Rob Wertheimer: Perfect. Thanks.
Operator: Our next question is from Steve Volkmann with Jefferies. Your line is open.
Steve Volkmann: Hi. Good morning. Thanks for fitting me in here. I wanted to go back. I think a couple of you have used the word robust cost agenda for next year a couple of times. And I’m just wondering if there’s any way for us to think about sizing that? Is this like sort of a big deal where we could see these sort of production costs in your waterfall chart could actually be positive next year? Or is this kind of continuous improvement, a better way to think about that?
Brent Norwood: Hey, Steve. It’s a great question. We’ve seen over the last couple of years billions of dollars of cost inflation flow into our operations. Some of that coming from systemic inflation. A portion of that, though, is coming from just, I will call it, COVID disruption cost and inefficiency cost, also associated with our deferred ratification of our UAW contract in ’22. All of those things cost, overheads to run higher than they normally do. So we’re bringing a lot of those back in 2023. I think there’s more room to run certainly in 2024. I would not probably characterize it as just a normal continuous improvement program here at Deere because we do have line of sight to specific costs that we want to take out, particularly as some commodity prices have come down, it’s really easy to capture that in our raw material spend, and we did see a tailwind in raw mats in the third quarter.
But for a lot of our purchase components that have those raw materials embedded in their purchase price, there’s an opportunity to go back and actively renegotiate. So, we’re very proactive there on executing the strategy and we do have a formalized process in place to take further action in 2024.
Josh Jepsen: Yes, Steve, the only thing I’d add on top of that is just coming through the last three years, which have been far from usual operating procedures in terms of pandemic, supply chain disruptions, et cetera, is continuing to root out that disruption cost that had come in and made its way in on top of we were seeing strong demand. So I think there’s going to be work done certainly. And I think ongoing getting back to a cadence that we would expect in terms of continuing to take cost out and drive efficiency in the operations. So we’re — we think there’s more room to go here for sure. Thanks.
Operator: Thank you. Now our next question is from David Raso with Evercore. Your line is open.
David Raso: Hi. Thank you very much. The comment earlier about the construction — the demand backdrop, right, saying — you were saying the six-month rolling order book extends into the second quarter ’24. Can you give us a sense of that order book? Are your orders up year-over-year? Is that implying growth in Construction & Forestry through the second quarter? Is that what that comment meant? And any help on the pricing within that order book would be great. And then a quick question on large ag. Maybe I’m misreading it, but for the fourth quarter for large ag, I know go back to normal seasonal times, the fourth quarter does have a pretty weak sequential margin. But large ag, you have profit sequentially down almost as much as revenues are implied down.
I’m just making sure I understand are there any unique costs or you mentioned Brazil, negative mix, just something on why the profits would fall almost as much as the revenues are going to fall sequentially? Thank you.
Brent Norwood: Hey, David. Let me start with the first — the last part of that question on the ag side, and then I’ll let Josh comment on Construction & Forestry. If you think about the fourth quarter, we’ll see revenues flattish to maybe down a little bit in ag. The big driver there, and then to your point, margins will come in a shade from where they were in the third quarter. The big driver there is we are seeing a return to, again, this normal seasonality, which does mean that we will institute normal factory shutdowns particularly at Harvester Works, which historically we’ve done factory shutdowns in the month of September and/or October. And so, I think what you’re going to see is the impact of shutting that down. We haven’t done that the last couple of years as we’ve been running behind on delivering machines to customers in late in ’21 and then all the way really through 2022.
So that’s really the big impact that we’re going to see happen in the fourth quarter. I think the other thing I would note specific to the fourth quarter, and this would actually be true for all three divisions, we’ll see a heavier R&D spend in the fourth quarter, that’s a timing thing. Our fourth quarter does tend to be a little heavy most years from an R&D perspective. That is certainly going to be true this year as well. And then, the other thing I would add on the fourth quarter is you’ll see a little less Brazil mix as well in the fourth quarter. So, kind of all three of those things will conspire together to bring down margins just a shade in the fourth quarter when you compare them to third quarter results.
