Commercial Vehicle Group Inc. (NASDAQ:CVGI) Q1 2020 Earnings Conference Call - Final Transcript

May 19, 2020 • 08:00 am ET

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Commercial Vehicle Group Inc. (NASDAQ:CVGI) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Harold C. Bevis

through Europe and North America and significantly affected our operations in those regions, including OEM production suspensions and our own temporary shutdowns to dramatically scale back our supply to those plants.

On a positive note, our China business is now operating at pre-COVID rates, as are our material handling and military businesses. Additionally, the impact to our sizable aftermarket business has been less than it has been on new commercial vehicle production. While it has only been a short time since I transitioned from Independent Director to CEO, I've been very impressed by how rapidly the team came together and took action to adjust to our new operational realities that this global crisis has brought us. I'm proud to be working alongside such dedicated and driven individuals.

The health and safety of our employees remains our top priority. And where work is underway, we have implemented heightened cleaning and sanitizing processes, social distancing requirements and provided for personal protective equipment. In fact, at our plant in Saltillo, Mexico, we are producing masks for all of our employees and their families to help keep them safe during this uncertain time.

In the face of these significant headwinds, the immediate focus of the CVG leadership team is the alignment of the business to the current marketplace realities and preserving our capabilities, so that we can restart our operations efficiently. We are progressively implementing a series of cost-reduction measures to further align our cost structure and business practices to the current environment, preserve liquidity and protect our workforce. These measures include permanent reduction of the salaried workforce, temporary compensation reductions, furloughs, as well as big reductions in most discretionary expenses. We are implementing lean staffing work charts where we can and are managing our working capital investments tightly, while remaining prepared to take further actions as developments occur. Additionally, we've been working closely with our customers to prioritize key projects and short-term production decisions.

Turning to our end markets, as I mentioned, the North American medium and heavy-duty truck markets were already in a cyclical decline coming into 2020. As noted in our year-end commentary, our initial outlook for 2020 was based on industry data which signaled declines in 2020 Class 8 production of approximately 40% and Class 5-7 production decline of approximately 15% to 20%. We also anticipated a decline of 15% to 20% in the global construction markets we serve. As a result of the COVID-19 pandemic, the North American truck markets have subsequently come to a halt and more specifically, our customers temporarily closed their facilities and curtailed production, resulting a significant production inefficiencies that began in the second half of March and have continued through April and early May.

Substantially, all of our major customers are in the process of restarting production and as a result, we are restarting our operations in sync. Given the nature and timing of the COVID-19 pandemic and its impact on global business operations, we expect to see production inefficiency throughout the second quarter