DANA Inc 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions) Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the financial statements and accompanying notes in this report. Forward-Looking Information Statements in this report (or otherwise made by us or on our behalf) that are not entirely historical constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can often be identified by words such as “anticipates,” “expects,” “believes,” “intends,” “plans,” “predicts,” “seeks,” “estimates,” “projects,” “outlook,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing” and similar expressions, variations or negatives of these words. These statements represent the present expectations of Dana Incorporated and its consolidated subsidiaries (Dana) based on our current information and assumptions. Forward-looking statements are inherently subject to risks and uncertainties. Our plans, actions and actual results could differ materially from our present expectations due to a number of factors, including those discussed below and elsewhere in this report and in our other filings with the Securities and Exchange Commission (SEC). All forward-looking statements speak only as of the date made and we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances that may arise after the date of this report. Management Overview Dana, with history dating back to 1904, is headquartered in Maumee, Ohio. We are a world leader in providing power-conveyance and energy-management solutions for vehicles and machinery. The company's portfolio improves the efficiency, performance, and sustainability of light vehicles, commercial vehicles, and off-highway equipment. Our technologies include drive systems (axles, driveshafts, transmissions, and wheel and track drives); motion systems (winches, slew drives, and hub drives); electrodynamic technologies (motors, inverters, software and control systems, battery-management systems, and fuel cell plates); sealing solutions (gaskets, seals, cam covers, and oil pan modules); thermal-management technologies (transmission and engine oil cooling, battery and electronics cooling, charge air cooling, and thermal-acoustical protective shielding); and digital solutions (active and passive system controls and descriptive and predictive analytics). We serve our global light vehicle, medium/heavy vehicle and off-highway markets through three business units – Light Vehicle Systems (Light Vehicle), Commercial Vehicle Systems (Commercial Vehicle) and Off-Highway Drive and Motion Systems (Off-Highway). We have a diverse customer base and geographic footprint which minimizes our exposure to individual market and segment declines. At March 31, 2025, we employed approximately 39,300 people and operated in 31 countries. External sales by operating segment for the periods ended March 31, 2025 and 2024 are as follows: Three Months Ended March 31, 2025 2024 % of % of Dollars Total Dollars Total Light Vehicle $ 1,180 50.2 % $ 1,324 48.4 % Commercial Vehicle 568 24.1 % 653 23.9 % Off-Highway 604 25.7 % 758 27.7 % Total $ 2,352 $ 2,735 See Note 18 to our consolidated financial statements in Item 1 of Part I for further financial information about our operating segments. Our internet address is www.dana.com. The inclusion of our website address in this report is an inactive textual reference only and is not intended to include or incorporate by reference the information on our website into this report. Operational and Strategic Initiatives 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. We are achieving improved profitability by actively improving our cost structure and gaining efficiencies across all of our operations and functions. 25 Table of Contents 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. 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 In addition to investing in our business, we plan to prioritize a balanced allocation of capital while maintaining a strong balance sheet. Shareholder return actions — When evaluating capital structure initiatives, we balance our growth opportunities with maintaining a strong balance sheet and returning capital to shareholders via dividends and share repurchases. Except for three quarters in 2020, when we temporarily suspended dividends to common shareholders in response to the global COVID pandemic, we have paid quarterly dividends to our common shareholders since the first quarter of 2012. We also utilize share repurchases to provide returns to our shareholders. Financing actions — Our current portfolio of unsecured senior notes is structured such that no more than $460 of senior notes comes due in any calendar year, with no maturities until the second quarter of 2025. Our $1,150 revolving credit facility matures on March 14, 2028. See Note 11 to our consolidated financial statements in Item 1 of Part I for additional information. Cost Reduction Initiatives During the fourth quarter of 2024, we announced further actions to support sustained long-term profitability and enhanced cash flow generation. This includes substantial reduction in selling, general and administrative costs and aligning engineering expenses to match current industry dynamics, including the ongoing delay in the adoption of electric vehicles. We expect to deliver annualized savings of $300 through 2026. Approximately $100 of the annualized savings is expected to come from headcount reduction actions, with approximately $75 of the headcount-related savings being realized through 2025. See Note 4 of our consolidated financial statements in Item 1 of Part I for additional information. Other Initiatives Aftermarket opportunities — We have a global group dedicated to identifying and developing aftermarket growth opportunities that leverage the capabilities within our existing businesses – targeting increased future aftermarket sales. Powered by recognized brands such as Dana®, Spicer®, Spicer Electrified™, Victor Reinz®, Glaser®, GWB®, Thompson®, Tru-Cool®, SVL®, and Transejes™, Dana delivers a broad range of aftermarket solutions – including genuine, all makes, and value lines – servicing passenger, commercial, and off-highway vehicles across the globe. Selective acquisitions — Although transformational opportunities will be considered when strategically and economically attractive, our acquisition focus is principally directed at “bolt-on” or adjacent acquisition opportunities that have a strategic fit with our existing core businesses, particularly opportunities that support our enterprise strategy and enhance the value proposition of our product offerings. 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. 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. 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 was 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 was integrated into our Light Vehicle segment while the aftermarket business was integrated into our Commercial Vehicle segment. 26 Table of Contents Trends in Our Markets We serve our customers in three core global end markets: light vehicle, primarily full frame trucks and SUVs; commercial vehicle, including medium-and heavy-duty trucks and busses; and off-highway, including construction, mining, and agriculture equipment. Each of our end-markets has unique cyclical dynamics and market drivers. These cycles are impacted by periods of investment where end-user vehicle fleets are refreshed or expanded in reaction to demand usage patterns, regulatory changes, or when the age of vehicles in service reach their useful life. Key market drivers include regional economic growth rates; cost and availability of end customer financing; industrial output; commodity production and pricing; and residential and nonresidential construction rates. Our multi-market coverage and broad customer base help provide stability across the cycles while mitigating secular variability. The current tariff environment has resulted in increased uncertainty in the markets we serve. 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 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 near-term production being relatively stable across all regions but demand risk later in the year due to tariff impacts. 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 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 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 relative stability compared to 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. Off-highway markets — Our off-highway business has a large presence outside of North America, with 65% of its 2024 sales coming from products manufactured in Europe; however, a large portion of these products are utilized in vehicle production outside the region. The construction equipment segment of the off-highway market is closely related to global economic growth and infrastructure investment. 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. 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. Like the underground mining segment, investment in agriculture equipment is primarily driven by prices for farm commodities. Farm commodity price decreases in 2024 spurred a 8% decrease in agriculture equipment production. 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 first quarter 2025 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 accounted for 46% of our year-to-date 2025 non-U.S. sales, while India, Brazil and China accounted for 11%, 9% and 8%, respectively. Although sales in South Africa are less than 5% of our non-U.S. sales, the rand has been volatile and significantly impacted sales from time to time. International currencies weakened against the U.S. dollar in the first quarter of 2025, decreasing sales by $53, with the effects of a weaker euro, Brazilian real and Indian rupee, being partially offset by a stronger Thai baht. Argentina has experienced significant inflationary pressures the past few years, contributing to significant devaluation of its currency among other economic challenges. Our Argentine operation supports our Light Vehicle operating segment. Our sales in Argentina for the first quarter of 2025 of approximately $49 are 2% of our consolidated sales and our net asset exposure related to Argentina was approximately $53, including $21 of net fixed assets, at March 31, 2025. During the second quarter of 2018, we determined that Argentina's economy met the GAAP definition of a highly inflationary economy. In assessing Argentina's economy as highly inflationary we considered its three-year cumulative inflation rate along with other factors. As a result, effective July 1, 2018, the U.S. dollar is the functional currency for our Argentine operations, rather than the Argentine peso. Beginning July 1, 2018, peso-denominated monetary assets and liabilities are remeasured into U.S. dollars using current Argentine peso exchange rates with resulting translation gains or losses included in results of operations. Nonmonetary assets and liabilities are remeasured into U.S. dollar using historic Argentine peso exchange rates. Commodity costs — The cost of our products may be significantly impacted by changes in raw material commodity prices, the most important to us being those of various grades of steel, aluminum, copper, brass and rare earth materials. The effects of changes in commodity prices are reflected directly in our purchases of commodities and indirectly through our purchases of products such as castings, forgings, bearings, batteries and component parts that include commodities. Most of our major customer agreements provide for the sharing of significant commodity price changes with those customers based on the movement in various published commodity indexes. Where such formal agreements are not present, we have historically been successful implementing price adjustments that largely compensate for the inflationary impact of material costs. Material cost changes will customarily have some impact on our financial results as customer pricing adjustments typically lag commodity price changes. Higher year-over-year commodity prices decreased earnings during the first quarter of 2025 by $1. Material cost recovery pricing actions decreased earnings in the first quarter of 2025 by $10. 27 Table of Contents Sales, Earnings and Cash Flow Outlook 2025 Outlook 2024 2023 Sales $9,525 - $10,025 $ 10,284 $ 10,555 Adjusted EBITDA $925 - $1,025 $ 885 $ 845 Net cash provided by operating activities $500 - $600 $ 450 $ 476 Purchases of property, plant and equipment ~3% of sales $ 380 $ 501 Adjusted free cash flow $175 - $275 $ 81 $ (23 ) Adjusted EBITDA and adjusted free cash flow are non-GAAP financial measures. See the Non-GAAP Financial Measures discussion below for definitions of our non-GAAP financial measures and reconciliations to the most directly comparable U.S. generally accepted accounting principles (GAAP) measures. We have not provided a reconciliation of our adjusted EBITDA outlook to the most comparable GAAP measure of net income. Providing net income guidance is potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items that are included in net income, including restructuring actions, asset impairments and certain income tax adjustments. 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. 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 $90. A 5% change on the Chinese renminbi, Indian rupee or Brazilian real rates would impact our annual sales in each of those countries by approximately $20. At our current sales outlook for 2025, we expect full year 2025 adjusted EBITDA to approximate $925 to $1,025. Adjusted EBITDA margin is 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. Our current guidance reflects tariff related cost impacts being largely recovered from our customers. 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 adjusted 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. 28 Table of Contents Summary Consolidated Results of Operations (First Quarter, 2025 versus 2024) Three Months Ended March 31, 2025 2024 Dollars % of Net Sales Dollars % of Net Sales Increase/ (Decrease) Net sales $ 2,352 $ 2,735 $ (383 ) Cost of sales 2,132 90.6 % 2,491 91.1 % (359 ) Gross margin 220 9.4 % 244 8.9 % (24 ) Selling, general and administrative expenses 132 5.6 % 139 5.1 % (7 ) Amortization of intangibles 3 3 — Restructuring charges, net 5 5 — Loss on disposal group previously held for sale (29 ) 29 Other income (expense), net (8 ) 2 (10 ) Earnings before interest and income taxes 72 70 2 Interest income 3 4 (1 ) Interest expense 39 39 — Earnings before income taxes 36 35 1 Income tax expense 8 37 (29 ) Equity in earnings of affiliates 2 2 — Net income 30 — 30 Less: Noncontrolling interests net income 5 5 — Less: Redeemable noncontrolling interests net loss (8 ) 8 Net income attributable to the parent company $ 25 $ 3 $ 22 Sales — The following table shows changes in our sales by geographic region. Three Months Ended March 31, Amount of Change Due To 2025 2024 Increase/ (Decrease) Currency Effects Organic Change North America $ 1,118 $ 1,327 $ (209 ) $ (5 ) $ (204 ) Europe 730 875 (145 ) (23 ) (122 ) South America 166 184 (18 ) (21 ) 3 Asia Pacific 338 349 (11 ) (4 ) (7 ) Total $ 2,352 $ 2,735 $ (383 ) $ (53 ) $ (330 ) Sales in the first quarter of 2025 were $383 lower than in 2024. Weaker international currencies decreased sales by $53, principally due to a weaker euro, Brazilian real and Indian rupee, partially offset by a stronger Thai baht. The organic sales decrease of $330, or 12%, primarily resulted from declining global construction/mining and agricultural equipment markets and lower light-truck and medium/heavy-truck production volumes in North America and Europe, partially offset by the conversion of sale backlog. Pricing actions and recoveries, including material commodity price and inflationary costs adjustments, increased sales by $17. The North America organic sales decrease of 15% was driven principally by lower full-frame light-truck and medium- and heavy-duty truck production volumes, partially offset by the conversion of sales backlog and net customer pricing and cost recovery actions. First quarter 2025 full-frame light-truck production was down 9%, Class 8 production was down 22% and Classes 5-7 was down 24% compared to 2024. Excluding currency effects, sales in Europe were down 14% compared with 2024. 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 18% compared with 2024. Excluding currency effects, sales in South America were up 2% compared to 2024, reflecting improved medium/heavy-duty truck production volumes. Excluding currency effects, sales in Asia Pacific decreased 2% compared to 2024, reflecting declining off-highway markets, partially offset by modestly improving light- and medium/heavy-truck production. 29 Table of Contents Cost of sales and gross margin — Cost of sales for the first quarter of 2025 decreased $359 when compared to 2024. Cost of sales as a percent of sales was 50 basis points lower than in the previous year. Incremental margins from cost reduction initiatives of $37, higher material cost savings of $28, operational efficiencies of $18, lower incentive compensation expense of $3 and lower premium freight costs of $1 were partially offset by unfavorable product mix, non-material inflation of $34, tariff-related impacts of $6, higher warranty expense of $3, higher spending on electrification initiatives of $1, higher commodity costs of $1 and higher program launch costs of $1. 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 $220 for the first quarter of 2025 decreased $24 from 2024. Gross margin as a percent of sales was 9.4% in the first quarter of 2025, 50 basis points higher than in 2024. The improvement in 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 remaining relatively flat during the first quarter of 2025, 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 the first quarter of 2025 were $132 (5.6% of sales) as compared to $139 (5.1% of sales) in the first quarter of 2024. SG&A expenses were $7 lower in the first quarter of 2025 primarily due to lower salary and employee benefit costs and lower travel and discretionary spending, resulting from global headcount and cost reduction initiatives that commenced during the fourth quarter of 2024. Amortization of intangibles — Amortization expense was $3 in both the first quarter of 2025 and the first quarter of 2024. See Note 3 of our consolidated financial statements in Item 1 of Part I for additional information. Restructuring charges, net — Net restructuring charges were $5 in both the first quarter of 2025 and the first quarter of 2024. See Note 4 of our consolidated financial statements in Item 1 of Part I 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 in the first quarter of 2024. The transaction was not completed by the date set forth in the definitive agreement. The disposal group is no longer held for sale. See Note 2 of our consolidated financial statements in Item 1 of Part I for additional information. Other income (expense), net — The following table shows the major components of other income (expense), net. Three Months Ended March 31, 2025 2024 Non-service cost components of pension and OPEB costs $ (2 ) $ (4 ) Government assistance 2 1 Foreign exchange gain (loss) (3 ) 1 Strategic transaction expenses (15 ) (2 ) Gain (loss) on sale of property, plant and equipment 1 (5 ) Other, net 9 11 Other income (expense), net $ (8 ) $ 2 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, and other strategic initiatives. Strategic transaction expenses during the three months ended March 31, 2025 were primarily attributable to investigating the potential sale of our Off-Highway business. Interest income and interest expense — Interest income was $3 in the first quarter of 2025 and $4 in the first quarter of 2024. Interest expense was $39 in both the first quarter of 2025 and the first quarter of 2024, reflecting higher average outstanding borrowings in 2025 being offset by lower average interest rates. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.5% in the first quarter of 2025 and 5.8% in the first quarter of 2024. Income tax expense — We reported income tax expense of $8 and $37 for the first quarter of 2025 and 2024, respectively. Our effective tax rates were 22% and 106% for the first quarter of 2025 and 2024, respectively. During the first quarter of 2025, we recorded a tax benefit of $19 due to a basis difference in a foreign subsidiary as a result of a change in tax status and $9 of tax expense for income tax reserves associated with prior tax years in foreign jurisdictions. During the first quarter of 2024, we recorded tax expense of $11 for valuation allowances related to foreign locations. Our effective income tax rates vary from the U.S. federal statutory rate of 21% due to establishment, release and adjustment of valuation allowances in several countries outside the U.S., different statutory tax rates outside the U.S. and withholding taxes related to repatriations of international earnings. The effective income tax rate may vary significantly due to fluctuations in the amounts and sources, both foreign and domestic, of pretax income and changes in the amounts of nondeductible expenses. Equity in earnings of affiliates — Net earnings from equity investments was $2 in both the first quarter of 2025 and the first quarter of 2024 . Net earnings from Dongfeng Dana Axle Co., Ltd. (DDAC) were de minimis in both the first quarter of 2025 and the first quarter of 2024. 30 Table of Contents Segment Results of Operations (2025 versus 2024) Light Vehicle Three Months Sales Segment EBITDA Segment EBITDA Margin 2024 $ 1,324 $ 78 5.9 % Volume and mix (151 ) (36 ) Performance 14 26 Currency effects (7 ) 2025 $ 1,180 $ 68 5.8 % Light Vehicle sales in the first quarter of 2025, exclusive of currency effects, were 10% lower than 2024 reflecting lower production volumes in North America and Europe partially offset by the benefit of net customer pricing and cost recovery actions and the conversion of sales backlog. Year-over-year North America full-frame light-truck production decreased 9% and year-over-year light-truck production in Europe decreased 5%. Net customer pricing and cost recovery actions increased year-over-year sales by $14. Light Vehicle segment EBITDA decreased by $10 compared to the prior year. Lower sales volumes decreased year-over-year earnings by $36 (24% decremental margin). The year-over-year performance-related earnings increase was driven by cost reduction initiatives of $17, net customer pricing and cost recovery actions of $14, higher material cost savings of $12, lower incentive compensation expense of $4 and operational efficiencies, inclusive of lower corporate allocations resulting from cost reduction initiatives, of $7. Partially offsetting these performance-related earnings increases were inflationary cost increases of $20, tariff-related impacts of $4, higher premium freight costs of $2, higher program launch costs of $1 and higher warranty expense of $1. Commercial Vehicle Three Months Sales Segment EBITDA Segment EBITDA Margin 2024 $ 653 $ 33 5.1 % Volume and mix (63 ) (19 ) Performance 6 32 Currency effects (28 ) (2 ) 2025 $ 568 $ 44 7.7 % Commercial Vehicle sales in the first quarter of 2025, exclusive of currency effects, were 9% lower than 2024 reflecting generally weaker global markets 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 22% while Classes 5-7 was down 24% in this year’s first quarter. Year-over-year medium/heavy-truck production in Europe was down 11% while year-over-year medium/heavy-truck production in South America and Asia Pacific were up 7% and 4%, respectively. Net customer pricing and cost recovery actions increased year-over-year sales by $6. Commercial Vehicle segment EBITDA increased by $11 compared to the prior year. Lower sales volumes decreased year-over-year earnings by $19 (30% decremental margin). The year-over-year performance-related earnings increase was driven by cost reduction initiatives of $11, higher material cost savings of $8, net customer pricing and cost recovery actions of $6, lower premium freight costs of $2, lower incentive compensation expense of $1 and operational efficiencies, inclusive of lower corporate allocations resulting from cost reduction initiatives, of $17. Partially offsetting these performance-related earnings increases were inflationary cost increases of $8, commodity cost increases of $2, tariff-related impacts of $2 and higher spending on electrification initiatives of $1. 31 Table of Contents Off-Highway Three Months Sales Segment EBITDA Segment EBITDA Margin 2024 $ 758 $ 115 15.2 % Volume and mix (133 ) (35 ) Performance (3 ) 1 Currency effects (18 ) (2 ) 2025 $ 604 $ 79 13.1 % Off-Highway sales in the first quarter of 2025, exclusive of currency effects, were 18% lower than 2024 reflecting weaker global markets and the impact of net customer pricing and cost recovery actions partially offset by the conversion of sales backlog. Year-over-year global construction/mining equipment and agricultural equipment markets continued to soften, especially in Europe. Year-over-year first quarter construction/mining equipment and agricultural equipment production in Europe were down 10% and 5%, respectively. Net customer pricing and cost recovery actions decreased year-over-year sales by $3. Off-Highway segment EBITDA decreased by $36 compared to the prior year. Lower sales volumes decreased year-over-year earnings by $35 (26% decremental margin). The year-over-year performance-related earnings increase was driven by higher material cost savings of $8, lower commodity costs of $1, lower incentive compensation expense of $1, lower premium freight cost of $1 and operational efficiencies, inclusive of lower corporate allocations resulting from cost reduction initiatives, of $3. Largely offsetting these performance-related earnings increases were inflationary cost increases of $8, net customer pricing and cost recovery actions of $3 and higher warranty expense of $2. 32 Table of Contents Non-GAAP Financial Measures Adjusted EBITDA We have defined adjusted EBITDA as net income (loss) before interest, income taxes, depreciation, amortization, equity grant expense, restructuring expense, non-service cost components of pension and other postretirement benefits (OPEB) costs and other adjustments not related to our core operations (gain/loss on debt extinguishment, pension settlements, divestitures, impairment, etc.). Adjusted EBITDA is a measure of our ability to maintain and continue to invest in our operations and provide shareholder returns. We use adjusted EBITDA in assessing the effectiveness of our business strategies, evaluating and pricing potential acquisitions and as a factor in making incentive compensation decisions. In addition to its use by management, we also believe adjusted EBITDA is a measure widely used by securities analysts, investors and others to evaluate financial performance of our company relative to other Tier 1 automotive suppliers. Adjusted EBITDA should not be considered a substitute for earnings (loss) before income taxes, net income (loss) or other results reported in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. The following table provides a reconciliation of net income to adjusted EBITDA. Three Months Ended March 31, 2025 2024 Net income $ 30 $ — Equity in earnings of affiliates 2 2 Income tax expense 8 37 Earnings before income taxes 36 35 Depreciation and amortization 101 106 Restructuring charges, net 5 5 Interest expense, net 36 35 Supplier capacity charge adjustment (19 ) Loss on disposal group previously held for sale 29 Other* 29 13 Adjusted EBITDA $ 188 $ 223 * Other includes stock compensation expense, non-service cost components of pension and OPEB costs, strategic transaction expenses and other items. See Note 18 to our consolidated financial statements in Item 1 of Part I for additional details. Adjusted Free Cash Flow We have defined adjusted free cash flow as cash provided by (used in) operating activities less purchases of property, plant and equipment plus proceeds from sale of property, plant and equipment. We believe adjusted free cash flow is useful to investors in evaluating the operational cash flow of the company inclusive of the spending required to maintain the operations. Adjusted free cash flow is not intended to represent nor be an alternative to the measure of net cash provided by operating activities reported in accordance with GAAP. Adjusted free cash flow may not be comparable to similarly titled measures reported by other companies. The following table reconciles net cash flows provided by operating activities to adjusted free cash flow. Three Months Ended March 31, 2025 2024 Net cash used in operating activities $ (37 ) $ (102 ) Purchases of property, plant and equipment (75 ) (70 ) Proceeds from sale of property, plant and equipment 11 4 Adjusted free cash flow $ (101 ) $ (168 ) 33 Table of Contents Liquidity The following table provides a reconciliation of cash and cash equivalents to liquidity, a non-GAAP measure, at March 31, 2025: Cash and cash equivalents $ 507 Additional cash availability from Revolving Facility 1,025 Total liquidity $ 1,532 We had availability of $1,025 at March 31, 2025 under our Revolving Facility after deducting $115 of outstanding borrowings and $10 of outstanding letters of credit. The components of our March 31, 2025 consolidated cash balance were as follows: U.S. Non-U.S. Total Cash and cash equivalents $ — $ 347 $ 347 Cash and cash equivalents held at less than wholly-owned subsidiaries 9 151 160 Consolidated cash balance $ 9 $ 498 $ 507 A portion of the non-U.S. cash and cash equivalents is utilized for working capital and other operating purposes. Several countries have local regulatory requirements that restrict the ability of our operations to repatriate this cash. Beyond these restrictions, there are practical limitations on repatriation of cash from certain subsidiaries because of the resulting tax withholdings and subsidiary by-law restrictions which could limit our ability to access cash and other assets. At March 31, 2025, we were in compliance with the covenants of our financing agreements. Under the Revolving Facility and our senior notes, we are required to comply with certain incurrence-based covenants customary for facilities of these types. The incurrence-based covenants in the Revolving Facility permit us to, among other things, (i) issue foreign subsidiary indebtedness, (ii) incur general secured indebtedness subject to a pro forma first lien net leverage ratio not to exceed 1.50:1.00 in the case of first lien debt and a pro forma secured net leverage ratio of 2.50:1.00 in the case of other secured debt and (iii) incur additional unsecured debt subject to a pro forma total net leverage ratio not to exceed 3.50:1.00, tested at the time of incurrence. We may also make dividend payments in respect of our common stock as well as certain investments and acquisitions subject to a pro forma total net leverage ratio of 2.75:1.00. In addition, the Revolving Facility is subject to a financial covenant requiring us to maintain a first lien net leverage ratio not to exceed 2.00:1.00. The indentures governing the senior notes include other incurrence-based covenants that may subject us to additional specified limitations. From time to time, depending upon market, pricing and other conditions, as well as our cash balances and liquidity, we may seek to acquire our senior notes or other indebtedness through open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as we may determine (or as may be provided for in the indentures governing the notes), for cash, securities or other consideration. In addition, we may enter into sale-leaseback transactions related to certain of our real estate holdings and factor receivables. There can be no assurance that we will pursue any such transactions in the future, as the pursuit of any alternative will depend upon numerous factors such as market conditions, our financial performance and the limitations applicable to such transactions under our financing and governance documents. The principal sources of liquidity available for our future cash requirements are expected to be (i) cash flows from operations, (ii) cash and cash equivalents on hand and (iii) borrowings from our Revolving Facility. We believe that our overall liquidity and operating cash flow will be sufficient to meet our anticipated cash requirements for capital expenditures, working capital, debt obligations and other commitments during the next twelve months. 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. 34 Table of Contents Cash Flow The following table summarizes our consolidated statement of cash flows: Three Months Ended March 31, 2025 2024 Cash used for changes in working capital $ (141 ) $ (251 ) Other cash provided by operations 104 149 Net cash used in operating activities (37 ) (102 ) Net cash used in investing activities (65 ) (63 ) Net cash provided by financing activities 95 1 Net decrease in cash, cash equivalents and restricted cash $ (7 ) $ (164 ) Operating activities — Exclusive of working capital, other cash provided by operations was $104 in 2025 and $149 in 2024. The year-over-year decrease is primarily attributable to lower operating earnings in 2025. Working capital used cash of $141 and $251 in 2025 and 2024. Cash of $181 and $169 was used to finance receivables in 2025 and 2024. Cash of $37 and $18 was used to fund higher inventory levels in 2025 and 2024. Increases in accounts payable and other net liabilities provided cash of $77 in 2025 while decreases in accounts payable and other net liabilities used cash of $64 in 2024. Investing activities — Expenditures for property, plant and equipment were $75 and $70 in 2025 and 2024. The increase in capital spending during 2025 is primarily due to the year-over-year calendarization of capital spending being higher in this year’s first quarter. Financing activities — During 2025 and 2024, we had net borrowings on our Revolving Facility of $115 and $15, respectively. During 2024, we paid the $25 note payable due to the former owners of SME S.p.A. We used cash of $15 for dividend payments to common stockholders during both 2025 and 2024. Distributions to noncontrolling interests totaled $1 in 2025 and $3 in 2024. Hydro-Québec made cash contributions to Dana TM4 of $9 in 2024. 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. from Dana. 35 Table of Contents Off-Balance Sheet Arrangements There have been no material changes at March 31, 2025 in our off-balance sheet arrangements from those reported or estimated in the disclosures in Item 7 of our 2024 Form 10-K. Contractual Obligations There have been no material changes in our contractual obligations from those disclosed in Item 7 of our 2024 From 10-K. Contingencies For a summary of litigation and other contingencies, see Note 13 to our consolidated financial statements in Item 1 of Part I. Based on information available to us at the present time, we do not believe that any liabilities beyond the amounts already accrued that may result from these contingencies will have a material adverse effect on our liquidity, financial condition or results of operations. Critical Accounting Estimates The preparation of our consolidated financial statements in accordance with GAAP requires us to use estimates and make judgments and assumptions about future events that affect the reported amounts of assets, liabilities, revenue and expenses and the related disclosures. See Item 7 in our 2024 Form 10-K for a description of our critical accounting estimates and Note 1 to our consolidated financial statements in Item 8 of our 2024 Form 10-K for our significant accounting policies. There were no changes to our critical accounting estimates in the three months ended March 31, 2025. See Note 1 to our consolidated financial statements in this Form 10-Q for a discussion of new accounting guidance adopted during the first three months of 2025. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to market risk exposures related to changes in currency exchange rates, interest rates or commodity costs from those discussed in Item 7A of our 2024 Form 10-K.