Mobility technology company Aptiv has reported its fourth-quarter financial results, which expectedly were mired by General Motors' labor strike by the United Automobile Workers (UAW). This situation, which played out in October, led to considerable losses for Aptiv as it is a vital parts supplier to GM and holds a significant stake in the automaker's autonomous vehicle program.
Aptiv's U.S. revenue (as per generally accepted accounting principles) for Q4 2019 stood at $3.6 billion, a decrease of 1% year-over-year. The company registered Q4 net income of $230 million and an operating income margin of 9%, with an adjusted operating income margin of 10.8%, a number that fell by 180 basis points compared to the year before.
Over the full year 2019, the company reported revenue of $14.4 billion, a decrease of 1% from 2018, resulting from the impact of the GM labor strike that eventually led to a flat performance in North America. However, Aptiv's international markets showed a sizable growth of 8% in Europe and 4% in Asia.
The lukewarm growth and declining vehicle production over the last year have not stopped Aptiv from investing in engineering necessary to ensure its dominance in the market. Kevin Clark, the CEO of Aptiv, mentioned that the company continued to reduce its overhead costs to further enhance its flexibility and business model competitiveness.
"We also announced a 50-50 joint venture with Hyundai, which manages the development of production-ready, autonomous driving systems — cost-effectively and at scale — which we now expect to close at the end of the first quarter," said Clark.
Clark pointed out that Aptiv's business bookings increased by 15%, even on the face of a 10% decline in global vehicle production over 2019. The global electric vehicle initiative sits well with Aptiv, with Clark remarking that more than 20% of all the vehicles produced annually by 2022 will include an electrified power train.
In the electrified vehicle segment, Aptiv's high-voltage electrification revenues totaled about $350 million, up by almost 40% year-over-year, making it one of the company's fastest-growing product lines.
That said, Joseph Massaro, the CFO of Aptiv, described the macro auto landscape to be softening, with the company expecting vehicle production to be down by 3% over 2020. Aptiv expects to see a 3% decline in vehicle production in China, a 4% decline in Europe and a 1% decline in North America over this year.
During the earnings call, Massaro touched on Aptiv's Chinese interests, dismissing fears on the impact of the coronavirus and mentioning that the company expects nothing more than two weeks of delay in production, compounded by labor dislocation during the Chinese New Year break.
The company will also continue to invest in its advanced driver assistance systems (ADAS) technology, having poured in more than $70 million into the safety program, which Clark called a "smart thing to do in the near term and long term." Aptiv's safety business now has healthy double-digit operating margins, which is better than the company's traditional businesses that run on low double-digit operating margins
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