Aptiv splits into NuAptiv and Versagen as Q4 strength meets FX and commodity pressure — US

Aptiv’s fourth-quarter report delivered a mix of operational momentum and clear macro headwinds: revenue reached $5.2 billion and adjusted operating income remained healthy, yet foreign-exchange swings and rising commodity costs shaved material margin percentage points. Leadership used the call to frame the business as two soon-to-be-independent companies — NuAptiv (the remainder) and Versagen (electrical distribution) — and to explain how that split will reshape capital use and cost structures beginning April 1. Bookings remained an important validation of demand, with full-year new awards at about $27 billion, concentrated in China and non-automotive markets, although the tally fell short of prior internal targets after some awards shifted into 2026. Management emphasized investments in software, sensing, and interconnect technologies and flagged partnerships in robotics and cybersecurity as strategic bets to expand addressable markets beyond traditional vehicle content. Cash generation stayed strong: Q4 operating cash flow was $818 million and full-year operating cash flow exceeded $2 billion, enabling aggressive debt paydown and share repurchases while leaving a sizable year-end cash balance. The company spelled out explicit guidance for the separated businesses — NuAptiv revenue of roughly $12.8–13.2 billion with EBITDA near $2.42 billion, and Versagen revenue of about $9.1–9.4 billion with EBITDA around $990 million — and detailed stranded and separation costs that will pressure free cash flow timing in 2026. Management also described a deliberate semiconductor inventory buildup and contract hedging that dampens near-term supply risk but raises working-capital requirements and cash absorption. Near-term margins have a quantifiable FX and commodity drag (about 160 basis points in Q4 and roughly 120 basis points expected in Q1), but executives argued that excluding those items and one-time separation effects, underlying operating leverage and performance programs should restore margin momentum across 2026–28. Capital allocation is designed to be conservative: roughly $1.9 billion of planned debt reduction next year funded largely by proceeds from the Versagen spin, continued buyback activity, and a maintained focus on returning cash while investing in growth initiatives. Regionally, North America remains the growth engine, China showed improvement in award mix despite near-term revenue softness, and India and other APAC markets delivered outsized bookings growth. The company acknowledged risks — commodity volatility, FX swings, program timing shifts and semiconductor cost inflation — but framed them as manageable through pass-through pricing, customer negotiations, and supply-chain resiliency measures. For investors, the narrative is one of transition: a company reporting strong top-line and bookings momentum while carving up its businesses, layering in near-term costs for structural gains, and setting explicit financial targets for two public entities. The interplay between realized bookings, commodity pass-through mechanics, and the pace of separation-related cost reductions will determine whether 2026 becomes a year of value crystallization or simply one of transition friction.