Question-and-Answer Session
Operator
Your first question comes from the line of Rich Kwas of Wachovia.
Rich Kwas
Good morning gentlemen.
Dick Dauch
Good morning Rich.
Mike Simonte
Good morning Rich.
Rich Kwas
Mike, could you go into a little bit about the contribution margin that you have realized in the first quarter, it was a little big higher than I would have expected given that you are paying as much in labor cost and if you could just walk us through that would be helpful?
Mike Simonte
Okay, no problem, Rich. A couple of things going out. First one is truly we are not paying as much to our hourly associates in the original US locations, but we were also not generating sales with those locations. So now the analysis is the profit margins of the plants that we are running and moving our operations. We see our large contribution margin in this quarter whether you can get it sequentially through the fourth quarter or year-over-year in the first quarter, about 33 to 34% loss margin on sales. Now that’s a little bit higher than the 30% range than normal we expect, but in the time period we have been managing extraordinary events.
I would say a couple of things. First of all, at the plants that we are running and particularly to shift these manufacturing from some of our original US locations other locations, we had some logistical issues we have to overcome, we have some supply issues with raw materials to a different location and incurred some [inaudible] to do that. We did pay some overtime. We had to increase security and maintenance expenses. These is a host of things we had to do about the plant running and not running to manage through this situation. The other thing I would mention, I would say though that what I have already said is the primary reason for that 3 to 4% higher loss margin rate in this quarter, to begin with I would say is that excluding the impact of the strike our volumes were down about 15% or so in the quarter. Our volume for heavy duty program were down more than that, probably 50% more than that and so that also had an impact on this margin comparison in the quarter.
Rich Kwas
That’s helpful, thank you. And then as we think about this for the current quarter, with that contribution margin, the negative contribution margin actually come in a little bit relative to 34 in the first quarter or should be about the same?
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