DANA INC

Previous wording

Dana, with history dating back to 1904, is headquartered in Maumee, Ohio. We are a world leader in providing power-conveyance and energy-management solutions for vehicles and machinery. The company's portfolio improves the efficiency, performance, and sustainability of light vehicles, commercial vehicles, and off-highway equipment. Our technologies include drive systems (axles, driveshafts, transmissions, and wheel and track drives); motion systems (winches, slew drives, and hub drives); electrodynamic technologies (motors, inverters, software and control systems, battery-management systems, and fuel cell plates); sealing solutions (gaskets, seals, cam covers, and oil pan modules); thermal-management technologies (transmission and engine oil cooling, battery and electronics cooling, charge air cooling, and thermal-acoustical protective shielding); and digital solutions (active and passive system controls and descriptive and predictive analytics). We serve our global light vehicle, medium/heavy vehicle and off-highway markets through four business units – Light Vehicle Drive Systems (Light Vehicle), Commercial Vehicle Drive and Motion Systems (Commercial Vehicle), Off-Highway Drive and Motion Systems (Off-Highway) and Power Technologies, which is the center of excellence for sealing and thermal-management technologies that span all customers in our on-highway and off-highway markets. We have a diverse customer base and geographic footprint which minimizes our exposure to individual market and segment declines. At June 30, 2024, we employed approximately 41,800 people and operated in 31 countries.

Current wording

Dana, with history dating back to 1904, is headquartered in Maumee, Ohio. We are a world leader in providing power-conveyance and energy-management solutions for vehicles and machinery. The company's portfolio improves the efficiency, performance, and sustainability of light vehicles, commercial vehicles, and off-highway equipment. Our technologies include drive systems (axles, driveshafts, transmissions, and wheel and track drives); motion systems (winches, slew drives, and hub drives); electrodynamic technologies (motors, inverters, software and control systems, battery-management systems, and fuel cell plates); sealing solutions (gaskets, seals, cam covers, and oil pan modules); thermal-management technologies (transmission and engine oil cooling, battery and electronics cooling, charge air cooling, and thermal-acoustical protective shielding); and digital solutions (active and passive system controls and descriptive and predictive analytics). We serve our global light vehicle, medium/heavy vehicle and off-highway markets through four business units – Light Vehicle Drive Systems (Light Vehicle), Commercial Vehicle Drive and Motion Systems (Commercial Vehicle), Off-Highway Drive and Motion Systems (Off-Highway) and Power Technologies, which is the center of excellence for sealing and thermal-management technologies that span all customers in our on-highway and off-highway markets. We have a diverse customer base and geographic footprint which minimizes our exposure to individual market and segment declines. At September 30, 2024, we employed approximately 41,100 people and operated in 31 countries.

Previous wording

Financing actions — Our current portfolio of unsecured senior notes is structured such that no more than $455 of senior notes comes due in any calendar year, with no maturities until the second quarter of 2025. Our $1,150 revolving credit facility matures on March 14, 2028. See Note 11 to our consolidated financial statements in Item 1 of Part I for additional information.

Current wording

Financing actions — Our current portfolio of unsecured senior notes is structured such that no more than $473 of senior notes comes due in any calendar year, with no maturities until the second quarter of 2025. Our $1,150 revolving credit facility matures on March 14, 2028. See Note 11 to our consolidated financial statements in Item 1 of Part I for additional information.

Previous wording

Commercial vehicle markets — Our primary business is driveline systems for medium and heavy-duty trucks and busses, including the emerging market for hybrid and electric vehicles. Key regional markets are North America, South America (primarily Brazil) and Asia Pacific. During 2023, production of Class-8 trucks in North America increased 8% over 2022 reflecting increased demand driven by higher freight volumes and rates during the first half of 2023, with demand tapering during the second half of 2023 as freight volumes and rates trended downward. The outlook for 2024 is for weakening demand with production down moderately from 2023 levels driven by lower year-over-year freight volumes and rates. Medium-duty truck production in North America experienced a modest 9% year-over-year increase from 2022 to 2023. The outlook for 2024 is for a modest decrease in production over the prior year. Outside of North America, production of medium- and heavy-duty trucks in South America declined 32% in 2023 reflecting weak economic conditions in the region. The 2024 outlook for South America is for a modest increase in production from 2023 as local economic conditions are expected to somewhat improve. Production of medium- and heavy-duty trucks in Asia Pacific, driven by China and India, increased 18% in 2023. The 2024 outlook for Asia Pacific is for a modest increase in production from the prior year.

Current wording

Commercial vehicle markets — Our primary business is driveline systems for medium and heavy-duty trucks and busses, including the emerging market for hybrid and electric vehicles. Key regional markets are North America, South America (primarily Brazil) and Asia Pacific. During 2023, production of Class-8 trucks in North America increased 8% over 2022 reflecting increased demand driven by higher freight volumes and rates during the first half of 2023, with demand tapering during the second half of 2023 as freight volumes and rates trended downward. The outlook for 2024 is for weakening demand with production down moderately from 2023 levels driven by lower year-over-year freight volumes and rates. Medium-duty truck production in North America experienced a modest 9% year-over-year increase from 2022 to 2023. The outlook for 2024 is for a moderate decrease in production over the prior year. Outside of North America, production of medium- and heavy-duty trucks in South America declined 32% in 2023 reflecting weak economic conditions in the region. The 2024 outlook for South America is for a moderate increase in production from 2023 as local economic conditions are expected to somewhat improve. Production of medium- and heavy-duty trucks in Asia Pacific, driven by China and India, increased 18% in 2023. The 2024 outlook for Asia Pacific is for a modest decrease in production from the prior year.

Previous wording

Off-highway markets — Our off-highway business has a large presence outside of North America, with 68% of its 2023 sales coming from products manufactured in Europe; however, a large portion of these products are utilized in vehicle production outside the region. The construction equipment segment of the off-highway market is closely related to global economic growth and infrastructure investment. The global construction equipment market continued to rebound in 2023 with production up 5% over the prior year. The outlook for 2024 is for modest growth in North America, South America and Asia Pacific, partially offset by moderately lower production levels in Europe. End-user investment in the mining equipment segment is driven by prices for commodity products produced by underground mining. The global mining equipment market has been mostly stable over the past several years as industry participants have maintained vehicle inventory levels to match commodity output, and this trend is expected to continue in 2024. The agriculture equipment market is the third of our key off-highway segments. Like the underground mining segment, investment in agriculture equipment is primarily driven by prices for commodities. Farm commodity price decreases in 2023 spurred a 2% decrease in agriculture equipment production. The outlook for 2024 is for global end-market demand to soften, reflecting a modest decrease from the prior year.

Current wording

Off-highway markets — Our off-highway business has a large presence outside of North America, with 68% of its 2023 sales coming from products manufactured in Europe; however, a large portion of these products are utilized in vehicle production outside the region. The construction equipment segment of the off-highway market is closely related to global economic growth and infrastructure investment. The global construction equipment market continued to rebound in 2023 with production up 5% over the prior year. The outlook for 2024 is for moderately lower production levels in North America, Europe and South America, with relatively stable production levels in Asia Pacific. End-user investment in the mining equipment segment is driven by prices for commodity products produced by underground mining. The global mining equipment market has been mostly stable over the past several years as industry participants have maintained vehicle inventory levels to match commodity output, and this trend is expected to continue in 2024. The agriculture equipment market is the third of our key off-highway segments. Like the underground mining segment, investment in agriculture equipment is primarily driven by prices for commodities. Farm commodity price decreases in 2023 spurred a 2% decrease in agriculture equipment production. The outlook for 2024 is for global end-market demand to soften, reflecting a moderate decrease from the prior year.

Previous wording

Foreign currency — With 54% of our first half of 2024 sales coming from outside the U.S., international currency movements can have a significant effect on our sales and results of operations. The euro zone countries accounted for 49% of our first half of 2024 non-U.S. sales, while India, Brazil and China accounted for 10%, 9% and 7%, respectively. Although sales in South Africa are less than 5% of our non-U.S. sales, the rand has been volatile and significantly impacted sales from time to time. International currencies weakened against the U.S. dollar in the first half of 2024, decreasing sales by $19. Weakening currencies included the Chinese renminbi, Thai baht, Indian rupee and South African rand.

Current wording

Foreign currency — With 54% of our year-to-date 2024 sales coming from outside the U.S., international currency movements can have a significant effect on our sales and results of operations. The euro zone countries accounted for 48% of our year-to-date 2024 non-U.S. sales, while India, Brazil and China accounted for 10%, 9% and 8%, respectively. Although sales in South Africa are less than 5% of our non-U.S. sales, the rand has been volatile and significantly impacted sales from time to time. International currencies weakened against the U.S. dollar in the first nine months of 2024, decreasing sales by $34, with the effects of a weaker Brazilian real, Chinese renminbi, Thai baht and Indian rupee, being partially offset by a stronger euro.

Previous wording

Argentina has experienced significant inflationary pressures the past few years, contributing to significant devaluation of its currency among other economic challenges. Our Argentine operation supports our Light Vehicle operating segment. Our sales in Argentina for the first half of 2024 of approximately $105 are 2% of our consolidated sales and our net asset exposure related to Argentina was approximately $62, including $21 of net fixed assets, at June 30, 2024. During the second quarter of 2018, we determined that Argentina's economy met the GAAP definition of a highly inflationary economy. In assessing Argentina's economy as highly inflationary we considered its three-year cumulative inflation rate along with other factors. As a result, effective July 1, 2018, the U.S. dollar is the functional currency for our Argentine operations, rather than the Argentine peso. Beginning July 1, 2018, peso-denominated monetary assets and liabilities are remeasured into U.S. dollars using current Argentine peso exchange rates with resulting translation gains or losses included in results of operations. Nonmonetary assets and liabilities are remeasured into U.S. dollar using historic Argentine peso exchange rates.

Current wording

Argentina has experienced significant inflationary pressures the past few years, contributing to significant devaluation of its currency among other economic challenges. Our Argentine operation supports our Light Vehicle operating segment. Our sales in Argentina for the first nine months of 2024 of approximately $165 are 2% of our consolidated sales and our net asset exposure related to Argentina was approximately $67, including $21 of net fixed assets, at September 30, 2024. During the second quarter of 2018, we determined that Argentina's economy met the GAAP definition of a highly inflationary economy. In assessing Argentina's economy as highly inflationary we considered its three-year cumulative inflation rate along with other factors. As a result, effective July 1, 2018, the U.S. dollar is the functional currency for our Argentine operations, rather than the Argentine peso. Beginning July 1, 2018, peso-denominated monetary assets and liabilities are remeasured into U.S. dollars using current Argentine peso exchange rates with resulting translation gains or losses included in results of operations. Nonmonetary assets and liabilities are remeasured into U.S. dollar using historic Argentine peso exchange rates.

Previous wording

Commodity costs — The cost of our products may be significantly impacted by changes in raw material commodity prices, the most important to us being those of various grades of steel, aluminum, copper, brass and rare earth materials. The effects of changes in commodity prices are reflected directly in our purchases of commodities and indirectly through our purchases of products such as castings, forgings, bearings, batteries and component parts that include commodities. Most of our major customer agreements provide for the sharing of significant commodity price changes with those customers based on the movement in various published commodity indexes. Where such formal agreements are not present, we have historically been successful implementing price adjustments that largely compensate for the inflationary impact of material costs. Material cost changes will customarily have some impact on our financial results as customer pricing adjustments typically lag commodity price changes. Lower year-over-year commodity prices increased earnings during the first six months of 2024 by $4. Material cost recovery pricing actions decreased earnings in the first six months of 2024 by $26.

Current wording

Commodity costs — The cost of our products may be significantly impacted by changes in raw material commodity prices, the most important to us being those of various grades of steel, aluminum, copper, brass and rare earth materials. The effects of changes in commodity prices are reflected directly in our purchases of commodities and indirectly through our purchases of products such as castings, forgings, bearings, batteries and component parts that include commodities. Most of our major customer agreements provide for the sharing of significant commodity price changes with those customers based on the movement in various published commodity indexes. Where such formal agreements are not present, we have historically been successful implementing price adjustments that largely compensate for the inflationary impact of material costs. Material cost changes will customarily have some impact on our financial results as customer pricing adjustments typically lag commodity price changes. Lower year-over-year commodity prices increased earnings during the first nine months of 2024 by $17. Material cost recovery pricing actions decreased earnings in the first nine months of 2024 by $45.

Previous wording

Our current 2024 sales outlook is $10,450 to $10,950, a decrease of $200 from our prior guidance, reflecting a reduction in electric-vehicle demand. Based on our current sales and exchange rate outlook for 2024, we expect overall stability in international currencies with a modest headwind to sales primarily due to a weaker euro, Chinese renminbi, Brazilian real and Thai baht. At sales levels in our current outlook for 2024, a 5% movement on the euro would impact our annual sales by approximately $60. A 5% change on the Chinese renminbi, Indian rupee or Brazilian real rates would impact our annual sales in each of those countries by approximately $15. At our current sales outlook for 2024, we expect full year 2024 adjusted EBITDA to approximate $875 to $975, unchanged from our prior guidance. Adjusted EBITDA Margin is expected to be 8.6% at the midpoint of our guidance range, a 60 basis-point improvement over 2023, reflecting higher margin net new business and improving operational performance being partially offset by the benefit of the material cost recovery tailwind experienced in 2023 dissipating in 2024, as commodity prices stabilize, and increased investment to support our electrification strategy. We expect to generate free cash flow of approximately $100 at the midpoint of our guidance range, an increase of $25 from our prior guidance, reflecting a reduction in anticipated capital spending.

Current wording

Our current 2024 sales outlook is $10,200 to $10,400, a decrease of $400 at the mid-point of the range from our prior guidance, reflecting weaker global commercial vehicle and agricultural and construction/mining equipment markets, a further reduction in electric-vehicle demand and lower customer demand associated with one of our full-frame light-truck programs. Based on our current sales and exchange rate outlook for 2024, we expect overall stability in international currencies with a modest headwind to sales primarily due to a weaker Brazilian real, Chinese renminbi, Thai baht and Indian rupee, partially offset by a stronger euro. At sales levels in our current outlook for 2024, a 5% movement on the euro would impact our annual sales by approximately $30. A 5% change on the Chinese renminbi, Indian rupee or Brazilian real rates would impact our annual sales in each of those countries by approximately $5. At our current sales outlook for 2024, we expect full year 2024 adjusted EBITDA to approximate $855 to $895, $50 lower from our prior guidance at the midpoint of the range. Adjusted EBITDA Margin is expected to be 8.5% at the midpoint of our guidance range, a 50 basis-point improvement over 2023, reflecting higher margin net new business and improving operational performance being partially offset by the benefit of the material cost recovery tailwind experienced in 2023 dissipating in 2024, as commodity prices stabilize, and increased investment to support our electrification strategy. We expect to generate free cash flow of approximately $100 at the midpoint of our guidance range, reflecting a year-over-year reduction in anticipated capital spending.

Previous wording

Summary Consolidated Results of Operations (Second Quarter, 2024 versus 2023)

Current wording

Summary Consolidated Results of Operations (Third Quarter, 2024 versus 2023)

Previous wording

Sales in the second quarter of 2024 were $10 lower than in 2023. Weaker international currencies decreased sales by $22, principally due to a weaker euro, Brazilian real, Thai baht, Chinese renminbi and Indian rupee. The organic sales increase of $14, or 1%, resulted from higher year-over-year full-frame light-truck and light-vehicle engine production in North America and the conversion of sales backlog, partially offset by softening of construction/mining and agricultural equipment markets, particularly in Europe. Pricing actions and recoveries, including material commodity price and inflationary costs adjustments, increased sales by $17.

Current wording

Sales in the third quarter of 2024 were $193 lower than in 2023. Weaker international currencies decreased sales by $15, principally due to a weaker Brazilian real, partially offset by a stronger euro. The organic sales decrease of $176, or 7%, primarily resulted from declining global construction/mining and agricultural equipment markets, lower global light-truck production volumes and lower medium/heavy-truck production volumes in North America and Asia Pacific, partially offset by the conversion of sales backlog. Pricing actions and recoveries, including material commodity price and inflationary costs adjustments, increased sales by $16.

Previous wording

The North America organic sales increase of 6% was driven principally higher full-frame light-truck and light-vehicle engine production levels and the conversion of sales backlog, partially offset by lower medium- and heavy-duty truck production volumes. Second quarter 2024 full-frame light-truck production was up 2% and light-vehicle engine production was up slightly, while year-over-year Class 8 production was down 2% and Classes 5-7 was down 13%. Excluding currency effects, sales in Europe were down 11% compared with 2023. With our significant Off-Highway presence in the region, weaker construction/mining and agricultural equipment markets were a major factor. Organic sales in this operating segment were down 10% compared with 2023. Excluding currency effects, sales in South America were up 23% compared with 2023, reflecting improved medium- and heavy-duty truck production volumes. Excluding currency effects, sales in Asia Pacific decreased 1% compared to 2023, reflecting lower electric vehicle related product sales.

Current wording

The North America organic sales decrease of 3% was driven principally lower full-frame light-truck and medium- and heavy-duty truck production volumes, partially offset by the conversion of sales backlog and net customer pricing and cost recovery actions. Third quarter 2024 full-frame light-truck production was down 3%, Class 8 production was down 12% and Classes 5-7 was down 11% compared to 2023. Excluding currency effects, sales in Europe were down 15% compared with 2023. With our significant Off-Highway presence in the region, weaker construction/mining and agricultural equipment markets were a major factor. Organic sales in this operating segment were down 15% compared with 2023. Excluding currency effects, sales in South America were up 16% compared with 2023, reflecting improved medium- and heavy-duty truck production volumes. Excluding currency effects, sales in Asia Pacific decreased 12% compared to 2023, reflecting lower electric vehicle related product sales.

Previous wording

Cost of sales and gross margin — Cost of sales for the second quarter of 2024 increased $6 when compared to 2023. Cost of sales as a percent of sales was 60 basis points higher than in the previous year. Decremental margins due to lower sales volumes and unfavorable product mix, non-material inflationary cost impacts of $51, higher warranty expense of $8, higher spending on electrification initiatives of $5 and commodity cost increases of $1 were partially offset by higher material cost savings of $33, operational efficiencies of $27, lower premium freight costs of $7, lower program launch costs of $5 and lower incentive compensation expense of $5. Commodity costs are primarily driven by certain grades of steel and aluminum. Non-material inflation includes higher labor, energy and transportation rates.

Current wording

Cost of sales and gross margin — Cost of sales for the third quarter of 2024 decreased $202 when compared to 2023. Cost of sales as a percent of sales was 110 basis points lower than in the previous year. Incremental margins from higher material cost savings of $31, operational efficiencies of $21, commodity cost decreases of $13, lower premium freight costs of $7, lower warranty expense of $5, lower incentive compensation expense of $4 and lower program launch costs of $2 were partially offset by unfavorable product mix, non-material inflation of $33 and higher spending on electrification initiatives of $2. Commodity costs are primarily driven by certain grades of steel and aluminum. Non-material inflation includes higher labor, energy and transportation rates.

Previous wording

Gross margin of $255 for the second quarter of 2024 decreased $16 from 2023. Gross margin as a percent of sales was 9.3% in the second quarter of 2024, 60 basis points lower than in 2024. The deterioration in gross margin as a percent of sales was driven principally by the cost of sales factors referenced above. Material cost recovery mechanisms with our customers lag material cost changes by our suppliers by approximately 90 days. Gross margin was negatively impacted by lower year-over-year net material cost recoveries on both a dollar and percentage basis. The recovery of non-material inflation is not specifically provided for in our current contracts with customers resulting in prolonged negotiations and indeterminate recoveries.

Current wording

Gross margin of $245 for the third quarter of 2024 increased $9 from 2023. Gross margin as a percent of sales was 9.9% in the third quarter of 2024, 110 basis points higher than in 2023. The improvement in gross margin as a percent of sales was driven principally by the cost of sales factors referenced above. Material cost recovery mechanisms with our customers lag material cost changes by our suppliers by approximately 90 days. With commodity costs abating during the third quarter of 2024, gross margin was negatively impacted by net material cost recoveries on both a dollar and percentage basis. The recovery of non-material inflation is not specifically provided for in our current contracts with customers resulting in prolonged negotiations and indeterminate recoveries.

Previous wording

Selling, general and administrative expenses (SG&A) — SG&A expenses in the second quarter of 2024 were $132 (4.8% of sales) as compared to $144 (5.2% of sales) in the second quarter of 2023. SG&A expenses were $12 lower in thesecond quarter of 2024 primarily due to lower incentive compensation and lower professional services and consulting costs.

Current wording

Selling, general and administrative expenses (SG&A) — SG&A expenses in the third quarter of 2024 were $130 (5.3% of sales) as compared to $126 (4.7% of sales) in the third quarter of 2023. SG&A expenses were $4 higher in thethird quarter of 2024 primarily due to higher salary and employee benefit costs.

Previous wording

Amortization of intangibles — Amortization expense was $4 in both the second quarters of 2024 and 2023. See Note 3 of our consolidated financial statements in Item 1 of Part I for additional information.

Current wording

Amortization of intangibles — Amortization expense was $3 in both the third quarters of 2024 and 2023. See Note 3 of our consolidated financial statements in Item 1 of Part I for additional information.

Previous wording

Restructuring charges, net —Net restructuring charges were $12 in thesecond quarter of 2024 and $3 in thesecond quarter of 2023. See Note 4 of our consolidated financial statements in Item 1 of Part I for additional information.

Current wording

Restructuring charges, net —Net restructuring charges were $24 in thethird quarter of 2024 and $17 in thethird quarter of 2023. See Note 4 of our consolidated financial statements in Item 1 of Part I for additional information.

Previous wording

Loss on disposal group held for sale —In February 2024, we entered into a definitive agreement to sell our European hydraulics business to HPIH S.à r.l. for approximately $38. We classified the disposal group as held for sale during the first quarter of 2024. See Note 2 of our consolidated financial statements in Item 1 of Part I for additional information.

Current wording

Gain on disposal group previously held for sale —In February 2024, we entered into a definitive agreement to sell our European hydraulics business to HPIH S.à r.l. We classified the disposal group as held for sale in the first quarter of 2024. The transaction was not completed by the date set forth in the definitive agreement. The disposal group is no longer held for sale. See Note 2 of our consolidated financial statements in Item 1 of Part I for additional information.

Previous wording

Strategic transaction expenses relate primarily to costs incurred in connection with acquisition and divestiture related activities, including costs to complete the transaction and post-closing integration costs, and other strategic initiatives. Strategic transaction expensesin the second quarter of 2024 and 2023 were primarily attributable to investigating potential acquisitions and business ventures and other strategic initiatives.

Current wording

Strategic transaction expenses relate primarily to costs incurred in connection with acquisition and divestiture related activities, including costs to complete the transaction and post-closing integration costs, and other strategic initiatives. Strategic transaction expensesin the third quarter of 2024 and 2023 were primarily attributable to investigating potential acquisitions and business ventures and other strategic initiatives.

Previous wording

Interest income and interest expense— Interest income was $2 in the second quarter of 2024 and $5 in the second quarter of 2023. Interest expense was $39 in both the second quarter of 2024 and the second quarter of 2023, reflecting lower outstanding borrowings in 2024 being offset by higher average interest rates. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.8% in the second quarter of 2024 and 5.5% in the second quarter of 2023.

Current wording

Interest income and interest expense— Interest income was $4 in the third quarter of 2024 and $5 in the third quarter of 2023. Interest expense was $40 in the third quarter of 2024 and $41 in the third quarter of 2023, reflecting higher average outstanding borrowings in 2024 being offset by lower average interest rates. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.8% in the third quarter of 2024 and 6.1% in the third quarter of 2023.

Previous wording

Income tax expense — We reported income tax expense of$54 and $55 for the second quarter of 2024 and 2023, respectively. Our effective tax rates were 81% and 62% for the second quarter of 2024 and 2023, respectively. During the second quarter of 2024, we recorded tax expense of $11 due to revisions in our assertions on unremitted earnings in foreign jurisdictions. During the second quarter of 2023, we recorded tax expense of $19 for income tax reserves associated with prior tax years in foreign jurisdictions. Our effective income tax rates vary from the U.S. federal statutory rate of 21% due to establishment, release and adjustment of valuation allowances in several countries outside the U.S., different statutory tax rates outside the U.S. and withholding taxes related to repatriations of international earnings. The effective income tax rate may vary significantly due to fluctuations in the amounts and sources, both foreign and domestic, of pretax income and changes in the amounts of nondeductible expenses.

Current wording

Income tax expense — We reported income tax expense of $43 and $33 for the third quarter of 2024 and 2023, respectively. Our effective tax rates were 83% and 60% for the third quarter of 2024 and 2023, respectively. Our effective income tax rates vary from the U.S. federal statutory rate of 21% due to establishment, release and adjustment of valuation allowances in several countries outside the U.S., different statutory tax rates outside the U.S. and withholding taxes related to repatriations of international earnings. The effective income tax rate may vary significantly due to fluctuations in the amounts and sources, both foreign and domestic, of pretax income and changes in the amounts of nondeductible expenses.

Previous wording

Equity in earnings of affiliates — Net earnings from equity investments was $3 inthe second quarter of 2024 and $2 inthe second quarter of 2023. Net earnings from Dongfeng Dana Axle Co., Ltd. (DDAC) were $1 in the second quarter of 2024 and de minimis in the second quarter of 2023.

Current wording

Equity in earnings of affiliates — Net earnings from equity investments was $2 inthe third quarter of 2024 and $3 inthe third quarter of 2023. Net earnings from Dongfeng Dana Axle Co., Ltd. (DDAC) were de minimis in the third quarter of 2024 and $1 in the third quarter of 2023.

Previous wording

Sales in the first half of 2024 were $81 higher than in 2024. Weaker international currencies decreased sales by $19, principally due to a weaker Chinese renminbi, Thai baht, Indian rupee and South African rand. The organic sales increase of $102, or 2%, resulted from having a full six months of production on a full-frame light-truck customer program that launched and was ramping up production in the first quarter of last year, higher light-vehicle engine production volumes in North America and the conversion of sales backlog, partially offset by softening construction/mining and agricultural equipment markets. Pricing actions and recoveries, including material commodity price and inflationary cost adjustments, increased sales by $52.

Current wording

Sales in 2024 were $112 lower than in 2024. Weaker international currencies decreased sales by $34, principally due to a weaker Brazilian real, Chinese renminbi, Thai baht and Indian rupee, partially offset by a stronger euro. The organic sales decrease of $74, or 1%, resulted from declining global construction/mining and agricultural equipment markets, which were partially offset by having a full nine months of production on a full-frame light-truck customer program that launched and was ramping up production in the first quarter of last year and the conversion of sales backlog. Pricing actions and recoveries, including material commodity price and inflationary cost adjustments, increased sales by $68.

Previous wording

The North America organic sales increase of 9% was driven principally by having a full six months of production on a full-frame light-truck customer program that launched and was ramping up production in the first quarter of last year, higher light-vehicle engine production levels and the conversion of sales backlog, partially offset by lower medium- and heavy-duty truck production volumes. First half 2024 light-vehicle engine production was up 1%, while year-over-year Class 8 production was down slightly and Classes 5-7 was down 4%. Excluding currency effects, sales in Europe were down 8% compared with 2023. With our significant Off-Highway presence in the region, weaker construction/mining and agricultural equipment markets were a major factor. Organic sales in this operating segment were down 9% compared with the first half of 2023. Excluding currency effects, sales in South America were up 15% compared with 2023, reflecting improved medium- and heavy-duty truck production volumes. Excluding currency effects, sales in Asia Pacific decreased 2% compared to 2023, reflecting lower electric vehicle related product sales.

Current wording

The North America organic sales increase of 5% was driven principally by having a full nine months of production on a full-frame light-truck customer program that launched and was ramping up production in the first quarter of last year, the conversion of sales backlog and net customer pricing and cost recovery actions. Excluding currency effects, sales in Europe were down 10% compared with 2023. With our significant Off-Highway presence in the region, weaker construction/mining and agricultural equipment markets were a major factor. Organic sales in this operating segment were down 11% compared with the first nine months of 2023. Excluding currency effects, sales in South America were up 15% compared with 2023, reflecting improved medium- and heavy-duty truck production volumes. Excluding currency effects, sales in Asia Pacific decreased 6% compared to 2023, reflecting lower electric vehicle related product sales.

Previous wording

Cost of sales and gross margin — Cost of sales for the six months of 2024 increased $82, or 2%, when compared to 2023. Cost of sales as a percent of sales was 20 basis points higher than in the previous year. Decremental margins resulting from unfavorable product mix, non-material inflationary cost impacts of $95, higher spending on electrification initiatives of $15 and higher warranty expense of $2 were partially offset by higher material cost savings of $68, lower premium freight costs of $22, operational efficiencies of $18, lower program launch costs of $8, commodity cost decreases of $4 and lower incentive compensation expense of $3. Commodity costs are primarily driven by certain grades of steel and aluminum. Non-material inflation includes higher labor, energy and transportation rates.

Current wording

Cost of sales and gross margin — Cost of sales for the nine months of 2024 decreased $120, or 2%, when compared to 2023. Cost of sales as a percent of sales was 30 basis points lower than in the previous year. Incremental margins resulting from higher material cost savings of $99, operational efficiencies of $39, lower premium freight costs of $29, lower commodity costs of $17, lower program launch costs of $10, lower incentive compensation expense of $7 and lower warranty expense of $3 were partially offset by unfavorable product mix, non-material inflation of $129 and higher spending on electrification initiatives of $17. Commodity costs are primarily driven by certain grades of steel and aluminum. Non-material inflation includes higher labor, energy and transportation rates.

Previous wording

Gross margin of $499 for the first six months of 2024 decreased $1 from 2023. Gross margin as a percent of sales was 9.1% in the first six months of 2024, 20 basis points lower than in 2023. The deterioration in gross margin as a percent of sales was driven principally by the cost of sales factors referenced above. Material cost recovery mechanisms with our customers lag material cost changes by our suppliers by approximately 90 days. With commodity costs abating during the first six months of 2024, gross margin was negatively impacted by net material cost recoveries on both a dollar and percentage basis. The recovery of non-material inflation is not specifically provided for in our current contracts with customers resulting in prolonged negotiations and indeterminate recoveries.

Current wording

Gross margin of $744 for the first nine months of 2024 increased $8 from 2023. Gross margin as a percent of sales was 9.4% in the first nine months of 2024, 30 basis points higher than in 2023. The improvement in gross margin as a percent of sales was driven principally by the cost of sales factors referenced above. Material cost recovery mechanisms with our customers lag material cost changes by our suppliers by approximately 90 days. With commodity costs abating during the first nine months of 2024, gross margin was negatively impacted by net material cost recoveries on both a dollar and percentage basis. The recovery of non-material inflation is not specifically provided for in our current contracts with customers resulting in prolonged negotiations and indeterminate recoveries.

Previous wording

Selling, general and administrative expenses (SG&A) — SG&A expenses in thefirst six months of 2024 were $271 (5.0% of sales) as compared to $284 (5.3% of sales) in thefirst six months of 2023. SG&A expenses were $13 lower in the first six months of 2024 due to lower incentive compensation, lower professional services and consulting costs and lower marketing expenditures.

Current wording

Selling, general and administrative expenses (SG&A) — SG&A expenses in thefirst nine months of 2024 were $401 (5.0% of sales) as compared to $410 (5.1% of sales) in thefirst nine months of 2023. SG&A expenses were $9 lower in the first nine months of 2024 due to lower incentive compensation, lower professional services and consulting costs and lower marketing expenditures.

Previous wording

Amortization of intangibles — Amortization expense was $7 in the first six months of both 2024 and 2023. See Note 3 of our consolidated financial statements in Item 1 of Part I for additional information.

Current wording

Amortization of intangibles — Amortization expense was $10 in the first nine months of both 2024 and 2023. See Note 3 of our consolidated financial statements in Item 1 of Part I for additional information.

Previous wording

Restructuring charges, net —Net restructuring charges were $17 in the first six months of 2024 and $4 in the first six months of 2023. See Note 4 of our consolidated financial statements in Item 1 of Part I for additional information.

Current wording

Restructuring charges, net —Net restructuring charges were $41 in the first nine months of 2024 and $21 in the first nine months of 2023. See Note 4 of our consolidated financial statements in Item 1 of Part I for additional information.

Previous wording

Loss on disposal group held for sale —In February 2024, we entered into a definitive agreement to sell our European hydraulics business to HPIH S.à r.l. for approximately $38. We classified the disposal group as held for sale during the first quarter of 2024. See Note 2 of our consolidated financial statements in Item 1 of Part I for additional information.

Current wording

Loss on disposal group previously held for sale — In February 2024, we entered into a definitive agreement to sell our European hydraulics business to HPIH S.à r.l. We classified the disposal group as held for sale in the first quarter of 2024. The transaction was not completed by the date set forth in the definitive agreement. The disposal group is no longer held for sale. See Note 2 of our consolidated financial statements in Item 1 of Part I for additional information.

Previous wording

Strategic transaction expenses relate primarily to costs incurred in connection with acquisition and divestiture related activities, including costs to complete the transaction and post-closing integration costs, and other strategic initiatives. Strategic transaction expensesin the first six months of 2024 and 2023 were primarily attributable to investigating potential acquisitions and business ventures and other strategic initiatives.

Current wording

Strategic transaction expenses relate primarily to costs incurred in connection with acquisition and divestiture related activities, including costs to complete the transaction and post-closing integration costs, and other strategic initiatives. Strategic transaction expensesin the first nine months of 2024 and 2023 were primarily attributable to investigating potential acquisitions and business ventures and other strategic initiatives.

Previous wording

Interest income and interest expense— Interest income was $6 in the first six months of 2024 and $9 in the first six months of 2023. Interest expense increased from $73 in the first six months of 2023 to $78 in the first six months of 2024, due to higher interest rates on outstanding borrowings. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.8% in the first six months of 2024 and 5.3% in the first six months of 2023.

Current wording

Interest income and interest expense— Interest income was $10 in the first nine months of 2024 and $14 in the first nine months of 2023. Interest expense increased from $114 in the first nine months of 2023 to $118 in the first nine months of 2024, due to higher average outstanding borrowings and higher average interest rates. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.7% in the first nine months of 2024 and 5.6% in the first nine months of 2023.

Previous wording

Income tax expense — We reported income tax expense of$91 and $85 for the first six months of 2024 and 2023, respectively. Our effective tax rates were 89% and 57% for the first six months of 2024 and 2023, respectively. During the first six months of 2024, we recorded tax expense of $11 for valuation allowances related to foreign jurisdictions and tax expense of $11 due to revisions in our assertions on unremitted earnings in foreign jurisdictions. During the second quarter of 2023, we recorded tax expense of $19 for income tax reserves associated with prior tax years in foreign jurisdictions. Our effective income tax rates vary from the U.S. federal statutory rate of 21% due to establishment, release and adjustment of valuation allowances in several countries outside the U.S., different statutory tax rates outside the U.S. and withholding taxes related to repatriations of international earnings. The effective income tax rate may vary significantly due to fluctuations in the amounts and sources, both foreign and domestic, of pretax income and changes in the amounts of nondeductible expenses.

Current wording

Income tax expense — We reported income tax expense of $134 and $118 for the first nine months of 2024 and 2023, respectively. Our effective tax rates were 87% and 58% for the first nine months of 2024 and 2023, respectively. During the first nine months of 2024, we recorded tax expense of $11 for valuation allowances related to foreign jurisdictions and tax expense of $11 due to revisions in our assertions on unremitted earnings in foreign jurisdictions. During the first nine months of 2023, we recorded tax expense of $19 for income tax reserves associated with prior tax years in foreign jurisdictions. Our effective income tax rates vary from the U.S. federal statutory rate of 21% due to establishment, release and adjustment of valuation allowances in several countries outside the U.S., different statutory tax rates outside the U.S. and withholding taxes related to repatriations of international earnings. The effective income tax rate may vary significantly due to fluctuations in the amounts and sources, both foreign and domestic, of pretax income and changes in the amounts of nondeductible expenses.

Previous wording

Equity in earnings of affiliates — Net earnings from equity investments was $5 inthe first six months of 2024 and $3 inthe first six months of 2023. Net earnings from Dongfeng Dana Axle Co., Ltd. (DDAC) were $1 in the first six month of 2024 and de minimis in the first six months of 2023.

Current wording

Equity in earnings of affiliates — Net earnings from equity investments was $7 inthe first nine months of 2024 and $6 inthe first nine months of 2023. Net earnings from Dongfeng Dana Axle Co., Ltd. (DDAC) were $1 in both the first nine months of 2024 and 2023.

Previous wording

Light Vehicle sales in the second quarter of 2024, exclusive of currency effects, were 7% higher than 2023 reflecting mixed global markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions. Year-over-year North America full-frame light-truck production increased 2% and Asia Pacific light-truck production increased 6% in this year’s second quarter while light-truck production in Europe and South America decreased 3% and 5%, respectively. Light Vehicle sales in the first half of 2024, exclusive of currency effects, were 10% higher than 2023 reflecting mixed global markets, having a full six months of production on a full-frame light-truck customer program that launched and was ramping up production in the first quarter of last year, the conversion of sale backlog and the benefit of net customer pricing and cost recovery actions. Year-over-year North America full-frame light-truck production increased 1% and Asia Pacific light-truck production increased 4% in this year’s first half while light-truck production in Europe and South America decreased 2% and 4%, respectively. Net customer pricing and cost recovery actions increased year-over-year sales by $27 and $54 in this year’s second quarter and first half, respectively.

Current wording

Light Vehicle sales in the third quarter of 2024, exclusive of currency effects, were 5% lower than 2023 reflecting mixed global markets, partially offset by the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions. Year-over-year third-quarter North America full-frame light-truck production decreased 3% while light-truck production in Europe and Asia Pacific decreased 3% and 4%, respectively. Year-over-year light-truck production in South America was up 15%. Light Vehicle sales in the first nine months of 2024, exclusive of currency effects, were 5% higher than 2023, reflecting a full nine months of production on a full-frame light-truck customer program that launched and was ramping up production in the first quarter of last year, the conversion of sale backlog and the benefit of net customer pricing and cost recovery actions, partially offset by mixed global markets. Year-over-year North America full-frame light-truck production decreased 1% while light-truck production in Europe decreased 1% in this year’s first nine months. Year-over-year South America and Asia Pacific light-truck production increased 3% and 1%, respectively, in this year’s first nine months. Net customer pricing and cost recovery actions increased year-over-year sales by $19 and $73 in this year’s third quarter and first nine months, respectively.

Previous wording

Light Vehicle second-quarter and first-half 2024 segment EBITDA increased $18 and $36, respectively, from the comparable periods of 2023. Higher sales volumes provided a year-over-year earnings benefit of $10 (22% incremental margin) in the second quarter of 2024. Higher sales volumes provided a year-over-year earnings benefit of $38 (24% incremental margin) in the first half of 2024. The year-over-year performance-related earnings increase in the second quarter of 2024 was driven by net customer pricing and cost recovery actions of $27, operational efficiencies of $25, higher material cost savings of $12, lower program launch costs of $4, lower premium freight costs of $3 and lower incentive compensation expense of $2. Partially offsetting these performance-related earnings increases were inflationary cost increases of $45, higher spending on electrification initiatives of $10, commodity cost increases of $5 and higher warranty expense of $4. Year-over-year performance-related earnings drivers during the first half of 2024 were neutral compared with the first half of 2023. Year-over-year performance-related earnings increases were driven by net customer pricing and cost recovery actions of $54, higher material cost savings of $25, operational efficiencies of $20, lower premium freight costs of $10, lower program launch costs of $8, lower incentive compensation expense of $1 and lower warranty expense of $1. Offsetting these performance-related earnings increases were inflationary cost increases of $89, higher spending on electrification initiatives of $21 and commodity cost increases of $9.

Current wording

Light Vehicle segment EBITDA increased $3 and $39 in the third quarter and first nine months of 2024, respectively, from the comparable periods of 2023. Lower sales volumes decreased year-over-year earnings by $27 (38% decremental margin) in the third quarter of 2024. Higher sales volumes provided a year-over-year earnings benefit of $11 (13% incremental margin) in the first nine months of 2024. The year-over-year performance-related earnings increase in the third quarter of 2024 was driven by net customer pricing and cost recovery actions of $19, operational efficiencies of $14, commodity cost decreases of $12, higher material cost savings of $11, lower premium freight costs of $4, lower incentive compensation expense of $2, lower program launch costs of $1 and lower warranty expense of $1. Partially offsetting these performance-related earnings increases were inflationary cost increases of $23 and higher spending on electrification initiatives of $11. The year-over-year performance-related earnings increase during the first nine months of 2024 was driven by net customer pricing and cost recovery actions of $73, higher material cost savings of $36, operational efficiencies of $34, lower premium freight costs of $14, lower program launch costs of $9, lower incentive compensation expense of $3, commodity cost decreases of $3 and lower warranty expense of $2. Offsetting these performance-related earnings increases were inflationary cost increases of $112 and higher spending on electrification initiatives of $32.

Previous wording

Commercial Vehicle sales in the second quarter of 2024, exclusive of currency effects, were 1% higher than 2023 reflecting mixed global markets and the conversion of sales backlog being partially offset by net customer pricing and cost recovery actions. Year-over-year Class 8 production in North America was down 2% while Classes 5-7 was down 13% in this year’s second quarter. Year-over-year medium/heavy-truck production in Europe was down 9% while medium/heavy-truck production in South America and Asia Pacific were up 55% and 7%, respectively. Commercial Vehicle sales in the first half of 2024, exclusive of currency effects, were flat with 2023 reflecting net customer pricing and cost recovery actions and the conversion of sales backlog being offset by mixed global markets. Year-over-year Class 8 production in North America was flat while Classes 5-7 was down 4% in this year’s first half. Year-over-year medium/heavy-truck production in Europe was down 13% while medium/heavy-truck production in South America and Asia Pacific were up 37% and 3%, respectively. Net customer pricing and cost recovery actions decreased year-over-year sales by $1 in this year’s second quarter and increased year-over-year sales by $6 in this year’s first half.

Current wording

Commercial Vehicle sales in the third quarter of 2024, exclusive of currency effects, were 5% lower than 2023 reflecting generally weaker global markets partially offset by the conversion of sales backlog and net customer pricing and cost recovery actions. Year-over-year Class 8 production in North America was down 12% while Classes 5-7 was down 11% in this year’s third quarter. Year-over-year medium/heavy-truck production in Europe and Asia pacific were down 15% and 3%, respectively, while medium/heavy-truck production in South America was up 51%. Commercial Vehicle sales in the first nine months of 2024, exclusive of currency effects, were 1% lower than 2023 reflecting mixed global markets being partially offset by the conversion of sales backlog and net customer pricing and cost recovery actions. Year-over-year Class 8 production in North America was down 2% while Classes 5-7 was up 1% in this year’s first nine months. Year-over-year medium/heavy-truck production in Europe and Asia Pacific were down 12% and 1%, respectively, while medium/heavy-truck production in South America was up 41%. Net customer pricing and cost recovery actions increased year-over-year sales by $6 and $12 in this year’s third quarter and first nine months, respectively.

Previous wording

Off-Highway sales in the second quarter of 2024, exclusive of currency and divestiture effects, were 10% lower than 2023 reflecting softening global markets and the impact of net customer pricing and cost recovery actions, partially offset by the conversion of sales backlog. Year-over-year global construction/mining equipment and agricultural equipment markets are showing signs of softening, especially in Europe. Year-over-year second quarter construction/mining equipment and agricultural equipment production in Europe were down 10% and 15%, respectively. Off-Highway sales in the first half of 2024, exclusive of currency and divestiture effects, were 9% lower than 2023 reflecting softening global markets and the impact of net customer pricing and cost recovery actions, partially offset by the conversion of sales backlog. Year-over-year global construction/mining equipment and agricultural equipment markets are showing signs of softening, especially in Europe. Year-over-year first half construction/mining equipment and agricultural equipment production in Europe were down 10% and 15%, respectively. Net customer pricing and cost recovery actions decreased year-over-year sales by $8 and $16 in this year’s second quarter and first half, respectively.

Current wording

Off-Highway sales in the third quarter of 2024, exclusive of currency and divestiture effects, were 15% lower than 2023 reflecting softening global markets and the impact of net customer pricing and cost recovery actions. Year-over-year global construction/mining equipment and agricultural equipment markets are softening, especially in Europe. Year-over-year third quarter construction/mining equipment and agricultural equipment production in Europe were down 12% and 24%, respectively. Off-Highway sales in the first nine months of 2024, exclusive of currency and divestiture effects, were 11% lower than 2023 reflecting softening global markets and the impact of net customer pricing and cost recovery actions. Year-over-year global construction/mining equipment and agricultural equipment markets are softening, especially in Europe. Year-over-year first nine months construction/mining equipment and agricultural equipment production in Europe were down 12% and 24%, respectively. Net customer pricing and cost recovery actions decreased year-over-year sales by $6 and $22 in this year’s third quarter and first nine months, respectively.

Previous wording

Off-Highway second-quarter and first-half 2024 segment EBITDA decreased $15 and $18, respectively, from the comparable periods of 2023. Lower sales volumes decreased year-over-year earnings by $26 (33% decremental margin) in the second quarter of 2024. Lower sales volumes decreased year-over-year earnings by $43 (32% decremental margin) in the first half of 2024. The year-over-year performance-related earnings increase in the second quarter of 2024 was driven by higher material cost savings of $8, operational efficiencies of $8, commodity cost decreases of $3, lower premium freight costs of $2 and lower incentive compensation expense of $1. Partially offsetting these performance-related earnings increases were net customer pricing and cost recovery actions of $8 and inflationary cost increases of $2. The year-over-year performance-related earnings increase in the first half of 2024 was driven by higher material costs savings of $17, commodity cost decreases of $10, operational efficiencies of $10, lower premium freight costs of $4 and lower warranty expenses of $2. Partially offsetting these performance-related earning increases were net customer pricing and cost recovery actions of $16 and inflationary cost increases of $1.

Current wording

Off-Highway segment EBITDA decreased $7 and $25 in the third quarter and first nine months of 2024, respectively, from the comparable periods of 2023. Lower sales volumes decreased year-over-year earnings by $25 (24% decremental margin) in the third quarter of 2024. Lower sales volumes decreased year-over-year earnings by $68 (28% decremental margin) in the first nine months of 2024. The year-over-year performance-related earnings increase in the third quarter of 2024 was driven by operational efficiencies of $12, higher material cost savings of $7, lower warranty expense of $4, lower premium freight costs of $2, commodity cost decreases of $2 and lower incentive compensation expense of $1. Partially offsetting these performance-related earnings increases were net customer pricing and cost recovery actions of $6, inflationary cost increases of $3 and higher program launch costs of $1. The year-over-year performance-related earnings increase in the first nine months of 2024 was driven by higher material costs savings of $24, operational efficiencies of $22, commodity cost decreases of $12, lower premium freight costs of $6, lower warranty expense of $6 and lower incentive compensation expense of $1. Partially offsetting these performance-related earning increases were net customer pricing and cost recovery actions of $22, inflationary cost increases of $4 and higher program launch costs of $1.

Previous wording

Power Technologies primarily serves the light-vehicle market but also sells product to the medium/heavy-truck and off-highway markets. Power Technologies sales in the second quarter of 2024, exclusive of currency effects, were 7% higher than 2023, reflecting the conversion of sales backlog and mixed global markets, partially offset by the impact of net customer pricing actions. Year-over-year light vehicle engine production was flat in North America and down 5% in Europe. In addition, our second quarter 2024 sales in Europe were impacted by lower electric-vehicle product orders. Power Technologies sales in the first half of 2024, exclusive of currency effects, were 5% higher than 2023, reflecting the conversion of sales backlog, mixed global markets and the benefit of net customer pricing actions. Year-over-year light vehicle engine production was up 1% in North America and down 3% in Europe. In addition, our first half 2024 sales in Europe were impacted by lower electric-vehicle product orders. Net customer pricing and cost recovery actions decreased year-over-year sales by $1 in this year’s second quarter and increased year-over-year sales by $8 in this year’s first half.

Current wording

Power Technologies primarily serves the light-vehicle market but also sells product to the medium/heavy-truck and off-highway markets. Power Technologies sales in the third quarter of 2024, exclusive of currency effects, were 4% higher than 2023, reflecting the conversion of sales backlog, partially offset by weaker global markets and the impact of net customer pricing actions. Year-over-year light vehicle engine production in North America and Europe were down 5% and 7%, respectively. Power Technologies sales in the first nine months of 2024, exclusive of currency effects, were 5% higher than 2023, reflecting the conversion of sales backlog and the benefit of net customer pricing actions, partially offset by weaker global markets. Year-over-year light vehicle engine production in North America and Europe were down 1% and 4%, respectively. Net customer pricing and cost recovery actions decreased year-over-year sales by $3 in this year’s third quarter and increased year-over-year sales by $5 in this year’s first nine months.

Previous wording

Power Technologies second-quarter and first-half 2024 segment EBITDA increased $3 and $7, respectively, from the comparable periods of 2023. The EBITDA benefit of higher sales volumes was offset by unfavorable product mix in both the second-quarter and first-half of 2024. The year-over-year performance-related earnings increase in the second quarter of 2024 was driven by higher material cost savings of $5, commodity cost decreases of $2, operational efficiencies of $1, lower program launch costs of $1 and lower incentive compensation expense of $1. These performance-related earnings increases were partially offset by inflationary cost increases of $3, higher premium freight costs of $2, higher warranty expense of $1 and net customer pricing and cost recovery actions of $1. The year-over-year performance-related earnings increase in the first half of 2024 was driven by higher material cost savings of $11, net customer pricing and cost recovery actions of $8, commodity cost decreases of $4, lower program launch costs of $1 and lower incentive compensation expense of $1. These performance-related earnings increases were partially offset by operational inefficiencies of $11, inflationary cost increases of $5, higher premium freight costs of $1 and higher warranty expense of $1.

Current wording

Power Technologies third-quarter segment EBITDA decreased $2 and first nine months segment EBITDA increased $5 from the comparable periods of 2023. The EBITDA benefit of higher sales volumes was offset by unfavorable product mix in both the third quarter and first nine months of 2024. The year-over-year performance-related earnings decrease in the third quarter of 2024 was driven by commodity cost increases of $4, inflationary cost increases of $4 and net customer pricing and cost recovery actions of $3. These performance-related earnings decreases were partially offset by higher material costs savings of $7, lower spending on electrification initiatives of $1, lower incentive compensation expense of $1 and lower program launch costs of $1. The year-over-year performance-related earnings increase in the first nine months of 2024 was driven by higher material cost savings of $18, net customer pricing and cost recovery actions of $5, lower program launch costs of $2, lower incentive compensation expense of $2 and lower spending on electrification initiatives of $1. These performance-related earnings increases were partially offset by operational inefficiencies of $11, inflationary cost increases of $9, higher premium freight costs of $1 and higher warranty expense of $1.