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Commercial Vehicle Group, Inc.(NASDAQ:CVGI)

8th Annual J.P. Morgan Diversified Industries Conference Call

June 04, 2013 2:45 pm ET

Executives

Chad M. Utrup – Executive Vice President, Chief Financial Officer and Secretary

Analysts

Michael D. Shlisky – JPMorgan Securities LLC

Michael D. Shlisky – JPMorgan Securities LLC

Okay. Let’s go ahead and get started here. I am Mike Shlisky from the JPMorgan Machinery team with Ann Duignan. We are very pleased to have with us Commercial Vehicle Group, CVGI with us today. And their CFO Chad Utrup also with us in the audience is John Hyre from Investor Relations. Chad has got few slides we’ll go through and then we’ll go right into the Q&A. Chad?

Chad M. Utrup

Thanks, Michael thanks everybody for joining us today. I am going to spend about 10 maybe 15 minutes just going through some slides are mostly based on strategy for those of you that aren’t as familiar with us. But just on slide three here, a quick overview of our product portfolio.

Seating is our top, this is by revenue by the way for 2012. Seating leads our revenue breakdown from a product standpoint followed by Wiring Harnesses and Panel Assemblies followed by Trim Interior and Exterior components and Cab Structures and Panels. And then what we call Mirrors, Wipers and Controls portion of our product. So that’s just a quick breakdown of the products that we offer into the Commercial Vehicle space.

Global footprint, we are a global company back 15 years ago, we would have been in the U.S. only, we have expanded I’ll get to it in a minute but that’s a key part of our diversification strategy as we move forward. It’s a very important piece of our strategy as we move forward and continue to grow our base outside of North America.

Slides aren’t showing up great, but keep moving here. So, as we look at our growth strategy some of you have seen this before, we have four components of our strategic objectives; geographic diversification, end-market diversification, being a technology leader as well as of course people development, internal developments, and succession planning. Thank you.

And so I’m going to touch on each one of those real briefly so as we look at our five year targets we put this out publicly about nine months ago at our Investor Day here in New York. Our targets are to have about 50% of our revenue outside of North America, today that’s closer to 80% than 50%. We want to make sure that we keep an eye and have no single end market more than 35% of our revenues, we currently have about 50% in the OEM truck market, which I’ll touch on in a second, and continued to have a balanced customer base across all other markets, products and geographies.

As I mentioned, we do have a goal of 50% of our revenue outside of North America. We have made some strides in this over the last several years and the last 10 years, but our focus is really enhancing that diversification so that we do become more balanced in the U.S. North America versus rest of the world.

End market, as I mentioned and as most of you know roughly 50% of our business is global heavy truck and about 23% from 2012 is construction. So, heavy truck in construction on a global basis makes up about three-forths of our business today. Our goal is to have no single end market more than 35% over the next four to five years and that’s a big piece of what we are focused on today.

Just as a side note, that heavy truck pie used to be about 95% we go back to before the company went public. So, the strategy has stayed the same and will continue to stay the same and it’s all about diversification.

From a customer standpoint, we do have a fairly well balanced customer portfolio today, however about nine customers makeup a significant piece of the pie. So we’ll continue to keep an eye on making sure that we have a well balanced customer portfolio as well as product, as well as market and as well as geography.

Just a few things, I’ve touched on the diversification aspect of our strategy, I’m going to touch real briefly on these our engineers much well more well versed in these products than I am, but just a few things that we’re working on to give you a flavor for some of the technology products hybrid power cable systems, I’m not going to read these, but hybrid power cable systems and low-cost mold technology for molded wire harnesses. So obviously we provide harnesses in electronic power system cables for many of our Commercial Vehicle suppliers mostly in the construction side of the business.

So, some advancements here that we’ve have invested and working on from a product offering standpoint. From a seat standpoint offering our breadth of products to anyone of our truck, construction or other Commercial Vehicle customers from an entry level to all the way to high option content. So that we can offer a wide variety of service levels for many, any level of seat in our portfolio.

And lastly, just we’re obviously working on a lot of things from a technology and product development standpoint. These are just a few slides. But, this is a more recent one, we announced an award from Caterpillar domestically in North America. And it’s really a testament to what we have been focusing on. For those of you that don’t know our business, we do have a significant amount of construction business in North America, but it’s primarily wire harness related and not, we are not the leader in North America for construction seating and so, through the developments and offering a product we did we were able to just within the last month or so announce a pretty significant win for us in the construction seating side in North America. So, we are pretty proud of that and it’s again a testament to the investment and development of products leading back to the technology side.

And, lastly I just leave with this; this is a slide that we’ve showed about nine months ago, as I said in our Investor Day here in New York. It’s really a bridge if you will, we had put out their a target for five years, in five years of about $1.6 billion this is marching from 2011 of about have that size. We see in organic growth between 4% to 6% a year, getting close to $200 million, we see India and Brazil expansion of about $100 million. China, growth from where we were in 2011 of about another $200 million, and acquisitions in that $300 million to $400 million range.

I think the take away here is that the Company and the management team is still behind this, obviously what is much more important to us than the top line growth is, how we grow the bottom line in concert with that and the capital structure that the Company has today can sustain the M&A growth we believe over that period of time, provided the timing of fits within the strategy. So the take away here is that, we still believe that this is doable, we are committed to it. We may have tweaks to it here and there, but by and large it’s something that the company is behind, and within this top line growth strategy is all the things I just talked about in terms of diversification, investment and technology and investment in our people so that we can support the growth.

And with that I’ll turn it over to Michael for some questions.

Michael D. Shlisky – JPMorgan Securities LLC

Great. Why don’t we just talk quickly with a couple of questions about some of the issues of the day and quite really of the day as well as over the last month or so. And maybe we can get some more questions from the audience as well.

First of all, one of the big headlines that was that came out of the last month or so is your new incoming CEO, I think he just started over the last week or so. He is a long time Caterpillar veteran. Just curious maybe just a bit more about him, now you should better you’ve worked with him for a week or two, your first impressions, how he came to be as a candidate for the position just a bit more about what you think his priorities are going to be going forward?

Chad M. Utrup

No problem Rich Lavin came to us from Caterpillar, Rich literally started last week and due to travels I have about 2.5 days with Rich. So, my first impression of Rich is seems like a good guy, he is obviously been through the ranks in Caterpillar, has spend a significant amount of his carrier dedicated to the Asia market, he has lived in India, lived in China and he has lived in Hong Kong.

So that construction side of the business and that regions of the world, where his breadth and depth of his experience, I think was kind of fit CVG like glove. So the things that I just went through, I mean the slide right here we talk about India, Brazil, and China, and M&A and it’s a big piece of where we see the future of CVG and I think Rich’s experiences fit that perfectly.

And so we’ll see he is, it’s early days he just started last week, he is getting another company, getting another people. He is going to be on the road for quite sometime to facilities and to customers and obviously to investors. So it’s we welcome him to Board and look forward to it.

Michael D. Shlisky – JPMorgan Securities LLC

Great, and going quickly to the Caterpillar announcement you had about a month ago, all that new construction business within North America. It sounds like there could be a change in margins due to mix, if you’re adding on lot more seats than you had in the past in North America construction business. Could you tell us if you know off hand of what kind of effect that might have on margins both here and on the overall company.

Chad M. Utrup

I think the biggest impact that you’ll have Mike is based on capacity, I don’t see a change in pricing per say, but more on capacity with where just like Q1 for example, with where Class 8 markets they are fine, but they’re not great, they’re not back to, they’re not at replacement level on our view. So, there is some room for uptick in the Class 8 market and certainly global construction is down. So, we’ve got capacity available today which will continue to look at where it makes sense for us to consolidate and improve that.

So, I would say that’s probably where the biggest impact that could have for us in terms of margin expansion, it’s not going to be in the price of that, say with that customer, with that market or with that particular products, it’s going to be in really utilizing the capacity that we have opened today.

Michael D. Shlisky – JPMorgan Securities LLC

Great. And then quickly on the current news of today about one day before we came in here the orders came out for May 23,300 units, so roughly flat from last month and up about 3% from last May. So it seems to me it’s like a stable number, quarter of a pie since last month and certainly up year-over-year up of last years weak number. Any thoughts there is to how that sort of fits in with your expectations for the quarter, for the year where it might be trending and what OEMs tells you about, how things might progress if order stay at these levels?

Chad M. Utrup

Yeah, I think the order number isn’t a total surprise. I think it’s within the range that everybody somewhat has expected at least for the month of May. The thing that we look at is, during the first quarter earnings call, I think we put out a number for our expectations for Class 8 of about 250,000 to 260,000 units. We still feel that that range is in the right level like ACT at least the last report was 264,000 units or something like that. So there are a little bit above our high-end. If that happens great, that will help us with capacity and things like that.

But as you look at Class 8 and frankly construction for us as well, we really look at 2012 to 2013 almost as mere opposites. The first half of 2012 last year both truck and construction was really strong, called an overbuild if you will. I think that’s mostly what it was in some cases, but then a dip down in the last half of the year and we’ve kind of felt that 2013 was going to be an opposite of that where it was going to be a somewhat moderate to down first half and then things will start to pickup again.

So from second half of the year, comps compared to last year I think it should be good if that happens, but that’s kind of how we have looked at it, both truck and construction.

Michael D. Shlisky – JPMorgan Securities LLC

Great. I can see one question in the audience. Go ahead.

Question-and-Answer Session

Unidentified Analyst

Chad you’ve described irrespective of the macro of China and India, your base is low, but you have been very successful in getting new contracts and so look like those were growth platforms for you, is it playing out that way and you still see that going forward into next year and 2015?

Chad M. Utrup

Very much so, Ed, I think what we are experiencing currently at least Q4 andQ1 and kind of the sentiment around China is, it’s probably I call it a pause or a delay, a perfect example is, we had opened a new facility in Beijing for some truck business that should have started production already and it’s been delayed in production for about nine months I think is the right number give or take.

So it was first to start late last year, late 2012 and it’s been pushed out and a lot of that’s due to where the sales levels are, where inventory levels are of both truck and construction and a little bit of what I’d call the GDP pause that we are seeing there.

So does it affect our five-year plan? No, we don’t believe so. We think there is a gap. We’d like to have seen more in 2013, but things have just seemingly been shifted if that makes sense. So we are still extremely positive about the outcome and potential for that three and five year plan 2013 is a little bit lower than what we would have expected say a year ago. So I call it a delay more than anything.

Unidentified Analyst

Quantify quickly on your previous answer about, there is some additional capacity you have in your current footprint if the market would have grow a bit, you would be able to take on that capacity in trucks. If we see growth in 2014 or really any year, how high can those go, what is your overall capacity for getting stuff build, if things would have grow from here?

Chad M. Utrup

Yeah, it’s a good question and a common question. I think the best way that we have been able to answer it is, because we don’t have our facilities dedicated to just truck, there is construction, there is a lot of industries and customers that comprised the processes within our facility. So it’s a little bit difficult to answer just dedicated to truck, but what we have kind of committed to and said is, that if truck levels get back to even close to where peak was in 2006, we do not see a brick and mortar issue from a capacity standpoint from our standpoint.

And the reason that I say that is, because our cost structure is predicated on highly variable cost, it’s labor and it’s assembly and it’s things like that it’s not capacity on equipment that has a six month lead time to get new capacity if that make sense so, to build capacity you have to increase capacity for us is not that significant of an event, and so, we have excess capacity today obviously neither the truck nor the construction market is where we consider replacement or ongoing level.

So, we’ll continue to look at what make sense from a rationalization standpoint, we’ve announced two closures already this year. And, we’ll continue to evaluate what make sense, but always keeping in mind, we won’t do anything silly that really hurts us from being able to do anything from a long-term perspective to support any other markets.

Unidentified Analyst

And is that true for companies like Daltek, similar ones that have little bit less delivered to your core products?

Chad M. Utrup

That’s very much true yeah. Daltek is more on the UTV market, recreational vehicle market today. So, Daltek was the hydrographics acquisition from December of last year. We see a lot of opportunities in the truck market it’s not a significant piece of that business today. So, we’re already looking at and starting capacity and what we could do to the support but its truck is not a big piece of that business today.

Unidentified Analyst

Got it, just try to looking to your current product portfolio and sort of in that pie chart earlier what you said three quarters of your business was really heavy truck and construction, you do have large, small slices in there of those like for example for ag or for even smaller trucks. Of those slices where could you see the sort of biggest gains over the next five years? So I didn’t see any smaller source in that pie chart either. So, I mean, have you got any thoughts going to be doing?

Chad M. Utrup

Yeah, we do. To some degree we do medium duty and a little bit of light duty products today that where we serve the light or medium duty market. It’s mixed into that OEM truck pie, that 50%. It’s not significant today. That said, we do have a focus on it. We do supply customers with cladding and interiors and seats and we are focused on things like the sprinter or the short haul trucks because we are aware that there is transition potential over time in terms from going from the sleeper to the more short haul trucks. So we see it. We see that dynamic as a potential. So it is a focus of ours and we have been successful in the couple of years with companies in the Class 5, Class 6 and Class 7 range. So it is a focus, but as far as the number, it’s actually mixed in with that 50% as OEM truck. So it’s part of that.

And as far as the other end markets, we do have a focus on bus in India. That’s our primary market there. So we do see a lot of opportunity there and also we have a heavy focus on aftermarket. Obviously, we love the margins in aftermarkets. So it’s a pretty significant focus of ours. It’s not a big piece of the pie today, but we have been successful over the last couple of years and some pretty heavy market share gains in the aftermarket. Aftermarket can be frustrating. You get wins, one to five to 10 seats at a time, for example. So it’s not big contracts. But we’re [bound] in the payment and we’ve been pretty successful. So we’re hopeful to see that continue to grow as well.

Michael D. Shlisky – JPMorgan Securities LLC

We’ve question in the front here.

Unidentified Analyst

Just looking at your revenue targets for your five-year goal, basically you’re going to double revenue and acquisition is going to be a big chunk of it. I guess my first question is what is the margin structure going to look like as you go for these goals? And second, could you just talk about your acquisition strategy, are you going to be targeting different products or you’re going to be trying to pick up more market share, can you just talk a little bit about that?

Chad M. Utrup

Sure, great question. I think no matter if this, $1.6 billion is a target of ours, it’s kind of a goal of ours, but frankly whether it ends up being $1.4 billion or $2 billion, whatever, pick a number, make no mistake, our objective is for the margin of our business to continue to grow. We would like to see this business be back to and exceed our peak levels in 2006.

Lot of things need to happen from where we are today for that to happen and those are things that we’re working on. And so that’s probably the overarching response, I would say, we were looking at achieving or/and exceeding where our peak level margins were, no matter what this is. Acquisitions, who knows what margins come with acquisitions. It totally depends if it’s service or value add or technology or commodity or what have you. So what we’ve kind of assumed is basically the same as the core business is today, just for our modeling purposes.

And the last piece of the question and I’ll [go] back, make sure I answer everything is how do we look at M&A and it’s kind of three different ways. From a geographic expansion what you see on the chart here; India, Brazil, China, the non-domestic growth, a piece of that could come from acquisition and that could be an existing product we have today, could be wire harness acquisition with a great pipeline or distribution in a place that we don’t have a strong foothold or frankly it’s going to take too long to get one. That maybe appealing to us, if the return is right.

Another one maybe some level of vertical integration to help us from a cost or a buying power perspective that may not be in one of our markets today. And the third would be a different product. And so we look at all three of those and even make sure that the return for our investment is going to be there, but those are probably what I would say are the three channels that we really look at. I don’t know. Hopefully I answered your question. If not I’m happy to expand…

Unidentified Analyst

What’s your market share?

Michael D. Shlisky – JPMorgan Securities LLC

What’s your business market share.

Chad M. Utrup

From a seat perspective, it’s different by product, but from a seat perspective that’s the one that you are specifically looking at. North America, from an OEM Class 8 perspective, we’ve had a pretty strong market share for a number of years. It’s 70%, 80% or higher and those fluctuate over time, but we’ve had a pretty strong market share in Class 8 specifically. But if you look at us on a global basis, we looked at this probably about a year ago and it’s in the low to mid-teens. So we have a significant amount of expansion that we can undertake.

And China and India, the markets there whether they’re in a pause right now or not or whether they won’t have double-digit growth for the next 50 years like, we probably all saw on some charts three years ago, the amount of units that are produced in both of those regions are significantly higher than where it is today and we have virtually zero market share if you look at it from a realistic standpoint. So the opportunities are significant for us. And we believe we have the products and the service to make it happen.

Michael D. Shlisky – JPMorgan Securities LLC

And I just want to quickly follow-up on that answer. Exactly how fragmented is the seat market globally? I mean, I’m sure you guys are, if not the largest among the largest companies in the industry. I know you have, you said mid-teen share, but globally how many companies are close to your size and is there additional room for consolidation?

Chad M. Utrup

There is. I think there is. If you looked at places like China we’re probably easy to point to from more of a consolidation happening than domestically of course. There I would say on similar products we may have really six, seven competitors globally from the seat, and those are going to be in different regions and somewhat different products or markets, but at the end of the day there’s, I would say six or seven competitors that we constantly run into. Make no mistake, there’s many more, but if you’ve really looked at the ones that are of substance I would say, six or seven or so.

Michael D. Shlisky – JPMorgan Securities LLC

I assume it’s a little bit less consolidated on the wire harness side and those other molded plastic sides.

Chad M. Utrup

Yeah, you look at wire harnesses and we do compete in some regards and also we don’t compete in some regards with the bigger companies that do most of the automotive side of things. Our niche in harnesses and frankly most of our businesses is that low volume customized service and value add offer and it’s very, very much different than an automotive approach. That’s mass production, low cost, chase the lowest labor that you can get and ours is very much different and it goes right back to the investment side. We have significantly different investment scenarios from a CapEx perspective and we’re very highly variable and it just couldn’t be any more different than automotive. So it really follows what the market is which is low volume, 200,000 trucks versus, pick a number, 10 million, 12 million auto. So it’s different.

Michael D. Shlisky – JPMorgan Securities LLC

Which also was up the question of content per truck here in North America I suppose? It tells a little about the growth you’ve had there over the last couple of years, and how far you want to go from here. I know that’s probably part of your organic growth strategy, but beyond just pricing, I guess how could that go for you guys over the next couple of years?

Chad M. Utrup

Yeah, no problem good question. I think if you looked at on an apples-to-apples basis from where we were say at the time we went public or right around the 2005 timeframe. I think our average content has probably gone up $400, $500 per truck. And that’s a combination of organic growth and the combination of acquisitions, where we fluctuate depending which customer has market share but within that $1,200 to $1,300 range per Class 8 vehicle today, at one point we were in that $700 to $800 range. So, we have gone up, we’ve lost some when Sterling-brand was discontinued and some of those things happened at dropped us down a little bit. But overtime, we’ve probably increased 50% or so over the last six to seven years.

Michael D. Shlisky – JPMorgan Securities LLC

And then I guess within let’s just go to pricing, I mean, what part of that has come from shift to more premium seats versus more basic seats over the last couple of years. And is that a function of your salesforce’s salesmanship or is that a function of the trucks that are being build are different that they were back then?

Chad M. Utrup

It’s both, I think, but the trucks have significantly changed I think as everybody knows over the last six, seven years. I’d say we’re, if you’re looking at Class 8 specifically the things from a content perspective, structural units, it’s not just seats we always tend to talk about the seats and the options and that does fluctuate with driver shortages and focus on ergonomics and workers comp and we believe we have the products that help our fleets and help our drivers alleviate those problems.

So, that is a component of it, but you talk about winning cabinet business, winning flooring business, you talk about winning harness, engine harness business with comments that we put out there so, there is a lot of things that have built-up over time aside from the seat that really adding to that, and there is acquisitions, we’ve acquired Bostrom so, it’s a combination of things Mike not only from the option content of the seat, but to harnesses to interiors to molded plastics and cabinetry to structural components, steel and aluminum structure. So, it’s actually everything on our product listing it’s really kind of molded into that increase we’ve seen over the years.

Michael D. Shlisky – JPMorgan Securities LLC

Great, also want to touch briefly and I guess at the other news of the week, which is you new Serta announcement that came out with, that creates some kind of branding alliance, I guess is there any cost to that for you, are you paying some kind of a royalty to take their materials and what role this Serta playing in this besides their logo and brand name.

Chad M. Utrup

I don’t want to get into the agreements too much, but we do have a licensing arrangement or agreement with Serta, that we’re working on jointly to use their brand and their technology, and this is just kind of niche, that we’ve worked on touched on the, our focus on the aftermarket side of things a little bit ago, and that’s a component of that our aftermarket folks have teamed up with Serta for seats and now bunks and things like that, so honestly it really makes sense if you think about it. The amount of money that people spend on beds for comfort in their home and you have drivers and trucks who are away from their home for that long and they’re sleeping in their vehicles for that long. Why wouldn’t you want the same type of comfort and technology that you sleep on there that you do at home basically is their home.

So there is a lot of things that you just, you scratch your heads, and well, it just makes a lot of sense and those are the things that our folks that are focused on aftermarket are teaming up with people like Serta not only to bring to the beds and the bunks, but also into the seat technology. So we’re excited about it.

Michael D. Shlisky – JPMorgan Securities LLC

Great. And just want to touch briefly here on OEM lead times. Have the OEMs, both the construction and truck, have they shortened lead times over the last few years, what’s really changed there and you’ve got fewer facilities than you’ve had, let’s say over the last couple of years. Does it affect your planning at all, does it affect your margins at all, just anything about lead times, maybe share with us about how that might affect your margins going forward?

Chad M. Utrup

Well, it hasn’t gotten any better. We typically still get some maybe 16 weeks CDI, EDI orders, but honestly firm orders you’re looking at maybe a month outlook at most. It just changes so frequently. So we do get 16 weeks heads up in many cases, but in reality it’s about 30 days that we have heads up and in some cases we’ve just seen in the last six months where we make a notification of being shutdown for an entire week next week and we get that on a Friday. So it happens. We try to work with the customers to do everything we can on our inventory, on our cost and, but at the end of the day it’s this industry. Hopefully, it gets a little bit better over time, but we think we’ve gotten pretty good at managing through it and that’s a barrier entry also. So we kind of look at it with a little bit positive spend also.

Michael D. Shlisky – JPMorgan Securities LLC

Okay, great. I want to spend the last couple of minutes, let’s see anything from the audience, asking a few questions that we’ve been focusing on, themes of the conference. And I’ll just can sort of by asking you. At this point what do you think is the single biggest risk to your company’s outlook looking to the Class 8 truck outlook, what macro factors are you looking at besides just orders that just came out today? I mean, how do you guys plan besides just getting the EDI and getting the Friday afternoon news from the OEM?

Chad M. Utrup

I think the biggest risk for us, short-term and long-term, is the volatility in the market. Everybody wants to look what am I missing. Am I missing anything with this story, am I missing anything with CVGI and honestly you’re not. It’s that simple. We have the truck market does and the construction recently has done it. It’s just that sawtooth in terms of volatility and our objective for just the market piece, short-term and long-term, is how do we manage through those things, because we don’t see them changing over time significantly and how do we manage through those and have the highest impact on our bottom line and we think that’s gets down to cost and capacity and that’s what we’re focused on.

And so, when you say where are the biggest risks as we look outward, I think that’s really here, it’s managing through what the market throws at us at because there is always going to be risk in our organic growth targets. So there is always going to be risk in our M&A strategy and things like that. But where we sit today with our capital structure, if you had asked me that two years ago, I’d said our capital structure, we refinanced that, but we’re in really a good position today.

The growth strategy outside in China and India, there’s always risks in foreign countries and currencies and markets that we’re not as familiar with, but we’ve been there for about 10 years now. We think we know what’s going on with the market and there’s always a little bit of risk with that, but we had this conversation this morning. When you step back and say and people look at us and say, what we are we missing with this company other than the market that it deals with and it’s really that simple. In our view the businesses are simple, but when you look at it from a big picture standpoint it’s managing through that sawtooth and we talk about it at the peaks and we talk about it at the valleys. And so, continuing to figure a better way to add to the bottom line during those peaks and valleys is what we’re focused on.

Unidentified Analyst

So if we saw a spec and, let’s say, production rates in Class 8 trucks that would be something that you could adjust for relatively quickly. I know obviously you’ve gotten out of Statesville. You’ve taken down your employee count, but how fast could you ramp up if you really had to if rates started to change very quickly which has happened in the past?

Chad M. Utrup

Well, if history is any indication, we can do it immediately. It’s not the cheapest grout to do it when you would deal with over time and temporary workers, but we’ve done this for a long time and ramping up and ramping down is, dare I say, kind of one of our specialties. I think we’ve gotten pretty good at it, just being in these industries, I think you have to be. And so, we’re prepared and hopeful that that happens pretty soon. But, yeah, we can do it fairly easy and you always pay a little bit more when you’re dealing with overtime and temporary labor, but it’s kind of part of the, it’s the nature of the industry and we recognize that, accept it and work on the cost improvements from there. But back to your question, we think we could do it relatively rapidly.

Michael D. Shlisky – JPMorgan Securities LLC

Okay. And now may we just wrap up here and listen anything from the audience with sort of a question we’ve asked ever company today. I guess what do you think is the single biggest misconception among investors about your company or by your industry?

Chad M. Utrup

I think one, well, there’s two that come to mind. I think, and both we’ve already talked about, but it’s really the difference between our business and industry and automotive. We do still have people that consider us somewhat automotive or we get thrown into that automotive bucket and I think that’s probably a misconception. We are certainly dedicated Commercial Vehicle side of things and our business model is very much different, as I mentioned before. And I think the other thing is, today is an example, but thank you for talking almost more about construction today than truck, because…

Michael D. Shlisky – JPMorgan Securities LLC

The other one, yes.

Chad M. Utrup

It’s one of the biggest things that we continuously focus on not eliminating or trying not to grow in the North American Class 8 truck market, but really focusing on growing more rapidly in other markets for our diversification objectives. And so, what we have typically talked about is 90% of our time is on Class 8 and it’s actually less than 50% of our business. So, giving people a focus more on the opportunities and the other 55% of our business, not just Class 8 and I think we’ve made some strides in that. And, so thank you for the construction questions today.

Michael D. Shlisky – JPMorgan Securities LLC

Well, I’m going to throw out one more because we have got a minute or two left here, and that is can you be handicapped for us between, let’s say, ag, mining, light truck, medium truck. Of those areas, which ones are the ones that you are most excited about to get to your organic growth goals?

Chad M. Utrup

I would say probably ag and light and medium truck as we sit here today, that’s probably what I would point to. We may have had a lot of success with folks like John Deere on the construction and forestry side. We’re optimistic that that will lead to some good things on the agriculture side. We’ll continue to look at Brazil, obviously heavy and the agriculture side to see if that has any opportunities for us.

And then, the light and medium truck to your point earlier, Michael, is something that we’re heavily focused on and have had some recent success. And so, we’re heavy in Class 8, but really focused on light and medium duty truck as well. May not be as high a content per vehicle, but it’s going to be component that we’re going to continue to try to grow. So those are probably the two I’d point to.

Michael D. Shlisky – JPMorgan Securities LLC

Okay, great. Well, Chad thanks so much for joining us today and hope to talk to you guys again soon.

Chad M. Utrup

Okay. Thank you, guys.

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