Kevin Nowlan: Yes. When you look at the eProduct related R&D, as we’ve mentioned in the past, we thought the real peak in that was going to be in 2022 in terms of the growth in the eProduct R&D. You might remember, it stepped up $150 million that year. But then we said we expect the pace of the growth in the R&D to step down year-over-year. And you can see that happening. Last year, it stepped up about $60 million so not as big an increase as what we saw in 2022. And as we look ahead to ’24, it’s going to step up about $40 million to $50 million organically. So the pace of the growth in that ER&D is definitely slowing but still growing because it’s supporting our ability to successfully launch and ramp up programs as well as to capitalize on continued profitable opportunity down to the future. So, we think the pace of what we’re seeing right now is supportive of our long-term outlook for electrification.
Operator: Our next question will come from Joe Spak with UBS.
Joe Spak: I guess I wanted to sort of touch on a couple of the midterm factors here in light of what’s going on in your strategy. So first, if I look at Slide 13 and I look at combustion plus hybrid of the industry, you’re showing about a 4% decline roughly at the industry level. Your implied foundational revenue growth is like minus 1.5%. So that’s like 2% to 3% at growth. Is that like a reasonable level of outperformance on the foundational stuff as ICE continues to decline over the coming years? And can you still hit that 13% foundational margin target that you laid out if ICE continues to decline?
Fred Lissalde: So I would say, Joe, that we’re outgrowing the inflational side by about 300 basis points. I would tell you that on the side, I see more upside than downside at this point in time. And we are constantly as we presented a few months ago and as we review the team regularly, we’re constantly restructuring in a position of strength. And that, I believe, will allow us to maintain the foundation of margins as it is called by our third pillar of Charging Forward.
Joe Spak: And then I guess a second question maybe to build off of [Colin’s] [ph] question a little bit. Let’s call it, $2.5 billion eProducts guidance for this year. Your prior ’25 was $4.5 billion to $5 billion. So that looks like a big jump. So maybe a couple of things there like it seems like maybe some of that product launches through the year. So maybe the ’24 exit rate is a better sense. And I don’t know if you would agree with that. And I guess just secondly, is that sort of ’25 level for your products still attainable? I mean, it doesn’t seem like the market really believes it is, but I’d be curious to understand how year-over-year.
Fred Lissalde: So if you take the CV packs, growing 65% CAGR year-over-year. And we are ramping up in U.S. significantly in Q2 and in Europe at the end of the year and more to come. So I would say that the end of 2024 jump-off point on CV is much higher than the current year. On light-vehicle, roughly 60% of the programs that we’ve disclosed so far, we’re launching this year or we’ve launched at the tail end of last year. So even if there is some variability possible, I think you’re right, the jump-off point at the end of this year is going to be from a much bigger base on a light-vehicle standpoint, as it is, I just alluded to on the CV side. So I would say that if the customer volumes are holding as our country forecasting, we would expect to be within that range in 2025.
Joe Spak: Obviously, in volatile market we need to monitor but based on what you see now and sort of the growth through the year on what you just sort of talked about, it still seems achievable?
Fred Lissalde: For now, we’re focusing on ’24. We’re launching so many products. We’re focusing on ’24, and we’ll let you know what we think finally on ’25 in due course. ’24 is our focus, but I just wanted to give you the color of the different building blocks between CV and light vehicles.
Operator: Our next question will come from Rod Lache with Wolfe Research. Please go ahead.
Rod Lache: I just want to, first of all, confirm on the question that Joe just asked is based on the growth in eProducts and in a flat market, it would appear that there’s some moderation in the foundational business, but you are maintaining that 13% margin. So you’re not delevering? And secondly, can you remind us what’s embedded for M&A within the eProducts revenue target for 2025? I’m referring to the $4.5 billion to $5 billion.
Fred Lissalde: So I’ll take the second part of the question. There is no M&A in the $4.5 billion to $5 billion. It is booked business. There is a significant portion of about $2 billion of M&A in 2027.
Kevin Nowlan: And then on the foundational margin, one of our key strategies is that we know over time, as electrification continues to grow at the expense of underlying combustion-based technology that will put pressure over time on our revenue outlook. And our challenge is to make sure we’re managing the cost structure of that business I should even say the overall P&L of that business, whether that’s on the price side or the cost side to make sure we’re delivering and sustaining our margin profile, we fully expect that to be the case as we go through 2024 and well beyond that.
Rod Lache: And maybe just bigger picture, when we take a step back and you kind of analyze the regulatory requirements for your light vehicle customers, I’m curious if you have any thoughts on how much flexibility the OEMs really have to defer electric vehicles? Do you think that they would be able to shift to plug-ins or hybrids to a much greater extent? And are you seeing any benefit from the fact that you have a lot of kind of off-the-shelf hybrid technology? Which if these are sort of late decisions, I would imagine they might accelerate.
