Mike Speetzen : Yes, Robin, I guess I’m not overly concerned about it on a couple fronts. I mean, one, we’ve obviously seen strong performance, even with a tepid environment, just given the mix of vehicles we’ve had some of the pricing actions that have been taken, although we expect pricing obviously to become less of a factor moving forward. I would tell you that if you look over history, when our market slows down, it tends to come back pretty quickly. I’m not necessarily sitting here telling you I think that happens in ‘24. But as I look out to ‘26 and I look at the mid-single digit revenue growth that we’ve got out there, I’m pretty confident that over the course of the next two to three years, we’re going to see the markets moving away that allow us to continue on the trajectory that we’ve been on thus far.
Like I said, the biggest focus area for us, for me, is ensuring that we’ve got the inefficiencies being addressed in our factories. The margin improvement is probably the single largest opportunity that we have in front of us that we’ve got to get after, the teams are aligned. We’ve been working through everything that has to happen. We’ve got the right trajectory change here in the fourth quarter, and I’m confident that as we get into ‘24, we’ll continue to see that progress.
Robin Farley: Great, now that’s very helpful, thank you. And maybe just one small follow-up. In terms of the market share gains, can you characterize a little bit about what might be happening in the market overall with market share shifts? There’s been a lot of movement in the last two or three years, and are you seeing the consumer, is it — do you think that the share gain is that maybe the sort of value or entry level customers not buying products in the way that they were of your competitors, and that part of the market isn’t there, and that’s making other industry share numbers lower, or is there a move to or away from premium out there in terms of market share shifts? Thanks.
Mike Speetzen : Yes, I’d say there’s a couple of things. I mean, certainly the dynamic we saw during the pandemic when some of those value players had a lot of availability and picked up some, what I’ll call short term share, that certainly has moved back the other way. Those consumers are really not in the market. They are highly sensitive to interest rates and economic conditions, and so certainly we’ve seen impacts there. And as we’ve talked about, there’s a bit of a bifurcation, us and one of our other key players both are doing well right now, and I would say that we’re viewed as more premium and high performance, and I think that end of the market, albeit weaker than what we expected, remains strong relative to the other segments of the market.
And so I think that’s a continuation of trends we’ve seen in the past and definitely a dynamic around some of the short-term share gains that were had back in ‘20 and ‘21 from those value players that had readily available, albeit very cheap product that consumers went after and those consumers are really not in the market anymore.
Operator: And the next question is from Sabahat Khan with RBC.
Sabahat Khan: Okay, great. Thanks and good morning. I guess one of your earlier comments was around a couple of drivers of the lower shipments. I think you talked about kind of the lower demand, but also some manufacturing issues as well. Are you able to maybe parse out how much of each of those components kind of contributed to the guide down or the performance in the quarter across demand versus maybe kind of inability to maybe get the product into the channel? And to what extent is, I guess, mixed in that composition as well?
Bob Mack : Yes, a complicated question. But yes, if you think about Q3, I would say that in terms of shipments, the bigger impact was the timing of getting our new products out would have been the largest impact on shipments in the quarter. Certainly even because of that, the mix is a little bit negative because those are high margin products. And then we talked about last quarter that we thought we would see an incremental $40 million of manufacturing inefficiencies costs related to those in the second half of the year. And most of that would be in Q3. And what we think now is that it’s going to be about $70 million with most of the $40 million in Q3 and about $30 million in Q4. And really, just because of the way the accounting works the costs we see in Q3 we incurred in Q2 and the cost we see in Q4 we incur really in Q3 just because they get loaded into inventory.
So our focus right now, as Mike has said, is driving those costs out as fast as we can so that they don’t carry forward into next year and that we can get a handle on them as quickly as possible. We’ve taken really aggressive actions. It’s really our two largest plants. They have the most complicated product sets. If you look at the rest of our plants, they’re operating at the levels of efficiency they were at pre-COVID. So we feel confident that we can get there. It’s just taken longer in the large plants but we’ve got a lot of resources focused on it right now.
Sabahat Khan: Okay. Great. And then I guess as we look out to ‘24 and you mentioned that you’re working on fixing some of these manufacturing issues, I guess is that kind of the bigger uncertainty on ‘24 beyond just the consumer? Is there some variability in your timeline? Are you able to get this stuff maybe sorted before it impacts ‘24 in a meaningful way or is that something you’re still kind of to be tbc on how quickly some of these issues can be contained. I’m just wondering what the timeline to get the stuff settled is so whereas maybe the consumer might be the only variable in the outlook
Mike Speetzen : Yes, no, we’re, I mean look we’re clearly, I’m not happy with the performance and the issues that we encountered that said, as I talked about in the prepared remarks, I mean the business has contended with an awful lot in terms of the supply chain labor disruptions, schedules moving around all that. That said as we look forward there’s really five things that have to happen, stability in the supply chain, stability in labor, stability in our production schedule, getting the new product production process nailed down and then this refocus on lean and what I tell you is the supply chain has stabilized. I’m not saying that things are perfect but I can tell you that we have worked through one of the last largest fires that was causing a bit of disruption even into Q3 and we’re feeling better about where those things say stand.
Labor stabilization, that presented some pretty significant challenges for us in Q2 and Q3 and we feel like we’ve got that largely in a better spot and the team has really put a lot behind that. I would tell you that schedule stability is improving. It helps to have a more dependable supply chain. We’re getting better at our demand forecasting certainly with the market slowing down that takes some of the volatility out of the equation. It allows the teams to kind of catch a breath and get that schedule set. I feel good about the new product manufacturing on XPEDITION. We’re obviously slated to start delivering XD in November and the teams are making really good progress on that. So I feel like that one’s well underway and then really comes down to this refocusing on lean.
Now that the environment has settle down, we can start working on things within our factories like material flow that probably haven’t been operating very efficiently over the past several years. And we can get to work on those. I laid all that out because it’s important to understand there’s a number of different things going on. Bob made the comment, it’s really our two plants in Alabama and Mexico. But there’s reason to believe we can get this done because we did it in Roseau with our snowmobile business. We did it in Spirit Lake, Iowa with our motorcycle business. And as I mentioned in my prepared remarks, our September production efficiency and hitting the mark was much improved. And we’ve seen that continuing in October. Bob mentioned it from an accounting standpoint, cost improvements or cost inefficiencies kind of fall on a one quarter lag.
