Craig Barber; Senior Director of Investor Relations, Strategic Planning and Corporate Communications; Dana Inc
R. Bruce McDonald; Chairman and Chief Executive Officer; Dana Inc
Good morning, and welcome to Dana Incorporated fourth quarter and full-year 2024 financial 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 Q&A session will be recorded for replay purposes. (Operator Instructions)
At this time, I would like to begin the presentation by turning the call over to Dana’s Senior Director of Investor Relations, Strategic Planning and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.
Good morning, everyone, and thank you for joining us today for Dana Incorporated’s 2024 Q4 and full-year earnings call. Today’s presentation includes forward-looking statements about our expectations for Dana’s future performance. Actual results could differ from what we’ve discussed today. For more details about the factors that could affect our future results, please refer to our safe harbor statement found in our public filings and our reports with the SEC. You’ll find this morning’s press release and presentation on our investor website.
And as a reminder, today’s call is being recorded and the supporting materials of the property of Dana Incorporated, they may not be recorded, copied or rebroadcast without a written consent. On this call this morning is Bruce McDonald, Dana Chairman and Chief Executive Officer; and Timothy Kraus, Senior Vice President and Chief Financial Officer.
Now, I’d like to turn the call over to Bruce to get us started.
R. Bruce McDonald
All right. Thank you, Craig, and good morning, everybody. Probably a little bit less than normal for me on this call, given we just spoke with the Street here a month ago. But just on Slide 4, it’s the high-level perspective on our financials. For the full year, sales down about nearly $300 million, really reflecting softness, I would say, in a few key areas.
One would be EV and some of our sales to the programs that we are currently in production on. And then as the year progressed, we saw increasingly weak markets in off-highway.
In terms of our profitability, we benefited from strong operating performance with our sales — with our sort of EBITDA, EBITDA EA up $40 million on lower volumes and driving our operating margins up by 60 basis points. Again, just a little bit of color there, strong operation performance. We’re starting to see the early benefits of some of our footprinting, actions and plant consolidation. And really good to see here in the fourth quarter, as we previously talked about the benefits of our cost reduction, our $300 million cost reduction program flowing through in the quarter, $10 million in Q4 here.
And, as I mentioned, last month, about $100 million of the $300 million is actioned, and you could think about in the bank. And lastly, in terms of free cash flow, big improvement getting from a slightly negative position in 2023 to $70 million in 2024. We’re pleased with the improvement, but it’s nowhere near where it needs to be and the guidance that we’re going to share with you later on. We have free cash flow more than tripling in 2025.
Turning to Slide 5. Again, this is sort of the lift from the deck a month ago. Focusing on very — Tim and I and the team, we’re very heavily focused on completing the off-highway divestiture. I really don’t have any new information to report versus a month ago with a robust process with strong interest, and we continue to believe that we can execute the legal agreements and announce a transaction somewhere in early Q2 with a closing by the end of our fiscal 2025. In terms of EV, and our approach to the marketplace, that’s been fully implemented and communicated.
That’s been critical for us. I think it derisks some of the capital that we’ve committed in the future. And the fact that we’re taking a much more measured approach, this really reduces our — the CapEx intensity of our business on a go-forward basis.
Little bit more information here in terms of Power Technologies consolidation or well underway in terms of completing that initiative. It’s been kind of fully rolled out, but that savings is worth somewhere in the $15 million to $20 million level. That’s kind of the run rate we hope to get from that initiative. And under Byron Foster’s leadership, I feel good about that.
In terms of financial commitments, we’re fully committed to getting new Dana margins up to the 8.1% to 8.6% here in 2025. And pushing towards double digit in 2026, really benefiting from strong continued operational performance and, of course, the benefits of the $300 million cost reduction that will be fully in our base in 2026. In terms of use of proceeds, again, committed to a strong balance sheet. Our — the discussions that we’re having with our Board would suggest we’re targeting a net leverage of about 1x through the cycle. That does not mean we’ll be at 1x when we — on day 1, what will probably be lower than that.
But that we want to have a conservative balance sheet that we’re strong throughout the cycle.
Lastly for me, on Page 6, just a few comments on our markets and our backlog for this year. I guess I’d categorize our outlook in terms of light vehicle is flattish year-over-year. That seems to be generally consistent with what other suppliers and OEs are talking about right now. And that’s sort of been reflected in the releases that we’ve seen so far. In terms of commercial vehicle, a little bit of softness in the market.
We do anticipate to see of — sorry, commercial vehicle stabilize here towards the end of this year and look forward to start to see the beneficial impacts of prebuys associated with the 2026 emissions legislation changes. In terms of off-highway, similar tight weakness in the market. I guess I would say, I haven’t seen our numbers for January and early view on February. It’s actually — the market is actually doing a little bit better than we had talked about a month ago. So I’m not going to call it a turnaround yet, but it seems to be holding up a little bit better than we had feared.
Tim is going to get into our quarterly phasing later on. But 1 thing I would point out is we are going to have difficult comps here in Q1 and to a lesser extent in Q2. In light vehicle, obviously, last year, we benefited from volume pickup associated with the strikes in North America. And then we’ve got tough year-over-year comps in both off-highway and CV. In terms of our backlog, $650 million — you can see how that flows by year.
Obviously, it’s a little — it’s down about $300 million from our backlog the year before. That really reflects, I would say, largely lower volumes on the EV programs that we have in our backlog. But nonetheless, we’ve got strong growth in each of the next 3 years. And I guess I’d just remind folks that 80% type plus of our backlog tends to be a new Dana as opposed to off-highway. So with that, Tim, I’ll turn it over to you to sort of deep dive on the financials.
Timothy Kraus
Thanks, Bruce, and good morning to everyone.
Please turn to Slide 8 for review of our fourth quarter and full year results for 2024. Beginning on the left column with fourth quarter, sales were $2.34 billion, $159 million below last year due to lower vehicle production and currency impacts. For the full year, sales were $10.28 billion, down $271 million, driven again by end-market weakness. Adjusted EBITDA was $186 million in the fourth quarter for a profit margin of 8%, that is a 170 basis point improvement over last year’s fourth quarter.
Full year adjusted EBITDA was $885 million, $40 million higher than the previous year for a profit margin of 8.6%, 60 basis points better than last year. The profit improvement is primarily due to cost saving actions and better efficiencies throughout the organization. Net loss attributable to Dana was $80 million for the fourth quarter, $41 million lower than last year, primarily driven by $31 million higher restructuring charges this year to implement our long-term cost savings plan and divestiture expenses. Full year net loss was $57 million compared to net income of $38 million last year. The primary difference of $51 million and higher restructuring charges and the $26 million loss recorded for the planned divestiture of our noncore Hydraulics business, that was announced earlier this year.
The transaction did not occur in the third quarter as expected and was no longer classified as held for sale. However, this loss was recognized to adjust the carrying value of the net assets to fair value remains due to accounting rules. Adjusted EPS for the quarter was $0.25 per share compared to a loss of $0.08 last year. For the full year, adjusted EPS was $0.94 per share, $0.10 better than the prior year. And finally, free cash flow was $149 million for the quarter, $70 million for the full year, a $13 million improvement for the quarter and $95 million improvement for the year.
Please turn with me now to Slide 9 for the drivers of the sales and profit change for the fourth quarter of 2024. Beginning on the left, organic sales were $135 million lower, driven by lower OEM production of heavy vehicles. Adjusted EBITDA on organic sales was $33 million higher. This strong incremental margin was due to improved cost efficiencies across the entire company and generated 175 basis points improvement in margin.
As we detailed in our business update call in January, we are showing the impact of our cost-saving programs in our profit locks. For the fourth quarter of 2024, cost savings added $10 million in profit through the various actions we took since we began the program in the fourth quarter. Foreign currency translation decreased sales by $15 million, primarily driven by lower value of the euro and real compared to the US dollar. Profit was lower by $1 million with no impact to margin.
Finally, due to falling commodity prices, commodity cost recovery in the fourth quarter was $8 million lower than last year. The profit benefit of the lower commodity prices was offset by the timing cost mechanisms within the commodity recovery agreements with our customers, resulting in profit being lower by $12 million, a 45 basis points decrement to margin.
Next, I will turn to Slide 10 for the drivers of the sales and profit change for the full year 2024. For the full year, organic sales were $164 million lower, driven by lower end market demand in the second half of the year. Adjusted EBITDA on organic sales was $76 million higher. This strong incremental margin, again, was due to improved cost efficiencies across the organization, resulting in 90 basis points improvement in margin.
The cost saving program, which began in the fourth quarter added the same $10 million to adjusted EBITDA, as was shown in the previous page for fourth quarter. Foreign currency translation lowered sales by $49 million in profit by $6 million with no impact to margin. Just as the fourth quarter — just as in the fourth quarter, the benefit of the lower commodity prices was offset by timing cost mechanisms with our customer agreements. Commodity cost recovery was $53 million lower than last year, and profit was lowered by $40 million, a 40 point — 40 basis point impact to margin.
Please turn with you now to Slide 11 for the details of the full year free cash flow. Free cash flow for 2024 totaled $70 million, $95 million higher than last year. Higher adjusted EBITDA was partially offset by higher onetime costs related to cost saving actions and the sale of the off-highway business as well as higher net interest due to the timing of interest payments and higher taxes driven by payment timing and regional mix of income. Working capital use was $17 million lower than last year. The use was due to the timing of payables and other working capital.
Finally, capital spending was $121 million lower, driven by a normalized launch cadence and lower investment for EV programs.
Please turn to Slide 12 for a review of our 2025 guidance. Our 2025 full year guidance remains unchanged from our business update call in January. As a reminder, our guidance includes the off-highway business for the full year and does not include any impact from unidentified tariffs. We are expecting sales for this year of about $9.75 billion at the midpoint of our range. That is about $500 million lower than last year, driven by lower end market demand and the delay in some EV programs as well as currency translation impacts.
Adjusted EBITDA is expected to be $975 million at the midpoint of the tighter ranges. This is approximately $90 million higher than 2024 and implies a profit margin of 10%, a 140 basis point increase over 2024. Full year free cash flow is expected to be $225 million at midpoint of the range for the year. This is approximately $155 million higher than last year. Our adjusted EPS guidance is expected to be $165 per share at the midpoint of the range.
Please turn with you now to Slide 13, where I will highlight the drivers of the full year expected sales and profit changes compared to 2024. We are expecting about $285 million of lower organic sales for 2025, driven by lower demand in all end markets, partially offset by new business. Adjusted EBITDA change on organic sales growth is expected to be approximately $40 million for a decremental margin of just 14%. This is due to the continued manufacturing and purchasing efficiency improvements in the organization.
Cost saving actions are expected to total $175 million this year, increasing margin by 180 basis points. Foreign currency translation on sales is expected to be a headwind of approximately $195 million with a profit impact of about $25 million. Finally, our commodity outlook is expected to be a headwind to sales of about $30 million due to lower recoveries driven by falling steel and other commodity prices. We expect a $20 million profit headwind due to the true-up in pricing governed by our 2-way commodity recovery mechanisms with our customers. Please turn with me now to Slide 14 for our outlook on free cash flow for 2025.
We anticipate full year 2025 free cash flow to be about $225 million at the midpoint of the guidance range. We expect about $90 million of higher free cash flow from increased adjusted EBITDA. Onetime costs will be about $20 million higher as we invest in our cost savings program and work to finalize the off-highway divestiture. Working capital requirements will be about $40 million lower and capital spending is expected to be about $325 million this year, which is $55 million lower than last year. Lastly, please turn with me to Slide 15 for an outlook of our quarterly phasing.
Page 15 shows our sales by quarter for 2024 and our expected sales for 2025. There are a few market drivers in 2024 that disrupted our normal quarterly cadence beginning in the first quarter, where light vehicle production increased dramatically coming off the 2023 UAW strike in North America. This year, we are seeing a slowdown in production as vehicle inventories remain high for a number of our programs.
The back half of the year we’ll see improved demand as we see inventories normalize and off-highway markets return to growth. In the near term, the impact to Q1 will be about $500 million in lower sales than last year due to lower end-market demand. We will see between $35 million and $40 million in cost saving improvements in Q1 and are expecting about 8% adjusted EBITDA margins for the quarter.
Thank you for joining us this morning, and I will now turn the call back over to Regina to start the Q&A session.
Operator
(Operator Instructions) Tom Narayan, RBC Capital Markets.
Tom Narayan
I’ll try to keep it to one. I just have a quick follow-up, if that’s okay. So the robust process and strong interest, and I know a lot of this is covered on the January ’25 call. Just — it just — it would appear that signing in Q2 that’s only like 2 months away, so I guess, is this time line based on just a prediction of interest, or is there something further along specific interest from 1 or 2 bidders? And then I just have a quick follow-up.
R. Bruce McDonald
Yes, Tom. So as we mentioned, we have a very robust process with a number of interested parties. I’m not going to get into the specific numbers, but we are well along in the process, and we expect to be able to sign a transaction here in the — early in the second quarter.
Tom Narayan
Okay. If it’s okay, the follow-up. So on the ’25 guidance, you had the market for light vehicle flat. We have heard some — from some other suppliers noting kind of get down mid-single digits. Is this specific to your light vehicle OEM exposure, perhaps geographics?
And then on the backlog that you guys have, the $150 million, is that — could you split that out on — across the segments, just so we can just understand how that works with off-highway?
R. Bruce McDonald
Yes. I saw on your first — the light vehicle — our light vehicle view is really related to our programs, not to the overall market. You got to remember, one, we really only play a full-frame truck and even within full-frame truck, we have a disproportionate number of — out of our sales in a number of key programs with Ford and Stellantis in particularly. And on the backlog question, the vast majority of the predominant of that is not off or — is LV in PT. So it — still the majority of that is in the light vehicle driveline parts of the business.
Operator
Colin Langan, Wells Fargo.
Colin Langan
Just a basic question here, but what is going on with the taxes and guidance? It seems like EPS is moving a lot more than the EBITDA guide. Is there a change in the valuation allowances that we should be thinking about? Why — it seems like I assume that’s a big driver of why EPS is jumping a lot more.
Timothy Kraus
Yes. I mean, Colin, this is Tim. So yes, I mean, because we have the valuation allowance up in the US, the — you don’t get a normalized rate, right, as mix changes, if a lot more of income comes into the US, it ends up being taxed essentially at a 0 rate because of the evaluation allowance. So until we kind of get through this and through this period and on the other side of the off-highway sales, we’re going to continue to see a fair amount of volatility around the rate and it’s also a bit more difficult to sort of predict and just due to the mix of income, especially from year-to-year or quarter-to-quarter.
R. Bruce McDonald
Yes. And, I guess, just Colin, just following up on that. I guess, after we get through the other side of selling off highway, deleveraging our balance sheet, and we get the benefit of the $300 million that we’re road mapping. We’ll be back to sort of like a normal company in terms of a tax rate.
Timothy Kraus
Yes, I would agree. I mean, we would anticipate. We obviously won’t know until we get there, but given the changes in interest expense as well as the cost saving program, we would anticipate that we could probably be able to relieve the valuation allowance at some point after that.
R. Bruce McDonald
And start talking about EPS being more normal flowing.
Timothy Kraus
Correct. Yes.
Colin Langan
So this would be a sign that your US operations went from unprofitable and are turning profitable. I know that those profits no longer have a tax on them.
Timothy Kraus
Yes, that’s correct. And obviously, a big chunk of our cost saving program is predominantly or disproportionately in North America and specifically in the US. So that should help as well.
R. Bruce McDonald
Yes, so you think about why it’s high now. It’s like we have losses in the US that are not tax-benefited.
Timothy Kraus
Correct.
Colin Langan
Yes. Okay. And then just to follow up on the prior question about customer mix because S&P has like the Super Duty down double digits. Are you assuming a similar assumption there because that is a pretty big platform for you guys, if I’m right? And then so if that’s the case, what is offsetting, that’s to keep it only flat?
Timothy Kraus
Yes. So I mean, the way we’re — the way our forecast is based on the mix of models that we’re seeing. And so even within Super Duty, there’s a pretty big difference between the mix and so even though overall Super Duty could be down single digits or even double digits, depending on that mix, it will have a different impact to us. We do most of the Super Duty, but not all. So some of it’s still done in-house, especially the low-end 250s that are generally gasoline powered.
They’re really glorified F-150s with a few extra —
R. Bruce McDonald
Yes. And that it’s also somewhat offset super duty by the fact that we don’t — we’re not expecting the inventory correction on some of the Jeep products to occur, a second line — second shift coming on. I think it’s for Gladiator.
Operator
Edison Yu, Deutsche Bank.
Edison Yu
I just wanted to come back to commercial vehicle. It seemed that the quarter was a bit weak. And I mean just thinking more high level about it, when can we start seeing that kind of turnaround?
Timothy Kraus
Edison, good to talk with you. This is Tim. So a couple of things in the quarter for CV. I think that your last part of question, you should start seeing that in the first quarter. There’s a couple of onetime items that really impacted fourth quarter.
So we did end up taking — having to take some adjustments for EV bad debt and inventory in the quarter given where that business has gone. And then we had an inventory or a warranty item that we ended up recording as well. So — and they don’t forget there’s going to be significant cost savings coming through in CV as part of the $300 million program.
Edison Yu
Got it. And just a quick follow-up. Got you. Just a quick follow-up on the contrasting that light vehicle was quite strong. Is that a good kind of jumping off point for ’25?
Timothy Kraus
Yes. I think we’re going to continue to see strong improvement really across all the markets for — all of our end markets as we go in. But yes, we do expect there to be continued growth in both core profit and the margin in light vehicle as we sort of see production stabilize and we start seeing the benefits of the cost savings flow through.
R. Bruce McDonald
Yes. And maybe, just to add though, we do tend to see a bit of lumpiness, though, in timing of custom recovery and we incur costs in some quarters and get sort of catch-up recoveries in different quarters. So that business is always sort of lumpy and things like that.
Timothy Kraus
Yes, some of that. But yes, I mean, if you think about the first quarter, sales are — we would anticipate sales being down quarter-over-quarter given how strong first quarter ’24 was coming off of the strike. So even despite that, I still believe that we’ll have a strong margin that we can turn in on first quarter given the work we’re doing on the cost side of the business.
Operator
James Picariello, BNP Paribas.
This is Jake on for James. As we think about — let’s think about the discussions with Hydro-Québec around their TM4 put option. Can you just provide any clarity on the timing or the magnitude of the potential payment you’re expecting?
Timothy Kraus
Yes. So I don’t want to get into anything specific, but we continue to work through that with Hydro-Québec, but I’m pretty confident we’ll be able to get something done here this year at some point.
All right. And then just 1 piece of housekeeping. When do you guys expect to actually implement the re-segmentation with Power Tech getting folded into light vehicle and commercial vehicle?
Timothy Kraus
Yes. We’ll be doing that during — here in Q1. So we — when we report first quarter, you’ll see Power Tech having been folded into LVCD.
Operator
Ryan Brinkman, JPMorgan.
Ryan Brinkman
I note that consistent with every other supplier this quarter, your guidance excludes the impact of obviously difficult-to-predict tariffs. I’m curious though what early scenario planning you may be doing around tariffs on Canada and Mexico, in particular, Mexico especially and what your exposure there might be how you’re thinking about the ability to either mitigate or pass potential tariff costs on to customers?
Timothy Kraus
So I think the — we’re obviously looking at the impacts across the business. It’s hard to predict, as we said, what they ultimately will be or really what the impacts will be. What I can tell you is that we have put all of our customers formally on notice that we intend to pass every dollar of any tariff impacts through to them. And that’s our position, and we’re not planning to waver from it.
Ryan Brinkman
Good to hear. And then regarding the $175 million of targeted cost saves in 2025, of course, a very impressive amount. How much of this end of the $55 million of lower CapEx, how much would you say relates to the changed EV strategy or maybe less pursuit of other future revenue opportunities versus more simply drifting and greater efficiency on your part?
Timothy Kraus
Yes. I mean, there’s a sizable piece of the $175 million that’s related to EV. I don’t want to get into all the specifics, but there is a large portion of the total $300 million related to the change in our EV strategy that’s flowing through, so you would have expected that. I think the — when you think about the $175 million, as Bruce mentioned, we’ve already actioned $100 million of that number. And if you look at where we think we’re going to end up first quarter between $35 million and $40 million, our ability to hit that $175 million for the full year is — we think is very, very, very certain.
R. Bruce McDonald
Yes. And then just on your question about capital, I guess, I would say is we’ll be able to return back to the sort of roughly 4% type capital reinvestment. In the business, obviously, we were significantly higher than that in the last few years. In the next couple of years, we still have a few programs that we have that will require some capital expenditure, and we expect — you’ll see a little bit of change in the balance sheet. But what we do expect to have suppliers — sorry, customers providing us with offsets to the capital expenditure beginning this fiscal year.
Ryan Brinkman
Okay. And then just lastly, I think 1 of the reasons why there’s been such a positive share price reaction to your multiyear cost savings plan. Is that — it comes at the same time as off-highway sale, and it sounds like it’s maybe even catalyzed by the sale given the simpler corporate structure that it can allow. But earlier, I remember management highlighting the cost synergies of supplying across multiple end markets, and you will still be supplying across the light and commercial markets for us. But just wanted to check in on that and what you think there may be from a dis-synergies perspective or — are most of those synergies between the light and the commercial and sort of in between space aircrafts 4 or 5, et cetera? Just curious.
R. Bruce McDonald
Yes. Yes, let me — I’ll do a few things maybe. I guess, first of all, there’s definitely a dis-synergy associated stranded costs, and we’ve talked about that. We’re continuing to chip away. But basically, it’s our corporate costs to get allocated to off-highway and how some of them are very variable.
Some of our corporate costs will go with the sale, but that is a dis-synergy that we have to chip away at. Secondly, I think about we buy steel and a lot of common components and we do similar things like gears and things like that. So, yes, for sure, there is a benefit of having the highway in terms of purchasing scale and maybe leveraging our footprint. But in the scheme of things, it’s manageable.
And to your point about — so all things being equal, we’re certainly not doing it to capture synergies. We’re doing it the driver for the off-highway business is very straightforward. It’s look the value of that business in terms of the multiple it trades at, it will sell for versus the value that’s reflected in our stock price, it’s just not being recognized at the market. And the market has spoken, our stock prices reacted very favorably because we’re going to capture that delta. Tim, you may have a few others.
Timothy Kraus
Yes. I think the business — CV and LV businesses certainly are much more aligned in terms of both process and product, but also geography. So those are just 2 businesses that are primarily North American businesses. So there are certainly more synergies there than between those and the off-highway business. But the other thing to think about here is that we — any of those dis-synergies, we’ve taken those into consideration as we’ve thought about how the value unlock happens and where new Dana margins end up.
So when we think about new Dana margins in the 10%, 10.5% when we get on the other side of this thing, that already has those impacts. So — and as Bruce mentioned, we are currently showing that we have about $40 million worth of stranded costs related to the transaction that we’re fully focused on actioning and reducing as we — after we get through the sale.
Operator
Joseph Spak, UBS.
It’s Alejandro on for Joe. Maybe just following up on the backlog question. I think you highlighted sort of roughly 20% will be in off-highway. So should I be thinking about the sort of the remaining 80% in LV, or how should I think about that LV and CV split?
Timothy Kraus
Yes. I mean, look, I think those are rough numbers in terms of 20-ish percent or whatever they move around. You got to remember the backlog number we’re looking at there is typically through the 3 years. But yes, I mean, there isn’t a lot of backlog in the CV business. It’s a catalog-based business, and is usually market share based, not backlog.
There is a little bit of backlog in there, but it’s not significant.
Got it. Okay. And maybe as a follow-up. You mentioned some weakness in 2Q in your prepared remarks. Can you maybe just give us some additional color on that?
Timothy Kraus
Yes, it won’t be as dramatic as first quarter, but we’ll see a little bit of additional weakness across the end markets in Q2. And then we’ll see that recovery start to really come through in Q3 and Q4. And I think if you look at Page 15 of the deck, you can see the bars reflect sort of that cadence.
Operator
Dan Levy, Barclays.
Dan Levy
I joined late, so I apologize if it’s mentioned earlier. But if you could just talk to the backlog within the light vehicle side, how much of that is reflecting extensions of current light vehicle programs? And given this idea of there could be a potential super cycle here as automakers see the longer tail of ice, how much incremental activity could we see added to the backlog in subsequent periods?
Timothy Kraus
Dan, so a couple of things. Remember, the way we calculate backlog is it’s truly incremental. So we don’t count additional vehicle volume on our programs in the backlog. You should be — if you were hold — you were to hold FX, commodity and volume constant across the 3-year period, you should be able to just — you will just add the amounts in the backlog to our sales to get what our resulting sales would be in ’25, ’26, ’27. So the idea that, hey, there’s going to be a lot more volume on our current programs, that would not be in our backlog.
It would be in our market outlook, but it won’t. Now, I say, if they bring out a brand-new variant or something like that, that would go to backlog, something we haven’t previously made or sold to the automakers, but not pure volume.
Dan Levy
Great. Okay. And then just as a follow-up, with the news of potential tariffs on steel and aluminum, can you just remind us of how this played out when we saw this in 2018? And just what the timing effects are of you passing this on to your customers?
Timothy Kraus
Yes. So I know this came up a little bit earlier. What we — we’ve obviously looking at the — what the impacts are likely to be on the business, and we continue to kind of work through that. And as we know more about like how they’re going to deal with maquilas and some of the other the other nuances within the supply chain, we’ll know more. But one thing we have done is we have put our — all of our customers on formal notice.
So we formally notified them that we — it is our intention to pass through every dollar of tariff that, that comes through as a result of it and that we expect them that they’re going to pay.
R. Bruce McDonald
Yes. I guess I’d maybe add to that, Dan, is if you think about the light vehicle business, we’re far more indexed now than we would have been back then. So to the extent the tariffs drive up costly and recovery mechanism through indexes we already have in placed is higher than it was back in 2018.
Timothy Kraus
Yes. And that at least gets you 75%, but our view is we’re not going to eat the 25% that doesn’t get recovered in our current commodity agreements. We also don’t know if it will be reflected in the indexes or not, it may be surcharge. We just don’t know. But at the end of the day, our intention and our expectation is that our customers will pay every dollar.
Craig Barber
Okay. Maybe just in a few concluding remarks. I guess, first of all, I’d like to thank the Dana team and our leaders for delivering our improved financial results. For me, personally, I feel really good about the progress the team is making in actioning the $300 million cost reduction road map that we have. 2025 for us is going to be — it’s a transformational year for Dana.
The sale of our off-highway business is going to unlock significant shareholder value, while at the same time, enabling us to return capital to our shareholders and be left with the best-in-class balance sheet in our space. I’m really excited to be here, and I look forward to sharing our progress in 3 months’ time. Thank you, everyone.
Operator
That will conclude today’s call. Thank you all for joining. You may now disconnect.