I mean you can see it in the 2024 guide right? We’re converting on an all-in basis at mid-teens. And all of the growth in 2024 is coming from the eBusinesses. So, we see the underlying fundamentals of the profitability coming through it. So as we scale that business, we see the path towards the profitability objectives of the Company intact for that portfolio.
Operator: Our next question will come from Emmanuel Rosner with Deutsche Bank.
Emmanuel Rosner: I was hoping to follow up on the incremental margins. And just trying to understand a little bit how the math would work for the foundational side of your business. So, we’ve basically reached a point that where within your 2024 guidance, foundation revenues are already down, I guess, even with the growth of the market. And so I guess, how should we think about contribution margin within foundational? Like does it become sort of like the decremental margin? Do you need sort of like restructuring to sort of like offset this? And if I think about some of our [indiscernible] basically cash-in decisions in the future? Like how quickly can you go from having sort of incremental, if the volume plays out better versus having to sort of like restructure to offset any potential downside?
Kevin Nowlan: I mean with respect to the foundational business, implicitly, you’re right. The revenue is down a little bit. Year-over-year, somewhere in our guidance implicitly around $60 million to $260 million, which means we’re down about 0.5 point to 2 points in that portfolio year-over-year. If you look at the underlying markets that those products support being the combustion and hybrid markets, those are down anywhere from 3% to 6% on a year-over-year basis. So we are outperforming those markets as those are going down a little bit year-over-year, but we are seeing a revenue line. And as you know, at our Investor Day, we talked about our expectation that overtime, we’re going to see revenue in the foundational portfolio is coming under some pressure.
And what we needed to do is make sure we’re managing that P&L holistically, pricing cost restructuring to make sure that we would sustain that margin profile over time. And we fully expect to do that and we expect to execute that in ’24 as well as all the way through the end of the Charging Forward plan.
Fred Lissalde: I would add one thing is that on the combustion side. We don’t really see no new — we don’t really see new engines or new transmissions being developed. It is more a longer life or slightly higher volume on the current product. So even if combustion, as you mentioned, may go back up or longer tail that doesn’t prevent us to adjust the [SA] and the engineering as I mentioned, of the foundational P&L.
Emmanuel Rosner: Just to make sure I understand, so 2024 could help us really understand also the mid- or longer-term picture because you have a guidance obviously about it, but so you mentioned this mid-teens incremental margins all in for this year. Any way to directionally think about it on what does that does look like on a foundational versus new eProduct because, obviously, as I mentioned, foundational is actually down revenues and then eProduct is up a lot. So what does that look like? And I think you could help us a little bit better understand how you manage this going forward.
Kevin Nowlan: I mean, fundamentally, we’re not going to break out the details in terms of our guide, but fundamentally, in order for us to execute on our foundational margin profile over the coming years in line with Charging Forward. It means we need to decrement on an all-in basis in that mid-teens. And for our eProduct portfolio to deliver on its margin expectations we need to convert in the mid-teens. And I think you see the blend of that actually coming through the financials and the P&L in our ’24 guidance.
Operator: And we have time for one final question, and that question will come from Noah Kaye with Oppenheimer. Please go ahead.
Noah Kaye: First, just a clarification, what was said earlier. You talked about really this year in [indiscernible] kind of the peak for CapEx, is that meant to be CapEx in absolute dollars? Should we think about sort of reversion to more like 5% of sales on a go-forward basis, that being the ’26, ’27? I’m just trying to understand the intent of your comments.
Kevin Nowlan: Yes. Fair question, I mean, typically, we’ve run in the past at 5%. We’ve had years where we’ve dipped below, and we’ve been in the 4.5% to 5% range. But then you see the last couple of years, we’ve been elevated running closer to 6% than 5%. My expectation over time is that as we get to more of a normalized run rate environment, we’re probably coming back down toward that 5% range.
Noah Kaye: And then, Fred, there was good color earlier on the battery pack expectations for this year. But I’d honestly love to delve a little bit more into where you’re at in terms of tooling and automation, staffing up cell supply to just help us understand your true visibility into the production ramp as you go throughout the year?
Fred Lissalde: Yes, we are ramping up a second production line in Seneca, North Carolina. We have our first production line in the Michigan area. This is ramping up in Q2. And the same line is being commissioned for Europe, and this will ramp up data in the year. And that is the 65% year-over-year growth at the midpoint for those daypacks. The demand is much higher than what we can produce. And we don’t see in the commercial vehicle, any noise of any slowdown whatsoever to the contrary. So that’s pretty much what we’re doing on the very back. We don’t see any issues on sales of the play. And all that is reviewed and monitored very in a very focused way and a very precise way.
Noah Kaye: Maybe I can ask one more. It’s more generally to help our understanding of your insights into customer behavior given the shifting dynamics around powertrain of choice versus increase in labor costs for some of the OEMs well publicized in North America, but more broadly, how has this translated to the customer expectations around pricing versus value proposition. Do you still feel comfortable in being able to hit the ROIC target, but you’ve always quoted for this program. Is there anything that you’d call out in terms of kind of customer expectations and there you’re in right now?
