 were primarily attributable to investigating potential acquisitions and business ventures and other strategic initiatives.

Continued devaluation of the Argentine peso was the primary driver of the foreign exchange loss in 2024.

Strategic transaction expenses in 2024 and 2023 were primarily attributable to investigating potential acquisitions and business ventures, divestitures and other strategic initiatives.

Loss on extinguishment of debt — On June 9, 2023 we redeemed $200 of our April 2025 Notes.

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See Note 12 of our consolidated financial statements in Item 8 for additional information.

Interest income and interest expense — Interest income increased from $11 in 2022 to $17 in 2023, due to higher average cash balances and higher interest rates being paid on cash deposits.

Interest expense increased from $128 in 2022 to $154 in 2023, due to higher average debt levels and higher interest rates on outstanding borrowings.

Interest income and interest expense — Interest income was $15 in 2024 and $17 in 2023.

Interest expense increased from $154 in 2023 to $161 in 2024, due to higher average outstanding borrowings and higher average interest rates.

Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.9% in 2024 and 5.6% in 2023.

Income tax expense — Income tax expense was $139 in 2024 and $121 in 2023.

During 2024, we recorded tax expense of $22 for valuation allowances related to foreign jurisdictions and tax expense of $11 due to revisions in our assertions on unremitted earnings in foreign jurisdictions.

During 2023, we recorded tax expense of $19 for income tax reserves associated with prior tax years in foreign jurisdictions.

In addition, we recorded net benefit of $55 on the intercompany sale of intangible assets to the U.S.

During 2022, we recognized tax expense of $240 to record valuation allowance in the U.S., which includes $189 on U.S.

federal credits and attributes and $51 related to U.S.

state attributes.

In addition, we recorded a tax benefit of $32 for U.S.

tax credits generated.

During 2022, we recorded a pre-tax goodwill impairment charge of $191 with an associated income tax benefit of $2.

See Note 16 to our consolidated financial statements in Item 8 for additional information.

Equity in earnings of affiliates — Net earnings (loss) from equity investments was a loss of $9 in 2023 and earnings of $4 in 2022.

Equity in loss of Dongfeng Dana Axle Co., Ltd.

(DDAC) was $16 in 2023 and $1 in 2022.

The year-over-year decrease in DDAC's earnings was primarily due to valuation allowances being recorded against certain deferred tax assets.

Equity in earnings of affiliates — Net earnings (loss) from equity investments was earnings of $10 in 2024 and a loss of $9 in 2023.

Net earnings (loss) from Dongfeng Dana Axle Co., Ltd.

(DDAC) were earnings of $3 in 2024 and a loss of $16 in 2023.

DDAC’s 2023 results were negatively impacted by valuation allowances being recorded against certain deferred tax assets.

Segment Results of Operations (2024 versus 2023)

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Currency effects

Light Vehicle sales in 2023, exclusive of currency effects, were 1% lower than 2022 reflecting generally stronger global markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions being offset by a customer program ending in 2022 and labor strikes during the fourth quarter of 2023 by the UAW at the U.S.

operations of certain of our customers.

Year-over-year North America full-frame light-truck production decreased 2% while light-truck production in Europe, South America and Asia Pacific increased 16%, 7% and 13%, respectively.

Light Vehicle sales in 2024, exclusive of currency effects, were 5% higher than 2023, reflecting a full year of production on a full-frame light-truck customer program that launched and was ramping up production in the first quarter of 2023, the conversion of sale backlog and the benefit of net customer pricing and cost recovery actions, partially offset by mixed global markets.

Year-over-year North America full-frame light-truck production increased 1% while light-truck production in Europe decreased 2%.

Year-over-year South America and Asia Pacific light-truck production increased 7% and 1%, respectively.

Net customer pricing and cost recovery actions increased year-over-year sales by $90.

Light Vehicle segment EBITDA increased by $102 in 2024.

Lower sales volumes decreased year-over-year earnings by $16 (8% decremental margin).

The year-over-year performance-related earnings increase was driven by net customer pricing and cost recovery actions of $184, commodity cost decreases of $40, material costs savings of $35, lower premium freight costs of $21, lower warranty expense of $3 and operational efficiencies of $13.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $187, higher incentive compensation of $12, higher program launch costs of $6 and higher spending on electrification initiatives of $16.

Higher sales volumes provided a year-over-year earnings benefit of $16 (15% incremental margin).

The year-over-year performance-related earnings increase was driven by net customer pricing and cost recovery actions of $90, operational efficiencies of $62, higher material cost savings of $50, lower premium freight costs of $16, lower program launch costs of $10, lower incentive compensation expense of $8 and commodity cost decreases of $2.

Offsetting these performance-related earnings increases were inflationary cost increases of $134 and higher spending on electrification initiatives of $16.

Commercial Vehicle

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Currency effects

Commercial Vehicles sales in 2023, exclusive of currency effects, were 5% higher than 2022 reflecting improved North America and Europe markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions, partially offset by a weaker South America market.

Year-over-year North America Class 8 production was up 8% while Classes 5-7 was up 9%.

Year-over-year medium/heavy-truck production in Europe was up 17% while medium/heavy-truck production in South America was down 32%.

Commercial Vehicle sales in 2024, exclusive of currency effects, were 3% lower than 2023 reflecting mixed global markets being partially offset by the conversion of sales backlog and net customer pricing and cost recovery actions.

Year-over-year Class 8 production in North America was down 3% while Classes 5-7 were up 4%.

Year-over-year medium/heavy-truck production in Europe and Asia Pacific were down 23% and 5%, respectively, while medium/heavy-truck production in South America was up 41%.

Net customer pricing and cost recovery actions increased year-over-year sales by $8.

Commercial Vehicle segment EBITDA increased by $44 in 2023.

Higher sales volumes and improved product mix provided a year-over-year earnings increase of $18 (56% incremental margin).

The year-over-year performance-related earnings increase was driven by net customer pricing and cost recovery actions of $76, material cost savings of $33, lower spending on electrification initiatives of $17 and lower premium freight costs of $12.

Partially offsetting these performance-related earnings increases were operational inefficiencies of $60, inflationary cost increases of $22, higher program launch costs of $9, higher incentive compensation of $9, higher warranty costs of $8 and commodity cost increases of $1.

Commercial Vehicle segment EBITDA decreased $20 in 2024.

Lower sales volumes and unfavorable product mix decreased earnings by $53 (87% decremental margin).

The year-over-year performance-related earnings increase was driven by higher material cost savings of $27, lower spending on electrification initiatives of $24, lower premium freight costs of $9, net customer pricing and cost recovery actions of $8, lower incentive compensation expense of $8 and commodity cost decreases of $2.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $19, operational inefficiencies of $16, higher warranty expense of $6 and higher program launch costs of $1.

Volume and mix

Currency effects

Off-Highway sales in 2023, exclusive of currency effects, were 8% higher than 2022 reflecting strong global markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions.

Year-over-year global construction/mining equipment markets increased 5% while global agricultural equipment markets were relatively stable with production decreasing 2%.

Net customer pricing and cost recovery actions increased year-over-year sales by $95.

Off-Highway segment EBITDA increased by $61 in 2023.

Higher sales volumes provided a year-over-year earnings increase of $37 (28% incremental margin).

The year-over-year performance-related earnings increase was driven by net customer pricing and cost recovery actions of $95, material cost savings of $33, lower premium freight costs of $14 and commodity cost decreases of $14.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $82, operational inefficiencies of $31, higher warranty expenses of $9, higher incentive compensation of $9 and higher spending on electrification initiatives of $1.

Off-Highway sales in 2024, exclusive of currency and divestiture effects, were 13% lower than 2023 reflecting softening global markets and the impact of net customer pricing and cost recovery actions.

Year-over-year global construction/mining equipment and agricultural equipment markets are softening, especially in Europe.

Year-over-year construction/mining equipment and agricultural equipment production in Europe were down 12% and 24%, respectively.

Net customer pricing and cost recovery actions decreased year-over-year sales by $22.

Off-Highway segment EBITDA decreased $46 in 2024.

Lower sales volumes decreased year-over-year earnings by $110 (28% decremental margin).

The year-over-year performance-related earnings increase was driven by operational efficiencies of $41, higher material costs savings of $33, commodity cost decreases of $13, lower premium freight costs of $6, lower incentive compensation of $5 and lower warranty expense of $2.

Partially offsetting these performance-related earning increases were net customer pricing and cost recovery actions of $22, inflationary cost increases of $11 and higher program launch costs of $2.

Power Technologies

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Power Technologies primarily serves the light-vehicle market but also sells product to the medium/heavy-truck and off-highway markets.

Power Technologies sales in 2023, exclusive of currency effects, were 9% higher than 2022 reflecting improved North America and Europe markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions.

Year-over-year North America light-vehicle engine production was up 12% while Europe light-vehicle engine production was up 10%.

Power Technologies sales in 2024, exclusive of currency effects, were 4% higher than 2023, reflecting the conversion of sales backlog and the benefit of net customer pricing actions, partially offset by weaker global markets.

Year-over-year light vehicle engine production in North America and Europe were down 1% and 5%, respectively.

Net customer pricing and cost recovery actions increased year-over-year sales by $18.

Power Technologies segment EBITDA decreased by $5 in 2023.

Unfavorable product mix resulted in decremental margins on higher year-over-year sales volumes in 2023.

The year-over-year performance-related earnings increase was driven by net customer pricing and cost recovery actions of $54, material cost savings of $13 and lower premium freight costs of $1.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $34, higher program launch costs of $6, higher incentive compensation of $6, increased spending on electrification initiatives of $7, operational inefficiencies of $7 and commodity cost increases of $2.

Power Technologies segment EBITDA increased by $3 in 2024.

The EBITDA benefit of higher sales volumes was offset by unfavorable product mix in 2024.

The year-over-year performance-related earnings increase was driven by higher material cost savings of $22, net customer pricing and cost recovery actions of $18, lower incentive compensation expense of $5, lower program launch costs of $2, lower spending on electrification initiatives of $2 and lower premium freight costs of $1.

These performance-related earnings increases were partially offset by operational inefficiencies of $18, inflationary cost increases of $12, commodity cost increases of $4 and higher warranty expense of $1.

Non-GAAP Financial Measures

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Income tax expense

Earnings (loss) before income taxes

Earnings before income taxes

Depreciation and amortization

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Loss on extinguishment of debt

Supplier capacity charge

Distressed supplier costs

Impairment of goodwill

Loss on disposal group previously held for sale

Adjusted EBITDA

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While uncertainty surrounding the current economic environment could adversely impact our business, based on our current financial position, we believe it is unlikely that any such effects would preclude us from maintaining sufficient liquidity.

In November 2024, we announced we are exploring the divestiture of our Off-Highway business.

We expect that a portion of any cash proceeds received from a sale transaction would be used to repay or redeem a portion of our outstanding indebtedness.

Cash provided by changes in working capital

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Operating activities — Exclusive of working capital, other cash provided by operations was $423 in 2024 and $406 in 2023.

The year-over-year decrease is primarily attributable to the impact of higher year-over-year operating earnings being offset by lower year-over-year dividends received from equity-method investments, higher year-over-year cash paid for interest and income taxes and higher year-over-year cash payments made to distressed supplier.

Working capital provided cash of $70 and $199 in 2023 and 2022, respectively.

Cash of $12 was provided by receivables in 2023 while cash of $81 was used to finance receivables in 2022.

Cash of $42 and $99 was used to fund higher inventory levels during 2023 and 2022, respectively.

Increases in accounts payable and other net liabilities provided cash of $100 and $379 in 2023 and 2022, respectively.

The year-over-year increase is primarily attributable to the impact of higher year-over-year operating earnings and lower year-over-year cash payments made to a distressed supplier, partially offset by higher year-over-year cash paid for interest, income taxes and restructuring activities.

Working capital provided cash of $27 in 2024 and $70 in 2023.

Cash of $94 and $12 was provided by receivables in 2024 and 2023, respectively.

Cash of $55 was provided by lower inventory levels in 2024 while cash of $42 was used to fund higher inventory levels during 2023.

Decreases in accounts payable and other net liabilities used cash of $122 in 2024 while increases in accounts payable and other net liabilities provided cash of $100 in 2023.

Investing activities — Expenditures for property plant and equipment were $380 and $501 in 2024 and 2023.

The increase in capital spend during 2023 is in support of awarded next generation programs and new business.

During 2022, purchases of marketable securities were largely funded by proceeds from sales of marketable securities.

Financing activities — During 2023 and 2022, we had net repayments of $25 and net borrowings of $25 on our Revolving Facility.

Elevated capital spending in 2023 was driven by the high volume of new program launches in that year.

Financing activities — During 2023, we made net repayments of $25 on our Revolving Facility.

During 2023, we completed the issuance of €425 of our July 2031 Notes, paying financings costs of $7.

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We used cash of $58 in both 2024 and 2023 for dividend payments to common stockholders.

We used cash of $25 to repurchase common shares under our share repurchase program during 2022.

Distributions to noncontrolling interests totaled $20 in 2024 and $10 in 2023.

Hydro-Québec made cash contributions to Dana TM4 of $18 in 2024 and $22 in 2023.

During 2024, we received $11 from Hydro-Québec, which represents deferred purchase consideration associated with their acquisition of a 45% ownership interest in SME S.p.A.

Off-Balance Sheet Arrangements

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See Note 16 of our consolidated financial statements in Item 8 for additional discussion.

Continge ncies

Contingencies

For a summary of litigation and other contingencies, see Note 14 of our consolidated financial statements in Item 8.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis