Robert Lyons: India, we would expect for sure because it continues to be such a growing market, and in fact, in certain car types, the Indian Railway has pretty sizable orders and to expand its own fleet. The issue really in India is not so much as the growth there, it’s the ability to get the wagons and to continue to diversify into different car types and different customers. The growth pool, based on the prospects today, is there. The European market is a little bit more, I would say, akin to North America in terms of maturity. So we wouldn’t anticipate any — and are certainly not banking on any significant growth in the overall fleet in Europe.
Matt Elkott: Got it. Thank you very much, Bob. Thanks, everyone.
Operator: Your next question comes from the line of Allison Poliniak with Wells Fargo. Your line is open.
Allison Poliniak: Hi. Good morning.
Robert Lyons: Good morning.
Allison Poliniak: Maybe starting bigger picture, utilization — this is focused on Rail North America, utilization is really high. The rails improving service, really focused on trying to capture growth. Would just love to get your perspective. I guess, one, what’s — do you think the market — the equipment market’s investing enough at this point, just given where utilization is for that potential inflection? And then two, I guess, how would — how is GATX sort of managing that potential dynamic? Just any thoughts there. Thanks.
Paul Titterton: Sure. So it’s a good question, Allison. This is Paul. I’ll take that. So what I would say right now is investment continues at a kind of slightly above replacement pace in North America overall. So with core carloads, as we measure them, maybe low-single-digit percentage year-over-year. That’s an investment pace that should be adequate to keep pace with demand in the context of somewhat improving service. And I will say, indeed, we hear from our customers that service is improving and the metrics of dwell time and velocity that are reported would bear that out. So with modest growth, modest service improvements and a modest level of investment, that speaks to a pretty balanced market. One of the nice things about the market that we see right now, frankly, is unlike past tight railcar markets, we haven’t seen that enormous build wave.
If we look back at the ethanol boom or the crude boom, we saw build years where the industry would produce upwards of 80,000 cars and then there would be a huge hangover after that excess production. This tight market, we’re seeing industry-wide production in North America top out in the 40s. And so that speaks to, I think, a much more balanced, much more disciplined market, which should be good for all participants.
Allison Poliniak: Got it. Thank you. That’s helpful. And then on other revenue in North America — Rail North America. Bob, I know you mentioned sort of the speed to get sort of those cards back on lease and so forth. Should we expect that to be elevated again in ’24? Like, how should we be thinking that? Sorry if I missed any commentary there.
Robert Lyons: Are you speaking specifically to the other revenue line item?
Allison Poliniak: Yeah. The other revenue, sorry. Yeah.
Robert Lyons: Yeah. We’re not anticipating any significant growth, any abnormal growth in that line item in 2024. It should grow right along in line with lease revenue.
Tom Ellman: Yeah. And Allison, just to put some perspective on that, really what you need to do is look at that in conjunction with the maintenance line. So really, I’d guide you to Bob’s comments on net maintenance being somewhere between flat and up $10 million.
Robert Lyons: Yeah. The biggest component of other revenue is essentially repairs build back to the customer.
Allison Poliniak: Got it. Thank you.
Operator: Your next question comes from the line of Bascome Majors with Susquehanna. Your line is open.
Bascome Majors: Thanks for taking my questions. Going back to your thoughts on the North American secondary market and a very high level of P&L from that historically, but a little down from where you were last week. Can you talk a little bit, maybe qualitatively, about the depth of the market, the buyers, and just anecdotally how that feels today versus how it’s felt over the last couple of years? And then maybe a little more precisely, just any thoughts on how that profit assumption correlates to your plan to sell fewer railcars or is it really just the gains on individual units coming down a little bit from where they were in the last few quarters? Thank you.
Paul Titterton: Sure. So this is Paul. I’ll take that. And yeah, I mean, bottom line for the secondary market is it has been robust and it continues to be robust. We continue to see a large number of participants on the buy side, a lot of depth. And whenever we see packages, whether it’s our own packages or other packages in the market, the response has continued to be robust, and we anticipate that robustness continuing. To the second part of your question, really for us, we’re trying to make good portfolio decisions. And so ultimately, we’re really looking at the economics of the transaction more than we are the accounting gains. We’re really trying to optimize the portfolio either from a credit or asset or market or term standpoint. And really, we’re using those — the sales in the secondary markets to balance out that portfolio and ensure we’ve got a diverse and attractive portfolio along all of the dimensions that I just mentioned.
Robert Lyons: Yeah, Bascome. I’d add, we did come into this year, I think, into 2023, that is, feeling within a rising interest rate environment that the secondary market condition was probably more uncertain. But it remained really strong throughout the entire year, continues to be strong. And I think it speaks to the quality of the underlying asset. Railcars have proven over time to be great stores of value and very good assets to hold long-term. So even with interest rates up, where we thought, well, maybe the buyer universe would shrink a little bit, still there, still great depth, still a lot of activity.
Bascome Majors: I appreciate the responses on both of those. I believe you mentioned that you expected to put a similar amount of capital to work this year from where you sit today as you did last year, which was like $1.6 billion, $1.7 billion, a fairly large number. Can you talk about — a little more about the opportunities you see? I think it was maybe 60% of that went to North America, 20%, 25% International, and the rest and some of your other businesses. Does your opportunity set in where you see investments this year look a lot different than what we’ve seen over the last 12 to 18 months?
