Dana Inc (DAN) 2009 Q4 法說會逐字稿

Good morning, welcome to Dana Holding Corporation fourth quarter and year-end 2009 webcast and conference call. My name is Regina and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and the Q&A session will be recorded for replay purposes. All lines have been placed on mute to prevent background noise. There will be a question-and-answer period after the speakers' remarks and we'll take questions from the telephone only. (Operator Instructions) At this time, I would like to begin the presentation by turning the call over to Dana Senior Director of Investor Relations, Lillian Etzkorn. Please go ahead Ms. Etzkorn.

Thank you, Regina. Good morning, ladies and gentlemen. Welcome to all of you who are joining us by phone or webcast. On behalf of the entire Dana management team, I would like to thank you for spending time with us this morning.

With me this morning are John Devine, Execute Chairman, Jim Sweetnam, President and Chief Executive Officer, Jim Yost, Chief Financial Officer, Jacqui Dedo, Senior Vice President Strategy & Business Development, Gary Convis, Special Advisor to our Chief Executive Officer, and Marty Bryant, President of Light Vehicle Products.

Before we begin, I would like to review a couple of items. Copy of this mornings earnings release and the slides that we will be using have been posted on Dana's Investor's website for your reference. Today's call is being recorded and the supporting materials are the property of Dana Holding Corporation. They may not be recorded, copied or re-broadcast without our written consent.

Finally, today's presentation includes some forward-looking statements about our expectations for Dana's future performance. Actual results could differ materially from those suggested by our comments here. Additional information about our factors that could effect our future results are summarized in our Safe Harbor Statement. These risk factors are detailed in our SEC filings, including our annual, quarterly and current reports with the SEC. With, that I would like to turn the presentation over to John Devine.

Thank you, Lillian good morning, everybody. Thank you for joining us again. Just a couple of points for me before I turn it over to Jim and Jim for the review today and Jacqui.

First point, 2009 was clearly a critical year for Dana in many respects. We feel good about the progress we made last year, but the message to our people internally and the message to you on the call today is no one at Dana's relaxing. We know we have to keep up our momentum. We know we have more to do. We know we're still participating in a difficult economic environment so the challenges are still there. But we're focused on 2010 and have been for some time. We're focused on the forward years.

Jim will talk about that at least briefly today. And my own confidence and the confidence of the team is very high. The Dana team will continue to deliver to our customers and to our investors.

Second point I would like to cover is that I have had a couple of questions about the management team. Just to clarify those. Obviously, after a lot of hard work, we're fortunate to attract Jim Sweetnam to the team last year as CEO. Jim is now running the Company. My roll has changed. I have gone back to an Executive Chairman and I've gone back and forth in those rolls over the last couple of years. But the point is I'm still very much engaged with Dana. I'm still part of the team. We're working together well, working well with Jim and the team. And I want to let you know I am still engaged here and will be. Although Jim, to be very clear s running the Company and is CEO now.

While on that topic, I want to be clear about Gary Convis. Gary's been a very important part of our team. Started with me shortly after we came in in 2008. Gary retired officially from Dana and the Board in December. Gary's title is now Senior Advisor but his role has not changed. I want to make sure that is clear to everyone. Gary is still deeply involved in the Company and the Company operations. We need his expertise and his wisdom and he's still very involved in Dana. So I wanted to clear those couple of points up before we started. And with that, let me turn it over to Jim Sweetnam.

Thank you, John. Good morning, everyone, and welcome to Dana's 2009 full-year earnings results call. Thank you for joining us. I am really very pleased to say that we have continued to improve our business performance as evidenced by the results that we just announced this morning. This, as John mentioned, has been a tremendously difficult year for the entire industry and like you, we're glad to have 2009 behind us. But we've very successfully managed through this period.

We have continued to make fundamental improvements to our business. First by completing our management team with the recent appointment of our President of Europe Operations, Mr. Aziz Aghili and the appointment of Ernesto Gonzalez Beltran, who is now our Senior Vice President of Global Operations worldwide. We continue to implement the Dana operating system under Gary Convis's leadership throughout our operations. And this is enabled us to deliver greater efficiencies, reduce costs, and improve our margins. We have also been able to dramatically resize our business, the lower volume requirements. We have reduced global head count by over 30% since 2007. And very importantly, we're now operating as one Dana having implemented a single operational and management system.

Right now, I will get to you turn your attention to slide six, where we will talk about the business highlights for 2009. Fundamentally, we at Dana delivered on the key objectives we had set ourselves for 2009 and which we have been public about.

In 2009, our adjusted EBITDA was $326 million on revenues of $5.2 billion. Dana delivered $520 million in operating improvements, which largely offset a 35% reduction in full-year sales. That is the equivalent of $2.8 billion in reduction and in a very, very challenging industry environment. We continue to sequentially improve the business. Our fourth quarter EBITDA was $115 million and that was $11 million higher than the third quarter. And our margins have also continued to improve.

In 2009, we focused on strengthening the balance sheet of the Company and we finished a year with a very strong liquidity position. We significantly reduced our debt. We issued $250 million in new equity for the Company and we focused tremendously on improving working capital. We reduced inventory by $300 million last year.

We continue to make good progress on right sizing our operations, on cost reductions and on pricing actions. And we continue to focus our profitable future growth and on our strong competitive position. The key to future growth from my prospective is new product development,. And I would like to highlight recent developments in the next few slides.

So, turning to slide seven, we would like to highlight there for you some innovative technology in our heavy vehicle business, in our commercial vehicle business of a new convertible Tandem Drive Axle. This new Spicer Tag Axle will improve fuel efficiency, reduce vehicle weight, which becomes very important in 2010 and beyond because of the emissions changes and the edition of weight the trucks have because of the additional weight on engines. And it lowers the OEM cost while enabling the fleet owners to easily convert from, you can see in the diagram, there a 6x2 arrangement into a 6x4 configuration. This allows the fleet to increase the resale value via a conversion kit, which would be attractive to fleet customers. The development of the convertible axle is an example of us applying innovative technology to respond to feedback from fleet customers and from our OEM partners.

You can now turn to slide eight. On our Sealing and thermal products business. I would like to highlight recent innovative productions that have been making news in the ceiling and thermal products area. First of all, our jointly developed all-new thermal plastic oil pan for the 2011 F Series Super Duty Truck that Ford received the Automotive Innovation Award from the Society of Plastic Engineers. This is a first-of-its-kind.

In addition, lower down on the chart, you will see that we developed industry-first battery-cooling technology for electric vehicles. The battery-cooling technology will extend the battery life in hybrid and electric vehicles and is featured on the 2010 Tesla Motors Roadster Sport. Our focus is to provide technologies that drive green value for our customers. If I can now have you turn your attention to slide nine, where we have some new product introductions that we have made.

First of all, we recently launched propshaft exports to Russia from China on a Nissan platform. We're supplying the products to Nissan for a global all-wheel drive crossover utility vehicle platform. The program consists of vehicles that are assembled in China, Japan, Russia, South Korea and Spain and is supported by Dana Manufacturing Operations in China, Spain, Thailand and here in the US. All I will emphasize, all with a common production process. The key element of our globalization strategy is to provide manufacturing and assembly support near to our customers' operations around the world. Lower down on the chart, you will see that we also announced that we are supplying prop shafts for the new Volkswagen pickup truck, the 2010 Amarok.. The pickup truck launched in South America and will eventually be sold in Europe and Australia and in South Africa.

If I can get you to turn your attention to slide 10 where we have made a significant investment in Asia-Pacific in an India Gear Plant and testing center. A couple of weeks ago, I had the pleasure of helping to break ground in India to lay the first stone for a new gear plant and testing facility in Chakan, India. It is close to Pune, which is scheduled to open late next year. Dana and our Spicer India Joint Venture Partner will jointly invest $35 million to $40 million for the new facility and technology capabilities at our existing joint venture operations in Chakan. This investment will occur over the next several years adding to our substantial presence in India where we already have 10 operations. We will manufacture the AdvanTEK series of axles at this facility and this is directly related to what we spoke to you about before. Our strategy to focus future growth on opportunities in emerging markets in Asia-Pacific.

If I can get you to turn your attention to slide 11. Our focus for 2010 and beyond. We will continue to make operational improvements and continue our restructuring efforts. Our focus will be on further optimization of our manufacturing footprint, on our supply chain and reduction in costs of our materials. We will continue to reduce complexity. We have a major initiative in this regard and in our entire value chain. We have now refocused our technical and marketing resources on reinvigorating our product portfolios across each of our business franchisees in order to create clearly differentiated products to help our customers compete in their respective marketplaces. We plan to pursue attractive business and growth opportunities primarily in Asia-Pacific but also pursue specific growth opportunities in other geographic areas. All this with a strong focus on improving margins while maintaining a strong balance sheet. I would now turn this over to Jim Yost to cover our financial results for 2009. Jim?

Thank you, Jim. Turning to slide 13, you can see there a summary of our fourth quarter and full-year financial results. As Jim mentioned, sales in the fourth quarter are almost $1.5 billion, and full-year, $5.2 billion. For the quarter, although the sales were $28 million lower than 2008, our adjusted EBITDA was significantly better than last year and also up from the third quarter as Jim noted earlier. For the full-year, our operating improvements largely offset the $2.9 billion decline in revenue with a full-year adjusted EBITDA, $326 million which we will cover shortly. The net loss of $236 million in the fourth quarter was largely a result of the $153 million charge we booked related to the sale of our structures business as we indicated last December. And that program is still on target to close later this month and that is at the beginning of March. Free cash flow was a positive $95 million in the fourth quarter and $109 million for the full-year, very strong performance and a dramatic improvement over last year

Turning to slide 14, you can see the adjusted EBITDA comparison of 2009 to 2008. As I mentioned the $2.9 billion decline was very substantial and would have resulted in a $528 million profit decline if we hadn't instituted very aggressive profit recovery actions which totaled $520 million essentially off- setting 100% of the volume decline. As we mentioned earlier, some of our pricing actions that totaled this year $216 million, about half due to material and lump sump adjustments and about half due to margin improvements to correct some of the unfavorable contracts which we mentioned previously. Cross reduction continued very strongly, including $200 million in conversion costs, $46 million in material cost reductions, $39 million in warranty savings and that is 50% reduction, and a total of $19 million in SG&A and other.

And I should just comment briefly on the SG&A. The fourth quarter, we did book about $13 million of one-time compensation and benefit changes, a special bonus that was awarded, that would have allowed us to show a slightly higher number. So, some of the savings are masked by the one-time charge. Overall, we met the targets with the exception of the EBITDA.

Slide 15 summarizes our adjusted EBITDA margins over the last eight quarters and this is a familiar slide to most of you. Dramatic improvement from the early part of 2008 and even more since the end of 2008. And really starting in the second quarter, the aggressive cost reductions actions we took in the other profit improvement actions generated significant improvement. In spite of our sales declines, we've been able to increase the adjusted EBITDA margins from 6, 7% in the early part of 2008 to the high 7%. And as an aside, if we were to pull out the $13 million one-time charge, our fourth quarter number would have been 8.5%. I think it's a credit to the capabilities of all of our people in Dana Worldwide and we thank them very much for their efforts to help achieve the results in a difficult environment.

On slide 16, I wanted to highlight some of the balance sheet actions we took last year. We took a number of actions to improve the balance sheet. Working capital is a key element of that where we reduced our inventory by about $300 million on a constant exchange basis. That reduced our day supplied from a bloated 90 days at the end of 2008 to 50 days. We still have more work to do and expect to see some significant improvements in that absolute level in 2010, in spite of higher volumes. We issued, as Jim mentioned, the $250 million of new equity and I think that helped put the Company back into the investment-grade category. We reduced our term loan by a total of $263 million, a combination of paying down the loans associated with the issuance of the equity as well as buying back some of our loans at a steep discount. Overall, we improved our net debt from a negative $418 million to just $56 million by the end of last year.

On slide 17, we summarized our free cash flow. As I mentioned, the strong story in the fourth quarter as well as the full-year. $95 million improvement in the fourth quarter driven by the increased EBITDA as well as continued working capital reductions. For the full-year, the $109 million was driven by the EBITDA and substantial improvement of $155 million in working capital. We did keep our capital spending down last year, which helped us significant reduction from 2008. We'll talk about what the numbers will be on a subsequent slide. Overall, an improvement in cash flow of almost $500 million year-to-year. Quite impressive.

On slide 18, you can see just a summary of our cash and debt position. We finished the year with $947 million at cash and slightly more than that in debt. And, again on the right-hand side, you can see the reduction from a net debt of $474 million at the end of 2008 down to $56 million at the end of the year. And I should just comment that we finished the year on our EBITDA covenant of 3.09 times. So, well within our 3.8 requirement.

On slide 19, we would like to emphasize again our liquidity is continuing to strengthen. Overall, we improve liquidity by $215 million since last year. The availability of our credit lines shown above $224 million reflect the underlying borrowing base, less letters of ccredit against the US facility. Just to remind everybody we have no cash draws on either of our facilities in the US or Europe. And the facilities were not constrained by our debt covenant at the end of the year.

Slide 20, recaps our 2009 results compared with the plan. As you can see with the one exception of EBITDA, which is shown here as red. We achieved 100% of our objectives. And I have to say given the volume decline, maybe we could shade that a little bit towards the green even in the event of a slightly missing it. I would like to turn to Jacqui for a market and sales update.

Thanks, Jim. Turning to slide 21, in the global market segments we serve, we continue to have cautious optimism in the light vehicle and medium truck markets where we expect to see slight growth. In off highway, we're seeing a flattening of the total market after a year of large decreases. We expect the revenue impact of this outlook will be about 10% above 2009.

Page 22 shows our customers split with the continued growing balance of automotive and non-automotive customers in our top 10. This is consistent with our ongoing growth, which is driving to balance our portfolio by market and geography.

On page 23, you will find our net growth target. As we begin a new year, it's important to note that we assume as part of our base business, that net new business previously awarded in 2009. Moving forward into 2010, we have two key targets that we are measuring. First, ensuring the continuation of our base business replacement with targeted awards of between $800 million and $900 million. This represents 100% wins of the anticipated replacement sourcing by our customers.

Second, incremental net new business awarded in 2010, for start of production in 2010 through 2014, is targeted at a cumulative range of $650 million to $700 million. This is based on winning the majority of the anticipated served market bids available to us in 2010 from our customers. We're also targeting the 60% to 65% of the new business awarded will be outside of North America, consistent with our global growth plans. We are on target to achieve these goals. Back to you, Jim.

Thanks, Jacqui. Turning to slide 24, you can see a summary of our 2010 financial targets. The plans showed there are unchanged from what we discussed with you in December. And we still believe that we're on target to achieve all of those objectives. As Jacqui mentioned, revenue seems to be trending towards the high end of the range we previously have given you. Our opportunities for further improvements obviously include the economic and market conditions which appear to be cautiously improving. We have got very aggressive cost reductions and resizing of our operations planned this year, $75 million to $100 million of favorable bottom line profits. And as I mentioned earlier, we're going to continue to work on working capital with our continued focus on inventory improvements.

As we mentioned in December, I will remind you that we do have a few head winds facing us. We will have some non-cash pension costs of about year-over-year $25 million to $30 million bottom line impact. We expect to spend about $100 million of cash restructuring this year. And also, we have also reinstated competitive comp and benefit programs that will cost us $40 million to $45 million on a year-to-year basis. So overall, we're still on track for the 2010 plan as well as setting the stage for the 2011 results where we target a positive net income and substantial improvements in our EBITDA margins. With that I will turn it back to Jim for some closing remarks.

Thank you, Jim. In summary, if you turn to slide 25, we have delivered on our 2009 objectives on what has been a very difficult environment. We have driven significant operational improvement. For 2010, we certainly intent to continue that trend. And we will also be increasing our efforts on new product development and future growth opportunities for Dana. I'd now like to turn the call over to our moderator to take questions.

At this time, we would like to begin the Q&A session. (Operator Instructions) Your first question is from the line of Pat Archambault with Goldman Sachs.

Hi, good morning.

Good morning, Pat.

I was hoping that we would dive a little bit into and how you have demand shaping up in class-8 and North America. Obviously orders have come in okay so far because of a pre-buy. But is there any indication that you're seeing any sort of incremental demand for some of the trucks that don't have like the 2009 engines?

No, right now, we agree with the pre-buy, but we're seeing a softer second quarter and a rebounding back half.

Okay, so, in the end, there is some demand for some of the non-pre-by trucks. You're seeing some evidence of that?

We're seeing some evidence of that, but I wouldn't be overwhelmed by it. The majority of the lift we'd see in the first quarter is due to the prebuy. And again we see a softening in the second and a strengthening in the third and fourth sequentially.

And how do you, I think your Europe guidance stayed the same. How would you characterize some of the activity you've seeing there so far?

I would say our Europe forecast is cautious but then again, we're not seeing Europe overall in any of the markets lifting. We're seeing better responsiveness on the region between North America, South America and Asia.

Okay. Thank you. Just going to your profit walk on slide 30, in terms of the $76 million, cost savings bucket, you have $33 million as material. Can you give us a breakdown? How much of that is ongoing cost lean initiatives with sort of ongoing efficiencies. And how much of that is raw materials. And may be you can remind us what you expect from raw materials on a go-forward basis just the way your contract are rolling out.

And this is Jim Yost. Conversion cost savings are a fundamental foundation savings which will flow through to income year. We have seen in second, third and fourth quarter improvements which is in line with that. We'll continue to work on that next year. But obviously, this benefit will flow through. The material is a combination of some cost reductions we have put in place as well as some slightly better commodity costs. As you know we account for our material on a FIFO basis. So, we still had some higher material costs in the fourth quarter of last year. So, some of that is a one-off item. So, the bulk of those costs are still flowing through into next year, but there is some unique one-time stuff in the fourth quarter.

Okay, great. Just a final question on the backlog,. It sounds like based on your revenue guidance that you took up the production improvement, or actually you brought it to the top end of the range from 5% to 10% and now it's up 10%. Your revenue guidance, I guess, is, on track but is, I guess that implies kind of stable content growth on a CPV basis. Is that the right way to think about that in terms of translating some of that back log color you that provided into actual CPV growth?

Let me try to characterize it this way for you. We have our base 2009 revenue. We added the net new business we discussed last year and above that, we're forecasting about 10% sequential, 2009, 2010 revenue. Does that help?

Yes, I guess I was just thinking though, in terms of, you have, it looks like your revenue guidance is still very much in line with your overall production or volume guidance, which would imply flattish content growth? And you do have, a book of new business, right, for 2010 to 2014 of, I guess, $650 million to $700 million. And so, I was trying to reconcile those two items. If you layer that new business on top of the volume, you would expect revenue growth to be bigger or higher than just the rate of production increase. I was just trying to reconcile those two items.

Right, the $650 million to $700 million is targeted wins this year. So, that would not yet be represented in our forecast. As we win that business, we'll let you know how we're proceeding. Those are the available wins to us this year we're targeting and we're right now green in the first two months against winning in that portfolio.

Okay, got you. Thank you, that is helpful.

The next question comes from the line of Joe Amatiro from Buckingham Research.

Hi, good morning.

Good morning, Joe.

If we could stick with this backlog for a moment. Could you possibly give us what amount of the backlog was represented by 2009 sales? I think there is a bit of concern that the backlog potentially could be going down. And then the second thing as it relates to backlog, could you remind us the typical cadence in the auto industry from over a four-year timeframe. What I'm referring to from 2013 to 2014, you probably don't have that much on the books yet but that is not unusual.

Okay. For our forecast, right now we're looking at our base 2009 achieved revenue. Then we have added the business we were rewarded last year we showed you was $875 million total. The year-over-year was something around $125 million to $150 million. I don't have that in front of me. You have that from previous presentations. And now we're looking at a market result, getting close to 10%, as we said. When we look at the cycles of growth and wins, first, we looked at available bids coming out from our customers in the various markets. And we targeted two things. First, to replace 100% of the base that we already have as those bids come up. And second, to win the majority bids of incremental growth, that comes up in the various markets. And that's the $650 million to $700 million number. And we request customer sourcing cycles in the automotive market, they getting tighter and they still averaging about a four- to five-year clip. In the off highway market, it's more like seven to nine years and the truck market, it's still out beyond that.

And is there a way to aggregate all of that and give us one net new incremental positive number on a run-rate basis?

I think we're not going to, we gave numbers last year and I think the cumulative number was $875 million. We obviously rolled that into our new base. So, as Jacqui said, our guidance of really close to 10% is what we're saying incorporates all the net business from last year that rolls into 2010. And what we're talking about here is additional net new business, which we expect to win that will add not a lot to 2010 but mostly to 2011. And beyond when you expect the wins to hit.

Okay. And I guess the next one, regarding SG&A, you cited the incremental cost of $40 million to $45 million to get more competitive with your compensation structure. Did some of that hit the fourth quarter?

No, none of that hit the fourth quarter. The only thing that hit the fourth quarter was $13 million comp accrual, which we indicated for a special bonus for all of our vast majority of our employees.

Okay. And maybe Jim Sweetnam can touch on the off road competitive landscape. I guess there is some of your competitors out there suggesting that that could be a new market for them? Could you just give us your thoughts on the bid activity there and has competition increased, particularly relating to pricing?

Sure, with respect to off highway, as you know a large chunk of our business is Euro centric or Euro centric based. We're working very hard on what we do with this business in both Asia-Pacific and Latin America. As Jacqui mentioned in her comments, the off highway market for the largest extent has been decreasing and now flattening with perhaps one exception. And that is in Latin America. The Ag business in Latin America has been fairly aggressive. We do have a long history in this business. We do have a substantial base. We intend to look and work aggressively on, I'll say, moving up the food chain, with respect to being able to supply a systems requirement. In fact, we do that with some of our customers today, where we supply not just one component but we'll supply on a platform, the axle, the drive shaft and the transmission which is a substantial portion of the drive train.

Thanks and one last one for Jim. I guess if we strip out this one time compensation bonus award in the fourth quarter, you probably would have done EBITDA of roughly $128 million? As it relates to the incremental contribution, would you say excluding that item that you were satisfied with the performance? And is that consistent with levels that we should expect going forward or?

I think we were relatively satisfied with the performance in the fourth quarter. A very good result with the convergent costs which we talked to, continuing seeing improvements in operations. And, quite honestly, happy that sales are beginning to rebound. Although as Jacqui said, we're still being cautious on the sales. I guess if I could reverse engineer your question and say that we have given guidance that will be $500 million in EBITDA for 2010. If you divide it by that, by 4 as the way I do my math, you come out to about $125 million. That is pretty close to the number you quoted. So I'll say on average, it will be hard to disagree with what you said. I just do want to caution you that that is not necessarily what we will see in every quarter. We don't intend to give quarterly guidance. So I won't commit to anything specifically for the next couple of quarters, but, obviously, on average, you would expect that to be the performance of 2010.

Okay. Great. Thank you for taking my questions. Take care.

Thanks.

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

Good morning, gentlemen, looking forward to seeing you tonight and tomorrow in New York. Let me take one more cut at the backlog. When you last reported the backlog, let's call that capital B backlog, it was $875 million for taking us through, I believe 2009 through 2012. So we obviously take that and roll that into revenue of the year. How do I reconcile that with the small B backlog target that you set for the year? One, is there any more incremental revenue we can expect in 2010 that might have been awarded in 2009. Are there any awards in 2010 that would actually hit the ground running in 2010. Or should we think about this goal of new business awards helping to contribute to whatever you announce the capital B three-year backlog again driving that up. If so, what would your capital B backlog be if you hit your green target for new business awards?

Thanks for the simple question. Quite honestly, the $875 million that we talked about last year is built into our base and it rolled in fairly evenly 2010 through 2013. The $650 million to $700 million should not be looked at as a small backlog. It's about what is available to us given the sourcing patterns of our customers right now, where they investing and where they are bringing up new quotes to open. If more quotes are available, we'll add them to the backlog opportunity and discuss them with you. But it's our view of our customer sourcing patterns in 2010 for future years. Some of that, to answer your question, will hit us in 2010 running. Not a majority. So, if you want to pattern it, you take the majority of it like 90%, a little over 90% plus percent and some nail it for 2011 out relatively flat. And then a small increment will see hit in 2010 if the customers' launch plans hold.

Right, back to the prior $875 million, including the $875 million, was there business that would start production in 2011? So, therefore, 2011 revenues would equal the base revenue plus what was in the 2009 and prior awarded business plus new business awards in 2010.

Oh, sure.

Or are we starting really fresh in 2011?

No, the $875 million, if you looked at our 2009 as a base add to it, the $875 million would have added through 2011, actually 2010 through 2013.

Okay.

Just like the $650 million to $700 million will. There is a little bit of shape but rough and tough, it's fairly even out. Did get that?

Is there any way to get a handle on if we were trying to replicate the 2009 through the $875 million but do it for 2010 through 2013. What that number would be? I think that is what those of us on the call are looking for, to get an apples-to-apples comparison.

Our expectation,ha is the $650 million to $700 million based on the customer sourcing plans and it's based on our view of the volume, so it might be a little bit conservative.

Okay. And the second question, the pricing negative in the fourth quarter. Was that typical seasonality? Was there something that developed going forward? Can can we expect to see price downs if any being concentrated in the fourth quarter?

That was just, Brian, an artifact of the fourth quarter. We did have some reduction due to give backs on material. As we said for 2010, we expected it to be pretty flat for the whole year. There may be some swings and rounds about on a given quarter. But over all, we expect to have pretty flat pricing.

Maybe if you have a commodity benefit, you might get some of that back fourth quarter. That's when the true-up takes place.

Yes, quite honestly, there will be some give back of some material cost pricing. Obviously, our cost have come down a little bit. There will be some give back on that as it phases in with the lagged contracts as we have talked about before. We still have other opportunities to improve our margins. So overall, we're expecting about a flat impact for the whole year. Now to the extent that commodity prices significantly increased since most of our contracts are written with some escalation clauses, as we also see pricing move up. But net-net, that wouldn't be anything to the bottom line.

Right, by the end of the year it washes out. Okay, thank you.

Our next question comes from the line of a Himanshu Patel with JPMorgan.

Hi. Good morning, guys.

Good morning, Himanshu.

A couple of small questions first. The $25 million to $30 million higher pension and $40 million to $45 million comp increase, is that captured in the $75 million to $100 million cost savings target for 2010?

No. That is a separate number. They're not included in the $75 million to $100 million.

Okay. And to clarify, Jim, the $40 million to $45 million is separate from the fourth quarter of $13 million, sounds like one was a one-time bonus coming in and the $40 million to $45 million was a re-instatement of competitive comp on an on going basis?

That is a correct analysis. Yes.

Okay. And any comments on the accounting treatment for a structured business? When will that move into disc ops?

It's being treated right now as an asset held for sale, if you look at the balance sheet. Once we close, I am assuming it will close for practical purposes on March 1st. There will be some operations that we can't finalize at least into the second quarter. But I would assume in the first quarter, once we close as part of our first quarter earnings call, we'll give you much better clarity on that. And it will move from asset held for sale to (inaudible).

Okay and then just going back to the revenue side. I understood the prior conversation on the backlog. What is the difference between the 10% anticipated product volume growth and the revenue guidance growth of 5% to 10%?

Let me see if we can make it a little bit clearer. When we gave you the plan in December, we said somewhere between 5% to 10% growth in industry and said our revenue is 5% to 10%, obviously, there is some pieces of that related to net new business and would be the difference between guidance on industry and our guidance on top-line revenue. It's not 5%, it's less than 5%. If you will, we gave a little bit of flex bit in the rounding. I think what we're seeing now is we expect the underlying industries to be a little bit stronger, closer to the top end of that 5% to 10% range and net new business is on top of that.

Overall, we expect revenue to be at 10%. We're still cautious on industries. We have seen some improvements. We have also seen some economic factors as well as some orders from some of our customers, which had been a little bit weaker.

Overall, we're still expecting it to be up towards the top end of 10% and when you add in the net new business at a little bit higher rate for overall revenue. We didn't change that slide where we had the 2010 plan. We just left the plan as it was. What we're saying is we're agreeing to that. And I think the end result of the conversation we have had is to say that our expectations will be at the top end of that range for a top-line revenue number.

Right, that was the disconnect I was trying to bridge. It sounds like you have updated your industry assumptions and now you're thinking the platforms you're on would lead to 10% production growth for Dana. But you're still saying 5% to 10% total revenue growth. You would think that with 10% growth in production plus a little bit of backlog flat pricing, you would be greater than 10% for total revenue growth for 2010. But you're guidance is only 5% to 10%. I know I'm kind of slicing percentages here. But should we view the 5% to 10% as conservative or are you making an implicit statement in there about mix or foreign exchange that could lead total revenues to be lower than the 10% number?

I proceeded to totally confuse the subject here. Let me see, I give it one more shot and see if I could make it clear. Slide number 24, where we said full-year plan, what I said was we haven't changed the plan. Our plan was to be up 5% to 10%. What Jacqui gave you was an updated outlook. So I would describe as our updated outlook as 10%. The plan originally was 5% to 10%. So, we're at 10% for industry and obviously a little more for net new business. So, just to make it clear, our guidance isn't 5% to 10% on top-line. It's 10% plus a little on top line. So, our revenue outlook, as we've shown there on slide number 24, is green. Why? Because we're beating what we set here for guidance.

Okay, understood. And lastly, any comments on just all the developments at Toyota and the associated recalls?

With respect to the Toyota recall issue, as I think you are aware we had filed with NHTSA, that we had a quality SU involved both Nissan, Ford and Toyota. We understand what the issue is. We have corralled and understand what percentage of our production was affected. We've communicated with all three parties. And I think if you were sitting in Toyota's shoes, they probably had no choice but to go public with that, to say that they would recall. But again, we would like to say that we continue to work with our customers and we certainly believe that there is no reports of accidents or warranty claims. We did detect the issue very early and we believe the vast majority of the draft shafts have actually not reached any consumers. But we continue to work with our customers and with NHTSA.

And your view on why Nissan and the other OEM's did not decide to take any action? Is it just maybe Toyota's being a lot more aggressive on this front now given that they're in the spotlight? Is that kind of your interpretation?

No, Himanshu, from that perspective that is a decision that's made by each vehicle OEM. It depends on the configuration of how the drive shafts installed in the vehicle. And it is not our call, it is their call.

Okay. Great. Thank you very much.

Thank you.

Our next question comes from the line of Derrick Wenger with Jefferies and Company.

Yes, I have three questions. What is the term loan balance now into the quarter, the year? And secondly, availability on the bank lines and letter of credits drawn? Lastly, what are you going to do with all of your excess cash?

I always say there is no such thing as excess cash, particularly in this industry and environment. Maybe I'll answer it by saying we're very happy with the cash we have. That's not to be too cute, but there are some cash needs we do have in 2010. There is a possibility that the Board, based on the Board's decision to re-enstate the preferred dividends. We did clear the hurdle at the end of the fourth quarter. So that is a potential use of some of the cash. We do have about a $77 million payment to the IRS to settle a tax issue that came from the 1990s. That will be a use of cash. And we're taking a look at a major investment in China, the commercial vehicle business, which is based on a relationship we formed in 2005. And that will have a requirement for a significant amount of cash. We'll be using and looking at specific cash needs along those lines so hopefully that answers your questions. In terms of what the absolute term loan is, it's the vast majority of the $1 billion we have outstanding. We have other small loans outstanding, but the vast majority of that is related to our term loan.

The availability on the bank lines and the letter of the credits, John?

As we showed on slide number 19, we have outstanding available credit on our two lines in US and Europe of $224 million.

And the letter of credits?

We have in total, total letters of credit, about $180 million outstanding.

Great, thank you very much.

Our next question comes from the line of Vlad Shteynberg with Realm Partnerships.

Hi, guys.

Vlad.

A few questions, first of all, how is Q1 tracking?

We're not at this time giving specific guidance on Q1.

Okay. And as far as $13 million one-time comp in Q4, is that something that is not getting repeated in 2010, 2011? Or is that depended on the performance of the Company in any particular year?

All of our incentive comp is based on the performance of the Company, based on what the Comp Committee put in place. Normally, you would expect to have a standard incentive comp program as well as for those who are not eligible for incentive comps and some type of ongoing merit increases. For our employees, we did not pay any, the vast majority did not get any increases in 2008 and 2009 given the conditions. So we decided that it would be appropriate to pay the bonus at the end of the year for all the contributions they made last year. I guess I would say that conceptually, that one $13 million accrual is not going to repeat. I would say on it, one-hand it's not going to repeat but essentially, the reason why we have highlighted the fact that we will have head winds of $40 million to $45 million of compensation is the essentially the same sort of thing, which is we would like to re-install a normal incentive comp program as well as return to paying merit incomes. And we have announced internally that it's our expectation we will do both of those as part of our normal course of business this year. So, although the $13 million was a one-off unique one-time item, essentially, you think about the $40 million to $45 million that is about the same concept and same amount of money, that we would expect to pay.

Right, I was asking if there was a possibility of another $13 million on top of that $40 million. And that sounds like it's a no.

That specifically, no.

Okay, and what is the cost of drive shafts issue to Dana?

It's not a material number. As Jim mentioned, we have the population identified. The failure rate on this is extremely low. And we're working with the customers to minimize the impact on them and to ensure that any potential defects are replaced, but it;s not a material number.

Okay. And the last issue I wanted to discuss, of course, is the backlog. Just, first of all, on page 21 when you say on the bottom, Dana impact production improvement about 10%. That is based on your specific platform mix?

That's correct.

Okay. And then, can you tell us what the net new business is for 2010, based on everything to date?

I think last year as we identified it, we're -- .

Yes, it was around -- .

$125 million to $150 million.

But that was based on the quoted production schedules, which I'm assuming for 2010 were quoted, anywhere from 2007 to 2009. So, when I think about that, do I have to make adjusts for the current market conditions and that number as a result would be much lower potentially, year over year. Or is that based on the forecasted product volumes?

The range we have given you takes into account that variance.

Okay, based on forecast then.

Right.

Okay, excellent. And lastly, when you talk about $650 million to $700 million incremental backlog target, what percentage wins of contract up for bids does that assume?

That is 85%. We're going to achieve, built the number around 85% for of the anticipated served market bids coming up.

Okay, okay, thank you very much.

There are no further questions at this time. I will turn the conference back over to management with closing remarks.

With that, I wanted to thank everyone for joining us this morning and we look forward to talking with you again in the future. Thank you.

This does conclude today's conference. You may now disconnect.