Mark Smith: And we’ll give you a fuller assessment on the next quarterly earnings call about the both the cost and the benefit impact. Of course, what we’re announcing today is voluntary actions, so we don’t know what the exact take-up is going to be and then our assessment of what is the kind of momentum in markets going forward. There will be some other smaller actions around facilities and other things. But we’ll lay that out in detail in the next quarter when we’ve got a more holistic or hopefully, clearer view of the full year next year.
David Raso: That’s helpful. Maybe you can educate me on something. I’m a little confused by the comment in the fourth quarter engine margin. And I appreciate Chris’ comment about the JV income, how that will impact 3Q to 4Q, but you highlighted a lower parts impact benefit in the fourth quarter. But then when I see the Components business, which, obviously, has a lot of parts as well, it seems like you’re implying a strong fourth quarter on margins for components. So, can you educate me on why the difference one division is getting hit on parts and really the parts division you would think for aftermarket, even more so components, is having a step-up in margins in the fourth quarter, at least appears to be…
Mark Smith: The size of the parts business in the engine business is significantly bigger than the size of the aftermarket business in the Components.
David Raso: Sure. I think difference one step down and one step up. And maybe I’m just doing the math right, but it seems like the component implied fourth quarter margins pretty strong?
Mark Smith: Yeah, I think it’s pretty stable. I think that’s just the dynamics we’re seeing between the two different businesses right now.
Jennifer Rumsey: Well, both of those segments are anticipating lower volumes for North America, medium- and heavy-duty truck market in Q4 for the reasons that I outlined here. Frankly, there’s a combination of focus on inventory reduction and supply constraints that are continuing to prevent OEMs from building to the full demand, and we expect to see that in Q4 impact our revenues for both of those segments.
David Raso: All right. Thank you very much.
Mark Smith: There can be some differing customer demand for Components and engines in any given short-term period, David. I think you’re right in the longer run or medium over multiple quarters should correlate pretty well. But in this case, we’re seeing a bit more pressure on the parts on the engine side. It’s not all parts that are sourced directly from our Components business. That’s the main part.
David Raso: All right. Thank you.
Operator: Thank you. Our next question is from Rob Wertheimer with Melius Research. Please proceed with your question.
Rob Wertheimer: Hey, I have two. One is just on the parts destock that you have mentioned and that makes sense. I’m just curious if you have any sense as to how much channel inventory people carry if you’re all the way through that, half the way through. If you just quantify that potential if you’re able to?
Mark Smith: It’s a little hard to say would say what we tend to see more clearly on the Power Systems side is destocking almost every year into the fourth quarter. We are seeing some of that and some lower rebuilds, particularly in the slice of the oil and gas market that we supply, Rob. But I would say the engine — on the engine side, the on-highway side, the seems to have been a more sustained multi-quarter approach. And I think part of that there was a focus on prioritizing OEM newbuilds, first-fit build as we started to ramp up through the cycle and wrestle through supply chain. And then the parts was in catch-up mode, and now we’re finding truck utilization has leveled off. Everybody is trying to do a better job on the inventory management.
It feels like it’s — we’re getting towards the bottom of that right now. Of course, that always depends on what’s the economic environment and what’s the underlying level of truck utilization. So if you were to ask me today, do I think we’re on a clear trend to have significantly lower parts in Q1? I’d say no. So it feels like this is the strongest step has been in the last three quarters with the information that we have right.
Rob Wertheimer: Perfect. And then if I can ask kind of a bigger picture question in China. It’s obviously been very weak for a lot of industrials. Maybe it’s bottomed in all your end markets maybe in some. I wonder if you could just give just your high-level view of what’s going on in the economy there, whether fleet dynamics mean you have to be in recovery mode, whether that’s true of trucks or power gen? Or just maybe give an overview of China, what you see in different parts of your business on the recovery? Thank you.
Jennifer Rumsey: Yeah. So when we look at the China market, I mean over economic activity has continued to be pretty weak there. We’ve seen improvements in 2023 compared to 2022 when they were heavily impacted by COVID lockdowns even more extreme weakness. So you’ve seen some improvement. We’ve seen the strong demand for natural gas heavy-duty engines because of the cost delta between natural gas and diesel there. We’ve kind of come through the emissions change over in an on-highway market. And so if we see recovery and continued recovery in the economy there, so I think that will continue to positively impact our business. And with the product investments that we’ve made, the emissions change, we’ll have more content, and we think continuing to increase our penetration. So we’ll watch and see if any of the government stimulus does start to drive positive momentum and the economic activity, but it’s been relatively weak this year.
Mark Smith: Yeah. I mean just to give you a sense, I know we don’t like talking about months, but July was like the lowest in a decade, right, in some of our JV production. It’s crept up since there, but it has been tough. Again, it’s not worse than we thought, but that just gives you a sense of how weak it was in the summer. Hopefully, there’s upside from here, but we don’t have good visibility to that.
Chris Clulow: Yeah, the RMB1 billion bond that’s planned, I think that’s encouraging to see the government moving that won’t impact fourth quarter, but hopefully, it drives more infrastructure growth in next year. We’ll wait and see that we’re up.
Operator: Thank you. Our next question is from Tami Zakaria with JPMorgan. Please proceed with your question.
Tami Zakaria: Hi, good morning. Thank you so much. So I just wanted to ask about the Power Systems business. Margins came out really strong. Sales growth is strong as well. But when we look at the fourth quarter guide, it seems like you’re guiding to a step down of almost 200 basis points sequentially. So just wanted to get a sense of what’s driving that? Is this conservatism? Or is there something that we need to be aware of for the fourth quarter for the segment?
