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Delphi Automotive (NYSE:DLPH)
Q2 2019 Earnings Call
Aug 01, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning. My name is Darinda, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Delphi Technologies second-quarter 2019 earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded and simultaneously webcast.

I would now like to turn the call over to Sherief Bakr, vice president, investor relations. Sherief, please go ahead.

Sherief Bakr -- Vice President of Investor Relations

Thank you, Darinda, and good morning and good afternoon to everyone. Welcome to Delphi Technologies' second-quarter 2019 earnings call. With me today in London is our chief executive officer, Rick Dauch; and our chief financial officer, Vivid Sehgal. This call will include a discussion of our second-quarter 2019 financial results as disclosed in today's press release as well as our updated outlook for 2019.

In order to follow along with today's presentation, you can find an accompanying set of slides on our Investor Relations website, at ir.delphi.com. Please note that our discussion includes references to non-GAAP financial measures, which are reconciled to their corresponding GAAP measures in the tables within our press release. In addition, references to changes in revenue are on an adjusted basis, excluding the impact of foreign exchange movements. Now before we begin, I'd like to remind you that certain statements made on this call may constitute forward-looking statements.

Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the company's Form 10-K and 10-Q as well as other filings with the SEC. I would encourage all of you to review these risk factors listed in these documents. And with that, I'd like to turn the call over to Rick.

Rick Dauch -- Chief Executive Officer

Thank you, Sherief, and good morning and good afternoon to everyone on the call. Since January 7, my primary focus has been on visiting our operating sites around the world, meeting with our people, our customers, suppliers and business partners to assess both our strengths and our weaknesses and to identify areas where we need to move quickly to improve our execution and efficiency, which is increasingly important in the weaker global production environment we find ourselves in today. My leadership team and I now have a clear idea of the material opportunities and the actions required to reshape and refocus Delphi Technologies into a leaner, more cost effective organization and a far more profitable business. My initial assessments, which I shared with you earlier in the year, were correct.

We have game-changing product technologies that sit at the heart and crossroads of the propulsion revolution. Our customers value our product portfolio and our global footprint, and we are winning more than our fair share of new business due to our technical prowess. But the clear feedback from our business partners, both suppliers and customers, and from our own associates is that we can do better and that we have numerous opportunities to improve our operational and financial performance. We have an overly complex and costly organizational structure underpinned by legacy IT systems that are suboptimal.

There are clear opportunities to take out excess cost and drive efficiency in almost all areas of our business. Across our operating footprint, supply chain and back office areas we have elements of lean, but they are not systematically embedded in our company or our culture. We are not a lean company, and this will change. For Delphi Technologies, delivering on our mission to make vehicles drive cleaner, better and further provides tremendous long-term opportunities for us and all of our stakeholders.

Turning to our second-quarter performance on Slide 2. At a macro level, our 5% year-on-year revenue decline was more than 2% better than the overall market. Relative to the outlook we provided last quarter, adjusted operating margin of 7.2% was negatively impacted by lower volumes as well as incremental FX and tariff headwinds. Despite this, operating cash flow was a relatively strong $70 million, and we remain highly focused on continuing to improve our cash flow performance in the second half of the year and beyond.

We continue to pursue numerous growth opportunities in key technologies, and I was especially pleased that we secured our largest-ever commercial win as a company in the quarter for our Power Electronics business. This clearly underscores the technical leadership capabilities of Delphi Technologies in the area of electrification. Moving to Slide 3. On last quarter's call I mentioned that we expected some market choppiness related to a number of industrywide transitions and macro impacts to continue over the coming quarters.

These include the transition from passenger car diesel to gasoline engines, especially here in Europe; the projected growth and timing of electrification, mostly in China and Europe; as well as the ongoing trade and tariff dynamics under way across the globe. In addition, we have also seen the dollar strengthen against most major world currencies. At a high level, we now expect global production to decline by approximately 5% in 2019. This is an update to our prior view of an approximate 2% decline.

This is primarily being driven by weaker industry trends in China, where we now expect full-year production to decline by approximately 12% in 2019, or around 4% worse than our prior view. Turning to Europe. We now expect full-year production in Europe to decline by approximately 3%, or 1% lower than our prior view, primarily due to uncertainty related to Brexit and revised GDP forecasts. Finally, turning to North America.

Light vehicle SAAR is relatively stable, with an ongoing shift away from sedans and traditional passenger cars. We do expect to see some softening in that area in Commercial Vehicles in the second half of the year and into 2020, given recent heavy-duty truck order trends. So on the one hand it is clear that we are navigating through some significant shorter-term industry and macro headwinds, but it is also clear that the long-term secular growth drivers of our business remain intact. Whether it is the pursued activities we are engaged in with customers or the public statements you are hearing from OEMs across the globe, the long-term structural shift to more efficient powertrains is accelerating.

This represents a tremendous content per vehicle and revenue growth opportunity for us here. Turning to Slide 4, which highlights some of the operational progress we made during Q2. My orientation as the new CEO is basically complete, and I have taken a much more hands-on leadership role here at Delphi Technologies. Let me give you a few areas of achievement in Q2.

We continue to be on track to exit our key transitional service and contract manufacturing service agreements. I have met with most of our top 12 customers around the world to fully understand how they view us as a partner and to identify areas where we can properly grow and win together. They highlighted many of our strengths and some of our opportunities to improve as a company. We have done a deep analysis of our legacy overhead cost structure and footprint.

This is a target-rich opportunity for us to meaningfully improve our overall profitability. As you know, we have a number of important product revenue transitions under way within our overall business mix, and improving the profitability of GDi is a key priority for us. I am pleased with the progress our team has made over the last two quarters, and we continue to expect to achieve breakeven profitability for GDi by the end of 2020. Our three new electric plants are now built and they are in qualification of launch mode.

We expect to be 100% self-sufficient in terms of Power Electronics production and supply at the end of Q1 2020. We will be well positioned to selectively make investments and flexible capacity in line with the industry's move to electrified vehicles in each region, which will improve our capex efficiency, going forward. We have initiated our lean systems journey across our supply chain and operating sites. We'll be using a proven system, and based on my personal assessments we can significantly improve our cash flow conversion cycle.

We have also realigned and reshaped our organization to simplify our structure and to drive greater speed and bottom line accountability across the company. Turning to Slide 5, which outlines our updated vision and mission. We have established a new vision for our company and it's pretty straightforward: to be the pioneers in propulsion technologies, solutions and services. Leadership in propulsion systems technology is the absolute heart of our company and something our customers highly value.

Being first to market gives us a competitive advantage by providing technological breakthroughs and solutions that help our customers meet the increasingly stringent global and regional standards for fuel efficiency and emissions. Our new vision gives us a well-defined and clear focus on the areas we will invest in to support our long-term profitable growth. At the same time, it allows us to identify those areas where we will minimize investments in legacy or noncore products and locations. What does it mean to be a pioneer in propulsion technologies? Let's start by talking about our significant commercial wins in the second quarter, and let's move to Slide 6.

We had another tremendous quarter of gross bookings in Q2, securing $3.8 billion of lifetime revenues across our internal combustion engine and electronic portfolios. Our major award of the quarter, our largest-ever commercial win, is where I want to spend a little bit of time. This win with a leading global premium OEM is a result of almost two years of collaborative pre-development work involving hundreds of engineers from both Delphi Technologies and the customer as well as a key supplier, resulting in us being the first to market with our high-volume, 800-volt Silicon carbide inverter. Throughout the process our industry-leading technologies, including our patented Viper power switch, coupled with our deep understanding of powertrain systems and software, set us apart from our competitors.

This is what being a pioneer in propulsion technologies means. I would like to congratulate the entire Delphi Technologies E&E team on bringing this one home, a huge breakthrough win for our company. Let's turn to Slide 7. We are not only winning in the area of electronics; we continue to win new business and expand our GDi product portfolio, as well.

As I mentioned earlier, the shift from light-duty diesel to gasoline systems is real and it is accelerating in pace, especially here in Europe. We first launched our GDi 200 bar systems in 2012 over in China. Today we have five plants in Europe and Asia making either 200 or 350 bar GDi injectors, pumps and rails. We will add a sixth plant in 2020 in North America.

In May, at the Vienna Powertrain Symposium, we introduced our next-generation design, a 500 bar system, the first in the industry to do so. We are now working closely with multiple OEMs in the labs to validate designs on their current engines. Importantly, this future shift to 500 bar GDi will significantly lower our future capex requirements and meaningfully improve our cash flow generation potential, as we believe there's a high level of capex reuse for our currently installed 350 bar manufacturing systems and capacity. This is another clear example of the Delphi Technologies team being true pioneers in propulsion, in both product and process technology leadership.

Let me switch gears and provide a bit of insight into areas where we need to move quickly to improve our performance. Let's move to Slide 8. Last quarter I showed you my early assessment of our overall strengths and weaknesses based on my first 90 days in the company. That assessment has not changed.

In fact, what I have seen over the past 90 days only reinforces my earlier findings. We must move aggressively to address our lack of common processes and an uncompetitive legacy overhead cost structure. To do so, we have added several new executive leaders to address specific areas of needs. First, I'd like to thank Mary Gustanski, who is stepping down from the company at the end of the year as part of a planned succession.

Mary has played an integral role at this company for over more than 39 years, most recently leading our advanced engineering teams. I would like to personally thank her for her support during my tenure as CEO and for her leadership role as Delphi Technologies was recently spun off. To improve our manufacturing, quality and program management and launch systems, we have brought in Michael Dorah and David Culton, who have worked with me previously in similar roles. At our Commercial Vehicle business, which is critically important to us and based on my visits to multiple sites had been a bit ignored and underled over the past few years, we have hired Todd Anderson, a proven P&L leader from the commercial vehicle industry, to step in and take over the leadership of these critical assets.

Dean Harlow just joined our company last week and will be working closely with me and the business unit leaders to rationalize our global engineering footprint, which is unwieldy and was never fully integrated after the acquisition of LucasVarity TRW powertrain business back in 1999. While we have moved to rationalize the manufacturing footprint, closing five plants across our three regions over the years, the redundant technical centers, material labs and testing facilities around the world were not adequately addressed. That will change. Slide 9.

Over the past four months we have taken a deep dive into our overhead cost structure. As you can see on Slide 9, we have a tremendous opportunity to improve our cost structure in the combined areas of R&D and SG&A without negatively impacting our long-term growth potential. Today we have 25 engineering sites around the world. With few exceptions, our average utilization of key testing lab equipment is less than 50%.

That is simply mind-boggling to me as a long-term automotive industry executive. We are finalizing a plan to rationalize this footprint in a cost-effective manner without disrupting more than 160 ongoing new product development and customer launch programs that will launch in 2020-23. We aim to finalize and announce these plans in the third quarter of '19. In addition, now that we are close to finishing our spin-related tasks, we are taking a hard look at our overall SG&A costs.

This is another area of opportunity for structural cost improvement. As a start, we will move to reduce approximately 200 positions by year-end. We are also in the process of better understanding the underlying IT systems and networks that underpin our company. We are developing a plan to significantly revamp this critical area of the company, which will allow us to further reduce SG&A costs.

We expect to finalize these plans by the end of the year. Before I turn the call over to Vivid, I wanted to conclude by updating you on what our business priorities are over the next two quarters. Slide 10 lays our our immediate priorities, many of which are consistent with the last quarter. First, we remain laser-focused on delivering improved underlying profitability in the second half of the year and meeting our overall 2019 objectives.

This includes ensuring we complete our full transition to a stand-alone company. Completing this transition will give us the opportunity to lower costs. Second, continue to improve GDi profitability through operational improvements and flawless execution of future capacity investments. We have made good progress in this area, and we continue to expect to get to breakeven profitability by the end of 2020.

Third, balance the pace of investments in Power Electronics between shorter-term headwinds and the undoubted longer-term opportunities. While we remain focused on profitably scaling our Power Electronics business to breakeven and beyond, three plants in 2019, we must also acknowledge and respond to the choppier market growth patterns we are experiencing. Fourth, continue to build on the great work our leadership team has done to improve the profitability and position our Aftermarket business for accelerated global growth. Fifth, expedite our journey to become truly world-class lean practitioners.

We will follow a proven multi-step process over the next two or three years that will drive meaningful improvements in our cash conversion cycle. And finally, we need to complete the work that is well under way to define our medium-term financial framework and value creation opportunity. Given the greater shorter-term industry and macro headwinds and uncertainties, most notably in China and in Power Electronics, we have determined that we need to further evaluate our initial assumptions and scenarios, including our second half performance and trends we expect heading into 2020. Let there be no doubt: we are focused on delivering margin expansion and higher levels of free cash flow over the long term, which we believe provides a compelling value creation opportunity.

I continue to be excited about the opportunities and intensely motivated to lead Delphi Technologies on a journey from being a good company into being a true industry leader and a great company. Our journey to become pioneers in propulsion technology is well under way. Our leadership teams around the world understand that we have established a clear vision for our company and that the standards of excellence have been raised significantly upon my arrival. As I said earlier, my CEO orientation period is over and we are now in full take-action mode to deliver on the tremendous long-term potential of Delphi Technologies.

With that, I'll turn the call over to Vivid.

Vivid Sehgal -- Chief Financial Officer

Thank you, Rick. Good morning and good afternoon to everyone on the call. My remarks will focus on our Q2 performance, our revised full-year outlook, which largely reflects incremental industry and macro headwinds, as well as providing additional commentary on how we now see our phasing for the second half of the year and the drivers of our expected sequential margin improvement compared to the first half of 2019. Looking at our Q2 performance in more detail on Slide 11.

Revenue of $1.12 billion in the quarter declined by 5.1% year on year, or more than a 2% favorable to the overall market decline of more than 7%. Our Q2 revenue performance was driven by mid-single-digit year-on-year growth in Commercial Vehicle and GDi as well as our growth in our Aftermarket business, which was more than offset by lower sales in China and lower passenger car diesel revenues in Europe. In addition, we saw a revenue decline in our Power Electronics business, primarily in China, due to the transition from China 5 to China 6, changes in NEV subsidies and the overall market decline of close to 20%. I'll come back to this in my later remarks.

Adjusted operating income of $81 million, or 7.2% margin, declined year on year and came in slightly below our prior outlook, as unfavorable product mix, lower production, foreign exchange, higher engineering and unfavorable tariff dynamics more than offset ongoing cost actions and other operational initiatives. Adjusted EPS of $0.58 also reflected a higher-than-expected tax rate in the quarter. Consistent with our focus on costs and cash flow in a softer growth environment, I was pleased with our operating cash flow performance, generating $70 million in the quarter, supported by ongoing working capital initiatives. Finally, capex of $103 million in the quarter is consistent with our front end-loaded phasing for the year, given the strong current and future demand we see for GDi and Power Electronics as well as the expected higher one-time capex related to the separation from our former parent as we build three plants for our electrification business and establish our own IT infrastructure setup.

Our full-year capex outlook is essentially unchanged. Turning to Slide 12, which provides more detail on our revenue progression in the quarter. As I mentioned earlier, year-on-year global industry production declined by more than 7% in Q2, approximately twice the rate of decline assumed three months ago. Partially offsetting this, we saw strong momentum in a number of areas of the portfolio; most notably, in our latest generation of 350 bar GDi systems for passenger cars as well as in Commercial Vehicles.

Our Power Electronics performance in Q2 was impacted by the changes in government regulations in China, which drove some shorter-term shifts in the mix between internal combustion engines, plug-in hybrids and full-battery electric vehicles. This resulted in both a slower-than-expected ramp of some of our Power Electronics launches in the first half of the year as well as more conservative volume expectations for the balance of this year. We expect Power Electronics revenues to return to year-on-year growth in the second half of 2019, including a number of new launches. Looking further ahead, we continue to expect strong revenue growth in Power Electronics, driven by our technology leadership, commercial wins and the increasing global shift toward electrified vehicles.

GDi revenues came in slightly ahead of our expectations, increasing by approximately 5% year on year, primarily driven by launches related to our 350 bar GDi products, which we expect to continue into the second half of the year. As you can see on the right-hand side of the slide, from a total company perspective we outgrew the market in all regions, with the exceptions of North America. Revenue in Europe was approximately flat year on year, as growth in Commercial Vehicle and GDi was again offset by the ongoing decline in passenger car diesel revenues. Revenue in China declined by 14% year on year, as new 350 bar GDi launches were offset by overall market softness as well as our own customer mix.

Finally, our sales in North America declined by 10%, driven by OEM customer decisions to exit certain segments in the region, which more than offset continued growth in Commercial Vehicle. Slide 13 walks through our operating income performance for Q2. Adjusted operating income was $81 million, down from $156 million in the prior year quarter. This was primarily driven by unfavorable mix; lower industry production, particularly in China; unfavorable FX dynamics; higher engineering spend, primarily due to our investment in electrification; high depreciation expenses; as well as high commodity- and tariff-related costs.

This was partially offset by ongoing improvements in material and manufacturing performance as well as overall cost control. Turning to our segment performance on the next slide. On a year-on-year basis, Powertrain Systems adjusted revenue declined by 7% in the quarter, as growth in Commercial Vehicle and GDi was more than offset by lower revenues from the roll-offs in passenger car diesel in Europe; OEM customer decision to exit certain programs in North America; and, to a lesser extent, lower Power Electronics revenue. Adjusted operating margin of 6.6% was down, primarily due to the fact, as I have just described, most notably unfavorable mix, primarily related to the ongoing transitions away from higher-margin passenger car diesel in Europe, and lower overall global volumes, particularly in China and North America.

In the near term, and as Rick referenced, ensuring we execute on our initiatives to improve GDi and Power Electronics profitability remains a key priority. Turning to our Aftermarket segment on Slide 15. On a year-on-year basis our Aftermarket business returned to growth in Q2, as higher sales to independent aftermarket customers more than offset lower OES revenues. Adjusted operating margin of 7.9% declined, primarily due to unfavorable mix relative to the prior year quarter; higher year-on-year tariff costs; partially offset by the continued improvements in operational performance consistent with our focus on driving sustainable profitable growth.

Now let's move on to our updated outlook for 2019. Slide 16 highlights our revised outlook for the year. Relative to our prior outlook, the change is predominantly driven by incremental industry and macro headwinds. Importantly, we continue to expect to achieve improvements in our profitability in the second half of the year, and I'll come back to this in a couple of slides.

Starting with revenue. We now expect full-year revenues to be in the range of $4.425 billion to $4.475 billion, which on an adjusted basis represents a 5% to 6% year-on-year decline. Adjusted operating income margin is now expected to be approximately 8%, resulting in an adjusted EPS range of $2.65 to $2.85. Consistent with our ongoing focus on cost control in a softer growth environment we are accelerating our restructuring initiative in the second half of the year, which we expect will yield incremental cost savings in 2020.

And as you can see on the right-hand side of the slide, we now expect restructuring expense to be between $35 million to $45 million in 2019, some $10 million higher than our prior outlook. And as Rick mentioned, we do see opportunities to further reduce SG&A, engineering and overhead costs, which will allow us to both improve our underlying profitability and also invest to support future long-term growth. Slide 17 walks you through the key drivers of our revised revenue outlook relative to the one I provided three months ago. At the midpoint, our revised 2019 revenue range represents a $250 million change from our prior outlook.

As you can see on the slide, this change is driven by three key factors. First, volume. As I mentioned earlier, we now expect global production to decline by approximately 5% in 2019, or a 300 basis points incremental headwind to our overall revenue growth. This equates to approximately $120 million of the change in our revenue outlook.

From a more Delphi Technologies-specific perspective, we have lowered our shorter-term volume assumptions for our Power Electronics business in the back half of the year, particularly in China, given the dynamics I described earlier. Second, foreign exchange, where we have revised our full-year FX assumptions. In terms of some of the key currencies, we now model a euro-to-U.S. dollar rate of $1.12, compared to our prior $1.15 assumption.

In addition, we now model a U.S. dollar-to-CNY rate of CNY 6.85, compared to our previous estimate of CNY 6.75. And for GBP, we now assume a $1.25, versus a prior $1.30. The changes to our foreign currency assumptions translate to an approximately $50 million revenue impact on a full-year basis.

And third, we have revised our Aftermarket revenue growth expectations for the back half of the year given some anticipated softness in North America and, to a lesser extent, in Europe. For the third quarter, we expect a mid- to high-single-digit adjusted year-on-year revenue decline. In terms of some of the key assumptions, we estimate year-on-year global production to decline by approximately 1%, with China declining by approximately 9%. Our revenues in China are expected to decline by more than 20% year on year in Q3 as continued market softness and expected further inventory adjustments from some of our customers more than offset our 350 bar GDi launches.

As you can see on Slide 18, our prior year adjusted operating margin outlook of approximately 9% for the full year, which implied a second half adjusted margin improvement of approximately 300 basis points compared to the first half. Of this, approximately three-quarters, or 200 to 250 basis points, were related to Delphi Technologies initiatives or measures that are within our control. The balance of the margin improvement was expected to be driven by external or volume-dependent drivers, such as customer launches and operational improvements in GDi and Power Electronics. As you move across the slide, you can see that now we expect our second half adjusted operating margin to improve by approximately 100 basis points.

While the expected benefit from the Delphi Technologies-specific initiatives are largely unchanged, the market and macro drivers, such as global production, foreign exchange and tariffs, have swung from being an expected 50- to 100-basis-points tailwind into a 100- to 150-basis-points headwind in the second half of the year. Looking at the drivers of what is within our control and where we continue to have good visibility, approximately one-third is related to the phasing of engineering costs; approximately one-third is from the phasing of our SG&A costs, where we remain on track to exit a number of transitional services agreements with our former parent through the year, which will eliminate duplicate costs in the second half and, particularly, in Q4; and the remaining one-third is driven by improvements in our manufacturing and materials performance, consistent with the cadence we have delivered in prior years, partially offset by higher depreciation costs. In total, we expect to achieve approximately one-quarter of the improvements from these three dynamics in Q3, with the remaining three-quarters in the fourth quarter. Layering in our other key assumptions for Q3, we expect adjusted operating margin to be in the mid-7% range, or similar to the first half, of our adjusted profit margins.

Slide 19 walks you through the changes in our operating cash flow for the year. As mentioned, I remain highly focused on our cash performance in 2019 and beyond. Relative to our prior outlook, the greatest impact was from the incremental industry and macro headwinds and the related impact on our full-year operating income outlook. In addition, we expect to have $5 million to $10 million more in restructuring cash outflows related to the incremental SG&A savings we are now targeting.

This is expected to be partially offset by our ongoing initiatives to improve working capital, particularly driven by a reduction in inventories aided by the exit of the contract manufacturing agreements with our former parent. So in closing and before we take your questions, despite a more challenging and uncertain macro and industry dynamics my focus will remain on cost control and operating cash generation, while continuing to invest to support our longer-term growth. With that, I'll turn the call back to the operator for your questions.

Questions & Answers:


Operator

[Operator instructions] Our first question comes from David Leiker, from Baird. Your line is open.

David Leiker -- Robert W. Baird -- Analyst

Good morning, everyone. So I want to dig up some old history here. If we look at Power Electronics and GDi since the spin, the discussion was that they needed to get to, like, $500 million in sales to get scaled and leverage the margin on the contribution line. It sounds like that just no longer is the proper framework.

Is there an update? Or is it too early to go through that today?

Rick Dauch -- Chief Executive Officer

So GDi, let me say on a macro basis the change from diesel to GDi is real, and we'll get those revenues. And we are fully on track and we expect to get to that breakeven position as we exit 2020. Power Electronics, as I said the last quarter and this quarter again, it's very choppy in both the market dynamics but also the intervention of the governments, especially in China, on some of the credits we have here. And that's one of the things we're struggling with right now.

We've made investments in one of our plants to launch. That launch is delayed, not because of us but because of the customer. And we're not sure if it's a customer issue or is really a government issue. You want to comment some more?

Vivid Sehgal -- Chief Financial Officer

Yes, I do. I think, David, one of the major elements that we need to remember is that GDi, the margin improvement is traditionally driven, as Rick said, through operational improvements. And every quarter we are seeing operational improvements continuing. So from a GDi perspective we remain confident that the end of Q4 2020 we'll reach breakeven.

In terms of Power Electronics, the main operating income sort of dilution right now is the level of engineering spend that we have booked. Factory gross margins are relatively strong. And we are beginning to review the engineering spend that we need to have in place. So in summary, GDi is on track for the end of 2020, and we believe that Power Electronics, if there is a change, will be very modest, perhaps moving out one or two quarters into 2020 as we refocus our operational costs and our SG&A and engineering focus.

But we are confident that we will return to profitability pretty much in the same time frame that we gave before.

Rick Dauch -- Chief Executive Officer

Another point, David, is that when we were spun off we had to go out and create three factories. So today still a large portion of our revenue comes from a prior supplier, and there's a significant step-function increase in our profitability in that business once we can start manufacturing it on our own. And we're in the process of starting that process right now. The plants are built, the equipment is in place, the people have been hired and trained.

We're now going through the qualification mode customer by customer, product by product across Suzhou, Reynosa and Bologna. OK? So there's a lot of work going on here and we'll see a brighter day next year.

David Leiker -- Robert W. Baird -- Analyst

And then just one quick follow-up on that. Are you comfortable that the price and the margin that that was all booked at that there's not a structural problem on profitability of the contracts that are in hand already?

Rick Dauch -- Chief Executive Officer

Based on what we've seen and what I understand in my first six months, I think we're fine and we're market competitive. And I don't think we bought our market share, if you're asking that.

Vivid Sehgal -- Chief Financial Officer

And I would just add, David, if you look at the landmark booking that we've just won, that's been done on the same basis in terms of our original pricing assumptions. We've not moved on those. And it's been done on the same basis as the ROIC. And I think if you look across all of our technology wins in GDi, Power Electronics, Commercial Vehicle, pricing right now is something that we're focusing on and we have a very balanced approach in terms of driving top line as well as continuing margin expansion and long-term profitability.

David Leiker -- Robert W. Baird -- Analyst

Great. Thank you. And congratulations on the contract.

Rick Dauch -- Chief Executive Officer

Thanks.

Operator

Our next question comes from David Tamberrino, from Goldman Sachs. Your line is open.

David Tamberrino -- Goldman Sachs -- Analyst

Great. Thanks for taking our questions. It seems like 180 days in you've got what you've announced as a deep-dive analysis on cost structure. I know you were trying to keep this at a high level and not trying to get into magnitude or timing, but really would love to get your thoughts as to where you really see this going in 2020, 2021, and 2022 and how fast you believe you can take action, it sounds like 3Q, 4Q we'll see some things, but for really that to start running through the P&L.

Rick Dauch -- Chief Executive Officer

Good question, David. So we put that chart up on the overhead cost structure to show you kind of where we are. And you can kind of see where we think our powertrain competitors are, and you can see there's 150- to 200-point difference there. And then you can see the other Tier 1s.

Right? And so somewhere in between those two numbers is where we're going to get to. What we have to do is we've got to peel this onion back one piece at a time. Right? 25 engineering centers, first of all. We know how many people are there now.

We know what kind of classifications they are, what type of engineers. We know the levels. We know the administrative support people who are there. We've done a lot of work.

So I'm going to tell you my expectation, my experience is that we've got to do this in a very disciplined process. This is not a rip-and-cut, because we're in the middle of 160 launches or product development programs. So we've got to make sure we don't drop any of those. And so that's why we're taking a little bit more time.

But I think it's a two to three-year process, and I'll point you back to that slide in terms of where we think we can get to. That's on the R&D side. On the SG&A side, we have to complete the spin, which we're on track to do so. There's some specific cost savings we're going to see in the back half of this year but will roll to 2020.

And what we're analyzing right now is our current systems of networks, either IT systems or applications we have, and how quick we can replace some of those and get to standard processes and what does that mean to us from an SG&A standpoint. OK? And what I see here at this company is similar to what I saw in 1995 when I joined American Axle, and that's 24 years ago. That's kind of almost shameful. But we'll get our hands around it.

Let's get 100% spun off first. We have our own systems. The guys have done a heck of a job in 18 months to put the least of the infrastructure so we can talk to each other, but we just basically cut and replaced what we had at the previous owner. So we've got to fix that.

Does that answer your question?

David Tamberrino -- Goldman Sachs -- Analyst

That answers my question. And so just a second question, for Vivid, just looking at the walk. Price-down for the quarter, only $1 million. Can you kind of give us a view as to how that looks, going forward? Where are you able to offset some of the typical annual or typical OEM-to-supplier price-downs and why that was much more favorable?

Vivid Sehgal -- Chief Financial Officer

Sure. It really, David, is coming from -- so our price-downs are pretty similar to what they have been in the past. We've always said between 1% to 2%, and they remain in that territory. Right now, the Aftermarket team continues to do a great job in relation to the project that we call Aftermarket 2020, where we're looking at margin expansion opportunities.

And we've been able to offset some of the typical price-downs that you see more in the powertrain side of the business with some excellent pricing decisions in the aftermarket. And so there's nothing underlying that's very different from what we've seen in the past. We're just very pleased that the aftermarket has been able to contribute and offset some of that typical price-downs.

Rick Dauch -- Chief Executive Officer

David, there's one area that I think that is unique right now, and that just goes back to Economics 101: supply and demand. The move from light duty to gasoline direct inject is faster than anybody in the industry expected here in Europe. There is a limited amount of capacity for GDi right now. And so, there is some price opportunities there for us right now, as well.

Right? So it's kind of a twofold there, is we need to get our own operations to be improved, and they're doing so. And as I said, I'm very happy at their performance the last two quarters. And we need to, as customers ask for more capacity, we need to make sure that we get paid for that capacity. It's not free.

What we make here at Delphi Technologies is not some generic part. The fuel injectors we make, whether they're for passenger car or trucks, are like Swiss watches. In fact, some of the equipment we use is the same used to make Swiss watches, and we need to get paid for it.

David Tamberrino -- Goldman Sachs -- Analyst

Understood. But just to clarify, within your guidance are you expecting for the second half to go back to, call it, 1.5% to 2% price-downs? Or should we be thinking of something similar to the, call it, half a percentage point for you?

Vivid Sehgal -- Chief Financial Officer

I think you'll see a slightly more negative price-down in the second half of the year. So we continue to have some very good aftermarket pricing, but you should see a slightly softer number in terms of the price-downs compared to what you've seen now in the second half.

Operator

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

Dan Levy -- Credit Suisse -- Analyst

Hi. Thank you for taking the questions. I wanted to start just ask a couple of questions in terms of the notion of sort of balancing growth alongside profitability. So starting with Power Electronics, you obviously just put up a very nice win here, this $2.7 billion win.

But I also see that you have the language in there in terms of "driving the path to profitability" and you're sort of walking away from sort of setting a hard date on reaching breakeven in Power Electronics. This idea of balancing the pace of investments. So you have a lot of growth there that needs to be worked through. How do you balance investments that presumably need to support this growth? Don't you have to just invest what you need to invest to support this?

Rick Dauch -- Chief Executive Officer

Great question. First, we had to go build three factories, which we've done. So we basically had to duplicate the capacity that used to be ours at the old parent company. And so we've got that in place now.

Then we've won a few programs which are launching in '20, '21, '22, '23, and we're putting that capacity in place. What we've asked the manufacturing team to do is, can you break that capital investment into modules so we don't have to put a huge line in; we can put different modules in and we can then flex up as the volumes take off. For sure, one thing we've seen, at least since I've been here six months and since the company stood up 18, 20 months ago, is that this launch of the electrification is quite choppy. Right? So we put the money in, we put the capital investment, we put the engineering in there, but we're not seeing the revenue yet.

We're going to see it. There's major capital investments being made by the largest OEMs in the world, in Europe, France, Germany, in China, in North America, to go to electric vehicles to meet the more stringent fuel economy emission standards. It's going to come. But there's going to be a tipping point.

And so we're kind of like a farmer who's plowing the field and putting the seed in the ground, and eventually it's going to come. And we're in that kind of phase right now. OK?

Vivid Sehgal -- Chief Financial Officer

I would just add, Rick, that we've been in Power Electronics for a long time. So we have put investments in early, and we're beginning and I think, just to the first question, we are clear that we're going to get back to profitability. Whether that's at the back end of 2019 or in 2020, we will drive that profitability of the business. Because we've seen it, we've impacted early.

As Rick said, we're building the plants out right now. So we're very confident we get there. But what we are going to do is fundamentally put the engineering spend in to drive long-term growth. And we have some very strong bookings momentum coming through.

70% of our bookings this year, in excess of $5 billion, are in the Power Electronics space. That gives us amazing confidence, going forward, that we are going to drive growth. And if we need to put engineering behind that, we will, because we were first coming in with our investments. We have a very strong growth in electrification right now.

We have the plants now to handle that growth. And we have a pathway to profitability. So we remain confident that this is a very, very strong business for us that is going to provide very strong momentum, both in profit and in revenue.

Dan Levy -- Credit Suisse -- Analyst

Got it. And then a second question, sort of in a similar vein. Rick, when you joined you noted that obviously some of the processes at Delphi were somewhat flawed in terms of launches and operational rigor. And I think you could argue that you had these flawed processes, but at the same time you maybe took on a larger backlog than the organization could chew.

So I guess my question is, is there still a commitment to stand by that backlog? And obviously, the backlog or the bookings will go as the market goes. That's probably going to be the biggest driver. But is the commitment still to stand by that? Or would you ever consider walking away from some of those if you just don't have the resources or the capacity in place to support that?

Rick Dauch -- Chief Executive Officer

Great question. So let's start across. On the Commercial Vehicle side we've got multiple programs with multiple customers, and we totally have our hands around those businesses. And there's going to be a significant technology change between 2020 and '24.

There's actually a two-step change there. Our team has worked on that. It's one of the reasons I brought Todd in, and he and I have run a couple of the big program reviews already. And so you'll see that's under control.

We won't walk away from there. On the GDi side of the house, this is a generational transition of technology. For decades Europe has been 50%, 55% diesel, and now it's going down to 10% or 15%. So we get the great fortune of being the leaders of the company as we make this massive investment and switch five or six plants over from diesel over to gasoline.

That doesn't happen overnight. I can be a Monday-morning quarterback and say we could have done a better job. I'll say we're doing a helluva much better job in the last two quarters. We're doing regular program reviews about every six or seven weeks at my level.

That had not happened before. I've asked people here when's the last time a CEO sat in a program review. One guy told me 24 years ago, when LucasVarity owned us. OK? So the intensity and my experience of doing this for Axle and other companies, we know how to do it.

That's why Dorah is here and that's why Culton is here. And the team is responding quite well. On the Power Electronics standpoint, the whole industry is going through a huge change right now. Right? And so we're going -- I don't think there's any we're walking away, but we have told our team don't take on more business that we don't have the resources to handle what we already have.

And so we're being very selective in what we bid on, going forward. Part of our restructuring of our technical center footprint will free up the cash that allows us to then put more engineers in or to subcontract some of that engineering to outside suppliers that can help us. We don't have to do every single line of code. We don't have to do every single electronics circuit board.

We're trying to balance that right now. And so across our three businesses: Commercial Vehicle, very confident; transition from the light-duty diesel to gas, we've got to transition some of our diesel engineers over to gasoline, a little slightly different system; and electronics, we can only grow as fast as the resources we have available to do it. OK? The demand to move to electric vehicles, at least in the early stages from the OEMs when they're going to launch in '23, '24, is tremendous. And we've put our team on let's focus on what we have and let's flawlessly execute it.

And if you can reuse some of those designs on future quotes, let's go do it. But you just can't keep throwing engineering bodies at stuff that's not going to launch for four or five years. Does that answer your question?

Dan Levy -- Credit Suisse -- Analyst

Yes. That's very helpful. Thank you. Great.

Operator

Our next question comes from Brian Johnson from Barclays.

Brian Johnson -- Barclays -- Analyst

Yes. Good morning or good afternoon. I was in London. I have kind of three questions: short term, mid-term, long term.

So sort of short term, I'm just kind of scratching my head over the growth under market in North America and, in particular, the decision on, I don't know who the OEM was, but Ford exits sedans, GM to wind down Lordstown and sedans has been out for a while. So did this take you by surprise in the quarter? Was it contemplated in the guidance? Or what happened?

Vivid Sehgal -- Chief Financial Officer

Brian, it's Vivid. That was contemplated in the guidance. So that was always expected, and our assumptions around that have not changed.

Brian Johnson -- Barclays -- Analyst

OK. Mid-term, how do we get comfortable with the margin implied for 4Q, which is mid- to high-9%? And how does that tie in with some of the initiatives that you've been outlining?

Vivid Sehgal -- Chief Financial Officer

So a lot of the Q4 visibility -- so you're absolutely right. In terms of the margin of Q3, that's going to be sort of a mid-7% as we have, which is pretty much in line with the H1 margins, as well. From our perspective we are pretty confident on the Q4 margin uplift and we have pretty good visibility. These are within our controls and not subject to the market and the macro impacts that are there.

They're really broken down into three parts, and most of these are ongoing initiatives that we've seen on a regular basis, in past years as well. So we're very clear. Our engineering, we will have significant ramp-down in engineering, both on a gross basis as well as the normal engineering recoveries that come in, in Q4. And so we will have a material lower engineering spend in Q4, and that's been similar to the previous years that we've had.

We've also got the final sort of roll-off on the duplicate operating costs as we come off the final part of our TSAs, and the final one will come off in August. And we are in the process of eliminating duplicate operating expenses in SG&A and that process has started now and we will see material benefits of that in Q4. And the last one is just, again, a regular cadence of where we recover on the manufacturing and material basis. We have again our regular cadence of events where we see an uptick in terms of the savings that we have on that side.

So we have confidence that the Q4 uptick we have visibility around it. Having said that, of course, we have revised our outlook at this stage to lower the Q4 numbers, which gives us even further confidence that we can hit that.

Brian Johnson -- Barclays -- Analyst

OK. And then around the long term, I guess there's still a little confusion on the product portfolio of GDi and Power Electronics and the margin potential into 2020 which you've kind of discussed around. I guess the fundamental question is, if you kind of think of getting to profitability in both product lines as some function of how the contracts were priced, just the overhead economics of growing into a factory and then just sort of the input costs and what-not from the supply chain. So as we think about it, I guess the question we have is, to what extent are some of those contracts just underpriced? So even if you get the capacity, good utilization and maybe even sweep some costs out of manufacturing engineering, it's still not a profitable business.

Rick Dauch -- Chief Executive Officer

Let me start with -- Brian, good question. Right? So on GDi standpoint, there's a lot of engineering money that was put in to qualify the 350 bar system and the 500 bar system. And so we know what that number is, and that number is pretty fixed and might go down a little bit in the future. But sales would more than double or triple over the next three or four years.

Right? I think our target longer term is to get over $1 billion of GDi. Right? But engineering is kind of fixed there. OK? I will tell you that we had a horrendous launch in 2018 and '19. We aren't hiding from that.

Significant premium fray, significant scrap and repairs, too many extra people, didn't make our production targets. What I'm telling you is we've been focused on that about the third week of January when I got here. And we're seeing marked improvement. Of our five plants that are running today, four of them are ahead of our targets that we put in place back around February; one is off track and we're going to do a program review there in early September.

So there's nothing I've seen in the business model or in the forecast that we can't get to where our target margins are in GDi. So I don't think it's underpriced. We've also gone back to some of the customers and have addressed price where there's been opportunities when they've asked for more capacity. So that's a good thing.

On the PE margin, the Power Electronics, on paper they look real good. But on paper we've got to see the volumes come across those assets we put in place. Right? And right now we're not seeing the volumes across some of those assets. And again, I go back to what I said before, we're in the process of transitioning from our old parent makes parts for us and now we're going to do it ourselves, and it's going to take us all the way to the first quarter of '20 to get all that transitioned to our plants.

So we're going through tremendous costs right now. We basically had duplicate people. As we built our Poland plant, they had to go to Hungary and be trained for six months. Now we're training the next staff.

We're going from 0 people in our electronics plant to over 200 in less than 12 months. All that money to train the people, to get them screened, to get them on board, to go through the launches, those are all expenses we're incurring right now. So I'm confident. We've just got to get through this transition period, both on Gdi, I think that will come faster because volumes are coming faster, and then Power Electronics is going to take us a couple of years.

Brian Johnson -- Barclays -- Analyst

OK. Thank you.

Operator

Our next question comes from Emmanuel Rosner from Deutsche Bank.

Emmanuel Rosner -- Deutsche Bank -- Analyst

Hey. Hello, everybody. Am I doing good now? Good. I'm still struggling a little bit with the very big ramp-up that's implied in your guidance for the fourth quarter and what exactly drives that. Obviously, you've changed the second half outlook for margins.

It used to maybe 10.5% at the midpoint. Now it's sort of, like, 8.5%. You're saying that most of these costs coming out is really a fourth quarter rather than a second half event. Was it always the case? Like, when you had 10% to 11% for the second half, were you looking at, like, 12%, 13% in the fourth quarter? Or has there been a push-out of some of these actions? And can you just go over again what exactly is hitting fourth quarter that's not in the third quarter?

Vivid Sehgal -- Chief Financial Officer

Sure. Emmanuel, it's Vivid here. There's been no change in the cadence of the sort of benefit of the Q4 operating income margin expansion. So if you look at our second half performance, the majority of the shortfall in the margin has come from the macro/micro; so effectively, with all the sort of trade, the volume declines that have come through.

The actual sort of Delphi Technologies-specific actions to drive margin have remained largely unchanged. So there is no material difference to what we presented previously, apart from the macro and industry volume reductions that we have. So from our perspective, just to sort of repeat, really the biggest element here is around the engineering spend. If you look at our engineering spend, just to give you a bit more color, we're closer to sort of 9% to 10% in relation to the first three quarters of this year.

And with the recoveries that we always get in Q4 as well as some of the cost actions that we've had in place that we identified some period ago and we have clear visibility around, that number comes down at least 200 basis points in the Q4. We're very confident around that number. The second one, as I said, is we are now coming off the final transition service agreements with all the duplicate operating cost that we've had in places like IT, finance. As we come off the TSAs, that will finalize in Q4, and we've already started the process of eliminating the duplicate headcount processes.

And again, that started and we have a very clear visibility about that, as well. And then, lastly, just the material and the manufacturing efficiencies that we have in place. That is traditionally the best quarter is Q4. You can go back at least two to three years and see that on a regular basis we've made improvements on that basis.

And again, that is built into our forecast, and we haven't changed our assumptions on that. The only thing that has changed is the market, the industry, where we've had to take down from minus 2% to minus 5%. That's driven the change in the margin trajectory. Everything within our control is on track right now.

Emmanuel Rosner -- Deutsche Bank -- Analyst

That's very helpful. And so if I wanted to take that one step further and try to extrapolate from that into what may or may not be a good run rate sort of starting point entering 2020, it seems like out of the three buckets you just named, the service agreements obviously should continue to remain sort of at the lower level I assume over to next year; the manufacturing efficiencies obviously, as well, assuming no big changes in production. It just feels like the first bucket, the recovery, seems to be just something that's toward the end of the year, and that's not necessarily a full-year run rate. Am I looking at it right?

Vivid Sehgal -- Chief Financial Officer

Yes, you are. So if you're looking at it on that basis, if you look at the business, if you look forward to '20, obviously we're not going to lean right now into a 2020 margin given the dynamics that we have in this play right now. But certainly the trajectory, going forward, we look at the SG&A and the duplicate savings that we have in place. Yes, material manufacturing, there's a big focus on that given some of the new resources and talent that we brought into the organization, with Rick's focus as well.

Engineering is a normal cadence. And going forward, of course we believe that the mix on GDi and Power Electronics margins will improve. And we're going to look for further cost efficiencies in this company with or without the restructuring benefits that are available to us. But given all of that, you're in a situation whereby we just have to look at the macros.

We need to look at industry volumes. We need to look at sort of CV North America, some of the tariff headwinds. All of those good things are continuing to be as well as FX, they continue to be the sort of outlier that we'll continue to monitor. But what's within our control, we're confident we can achieve and improve on the processes that we're showing in Q4.

Emmanuel Rosner -- Deutsche Bank -- Analyst

Great. Yes. Thanks for the call.

Operator

Our next question comes from Dan Galves from Wolfe Research.

Dan Galves -- Wolfe Research -- Analyst

Hey. Good morning. Just my first question is related to your assumptions for China market production going down from minus 8% to minus 12%. How much of that is related to the second half? I guess what I'm getting at is, are you guys seeing any kind of deterioration in second half expectations versus kind of where the third parties are and where they were or where you were thinking a couple of months ago?

Vivid Sehgal -- Chief Financial Officer

So all together there, if we look at our own performance in terms of China right now, we sort of -- if I look at the market, our assumptions at this point, you look at it a sort of Q1 position of about minus 11% for the market, and the market was down about close to minus 20% in Q2. We see more of a sort of minus 10% range in the second half of this year. And there's partly the fact that -- there's two reasons for that. I think the first one -- and so we continue to see softness.

We're not assuming an incentive. And in terms of our own, if I dial it back a little bit, in terms of our own revenues we saw a close to minus 20% to 25% in the first half of this year, and we're getting sort of back into the sort of minus 8% to minus 10% in the second half. So we do see some growth coming, or less negative, in the second half of the year. And really two things are at play here.

I think we saw a really major softness in China with some of the inventory adjustments hitting us in Q4 of last year. So we're overlapping some pretty weak quarters. That's number one. And from our own perspective we continue to launch.

We do have some important launches that are going on in Q4, particularly on the GDi and Power Electronics side, which gives us confidence of margin and revenue trajectory going into 2020.

Dan Galves -- Wolfe Research -- Analyst

Got it. Got it. So just essentially you think that your kind of revenue mix is going to be more consistent with the market in the second half in China? And then I just have one follow-up.

Vivid Sehgal -- Chief Financial Officer

Yes, that's exactly what we're saying, yes.

Dan Galves -- Wolfe Research -- Analyst

Thanks. And then I was interested in your comment about 500 bar GDi technology not really requiring a lot of incremental plant capacity or switching from 350. I guess just bigger picture, it sounds like there's a ton of capex this year that may not repeat in the future. Do you have any sense of kind of what your more sustainable capex number would be beyond 2019, in the next few years?

Vivid Sehgal -- Chief Financial Officer

Sure. So right now this year we're going to be probably in the range of closer to 7% in relation to capex, and that's partly for two reasons. It's the sort of incremental capex that from a business perspective we put in place, given particularly the GDi capacity that we've done given some of the strong growth, current and future growth that we expect. But we also have some one-time capex that's in play right now.

So in terms of our separation capex, as Rick mentioned, the build-out of our three electrification plants as well as the stand-up of our IT infrastructure, we're probably spending about $30 million to $40 million of capex this year that we will not plan to replicate, going forward. So I think you can look at our capex at about 7% this year, and our sort of going-forward range is more in the 5% to 6% is what we expect on an ongoing basis.

Rick Dauch -- Chief Executive Officer

Dan, it looks like from what I see since I've been here is that typical powertrain is somewhere between 5%, 6.5%, 7%. I think we'll fall in that range, as Vivid says. I think we're going through some unique time right now in terms of standing up the company, doing the transition over to GDi. I think there's a few things.

Wherever I go, I find things that are broken over the last few years. There will be a little bit of capex, but I think that number Vivid gave you is pretty good.

Vivid Sehgal -- Chief Financial Officer

And I think -- Rick and I have spoken a lot about this. I think the one thing, Dan, you need to think about is the way we use capex, I think given some of the macro and industry trends right now, we're looking at it in a slightly different way. And the way we're looking at it is that from a GDi perspective you have the opportunity to switch over from 350 bar to 500 bar with small modifications on the capex. So effectively, it's reusable.

On the Power Electronics side of the business, given some of the choppiness that we've seen, given the macro conditions, we're also going to take a hard look, and we are taking a hard look, at that. And that is also reusable capex. So in a win, for example, that we have just recently gone through, at least 60% to 70% of that capex is reusable and more generic in nature. So it means if volumes because of market don't come through, we can switch that capex into other areas.

That's number one. And the second thing is we're taking a more modular approach to capex right now, where we're not going to install capex in all in one go and we're going to take a breathing point over a period of time to see where the volumes are going, because we are very confident about our volumes in Power Electronics, but it makes sense from a management team to actually take a breath and make sure that we phase it rather than throwing it all in, in one go.

Rick Dauch -- Chief Executive Officer

Let me make a couple of comments here. So I've typically come from industries where we're doing heavy manufacturing: big forgings and stamping, big machining, assembly. Here at Delphi it's a little more sophisticated manufacturing in terms of very high volume, precision grinding machining, a lot of robotics. And then on the electronics side, clean-room situations, surface-mount technology, assembly operations.

And so the manufacturing guys are taking a hard look of what's really core versus noncore. Do we need to put the capital in ourselves or can we do it from the outside and save some capital? That's an opportunity. Are we fully utilizing the capital we have by using it three shifts a day, five days a week or six or seven days a week where it makes sense to do so where you have the ability to do so with the labor unions and stuff? Two, I'd say now that we've gone around the world and seen all of our technical centers, we're spending too much money there trying to maintain 25 different engineering sites and all the equipment that goes with it. I don't need eight materials labs.

They all have to have microscopes and test facilities. And so there will be some scale-back there, too. I think we'll have a much better handle. But generally, powertrain suppliers, from everything I've read, it's somewhere between 5% to 6%, sometimes up to 7% when you're going through some kind of launch.

On the GDi going to 500 bar, like I said, I'm very complimentary toward our product and process engineers. They designed a new system to fit into the area of the engine without having to redesign the engine first for the OEM, and then we can run the same stuff down our lines that we run today. OK? So that's a great smart use of our money down the road. OK? Does that help?

Dan Galves -- Wolfe Research -- Analyst

Got it. Yes. For sure. Thanks a lot.

Operator

I'm showing no further questions at this time. I want to turn the call back to Richard Dauch, chief executive officer of Delphi Technologies, for closing remarks.

Rick Dauch -- Chief Executive Officer

All right, Darinda. Thank you very much. And thank you for everybody on the phone call. We appreciate your interest in Delphi Technologies.

We look forward to seeing you on the road. We'll probably see many of you over at the Frankfurt IAA Show here in September. Enjoy your summer, and we'll talk to you soon. Thanks.

Have a great day. Bye.

Operator

[Operator signoff]

Duration: 71 minutes

Call participants:

Sherief Bakr -- Vice President of Investor Relations

Rick Dauch -- Chief Executive Officer

Vivid Sehgal -- Chief Financial Officer

David Leiker -- Robert W. Baird -- Analyst

David Tamberrino -- Goldman Sachs -- Analyst

Dan Levy -- Credit Suisse -- Analyst

Brian Johnson -- Barclays -- Analyst

Emmanuel Rosner -- Deutsche Bank -- Analyst

Dan Galves -- Wolfe Research -- Analyst

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