What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-10-31 compared with 2025-08-11 · 144 added, 138 removed, 314 unchanged (47% of the section changed)

40 unchanged sentences

We serve our global light vehicle and medium/heavy vehicle markets through two business units – Light Vehicle Systems (Light Vehicle) and Commercial Vehicle Systems (Commercial Vehicle).

At June 30, 2025, excluding the Off-Highway business which is presented as a discontinued operation, we employed approximately 28,000 people and operated in 26 countries.

External sales by operating segment for the periods ended June 30, 2025 and 2024 are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

At September 30, 2025, excluding the Off-Highway business which is presented as a discontinued operation, we employed approximately 28,000 people and operated in 26 countries.

External sales by operating segment for the periods ended September 30, 2025 and 2024 are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Light Vehicle

13 unchanged sentences

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.

The outlook for 2025 reflects global light-truck near-term production being relatively stable across all regions with demand risk 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.

4 unchanged sentences

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.

The 2025 outlook for South America reflects a moderate decrease in production 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.

Foreign currency — With 44% of our first half of 2025 sales coming from outside the U.S., international currency movements can have a significant effect on our sales and results of operations.

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

Foreign currency — With 43% of our sales for the first nine months of 2025 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 31% of our year-to-date 2025 non-U.S.

sales, while Brazil, India, Thailand and China accounted for 14%, 8%, 8% and 7%, respectively.

Although sales in South Africa are less than 6% 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 half of 2025, decreasing sales by $24, with the effects of a weaker Brazilian real, Indian rupee, Mexican peso and Canadian dollar being partially offset by a stronger Thai baht and euro.

dollar during the first nine months of 2025, decreasing sales by $3, with the effects of a weaker Brazilian real, Indian rupee, Mexican peso and Canadian dollar being partially offset by a stronger euro, Thai baht and South Africa rand.

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 half of 2025 of approximately $110 are 3% of our consolidated sales and our net asset exposure related to Argentina was approximately $52, including $21 of net fixed assets, at June 30, 2025.

Our sales in Argentina for the first nine months of 2025 of approximately $169 are 3% of our consolidated sales and our net asset exposure related to Argentina was approximately $58, including $20 of net fixed assets, at September 30, 2025.

During the second quarter of 2018, we determined that Argentina's economy met the GAAP definition of a highly inflationary economy.

11 unchanged sentences

Material cost changes will customarily have some impact on our financial results as customer pricing adjustments typically lag commodity price changes.

Lower year-over-year commodity prices increased earnings during the first six months of 2025 by $7.

Material cost recovery pricing actions decreased earnings in the first six months of 2025 by $12.

Higher year-over-year commodity prices decreased earnings during the first nine months of 2025 by $3.

Material cost recovery pricing actions increased earnings in the first nine months of 2025 by $3.

Sales, Earnings and Cash Flow Outlook

Adjusted EBITDA

Net cash provided by operating activities

Adjusted free cash flow

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

Summary Consolidated Results of Operations (Second Quarter, 2025 versus 2024)

Three Months Ended June 30,

Summary Consolidated Results of Operations (Third Quarter, 2025 versus 2024)

Three Months Ended September 30,

% of Net Sales

10 unchanged sentences

Interest expense

Loss from continuing operations before income taxes

Income tax expense

Income (loss) from continuing operations before income taxes

Income tax benefit

Equity in earnings of affiliates

Net loss from continuing operations

Net income (loss) from continuing operations

Net income from discontinued operations

Noncontrolling interests net income from continuing operations

Redeemable noncontrolling interests net loss from continuing operations

Net income attributable to the parent company

1 unchanged sentence

Three Months Ended

September 30,

Amount of Change Due To

4 unchanged sentences

South America

Sales in the second quarter of 2025 were $112 lower than 2024.

Stronger international currencies increased sales by $11, principally due to a stronger euro and Thai baht, partially offset by a weaker Brazilian real.

The organic sales decrease of $122, or 6%, primarily resulted from lower full-frame light-truck production in North America and lower medium/heavy-truck production volumes in North America and Europe, partially offset by the conversion of sales backlog.

Pricing actions and recoveries, including material commodity price and tariff and inflationary costs adjustments, increased sales by $55.

The North America organic sales decrease of 8% was driven principally by lower full-frame light-truck and medium- and heavy-truck production volumes, partially offset by the conversion of sales backlog and net customer pricing and tariff and cost recovery actions.

Second quarter 2025 full-frame light-truck production was down 4%, Class 8 production was down 28% and Classes 5-7 was down 31% compared to 2024.

Excluding currency effects, sales in Europe were down 4% compared with 2024, reflecting lower electric-vehicle product orders.

Excluding currency effects, sales in South America were flat compared to 2024, reflecting flat medium/heavy-duty production volumes.

Excluding currency effects, sales in Asia Pacific decreased 4% compared to 2024, reflecting lower electric vehicle related product orders, partially offset by modestly improving medium/heavy-truck production.

Cost of sales and gross margin — Cost of sales for the second quarter of 2025 decreased $133 when compared to 2024.

Sales in the third quarter of 2025 were $20 higher than 2024.

Stronger international currencies increased sales by $21, principally due to a stronger euro, Thai baht and Brazilian real, partially offset by a weaker India rupee.

The organic sales decrease of $1 primarily resulted from lower medium/heavy-truck production volumes in North America and South America and lower electric-vehicle product orders in Europe and Asia Pacific, partially offset by higher full-frame light-truck production volumes in North America and the conversion of sales backlog.

Pricing actions and recoveries, including material commodity and tariff and inflationary cost adjustments, increased sales by $65.

The North America organic sales increase of 6% was driven principally by higher full-frame light-truck production volumes, the conversion of sales backlog and net customer pricing and tariff and cost recovery actions, partially offset by lower medium- and heavy-truck production volumes.

Third quarter 2025 full-frame light-truck production was up 6%, while Class 8 and Classes 5-7 production were down 28% and 23%, respectively.

Excluding currency effects, sales in Europe were down 6% compared to 2024, reflecting lower electric-vehicle product orders.

Excluding currency effects, sales in South America were down 7% compared to 2024, reflecting lower medium/heavy-truck production.

Excluding currency effects, sales in Asia Pacific decreased 15% reflecting lower electric vehicle-related product orders.

Cost of sales and gross margin — Cost of sales for the third quarter of 2025 decreased $24 when compared to 2024.

Cost of sales as a percent of sales was 230 basis points lower than in the previous year.

Incremental margins from cost reduction initiatives of $52, higher material cost savings of $31, operational efficiencies of $23, lower premium freight costs of $9, lower commodity costs of $8, lower warranty expense of $6 and lower program launch costs of $1 were partially offset by unfavorable product mix, tariff-related impacts of $46, non-material inflation of $39, higher incentive compensation expense of $4 and higher spending on electrification initiatives of $3.

Incremental margins from cost reduction initiatives of $66, higher material cost savings of $25, operational efficiencies of $10, lower premium freight costs of $6 and lower warranty expense of $3 were partially offset by unfavorable product mix, tariff-related impacts of $50, non-material inflation of $32, commodity cost increases of $7 and higher incentive compensation expense of $2.

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 $138 for the second quarter of 2025 increased $21 from 2024.

Gross margin as a percent of sales was 7.1% in the second quarter of 2025, 140 basis points higher than in 2024.

Gross margin of $166 for the third quarter of 2025 increased $44 from 2024.

Gross margin as a percent of sales was 8.7% in the third quarter of 2025, 230 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 decreasing during the second quarter of 2025, gross margin was positively 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 second quarter of 2025 were $99 (5.1% of sales) as compared to $108 (5.3% of sales) in the second quarter of 2024.

SG&A expenses were $9 lower in the second 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 $2 in both the second quarter of 2025 and the second quarter of 2024.

Selling, general and administrative expenses (SG&A) — SG&A expenses in the third quarter of 2025 were $87 (4.5% of sales) as compared to $106 (5.6% of sales) in the third quarter of 2024.

SG&A expenses were $19 lower in the third 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 $2 in both the third quarter of 2025 and the third quarter of 2024.

See Note 4 of our consolidated financial statements in Item 1 of Part I for additional information.

Restructuring charges, net — Net restructuring charges were $11 in both the second quarter of 2025 and the second quarter of 2024.

Restructuring charges, net — Net restructuring charges were $4 in the third quarter of 2025 and $20 in the third quarter of 2024.

See Note 5 of our consolidated financial statements in Item 1 of Part I for additional information.

6 unchanged sentences

Three Months Ended

September 30,

Non-service cost components of pension and OPEB costs

2 unchanged sentences

Strategic transaction expenses

Loss on sale of property, plant and equipment

Loss on divestiture of ownership interests

Gain on sale of property, plant and equipment

Other income (expense), net

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.

On June 6, 2025, we sold our ownership interest in Switch Mobility Limited, recognizing an $8 pre-tax loss on the transaction.

During the third quarter of 2024, we received a transaction break fee related to the failed sale of our European hydraulics business to HPIH S.à.r.l.

See Note 17 of our consolidated financial statements in Item 1 of Part I for additional information.

Interest income and interest expense — Interest income was $3 in the second quarter of 2025 and $1 in the second quarter of 2024.

Interest expense increased from $40 in the second quarter of 2024 to $44 in the second quarter of 2025, reflecting higher average outstanding borrowings in 2025.

Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.8% in both the second quarter of 2025 and the second quarter of 2024.

Income tax expense — We reported income tax expense of $10 and $12 for the second quarter of 2025 and 2024, respectively.

Our effective tax rates were (43)% and (23)% for the second quarter of 2025 and 2024, respectively.

During the second quarter of 2025, we recorded tax expense of $6 resulting from the sale of Dana's ownership interest in an equity method investment.

During the second quarter of 2024, we recorded tax expense of $11 due to revisions in our assertions on unremitted earnings in foreign jurisdictions.

Interest income and interest expense — Interest income was $3 in the third quarter of 2025 and $5 in the third quarter of 2024.

Interest expense increased from $38 in the third quarter of 2024 to $47 in the third quarter of 2025, reflecting higher average outstanding borrowings partially offset by lower average interest rates.

Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.4% in the third quarter of 2025 and 5.7% in the third quarter of 2024.

Income tax benefit — We reported income tax benefit of $2 and $18 for the third quarter of 2025 and 2024, respectively.

Our effective tax rates were (22)% and 44% for the third quarter of 2025 and 2024, respectively.

During the third quarter of 2025, we recorded tax benefit of $27 resulting from the release of valuation allowance on certain U.S.

federal attributes and $6 of tax expense due to revisions in our assertions on unremitted earnings in foreign jurisdictions.

During the third quarter of 2024, we recorded tax expense of $11 due to revisions in our assertions on unremitted earnings in foreign jurisdictions.

Our effective income tax rates vary from the U.S.

2 unchanged sentences

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 $23 in the second quarter of 2025 and $3 in the second quarter of 2024.

Equity in earnings of affiliates — Net earnings from equity investments was $2 in both the third quarter of 2025 and the third quarter of 2024.

Net earnings from Dongfeng Dana Axle Co., Ltd.

(DDAC) were $4 in the second quarter of 2025 and $1 in the second quarter of 2024.

On April 25, 2025, we sold our ownership interest in Axles India Limited, recognizing a $19 pre-tax gain on the transaction.

(DDAC) were $1 in the third quarter of 2025 and de minimis in the third quarter of 2024.

See Note 20 of our consolidated financial statements in Item 1 of Part I for additional information.

Net income from discontinued operations — Net income from discontinued operations in the second quarter of 2025 was $34 lower than the second quarter of 2024.

The year-over-year second quarter decrease was primarily due to lower sales resulting from weaker global construction/mining equipment and agricultural equipment markets, especially in Europe, and Off-Highway business divesture related costs incurred during the second quarter of 2025.

Year-over-year second quarter construction/mining equipment and agricultural equipment production in Europe were down 10% and 5%, respectively.

During the second quarter of 2025, $14 of Off-Highway business divesture transaction related costs were attributed to discontinued operations.

Net income from discontinued operations — Net income from discontinued operations in the third quarter of 2025 was $42 higher than the third quarter of 2024.

The year-over-year increase was primarily due to higher sales resulting from improving global construction/mining equipment and agricultural equipment markets, especially in Europe, and lower year-over-year income tax expense, partially offset by Off-Highway business divesture related costs incurred during the third quarter of 2025.

During the third quarter of 2025, $20 of Off-Highway business divesture transaction related costs were attributed to discontinued operations.

See Note 2 of our consolidated financial statements in Item 1 of Part I for additional information.

Summary Consolidated Results of Operations (Year-to-Date, 2025 versus 2024)

Six Months Ended June 30,

Nine Months Ended September 30,

% of Net Sales

11 unchanged sentences

Loss from continuing operations before income taxes

Income tax expense

Income tax benefit

Equity in earnings of affiliates

Net loss income from continuing operations

Net loss from continuing operations

Net income from discontinued operations

3 unchanged sentences

Sales — The following table shows changes in our sales by geographic region.

Six Months Ended

Nine Months Ended

September 30,

Amount of Change Due To

5 unchanged sentences

South America

Sales in the first six months of 2025 were $346 lower than 2024.

Weaker international currencies decreased sales by $24, principally due to a weaker Brazilian real, Indian rupee, Mexican peso and Canadian dollar, partially offset by a stronger Thai baht and euro.

The organic sales decrease of $321, or 8%, primarily resulted from lower full-frame light-truck production volumes in North America and lower medium/heavy-truck production volumes in North America and Europe, partially offset by the conversion of sales backlog.

Sales in the first nine months of 2025 were $327 lower than 2024.

Weaker international currencies decreased sales by $3, principally due to a weaker Brazilian real, Indian rupee, Mexican peso and Canadian dollar, partially offset by a stronger euro, Thai baht and South Africa rand.

The organic sales decrease of $323, or 5%, primarily resulted from lower full-frame light-truck production volumes in North America and lower medium/heavy-truck production volumes in North America, South America and Europe, partially offset by the conversion of sales backlog.

Pricing actions and recoveries, including material commodity price and tariff and inflationary costs adjustments, increased sales by $142.

The North America organic sales decrease of 6% was driven principally by lower full-frame light-truck and medium- and heavy-truck production volumes, partially offset by the conversion of sales backlog and net customer pricing and tariff and cost recovery actions.

First six months 2025 full-frame light-truck production was down 6%, Class 8 production was down 22% and Classes 5-7 was down 25% compared to 2024.

First nine months 2025 full-frame light-truck production was down 2%, Class 8 production was down 21% and Classes 5-7 was down 25% compared to 2024.

Excluding currency effects, sales in Europe were down 5% compared with 2024, reflecting lower electric-vehicle product orders.

Excluding currency effects, sales in South America were up 1% compared to 2024, reflecting flat medium/heavy-duty production volumes.

Excluding currency effects, sales in Asia Pacific were flat compared to 2024, reflecting modestly improving medium/heavy-truck production partially offset by lower electric-vehicle related product orders.

Cost of sales and gross margin — Cost of sales for the first six months of 2025 decreased $373 when compared to 2024.

Cost of sales as a percent of sales was 130 basis points lower than in the pervious year.

Incremental margins from cost reduction initiatives of $90, higher material cost savings of $59, operational efficiencies of $37, lower premium freight costs of $10, lower commodity costs of $7 and lower warranty expense of $3 were partially offset by unfavorable product mix, tariff-related impacts of $52, non-material inflation of $72, higher spending on electrification initiatives of $4 and higher incentive compensation expense of $1.

Excluding currency effects, sales in South America were down 2% compared to 2024, reflecting lower medium/heavy-duty production volumes.

Excluding currency effects, sales in Asia Pacific were down 6% compared to 2024, reflecting lower electric-vehicle related production orders, partially offset by modestly improving medium/heavy-truck production volumes.

Cost of sales and gross margin — Cost of sales for the nine months of 2025 decreased $398 when compared to 2024.

Cost of sales as a percent of sales was 160 basis points lower than in the previous year.

Incremental margins from cost reduction initiatives of $156, higher material cost savings of $68, operational efficiencies of $31, lower premium freight costs of $16 and lower warranty expense of $5 were partially offset by unfavorable product mix, tariff-related impacts of $97, non-material inflation of $89, higher spending on electrification initiatives of $4, commodity cost increases of $3 and higher incentive compensation expense of $3.

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 $256 for first six months 2025 increased $27 from 2024.

Gross margin as a percent of sales was 6.9% in the first six months of 2025, 130 basis points higher than in 2024.

Gross margin of $422 for first nine months of 2025 increased $71 from 2024.

Gross margin as a percent of sales was 7.5% in the first nine months of 2025, 160 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.

Despite commodity costs decreasing during the first six months 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 six months of 2025 were $204 (5.5% of sales) as compared to $222 (5.5% of sales) in the first six months of 2024.

SG&A expenses were $18 lower in the first six months 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 $4 in both the first six months of 2025 and the first six months of 2024.

Selling, general and administrative expenses (SG&A) — SG&A expenses in the first nine months of 2025 were $291 (5.2% of sales) as compared to $328 (5.5% of sales) in the first nine months of 2024.

SG&A expenses were $37 lower in the first nine months 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 $6 in both the first nine months of 2025 and the first nine months of 2024.

See Note 4 of our consolidated financial statements in Item 1 of Part I for additional information.

Restructuring charges, net — Net restructuring charges were $13 in the first six months of 2025 and $16 in the first six months in 2024.

Restructuring charges, net — Net restructuring charges were $17 in the first nine months of 2025 and $36 in the first nine months of 2024.

See Note 5 of our consolidated financial statements in Item 1 of Part I for additional information.

5 unchanged sentences

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

Six Months Ended

Nine Months Ended

September 30,

Non-service cost components of pension and OPEB costs

2 unchanged sentences

Strategic transaction expenses

Gain (loss) on sale of property, plant and equipment

Loss on divestiture of ownership interests

1 unchanged sentence

During the third quarter of 2024, we received a transaction break fee related to the failed sale of our European hydraulics business to HPIH S.à.r.l.

On June 6, 2025, we sold our ownership interest in Switch Mobility Limited, recognizing an $8 pre-tax loss on the transaction.

See Note 17 of our consolidated financial statements in Item 1 of Part I for additional information.

Interest income and interest expense — Interest income was $5 in the first six months of 2025 and $4 in the first six months of 2024.

Interest expense increased from $79 in the first six months of 2024 to $83 in the first six months of 2025, reflecting higher average outstanding borrowings in 2025 being partially offset by lower average interest rates.

Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.6% in the first six months of 2025 and 5.8% in the first six months of 2024.

Income tax expense — We reported income tax expense of $0 and $5 for the first six months of 2025 and 2024, respectively.

Our effective tax rates were 0% and (4)% for the first six months of 2025 and 2024, respectively.

During the first six months 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, $9 of tax expense for income tax reserves associated with prior tax years in foreign jurisdictions and expense of $6 resulting from the sale of Dana's ownership interest in an equity method investment.

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

Interest income and interest expense — Interest income was $8 in the first nine months of 2025 and $9 in the first nine months of 2024.

Interest expense increased from $117 in the first nine months of 2024 to $130 in the first nine months of 2025, reflecting higher average outstanding borrowings in 2025 being partially offset by lower average interest rates.

Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.4% in the first nine months of 2025 and 5.7% in the first nine months of 2024.

Income tax benefit — We reported income tax benefit of $2 and $13 for the first nine months of 2025 and 2024, respectively.

Our effective tax rates were 4% and 8% for the first nine months of 2025 and 2024, respectively.

During the first nine months of 2025, we recorded a tax benefit of $27 to release valuation allowance on certain U.S.

federal attributes, $19 of tax benefit due to a basis difference in a foreign subsidiary as a result of a change in tax status, $9 of tax expense for income tax reserves associated with prior tax years in foreign jurisdictions, $6 of tax expense due to revisions in our assertions on unremitted earnings in foreign jurisdictions and expense of $6 resulting from the sale of Dana's ownership interest in an equity method investment.

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

Our effective income tax rates vary from the U.S.

2 unchanged sentences

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 $25 in the first six months of 2025 and $5 in the first six months of 2024.

Equity in earnings of affiliates — Net earnings from equity investments was $27 in the first nine months of 2025 and $7 in the first nine months of 2024.

Net earnings from Dongfeng Dana Axle Co., Ltd.

(DDAC) were $4 in the first six months of 2025 and $1 in the first six months of 2024.

(DDAC) were $5 in the first nine months of 2025 and $1 in the first nine months of 2024.

On April 25, 2025, we sold our ownership interest in Axles India Limited, recognizing a $19 pre-tax gain on the transaction.

See Note 20 of our consolidated financial statements in Item 1 of Part I for additional information.

Net income from discontinued operations — Net income from discontinued operations in the first half of 2025 was $52 lower than the first half of 2024.

The year-over-year first half decrease was primarily due to lower sales resulting from weaker global construction/mining equipment and agricultural equipment markets, especially in Europe, and Off-Highway business divesture related costs incurred during the second quarter of 2025.

Year-over-year second quarter construction/mining equipment and agricultural equipment production in Europe were down 10% and 5%, respectively.

During the first half of 2025, $34 of Off-Highway business divesture transaction related costs were attributed to discontinued operations.

Net income from discontinued operations — Net income from discontinued operations for the first nine months of 2025 was $10 lower than the first nine months of 2024.

The year-over-year decrease was primarily due to lower sales resulting from weaker global construction/mining equipment and agricultural equipment markets, especially in Europe, and Off-Highway business divesture related costs incurred during 2025, partially offset by lower year-over-year income tax expense.

Year-over-year construction/mining equipment and agricultural equipment production in Europe were down 8% and 5%, respectively.

During the first nine months of 2025, $54 of Off-Highway business divesture transaction related costs were attributed to discontinued operations.

See Note 2 of our consolidated financial statements in Item 1 of Part I for additional information.

Segment Results of Operations (2025 versus 2024)

6 unchanged sentences

Currency effects

Light Vehicle sales in the second quarter of 2025, exclusive of divestiture and currency effects, were 5% lower than 2024 reflecting lower production volumes in North America and lower electric-vehicle product orders in Europe and Asia Pacific partially offset by the benefit of net customer pricing and cost and tariff recovery actions and the conversion of sales backlog.

Year-over-year North America full-frame light-truck production decreased 4% in this year’s second quarter while light-truck production in Asia Pacific increased 6%.

Light-truck production in Europe was flat compared with last year’s second quarter.

Light Vehicles sales in the first half of 2025, exclusive of divestiture and currency effects, were 8% lower than 2024 reflecting lower production volumes in North America and lower electric-vehicle product orders in Europe and Asia Pacific partially offset by the benefit of net customer pricing and cost and tariff recovery actions and the conversion of sales backlog.

Year-over-year North America full-frame light-truck production decreased 6% in this year’s first half while light-truck production in Asia Pacific increased 8%.

Light-truck production in Europe was flat compared with last year’s first half.

Net customer pricing and cost and tariff recovery actions increased year-over-year sales by $41 and $55 in this year’s second quarter and first half, respectively.

Light Vehicle second-quarter and first-half 2025 segment EBITDA increased $22 and $12, respectively, from the comparable periods of 2024.

Lower sales volumes decreased year-over-year earnings by $31 (26% decremental margin) in the second quarter of 2025.

Lower sales volumes decreased year-over-year earnings by $67 (25% decremental margin) in the first half of 2025.

The year-over-year performance-related earnings increase in the second quarter of 2025 was driven by net customer pricing and cost and tariff recovery actions of $41, cost reduction initiatives of $22, higher material cost savings of $16, lower premium freight costs of $8, commodity cost decreases of $6 and operational efficiencies, inclusive of lower corporate allocations resulting from cost reduction initiatives, of $17.

Partially offsetting these performance-related earnings increases were higher tariff-related costs of $32, inflationary cost increases of $24, higher incentive compensation expense of $1 and higher warranty expense of $1.

The year-over-year performance-related earnings increase in the first half of 2025 was driven by net customer pricing and cost and tariff recovery actions of $55, cost reduction initiatives of $39, higher material cost savings of $28, lower premium freight costs of $6, commodity cost decreases of $6, lower incentive compensation expense of $2 and operational efficiencies, inclusive of lower corporate allocations resulting from cost reduction initiatives, of $25.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $44, higher tariff-related costs of $36, higher warranty expense of $2 and higher program launch costs of $1.

Light Vehicle sales in the third quarter of 2025, exclusive of currency effects, were 5% higher than 2024 reflecting higher production volumes in North America, the benefit of net customer pricing and cost and tariff recovery actions and the conversion of sales backlog, partially offset by lower electric-vehicle product orders in Europe and Asia Pacific.

Year-over-year North America full-frame light-truck production increased 6% and light-truck production in Asia Pacific increased 5%.

Light-truck production in Europe was flat compared with last year’s third quarter.

Light Vehicle sales in the first nine months of 2025, exclusive of divestiture and currency effects, were 4% lower than 2024 reflecting lower production volumes in North America and lower electric-vehicle product orders in Europe and Asia Pacific partially offset by the benefit of net customer pricing and cost and tariff recovery actions and the conversion of sales backlog.

Year-over-year North America full-frame light-truck production decreased 2% in this year’s first nine months while light-truck production in Asia Pacific and Europe increased 8% and 2%, respectively.

Net customer pricing and cost and tariff recovery actions increased year-over-year sales by $54 and $109 in this year’s third quarter and first nine months, respectively.

Light Vehicle third quarter and first nine months 2025 segment EBITDA increased $44 and $56, respectively, from the comparable periods of 2024.

The EBITDA benefit of higher sales volumes was offset by unfavorable product mix in the third quarter of 2025.

Lower sales volumes decreased year-over-year earnings by $86 (32% decremental margin) in the first nine months of 2025.

The year-over-year performance-related earnings increase in the third quarter of 2025 was driven by net customer pricing and cost and tariff recovery actions of $54, cost reduction initiatives of $35, higher material cost savings of $18, lower premium freight costs of $3 and operational efficiencies, inclusive of lower corporate allocations resulting from cost reduction initiatives, of $26.

Partially offsetting these performance-related earnings increases were higher tariff-related costs of $41, inflationary cost increases of $25, commodity cost increases of $5, higher incentive compensation expense of $1 and higher warranty expense of $1.

The year-over-year performance-related earnings increase in the first nine months of 2025 was driven by net customer pricing and cost and tariff recovery actions of $109, cost reduction initiatives of $74, higher material cost savings of $46, lower premium freight costs of $9, commodity cost decreases of $1, lower incentive compensation expense of $1 and operational efficiencies, inclusive of lower corporate allocations resulting from cost reduction initiatives, of $51.

Partially offsetting these performance-related earnings increases were higher tariff-related costs of $77, inflationary cost increases of $69, higher warranty expense of $3 and higher program launch costs of $1.

Commercial Vehicle

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Currency effects

Commercial Vehicle sales in the second quarter of 2025, exclusive of currency effects, were 7% lower than 2024 reflecting generally weaker global markets partially offset by the conversion of sales backlog and net customer pricing and cost and tariff recovery actions.

Year-over-year Class 8 production in North America was down 28% while Classes 5-7 was down 31% in this year’s second quarter.

Year-over-year medium/heavy-truck production in Europe and South America were down 2% and 1%, respectively, while medium/heavy-truck production in Asia Pacific was up 13%.

Commercial Vehicle sales in the first half of 2025, exclusive of currency effects, were 8% lower than 2024 reflecting generally weaker global markets partially offset by the conversion of sales backlog and net customer pricing and cost and tariff recovery actions.

Year-over-year Class 8 production in North America was down 22% while Classes 5-7 was down 25% in this year’s first half.

Year-over-year medium/heavy truck production in Europe was down 9% while medium/heavy truck production in South America and Asia Pacific were up 3% and 9%, respectively.

Net customer pricing and cost and tariff recovery actions increased year-over-year sales by $16 and $22 in this year’s second quarter and first half, respectively.

Commercial Vehicle second-quarter and first-half 2025 segment EBITDA increased $8 and $16, respectively, from the comparable periods of 2024.

Lower sales volumes decreased year-over-year earnings by $20 (32% decremental margin) in the second quarter of 2025.

Lower sales volumes decreased year-over-year earnings by $42 (33% decremental margin) in the first half of 2025.

The year-over-year performance-related earnings increase in the second quarter of 2025 was driven by net customer pricing and cost and tariff recovery actions of $16, cost reduction initiatives of $10, higher material cost savings of $7, lower warranty expense of $4, lower premium freights costs of $2, lower program launch costs of $1 and operational efficiencies, inclusive of lower corporate allocations resulting from cost reduction initiatives, of $10.

Partially offsetting these performance-related earnings increases were higher tariff-related costs of $9, inflationary costs increases of $8, higher spending on electrification initiatives of $3 and higher incentives compensation expense of $2.

The year-over-year performance-related earnings increase in the first half of 2025 was driven by net customer pricing and cost and tariff recovery actions of $22, cost reduction initiatives of $21, higher material costs savings of $15, lower warranty expense of $4, lower premium freight costs of $4, lower program launch costs of $1 and operational efficiencies, inclusive of lower corporate allocations resulting from cost reduction initiatives, of $27.

Commercial Vehicle sales in the third quarter of 2025, exclusive of currency effects, were 10% lower than 2024 reflecting generally weaker global markets partially offset by the conversion of sales backlog and net customer pricing and cost and tariff recovery actions.

Year-over-year Class 8 production in North America was down 28% while Classes 5-7 was down 23% in this year’s third quarter.

Year-over-year medium/heavy-truck production in South America was down 16% while production in Europe was up 9% in this year’s third quarter.

Commercial Vehicle sales in the first nine months 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 and tariff recovery actions.

Year-over-year Class 8 production in North America was down 21% while Classes 5-7 was down 25% in this year’s first nine months.

Year-over-year medium/heavy truck production in Europe and South America were down 1% and 4%, respectively.

Net customer pricing and cost and tariff recovery actions increased year-over-year sales by $11 and $33 in this year’s third quarter and first nine months, respectively.

Commercial Vehicle third quarter and first nine months 2025 segment EBITDA increased $6 and $22, respectively, from the comparable periods of 2025.

Lower sales volumes decreased year-over-year earnings by $16 (22% decremental margin) in the third quarter of 2025.

Lower sales volumes decreased year-over-year earnings by $58 (29% decremental margin) in the first nine months of 2025.

The year-over-year performance-related earnings increase in the third quarter of 2025 was driven by cost reduction initiatives of $17, net customer pricing and cost and tariff recovery actions of $11, higher material cost savings of $7, lower warranty expense of $4 and lower premium freight costs of $3.

Partially offsetting these performance-related earnings increases were higher tariff-related costs of $9, inflationary cost increases of $8, commodity cost increases of $2 and operational inefficiencies of $3, inclusive of lower corporate allocations resulting from cost reduction initiatives.

The year-over-year performance-related earnings increase in the first nine months of 2025 was driven by cost reduction initiatives of $38, net customer pricing and cost and tariff recovery actions of $33, higher material costs savings of $22, lower warranty expense of $8, lower premium freight costs of $7, lower program launch costs of $1 and operational efficiencies, inclusive of lower corporate allocations resulting from cost reduction initiatives, of $24.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $24, higher tariff-related costs of $20, higher spending on electrification initiatives of $4, commodity cost increases of $4 and higher incentive compensation expense of $1.

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Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

The following table provides a reconciliation of net loss from continuing operations to adjusted EBITDA.

The following table provides a reconciliation of net income (loss) from continuing operations to adjusted EBITDA.

Three Months Ended

Six Months Ended

Net loss from continuing operations

Nine Months Ended

September 30,

Net income (loss) from continuing operations

Equity in earnings of affiliates

Income tax expense

Loss from continuing operations before income taxes

Income tax benefit

Income (loss) from continuing operations before income taxes

Depreciation and amortization

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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 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 plus cash paid for Off-Highway business divestiture related activities.

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.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net cash provided by (used in) operating activities

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Proceeds from sale of property, plant and equipment - Discontinued operations

Cash paid for Off-Highway business divestiture related activities

Adjusted free cash flow

The following table provides a reconciliation of cash and cash equivalents to liquidity, a non-GAAP measure, at June 30, 2025:

The following table provides a reconciliation of cash and cash equivalents to liquidity, a non-GAAP measure, at September 30, 2025:

Cash and cash equivalents

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Total liquidity

We had availability of $615 at June 30, 2025 under our Revolving Facility after deducting $525 of outstanding borrowings and $10 of outstanding letters of credit.

The components of our June 30, 2025 consolidated cash balance were as follows:

We had availability of $765 at September 30, 2025 under our Revolving Facility after deducting $375 of outstanding borrowings and $10 of outstanding letters of credit.

The components of our September 30, 2025 consolidated cash balance were as follows:

Cash and cash equivalents

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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 June 30, 2025, we were in compliance with the covenants of our financing agreements.

At September 30, 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.

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The following table summarizes our consolidated statement of cash flows:

Six Months Ended

Net cash provied by (used in) operating activities

Nine Months Ended

September 30,

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net cash used in financing activities

Net decrease in cash, cash equivalents and restricted cash

Operating activities — Exclusive of working capital, other cash provided by continuing operations was $153 in 2025 and $175 in 2024.

The year-over-year increase is primarily attributable to higher operating earnings in 2025.

Continuing operations working capital used cash of $212 and $219 in 2025 and 2024.

Cash of $219 and $112 was used to finance receivables in 2025 and 2024.

Lower inventory levels provided cash of $48 in 2025 while cash of $45 was used to fund higher inventory levels in 2024.

Decrease in accounts payable and other net liabilities used cash of $116 in 2025 while increases in accounts payable and other net liabilities provided cash of $28 in 2024.

Cash of $18 and $71 was used to fund higher inventory levels in 2025 and 2024.

Increases in accounts payable and other net liabilities provided cash of $25 in 2025 while decreases in accounts payable and other net liabilities used cash of $36 in 2024.

Operating activities of discontinued operations generated cash of $165 and $192 in 2025 and 2024.

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Financing activities — During 2025, we had net borrowings on our Revolving Facility of $375.

During 2025, we drew $250 on our Term A Facility.

During 2025, we redeemed the remaining $200 of our April 2025 Notes.

During 2024, we paid the $25 note payable due to the former owners of SME S.p.A.

We used cash of $29 for dividend payments to common stockholders during both 2025 and 2024.

We used cash of $42 and $43 for dividend payments to common stockholders during 2025 and 2024, respectively.

Distributions to noncontrolling interests totaled $14 in 2025 and $17 in 2024.

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Off-Balance Sheet Arrangements

There have been no material changes at June 30, 2025 in our off-balance sheet arrangements from those reported or estimated in the disclosures in Item 7 of our 2024 Form 10-K.

There have been no material changes at September 30, 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

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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 six months ended June 30, 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 six months of 2025.

There were no changes to our critical accounting estimates in the nine months ended September 30, 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 nine months of 2025.

Quantitative and Qualitative Disclosures About Market Risk

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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-Q

Item 2. Management’s Discussion and Analysis