Jason Cardew: Yes. So, we would expect – if volumes on existing platforms come in $700 million better, we would convert it at 15% to 20% in Seating and 25% or so in E-Systems, depending on the underlying profitability of the platforms that come back, the level of vertical integration that we have in the platforms as well. I would say that some of that volume would be on backlog programs, though, John, so that may convert at a little bit lower rate. in that first year of production sort of – 10% to 15% probably. And that’s where some of the guidance range is earmarked for, so to speak, is some of the uncertainty around these new EV platforms. The other factor and the reason for a little bit higher conversion on the range is the commercial negotiations around inflation and the pace at which we can deploy our automation projects to offset wage inflation.
So, we’ve got a little wider range than we normally would have. It’s fairly tight in seating sort of 6.7% to 7%. But in E-Systems, it’s a little bit wider range, 6% at the top; let’s say 5% to 6% or 5.1% to 6%. Any systems to sort of account for the impact of those commercial negotiations and the pace of deployment of automation.
John Murphy: That’s very helpful. And then a second quick one here on the backlog. It seems like you guys have dinged and hit the backlog reasonably hard for EV push down and out, but have not taken the liberty and have not seen this necessarily from your customers of backfilling that lost volume with ICE programs. Is that a fair statement in the way you’ve approached the recoup of the backlog is not a backfill or a significant backfill of these ICE vehicles actually transacting and being sold and taking the place of those?
Jason Cardew: Yes, that’s effectively what we’ve done because it’s a fairly conservative approach, but we’ve taken our customers’ guidance in terms of their plans to balance out some of their ICE platforms as they ramp up their EV platforms. And then we’ve taken a bit of a conservative view on the volumes of some of the new EV platforms. So, we may have sort of double dipped a little bit there. I’ll just give you a couple of examples. We have the Blazer ICE seating, but we don’t have the Blazer EV seating. So GM’s plan as it sits right now, has the Blazer building out next year. So that’s a backlog hit in seating that may get pushed out. And there are several programs like that, for with the Aviator. That is assumed to build out the launch.
The ICE launch is as we need to be in a different plant that we – where we don’t have the production contract. So, I think that is sort of maybe a hidden upside to the 2025 backlog because of our sort of mechanical approach that we follow when we establish the backlog if the customer tells us the program is building out, then we take it out of backlog. Another example on the systems side, the Ford, the focus is assumed to begin winding down in 25 [ph] and it’s gone in 26. There isn’t a replacement for that at this stage. So that’s a negative to the backlog. So there’s a handful of programs like that, that could lead to some kind of underlying upside in the backlog when we post that number 12 months from now.
Ray Scott: Yes, I think our customers do over the – probably the first two quarters to start clarifying the specifics around those type of situations. And we did take, like Jason said, a more balanced conservative approach given the information we have. And if there is movement, and that said, not formally, but informally, we’ve gotten some feedback that they are internally across the board looking at how they’re going to position between hybrid electric vehicles and the continuation in some cases, the ICE vehicles. And what’s nice about the continuation of ICE vehicles, those are usually longer in the tooth. We’re usually doing a really nice job efficiently. And so we’re with you. We hope to keep running those things. So – but we will – I think we’ll get more clarity over the next couple of quarters here as they start to kind of rebalance their own internal strategies.
Jason Cardew: John, just to add one comment to that. And with both businesses sort of being power trade agnostic. If that happens, I think it’s generally positive for us to raise lastly just to reinforce that running that capital for a year or two years, three years longer than we initially planned. It’s good for operating margins, good for ROIC and on balance, good for Lear overall.
John Murphy: I definitely agree with you. And then just lastly on the buyback Jason, what was the average price you bought back the shares? I apologize, in the fourth quarter? I missed that. And as I look at the operating cash flow expectation for this year and just apply that 22% cap allocation you did last year, it looks like there’d be $300 million, maybe a little bit more in buybacks that might be earmarked. I mean, I know you’re not doing it that directly, but it seems like that would be the number. So what was the average price in the fourth quarter and the buyback number you would think of for 2024?
Jason Cardew: Yes. I’ll start with the second part as the guys in the room scramble to find that number for; I think it’s in the mid-130s. So, we would – we fully expect to continue to be aggressive in buying back stock and to be opportunistic as there’s sort of this dislocation in value in the near term. And if you look at the free cash flow, we’re going to generate in 2024, which is greater than 2023. There’s no near-term M&A of any significance on the horizon. We do have a term loan. We could take a look at that’s tied to the IGB acquisition, but we’re – no rush to pay that down. So, I think share repurchases sort of in that 4% of shares outstanding again range is a reasonable target. Of course, we’re being with our Board next week, that’s a Board decision. And we’re certainly advocating for that and the Board has been very supportive of that in our recent meeting. So, I’d expect that to continue.
Ray Scott: Yes. Our focus is driving free cash flow. And we’re going to convert at our target or higher, and we’re going to return it to the shareholders. I mean we’re going to – what’s nice is right now, we talk about innovation technology on the plant floors. We acquired some small tuck-ins with [indiscernible], ASI, InTouch, and boy, they made a dramatic difference. And it’s not extremely costly when we talk about this capital deployment; we’re doing it at a lower cost. And we’re seeing that capital come in significantly lower, and we’re deploying it in a life or with new launches. So, we’re going to be very, very focused on our working capital, how we’re converting our cash flow and we’re in a really good position.
We’ve been doing this for several years. So when I’m going out the plant and seeing this, what’s really nice in this WS launch, we just went through unprecedented, never done before in the history of Seating. We had our capital. We wouldn’t even take the capital from our competitor because it was that bad from a throughput standpoint and how it was working within their facility. We launched that plant with our technology innovation, low capital cost, much more efficient. We produce more output than they could produce ever produced in their three years of trying to hit their daily volumes. And what was great about it. And Frank’s here, the team did a remarkable job was our quality from our customers, said it was superior to our competitor that was producing those parts for years.
And so that gives me excitement, because I’m looking at this technology in the plants and the more manufacturing company, we produce parts. That acceleration of innovation technology that we’ve been driving for multiple years is starting to really take hold. And it’s about – we don’t need anything. We’ve made some nice acquisitions. There’s nothing on the horizon like Jason said. And we’ll walk out this meeting. We’re going to go to how we’re going to drive more cash flow. So that’s what we’re going to stay focused on.
Jason Cardew: And John, your first question there, $135.67 was the average price in the quarter.
John Murphy: Ray, just that WS program, that’s a Grand Wagoneer and the Wagoneer’s what you mentioned in that takeover. That’s what you were just discussing guys.
Jason Cardew: Yes. Yes.
John Murphy: I appreciate it.
Ray Scott: Thanks, John.
Operator: Our next question comes from James Picariello from BNP Paribas. Please go ahead with your question.
James Picariello: Hi. Good morning, everybody. Just to focus on this year’s volume mix assumptions relative to a flat global production outlook, Seating’s volume mix is going to be down almost two points. The systems down almost four points. Can you just help unpack a little more that the key drivers here for both segments that informs the underperformance first market?
