Kevin Clark: Yeah. As it relates to the wins with the Japanese OEMs, they were in and around radar. They’re global wins. So, for the Japanese OEMs, in Japan, as well as in Europe, China and North America, it’s to be transparent. The first time we’ve been able to penetrate in a meaningful way that customer base with our ADAS solutions. Part of that reflects where we are from an overall technology standpoint versus their traditional supply chain, which you are all familiar with. We’re confident that that will present us with incremental opportunities on the ADAS side, on the user experience side, as well as on the vehicle architecture side. So, we’re very excited about it.
Itay Michaeli: Terrific. That’s all very helpful. Thank you.
Operator: And John Murphy from Bank of America, please go ahead.
John Murphy: Good morning, guys. Maybe I might take a sort of different angle on sort of the growth change here. Kevin, you guys have obviously great technology and great product, and almost seem to be far more than one step ahead of the industry. I guess the question is, as we look at the R&D spend, $1.5 billion gross, I think you guys $1.2 billion net when you get your recoveries or sharing with your business partners, is there a question that you may be spending too much on R&D and getting too far out in front of the growth curve here, and maybe that might be an opportunity in the near term to skinny back on R&D and drive better margins and cash flow and then return to shareholders? I mean, once again, the product portfolio is great. It just seems like the industry has an inability to absorb all the good tech you bring to the table.
Kevin Clark: Yeah. Listen, John, I think that’s a good question. It’s something that we watch very closely. Our advanced development spending as a percent of total engineering was higher in 2023 than it’s been in the past. I’d say the bulk of that, quite frankly, has been working to productize our portfolio, which means significantly more reuse of existing technology on new platforms, which is what the industry needs. It’s driving a significant amount of interest from OEMs in areas like electrification, like battery management systems, like ADAS, like software, which we think is going to translate into continued growth in bookings. We talked about the $35 billion is kind of our estimate as we sit here today for 2024. I would say that number could be higher.
So, it’s important that we continue to invest, and we continue to position ourselves for growth. I would say we’ve doubled down our focus though on how do we make engineering more efficient, how do we get more out of engineering, and again, how do we drive more reuse, which allows us to be more efficient and develop higher margin solutions and allows us to deliver them to our customers at much lower cost. And I’d say equal focus on cost-effective solution now as there is on innovation.
John Murphy: Okay. Maybe…
Kevin Clark: But appreciate the question.
John Murphy: Yeah. And just one quick follow up on just the volume outlook. Flat, globally. I know there’s variances between regions. What are you seeing in schedules right now? I know you’re using some of your internal work and then external forecasts, but is that jiving with the early read on schedules or actually seeing schedules running above or below that in any meaningful way?
Joe Massaro: Yeah, it generally jives, although to my comments, it’s a build throughout the year. So, my comments around revenue growth and the calendarization very much tied out to what we’re seeing in schedule. So, total is connected. I would say this year, unlike the last couple of years, we actually don’t see much schedule disconnect between — we don’t see much disconnect between the schedules and the broader forecasting services. We did see some differences related to supply chain and stuff over the past couple of years, but they’re pretty much in line. But it is back-end weighted. It’s just not us that’s back-end weighted. It is the customer production schedules at this point.
John Murphy: Okay, great. Thank you very much, guys.
Operator: And our next question is going to come from Mark Delaney from Goldman Sachs. Please go ahead.
Mark Delaney: Yes, good morning. Thanks very much for taking the question. Incremental EBIT margins implied in guidance for 2024, I think are in the mid-20% range, even adding back for the strike impact that you had in ’23. Is the extra margin leverage this year relative to the historical roughly 20% due to capturing the remaining COVID disruption costs? And then maybe you can talk a little bit more around how much visibility you have into pricing and how firm that is for ’24 at this stage. I know with OEMs dealing with a lot on their plates, there was a fear from investors they could push more on margins. So, the visibility you have into achieving that higher margin leverage for ’24 would be helpful.
Joe Massaro: Yeah, Mark, it’s Joe. Similar to ’23, we have those bigger step downs in COVID on a year-over-year basis, supply chain disruption costs. So that is helping keep that incremental flow at the EBIT line a little higher than normal. I think that sort of 18% to 22% range that we usually talk about is still good in normalized times, but it is a little higher, much like it was last year. And then, listen, I think from a pricing perspective, there has been a lot of activity as we’ve talked about over the past couple of years, as we’ve worked through direct material inflation and stuff. I think we’re as settled as we normally are on it. There is obviously ongoing discussions with customers, but I think we’re in a relatively good place and a consistent place with where we’ve historically been this time of year.
Mark Delaney: That’s helpful, Joe. And the second question was just around shifting EV plans. A number of OEMs have talked about trying to do more with hybrids and plug-in hybrids. Maybe you can remind us what your content opportunity is on a hybrid and plug-in hybrid compared to BEV or ICE vehicles. And how well positioned do you think Aptiv is to potentially capture some of that higher intermediate-term production around hybrids and plug-in hybrids? Thanks.
Kevin Clark: Yeah, it’s Kevin. So, better electric vehicles are about 3x the content opportunity as an internal combustion engine vehicle. Plug-in hybrids are 2x, roughly 2x the content internal combustion engine. When you look at our mix of high voltage bookings and roughly the same from a revenue standpoint, roughly 25% to 30% of that relates to plug-in hybrid vehicles. So, hopefully that gives you a bit of context. So, we feel like we’re very well positioned whether OEMs are producing plug-in hybrids or battery electric vehicles.
Mark Delaney: Thank you.
Operator: Our next question is going to come from Dan Levy with Barclays. Please go ahead.
Dan Levy: Hi, good morning. Thanks for taking the question. Wanted to just go back to the EBIT bridge and just a point on the economics here. And specifically, I know in the past you had a lot of inflation from chips. We’ve obviously heard a number of accounts now that on the chip side there’s excess inventory. I’m just wondering to what extent you’re embedding chip deflation in the guidance? If not, is it at upside? And then maybe you could just comment briefly on the FX piece, because we’re under this understanding that your hedge is unwinding and that a reset would drive some peso headwind. So maybe just to comment on the FX than the bridge as well.
