Patrick McCann : Peter, I’ll start and Swamy, jump in. So when you think about the engineering spend, we say they’re elevated. I would say they’re fairly consistent with our previous outlook where we would have been guiding. When you think about some of these new types of products we’re getting into, they’re higher engineering and we just spoke about capital intensity, and that applies in our industrial group where you buy assembly lines, brick, mortar that type. When you move into electrification and ADAS type programs, your capital spend tends to be lower, but it’s replaced with an engineering analysis. But our program analysis, our quoting models don’t change. It’s still viewed as a — if we treat it effectively as a capital spend.
So that’s kind of the return profile. When you think about the engineering spend that goes through our books, it is — as you said, it’s two pieces. There’s a piece that’s up some upfront payments prior to program prior to SOP. The second portion is you might have it recovered. So you’ll see this other asset spend we referred to and this is guaranteed spending that we recover over the program life. And then the third obviously just comes through piece price recoveries. All that means a long answer, our expectations are we we’re going to win, we’re going to recover all that engineering spend and the returns on those programs are equal to the returns we achieved in the rest of our portfolio.
Swamy Kotagiri : And I think that’s one of the things we said that we are expecting the net engineering to be relatively neutral to earnings through our after period and it’s going to be $900 million annually as we have talked in the past. So just talking about the Q4, it’s just a matter of timing.
Peter Sklar : Okay. And I believe I heard you say, Pat, that you expect that earnings are going through — 2023 quarterly earnings are going to improve sequentially about the earnings level on an adjusted basis in Q1 would be less than the Q4 that you just reported today. And when I look at — just looking at the industry vehicle production volumes, like North America and Europe are going to be up quarter-over-quarter. So why — what are the dynamics that’s causing Q1 to look a little bit weaker than Q4?
Patrick McCann : So if you think about Q4, you normalize it for some of the unusuals, and we take that. I would say that’s factors going one way. When we move into Q1, we did have some positive commercial settlements in Q4 that just the nature of how these discussions proceed, Peter, and a split of what’s continuing versus what’s new. Those discussions will intend to result, so we’re conservative in our accounting procedure. So we’re going to only record those recoveries as incurred or received. So I think it’s slightly below Q4 levels, Peter, and then we’re going to see growth as we come through. And the other factor you have to consider is as we go through the year, we’re expecting volatility in the industry to improve just as we move throughout the year. So I would say it’s a combination of unusual items in Q4, it’s the inflation recovery is being pushed into Q2, Q3, Q4 similar to what we experienced this year, and then normalization of the OEM production schedules.
Peter Sklar : Okay. And then just lastly, like one of the issues that you’ve raised for — on the Q4 earnings has been higher warranty accruals. So what’s going on? Is there any one program that caused this? Or is it just kind of random from quarter to quarter?
