7 February 2024
Adient plc’s revenue stagnated in the first quarter, though its CEO said business performance is improving and margins will, too.
The company, which has its North American base in Plymouth, about 27 miles West of Detroit, had sales of $3.66 billion, down marginally from the year prior, and adjusted EBITDA of $216 million, up 2 percent year over year.
Adjusted earnings came to 31 cents per share for the quarter, falling below investor expectations. Adient stock value closed down 7.67 percent Wednesday at $32.88 per share after the company reported quarterly earnings.
Executives pointed to unfavorable volumes and mix as the main reason for falling short. The United Auto Workers strike against the Detroit 3 automakers in the fall was a major factor, causing an overall $125 million sales loss and $25 million earnings hit.
While operations have stabilized in the Americas, the company sees more opportunity in China — a key focus for the supplier. Adient is shifting more of its business in that market to Chinese OEMs, which move quicker and provide more opportunity for content than the traditional automakers, said Jerome Dorlack, who took the reins as CEO at the beginning of the year.
“These trends represent an opportunity for Adient but also increase a level of complexity that we will have to manage,” Dorlack said on a call with investment analysts.
The supplier also sees opportunity to take on more work from automakers as seating becomes more complex, with elements such as thermal comfort and Advance Driver Assistance Systems coming into play. That also makes the just-in-time assembly trickier.
“This is especially relevant as customers look to offset increased labor costs at their assembly plants,” Dorlack said.
Like other suppliers, Adient is aiming to drive down its own labor costs and streamline assembly with modular designs. The CEO said this is inspiring the company to look at revamping its business strategy.
“Not just the standard blocking and tackling, but really redesigning the way we conduct some of our core business,” he said. “Taking large chunks of labor sloth and relocating them and displacing them to lower-cost countries or eliminating them all together so that we can really start to kind of leapfrog and get out of the day-to-day trench warfare and actually take big chunks out.”
Competitor Lear Corp. is taking a similar approach as it relates to modularity and driving down labor costs with automation and outsourcing to cheaper parts of the world.
Dorlack said the company is well protected from electric vehicle production volatility because it is servicing those contracts through its existing footprint.
“We’ve been I think very good stewards of capital when it comes to leveraging existing brick and mortar from an EV versus ICE deployment and really looking at long-distance JIT, particularly in the Americas,” he said. “We haven’t installed new brick and mortar.”
CFO Mark Oswald said Adient expects margin expansion throughout the year.
“It’s all about volumes and the stability of those volumes,” he said.