Superior Industries International, Inc.
Q4 2012 Earnings Call Transcript

Published: 1 Mar 2013

[Operator:]

Good day, and welcome to the Superior Industries Fourth Quarter and Full Year 2012 Earnings Teleconference. For opening remarks, I would like to turn the call over to Mr. Kerry Shiba. Please go ahead, sir.

[Kerry A. Shiba:]

Thank you, Brandon, and welcome, everyone, to our year-end call for 2012. I'm trying to shake a cold, so if I stop to cough on occasion, I apologize. I expect this will be an interesting call this morning, as our stock has been very active since the opening. But in any event, we're going to go through the typical format first, of talking about our financial results and then concluding with some discussion about our new plant. But before we get started, as usual, I'll be referring to a PowerPoint presentation, which is available on our website at www.supind.com. I'd also like to start, as usual, with Slide #2 of the presentation, where I would like to remind everyone that any forward-looking statements made in this webcast or contained in this presentation are subject to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially because of issues and uncertainties that need to be considered in evaluating our financial outlook. We assume no obligation to update publicly any forward-looking statements. Conditions, issues and uncertainties that may be discussed from time to time include, but are not limited to, global competition; product pricing and mix; domestic and foreign market demand; commodity prices, including metal, energy and foreign currency; manufacturing capacity, including plans to construct a new manufacturing facility; productivity; capital investment; operating and manufacturing challenges; and our strategic and operating plans. Please refer to the company's SEC filings, including our annual report on Form 10-K, for a complete discussion on forward-looking statements and risk factors that may cause actual events to differ from those forward-looking statements. By now, I expect that most, if not all, of you had the opportunity to see our press release this morning. Despite the market reaction, I want you to know that we are very excited about our investment announcement. So before I review our 2012 performance and financial results with you, I'd like to turn the call over to Stephen Borick, our Chairman, CEO and President. Stephen?

[Stephen J. Borick:]

Okay, Kerry. Thank you, and good day to everybody, as they say. So it's certainly disappointing to see our results as they've turned out, not completely unexpected based on the performance on a per-quarter basis that we've reported. We're up against the wall when it comes to capacity, as we've stated many times, and obviously, one of the reasons for this exciting announcement is so that we can deploy our capital to bring that situation around and take us to the next level in this company. So despite the activity in our stock today, I am more excited than I've been in many, many years, quite frankly, with the prospects for the company. I believe that, number one, the capital that we're going to continue to deploy in our older business units is going to be deployed to ensure that we continue to have an opportunity for improvement in those units. And we're going to not only do that, but as of last week, I've already made some significant commitments to both of our U.S. operations for new capital. So they, in fact, know where they stand and can start moving and deploying it. I don't see, by the way, some of that creating a lot of additional financial opportunity for, at least, part of the year as we deploy that capital because of the long-term nature of some of it. But I do see that it is going to make a difference in what we see in the way of potential margin uplift in our U.S. operations. The same goes for our Mexico operations in deployment of capital. So I want to make sure that everybody understands that we're going to be deploying capital in our Mexico operations to continue to improve what I consider to be a very world-class leading operations in our business units. The new facility, by the way, will further modernize our business units, and it will take us to approximately 10 million wheel capacity in our Mexico operations alone and increase our overall capacity by 2 million to 2.5 million units. This increased capacity will certainly, in the long run, improve our overall profitability for the company. So that prospect is very exciting to me, and obviously, after a lot of thought into how to deploy capital, this appeared to be certainly the best way to deploy that capital. In our U.S. operation, we will continue to work tirelessly to improve, both with human and financial capital, whatever we need to do to at least get out of some of what has been a drag on some of our earnings in the past. No promises, but we're working very hard at moving in that direction. Obviously, people are very important, and with that, I'm extremely excited about the long-term prospects for the company. The team of employees at all levels understands the importance of executing well on each one of these initiatives. Now just a minute of further discussion on our new wheel plant. Probably, some of you will ask or wonder why it took so long to get to this decision, because important decisions like this take a long time. It's easy to look at the capacity and the capacity utilization at the company and look at the marketplace. And whether we decided to wait too long, we've made a decision today to move forward. We're going to build a facility in Mexico. We have not specifically chosen the site yet. We are working on plans. In fact, I'm going down to Mexico next week to deal with a couple of the large construction companies to see when we can get this kicked off and start moving dirt. It'll be probably close to 2.5 million units and between $125 million and $135 million in capital spend. The good news is we have the capital in the bank. We are looking at, as Kerry will state later, some lines of credit as availability in case anything catastrophic happens in the next ensuing couple of years during the build. We'll push relentlessly with our team to move this capital along as quickly as we can to get up and running. We have homes for a lot of wheels in that plant already. A lot of requests coming from OEMs, particularly in Mexico with all the new build that are taking place. So we're extremely excited about the prospects. I will tell you that even though we don't necessarily segregate out our operations between the U.S. and Mexico, it's quite obvious that our operations in Mexico are operating at very significant and good margin levels for us, and we continue to believe that, that is going to continue into the future. Again, most importantly to know is that we believe in all of our business units, and we believe what we're doing in deploying capital for this year and into the future and the people that we're going to continue to find the human capital will make a difference. And as I said at the beginning, I'm extremely excited about the prospects for the future of Superior. We have a new story to tell and we're telling it, and to me, it's a story of growth both at the top line and the bottom line into the future. And I look forward to, those of you that wish to participate with us to, to stay the course with us and let us prove what we're capable of doing, continuing to be the best and certainly, the largest North American aluminum wheel supplier. And with that, I'm going to turn it back over to Kerry.

[Kerry A. Shiba:]

Thanks, Steve. I'm sure a lot of you are anxious to get to the Q&A, but if you'll please be patient, we'll go through the financial results and get there in just a few minutes. So let's begin the detailed discussion, which will follow the same overall format we've been using for the past several conference calls. We provide a data for the fourth quarter and the full year. Although most of my comments will touch on the full year. There'll be some on the fourth quarter also. First, let's begin with a very quick overview. If you'd like to refer to the data on Slide #11 and #12, which show the condensed income statements for the fourth quarter and full year, you can do so. But my comments of the overview will be brief. Our fourth quarter revenues for 2012 were down 3% from the prior year. That was on flat unit volume. Gross profit declined about $5.3 million. However, net income and EPS both were down dramatically when compared to Q4 of last year, with the change in income taxes the cause for over 80% of the net income decline. For the full year, 2012 revenues were flat when compared to 2011, while unit volume increased 7%. Gross profit declined about $6.5 million for the entire year. And as for the fourth quarter, the full year net income and EPS comparisons were significantly affected by the year-over-year change in income taxes. So with this brief overview in mind, if you'd please turn to Slide #3 at the beginning of the slide deck. Hopefully, our discussion today will help you better understand what our 2012 financial results reflect about the underlying business. Slide #3 is titled North American Vehicle Production vs. Superior Shipments. This is where we frame the market environment in which we operate in. First, just a quick overview of the slide format. The charts at the top show North American light vehicle production on the left and the company's unit sales volume on the right. Because our business is focused in North America, as most of you know, the graph on the left provides an overall indicator of the demand driver for our products. As we progress to the next 3 slides, I will provide some perspective on customer and product mix, which is necessary to really understand our performance against the overall market. So let's first take a look at North American vehicle production shown in the upper left. The market reached about 3.8 million units in the fourth quarter, which was up roughly 11% year-over-year. You need to go back to 2007 to find a fourth quarter that is somewhat comparable. The fourth quarter also increased on a sequential basis, up almost 4% over the preceding Q3. Bolstered by a good fourth quarter, the trailing 12-month build rate reached close to 15.4 million vehicles, which is a robust 17.5% up for the full year. You may not recall, but in Q3, the comparisons by product category, in other words passenger cars versus light trucks, revealed quite a bit of disparity in the year-over-year changes. In Q3, passenger car volume increased almost 23%, while the light truck category grew far less at about 9%. This gap narrowed in the fourth quarter. While passenger car volume was up 12%, the light truck category followed pretty close at plus 10%. Turning to the chart on the right. Superior's fourth quarter unit sales volume was flat year-over-year, while the full year comparison was a plus 6.6%. Impacted by our manufacturing capacity constraints, we lost share in a growing market when comparing 2012 to 2011. We estimate the share loss at about 380 basis points for the full year. However, we did gain back 80 basis points of share going from Q3 to Q4 of 2012. The full year share decline also reflects the significance of Ford and General Motors as the 2 largest customers in our portfolio. We estimate that Ford gave back approximately 2 share points and GM lost about 3 share points when compared to the prior year. So I expect you know, the market share changes at the OEM level largely reflects the recovery of key Japanese brands from the impact of the 2011 natural disaster in Japan. If you would now please move on to Slide #4. We changed the format on this slide since our last presentation. So let's first get you oriented to what we've included. The bar chart shows our top 5 customers individually, with the remainder of the OEMs grouped together in the last set of bars. For each customer, we provide year-over-year production volume comparisons for the full 12 months, including a product category breakdown between light trucks in blue or black, however it shows up to you, and passenger cars in red or sort of like a pale red. In any event, to give you some overall total industry context, total production was up 17.5%, with the passenger car category at plus 23% for the year and light trucks at plus 13%. Now here are a few key observations. As just mentioned, Ford and GM are the #1 and #2 customers in our portfolio. Assembly rates for both these customers increased at a substantially lower pace than for the industry overall. Compared to the almost 18% industry growth rate, Ford was at plus 4% and GM was at plus 5%. Nissan, who also was a relatively large customer, also was below the industry average at plus 13%. Ford's growth rate was spread fairly evenly between light trucks and passenger cars. Commentary on the slide provides some details about the major programs that drove the change. We sell into all these programs noted, except for the C-Max and the Focus. For General Motors, their annual growth was biased toward passenger cars, which were up 8% compared to a 3% increase for light trucks. The momentum in light trucks did improve going from Q3 to Q4 of 2012. Most of you are aware of our strong overall position in the GM light truck programs including the GMT900. Of the passenger car programs noted, we just started shipping into the Cadillac ATS program late in the year, but we are looking forward to our future volume ramping up. Chrysler's rate of production increased to plus 19%, just exceeding the overall market rate. Their growth was strongest for passenger car programs. However, light truck production, where we are heavily concentrated, at Chrysler was up a healthy 14%. Production for the international brands grew at a rate well exceeding the overall market, increasing about 31% compared to last year. For the customers affecting Superior, Toyota was the largest gainer at plus 41%. VW also grew nicely, while Nissan's growth rate was in double digits, albeit below the overall market rate. Turning now to Slide #5, which is titled Superior Shipments Year-over-Year Comparison. Let's take a look at what drove Superior's year-over-year volume changes for 2012. We are using the same format as just shown, except now the focus is on Superior's unit shipments to our customers. I mentioned previously that our market share declined to a large degree because of our capacity limitations and based on our customer mix being heavily weighted towards Ford and GM. Overall, our mix of sales to domestic versus international brands stayed relatively steady when comparing 2012 to 2011. We grew about 14% in the light truck category while declining almost 9% in passenger cars. Our growth on light trucks was fueled by several programs of Ford, Chrysler and Toyota. For those of you that may not be aware, keep in mind the light truck category is pretty broad and includes SUVs, crossover vehicles and vans, along with pickup trucks. The decline in passenger cars reflects mostly 2 programs, the Chevrolet Malibu and the Ford Fusion. We mentioned last quarter that we are ramping down on the Malibu program. As we also mentioned last quarter, the Fusion was going through a major model changeover which affected our shipment levels to this program during 2012. One more thing stands out on the slide, and that's the annual rate of decline in Nissan. We grew significantly on the Maxima program, but this growth was not enough to completely absorb declines on the Altima and the Sentra. While the decline on the Sentra is a result of ramping down on this program, the Altima decline reflects the effect of the recent model changeover at Nissan. As we expected, volume on the Altima did turn upward going from Q3 to Q4. I believe the remaining details on the slide are relatively self-explanatory, so I'm not going to address each bullet point individually. If you would now turn to Slide #6, we can look at the sequential sales volume comparison. The changes going from Q3 to Q4 of this year tell a bit of a different story for both the market and Superior. Let's start with a context to what happened in the market. As I mentioned earlier, fourth quarter assembly rates were relatively robust as evidenced in the sequential increase of almost 4%. The growth rate in light trucks was higher than for passenger cars. The mix between domestic and international brands basically was unchanged. Ford, by far, showed the largest sequential increase at plus 9%. The Fusion and Escape were the big gainers. At 5 -- at plus 5%, Chrysler also grew at a rate higher than for the overall market. GM was up 2%, with the GMT900 and Cadillac ATS the biggest gainers. In contrast to the year-over-year comparison, Superior's fourth quarter shipments increased at above the industry rate, growing 7% sequentially against the industry rate of plus 4%. Our increase occurred entirely due to growth in shipments for light trucks, most notably for the GMT900. Overall gains in passenger car volume at Ford, Toyota, Chrysler and Subaru were offset by overall declines at Nissan and GM. I next would like to turn to Slide #7, which focuses on net sales dollars and a year-over-year comparison for the fourth quarter and the full year. This slide is in the same format we've been using for the past several conference calls, so I'll skip the definitions and just move on to the data. I'll focus primarily on the full year, which is on the right-hand side of the slide. At the top, you can see the 6% unit volume increase, which is shown on the first line of the data table. This contrasts with a flat sales dollars comparison, which is shown on the second line. The remainder of the table breaks apart the components of the sales dollar comparison. Starting on the third line, you can see the unit volume increase translates into about plus $50 million in sales dollars, yet total net sales for 2012 were flat when compared with the prior year. So the obvious question is

[Operator:]

[Operator Instructions] And we'll go to Chris Ceraso with Crédit Suisse.

[Robert Moffatt:]

It's Rob on for Chris. So what was the -- I don't see the exact number. What was the 4Q utilization rate?

[Kerry A. Shiba:]

Sorry, we neglected to put that in. It was -- if I recall correctly, it was just in excess of 100%. We're still bumping up right at the very top of our headroom.

[Robert Moffatt:]

Okay. And then, I guess, more importantly, on the decision for the new facility, I know that's something that you guys debated internally for a long time. What was kind of the tipping point in the decision process? What got you guys to lean in that direction and make that choice?

[Kerry A. Shiba:]

Well, I'll offer my view and I'm sure Steve may want to add something else, Rob. I don't think there was -- I think maybe the reason it took a while, there wasn't a single tipping point or a structural trigger that led us to the conclusion. I think it's the combination of several things, our operations in Mexico. And if you think back to 2010, when we came out of the recession, everybody was kind of running around with their hair on fire just trying to meet the demand in the marketplace. So while our profit line was very good in 2010, there was really a lot of flurry of activity that was reactionary in 2010. In 2011, you saw our gross profit -- our operating profits start to turn downwards and they became very inconsistent, if I think about the pattern. It was at that stage that we started to struggle a bit more. We had the pricing line and the price/mix line going negative on us based on programs we bid in 2009 during the recession. We are starting to incur more friction and disruption in our factories at that point in time. So 2011 was sort of a year of trying to steady ourselves and stabilize ourselves, and we were still somewhat looking back on a market that fell apart on us in 2009. In 2012, you've got kind of a rocky economy and an election coming up. But as the year progressed, what became very clear is that the automotive market was continuing to have legs that the pent-up demand was real so that was a very good feeling for us, from a strategic market perspective. Our operations in Mexico stabilized and began to perform, in 2012, very consistently, which gave us a lot of confidence. We always had confidence, but growing confidence in putting more assets in Mexico. And then, at the same time, you have additional, very importantly, capacity announcements by our customer base. I think there's maybe 4 new plants which have been announced in Mexico, some of which is already underway at this point in time. And so further localization of our customer base demand into North America, I think we're positioned very, very well for that. So I think in my view, you have to look at a combination of factors which led us to the conclusion.

[Stephen J. Borick:]

I don't have much to add there at this point. I think that's very accurate.

[Robert Moffatt:]

And then, I mean, so in that process, too, then -- you mentioned that the new facility will be home for certain platforms. Do you have any volume commitments or anything, whether verbal or contractual, that you could kind of point to, for the new facility?

[Stephen J. Borick:]

I don't want to say we do yet because we just announced today. But I'm sure that as soon as Mike O'Rourke gets out of this conference room, the OEs will be calling. There are...

[Kerry A. Shiba:]

On Monday, we will expect them [indiscernible].

[Stephen J. Borick:]

We'll have the plant filled. I have no concerns about filling the plant. One of the things that's very important for everybody to understand is that as we look at our Midwest operations and specifically, our larger plant being Fayetteville, I believe we have some really great new management in both Rogers and Fayetteville, and I'm seeing some stabilization. I don't want to say financial stabilization at the level I'd like or that we'd like. But what is important is it's going to give us a lot of latitude to make some readjustments in our mix. The older plants don't take certain products as well as what the customers are demanding today. As an example, premium paint wheels are becoming more important. Maybe it doesn't mean much to the shareholders here, but it's an upcharge. It's a different look. It takes a certain kind of paint system. We're gearing. As we build every new plant we're building, since plant 9 in 2000 and -- 2000, I guess, is when we started plant 9 up, that we build new paint systems that can take on. So my point is it's going to give us a lot of flexibility, which I hope will give some relief to the U.S. operations, and specifically Fayetteville, with some of the capital we're spending to get them more aligned with what their capabilities are and to be able to create some level of margin that gives us a comfort level.

[Kerry A. Shiba:]

And Rob, I guess, kind of broadly, I mean, I'm sure you respect that our specific discussions with our customers are confidential and need to be held that way out of respect for our customers. But I can tell you, I think, overall, that the tone in the marketplace, certainly, where we compete is more positive than it's been since I started with the company in 2010, and that's very, very encouraging also. I think there's more discussion about strategic supplier basis, that's been a buzzword, but I think we're starting to feel that more seriously right now. And so there's a lot of things that feel pretty good about the direction that we're going in here.

[Robert Moffatt:]

Sure, great. And if I could just, can I sneak in one more? Big step-up in CapEx, and you kind of addressed this a little bit. It won't be an immediate benefit necessarily on the margin line, but how long does it take for the investments in CapEx to translate into gross margin and how should we think about a margin trajectory where your utilization is probably going to be high until this next facility opens? How does CapEx kind of help us on the margin side over the next 2 years?

[Kerry A. Shiba:]

Well, I think that it's going to be something that's going to be, I'll use a very scientific assessment here, slow but steady. I think we'll continue to see benefits just feather in at your level. Initially, it may be almost imperceptible compared to what we kind of look like from month-to-month, much less week-to-week, factors like scrap rates and production rates and labor, over time rates in the factories. Some of the larger investments we've made in the fourth quarter -- that were completed in the fourth quarter of 2012 in one of our specific U.S. plants, we already are starting to see the benefits of the improvements at our smallest plant in our entire network. So again, it may not be terribly visible on a consolidated basis. In the other areas, despite a lot of projects being approved, the money still got to be spent out. The equipment still has to be received, it has to be put on the floor and it has to be started. So you just kind of think about it as, I think, give us another 6 months, I think we'll start to get stuff on the ground. And then, hopefully towards the back half of 2013 and then on into 2014, our hope is that we'll start to see some benefits.

[Stephen J. Borick:]

Rob, we're going to also move as rapidly as we can on the new facility to push its opening up. We put a 2-year mark on there. It's aggressive, but it's not undoable. And we're going to get some stakes in the ground pretty quick on site selection. Footprint, we're already working on architectural plans. So we're way into the process. Because I and the team have anticipated this, we've had a program underway called NWP, which stands for new wheel plant -- a really interesting buzzword, right -- for quite some time. So we've added a pack on coating and looking at details for some of the large capital items, like paint lines and heat treat systems and casting machines. So we do actually know where we're going. I'm actually going to Taiwan next week to look at some new capital equipment on machining as a potential change to what we've been doing for quite a few years. Obviously, cost is important for ROIs. But as I said earlier, I think we're geared. So give us the time now that we really made some strategic decisions on direction to move forward. I am as disappointed as everybody on this line and as a shareholder, and don't forget, a large shareholder, at some of our performance. But I am as excited as I've ever been about the future prospects for Superior and where we're going. So I think it's good mixed blessings, if you will.

[Kerry A. Shiba:]

On the new plant and timing and also the building of the plant itself, building itself is not the critical path item. It's -- clearly, it's getting the equipment and getting it into the factory. So it's a different world than the last time this company built a plant, not only from the price of the machines that we're going to have to procure, but there's not nearly as much machine building going on in the world as there used to be. So we're doing everything we can to get ourselves up to the front of the line, but that's going to be the critical path.

[Operator:]

We have a question from Jimmy Baker with B. Riley.

[Jimmy Baker:]

; First, just a follow-up on some of your commentary on maybe the flexibility or interchangeability of your capacity, if you will. So once this new facility is ramped, will it be possible for you to kind of attempt to keep your Mexican facilities running near optimal levels through -- in terms of capacity utilization throughout a cycle and then flex capacity at your kind of less efficient domestic facilities? Or can it not really be set up that way?

[Stephen J. Borick:]

It's completely planned to be set up that way. For those of you that have been following Superior for a long time, going back since I've been around and since '06, we've shut down 3 major casting facilities or business units in this company that manufactured wheels

[Kerry A. Shiba:]

And concurrently with that, Jimmy, while, from a cost perspective, it's pretty obvious, you want to keep as much in our lowest-cost facilities as we can. The goal and the challenge that's concurrent is that in our higher-cost facilities, my word is learn how to run them a little different way than we do today, which means making them more flexible, making them more adaptable to upticks and downticks in volume. The good news about the basic layouts of our factories, it's not like it's just one single production line. You have numerous casting machines, numerous machine cells, multiple heat treat furnaces, et cetera, et cetera. And so your ability to adjust up and down the volume trends is something that is achievable. It's not necessarily built well into our business model right now, but it's something we'll be focusing on.

[Jimmy Baker:]

That's helpful. And I don't expect I'll be able to tease out any 2016 guidance today, but I was just hoping that you might be able to give us some framework for margin expectations or rough targets for the new facility that can help us better understand the ROI on the investment.

[Kerry A. Shiba:]

I fully expected you to ask the question.

[Stephen J. Borick:]

Yes, right, and I'm not going to answer it. But I will say this, it's going to be better than it is today. How is that for a good answer?

[Kerry A. Shiba:]

Clearly, we wouldn't be doing this if it wasn't accretive, if we weren't adding value to the company. I think we're a little bit early in the process to want to be talking about -- to help you build the models for 2016. Understand the desire, understand the question, and I guess right now, I'd just say please give us some time to let some things crystallize better.

[Jimmy Baker:]

Okay, fair enough. Lastly, then, now that you do have a kind of a better framework or visibility into your forward capital spending, can you just kind of update us on your thoughts about returning any meaningful amount of capital to shareholders? And just an elaboration on your credit use commentary would also be helpful.

[Kerry A. Shiba:]

I guess a couple of things. As Stephen mentioned -- well, we had liquidity at the end of the year just under $210 million, between $205 million and $210 million, no debt. So that was net liquidity. As Stephen mentioned, the plant will cost somewhere -- we target between $125 million and $135 million at this stage. There will be some working capital build once the business gets up and running also, in addition to that. That leaves us kind of with headroom at this point in time of, call it, $50 million, $60 million. And I think a couple of things. The company is used to having quite a lot of cushion on the balance sheet, so we're going to remain conservative. Even with the amount of liquidity headroom that we're looking at, I do expect that we'll look at possibly putting a revolving credit facility into place to provide at least some more buffer in case -- I wish I could predict when the next cycle is going to be or shock to the system. I'm not smart enough. I just want to be prepared ahead of time for that to occur. With regard to your question about return of capital, I mean, we've made our strategic decision at this point in time with regard to our capital deployment, and we believe that the best decision for this business and then therefore, for the value of the business -- therefore, value to shareholders, is to make the investment in the capacity to grow this company.

[Operator:]

And we'll go to our next question from Jeff Linroth with Leaving It Better, LLC.

[Jeff Linroth:]

First of all, congratulations on this big decision. I just want to know, was there any consideration given to locating this in China? And besides the obvious benefit of already operating in Mexico, were there other factors that attracted you to Mexico over China, how did that decision come out?

[Stephen J. Borick:]

First of all, I've spent quite a bit of time personally in China with some of my senior management last year, looking at opportunities. We had stated. They're having a tougher time in China. Their costs are going up. I believe that the OEs are telling us that. They're getting some cost push pressure. So we're not as comfortable as we, maybe, were. Not that we're not going to continue to look at that, but one of the things that is very important is that we are operating -- as I say when I go to Mexico, which I go every month now, approximately, "You guys are doing a great job, but you can do a lot better." And they keep doing a lot better. They keep performing well. They are really a strong team. Our U.S. guys are doing the same thing. They're a strong team of players. The difference is we have some very, very seasoned players in Mexico. So we believe that wherever we locate, we'll be able to tap in at that same level of management expertise and teamwork. And we just think it's the right thing. Logistics are going to become more and more important, I believe, as we go down the road in the future. And really, really important, for those that don't know, if you look at what is being built in new OEM manufacturing facilities in Mexico that are underway, that are literally in construction, it's really significant. The change in the OEM marketplace, both for that domestic market and for export, is quite significant today. In fact, that's the largest new build of new OEM vehicle plants in Mexico in dozens of years. And so we need to be there, and we need to be part of that. We're the respected player in Mexico, and as I said, I have no issues about filling this plant up completely. And hopefully, when we execute appropriately, we're thinking about the next steps already.

[Kerry A. Shiba:]

Jeff, we believe we're absolutely cost competitive, especially considering the logistics costs of getting volume from -- getting product from China back over to this country. So if you stand back, we said there is a growing market here. There's already a substantial amount of imported wheels coming from Asia at this point in time, and we're either going to have to keep that share to further offshore competition or we're going to fill the void in and do it in a way that we think we can win the battle. And for us, as we -- as I mentioned before, once we became convinced there's real legs in this market, it kind of became a pretty easy decision.

[Jeff Linroth:]

Sure. And just one follow-up. I'm pretty -- I'm aware of the cost pressures in China, and I'm also, as you know, pretty enamored with the reputation that Superior enjoys. And so I've been a bit surprised at the loss in market share, and forgive me if I'm asking you to repeat a little bit, but I'm -- where would you assign that -- I mean, assign that to? Because I can't -- I'm thinking less and less that you would lose out a program to someone who was bidding it.

[Kerry A. Shiba:]

It's simple. We don't have the capacity, and the OEMs in a lot of cases, are deal-sourcing programs today to keep their comfort level. Mike comes to me every day and tells me about who wants additional volume. And we just can't fill it, so they need to protect themselves and they pull some programs to do that. It's that simple.

[Operator:]

[Operator Instructions] And sir, it appears we have no further questions in our queue.

[Stephen J. Borick:]

Okay. We're going to close. I want to make a comment, number one, personally, myself, to all of our employees, some which are not listening but the word will get out through our management teams. I personally truly appreciate all the efforts and hard work that has gone into 2012, and everybody knows that '13 is going to be just as difficult. We will continue to try to give everybody what they need, trying to balance out their home lives and work lives. But again, appreciate that. And secondly, appreciate all the shareholders that, either are new today or deciding to stay with us as we go through this, what I consider to be a significant transition to the upside for the company. And thirdly, I want to acknowledge friends out there that have stayed aligned with the company and listened to these webcasts and give all of us, and me personally, the fortitude to continue to move forward. And finally, my Board of Directors, I want to thank them today for their hard work in making these decisions with us. And with that, Kerry, if you want to close, please.

[Kerry A. Shiba:]

Okay. Well, I think, once again, thank you, everyone, for joining us on the call and for your attention. And be patient, these are long-term investments. They're very important investments that we're making, and we'll obviously keep you updated along the way. So with that, thank you, and have a good day, everyone.

[Operator:]

That does conclude today's call. Thank you, all, for your participation.