Question-and-Answer Session
Operator
Thank you. The question-and-answer session will be conducted electronically. (Operator Instructions). And we'll take our first question from John Murphy with Merrill Lynch.
John Murphy - Banc of America - Merrill Lynch
Good morning. I'll try to keep this to one. It copies a lot of questions out there. But, I guess just focusing on gross margin, I mean it was significantly weaker than we were expecting in the first quarter. And I'm just trying to understand that as volumes potentially stabilize and recover in the future, hopefully they will.
It will see a real recovery in the gross margin. And if you can kind of explain the components of the pressure on gross margins, really I mean in certain major buckets in sort of negative operating leverage pricing pressure, maybe negative mixed-shift, and just kind of give us an idea of what major leverage were there, and if it was 90%, operating the leverage and that will just comeback over time. It's surely trying to understand what's going on with the gross margin.
Steve Dykman
Okay. If you look at our margin, both on a sequential basis and on a year-over-year basis, the primary driver is our inability to leverage our fixed overhead costs. And with the significant declines, we're experiencing in revenues that obviously has put some downward pressure on our margins. So, as that stabilizes, we anticipate that the margin will improve over time and obviously our objective is to get back to historical average of the 35%. And that we were at prior to the third and fourth quarter drop-in vehicle production levels.
John Murphy - Banc of America - Merrill Lynch
So there is nothing exchanged that would make you believe that that 35% is not achievable if files recover?
Steve Dykman
No. So, if you think about it sequentially and year-over-year about three quarters of the margin drop was solely due to our inability to leverage fixed overhead costs.
John Murphy - Banc of America - Merrill Lynch
And there is nothing that you would do to cause in the interim to... would you do anything with cutting cost in the interim to get closer to that margin or are you're kind of comfortable with the restructuring actions you've taken to-date and maybe some variable costs around the fringes over the next couple of quarters and it's kind of a waiting game for this volume to stabilize and recover?
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