John Fortson: We are just running our business — we’re just running the business.
Christopher Kapsch: So the question on the follow-up, there’s a lot of different hybrid lexicon out there, mild hybrids, plug-in hybrids, hybrids with range extenders, or content per… What’s that?
John Fortson: You said you don’t see… There is a lot of diverse[indiscernible] out there.
Christopher Kapsch: Your content per vehicle lift in hybrids. Can you just explain where that’s relevant. And also, the data I look at actually while everybody talks about EV penetration in China, it looks — it looks like about 1/3 of the [indiscernible]EVs in China are hybrid. So curious if your content lift in hybrids is also relevant to China.
John Fortson: Look, I’ll start off and then add you, Chart because, yes, we do feel a little validated. But the truth of the matter is we’re not — sometimes — and believe it or not, there are some organizations out there that include start-stop technology is a variant of a hybrid, right? Because when you stop at a stopping lot and then you turn the engine turns off, it runs on your battery and then it — when you take your foot off the brake, it kicks back on, right? Basically, if it involves an internal combustion engine, right, in some way, shape or form, it has our technology on it, right? And the traditional hybrid that most people think of, which is a — it has an internal combustion engine and then a battery motor or a larger battery pack, right, is going to involve where it’s switching between the 2, right?
It’s going to require our technology. And as we said earlier, we’re relatively agnostic between if it’s only an ICE or if it’s got an ICE and an electric motor next to it. So Ed, I don’t know if you want to add anything to that.
Stuart Woodcock: Yes. From an overall look at the market in China, we’ve got data across 3 years that you show basically what I call a classic S curve, right? So you’ve got battery electric vehicles going up, and then you’ve got this plateau of battery electric vehicles. But underneath that, you have a growing rapidly growing plug-in hybrid, hybrid platforms in China. And that’s getting upwards of 25%, 30%. And if you think of who’s the primary manufacturer of those, it’s BYD. And so we do kind of like what’s happening in China, but it’s also happening elsewhere. It’s in Europe, it’s in North America, and you’re seeing a lot of people walking away from full battery electric vehicles for what is a more simpler program with plug-in hybrids and mild hybrids.
John Fortson: I also think it’s a question of affordability, Chris, right? I mean the — look, electric vehicles and electrification is here to stay. We fully believe that, right? It’s just when you think about a consumer and you can kind of look at it by geography, right, — it’s been interesting even in the European market to see that the number of Chinese vehicles that are finding their way into the European — Western European markets, right? And it’s because of affordability, right? And these vehicles are so expensive relative to what — particularly with interest rates where they are relative to what a consumer can pay. A hybrid actually is a great solution, right? You can drive on electric power to and from your job 8 to 10 miles each way. But when you want to take the road trip, you can flip over to gas engines. So yes, we’re very encouraged by all this, but it bodes very well for our business over the long term.
Christopher Kapsch: Right… It just to be devil’s advocate on that cost argument. And some would say, I totally get I’m watching closely the EVs trying to get some parity with ICE. But one might also say though that true hybrid has dual drivetrains and that’s sort of expensive and complex over time. And so is the variant of hybrids that where you’re not really truly on 2 drivetrains. Does that require your emission abatement…
John Fortson: We have to have an internal combustion engine, Chris, that’s the best way I can think about it, right? If you have an internal combustion engine in there in any way shape or form, you’re going to have our technology on there, right? I — listen, I appreciate and we obviously look very carefully at the cost curves and the argument that eventually EVs are going to come down, et cetera, et cetera. But I also think hybrids will continue to come down because the electric piece of the hybrid will come down, right? And what they’re up against is the sunk cost that’s already been all the development and all the infrastructure of supporting ICE, right? So I would not underestimate a hybrid’s ability to bring its cost down as the EV. This is going to be competitive and it’s going to come down to consumer sentiment.
Christopher Kapsch: Fair enough. Just one real quick one on the transformation on PC and the actions you’re taking. Sorry, so as I understand it going forward, does Cross It now become a swing plant with the ability to do AFA and CTO — or is it still dedicated…
John Fortson: Cross it will remain as an AFA facility. Right… I mean, listen, theoretically, we could convert it back to a tall oil rosin CTO running facility, but I do not see that as — right now, the plan is to run it on AFA…
Richard White: That’s right, John. This is Rich, Chris. — that cross, we took the — April 1, as you know, we transitioned that, that transition is complete. I would think that before we would transition cross it back to CTO that we would consider doing something different at Charleston or somewhere else.
John Fortson: And the ability, listen, I know it’s something you need to understand, and Mary made this point earlier, which I think is important. People think of these plants as sort of these monolithic dual purpose, very similarly structured. Each one of these plants was optimized for different capabilities, right? And we’re trying to optimize the network. It would be — if we were to decide to expand our CTO purchasing and broaden that, there are a number of options available to us in Charleston, and those are separate and away from the refining piece or the derivative piece. The refining is separate from the derivatives. So we are in a plant optimization that’s going to be driven by focusing on the higher-margin products and we will meet the demands of the higher-margin products, higher growth opportunities, and we have the footprint to make that happen.
Christopher Kapsch: Got it. And the pathway there is rationalizing some tour products but also some TOFA-based products that are below…
