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Aptiv PLC (NYSE:APTV)
Q2 2019 Earnings Call
Jul 31, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day. My name is Chris. and I will be your conference operator today. At this time, I would like to welcome everyone to the Aptiv Second Quarter 2019 Earnings Conference Call. [Operator Instructions]. Elena Rosman, Vice President of Investor Relations, you may begin your conference.

Elena Rosman -- Vice President of Investor Relation

Thank you, Chris. Good morning, and thank you to everyone for joining Aptiv's Second Quarter 2019 Earnings Conference Call. To follow along with today's presentation. Our slides can be found at ir.aptiv.com and consistent with prior calls today's review of our actual and forecasted financials exclude restructuring and other special items and will address the continuing operations of Aptiv. The reconciliation between GAAP and non-GAAP measures for both our second quarter financials, as well as our outlook for the third quarter and full year 2019, are included in the back of today's presentation and the earnings press release. Please see Slide 2, for disclosure on forward-looking statements, which reflect Aptiv's current view of future financial performance, which may be materially different from our actual performance for reasons that we cite in our Form 10-K and other SEC filings.

Joining us today will be Kevin Clark, Aptiv's President and CEO, and Joe Massaro CFO and Senior Vice President. Kevin will provide a strategic update on the business, and then Joe will cover the financial results and our outlook for 2019 in more detail. With that, I'd like to turn the call over to Kevin Clark.

Kevin P. Clark -- President and Chief Executive Officer

Thank you, Elena. Good morning, everyone. I'm going to begin by providing an overview of our second quarter highlights, and then provide a perspective on the second half of the year. Joe will then take you through our second quarter financial results as well as our full year financial outlook in more detail.

Second quarter was in line with the guidance we provided back in May, while EBITDA, operating income and earnings per share were all above the high end of our guidance range, reflecting very strong operating performance, even in the challenging macro environment.

Revenues increased 4% representing nine points of growth over underlying vehicle production, reflecting strong above market growth across both segments in every geographic region. Operating income and earnings per share totaled $405 million and $1.33 respectively, driven by volume growth overhead cost reductions, and very solid manufacturing immaterial performance.

Our portfolio of industry-leading advanced technologies, led to another strong quarter of new customer awards totaling $5.5 billion, bringing the year-to-date total to just under $10 billion. To put it simply, it was another good quarter in a tough environment, further validating our portfolio of safe green and connected technologies flexible operating model and sustainable business strategy.

Moving to Slide 4, given the weak macro environment, I'd like to provide a backdrop for our full-year outlook, which remains unchanged. Starting on the left, we now expect global vehicle production for the year to decline 4%, versus our previous forecast of 3.5%. Driven by a 5% decline in automotive, light vehicle production, principally driven by further weakness in China, partially offset by a flat commercial vehicle market.

Foreign exchange continues to be a headwind as euro in RMB exchange rates are weaker than the prior year, higher commodity prices principally specialty resins remain a headwind, as a result of tight supply conditions globally, and lastly US, China tariffs also continue to be a headwind.

Although we are aggressively working to remediate, the impact on our results. However, as I mentioned, our full year outlook for revenue, EBITDA and operating profit remains unchanged, as well of continued strong growth over market driven by both content per vehicle growth and market share gains, our balanced customer regional and end-market exposure and incremental overhead cost reductions as well as the timing related to material and manufacturing productivity initiatives, all of which are gaining traction and translating into margin expansion in the second half of 2019. In short, our strong performance in the second quarter gives us confidence in our full year outlook and our ability to execute in a challenging macro environment.

Turning to Slide 5. Second quarter new business bookings totaled $5.5 billion, highlighting our portfolio alignment to the safe, green and connected mega trends. In our Advanced Safety and User Experience segment our expertise in central compute platforms in sensing and perception systems are helping us deliver smarter, safer and more integrated solutions both outside the vehicle with advanced active safety systems as well as in the cabin, through enhanced user experiences.

In the second quarter, Active Safety new business bookings totaled $1.4 billion, which puts us on track to exceed $4 billion in 2019. Our Signal and Power Solutions segment had new business bookings totaling $3.7 billion during the quarter, including $1.9 billion of electrical distribution and $1.8 billion of engineered components bookings. Within those numbers, we booked over $350 million in high-voltage electrification awards, bringing the year-to-date total to roughly $800 million and we're on track to meet or exceed last year's record of $2 billion.

Turning to our Advanced Safety and User Experience segment highlights on Slide 6. Second quarter revenues increased 8%, 13 points over market. The continued strong demand for Active Safety Solutions drove product line revenue growth of 53%. And as expected, the roll-off of revenues tied to our displays business contributed to a decline in our user experience product line revenues.

During the quarter we were awarded the Active Safety System for the Jeep Grand Cherokee and Wagoneer nameplates. Additions to our previously awarded satellite architecture programs with FCA. further underscoring our industry-leading position in advanced ADAS solutions.

Turning to Slide 7, our unique ability to leverage our capabilities in both the brain and nervous system of the vehicle has perfectly positioned us to deliver the advanced architecture necessary to support the feature rich electrified and highly automated vehicles of the future. Smart vehicle architecture or SVA is an optimized and scalable architecture, that lowers the total cost of ownership for the OEM, while also unlocking the opportunity for new business models. During our 2019 Investor Day in early June, we highlighted the two advanced development awards we received this year. And while customers are evolving their vehicle architecture roadmap at different speeds. We see many of them transitioning to more scalable systems enabling four FCA in the future. Underscoring that point, we own a 11 different domain controller platforms and recently were awarded the zone controller for a premium European OEM. Effectively representing our first power data center win. This award represents another step in the continued commercial validation of Aptiv's FCA approach as well as our unique ability to conceive specify and deliver next generation architecture solutions.

Turning to Slide 8, our Signal & Power Solution segment is focused on enabling the high speed data and power distribution technologies that required to support the advance, safe green and connected applications that our customers are demanding. Revenues increased 2% during the quarter, seven points over market. High voltage electrification revenues increased 67% while commercial vehicle and industrial revenues were up 36%. During the quarter, we were awarded several new business wins including the Signal Distribution and the new Tesla Model Y in the Model 3 launching in China. The low voltage systems for the -- for the Fiat 500 battery electric vehicle recall that last quarter we won the high voltage system as well in a new electrified large SUV platform in China with a premium OEM. These awards for both low and high voltage systems underscore our strength in optimizing electrical distribution for complex architectures. As well as our ability to serve customers globally to consistent launch execution.

Turning to Slide 9, all of our global customers are aggressively working to electrify their vehicle lineups. Beginning on the left side, you can see the progression of CO2 emissions in Europe. Between 2010 and 2018, CO2 emissions declined at an average rate of 2% per year. However, to meet future targets OEMs will need to reduce CO2 emissions by a much more aggressive 7% per year through 2021 and then sustained 5% annual reductions through 2013.

These are challenging targets and OEMs have been responding by aggressively accelerating their electrification technology roadmaps. Moving to the right side of the slide, Aptiv's high voltage new business bookings and revenue growth track the pace of deployment of our customers. Between now and 2022 OEMs are expected to launch roughly 45 new high-voltage platforms globally spending hundreds of nameplates representing 13% of global vehicle production.

Based on our $4.5 billion of new business bookings since 2016 high voltage electrification is among our fastest growing product lines with revenues expected to be over a $1 billion in 2020 of 40% compounded growth rate over the period.

Turning to Slide 10, continued above market growth in our Signal & Power Solutions segment is partially the result of our focus diversification strategy, allowing us to expand our capabilities into the commercial vehicle and industrial markets, both organically and inorganically.

Our non-auto, revenues are approximately 14% of total sales today. That's up from just 6% in 2015, and are expected to reach 25% by 2025. As previously highlighted, our acquisition of Winchester Interconnect provided us with a solid platform to build upon and execute our engineered components group diversification strategy.

As shown on the slide, the Winchester management team has been actively adding accretive connector bolt-ons with a number of other acquisitions in the pipeline. In the last 12 months, Winchester acquired W-Technology. The supplier of rotatable cable connectors and precision machine components strengthening our capabilities in the oil and gas space.

And more recently Falmat with specializes in ruggedized mission critical cables and assemblies further expanding our industrial revenues. Now consistent across these businesses is the high cost of product failure and the need to meet the challenging temperature, vibration and other design specifications. We are more confident than ever in Winchester's ability to serve as a platform for additional bolt-on opportunities in the engineered component space. Before I turn it over to Joe, I'd like to take a minute to recap our 2019 Investor Day.

For those of you who participated either live or via the video webcast. I hope you came away with an even better understanding of our business strategy, our advanced portfolio of forces and solutions and rigorous execution culture. For those of you who missed the event the video replay remains available on our website for your review.

To summarize, we are focused on building more predictable and sustainable business with robust downturn resiliency better positioned to outperform in any macro environment. Our ownership mindset means that we remain disciplined and focused on driving the successful execution of our strategy and continue our track record of outperformance. The combination of which delivers significant value to our shareholders. So with that I'm going to hand the call over to Joe to take us through the second quarter results and outlook for 2019.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Thanks Kevin and good morning everyone. Starting with our second quarter revenue growth on Slide 12. Revenues of $3.6 billion were up 4% adjusted, totaling 9% growth over market as vehicle production declined 5% in the quarter. Excluding acquisitions, organic growth over market was 6%. As a reminder KUM is now fully integrated and lap itself at the end of the second quarter, while Winchester Interconnect will lap in the fourth quarter. The strong launch volume and content gains we had in 2018 continue into 2019, helping to offset price of 1.6% in the quarter and the unfavorable impact of FX and commodities. From a regional perspective, we saw strong performance in every major region of the world despite lower vehicle production year-over-year.

North America revenues were up 1% adjusted with 3 points of growth over market. Excluding acquisitions, organic growth over market was down 1% driven by the previously discussed exit of the display audio product line and low passenger car volumes overall, partially offset by key launches in the quarter. Europe revenues were up 7% adjusted with 13 points of growth over market driven by the uptick of several Active Safety and electrification programs. And lastly, our China adjusted growth was negative 6%, significantly exceeding China vehicle production resulting in growth over market of 10 points. Although China vehicle production was lower than our expectations, we continue to see strong growth across our key product lines.

I will provide an update on our production outlook for the year shortly. Turning to Slide 13, as Kevin indicated second quarter EBITDA, operating income and EPS were all above the high end of guidance we provided back in May. EBITDA and operating income of $583 million and $405 million respectively, reflected the impact of lower vehicle production. FX, commodity and tariff headwinds, partially offset by our cost savings and reduction actions as well as the positive benefit of volume growth.

Operating margin, adjusted for FX, commodities and tariffs was 12.1%. Tariffs were $6 million headwind year-over-year, although favorable to guidance reflecting both lower demand levels as well as some benefit from our tariff remediation actions. Earnings per share of $1.33 was $0.19 above the midpoint of our guidance. $0.08 from higher operating income driven in part by traction on the cost savings reduction actions noted earlier $0.08 better on tax expense inclusive of increasing benefits from the changes to our structural operating model. These benefits will be sustainable going forward, as I'll cover in a moment. Net below the line items were also slightly favorable.

Moving to the segments on the next slide. For the quarter Advanced Safety and User Experience revenues grew 8% or 13 points over market. Driven by new launch volumes and robust growth in Active Safety more than offsetting the planned roll-off of our display audio product line, in the infotainment launch cadence and user experience. Operating performance before the impact of higher mobility spend included higher engineering investments to support our strong backlog of new wins, particularly in active safety. As a result, we expect Active Safety revenues up 45% for the year with low double-digit operating margins. Our mobility spend for the quarter totaled $48 million and we remain on track to our target of approximately $180 million for the full year.

Turning to Signal and Power Solutions on Slide 15. Revenues were up 2% adjusted totaling 7% growth over market. Excluding acquisitions, organic growth over market was 3% driven by strong double-digit growth in our high-voltage electrification product line. EBITDA margin, adjusted for the dilutive impact of FX, commodities and tariffs was 19.2%, up 20 basis points. Operating income margin on a comparable basis was 14.1% down 50 basis points.

Given continued weak macros Slide 16 provides an update of our global vehicle production assumptions underpinning our revenue outlook for the year. We saw vehicle production in the second quarter track our expectations overall, down 5% in total. As Europe volumes were better than expected offset by a weaker China. However, extended macro uncertainty regulatory constraints and continued weak vehicle sales, particularly in China have caused us to revise our vehicle production outlook slightly lower for the remainder of the year.

At a global level, we expect vehicle production to be down 2% in the third quarter and 4% for the full year versus our prior outlook of down 3.5%. Driven by a percent decline in automotive light vehicle production partially offset by a flat commercial vehicle market. From a regional perspective, we expect China production to decline 15% in the third quarter and 13% for the year and while we continue to experience strong growth over market in China, driven by double-digit growth in our key product areas. We are preparing for structurally lower industry volumes going forward and continue to take actions to adjust our cost structure in the region.

Turning to Europe, we continue to expect vehicle production to be flat in the third quarter and down 4% for the full year, driven by lower customer demand and program launch delays. Lastly, we see North American production largely unchanged from the prior guide. Despite the challenging global market, we continue to expect our portfolio of safe, green and connected technologies and balanced regional customer in industrial market mix to more than offset the automotive macros contributing to growth over market in every region.

As a result, our growth above market rate for the year is slightly higher at up -- at up 9% to 10%, while our revenue outlook of $14.65 billion at the midpoint remains unchanged.

Turning to Slide 17, third quarter revenue was expected in the range of $3.6 billion to $3.7 billion, up 8% at the midpoint or 10 points of growth over market. As I mentioned, that assumes global vehicle production down 2%. In addition to a $1.12 euro and an RMB of 6.90. Operating income and EPS are expected to be $425 million and a $1.30 at the midpoint respectively, and includes estimated tariffs of $16 million in the quarter.

Moving to the full year, no change in our 2019 outlook at the midpoint for revenue, EBITDA and operating income. Revenues are expected to be in the range of $14.525 billion to $14.725 billion up 5% to 6%. We continue to expect adjusted EBITDA and operating income to be $2.4 billion and $1.6 billion at the midpoint respectively. And our outlook includes over $90 million of FX and commodity and $44 million of US, China tariff headwinds for the full year. In aggregate, we believe these are mostly short-term impacts that should improve as we head into 2020, and given the strength of our revenue growth in bookings pipeline, we continue to invest in our key technologies and capabilities.

EPS is now expected in the range of $5.05 to $5.15, $0.10 higher at the midpoint from prior guidance, reflecting our updated tax rate assumption of 12.5%. Looking forward to 2020, we expect our tax rate to remain in the range of 12% to 13% reflecting our relocation to Dublin and continued alignment of our structural operating model. Operating cash flow is expected to be $1.65 billion with restructuring cash outflows in 2019 of a $150 million and capex unchanged at roughly $800 million.

Turning to the next slide. We thought it'd be helpful to provide more detail on the full year outlook from our first half versus second half perspective. Starting with the revenue walk in the left, second half revenue is expected in the range of $7.3 billion to 7.5 billion driven by incremental volume from new program launches and ramp ups in Active Safety engineered components at high voltage electrification. Partially offset by lower production volumes in the second half.

Moving to the walk on the right, we expect $920 million of second half operating income at the midpoint. Headwinds from FX, commodities and tariffs are offset by the benefits of volume growth and continued traction in our material and manufacturing performance initiatives that Kevin referenced earlier, as well as the added benefits from our continued cost savings and reduction actions. In summary, the strength of our revenue growth in the face of vehicle production declines underscores the strength of our product portfolio, while operational performance continues to reflect the benefits, but remaining maniacal about our cost structure and our ability to self-fund investments in future growth. With that I'd like to hand the call back to Kevin for his closing remarks.

Kevin P. Clark -- Chief Executive Officer

Thanks, Joe. Let me wrap up on Slide 19 before we open it up for Q&A. Our second quarter performance was further evidence of Aptiv's ability to drive sustained above market growth and deliver on our commitments, despite a tough macro environment, we're maintaining our outlook for 2019, which includes roughly 5% to 6% revenue growth, representing 9 points to 10 points of growth over market.

As Joe mentioned, our outlook for the second half of the year, really reflects our balanced approach to investing in future growth while reaping the benefits of our lean cost structure in our flexible business model. Now we believe we are -- we believe our unique formula, further differentiates Aptiv as a company capable of capitalizing on the key global Auto 2.0 megatrends, while also building a more predictable and sustainable business with robust downturn resiliency better positioned to perform in any macro environment and continuously delivering value to our shareholders. So with that, let's open up the line for Q&A.

Questions and Answers:

Operator

Thank you. [Operator Instruction].Your first question comes from the line of David Tamberrino of Goldman Sachs. Your line is open.

David Tamberrino -- Goldman Sachs -- Analyst

Great. Good morning, gentlemen.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Good morning.

David Tamberrino -- Goldman Sachs -- Analyst

First question is really on your organic growth in the market. I think that got raised slightly what's really driving that is it improved take rates is it driven by customer pull-through is it OEM choice and then for the fourth quarter, can you just remind us how much in acquisitions is going to be rolled into that versus pure growth over your market forecasts.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Yeah. David -- let me -- let me take the acquisition question first and then I'll start your first very question Q4 will be very small. We closed on Winchester in mid-October. So if you think that business runs roughly at $85 million or so a quarter your -- your fraction of that. As it relates to the growth over market. I think it's really in the sort of in the product lines that we're talking about and it's really across a number of regions. Right. We continue to see strong growth in Active Safety. I would say that's a penetration as well as new launch discussion, high voltage clearly particularly in China really around launches in some of the new programs we have both on the, both within within the China locals, as well as the multinationals.

David Tamberrino -- Goldman Sachs -- Analyst

Okay. And was there something different that you've seen throughout the year that gave you the confidence to raise that or was a conservatism earlier in the year. Just wondering what you're seeing just again because you do have your global production coming down, but the growth of the market going up and obviously revenue basically unchanged.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Yeah, I would say that's just more of the math, it's working out as we're pulling -- we're looking at customer schedules whose ARPU is down, we're seeing some pickup in that part of the business. Active Safety and electrification relative to what's coming down. Remember, particularly in Signal and Power solutions with content on one out of every 3.5 vehicles. We've got, we've got a fair amount of market in that business. So it's really sort of the market is coming down, while those product lines are our sort of at or slightly above expectations.

David Tamberrino -- Goldman Sachs -- Analyst

Understood. Then my follow-up is on the validation of your smart vehicle architecture. Dead zone controller award. Is that a business that you were able to win as a result of the two advanced development awards that you have in place is that the next step from a satellite architecture that you already have in place. Just trying to understand where to fit that in for the story as you continue to provide solutions for -- for some OEM partners, but just wondering if it was the, if it's the vision that you have for a rearchitected vehicle long term that allowed you to win it or if it's just the next evolution of a program you are already on.

Kevin P. Clark -- President and Chief Executive Officer

So no, David, it's with a completely separate OEM. So it's the next step in the evolution of smart vehicle architecture. We think it's again further validation of the direction that the industry is headed in and what we're trying to drive and we feel as though we're competitively well positioned. And we would expect, as we referenced in our comments, 11 domain controllers plus the zone controller you'll continue to see more awards in the future.

David Tamberrino -- Goldman Sachs -- Analyst

Okay. And then this is just -- is this more complicated and more complex in the satellite architecture product that you currently have out there?

Kevin P. Clark -- President and Chief Executive Officer

It's a part -- it's a -- you should consider it's a part of the satellite architecture, it's what enables the various domain controllers to actually operate. So it's ultimately a part of the complete [Phonetic] FVA solution.

David Tamberrino -- Goldman Sachs -- Analyst

Understood. Thank you.

Kevin P. Clark -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from Emmanuel Rosner of Deutsche Bank. Your line is open.

Kevin P. Clark -- President and Chief Executive Officer

Good morning, Emmanuel.

Emmanuel Rosner -- Deutsche Bank -- Analyst

Hi, good morning. So my first question is around the second half walk, obviously very strong ramp-up of margin expected between the first half and second half. And the biggest bucket in your walk is obviously performance, 220 basis point. Could you give us a little bit more color around what actually goes in there, anything that you could sort of dimension for us in terms of size of buckets? And some high level point of view, is it mainly a function of being able to catch up the costs to where the lower production is now as volumes stabilize?

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Hey, Emmanuel. It's Joe. Let me go through a bit here. So, you're right, there certainly is a ramp up. I think when we talk about performance, generally talking about manufacturing efficiencies, material savings, some of the cost savings obviously hit that line but our cost savings also include sort of the other overhead categories as well as SG&A. So really the bulk of that number is material in manufacturing performance and efficiencies. A couple of things to think about. If you compare H1 to H2 on its face, you're right, it's a significant step up. If you remember from last year, we had about $65 million of inefficiencies in the back half from OE plant closures, when they were sort of closing unexpectedly for a week or two, that totaled about $65 million. So if you think about our performance increase H1, H2 is a little over $200 million, about -- a little under $200 million, about $65 million of that is going to be sort of lapping that performance issues. We did about $90 million of performance in the first half. So if you look at that we're sort of running at about $40 million higher second half to first half, which is a step-up we're going to have and we have initiatives to achieve that number. We obviously got a work to accomplish it but from our perspective, you know $40 million of additional performance and over a six month period it is something that's within our capabilities to achieve.

Kevin P. Clark -- President and Chief Executive Officer

Yeah, Emmanuel. I think if you look historically, we tend to have more performance in the back half of the year, the second half of the year material manufacturing then in the first half. So there is also a natural cadence there.

Emmanuel Rosner -- Deutsche Bank -- Analyst

Okay. That's helpful color and then second question would be on your wiring business, one of your smaller competitors was essentially making noises around giving some fairly substantial price reductions and you know not too clear what the drivers are from -- from the outside. And just I was just curious, from your perspective, are you seeing a different competitive environment on the wiring or harness business and if not overall are the actions from one of your smaller competitors can they have an impact on you?

Kevin P. Clark -- President and Chief Executive Officer

yeah. Listen, I think, based on Joe walk you through the reconciliation and gave you an update on price down. So, look, -- we ended the year. We ended the quarter, I'm sorry, roughly 1.6% we are consistent in terms of our outlook that will be in the 1.5% to 2% range. We get to say -- question asked pretty regularly and you've heard our response with respect to the markets we're in a challenging industry and the pricing discussion is always a tough discussion, we would tell you the underlying environment really hasn't changed. I think you know each competitor or each supplier may have different situations affecting price, but the overall market dynamics from a price standpoint, are, continue to be tough just as they've always been. As it relates, can a competitor, can a competitor effect the overall market. I guess it's possible, but at the end of the day you have to falsely execute and deliver on we will launch 2200 programs this year, and you have to falsely execute and deliver on those programs. And that's what tends to be the most important that in the technology that you're bringing -- bringing to bear to the customer and we view our wins, our major wins with customers like Tesla on a global basis to be validation of the value that we bring the technology we're bringing in our operating execution.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

The thing I'd add Emmanuel is that, there is competitors and those competitors. Right. Our competitors for us in that SPS business on the electrical distribution side are really the [Phonetic] Izaki's of the world they are, who we bump up against the most with Sumitomo a bit of a distant third and that when you think about our business focused on KSK or win specific builds really large global platforms complete electrical distribution systems that I'd like to think, I think, I know who you're talking about obviously, I'd like to think we're at a much different level than they are in terms of that type of business.

Emmanuel Rosner -- Deutsche Bank -- Analyst

Great. Yeah, that's very helpful. Thank you.

Operator

Your next question comes from Itay Michaeli of Citi. Your line is open.

Itay Michaeli -- Citi -- Analyst

Great, thank you. Good morning, everybody.

Kevin P. Clark -- President and Chief Executive Officer

Good morning.

Itay Michaeli -- Citi -- Analyst

Good morning. Just as a first question on China. It does look like the growth over market there in Q2 was below the original guide it does seem that you had that accelerating in the back half of the year. I was hoping you give us a little more color about the drivers there perhaps program timing and so forth?

Kevin P. Clark -- President and Chief Executive Officer

Yeah. Itay it's Kevin and Joe can -- can comment. It's just program timing. So if you look at the back half of the year, you'll see continued strong, in acceleration and growth partly due to incremental launches in the back half of the year versus the front half, but continued strong market outgrowth in absolute revenue growth in Q3 and Q4.

So there's a little bit of movement there that we experienced in Q2, but have not seen any incremental retiming of programs or cancellation of programs at this point in time.

Itay Michaeli -- Citi -- Analyst

Great, that's helpful. And then a second question on Slide 18, just want make sure I'm interpreting it correctly. So the volume bucket and the production bucket are you effectively saying that your backlog and content is going to be more accretive than the declines in pressure, you'll see on the base business because some suppliers, talk about the backlog coming in at a lower margin than the base business, just curious how you're experiencing to that in the second half and even beyond.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

No, the margin coming out of backlog Itay is consistent with what we would have expected and consistent with what we've historically seen, right, we've had somewhat higher decrementals in Q1 as production was coming down quick and we were adjusting sort of capacity and cost structures decrementals in Q2 were very much in line with that 25% to 30% that we've always guided to.

So again we're dealing with, what I'll call sort of the cost structure on the capacity side. But when you look at the profitability of the business coming out of backlog, it's very consistent with where we thought it was going to be with the existing business, and certainly haven't seen that impact.

Itay Michaeli -- Citi -- Analyst

Yeah. But just to clarify on slide 18 that the difference between volume and production is -- if production what kind of base business and the volume side of the content and backlog or am I not reading that correctly.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Yeah. Production would be. We try to make a difference between the market in production. Just the vehicle production coming out again SPS has a large part of market and then the incremental volume would be what I'll call sort of the growth over market. The content or I think of it as more growth over market obviously content has a role to play, there.

Itay Michaeli -- Citi -- Analyst

Great. That's very helpful.

Kevin P. Clark -- President and Chief Executive Officer

Itay -- just -- I wanted to just make sure I close on one comment if your question ultimately is when you look at the financial profile of the business that we're bringing on. First is the financial profile of the business, we currently have. The profile of the business we're bringing on at run rate is more profitable business than our existing business.

So the dynamic team a profitability standpoint in the business have not changed. Just as we have reviewed with you at our Investor Day in -- in June.

Itay Michaeli -- Citi -- Analyst

Yeah, that's exactly what I was getting at. That's very helpful. Thanks so much.

Kevin P. Clark -- President and Chief Executive Officer

Thanks

Operator

your next question comes from Dan Levy of Credit Suisse. Your line is open.

Dan Levy -- Credit Suisse -- Analyst

Hi, thank you.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Good morning, Dan.

Dan Levy -- Credit Suisse -- Analyst

Hi. Hey, good morning. Thank you. Wanted to actually just start with a question on your, on your back half margins and I know you're not giving 2020 guidance. But obviously 12.5% give or take is pretty high. And I believe that your '2020 that your three-year outlook on margin was roughly 12.4%, so why wouldn't 12.5% be a fair starting point to go into 2020 meaning, what are the things that maybe don't repeat into 2020 that you have in the back half of the year.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

I think as we've talked about, we've got programs in place to expand margins on an annual basis. We've often talked about margin in a particular quarter can be lumpy depending on time of year, I think the other thing is Q4, a lot of our material and manufacturing savings program tend to be annual programs, we start with initiatives in the beginning of the year.

Build through them and they tend to have greater level of benefit in the back half of the year and then we sort of start -- start over from a program and our initiative perspective. So I think we are, we remain confident in the margin expansion guidance we provided at Investor Day, but certainly wouldn't expect it to happen in one quarter than hold for the subsequent years, there will be some fluctuations, particularly with the -- with the volume changes.

I think the other thing. And certainly may have -- one of the things we focus on is preservation of our light dollars as well. Just, not necessarily the the margin rates. So as we look to cost savings, how can we, how do we make sure we are preserving those -- those dollars even in even in a tougher market.

Dan Levy -- Credit Suisse -- Analyst

Understood, understood. And then just on China, you know, obviously you're holding your margin despite a week your market outlook, and just and broader choppiness or volatility there. So, and this is I think something we've seen for other suppliers where just the volatility in the launch schedule has may be thrown off the margin. So what is it that you're able to do? And I know you talk to just being more vigilant on the cost structure in China, but what is it that you've been able to do that you're doing that's allowing you to maintain that profit or that margin despite that continued volatility, especially in China around launches and we know the importance of launches to your business and your growth.

Kevin P. Clark -- President and Chief Executive Officer

Yeah, I think Joe, will go through the numbers in detail. I think first Joe made the comment earlier with respect to our focus on absolute operating income dollars and commitments that we make and as volume has declined in China. First and foremost, we've been way in front of it.

We've reduced headcount in China in line with vehicle production declines and overlaid on top of that a number of initiatives from a material and manufacturing standpoint to offset the volume decline, we're able to do that because of our 14 entities there, some of which we wholly own some of which are joint ventures, we have complete management control.

So we drive the strategy, we drive the tactical -- tactical decisions and the team in China has done an excellent job reducing our cost structure. Joe made the comment about kind of coming to terms with kind of a new baseline from a vehicle production standpoint making the taking the actions necessary to reposition the business for a lower level of vehicle production than what the industry had expected, just a year or to two ago.

We've done a tremendous job. Joe can talk about what, what they've been able to do from a OI and OI margin standpoint.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Yeah, I think, Dan, if you look at, I mean right now, within our -- within our forecast. We're expecting to hold effectively EBITDA NOI dollars in 2019 consistent with flat with the dollars. Now the market flat with-flat with 2018. And I think you know there's to Kevin's comments you know obviously staying upon a thing on top of it.

I'd also. And we've talked about this, OI right. We try to get ahead of it as much as we can -- we certainly haven't been perfect in calling China vehicle production down but like to think we were out ahead of it. We were focused on Q4 of last year being lower than others expected.

We've been trying to get ahead of it. So that our programs in China from a cost containment perspective started this time last year. As we started to see the weakness in the back half. And again, we haven't called volume perfectly. But I'd like to think we're almost close with anybody at this point in terms of the market coming down. Yeah, I think the other thing we talked a lot about at our Investor Day was our focus going all the way back to 2016, on through cycle performance. We assumed we were going to get to this point at some you know at this point in the cycle, sooner or later, and wanted to be ready for it.

So some of our overhead reductions. The cost reductions that we're talking about now. The basis for those started back in 2016, 2017. So, I think being ahead of it and sort of assuming at some point it's going to happen has helped us, helped us stay ahead of it or really try to keep pace with it over the last couple quarters as well.

Dan Levy -- Credit Suisse -- Analyst

If I could just toss in a quick follow up to, obviously, a lot of sort of cost visuals and vigilance and focusing on maintaining the profits. To the extent you have a downturn in another region and obviously, Europe is in the cross areas, is it the same mentality there as well.

Kevin P. Clark -- President and Chief Executive Officer

Yeah. Listen, again Joe use the word, you've heard us use it before we're maniacal about our costs and we've reduced our corporate overhead by roughly 50%. I think roughly $200 million plus over the last couple of years. And on top of that very focused on how we operate from a manufacturing material and SG&A stand point. So, those are things that are in- flight now. To the extent we need to make more aggressive course corrections in light of more significant downturns, those are things that we will do and we're positioned to do but the organization is already focused on driving cost out. It's a part of our DNA.

Dan Levy -- Credit Suisse -- Analyst

Great, thank you very much.

Kevin P. Clark -- President and Chief Executive Officer

Thanks, Dan.

Operator

Thanks. Our next question comes from Brian Johnson of Barclays. Your line is open.

Brian Johnson -- Barclays -- Analyst

Yes, good morning. Just a follow up on the question earlier about the profit pressures in any competitors systems the broader issue could very well be that they certainly are attractive growth over market categories in auto parts when most of which your very active in Active Safety infotainment, electrical distribution, signal processing and so forth. That's attracting competitors who want in on that growth. So the question is, are there pockets of revenue in those categories that are less defensible. In terms of the margin [Phonetic] moats around those and that as you kind of roll out two or three or four years, you would perhaps not aggressively seek renewal of that business, I'm thinking of some things that in wiring harness for example. And so how do we think about how you balance the ability to hold the mid-teens margins versus.

Kevin P. Clark -- President and Chief Executive Officer

Yeah.

Brian Johnson -- Barclays -- Analyst

Hold growth over market.

Kevin P. Clark -- President and Chief Executive Officer

Yeah. Listen, at the end of the day. Brian, we're bottom line focused and and I think the point you make is a good point. I would tell you today, I don't think there is any area that we operate that we would consider commodity like, whether that be in vehicle architecture or that be an areas like Active Safety or user experience. Those are areas that we've decided to exit including areas like displays, reception systems that we sold Thermal. As it relates to a specific vehicle architecture, I think Joe made the point, we don't do build-to-print sort of work we're really about full-body harnesses where we can work with OEs to optimize the full harness a big portion of our business is KSK related where we're actually building harnesses on a customized VIN -- VIN number by VIN number basis and that's really tough to do, and I think there are players in the space, who have tried to compete in those sort of areas who had significant challenges competing and operating which is translated into issues with customers, which is translated into very low profitability and cash flow and ultimately I think what it translates to is the industry recognition of complexity and again customers most focused on liking price, but most focused on service and the ability to work with them to engineer out complexity and cost.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Yeah, Brian, the only thing I'd add to that and we often talk about the modes as it relates to active safety or the brain side of the business. There is a motto around that SPS business and it's in part driven by capability. Global scale capability, again we're out of Yazaki, TE Connectivity, Amphenol level from a competitive perspective. To Kevin's point that's KSK big part of the business. Global platforms, where we're the only provider of full electrical distribution systems and a very large part of that business. A lower margin, lower cash flow competitor deciding they're going to somehow attain those capabilities in a relatively short period of time is not something that we quite honestly foresee. We're very focused on competing with who we compete against and remaining competitive, but there is a set of capabilities not SPS phase it would be hard for others to to duplicate quickly.

Brian Johnson -- Barclays -- Analyst

Thanks. And sort of a separate but also forward-looking question around future business, any updates on NuTonomy in terms of just the pace toward Robo-Taxi 's we've seen crews get more conservative about their timing it at the same time we've seen folks who could make a major investment into Argos -- some kind of -- I guess two sub questions one pace of progress toward Robo-Taxi business and two are you open to taking strategic partner money in that business or is it something you want to continue to own a 100% enough.

Kevin P. Clark -- President and Chief Executive Officer

Well, in terms of operationally, we now have vehicles on the road, either testing or operating through the list network only in [Indecipherable] but operating now in China, Singapore, Germany in Boston Pittsburgh in Las Vegas, the fleet in Vegas is part of the Lyft network is dozens of vehicles. I think we're up to 60,000 rides 1.3 million miles. And I think roughly 55 or 60 hub that ultimately delivered to 2200 different locations in Las Vegas. So we continue to operate and operate very well and collect some revenue in a lot of, lot of learning's with respect to mobility-on-demand and automated driving listen, our view is, we feel as though we've always been reasonably prudent and conservative that you'll start to see vehicles on the road in 2022 to 2023 with meaningful revenues in 2025.

Our current plan from a technology standpoint is to have driver out of the car for testing purposes in 2020. So from an introduction standpoint technology standpoint. Our view hasn't changed with respect to taking -- taking capital. Listen, whatever makes the most sense from a financial return standpoint as you know, we feel as though we have the capital today in the balance sheet to fund the investment in the business we're funding investment in the business to deliver on the timetables that we've talked about to the extent it made sense to partner with someone strategically and financially. That's something that we consider doing

Brian Johnson -- Barclays -- Analyst

Thank you very much.

Kevin P. Clark -- President and Chief Executive Officer

All right, thanks.

Operator

Your next question comes from Chris McNally of Evercore. Your line is open.

Chris McNally -- Evercore -- Analyst

Hi, thanks so much. Hey guys.

Kevin P. Clark -- President and Chief Executive Officer

Hi, Chris.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Hi, Chris.

Chris McNally -- Evercore -- Analyst

Two questions. So the first, if we think about on a divisional basis versus plan you discuss sort of by the quarter. But if we think about production, got a little bit worse, but for SPS you didn't have to change the guide. So can we just assume that the benefit is the outgrowth and then obviously the same question for ASUE it seems like you bought the organic down by 2% to 3%. It's a little bit more than the production change. Is there a mix component. And just maybe just a little bit of color, particularly on the change in the ASUEX woes the outgrowth in the first half was actually pretty good.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Yeah on SPS you are right Chris, I mean it's the continued out growth coming from the product line, high voltage, the connection systems business HellermannTyton continues to have a good revenue growth year. On ASUEX it's very platform driven, there is not a -- it's not-- it's not really even a market or a particular region, it's very specific platforms. We did have a couple of OEs that have trim production, but not, not take rates not penetration of actually trim vehicle production that has given us a little bit of headwind from a sort of a growth over market perspective.

But, I would say all of it is within what you would expect in this kind of market, there is no particular out wire. There is no product cancellations. There is no change in take rate that type of thing. I think it's really just tweaking around production cycles and sort of launch volumes.

Chris McNally -- Evercore -- Analyst

Perfect. Makes sense. And then the second question, it only makes sense. The 12.4% margin in the second half, it's not an indication because of seasonality for 2020. But if we-- we sort of dive in maybe to ASUE's ease margin where sort of the implied even if it's 7% plus for the full year you're finally starting to get a little bit of the pick up here and -- and I think you gave the detail on the mobility spend, it's annualizing almost $200 million. We're finally lapping some of it -- it's just pure investment so that we can get the incremental margin from -- from Active Safety.

Could you talk about just over the next 12, 18 months. Do we need to make another step level on mobility or can we start to finally think about whatever the revenue growth in that end market is that we could start to get your typical more 20%, 30% type incremental because we finally lacked the investment in new economy and mobility.

Kevin P. Clark -- President and Chief Executive Officer

Yeah. We've talked a couple of times and certainly the significant step up. We don't foresee a significant step up in mobility spending into next year. Right. Because the $180 million, be $190 million or $200 million, we're obviously starting the planning process and need to look at that, but it certainly would it be what you saw from sort of a '17 or '18 type step up. So depending on sort of where you are -- sort of where you're calling the average somewhere between a $180 million to $200 million or do we start to get consistent around that level.

Yes, that's our view at the moment, as we go through the plan to start the planning process. On underlying ASUEX margin or ASUEX margin ex-mobility is in the product lines, particularly Active Safety are delivering where we expected them to be above 10% in Q1. We're on track for what I'll call a low double-digit to -- sorry, high double-digit to low teens exit margin coming out of Active Safety and this year from an exit perspective. Now, what we're, what we're continuing to do is have opportunities in that business around pursuit's new business wins, those types of things. And as we have in the past, we'll be making decisions around around investing in what we think made sense, but certainly in a product line perspective, we are seeing that, we are seeing the -- the margin develop as we expected.

Yeah. Chris, I just want to echo Joe's comment, I think it's all about the near-term trade-off for margins versus the longer-term opportunities to widen the Active Safety. I think that those are the, those are the trade-offs we will have to consider obviously additional programs need to drive incremental returns to the baseline business in incremental margin expansion. But you could get caught up a bit in that timing. And as you know, a number of these Advance Active Safety Programs that we're talking about the scalable level one, level two plus, level three minus that our global for global OEs are complex programs, but the opportunity to be awarded those programs and to be awarded at the right sort of margin rate and expand our competitive mode, you know is something that we'll have to evaluate versus the near-term investment resources to launch and develop those programs.

Chris McNally -- Evercore -- Analyst

So to be clear, I mean essentially if ADAS continue that is extremely high, high rate 40% plus, essentially the E of RD&E for ADAS will continue. So you'll get good incremental margins because you're allowing mobility, but it will still be an investment period for because of the growth is there, particularly for the complex programs.

Kevin P. Clark -- President and Chief Executive Officer

Yeah. RD&E will continue. I think the percent of revenue will vary a little bit on how much of that growth comes within existing OEs. How much is a craft in with is with new OEs with new programs and obviously as a part of that process we leverage to reuse as much software as much of the systems capability as we can on each program.

Chris McNally -- Evercore -- Analyst

Okay, much appreciated.

Kevin P. Clark -- President and Chief Executive Officer

Thanks, Chris.

Operator

Thanks, Chris. Your next question comes from Dan Galves of Wolfe Research. Your line is open.

Dan Galves -- Wolfe Research -- Analyst

Good morning, guys. Thanks,

Kevin P. Clark -- President and Chief Executive Officer

Good morning, Dan.

Dan Galves -- Wolfe Research -- Analyst

You guys have been

Real good on calling China production and you know, that your second half production forecasts are quite a bit below, kind of other numbers that we've seen basically about as bad as the first half, are you guys seeing something in China that looks like a kind of an incremental weakness in retail demand that would make the second half, just as bad as the first. Even though the comps get a little bit easier

Kevin P. Clark -- President and Chief Executive Officer

Yeah, I think from our perspective Dan. I mean near term in China, although there can be some volatility. We're really operating off of the production schedules that we see today. And just a perception or perspective based on are the time we spent in China interacting with our management team that we're really not going to see a turnaround in the balance for the balance of the year that the government is not pushing really hard. There is no lot of consumer demand that it's not really clear if the inventory shake out is completely happened and just facing the reality of what we think the China market looks like at this point in time.

Dan Galves -- Wolfe Research -- Analyst

Okay. Got it.

Kevin P. Clark -- President and Chief Executive Officer

Joe, if you want to add anything to it.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

No, Dan, all I will say here is we talked before, our fundamental philosophy tends to be run rate until proven other office on some of these vehicle production numbers. And when you look at, to us Q3, looks a lot like, looks a lot like Q2 with some launch activity starting late Q3 and Q4 that should help a little bit, but there's just to Kevin's point we're not seeing a lot of reason for change at the moment.

Dan Galves -- Wolfe Research -- Analyst

Okay, got it. And just following up on that looking toward kind of six-six pretty bad quarters in a row in China, can you give us an update on the health of the Tier 2 supply chain there, some of the customers. Are you seeing any stress in China or if you've noticed anything globally. If you could just give us an update on the health of the Tier 2 network.

Kevin P. Clark -- President and Chief Executive Officer

Yeah. Listen, I think from a Tier 2 network standpoint, it's something we watch very, very, very closely maybe there has been some incremental pressure with some of the smaller, smaller local players, but we have at least minimal exposure from a customer standpoint, roughly 75% of our revenues are with the multinational JVs. And then the balance with the top 5 or top 10 local OEs. So again, it's something we watch closely from an exposure standpoint, but we haven't seen any, any real change from a, from a risk profile, are how people are acting so -- but it's something that we're watching very closely.

Dan Galves -- Wolfe Research -- Analyst

Okay, thanks a lot much appreciated.

Operator

Your next question comes from Joseph Spak of RBC Capital Markets. Your line is open.

Joseph Spak -- RBC Capital Markets -- Analyst

Thanks everyone. The first question. Hey, Kevin and Joe. And like you guys were I think one of the first or certainly on the earlier side to sort of talk about some of the slower ramps of launches in Europe. And I think China and we've obviously seen other companies sort of talk about that since then. Any update from what you saw sort of last quarter to this quarter as we go forward?

Kevin P. Clark -- Chief Executive Officer

Yes, nothing really meaningful at this point in time since our conversations in May, earnings call in May. Nothing meaningful at that point. A little bit of shifting and small -- very small programs in China. But nothing that would -- we would raise to your attention at this point.

Joseph Spak -- RBC Capital Markets -- Analyst

Okay. And then just two I guess maybe sort of clarification on housekeeping. But one, on the commodity FX line, I think you are sort of pointing to like a $110 million hit to EBITDA and I think that was about $80 million prior. Is some of that because of copper coming down and that sort of pass-through? And is that actually helping your margins little bit?

Kevin P. Clark -- Chief Executive Officer

Yes. Joe, copper doesn't really hit the OI. It's just really that margin rate optics, because it's a pass-through, it's very minimal flow through. So it -- last year, as copper ran up, you get margin rate optics going one way this year to the extent we're passing through lower prices. You can get it the other way, but it's captured in that -- that adjustment for FX and commodities. It's all in that -- it's all in that line.

Joseph Spak -- RBC Capital Markets -- Analyst

Okay. So it's more FX and I guess resins and it's really --

Kevin P. Clark -- Chief Executive Officer

It's FX -- yes, it's FX and it's the $90 million or so that we have in for the full year is really FX and resins. Copper per se again is a rate optics, but not a margin dollar hit.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

And the impact is $110 million for EBITDA and $90 million of OI.

Kevin P. Clark -- President and Chief Executive Officer

Yes, $90 million on the OI.

Joseph Spak -- RBC Capital Markets -- Analyst

Okay. And just lastly, looks like you did maybe three quarters of the $450 million in buybacks for -- that your guidance suggests thus far, but your free cash flow is generally more second half weighted. So is there a little bit more opportunity there?

Kevin P. Clark -- President and Chief Executive Officer

We will continue to remain opportunistic as we always do.

Joseph Spak -- RBC Capital Markets -- Analyst

Okay. Thank you very much.

Kevin P. Clark -- Chief Executive Officer

Thanks, Joe.

Operator

Your next question comes from John Murphy of Bank of America Merrill Lynch. Your line is open.

Aileen Smith -- Bank of America Merrill Lynch -- Analyst

Good morning, everyone. This is Ellen Smith on for John.

Kevin P. Clark -- Chief Executive Officer

Good morning.

Aileen Smith -- Bank of America Merrill Lynch -- Analyst

Good morning. First question on the smart vehicle architecture. I think it's pretty clear, you're seeing traction with OEM customers with the advanced development awards. And then on top of that the recent zone controller awards as you look at the competitive landscape. Is it fair to say you're well ahead of your competition on this front. Or are you seeing some fast following among some of your peers as you've been fairly successful in your awards.

Kevin P. Clark -- Chief Executive Officer

Listen, we think we're uniquely positioned as we've talked about Active and our product portfolio and capabilities having -- having capabilities both in the history and vehicle architecture as well as in the software side is unique and bringing the whole, the ability to bring the whole solution together is certainly unique, we would say there is no competitor out there that has that capability or can be competitive with us,

We think we're driving mind share in the industry, we first started talking about SVA roughly, call it two plus years ago, I think there's a lot more dialog about it now among OEMs and even the supply base. We have the two advanced development programs the zone controller award we're in dialog with another roughly dozen OEs about smart vehicle architecture.

So we feel like we're really leading the activity there are players out there, the strong German supply base that have experience in around controllers that can certainly provide a portion of the smart vehicle architecture, but they're not in a position to provide all of it. And that's why we're so aggressively, so aggressively pursuing it just given our again our unique capabilities and our resources we can bring to bear.

Aileen Smith -- Bank of America Merrill Lynch -- Analyst

Okay, great. And just as a follow-up to that point you made, you've talked a lot about in the past. Your competitive advantage on connectors and specifically the print position that makes it pretty hard to displace incumbent suppliers, do you look at the competitive landscape for SVA over time and that electrical architecture system as being similar in anyway.

Kevin P. Clark -- President and Chief Executive Officer

Yeah, to, well listen, I think you know taking a step back. We think it's similar in a number of areas that ultimately lead to SVA and as Joe talked about competitive moat driving a competitive moat in areas like advanced ADAS systems, in our view, ultimately leads to leverage in areas like SVA and leveraging the competitive moat in and around user experience in combination with Active Safety ultimately leads to ultimately leads to SVA and having the capabilities in and around each of each -- each one of those areas in a strong competitive position. Number one in Active Safety obviously leading the charge on SVA puts us in a position, it's probably not exactly like engineered components where you have low cost in high cost of failure. The solutions are higher value add but high, high cost of failure but we think there's a real benefit in having the first mover being in the first-mover position.

Aileen Smith -- Bank of America Merrill Lynch -- Analyst

Great, that's very helpful. And second question on the macro side, as you think about US, China tariffs and trade friction that may be much more structural than transitory, can you remind us how your equipment realignment actions to Korea and potentially some other countries is progressing and could this be sped up or push more aggressively in the event that trade tensions escalate?

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Yeah, I think from a tariff we continue to make progress we saw a little bit of -- little bit of help from on the remediation side in Q2, we were obviously up $6 million year-over-year on tariffs, but below the guide by about $6 million. So that's in part lower volumes unfortunately it's not the best way to avoid tariffs we just had lower the tariff impact on things moving across the border, less of it, but we did see some traction and remediation. The Korean plants in validation with customers we'd expect that to be completed by the end of the third quarter for the most part.

So certainly tariff remediation for '19 we're working hard to do more, but it's probably more of a 2020 as we start to work that down with particularly with the Korean manufacturing facilities so; all is tracking according to original plan. Again we didn't, we didn't wait to see if tariffs went away we got right on it, obviously, we'd like to try to do more in 2019.

But certainly feel we're positioned well to -- to eliminate a good portion of that $44 million going into 2020.

Kevin P. Clark -- President and Chief Executive Officer

Yeah, I think it's important to Joe's point he said this before, we don't view these transitory we view them as they're going to be they're going to be in place for quite some time. So, as Joe said, we've taken action as though are permanent from a supply chain from a sourcing from a manufacturing standpoint, and we'll continue to do that and I would say we're moving as fast as we can.

Aileen Smith -- Bank of America Merrill Lynch -- Analyst

Yeah.

Kevin P. Clark -- Chief Executive Officer

One of the biggest issues quite frankly is customer validation of new manufacturing facilities and sources.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Yeah, the original exposure was 75% and we're now down to 44% for the year. So we've made some progress so we'd like to continue and again dress ourselves up well for 2020.

Aileen Smith -- Bank of America Merrill Lynch -- Analyst

Great, thank you very much. Thanks for the question.

Kevin P. Clark -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from David Leiker of Baird. Your line is open.

David Leiker -- Baird -- Analyst

Good morning, everyone.

Kevin P. Clark -- President and Chief Executive Officer

Hey, David.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Hey, David.

David Leiker -- Baird -- Analyst

Just follow up on SVA on a couple of things and you got a development award and the zone controller, which looks like a step toward production on those SVA, but to take these development awards further along that they become production is there validation of the technology, you need to do, is there the cost side of that equation, what is the stepping stones there for that to turn into a production contract?

Kevin P. Clark -- President and Chief Executive Officer

Yeah, it's really all the above. Right. You're working with the to OEM to validate the effectiveness of the technology, the efficiency of the technology manufacturability and got a commercial price, right. Making sure that it makes economic sense. The benefit of it from our perspective is we have an OE who participates in the technology development and funds a portion of it, helps us validate our views and our underlying technology and ultimately are in a position to define what ultimately goes into the, into the vehicle. Which means you ultimately have a hand in defining certain elements of the RFQ. So, it's an important step.

David Leiker -- Baird -- Analyst

And if we look at how that evolution happens, is it going to be more zone controllers and then multiple zone controllers and then development and then the full SVA or do you think that there is a couple of steps there to kind of learn or validate and then we jump right to their more quickly?

Kevin P. Clark -- Chief Executive Officer

No, I think we said we expect SVA revenues in kind of 2022, 2023 to start. It's really continued consolidation of controllers into domain controllers and then additional zone controller awards and then optimization from there. So, I would say, David, it's kind of a two, maybe a three-step process and it varies by OE depending upon where they are in their vehicle lifecycle and vehicle architecture tech roadmap.

David Leiker -- Baird -- Analyst

Okay. That's right.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

David we've mentioned this before, but for us the exciting part of the advanced development programs right, our Active Safety multi-domain controller business started much the same way with -- the Z fast advanced development program years before. So, for us this is a, it's a positive sign in that business how particularly the more sophisticated OEs bring tech to market with these advanced development programs and we've had -- we've had that experience before in very similar domains and very similar areas.

David Leiker -- Baird -- Analyst

Okay, great. Thank you very much.

Operator

Your next question comes from Steven Fox of Cross Research. Your line is open.

Steven Fox -- Cross Research -- Analyst

Good morning. Two quick questions please. On the 220 basis point improvement from performance you're expecting in the second half. Can you sort of break that down where you're exactly getting that from half-over-half. And then secondly, there has been some interesting comments you made on China, as you mentioned and you sort of looking for some kind of stabilization there. But there are inventories still in the vehicle channel. There is uncertainty in the economy. So what is the confidence level that production actually stabilizes by the fourth quarter versus further declines. Thank you.

Kevin P. Clark -- President and Chief Executive Officer

Yeah, This is Kevin. I will -- maybe I'll answer the first question. Joe can respond to the second. Listen, as it relates to outlook for China. Listen, I think we'd say you it's in opaque situation so visibility inventory levels in Chinese is -- is challenging and whether there is still -- still inflated or not I think is a bit of a question in somewhat debatable near term we operate off of customer schedules.

Longer term, we operate off the discussions with customers to get a feel for what their plans are as well as use sources like TAM in China and IHS we feel as though we've made taken a fairly conservative position and have balanced the risk in the opportunities in our current outlook is it possible that it could be worse.

It is possible. We don't think it's likely, and we think we've taken actions to get in front of the situation even it is a bit worse. On the flip side, we could be overly conservative on the fourth quarter and there could be some upside. Now we're not planning on it. We're not operating in that way.

But based on our 25 years of experience in China. We feel as though we have the appropriate amount of conservatism built into our outlook .

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Yeah. Steven, I think it's a little bit of just definition of stabilization. We've got China down 15% in Q3 down 13% for the year, which is still a double-digit decline in Q4.

So I, it's, again it's I guess relative stabilization and maybe where it was in Q2 and Q3, but we still have it down fairly significantly. On your original question around performance in the H1 versus H2. I go back to Emmanuel's question in the response, obviously when you look at it optically the performance numbers, a big number in the back half of the year round numbers a little less than $200 million. Some of that $65 million is off lapping the performance issues last year from the plant closures. The OE plant closures. If you recall, we started to get back half of last year into a cycle with the OEs that they were sort of adjusting inventories by closing plants for a week or two, that got very hard for us from a offset perspective versus longer term scheduled changes that was about $65 million.

So if you, if you take that out. So to take the comp a year-over-year effect of that out. We're looking at about $130 million of performance material manufacturing performance in the back half. We did $90 million in the first half. So you are actually, right. It's 40% higher, but our view, just given our initiatives tend to be back-end loaded.

We've been working on this for a while. In $40 million increase over the next six months is not something, it's a lot of work. We've got things to do, but it isn't something that we don't know how to do, it should be. It should be manageable with in the initiatives we have going on.

Steven Fox -- Cross Research -- Analyst

Great, that's very helpful. Thank you.

Operator

Your next question comes from David Kelley of Jefferies. Your line is open.

David Kelley -- Jefferies -- Analyst

Good morning. Thanks for squeezing me in.

Kevin P. Clark -- President and Chief Executive Officer

Good morning Dan.

David Kelley -- Jefferies -- Analyst

I'll keep it quick as well. Just on the Active Safety bookings. Could you provide some color on the mix of that ramp. I mean, how much is Level 1 versus Level 2 at this point. And is there any much Level 2 plus ramp taking place also.

Kevin P. Clark -- President and Chief Executive Officer

Yeah, I don't have the Level 1 versus Level 2 right in front of us. A number of those programs. A significant number of those programs David, are effectively scalable programs that scale to be anywhere between Level 1 and Level 2, Level 2 plus actually. So, I think the bulk of them kind of sit within that sort of a framework Joe can comment assumptions related to revenue on Level 1 versus Level 2 or Level 2 plus.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Yeah, Dave. I think, just as you'd expect, the way this technology is rolling out. Right. The bulk of revenue today tends to be the Level 1, Level 2, like Line 2 minus type systems. It's what you see in the cars today. That's what we're producing today to Kevin's point, if you look at the types of things we're booking, whether it's the PSA [Indecipherable] Ford, so the others.

Those tend to be the scalable systems where -- where the OEs in ourselves they have come to appreciate that the best and most cost effective way to put this technology to vehicles is to have like-for-like systems across platforms and across levels of optionality, so you're not redesigning systems. Those tend to be what's in bookings at the moment for launches over the next couple of years.

David Kelley -- Jefferies -- Analyst

Okay, great, thanks. And just quickly on the same theme. Looking at the engineering components bookings, which also ramped up in the quarter, anything to call out non-automotive there is or is that at this point we're still strictly mostly on the automotive side booking business.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

No, listen, I think our CV in industrial business continues to -- continues to grow. We continue to book well, our CV business is up 17% or 18% in the quarter and we continue to book to those levels. Our expectation is we finish 2019 at about 14% non-auto, so CV and industrial revenues. It's not too long ago, if you go back a few year, that was at 5% go back even a couple year before that, that was less than 2%. So that progress continues.

David Kelley -- Jefferies -- Analyst

All right, great. Thank you.

Kevin P. Clark -- President and Chief Executive Officer

Thank you.

Operator

Our final question comes from Maynard Um of Macquarie. Your line is open.

Maynard Um -- Macquarie -- Analyst

Hi, thank you good morning.

Kevin P. Clark -- Chief Executive Officer

Hi, good morning.

Maynard Um -- Macquarie -- Analyst

You talked about an acceleration in electrification OEMs need to meet more stringent emission centers this might be little bit of an obvious question. But how do you think about managing the secular transition from ICE toward electric and I know you have visibility from your programs, but if there is a steeper acceleration toward electric, are there any meaningful changes you need to make for the transition or is it mostly incremental.

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

No, It's mostly incremental listen electrification electrification is good for us. Right. To the extent there is more power train electrification it means there is more content within our Signal Power and Solutions segment at higher margins, so it's something that's positive.

And from a overall if your question is leading capacity and capability that's something that actually can be, can be easily done, whether it's in our existing facilities depending on the amount of growth or in -- in the addition of additional manufacturing facilities.

But today we have a full high voltage electrification portfolio that's very attractive, very competitive and again the more electrification or better.

Kevin P. Clark -- President and Chief Executive Officer

Yeah, from our post -- post the Powertrain has been active -- are active. We actually do not have a detrimental CPV going from BEV to internal going from internal combustion to be EV what we lose on say connectors on an engine itself are actually offset by the additional electrical content of whole BEV. So from a content per vehicle perspective, ICE to be BEV is actually neutral to slight positive for us.

Maynard Um -- Macquarie -- Analyst

Okay, great. And then can you talk about on the AV side new scenes and the sharing of AV data, the industry looks like it's kind of following suit with your sharing strategy, do you think this levels the playing field on the AB side. And does this help you...

Kevin P. Clark -- Chief Executive Officer

No.

Maynard Um -- Macquarie -- Analyst

To reduce any R&D burdens for Aptiv?

Kevin P. Clark -- Chief Executive Officer

No, listen, I think from our perspective, anything that accelerates the development of automated driving. One makes the world safer, two it makes the market bigger, three virtually all the automated driving players are out there are customers in some way, shape or form, whether it be perception systems, whether it'd be vehicle architecture, whether it'd be data. So it creates additional profit pool. So to the extent we can accelerate the development for ourselves as well as other players out there, we view it as a positive.

Maynard Um -- Macquarie -- Analyst

Great, thank you.

Kevin P. Clark -- Chief Executive Officer

Thank you.

Operator

Ladies and gentlemen, that was our final question. I will now turn the call over to our presenters.

Kevin P. Clark -- Chief Executive Officer

Okay, thank you very much. We appreciate you dialing in have a nice day.

Operator

[Operator Closing Remarks]

Duration: 83 minutes

Call participants:

Elena Rosman -- Vice President of Investor Relation

Kevin P. Clark -- President and Chief Executive Officer

Joseph R. Massaro -- Senior Vice President and Chief Financial Officer

Kevin P. Clark -- Chief Executive Officer

David Tamberrino -- Goldman Sachs -- Analyst

Emmanuel Rosner -- Deutsche Bank -- Analyst

Itay Michaeli -- Citi -- Analyst

Dan Levy -- Credit Suisse -- Analyst

Brian Johnson -- Barclays -- Analyst

Chris McNally -- Evercore -- Analyst

Dan Galves -- Wolfe Research -- Analyst

Joseph Spak -- RBC Capital Markets -- Analyst

Aileen Smith -- Bank of America Merrill Lynch -- Analyst

David Leiker -- Baird -- Analyst

Steven Fox -- Cross Research -- Analyst

David Kelley -- Jefferies -- Analyst

Maynard Um -- Macquarie -- Analyst

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