So I think that you could probably count on — we’re counting on retail being a tick up from the 325 to 350. We don’t really have a firm number there. We just don’t think it’s going to be one for one until maybe fall time next year when dealer inventories are in a much tighter spot than what they are today. Is that helpful?
Frederick Wightman: That’s perfect. Thank you.
Operator: Thank you. Our next question comes from Daniel Moore from CJS Securities.
Daniel Moore: Just given kind of — I guess, one a longer term and one shorter term. Given the rightsizing measures and automated investments you have made, how do we think about incremental operating margins in RV OEM, specifically as shipments, when they do start to recover, be it summer, fall, spring ’25, whenever it is. How should we kind of think about incrementals over the next couple of years, any meaningful change versus kind of the historic algo?
Lillian Etzkorn: I would say probably still pretty consistent with historical kind of in the mid 20s is what we see on those incrementals. We are still obviously looking to do the automation in grades and take rightsizing action. But that really is making sure that we are staying pace with the industry and the capacity needs to support our customers. So you will still continue to see that conversion in the mid 20s.
Jason Lippert: And from a cost structure standpoint, coming into next year, we have obviously been working cost structure down across the business over this entire year. We will continue to do that through the next couple of quarters of softness. But I think we will be set in a much better cost structure position next year as business starts out. And then you look at automation specifically, we have added a lot of automation, we just finished with a $70 million window project that was the final implementation happened in September. So obviously, during a time like this when you put that kind of fixed cost structure in place with low volume, it’s a little bit of a drag. But when business starts to pick up and we need labor, that’s where those investments really kick in.
And we are in a cyclical business, so we are hitting a a down part of the cycle right now and it’s always a temporary blip. So we will have that fixed cost drag on some of our automation investments for a really short period of time, but then it really picks up and helps to add down the road. After every bust there is a boom in this business and we are preparing for the boom right now.
Daniel Moore: And then just trying to drill in a little bit more on the comments around Q4, and appreciate the commentary and the visibility. From a gross margin perspective, obviously, with little bit lower volume, little bit lower absorption, we assume we tick a bit lower, any comments around what either gross or operating margin range might look like for Q4?
Lillian Etzkorn: So what I would say, as we look to Q4, we are pretty consistent there in terms of the margins, might be a little bit lower again to the point that you raised as you have lower volumes because of the seasonality. You have a little bit less of the fixed cost absorption. So that will be a drag on the margin. But really nothing extraordinary, I would say, in the fourth quarter aside from really the the impact from those reduced volumes and the lower absorption.
Operator: Our next question comes from Bret Jordan from Jefferies.
Bret Jordan: On the content subject, I think you said you don’t expect much impact from de-contenting, I think it’s more just the index pricing. The Open House in Elkhart sort of seemed like everybody, the theme was lower price point units, and I saw a lot of manual leveling systems versus powered. So I guess as they shift what they’re making, what is your offset, what are you adding that’s replacing what might be a manual jack instead of an electric jack to keep that content number stable outside of the index price?
Jason Lippert: How long you got? I could talk for hours about this This is my favorite subject. Well, as I mentioned earlier in one of the previous questions, for sure, there’s a lot of high end fifth wheel and toy hauler and the motorhome inventory out there that’ll just — it’s going to be a drag on the next quarter or two. So there will be a — I mean, there is today a focus on some of the more entry level units with lower price points and things like that to hit the consumer sweet spots. So I would say when it comes to what are we doing to replace, I would say that electric leveling systems, to your point, we’re putting more of those on units than we ever have. If you look at ABS brakes, like I mentioned in our prepared remarks, that’s just kind of hit the scene in the last 12 months.
And consumers and dealers and OEMs are all running to start putting those on units. So if you look at just an ABS system that goes on a small trailer, because these ABS systems will hit every unit eventually and it’s appropriate for any price point, but it’s another $300 or $400 of content per unit just on the small trailers. You look at some of our jack systems, our integrated blind systems, I mean, we’re adding content to just about every core product that we have. But I think with some of our suspensions, our independent suspensions our customers are looking at those things, we’re putting feature and content on awnings. So as I’ve always said on the calls, I mean, I think that to create value for these brands that all seem to look alike and act alike in the marketplace, it’s hard to tell RVs apart sometime when you’re looking at two different brands of trailers.
Where they differentiate is a lot of the things that we can upgrade on features and benefits on each of our components, whether it’s a leveling system or an axle, or a window, or a piece of furniture. The chassis, there’s not too much to differentiate and add content on. But when you look at literally everything else we sell, there’s upgrade opportunities there. So that’s what our teams are working on and really what a big chunk of that $185 million of added content and market share growth is for next year.
Bret Jordan: And then I think you’ve mentioned, I think specifically THOR, saying they are not getting into chassis. Is anybody else pushing in that category? I mean, is there — seems like a lot of noise around the chassis. But is that just — is your share stable there?
