Kevin Nowlan: We don’t really break that out, but publicly in terms of what we’ve been disclosing in terms of an overall R&D or CapEx allocated that way. But what I would tell you is, if you look at R&D first and foremost, we invested about $475 million in eProduct-related R&D in 2023 versus the $700 million or $715 million or so of R&D in total. As we look ahead to ’24 organically, we’ll add another $40 million to $50 million there from eProduct R&D perspective. And you can expect that the foundational based R&D will probably come down a little bit on a year-over-year basis as it’s been doing the last few years. So the R&D will continue to be increasingly weighted towards eProduct, and it is the majority of the investment. From a capital perspective, you can see we stepped up our capital investment last year pretty meaningfully, a couple of hundred million dollars relative to 2022, and that was really focused on investing in some of the eProduct portfolio ramp ups that we needed, particularly within our ePropulsion segment as well as our battery pack business and you’ll see a comparable level of investment in capital in 2024 going toward that.
I think these will be a couple of the peak years of investment from a CapEx perspective, particularly on that battery pack business. And then you’ll probably see it come back down a little bit to more normalized levels as we hit ’25 and beyond.
Fred Lissalde: And then what’s really important is to understand that the RMB CapEx are for EV and hybrids. And again, I’d say it’s wonderful times, the products are the same for us in light vehicle, whether it goes in the hybrid or above. It’s the same people it’s the same R&D, it’s the same CapEx.
Adam Jonas: And then just going to temp on that point, Fred, that there are many aspects of eSystems that are agnostic between BEV and hybrid, I’ll ask you — I won’t hold you to specifics, but what would be your best guess or a range of how much of your 2024 eSystems and foundational business are going into hybrid include plug-in hybrids? If you were to isolate just hybrid specifically before some of your foundational stuff increasingly is going into hybrids as well, as we all know. So I didn’t know if you could isolate a guess of how much hybrid would account for the revenue in ’24? A range would be great.
Kevin Nowlan: Yes. I guess maybe just a couple from me. I think Pat can come back to you on the details. But what I would say is when you look at the $2.5 billion to $2.8 billion guide, the first thing I’d say is off the top the $700 million to $800 million associated with battery is all EV. It’s EV in the commercial space in the CV space. So then what you’re really looking at is the other $1.8 billion to $2 billion of eProduct revenue, and we’ll come back to you with the specific breakdown. I don’t want to put a number and have it a little bit off.
Operator: Our next question will come from James Picariello with BNP Paribas.
James Picariello: Just a clarification question first. So based on the margin guidance, excluding Eldor, the implied loss rate for Eldor this year is roughly $50 million, is that right? And then in addition to that impact, you’re stepping up organic products R&D by $40 million to $50 million. So all in at an additional $90 million to $100 million in spend, is that right?
Kevin Nowlan: Roughly, yes. The portion of the Eldor loss, that’s engineering related it’s somewhere around $40 million. So you’re right, it’s $40 million to $50 million of organic step-up of to the R&D. And then Eldor adds about another $40 million, the overall loss and Eldor is around — the midpoint is around what you said.
James Picariello: And then can you just confirm what the eProduct margin was in 2023? And then based on what we just covered, is it possible eProduct losses are close to flat year-over-year? Just how should we be thinking about that? Or asked another way, part of the impetus behind separating out of the propulsion was to provide that clarity and transparency on the product progression. Is there a segment-specific guidance to share maybe on the ePropulsion?
Kevin Nowlan: We’re not going to give any segment-specific guidance this year. But what I would say, when you look at the ePropulsion segment, obviously, we were focused on driving toward breakeven in the fourth quarter of last year. That was the guidance as we started out the year last year, and that was truly premised on our ability to successfully convert on the incremental revenue and we were disappointed that we had to pull back on that when we saw some of the volatility in the eMarkets and how that was impacting our revenue. So as we ended the year, you can see when you look at the ePropulsion segment, we ended up coming in at about $540 million of revenue in the fourth quarter, which is about $200 million to $300 million short of our original guidance when we were expecting to get to break even.
So that business ended up losing about I think $16 million or so in the fourth quarter. I think what gives us some comfort in the way we’re managing the profitability of that business is the fact that we were down $200 million to $300 million in revenue versus our original guidance. If we had simply let contribution margin flow through on that lower revenue, we probably would have had a bigger loss than $16 million in the quarter. So I think we feel good about the fact that we’re managing the profitability of that business in light of some of the near-term volatility. But ultimately, the path to breakeven into long-term profitability of that business comes from successfully converting on the incremental revenue. And what we take a lot of comfort in is that we see the contribution margin really flowing through the business.
