Fred Lissalde: Yes. So for customers, I think most probably you need to ask them. I think there is some flexibility. We are hearing commentaries as you do that in the U.S., there is some intention to report hybrids outside of the U.S., hybrid is a big portion of the new energy vehicles. In China, it’s 30% to 40%. In Europe, it’s a big percentage, too. What’s important to me is that we’ve built a product portfolio that is totally fungible across hybrid and BEV. R&D is the same engineers, power electronics, motors, transmission, thermal, it’s the same thing. For us, it does not matter. We can support our customers to wherever they want to go.
Rod Lache: So Fred, just to clarify, are you actually seeing that? We’re reading about it. We’re hearing about this increased interest in the U.S? Are your customers now sort of accelerating activity with you in that area?
Fred Lissalde: Rod, I think it’s a little too early to see the communication and the RFQ materializing on the hybrid side. But I would say that with the scale that we have in our eProducts that cuts the grass hybrid, different types of hybrids and BEV, we can be one of the enablers of a rapid launch of hybrid powertrain for those customers.
Operator: Your next question will come from Dan Levy with Barclays.
Dan Levy: And maybe we could just start with Eldor, the broader M&A strategy, specifically, how are you managing, I guess, we could say the integration deals because you have done a lot in the way of M&A. What is the process for integration? How do you manage any integration risks? And then maybe you could just remind us on Eldor, are these losses in line with what you originally anticipated? Or is this a function of maybe a weaker EV environment than when you originally did the deal?
Fred Lissalde: So first of all, the financial profile of Eldor was fully comprehended when we did the due diligence and it was fully comprehended into the views of our financials. Integrating companies becoming, I think, a real strength of BorgWarner. And we do that in a very disciplined way, and we’re doing it with a very disciplined way with Eldor too. We are locating BorgWarner people on location. And we are managing the business starting Day one where we’ve owned Eldor for a couple of months now. But we are going to just manage the Eldor business as we manage the BorgWarner business with financial discipline. There are attractive businesses in onboard chargers, DC/DC converter and one-box, which again is totally the same products, either it’s hybrid or BEV. And we see a lot of pools and a large event from our customers in those electronics technologies too.
Dan Levy: And maybe I’ll just piggyback on that, Dan, back to the losses being in line. Keep in mind, if you look at what’s implied in our guidance this year, we’re at 9.6% to 9.9% without Eldor and as we look out the 2027, we thought we were on track to be a 10% margin business. So, we’d already be on the cusp of that without doing Eldor, but Eldor was contemplated that and — impacting us to the tune of 30 to 40 basis points in the short term because we knew we were investing in a strong engineering shop that doesn’t have a lot of revenue today. And so that was contemplated in our original guidance.
Dan Levy: And then maybe just as a follow-up on that. Given we’ve seen some shifts in product plans, maybe you could just give us a sense of what the go-forward capital allocation? I mean, Fred, you mentioned a moment ago that there’s $2 billion of M&A assumed in the 2027 targets. I know we’re not going to get an update on that today. But maybe you can give us a sense of how this environment shifts what your appetite is for perhaps, how does the capital allocation change? And what else is remaining that still isn’t in your portfolio from a capability or product or customer exposure standpoint that still would require some M&A?
Fred Lissalde: I would say that the capital allocation strategy is pretty much unchanged. We are looking at M&A as an important part of strengthening electrification capabilities. We are very disciplined in the way we look at M&A. We are looking at way more companies than we’re actually putting the trigger on. And we think that the current environment could provide some attractive buying opportunities and be rest assured that we will include and consider the near-term impact in the valuation assessment. We are looking at M&As with discounted cash flows. We’re taking those near-term impacts are really importantly, the policy on capital allocation also includes the dividends that we’ve left unchanged even during covet. We’ve repurchased stocks and buyback is start of the strategy.
I alluded to in my prepared remarks on how much we’ve given back to our shareholders and the spin-off of PHINIA, which I think was a great success. It is also part of the capital allocation strategy. Kevin, do you want to add anything?
Kevin Nowlan: No, I think that’s it.
Operator: Our next question will come from Adam Jonas with Morgan Stanley.
Adam Jonas: Just two simple questions. First one, what portion of your 2024 budget of CapEx and R&D is allocated to eSystems?
