Christopher May: Yes, I wouldn’t say magnitude of recoveries per se Joe. This is Chris. If you look at our last couple of mergers that we’ve provided through these earnings calls, we talked about, this quarter, 20% to 30% of that $30 million of performance related to net inflation. You saw a number of about $14 million we disclosed in the second quarter and another similar number back in the first quarter. So that’s giving you the magnitude of the inflation headwinds that we’re facing that we’re obviously in active discussion with.
Joseph Spak: Okay. Thank you.
David Dauch: Thanks, Joe.
Operator: Ladies and gentlemen, our last question today comes from Dan Levy from Barclays. Please go ahead with your question.
Dan Levy: Hi. Good morning. Thanks for taking the question. A couple of questions on the EV side. First, maybe you can just give us a sense of the trajectory of your R&D spend on EVs. I know you said the backlog right now is intact, the program delays. But maybe you could give us a sense of the trajectory. And specifically, the level of flexibility you have if there are haircuts to emerge on the volume side, what flexibility do you have to defer pieces of spend?
Christopher May: From a dollar perspective – Dan, this is Chris. From a trajectory, as you know, we’ve talked about over probably the last, I would say, four to eight quarters that we would from a spend perspective, clip it up to about $35 million to $40 million per quarter. You see us now sort of performing in that range. That’s why while we’re building out our electrification platform, while we have one work and beginning some development work for the programs that we have won, in the event that something was delayed or deferred or something of that nature, obviously, we can manage some of those costs accordingly.
David Dauch: Yes. Dan, this is David. The only thing I would say is that, obviously, all the OEMs are going to be reevaluating their electrification strategies in light of some of the softening of the EVs as far as inventory levels are growing, and just maybe the acceptance by the consumer is maybe a little bit slower than maybe what was anticipated. So as Chris said, we can throttle things with respect to our spending there. But at the same time, we want to make sure that we continue to develop the portfolio so we can be agnostic to the market so we can supply ICE hybrid or EV-related products going forward. So we’ll spend appropriately going forward, but we wanted to make sure we round out our electrification portfolio appropriately.
Dan Levy: Okay. Thank you. And the margin impact, should we think if there is a slowdown that emerges within your particular product set, but it’s offset by ICE. Is it that the margin profile on ICE, at least from a contribution margin standpoint, is superior to EV, so net positive to margins? How should we think of the net margin impact in the event of a slower EV volume outlook?
Christopher May: Yes. Holistically, our ICE business is basically how we performed over the last several years, which can be very compelling from a margin perspective. We have high variable profit, if it’s just incremental volume on our ICE. It can be anywhere from 25% to 35% depending on the product set. So if it’s just variable incremental volume on ICE, that’s obviously very positive for us. And some of our large electrification wins, some that we announced earlier are launching latter part of the decade. So that mix obviously is not upon us right now. We’ll launch some smaller programs, but they’ll come in at more full cost like any new piece of business would come in at full cost. But a profile, as you know, we’ve tried to articulate that we’re trying to run in reasonable financial returns for both sides of this business.
David Dauch: But it’s very clear that we’ve got size and scale on our ICE business, and we have growing scale on our but you can’t expect the margins on EV to be at the same level as ICE right out of the chute. But as that scale grows, then you could expect margins to improve. But clearly, as Chris indicated, we should benefit if there’s a slowdown of based on – I mean a slowdown of EV based on ICE margins that we’re incurring today.
Dan Levy: Okay. Thank you. And just as a follow-up, I think what we’ve heard from some of the OEMs out there is that in a weaker volume environment, it makes them rethink the level of vertical integration that they have planned because maybe it takes them longer to get scale or to get the volumes to justify that scale. Is the tone or tenor of your conversations with OEM to – maybe initially, we’re a bit more aggressive on vertical integration shifting a bit that there’s perhaps a bit more opportunity for that to be outsourced to you?
David Dauch: We haven’t had any discussions to date because the labor negotiations just have wrapped up. They’ve clearly got to assess their long-range product plans strategies, what they want to do to your point on vertical integration. They clearly understand our capability. They clearly understand that we’re available to help them. Currently, today, we have a cost structure that’s lower than the OEM cost structure. Hopefully, we can maintain that as we go forward. So I do expect that there will be some discussions along those lines in the future.
Dan Levy: Thank you.
David Dauch: Thanks, Dan.
David Lim: Thank you, Dan, and we thank all of you who have participated on this call and appreciate your interest in AAM. We certainly look forward to talking with you in the future. Thank you.
Operator: Ladies and gentlemen, that does conclude today’s conference call and presentation. We thank you for joining. You may now disconnect your lines.
