Swamy Kotagiri: Yes, I think maybe there is two things to consider that you can add to it. I think when we bring all of this stuff together, there is synergies in terms of how we look at platforms, how we look at coordinated efforts on some core projects, some purchasing initiatives, so I think it’s better, maybe in my opinion, to look at run rates going forward from the combined entity, rather than look at each one separately. Hopefully we’ll be able to give some color when we talk in September, but all of this would be included when we come back, as we’re doing all bottoms-up, the business planning process, and will be included when we come out and talk in 2024.
James Picariello: Okay, that’s helpful. Can I just slip–
Louis Tonelli: Sorry James. Keep in mind what we said earlier about neutral in 2024, right, so that tells us something about the run rate relative to the back half of the year – neutral on EBIT.
James Picariello: Yes. In the second quarter, just a quick one, was there any retroactive material recovery tied to the first quarter in the second quarter numbers, particularly in the body exteriors and structure segment? Thanks.
Patrick McCann: Yes, so I think we talked about this earlier, James, so I’m not going to repeat everything, but the short answer is yes.
James Picariello: Okay, you just can’t quantify it?
Patrick McCann: No.
James Picariello: Okay, thanks.
Operator: Thank you. Our next question comes from the line of Brian Morrison with TD Securities. Please proceed with your question.
Brian Morrison : Good morning. I have a housekeeping question as well. Pat or Swamy, in the prepared comments on net inflationary costs, you said something to the tune of an incremental $100 million for 2023 and you’d recover half of that. Can you just clarify what the net exposure is now? I know you started the year at $680 million, you made progress in Q1, you did an update on scrap and energy, but start with the 680 and update what’s baked into your new guidance and maybe break down what is labor and what’s commodity, please. I think labor was about $200 million of your previous forecast.
Swamy Kotagiri: I think the 680, let me break it down, was the 530 coming from 2022, incremental 100 plus the 50 in scrap. That’s how we came to the 680. We’re looking at the movement in some of the commodities, energy and all the other initiatives that we are working through, we said that 100 is now 50 and the scrap, which was 50, is now 25. I don’t know if we can get into the details of how much is labor and how much is the breakdown. It gets combined in terms of all the efforts that I talked about, so it’s very difficult to exactly quantify how much and where. We can say that labor is the sticky part and we continue to look at optimizing that going forward, not just from a restructuring today perspective but as we are launching this business into ’24 and ’25, how do we manage it.
We have to have so much hiring, so the question is how do you level or normalize what we have now and look at optimizing the hiring, but at the same time protect the programs and the launches, so it’s a little bit of a complex set of variables that we are going through. I don’t know, Pat, if you want to add any color to that?
Patrick McCann: No, I have nothing to add. Thank you.
Brian Morrison: That’s helpful. So I just want to–this 30 basis points of margin improvement ex-Veoneer, how much of that is related to inflationary impact? It looks like to could be about 10 of the basis points, is that correct?
Patrick McCann: Sorry, I’m reaching for a calculator here.
Louis Tonelli: It’s $75 million, right?
Patrick McCann: Yes, it’s probably 10 to 13 basis points, Brian.
Brian Morrison: Okay, thanks Pat. Then last housekeeping question, on that underperforming BES facility where you’re making great progress, I think you said you were going to–you were tracking to about half of the 35 basis points to maybe the $140 million drag last year. How much of that do you expect to recover this year? Is it still tracking half and then eliminated in 2024?
Swamy Kotagiri: That’s correct.
Brian Morrison: Great, thanks very much for your time.
Louis Tonelli: Thanks Brian.
Operator: Thank you. If there are no further questions, I will now turn the call back to Swamy Kotagiri for closing remarks.
