David Begleiter: Thank you, good morning. Sean, first given your new contract structures in Mobility, could you remind us what happens when raws actually come down, how much do prices decline here or how much they hold?
Sean Lannon: Yes. So, David, we are still behind our mobility, which we will see in the price cost slide. So, outside the indexing contracts, we are still going to be pushing price even if we do see a deflationary environment. But to your point maybe on the indexing, in general we are on six-month lag. So, again, depends on the pace of deflation. But we would expect to give back potentially something on roughly 40% of those contracts.
David Begleiter: Very good. And Chris, again welcome aboard. As you put a fresh eyes on mobility, what do you think the biggest issue was last 18 months? And were there any structural reasons why this business can’t return to prior levels of earnings forgetting margins because they will go up or down based on other factors? But earnings dollars — can we get back to prior levels? Thank you.
Chris Villavarayan: Well, I think it’s focused on execution as I think about the business. And I know that might sound pretty simplistic. But if you look at the last quarter — two quarters and what was done, that was primarily the focus. It was focused around driving pricing. Again, I think as Sean mentioned, it’s about making sure we are getting the value from our — that we are providing for our service. And essentially in this space, I look at it as if you look at it if you look at where our customer margins are, where our margins where for the last year, we certainly can’t invest. And if we are providing the value that’s driving the growth, we certainly need to be pushing pricing here whether as we have discussed above and beyond where we are.
And we believe we are providing that level of — sorry, value because we certainly are continuing to grow. So, that’s certainly going to be our focus as we go forward. So, one is pricing. The second part is execution. So, what does that mean? We’ve obviously had supply chain constraints in plants. And it’s not associated with the capacities of our plants or the utilization of our plants. It’s really about how we drive the supply chain from a procurement standpoint right through the facilities to get the volume out. And then we have made choices there that’s obviously limited our ability to drive that gap. So, certainly those two are the focuses we are going to continue. So, simply put focus on execution.
Sean Lannon:
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David Begleiter: Thank you very much.
Operator: Thank you. Next question today is coming from Mike Sison from Wells Fargo. Your line is now live.
Mike Sison: Hey, guys. Nice quarter. Just one question, in terms of refinish volumes, you talked about it being seasonally weak. Or, typically seasonality first quarter versus fourth quarter. But what do you think about the second quarter? There are odds that the seasonality could be similar improvements? And maybe talk about the regions? Maybe China is not as strong sequentially. But any thoughts about what you are seeing for a typical improvement in 2Q versus 1Q in refinish?
Sean Lannon: Mike, we are only guiding to the first quarter, but we fully expect there will be a nice uptick in the second quarter of 2023. We also think the cautiousness that we are seeing in China, hopefully, that will fade away pretty quickly. And we will see the benefits in the second quarter as well.
Mike Sison: Great. Thank you.
Operator: Thank you. Next question is coming from PJ Juvekar from Citi. Your line is now live.
PJ Juvekar: Yes. Good morning. And Chris, welcome to Axalta.
Chris Villavarayan: Thanks PJ.
PJ Juvekar: As China reopens, how do you think about that benefiting your industrial demand versus auto OEM? In auto OEM, you mentioned China was a big growth driver for you. So, talk about sort of what kind of pace of improvement you expect. And on the flipside, if China does rebound then oil demand and prices could go up. And could that create some potential headwind? Thank you.
Chris Villavarayan: Let me start off. Again, three weeks in the role. And then I’ll probably hand it over to Sean, but again, obviously we are being conservative and being cautious that’s our approach for China. But to your point, there is upside as you think especially since we have significant new business wins are ramping there. So, that is a bright spot for us. On the industrial side though, I would say globally we are seeing softening. And even in China, we forecasted that we are being somewhat muted. I think the bright spot for us just answering your question on the regional side. If I think about where is the opportunity for industrial, it’s really North America. And we look at our building products business where we see some great growth.
In the siding business also as Sean pointed out on the EV side, we are also seeing growth there. But then coming back to China and as we look at the overall basket, I would say we are being somewhat conservative as we go through it. Obviously, it’s got fits and starts. We went through an experience as we started out from let’s call it the COVID lockdown early in the month January, but we certainly see a lot of our facilities opening up, and it seems like the same story for rest of China. So, short-term we are being somewhat conservative. And I’ll now turn it to Sean.
