NN, Inc. (NASDAQ:NNBR) Q4 2022 Earnings Call Transcript

Warren Veltman: I don’t know if — look, I don’t know if we have it broken down by the percentage of the programs. Certainly, one of the issues — we have 2 specific issues that we’re focused on right now. We’ve had some difficulty in a couple of program launches out of our Mexico facility. We’re frankly, struggling with some of the technical aspects of some programs that we’re launching down there. So we’ve engaged some of our global teams to participate and help solve some of the problems down there. It’s going to be a little bit longer-term process in order to fix some of that because we’re struggling with some process capabilities right now on some parts that have some relatively tight tolerances. So we’re working through that.

I would tell you, by and large, as you look at Mobile around the globe, our Chinese operations are very successful and profitable. Our Brazilian operations are successful and profitable. Our Poland operations are successful and profitable and several of the North American-based facilities primarily those in Michigan have historically been very profitable as well. So we’re struggling right now with some program launches in Mexico and one program in particular, out of our Ohio facility, electric power assist program that we’re launching out of that facility, we think we’ll have our hands around that one, certainly much sooner than the issues that we’re struggling with in Mexico.

Robert Barger: Historically, and you mentioned some of the areas where you’re profitable right now. Historically, you’ve been good at holding tight tolerances. Is this a tooling issue or the machines themselves? What is the source of the problem?

Warren Veltman: Yes. It’s really a process-layout issue and some stack-up tolerances. And frankly, it’s a personnel issue for us, Steve, as much as anything. When we look at what’s going on in Juarez, and we’re not alone in this, okay? I would tell you that the turnover that we’ve had in that facility and getting employees to stay on a consistent basis, we train them, they’re there for a period of time, and then they leave for an opportunity where they then get a signing bonus someplace else. Our turnover per month in our Mexican site today is, I think, in the 15% range per month. So we’re having some difficulty with retention. We’ve benchmarked ourselves against other suppliers in that region that are all suffering through the same types of issues.

So we’re looking at different opportunities to potentially move some of the more difficult machine operations to either sites in Poland — low labor cost sites in Poland or in Brazil. But again, some of those fixes will be a little bit longer term. So we’re working with our technical teams primarily out of Kentwood, some out of Brazil and some out of Wellington as well to help us support our Juarez facility.

Operator: Our next question comes from Rob Brown from Lake Street Capital Markets.

Robert Brown: On the pricing actions you’ve taken, how much is sort of done now? And how much do you have left in terms of negotiations and activity?