How Modine's 80/20 Strategy Is Steering Its Transformation?

Modine Manufacturing Company MOD is applying its 80/20 principles to drive commercial excellence and operational focus. By analyzing customer and product data, the company is targeting actions that enhance profitability and address areas for improvement. Both the Climate Solutions and Performance Technologies segments have fully adopted the 80/20 methodology to drive transformative change throughout the organization.

The 80/20 principle, which holds that 80% of outputs stem from 20% of inputs, underpins Modine’s high-performance culture. This approach directs resources toward products and markets with the greatest sustainable growth and return potential while streamlining processes. Through this disciplined application, Modine has achieved significant business and financial improvements. The company is also extending 80/20 practices within its manufacturing facilities to boost production efficiency further.

In fiscal 2025, Modine reported gross margin gains despite lower sales volumes by applying 80/20 principles. The company closed a technical service center in Germany to optimize global capacity. It implemented restructuring actions, including targeted headcount reductions and product line transfers, to reduce expenses and improve supply-chain and manufacturing efficiency.

For fiscal 2026, Modine plans to deepen its 80/20 discipline within the Climate Solutions segment. Leveraging its expertise in thermal management, the company aims to deliver highly engineered, mission-critical thermal solutions. It also aims to capitalize on growth opportunities driven by trends in high-performance computing, low global warming refrigerant regulations and indoor air quality. 

MOD carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Transformative Strategy Adopted by Other OEMs

American Axle & Manufacturing Holdings, Inc.’s AXL acquisition of Metaldyne Performance Group has widened its operating scale, customer base and end markets. During the first quarter, the company exited its Hefei and Liuzhou AAM automotive joint ventures in China, generating approximately $30 million in cash. American Axle completed sales of its India commercial axle business to Bharat Forge Limited in July 2025 for approximately $65 million. The divestiture will help American Axle to sharpen its focus on ICE, hybrid and fully electric applications across passenger cars, pickup trucks/SUVs and vans worldwide.

BorgWarner Inc. BWA is streamlining its portfolio to sharpen focus and improve profitability. In the second quarter of 2025, BorgWarner exited its Charging business, a move expected to eliminate around $30 million in annual adjusted operating losses. The company is also consolidating its North American Battery Systems operations to better align with current market conditions. This restructuring is projected to deliver annual cost savings of about $20 million by 2026. These actions support BorgWarner’s goal of building a more efficient and competitive business.

MOD’s Price Performance, Valuation & Estimates

Modine’s shares have gained 28.6% compared with the Zacks Automotive-Original Equipment industry’s growth of 13.5% year to date.

From a valuation perspective, MOD appears overvalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 2.54, higher than the industry’s 2.16.

The Zacks Consensus Estimate for MOD’s fiscal 2026 and 2027 EPS has moved up 11 cents and 46 cents, respectively, in the past 90 days.

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This article originally published on Zacks Investment Research (zacks.com).

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