So we’re going to be battling a little bit of that as we get into next year. But the teams are aligned. We’ve got incredible lean resources that we now have embedded in each of the two big facilities. And we’re monitoring it daily. I’m briefing on it every week. So it is a big focus for us. And I’m confident the teams will get this moving in the right direction as we get into ‘24.
Operator: The next question is from Megan Alexander with Morgan Stanley.
Megan Alexander: Hi, thanks for taking our questions. At first, I just wanted to make one clarification. Bob, I think you mentioned in the prepared remarks, you lowered the Off Road guide, but still up high singles. I think slide 12 said Off Road unchanged. So is that just a plus seven or plus eight nuance type of situation?
Bob Mack : Yes, we lowered the range a little bit.
Megan Alexander: Okay. And then looking at the implied fourth quarter you talked about flat-ish volume year-over-year. You maybe have some shift that you talked about from the new product, from a shipment perspective into the fourth quarter. And then you talked about retail up driven by snow. So I guess it’s the implication that side by side retail, you expect to be down in the fourth quarter, and maybe can you contextualize how that compares with what you’re seeing so far in October?
Bob Mack : Yes, so a couple of things. So if you think through shipment in Q4, relative to prior year, there’s a fair amount more snow in ‘23 than there was in ‘22, because we have production problems in snow in ‘22, and that’ll all ship Q3, Q4 this year. So that’s part of it from a ship standpoint that’s negative to mix though. And then on the side by side, if you think about retail, retail will be up on side by sides, primarily driven based on our expectations of shipments of the new XPEDITION and XD, RANGER XD products. Those will be big contributors because they’re shipping, XPEDITION were shipping in Q3 for retail in Q4 and then we’ll continue to ship XPEDITION and we’ll start shipping XDs which dealers have orders customers waiting for and so that will all retail in a quarter. So we’re not expecting side by side to be down. We just right now the core part of the side by side market looks a little soft.
Megan Alexander: Okay, that’s helpful. And then maybe a follow up as it relates to dealer inventory levels given those comments and some of the shipments shifting into the fourth quarter. And you talked about down 10% versus ‘19. One of your slides suggests history would imply that dealer inventory is flat on a quarter-over-quarter basis. So is the implication that it’s actually up on a quarter-over-quarter basis and I guess how are you thinking about how dealer inventory ends the year and what that could mean in terms of ‘24 sales?
Mike Speetzen : Yes, I mean dealer inventory improves sequentially. So it certainly is up in third quarter versus the second quarter. A lot of that’s driven by the slowdown we’ve seen and obviously even though our production and efficiencies were there, we were able to get more product into the market. We’re targeting to have dealer inventory kind of either flat or down versus 2019 as we get to the end of the year. But we’re going to watch that. Certainly you’ve got dynamics around making sure that we get plenty of XD and XPEDITION, which are both under high demand as well as our NorthStar Rangers into the channel. But I wouldn’t suggest that there’s some substantial significant change from where we are today.
Operator: The next question is from Fred Wightman with Wolfe Research.
Fred Wightman: Hey guys, good morning. I wanted to come back to the manufacturing and efficiency number. It sounds like that’s now supposed to be $70 million versus $40 million previously. Can you just sort of help us with the sequencing of that as we carry into the first half of the year ,sounds like that’s something that you expect to continue, but just the relative impact on 1Q versus 2Q would be helpful.
Mike Speetzen : So the way it’s flowed through this year, at the end of Q2, we thought it would be $40 million and really most of those costs were incurred in Q2 so we knew they were going to come through in Q3 and we had expected to be able to have a bigger impact on them in Q3 than we did. So the Q3 sort of excess cost carried into Q4, that’s about $30 million that will impact us in Q4. It’s a little tough to say what the impact will be in Q1. We’re actively working to, because we’ll, look, the Q1 impact will be the cost we, mostly the cost we incur in Q4. And so we’re working actively to bring those costs out and to address those inefficiencies as Mike discussed. So I would say it’s a little early to say what the impact will be on 2024 and we’re not focused on ‘24 guidance yet, but you can count on the fact that we’re working as aggressively as we can to minimize any impact going forward.
Fred Wightman: Fair enough. And then there’s a comment in the slides just talking about some lending metrics that were pressured. Can you just expand on what exactly you’re referring to, what categories, whether it’s retail or wholesale, what exactly you meant by that?
Mike Speetzen : Really, the comment was really related to retail. And so what we saw in the quarter was really good [inaudible] rates and volumes up versus prior quarters and last year. Approval rates were pretty flat relative to history and FICO scores are actually up. The pressure is coming from increased focus on kind of debt to income ratios and the lenders kind of putting more focus on that versus just FICOs. And then also some of the smaller lenders, the credit unions and things like that, that were aggressive during the pandemic have backed off a little bit, which is good for us because we’ve got four lending partners who’ve been aggressive in the market. So there’s not a lack of credit, but there’s a little bit of pressure on this sort of debt to income as the banks continue to review their portfolios.
Fred Wightman: Perfect. Thank you.
Mike Speetzen : We don’t believe that it’s a panic impact on retail or anything like that. It’s just a slightly changing environment.
Operator: The next question is from Tristan Thomas with BMO Capital Markets.
Tristan Thomas: Hey, good morning. Just a question given the kind of slower production ramp, are you shipping in as many RANGER XD 1500s in 4Q as you expected three months ago, or is some of it going to kind of still over into the first quarter next year?
Mike Speetzen : We are not. We got off to a late start as we talked about. And so we anticipate that just pushes forward into ‘24.
Tristan Thomas: Okay. And then just kind of back to retail. I think you said flat, maybe down a little bit, versus ‘19. If I just look at, I think market share is down a bit, retail is trending lower. Should your inventory levels be lower. And I mean kind of how are you thinking about what’s appropriate?
Mike Speetzen : I didn’t catch the first part. Did you say market share is down?
Tristan Thomas: Well, I said, if I look at market share compared to ‘19, at least I can see your ORV market share is down. And then also retail is running lower than 2019, but if inventory is flat, I mean, why is that appropriate?
