Patrick Cunningham: Got it. And then just on the BMW crude partnership it looks very promising, but can you help us understand the timing of getting penetration into those body shops and then maybe the volume and earnings potential from that partnership?
Chris Villavarayan: Yes, it’s certainly going to be sometime in 2024. So, we have to convert these shops in our — as we see it every quarter next year. We’re going to work on converting more and more of those shops. It’s certainly a true testament to the group. This year as I look at it we’re on path to win 2,000 net body shops. If I look at the last three years, the team’s done an exceptional job winning 10,000 body shops. So this 730 is a great step right off the get go in how we’re set up for 2024.
Patrick Cunningham: Great. Thank you.
Chris Villavarayan: You’re welcome.
Operator: Our next question comes from Joshua Spector with UBS. Please go ahead. Good morning.
Lucas Beaumont: Good morning. This is Lucas Bowman on for Josh. So I just wanted to get back to Refinish if we could. So could you please comment on the base volume growth there for us by region and just highlight as well what was the impact of a low margin exit in the quarter and kind of how much of that is like left to go now as we sort of roll into 2024?
Chris Villavarayan: So if I look at it quarter-over-quarter, let’s call it, you know, what we’re seeing is, I would call it, a 5% decline in volumes. And a lot of this obviously related to what we went through with our Refinish market. But if I look from this quarter into next quarter, we’re essentially flat. And going into next year, I would say from a volume basis, we expect that to remain flat. Just explaining the dynamic quarter-over-quarter, Q2 to Q3, again, primarily driven from our S/4 implementation. We made a large step up, but still there’s more opportunity, obviously, with us burning more of the backlog as I think about Q4 and prepping us for next year. But Q3 to Q4, we expect volumes to be overall flat and heading into next year to be flat. If you were to break that region by region, I would say Europe and North America somewhat stable and then South America, sorry, China continuing to be soft on the Refinish side.
Lucas Beaumont: Great. Thanks. And then I just sort of wanted to talk about kind of the one time bridge items going into next year. So just in terms of where we stand now with like what you know. So you highlighted the sort of $35 million in the consultant spending that’s not going to sort of occur. But then, we have the other factors like the low margin product exits, change in the availability contract pricing. Just anything else sort of that you’d like to highlight for us that’s known at this time if you could kind of walk us through that please?
Carl Anderson: Yeah. I think just to add what Chris said earlier in some of his comments, if you think about the bridge into 2024, we do expect a little bit more pricing, especially if we think about what we can do and refinish as well as in some of the other verticals as well for us. And we think also VCOGs at least on a year over year basis will continue to trend favorably especially at least through the first half of 2024. So those would be the primary areas of the bridge that will help lock you to where we think 2024 will end up.
Lucas Beaumont: Thank you.
Carl Anderson: Thank you. You’re welcome.
Operator: Our next question comes from Kevin McCarthy with Vertical Research Partners. Please go ahead.
Kevin McCarthy: Yes, good morning. Chris, it sounds like you’ve made a lot of progress with regards to your purchasing initiatives. Can you provide a little bit more color on the raw material cost outlook heading into 2024 and perhaps where you’re seeing the most deflation or the most stickiness in your input costs?
Chris Villavarayan: Sure, love to. So I think I would say, as we look at Q4 and also into 2024, I would call it mid-single-digit opportunity on material. This is going to provide us a tailwind. Now in terms of – there is one – a few outlying factors. We are monitoring oil and we – but at this point, we’re certainly not seeing any impact on our downstream market. But oil does play a key factor in solvents as well as if we think about freight but again no pressure that we are seeing at this time. But epoxies, isocyanates and resins are all trending favorably. So as I think about 2024 we still – from our planning standpoint, where I would say we see mid-single-digit opportunity in material performance.
Kevin McCarthy: Okay. And then – would you comment Chris, on your outlook for auto builds, I think Axalta used to provide some fairly specific numerical guidance. I didn’t see that unless I missed it but maybe you can kind of talk through what you’re thinking about for the fourth quarter as well as 2024 as it relates to production backdrop?
Chris Villavarayan: So fourth quarter obviously, going around the world, Europe seems to be stable and growing. China is just going with gangbusters, if I look at Q3 and also as we look at our forecast for Q4, the team has just done a stellar job also on top of our wins. If we look back a year ago, we talked about $200 million of new wins running through the P&L at the back end of 2024 and we’re certainly seeing our share of not only growth but also the market rebounding in China. So, so far as I look at Q3 and Q4, I would say globally the markets seem to be trending the right way. Specific to North America obviously, the step down in – with the UAW strike. We certainly saw – we saw a minimal impact from the strike in Q3.
As you can see from our performance. In Q4, I would say we’re – we’re guiding to 1% of our revenue being impacted possibly from the strike. But if that gets resolved here based on where the discussions are going that we do see some level of opportunity there in our guide as well. Now looking at 2024, all indications to your point are that markets are going to start building up. So builds – for the global builds, we see that going up to $89 million. So certainly a positive trend there heading back to the numbers we saw let’s call it pre-pandemic. The one outlier is on the commercial vehicle side. On the commercial vehicle side I would say ACT as markets going down to 275,000 bills. Obviously, we’re running at well north of 300 right now at 325.
So there’s a bit of a risk there. But that said, I think the team is doing well with winning new business and also driving price and cost actions that we should see overall margin continuing to improve into 2024.
