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Aptiv PLC (APTV) Q1 2019 Earnings Call Transcript

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Aptiv PLC  (NYSE: APTV)
Q1 2019 Earnings Call
May. 02, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day. My name is Jack, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Aptiv First Quarter 2019 Earnings Conference Call. (Operator Instructions)

Elena Rosman, Vice President of Investor Relations, you may begin your conference.

Elena Doom Rosman -- Vice President of Investor Relations

Thank you, Jack. Good morning, and thank you to everyone for joining Aptiv's First Quarter 2019 Earnings Conference Call.

To follow along with today's presentation, our slides can be found at ir.aptive.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 Q1 financials as well as our outlook for the remainder of the year are included at the back of today's presentation along with other supplemental tables.

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.

With that, I'd like to turn the call over to Kevin Clark.

Kevin Clark -- President and Chief Executive Officer

Thanks, Elena. Good morning, everyone.

I'm going to begin by providing an overview of our first quarter highlights and provide some perspective on how we're thinking about the balance of the year. Joe will then take you through the -- our first quarter financial results as well as our updated financial outlook in greater detail.

First quarter revenue, EBITDA, operating income and earnings per share all finished above the guidance we provided back in January, reflecting our ability to drive sustained outperformance even in a more challenging macro environment.

We delivered 4% revenue growth despite vehicle production declining 5%, representing 9 points of growth over market. The result of strong demand for our portfolio of technologies aligned to the safe, green and connected megatrends. And operating income and earnings per share totaled $345 million and $1.05, respectively, driven by volume growth in our industry-leading cost structure.

The strength of our portfolio of advanced technologies resulted in over $4 billion of new customer awards, which, combined with an expanding funnel of new business opportunities, puts us on track to exceed our prior year record of $22 billion.

Given our win rate on new business bookings and the size and scale of our funnel of new business opportunities, we believe it's important that we continue to invest in our safe, green and connected technologies even in this more challenging macro environment, thereby, further expanding our competitive moat and better positioning Aptiv for sustained value creation.

In summary, it was another strong quarter further validating our operating model, portfolio of advanced technologies and our business strategy.

Given the increasingly challenging and uncertain macro landscape, I'd like to provide some context for how we're thinking about the remainder of 2019 on Slide 4. Relative to our initial expectations, our first quarter financial performance benefited from stronger outgrowth in weaker end markets, the result of stronger-than-expected new program launches and content gains globally. In light of the weaker macro environment, we've implemented incremental overhead cost reductions in addition to manufacturing and supply chain initiatives to improve our cost structure and be in a position to fund our growth investments.

In addition, we repurchased 226 million of our stock, opportunistically taking advantage of market discounts while maintaining a strong and flexible balance sheet. And we now expect share repurchases to total $450 million for the full year.

Moving to the right side of the page. We've seen a deterioration in key macros underpinning our initial 2019 outlook. Joe will take you through the details in a moment, but we now expect global vehicle production to be down 3.5% for the year versus down 2.5% previously primarily driven by weaker demand in both Europe and China. In addition, since our outlook in January, the euro has weakened relative to the dollar and commodity prices, principally related to resins, have seen recent spikes as a result of tightening supply conditions.

While our teams are aggressively working to mitigate these impacts with cost reductions and productivity initiatives, the combination of weaker end markets and the changes in FX rates and increased commodity prices are enough to cause us to lower our outlook for the remainder of the year. And as we look at the current implied second half ramp up in vehicle production forecasted by many industry experts, we believe our balanced outlook represents a much more realistic perspective.

Turning to Slide 5. We're focused on taking actions that increase the flexibly of our business model and position the company for better through-cycle performance.

Despite our revised outlook for lower vehicle production resulting from the current weaker macro trends, we remain confident in our ability to continue to outperform driven by increased vehicle content and market share gains, the benefit of more -- of a more balanced customer, regional and end-market exposure and our relentless focus on optimizing our cost structure.

Our DNA is wired to constantly deliver material and manufacturing efficiencies while also reducing overhead costs. In 2018, we eliminated $50 million of overhead and stranded costs related to the Powertrain spinoff. Turning to 2019, we're executing initiatives targeted to save an incremental $40 million of run rate overhead and stranded costs, including manufacturing and engineering footprint rotation of best-cost countries, supply chain initiatives to improve supplier quality while reducing our overall spend and corporate and back office consolidations that improve service levels while reducing costs.

While we expect the benefits of these initiatives to gradually layer in over the coming quarters, we're continuing to prudently fund growth investments, including increased engineering investments to support the higher demand for advanced active safety solution and increase investment to fund the further development of our automated driving platform, smart vehicle architecture, advanced development programs and connected services data monetization opportunities.

In summary, the constant focus on optimizing our cost structure improves our operational efficiency and frees up investment to fund future growth.

Turning to Slide 6. First quarter new business bookings totaled $4.3 billion, further highlighting our portfolio alignment to the safe, green and connected megatrends as well as our strong, competitive position in several advanced technologies.

In our Active Safety and User Experience segment, our expertise in central compute platforms, sensing and perception systems and machine learning is helping to deliver a safer, smarter and more integrated solution, both outside the vehicle with advanced active safety systems as well as in the cabin, through enhanced user experience and interior sensing solutions. And as a result, we booked 800 -- or 600 million and 300 million of active safety and info and user experience awards, respectively, during the quarter. We believe the strong start to the year in active safety bookings puts us on pace to exceed 2018's record with well over $4 billion of new awards estimated for 2019.

Moving to our Signal and Power Solutions segment. Engineer components booked almost $1.7 billion in new customer awards during the quarter. And we also booked over $350 million in new high-voltage electrification awards and are on track to exceed last year's $2 billion of new business awards.

Turning to segment highlights in Advanced Safety and User Experience on Slide 7. Revenues for the first quarter were up 7%. That's 12 points over market. The continued strong consumer demand for active safety solutions drove product line revenue growth of 69%. And as expected, the roll-off of revenues tied to our displaced business contributed to a modest decline in inflow and user experience revenues.

During the quarter, we booked an important conquest win with Porsche and Audi to supply a smart actuator charging interface controller, which manages the flow of data coming into the vehicle while it charges. Industry experts have identified this as a potential intrusion point on the vehicle and as such, this is an exciting growth area for our connectivity and cybersecurity product lines.

Turning to Slide 8. Our investments in scalable vehicle architecture are seeding our next wave of growth helping to drive the democratization of new mobility solutions globally. As a result, Aptiv is uniquely positioned to benefit today from our smart vehicle architecture and automated driving investments as the demand for advanced active safety solutions increases.

We booked multiple scalable Level 2+ customer awards, leveraging the integration of our unique satellite architecture and active safety domain controller with our perception systems.

Underscoring our technology leadership position, last month, our ASUEX team was recognized with a PACE Award for our work with Audi on their automated driving satellite compute platform. This industry-first platform, developed as part of our strong partnership with Audi, has been a game changer in the industry and has since been selected by 6 other OEMs to help them realize and, in effect, democratize active safety solutions across their multiple vehicle platforms, which underscores our mission. As the complexity of technology increases, OEMs appreciate our value and contribution toward getting the architecture right today, which is critical to delivering the feature-rich, highly automated vehicles they need in the future.

Moving to the right of the slide. We recently announced the expansion of our autonomous driving activities to the China market. Shanghai is now the fifth city where we've localized autonomous driving operations, joining Singapore, Las Vegas, Boston and Pittsburgh. Our plans to bring autonomous driving to China by partnering with the transportation network company and others in the mobility ecosystem brings us 1 step closer to the broader adoption of automated mobility in the region.

Turning to Slide 9. Our Signal and Power Solutions segment is focused on next-generation vehicle architectures, including high-speed data and high-power electrical distribution, that enable the advanced technologies that will shape the future of mobility. Revenues increased 3% during the quarter, 7 points over market despite the weakening macros driven by 65% sales growth for our high-voltage electrification products and almost 40% growth in commercial vehicle and industrial revenues.

Underscoring our industry-leading position in vehicle architecture, we were recently awarded the high-voltage electrical architecture on the Fiat 500. This award validates the increasing need for optimized high-voltage architecture across a full range of vehicle types.

Before turning it over to Joe, I'd like to take a minute to preview our upcoming 2019 Investor Day theme and topics of discussion. You've heard us talk before about our strategic imperatives and the importance of building a strong, sustainable business that delivers long-term value to all our stakeholders through the relentless focus on having the right people, a portfolio of market-relevant advanced technologies and the continuous improvement mindset. We believe this formula leads to a more sustainable business that's better positioned to perform through-cycle. And we've seen evidence of this the last 2 years with record growth over market despite declining vehicle production, putting us on the path to deliver on our 2022 revenue targets in a weaker macroenvironment, positioning us to see the investments in future growth initiatives that will lead to new solutions and new markets and that will allow us to achieve our vision for the company in 2025, which we believe results in a differentiated and compelling investment thesis for Aptiv.

In summary, we believe Aptiv is well on its way to becoming the Tier 0 partner of choice for our customers capable of delivering the advanced architectures and optimized solutions that are making the future of mobility real.

With that, I'll hand the call over to Joe to take us through the first quarter results and review our outlook for 2019.

Joseph Massaro -- Chief Financial Officer

Thanks, Kevin, and good morning, everyone.

Starting with our first quarter revenue growth on Slide 11. Revenues of $3.6 billion were up 4% adjusted despite a 5% decline in vehicle production in the quarter. From an organic standpoint, excluding acquisitions, we estimate revenue increased approximately 1% with organic growth over market of 6%. As a reminder, KUM is fully integrated and will lap itself in the second quarter while Winchester integration continues and will lap in the fourth quarter.

The strong launch volume and content gains we had in 2018 continue in 2019, helping to offset price and the unfavorable impact of FX and commodities. From a regional perspective, we saw outperformance in every major region of the world despite lower vehicle production across-the-board. North America revenues were up 7% adjusted driven by multiple new platform ramp-ups and the addition of Winchester Interconnect. Europe had 11 points of growth over market driven by the uptick of several new programs. And our China adjusted growth was negative 12% with 3 points of growth over market. Although China vehicle production was lower than our original expectations, we continue to see growth in key product lines, including active safety and high voltage. I'll provide an update on our production outlook for the year shortly.

Turning to Slide 12. As Kevin indicated, first quarter EBITDA, operating income and EPS were all above the midpoint of the guidance we provided back in January. EBITDA and operating income of $518 million and $345 million reflected the benefits of strong volume growth in North America and Europe, which were more than offset by volume declines in FX and commodity headwinds in China -- and U.S., China tariffs.

Operating income margin, adjusted for FX and commodities and tariffs, was 10%, reflecting lower production volumes while continuing to invest in future platform growth in Advanced Safety and User Experience, as Kevin referenced earlier. While favorable to guidance, tariffs were $6 million headwind year-over-year, reflecting lower demand levels in the region and a 10% tariff rate for the full quarter.

Earnings per share of $1.05 were $0.05 above the midpoint of our guidance driven by higher operating income. Net below the line items were favorable year-over-year largely driven by a lower effective tax rate of 11.3%. However, versus guidance, this benefit was offset by other items primarily higher interest expenses associated with the debt refinancing we did in the quarter, which I'll cover in more detail shortly.

Moving to the segments on the next slide. For the quarter, Advanced Safety and User Experience revenues grew 7% or 12 points over market driven by new launch volumes and robust growth in active safety more than offsetting the planned roll-off of our lower-end display audio product line in Info and User Experience.

Operating income before the impact of higher mobility investments benefited from strong active safety margin expansion despite higher planned engineering investments to support our strong backlog of new wins and pursuits. As a result, we now expect active safety revenues up 50% for the year with low teens operating margins. Our mobility investments for the quarter totaled $47 million, and we remain on track to target spend of $180 million.

In summary, another strong quarter of revenue growth and operating leverage in the Advanced Safety and User Experience segment.

Turning to Signal and Power Solutions on Slide 14. Revenues were up 3% or 7 points over market driven by new program launches in North America, strong growth in our CV in industrial end markets and continued robust penetration of high-voltage electrification. Operating income margin adjusted for the dilutive impact of FX, commodities and tariffs was 11.3%, down 200 basis points due to lower production volumes primarily in China.

FX and commodity headwinds were largely driven by the weaker euro and RMB in addition to higher resin costs, as previously discussed. We expect FX and commodity headwinds to continue for the remainder of the year and have contemplated this in our revised outlook.

Given the continued challenging macro landscape, Slide 15 provides a refresh of our vehicle production assumptions underpinning our updated revenue outlook for the year. We saw deteriorating trends escalating in Q1 with global vehicle production down 5% in the quarter. Meanwhile, extended macro uncertainty, regulatory constraints and continued weak vehicle sales, particularly in Europe and China, have caused us to revise our vehicle production outlook lower for Q2 and the remainder of the year. At a global level, we now expect vehicle production to be down 5% in the second quarter consistent with Q1 and 3.5% for the full year.

From a regional perspective, we now expect China production to decline 12% in the second quarter and 9% 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 to structurally lower industry volumes going forward and we'll continue to take additional actions to adjust our cost structure in the region as a result. Turning to Europe, we now expect vehicle production to decline 9% in the second quarter and 4% for the full year driven by lower customer demand and certain program launch delays. Lastly, we see North American production largely unchanged as OEMs launch new truck and SUV platforms to offset continued passenger car revenue declines.

Despite the more challenging global market, we continue to expect our portfolio of safe, green and connected technologies and balanced regional customers -- customer and industrial market mix to more than offset the automotive macros, contributing to strong growth over market in every region. As a result, our adjusted revenue growth rate for the year remains unchanged at 6%.

Turning to Slide 16. Second quarter revenue is expected in the range of $3.6 billion to $3.7 billion, up 5% at the midpoint or 9 points of growth over market. As I mentioned, that assumes global vehicle production down 5% in addition to $1.12 euro and a RMB 6.90. Operating income and EPS are expected to be $385 million and $1.14 at the midpoint, respectively, and includes estimated tariffs of $12 million in the quarter, assuming the List 3 step operate to 25% takes effect June 1 having been previously postponed. As a result, EPS is expected to be in the range of $1.11 to $1.17.

Moving to the full year. Revenues are now expected to be in the range of $14.425 billion to $14.825 billion, up 6% at the midpoint. Adjusted EBITDA and operating income are expected to be $2.395 billion and $1.67 billion at the midpoint, respectively.

It's important to note, our outlook includes over $130 million of FX, commodity and tariff headwinds for the full year. In aggregate, we believe these are mostly short-term impacts that should improve in the back half of 2019 and 2020. And given the strength of our market position and bookings pipeline, we continue to make the investments in active safety and high voltage to supports sustained, strong revenue and income growth.

U.S., China tariffs are now estimated at $50 million for the year, down from our prior forecast of $60 million due to the delayed increase in the List 3 step-up rate and lower China volumes. As a result, earnings per share are expected in the range of $4.90 to $5.10. And operating cash flow is now expected to be $1.65 billion, reflecting higher restructuring cash for the year. No change to CapEx spend at $800 million.

Turning to the next slide. We thought it would be helpful to provide more detail on the full year outlook guidance change. Starting with the revenue walk on the left. You can see the first quarter outperformance is being more than offset by $170 million of unfavorable FX and commodity translation with the euro now estimated at $1.12 for the year versus our prior outlook of $1.17. And our revised vehicle production outlook results in $150 million lower sales for the year.

Moving to the operating income walk on the right. Our updated operating income outlook similarly reflects our fourth -- our first quarter volume upside, the flow-through of our updated FX and commodity assumptions lower vehicle production volumes, partially offset by the benefit of incremental structural cost actions Kevin mentioned earlier. The annualized impact of these actions are roughly $40 million and will further improve our flexible and scalable cost structure in 2020 and beyond.

In summary, the strength of our revenue growth in the face of lower vehicle production underscores our portfolio positioning while we continue to fund growth investments that are resulting in significant share gains.

Turning to Slide 18. Our strong and flexible balance sheet allows us to execute our strategy for growth and create value for shareholders. In efforts to maintain our low net debt, conservative leverage profile and improve long-term business flexibility, we refinanced $650 million of 2020 senior notes to 2029 and 2049, extending the weighted average tenure from 7 to 12 years with a significant portion of 30-year debt. As a result, there are no significant notary payments due until 2024. This refinancing resulted in $11 million higher interest expense versus prior guidance, which we will offset by our revised share repurchase outlook for the year, which now totals $450 million. At the same time, our M&A pipeline remains full. We remain focused on accretive bolt-ons similar to HellermannTyton, KUM and Winchester, which provide attractive end-market diversification as well as strategic technology acquisitions where we have the opportunity to accelerate the commercialization of new technologies. As a result, our consistent capital deployment strategy remains focused on investing in our business, both organically and inorganically, and opportunistically returning cash -- excess cash to shareholders.

In summary, we believe effective capital deployment is a major differentiator for Aptiv and an important lever for shareholder value generation.

With that, I'd now like to hand the call back to Kevin for his closing remarks.

Kevin Clark -- President and Chief Executive Officer

Thanks, Joe. Let me wrap up on Slide 19 before opening it up for Q&A.

Our first quarter performance was further evidence of Aptiv's ability to drive sustained above-market growth. While our updated 2019 outlook contemplates a more challenging macro environment than we expected coming into the year, our teams are focused on executing our strategy. And we believe it's critical that we balance continued investment in our promising future with a relentless focus on increasing the flexibility of our cost structure, thereby, creating more operating leverage when macro concerns abate.

We believe our unique formula further differentiates Aptiv as a company capable of capitalizing on the key global Auto 2.0 megatrends, driving increased vehicle content and market share gains while also building more predictable and sustainable business with robust downturn resiliency better positioned to perform in any macro environment. And lastly, we remain focused on delivering value to our shareholders, building upon our strong track record of operational execution and value-enhancing capital deployment.

With that, let's open up the line for Q&A. Operator?

Questions and Answers:

Operator

(Operator Instructions) Joseph Spak with RBC Capital Markets.Your line is open.

Joe Spak -- RBC Capital Markets -- Analyst

Thanks. Thanks for taking the question. The first one is just on the -- in the Slide 17, I guess where you have the change in the guidance walk. The net incremental performance, is that something that new that you sort of used some of your flexibility to sort of help offset some of the incremental volume pressures we've seen? So like the way to think about it is that minus $55-plus million that $10 million over the change in $150 million, which should sort of be like that 30% decremental margin? Or is that just sort of stuff that sort of already in the system that you just -- has been coming in better?

Kevin Clark -- President and Chief Executive Officer

No. It's incremental, Joe. The first way to think about it is the right way.

Joe Spak -- RBC Capital Markets -- Analyst

Okay.

Kevin Clark -- President and Chief Executive Officer

So we're looking -- so as we're looking at these production volumes coming down and again, assuming lower level of production going forward in some of these markets, we are taking another look at the cost structure and working that through. So that would be incremental to what we've talked about in the past.

Joe Spak -- RBC Capital Markets -- Analyst

Okay. And then maybe just on the -- I noticed you provided the slides on sort of organic growth. I just -- this is a little bit of housekeeping, but how are you getting to 7% in U.S. segment? Because if you look at the change -- just trying to, sorry, quickly find the slide on -- you only show like a $29 million positive on the $1.32 billion.

Elena Doom Rosman -- Vice President of Investor Relations

So within AS and UEX, there's some divestiture revenue related to the wind down of some contract manufacturing in that business, Joe.

Joe Spak -- RBC Capital Markets -- Analyst

Okay. So that's the difference? Okay.

Kevin Clark -- President and Chief Executive Officer

Yes. You have it. Now you've got that. That's why -- for the M&A is net. So you've got the ads from Winchester and KUM and the contract manufacturing coming down from prior divestitures.

Joe Spak -- RBC Capital Markets -- Analyst

Okay. Thanks

Operator

Brian Johnson with Barclays, your line is open.

Brian Johnson -- Barclays -- Analyst

Thank you. A couple of questions. So we've thought -- seen in the past the impact of copper, which is mostly my understanding pass through at the leg over an SPS. Now we're seeing resins. So can you talk about whether these are contractual pricing mechanisms? I assume this is on the connector side although maybe it's the insulation for the wiring. Kind of what is it? What are your contractual provisions around it? And then what gives you some confidence in recovery of those or whether if you recover some of those...

Kevin Clark -- President and Chief Executive Officer

Yes. Brian, it's Kevin. I'll start. So it's resin. And you're right. It's resin principally related to the connector engineered components business. And it relates to tightness in the supply chains from an available capacity standpoint. It's actually some of the additives that go into some of the resins like PA66 and others that are out there. We started to see a significant increase late last year of relatively large increase into our business plan for 2019 as we exited 2018 and saw incremental tightening of supply and incremental pricing. And given growth on some of our product lines, the reality is we need to buy some of that product out on spot on the spot market relative to our contractual provisions. And those have been, at least to date, at much higher rates. We're working to push those through to customers. We've had some success. But in light of some of the softer volume, it's been a bit more challenging to do. It's something that we'll continue to work through. While we're doing that, we're also in the process of validating other resin alternatives to replace the existing -- for example, like PA66, to replace that sort of resin with alternative products that are automotive-grade and are validated by our customers.

Brian Johnson -- Barclays -- Analyst

Okay. So this is more driven by developments in the chemical industry than the impact of smaller parts.

Kevin Clark -- President and Chief Executive Officer

Yes. It's more driven by, quite frankly, a limited supply on one of the components or additives into products like PA66 where we've actually seen some facility -- temporary facility shutdowns, significant price increases as a result of the shortage of supply and again, demand for select products where we need to go out on the spot market and actually buy the resin. And as I said, we forecasted or we had in our plan a significant increase on a year-over-year basis, but we've actually seen much higher prices than what we originally anticipated.

Joseph Massaro -- Chief Financial Officer

Yes. And Brian, just to echo Kevin's point. So this would be -- this is across ECG. So this is -- there's some of these in HellermannTyton as well. We've typically -- through the industrial channel, we're able to push price easier than the automotive channel. It just takes a little bit of time. And I would say, moves in these resins historically have been on size where we've been able to sort of manage them in the -- sort of in the daily flow of sort of back and forth. This is a particularly high spike that we see lasting through the balance of the year, and it's going to take a little more time to work through.

Brian Johnson -- Barclays -- Analyst

Okay. A follow-up, slightly different topic. So I just -- your bookings were actually down year-over-year yet you're on track. So are there big things that -- just in terms of timing that are likely to hit Q2 and 3Q?

Kevin Clark -- President and Chief Executive Officer

Yes. Listen, I -- Brian, as we said, bookings are lumpy. So I wouldn't read in the quarter that quarter -- year-over-year or kind of quarter-to-quarter comparison. So when we look at the funnel of opportunities, especially in areas like ADAS, vehicle electrification or high voltage, the funnel is actually larger this year than it was last year at this point in time. So we have a high level of confidence that bookings for the year will be over $23 billion. So -- and on the active safety side, over $4 billion. So I wouldn't read into a single quarter.

Operator

Your next question comes from the line of David tambourine with Goldman Sachs. Your line is open

David tambourine -- Goldman Sachs -- Analyst

Hi Good morning.A couple of questions. The first one's can we dig into the Signal and Power Solutions business? I mean I think the -- you probably went through it in your prepared remarks. Unfortunately, I wasn't on for that. But I think the decremental for that business was like 120%. I'd really love to just understand the puts and takes there, if that should be continuing throughout the year. And that's my first question.

Joseph Massaro -- Chief Financial Officer

Yes. David, I think the way to think about that -- when we talk about the FX commodity impact, those -- and the majority of tariffs, those all hit an SPS, right? So it's 90-plus percent of the numbers, those numbers that we talk about from -- at an Aptiv level actually hit that segment. So that's the majority of what you're seeing there from a flow-through perspective. I think the other thing that's impacting that again at a flow level, and it's -- we've known it and it's one of the reasons -- it's sort of in the Q1 guide. At the OI level, you've got the legacy business bounced 12% in China, for example. You've got new business from KUM and Winchester coming in but obviously, at a lower OI rate given the deal amortization. So you've got a little bit of that going on. Wherein a typical -- in typical situation, you would have China coming down so much so you would necessarily see that negative flow. And we'd expect to start to lap that at the back half of the year. But the primary reason when you think about SPS is the FX, the commodity, the tariff hit that segment.

David tambourine -- Goldman Sachs -- Analyst

Okay. So then excluding all that, I mean what target decrementals would you think that business would achieve at volume...

Joseph Massaro -- Chief Financial Officer

That business -- yes, that business should be -- I mean we talked about decrementals, 25% to 30%. That business would be closer to the lower end of that range.

David tambourine -- Goldman Sachs -- Analyst

Okay. And then for my second question. A lot of new headwinds that you're calling out for the remainder of the year, what opportunities do you have to mitigate some of them? Are you going to be able to pass through some of those price increases? What type of lag time could we be looking at?

Kevin Clark -- President and Chief Executive Officer

Yes. David, I'll start. Listen, I mean the first action -- Joe answered the first question with respect to kind of cost structure activities. So as a result of the slowdown there, we pulled forward a number of initiatives that relates to the footprint consolidation into this year that we're putting in for next year as well as have taken incremental actions in light of the significant slowdown in China. So when you look at China for -- outlook for the year and back half of last year, the reality is we're forecasting 6 straight quarters of vehicle production decline. And in light of that, it's important that we continue to reduce our cost structure. We will implement an initiative in the fourth quarter of last year from a footprint and headcount standpoint. We're going to take further action in that region. As I said, we're going to pull forward some of the plans that we had in the rest of the globe as a result of the lower vehicle production. As it relates to things like resin and FX, resin, we're pushing real hard from a customer standpoint, from a pricing standpoint. As Joe says, we can't flip the switch overnight, but I think we feel comfortable those are things that over the balance of the year we should be able to abate. So as we head into 2020, we're in a net-neutral position. That'll be a mix of price increases as well as replacement product for things like PA66. So that's something that we think we can meter in for the balance of the year.

And then there's several areas that we're looking at from an overhead and corporate standpoint in terms of streamlining and tightening our belts. The one area that we've spent a lot of time looking at and thinking about is the advanced engineering and the pursuit engineering areas. We, at this point in time, feel strongly that that's not an area we should touch. We've had tremendous success as it relates to smart vehicle architecture. We now have won our second advanced engineering program, a significant success in our ADAS or active safety business and there are several other areas that we feel like we're getting a lot of traction. We're gaining tremendous market share. Joe talked about the margin growth on a year-over-year basis in some of these areas. And our view is we should just continue to invest so that we can be dominant in those particular areas and widen the competitive moat. But that's an area that if we continue to see significant softening, that's an area that we continually evaluate.

David tambourine -- Goldman Sachs -- Analyst

Okay. And that's not -- none of that is contemplated within the guide. Correct?

Kevin Clark -- President and Chief Executive Officer

No. None of that is contemplated in the guide.

David tambourine -- Goldman Sachs -- Analyst

Thank you very much.

Operator

Chris McNulty with Evercore. Your line is open.

Chris McNulty -- Evercore -- Analyst

Thanks so much.Maybe we'd start on the production guide for Europe. Looking at your Q2 in the second half, you're definitely more conservative than the forecasters, which I think many people are saying, the hockey stick in second half looks a little bit too aggressive. But I wanted to just hone in on are you getting any early indications around RDE? And is there some bit of conservativism baked in for the changeover that happened at the end of Q3?

Joseph Massaro -- Chief Financial Officer

Yes. Chris, I would say over the course of March, we saw our European customers' schedules come down significantly in Q2, right? So we've got Europe down 9% in Q2. So there's a bit of -- when you talk through it with customers, this Brexit uncertainty is still out there. I think that can has been kicked until October. You have RDE. There may be a little bit of China contagion as well in some of the higher-end models, which -- in our European business, we are on the bigger platforms that are, in some cases, exported out. So I would say it's that combination of things. As you look -- the other -- and Kevin mentioned in his comments, the one thing we've tried to do is be very prudent on just how big that back half ramp gets. And when you looked at -- when look at China down 15 points, now 11 in Q1, down again in Q2, a little bit more than we were forecasting at 0.5 point to 1 point. And now with Europe, we just wanted to make sure we were thinking properly about the business, planning accordingly, taking the actions and not just assuming this big snapback. And that's really what you've seen us work through Q2 in the back half of the year.

Kevin Clark -- President and Chief Executive Officer

Yes. Chris, I would say the second quarter was the first time we've seen actually shifting out of program launches, vehicle program launches and that penetration of our product, but actually, delay in vehicle launches from OEs in Europe, which isn't good. And then to Joe's point, it's -- from a credibility standpoint, it's tough to sit and say, "China is down double digits the first half of the year and is going to rebound and have growth, significant growth in the back half of the year." And from our perspective, we think it's prudent to assume there is some back half improvement, but it's much more muted.

Chris McNulty -- Evercore -- Analyst

Okay. That makes sense. And then the second on the FX and commodity. I think the $60 million drain on the $170 million sale, should we think about it -- you talked about the resin, if I just run -- if I think about like a decremental margin on it, the resin $40 million hit is just straight to the bottom line. And then the other $20 million should be the FX translating at slightly above company average margins?

Joseph Massaro -- Chief Financial Officer

Yes. That is correct.

Chris McNulty -- Evercore -- Analyst

Okay great, thanks so much guys.

Joseph Massaro -- Chief Financial Officer

Thanks Chris.

Operator

Dan Galves with Wolfe Research, your line is open.

Dan Galves -- Wolfe Research -- Analyst

Hey good morning everybody.

Kevin Clark -- President and Chief Executive Officer

Good morning.

Dan Galves -- Wolfe Research -- Analyst

Yes. Just had a couple of questions. Just to clarify, when you say you'll be back at kind of a neutral position on resins, what do you mean by that? It's -- I guess I'm just trying to see if there's an opportunity to kind of reduce some of this $40 million headwind over the course of the year. Is that something that you're looking to get back to neutral heading into 2020 at which point you'd have a -- kind of a positive year-over-year?

Kevin Clark -- President and Chief Executive Officer

Yes. Listen, I -- our objective would be to give back -- our objective would be to get it back to neutral as soon as we can. I think there's a reality in terms of validating new materials with our OE customers that needs to be taken into consideration from a timing standpoint. Increased price. That's something that obviously needs to be negotiated and pushed through. That's a little bit tougher in a weaker environment, quite frankly, than it is in a harder environment. But we think between the two, we'll be able to offset it. Dan, we'll work real hard to pull that forward and get it done as quickly as we can. But probably, the prudent thing is to assume it's not a net neutral or we're not at that point until year-end. And then for next year, it means it's not a headwind. You don't have the same headwind from a year-over-year standpoint.

Dan Galves -- Wolfe Research -- Analyst

Got it. Okay. The other question is somewhat kind of dovetailing to what you said about a tougher environment to get relief from the customers. The program launches that you're talking about in Europe, do you think that that's related to emissions programs, regulations that are coming in next year, fines? It seems like there's a lot of uncertainty there. And kind of what are you hearing in terms of desire of OEMs to try to offset some of the kind of regulatory costs they're facing in Europe through kind of broad actions into the supply chain?

Kevin Clark -- President and Chief Executive Officer

Yes. I -- listen, I think the environment with the supply chain again -- and not to give you the same answer all the time, it continues to be challenging just has it always been -- as it always has been. So I wouldn't say that there's necessarily incremental pricing pressure. I think it's -- it continues as it historically has. I think with respect to shifting vehicle production, it's tough for us to get precise ability to what drives that. I'm sure some of that's regulatory, some of that's cost, some of that's funding investment. This particular product line is one that the OE will certainly introduce. So it's not a cancellation. It's just a shifting or delay that had a revenue impact on us. But I think it's a bit of all of the above, right? The regulatory environment costs as well as capital constraints.

Joseph Massaro -- Chief Financial Officer

And Dan, just to follow up, we're still at 2% price for the year. So we're not -- we're -- again, to Kevin's point, we're sort of always working through that with customers but haven't any significant -- haven't had any significant changes on our expectations on price for the year.

Dan Galves -- Wolfe Research -- Analyst

That's really helpful. Thanks a lot Joe and Kevin.

Joseph Massaro -- Chief Financial Officer

Thank you.

Operator

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

Emmanuel Rosner -- Deutsche Bank. -- Analyst

Good morning everybody.

Joseph Massaro -- Chief Financial Officer

Good morning

Emmanuel Rosner -- Deutsche Bank. -- Analyst

So I was hoping to zoom in on the volume piece of the headwinds so -- because I believe I understand some of the things you said on FX and commodities. But whether I look at the first quarter specifically or the updated sort of like full year guidance, it just feels like the volume impact is just sort of like dramatically more negative than generally maybe expected. So I'm looking, for example, at your year-over-year walk within Signal and Power Solutions on Slide 23. You have sort of like a positive volume on the revenue side from $71 million but like deeply negative impact from operating income of negative $59 million. And that excludes obviously FX and commodities that are on the following line. And then on a full year basis, obviously in your Slide 17, obviously the extra volume hit seems to be carrying a certain plus 35% on top of a decremental margin on this. So can you just -- long question, I apologize, but can you just zero in on the volume piece of the headwinds? And what is it that makes it so deeply negative, both I guess in the quarter and then on the outlook?

Joseph Massaro -- Chief Financial Officer

Yes. No, Emmanuel, you're right. It's a good question and it applies to both Q1 and Q2. Obviously, we knew. And the fact that we had it in the guide, I think we touched on it during year-end as it is related to the Q1 guide. We do have -- when production comes down that quickly, whether it was China in Q1, we're seeing some of it in Europe, Q2. Look, we will have negative flow from a decremental perspective. And I would say in each quarter, I'd call sort of a negative flow about $50 million that we're working through. Again, for Q1, we had expected it. Q2, it's going to be a little bit more than we originally expected just given the recent takedown in Europe. The cost actions will come in to help offset that, but particularly in Europe, those take a little bit of time before they hit.

So you've got that. And then I think you've got the added -- and I mentioned it earlier, when the acquisitions come in, they come in, in a lower OI rate for the deal amortization. So I wouldn't call it mix. I'm not implying that, but you just -- the revenue that's in there is flowing a little bit lower in the first 4, 6 quarters after an acquisition because we're working up synergies but have the purchase accounting in there sort of out of the block. So that's really what you're seeing. And we've quantified it at about $50 million in each of the 2 quarters. More China-related in Q1, more Europe-related in Q2 but again, within our original guide certainly for Q1.

Emmanuel Rosner -- Deutsche Bank. -- Analyst

Okay. That's helpful. And so the second part of that question, the -- for the guidance walk, when you have sort of like a $150 million extra headwind on the volume side and a $55 million operating income, that's a -- much more normalized on top of the decremental margin?

Joseph Massaro -- Chief Financial Officer

Yes. And so what we got -- what we're -- yes, what we're seeing in the back half of the year is that flow starts to normalize, right? We've got a -- we sort of -- for H2, the back half of the year, flow returns to a more -- we should be flowing somewhere between, call it, 25% to 30% on an average quarter, some quarters a little different. But that starts to return so we're starting to make -- we start to make up on that.

Emmanuel Rosner -- Deutsche Bank. -- Analyst

Great. And then I wanted to follow up on my question from last quarter around the longer-term margin outlook. So essentially, you've had a framework of consistent margin expansion. And I think we fully understand the sort of environment that we're in and a lot of the headwind. Some of them expected, some of them that have surfaced more recently. When you sort of look beyond that, are you still comfortable with the idea that this -- you should be able to consistently keep growing margins? Or has the environment fundamentally become more challenging?

Joseph Massaro -- Chief Financial Officer

Well, they're certainly more challenging in, what I'd call, some of these transactional items, the FX and the tariffs. But I'd answer that in sort of 2 parts and then Kevin can certainly weigh in. When we talked about margin expansion, there were certain underlying things that had to happen in the business for us to get comfortable that we could continue to expand margins. A good example is active safety. That business would continue to grow. As it grew, it would expand margins. That, we're certainly seeing, right? Active safety is going to be over -- well over $1 billion this year with low-teen operating margins. And back in September '17 when we provided sort of our thoughts on margin expansion, that business had just -- was just about to break even. So things like that. High voltage is another very similar example of that.

So the core underlying things that needed to happen in the product line and how we run the business had happened. We are certainly dealing with sort of some of the FX and tariffs. We don't give up on those. They're hard to deal with in a particular quarter, over particular couple of quarters, depending on how significant the movement is. But we'll continue to remain focused on that cost structure to work to offset those. But I'd say the underlying product line growth, the underlying business developments that needed to happen to -- for us to be able to say we're going to grow margins, it's certainly taking place. Kevin, I don't know if you...

Kevin Clark -- President and Chief Executive Officer

Yes. Listen, I'd just say the framework is intact and remain -- so I think the challenge we're dealing with right now is a decline in vehicle production, significant decline in vehicle production in China, right, and a protracted decline in China. The impact of FX rates and then, in this particular case, the resin challenge that we have on a year-over-year basis that -- we'll find substitutes. We'll push the price. In reality, they're somewhat -- it fixes itself as more capacity comes online during 2020. So I think there's -- to Joe's point, there are some one-off items that can affect that model. But from a long-term standpoint, the model remains intact.

Emmanuel Rosner -- Deutsche Bank. -- Analyst

Great. Thank you.

Kevin Clark -- President and Chief Executive Officer

Thanks.

Operator

John Murphy with Bank of America Merrill Lynch. Your line is open.

Bank of America Merrill Lynch -- -- Analyst

This is (inaudible) on for John. First question around the cost-saving actions that you're perceiving, I believe you said it's $50 million in 2018 and $40 million in 2019. Is there more room to go and rationalize cost if the broader macro environment remains tough and we don't get this inflection in the back half of the year?

Kevin Clark -- President and Chief Executive Officer

Yes. There's -- listen, there's a -- the $50 million was last year. The $40 million is run rate. Just to be clear, the $40 million is run rate for 2019. $10 million of which will show up, just given timing, a portion of which relates to regions where you can't as quickly get people out. Yes. I mean we have a cost structure and we have the ability to adjust that cost structure in response to one, how we manage the business; but two, especially in -- at times when you have a slowdown in vehicle production. Some of that naturally happens like direct labor where you take people out of the factory, indirect labor, things like that. And there are other areas like corporate overhead that we've been working on a regular basis over the last several years and will continue to work on. And then that last area is the engineering area.

And as we talked about earlier, that's an area that spending is up significantly on a year-over-year basis. I think we're up roughly $100 million between mobility spend and engineering spend in our ASUEX -- principally our ASUEX and our ABS business, but we've gained tremendous traction from a market share and customer acceptance standpoint. So we've been reticent given the number of programs we've won, given how we're positioned to go after that in -- out of any ordinary course way. Obviously, we're always focused on how do we make the engineering factory more efficient, more productive. But incremental reductions, restructurings, those are things that we shied away from. To the extent you had a protracted slowdown and you didn't see the snapback, that's something that we'd have to evaluate in light of our customer commitments.

Bank of America Merrill Lynch -- -- Analyst

Great. That's very helpful. And looking at Slide 15 for a second and focusing in on China in terms of the adjusted growth executions. It looks like you're expecting some more pronounced adjusted growth versus market in 2Q relative to H2. Is this just a function of product launches that are more weighted to the second quarter? Or could this be (inaudible) just some conservative in the back half?

Joseph Massaro -- Chief Financial Officer

Yes. No, there's a lot of launch activity. So our China launches are up almost 70% year-over-year in the second half of the year and launched -- over a broad swath of our customer base. So there's just a lot of new products coming to market in the back half of the year.

Bank of America Merrill Lynch -- -- Analyst

Okay. And...

Kevin Clark -- President and Chief Executive Officer

If I can just -- one item that you implied in your question, and I think Joe answered the question really well. I think as we look at our outlook for vehicle production in the back half of the year, we don't view it as overly conservative. And industries tend to run in trends. And seeing more rapid snapbacks in things like vehicle production, that's not something -- although mathematically, when you look at things year-over-year from a growth rate standpoint, so for example, the decline in vehicle production in China in Q3 2018, in Q4 2018 relative to the first half of the year, you can mathematically arrive there. We think from an operational standpoint, it's tougher in reality for our customer base to do that. So...

Bank of America Merrill Lynch -- -- Analyst

Okay. And one last housekeeping question, if I may. The slight decline in your operating cash flow outlook relative to the one you provided earlier this year, is that purely just a function of higher restructuring costs as you note on Slide 16? Or is it a combination of that with a slightly lower profit outlook?

Joseph Massaro -- Chief Financial Officer

Yes. No, I mean cash -- we'll perform well on cash. We did take $50 million out of the outlook just -- we've got these additional cost-saving actions, so we're going to have to pay for those. So we wanted to have a balanced perspective there. But no -- cash, working capital, we're performing in line with expectations.

Bank of America Merrill Lynch -- -- Analyst

Great. That's it for me. Thank you very much.

Operator

Maynard Joseph Um with Macquarie. Your line is open.

Maynard Joseph Um -- Macquarie -- Analyst

Hi. Thanks.You spoke last quarter of moving production out of China and into Korea. Are you still sticking with those plans? I guess where are you within that process with customer validation? And then what's embedded into your guidance? Then I have a follow-up.

Joseph Massaro -- Chief Financial Officer

Yes. No, the move is still there. As we said, we were assuming tariffs. We were going to operate as if tariffs don't go away. We had an advantage in that the acquisition KUM had a similar product line on these media modules to what we needed to move out of China. So that process has begun. The production line stood up in Korea. We're in the process of -- we're still manufacturing out of China, but we're in the process of ramping and manufacturing samples for customer validation and customer starts to go into the plants to validate and approve the lines end of May, June. So we'll be tracking as originally expected, and that's what's in the guidance.

Maynard Joseph Um -- Macquarie -- Analyst

Okay. And then there's been a lot of news in the market around autonomous and Robotaxis. And given that you have a commercially deployed autonomous vehicles, can maybe just talk about your expectations for when full autonomous service is feasible? And addressing that question I guess from 2 perspectives. One, from a technology perspective, when will technology be ready versus a regulatory perspective?

Kevin Clark -- President and Chief Executive Officer

Yes. I -- listen, I -- we've publicly stated in the past, we expect to have a driver out of the car first -- late -- first half 2020. And actually, vehicles out from a commercial standpoint in 2022 with 2025 revenues of $500 million tied to the automated driving for mobility services. So our view of the technology, the maturity of the technology in the rollout of the technology, quite frankly, has not changed. We think it's something that -- there'll be great demand for the most significant application early on will be with mobility players or fleet owners. And then later in 2020s, probably around 2030, you're going to see stepped-up consumer demand just given the maturity of the technology and getting the technology to a commercial rate or commercial cost that consumers are willing to pay for. So our outlook, quite frankly, has not changed. I guess the one area where maybe it's changed a bit is with respect to Level 2+, Level 3 systems where we're now in the last 12 months seeing significant demand from several OE customers with respect to that technology. We won roughly 7 programs last year in that area. So advanced ADAS is growing much faster than what we would have anticipated over a year ago, and the AD market is right where we thought it would be.

Maynard Joseph Um -- Macquarie -- Analyst

Great. Thank you

Operator

David liker with Baird. Your line is open.

Joseph Massaro -- Chief Financial Officer

Good Morning David.

Joseph D. Vruwink -- Baird -- Analyst

Good morning. This is Joe Vruwink for David. There's been a lot of discussion this earning season by other suppliers about how the heavy launch cadence across the industry, front-loaded engineering requirements for new launches is diluting profitability. You've talked a lot about your profitability, but it doesn't sound like it's at all related to your backlog or your outgrowth. Is that fair? Are the new programs you're launching in line with your expectation in terms of their levels of return?

Kevin Clark -- President and Chief Executive Officer

Yes. There's significant investment related to launching those new programs. But it's in line with what our expectations were, quite frankly, what we did on the programs, when we won the programs and what we have had in our forecast and outlook. So no change at all from our standpoint.

Joseph Massaro -- Chief Financial Officer

Yes. I'd say, the one thing that -- we certainly focus on ensuring the business is done. And this is to Kevin's comments about expanding moat or growing share. The more you do of these, the better you get. And you've got resources, capabilities in the organization you can start to leverage as well. So again, I think as we continue to do these, we're starting to see that -- I mentioned earlier that active safety OI margin for the year is going to be in the mid-teens. That's burdened with its engineering expense. That -- we run the P&L sort of every top on its own bottom. So that's in those numbers.

Joseph D. Vruwink -- Baird -- Analyst

Okay. Great. And then a follow-up. I think the end-market forecasts and the view into the second half are prudent. At the same time, some of your technology partners at the Tier 2 level, so electronics or semis, have actually started talking about sequential order improvement for their business. So it seems like the trends maybe they're seeing or the requests they're getting are perhaps a bit better than the views you're outlining. Do you think that both can coexist? Or are you maybe just a little more prudent in how you're planning on a go-forward basis?

Joseph Massaro -- Chief Financial Officer

I think it's -- those -- I understand the question on triangulation. So if I had to answer that, I'd say what they're seeing is our outgrowth, right? They're seeing increases in the content. And particularly if you're on some of the higher-end semi guys, the GPU folks, that's what we're seeing. I mean our active safety business is growing 50% this year. So there is -- that is how I would think it's triangulated. I haven't done that. I haven't worked it all through. But if -- just off the top of my head, that's how I would think you should triangulate those logically.

Joseph D. Vruwink -- Baird -- Analyst

Okay. Great. Thank you.

Operator

David Kelley with Jeffries. Your line is open.

David Kelley -- Jeffries -- Analyst

Good morning. Thanks for taking my questions.And a quick follow-up on the active safety discussion. A competitor referenced some active safety headwinds tied to unfavorable mix I believe within the premium market. Are you seeing anything in any subset of the market that would suggest any active safety headwinds are either taking place now or might be on the horizon, whether it be delayed product adoption or customer decontenting?

Kevin Clark -- President and Chief Executive Officer

No. Listen, I -- our active safety business is going to grow north of 50% this year. And in fact, we'd say we've seen an accelerated demand from our customer base. So I think for us, when you look at the absolute numbers, at some point, you'll see slowing growth rate, but it'll be law of large numbers versus customer demand or market penetration. And I think it's important when you put in perspective globally, active safety I believe is roughly 15% penetrated globally. And it's a technology that one, helps OE sell cars; two, they make a lot of money selling it; and three, once consumers have been in a car with an active safety solution, the likelihood of them purchasing a car or a replacement car without it are slim and none. So we see tremendous growth opportunities going forward and have not seen any delay, cancellation. And that's actually in the contrary.

David Kelley -- Jeffries -- Analyst

Okay. Great. And just quickly switching to Slide 9 here, the commercial vehicle and industrial growth. I guess could you discuss the impact of Winchester on the quarterly growth rate? And similarly, how should we think about organic full year growth? And maybe a high level, where you're gaining traction in the commercial and industrial markets?

Elena Doom Rosman -- Vice President of Investor Relations

David, this is Elena. The organic CV in industrial end-market growth in Signal and Power Solutions is mid-teens. That's consistent for our outlook for the remainder of the year.

Joseph Massaro -- Chief Financial Officer

And that -- so that's -- so that would be the significant gain in the adjusted. We're seeing -- end markets, we're seeing growth. CV is off to a really good start this year for us. We expect that to continue. Looking at about 18% adjusted CV growth for the year. That's in both the ASUEX business, where things like the infotainment user experience, active safety start to take hold. And then SPS also has a -- has been increasing their product offering in the CV space. So we view that as a potential. And that's a good sort of growth over markets to work for us, too. We had that market growing sort of 3% -- 2% to 3% for the year. So strong, strong outgrowth. As it relates to Winchester, Mil-Aero continue to be strong. Other industrials are in line with our expectations. So we continue to see sort of that play out according to plan as we work through diversification. I think our non-auto revenue this year will be close to 13% of total. If you go back a couple of years, it was mid-single digit. So we have -- we are moving the needle from a -- from our revenue diversification, which, again, as you're probably aware, is part of our plan as we think through through-cycle performance and how to make the business more resilient through -- certainly through the autocycle and getting some revenue diversity.

David Kelley -- Jeffries -- Analyst

Great. Thank you.

Operator

Colin Roche from Oppenheimer. Your line is open.

Colin Roche -- Oppenheimer -- Analyst

Thanks so much for again nuts and Could you talk a little bit about the mix in China in terms of new start-ups and existing OEMs as you look at this year? I'd love to really understand how much you're helping those folks get their business up and going.

Kevin Clark -- President and Chief Executive Officer

Yes. Our -- the bulk -- so roughly 75% of our revenues are with the multinational JVs. And then 25% with what you would consider to be the locals. When you look at that 25%, that's with the locals. Literally, 80% or 90% of it is with the top 10 or the largest OEs that are in China. So I would say we have very little, if any, business with the China start-up space at this point in time.

Colin Roche -- Oppenheimer -- Analyst

Okay. That's super helpful. And then just turning to ADAS and the hardware evolution. Obviously, one of the advantage of your system is your ability to integrate some of these newer hardware pieces, but we're seeing significant investments in terms of the sensing technology. As you look forward in some of your projections, you've obviously made some commitments around LiDAR a bit. And there's a big debate with some of your -- some of the other systems out there in terms of whether a camera-based system will ultimately prevail here. But as you look forward and look at future proofing the system, what are you looking at in terms of really meaningful evolution in terms of that sensing technology over the next couple of years that's reaching critical points in development? And what should we be looking for in terms of how you think about the system evolving over the next 2 or 3 years?

Kevin Clark -- President and Chief Executive Officer

Yes. Well, listen, I think it's probably -- well, 2 to 3 years is probably a little bit longer than that. But the reality is our view is now and has historically been that you need modalities to have. (technical difficulty)

We're going to have a tremendous amount of consolidation of compute power and, quite frankly, software and capability in the compute platform. So a fair amount will come out of the perception system. It will be centralized. It'll result in a much more powerful, much more effective, much more efficient and much lower cost solution for the OE. It's one of the models we've used quite frankly (technical difficulty)

Operator

Ladies and gentlemen, currently, we are experiencing technical issues. Please stand by.

This concludes the Aptiv's First Quarter 2019 Earnings Conference Call. We thank you for your participation. You may now disconnect.

Duration: 72 minutes

Call participants:

Elena Doom Rosman -- Vice President of Investor Relations

Kevin Clark -- President and Chief Executive Officer

Joseph Massaro -- Chief Financial Officer

Joe Spak -- RBC Capital Markets -- Analyst

Brian Johnson -- Barclays -- Analyst

David tambourine -- Goldman Sachs -- Analyst

Chris McNulty -- Evercore -- Analyst

Dan Galves -- Wolfe Research -- Analyst

Emmanuel Rosner -- Deutsche Bank. -- Analyst

Bank of America Merrill Lynch -- -- Analyst

Maynard Joseph Um -- Macquarie -- Analyst

Joseph D. Vruwink -- Baird -- Analyst

David Kelley -- Jeffries -- Analyst

Colin Roche -- Oppenheimer -- Analyst

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