Tim Knavish: Yes. Hey, Frank. I do appreciate you congratulating John on his promotion. Very easy decision for us, well deserved, but it didn’t affect our wage inflation because John loves his job so much, he does it for free. But going into next year, I’m confident based on what we know today, based on what we see today, that we will swing to positive volume as a total enterprise in 2024. Q4 will be close, but again, UAW is a big unknown, what it will on how that goes and which plants and which ones we supply, customer mix wise, it’s still a bit of an unknown. But I do feel positive that we will swing to positive volume in 2024. We’ve got Europe and China, two of our biggest regions that sequentially – sequentially, we believe China is going to recover to a slower speed than historical, to a slower speed than what we thought a couple of quarters ago, but sequentially, we will see improvement in China.
Europe, as I said earlier, we’re actually pleased to see flat volume across some of our larger businesses like deco in Europe because we really believe it is bouncing off the bottom. So we’ve got demand stability and any incremental increases in Europe will drive really good leverage for us. I mentioned the aerospace backlog, the more we make, the more we sell and that will go on for many quarters. And we’re focused very heavily on productivity and getting more out the door, which will drive growth for us. Automotive, I believe, will have sequential improvement, sequential build increases moving into 2024, so when exactly, which month? We will have some macro dependency. But overall, I’m confident in the swing to positive volume in 2024.
Operator: Your next question comes from the line of Laurence Alexander with Jefferies. Please go ahead. Your line is now open.
Laurence Alexander: Good morning. Congrats on strong quarters. I just want to pin down one point. With respect to the incremental price actions and productivity, do you think you’ll be able to keep that ahead of wage inflation in Q4 in next year or how should we think about the bridge there?
Tim Knavish: Yes. Hey, Laurence. Thanks for the question. The short answer is, yes. We’ll stay ahead of wage inflation with a combination of price and productivity. We do expect, if you look at, let’s call it, salary inflation in the established markets a little higher than normal, call it, 3%, frontline workers is very country specific. So it will be higher than that in some countries. But we’re also confident, given our pricing track record that through a combination of price and productivity, we’ll be able to offset the wage inflation that we’ll see. And I’ll also point out, remember that with our mix of businesses, with the exception of company-owned stores, we have a very low people intensity structure because most of our businesses are direct or direct to somebody else’s distribution channel. So with the exception of company-owned stores, we have a pretty low human capital intensity frontline business.
Operator: Your next question comes from the line of Aron Ceccarelli with Berenberg. Please go ahead. Aron, your line is now open.
Aron Ceccarelli: Hi. Good morning. Thanks for taking my question. I have one on pricing. With the heavy lift on pricing initiatives now behind us and the supply of raw materials back to normal condition, how should we be thinking about pricing across the two segments for 2024? And how do you feel about the potential scenario where pricing could turn negative next year? Thank you.
Tim Knavish: Yeah. Hey, Aron. Thank you for the question. Pricing, we will — in the Performance segment, we will get incremental targeted pricing as we move into 2024 because of the structure and the value add that we deliver relative to the total cost of production that our customers have. So in other words, the small amount of paint consumption, a small amount of price is more than offset by the total production cost that we impact and the value that we add to our customers from a productivity standpoint. So we will get more targeted price in performance next year. In Industrial segment, we have not seen price give back to this point. We do have some structural contracts about 30% of our Industrial segment that is tied to some form of an index contract.
So depending on what happens to that total basket of raws, there is a time lag built into where there would be some structural price changes. But again, that’s less than half of our business. Beyond that, let’s — to the prior question, let’s recall that there’s a lot of other inflation out there. So the discussions we’ll have with our customers and continue to have with our customers is that, that other inflation we also need to talk about when it comes to the price of our products and services.
Operator: Your next question comes from the line of Mike Harrison with Seaport Research Partners. Mike, please go ahead. Your line is now open.
Michael Harrison: Hi. Good morning. I wanted to ask a question about the growth that you’re seeing in powder coatings. Is this mostly share gain where you’re seeing the growth or is there a lot of conversion happening with existing customers such that we should view it more as cannibalization. And I guess what does the margin profile look like for powder coatings compared to liquid for a similar application. Thank you.
Tim Knavish: Yeah, Mike. Great question. Thank you. What you see in powder growth for PPG is share gain, okay? Very little, if any, conversion of existing PPG customers from liquid to powder because there’s two factors there. One, frankly, we’re starting at a fairly low market position in powder. So we’re specifically targeting share gain and conversion of an existing customer from liquid to powder takes a capital investment by that customer in their paint job. So it’s not an overnight flip. So what you’re seeing is share gain. Now from a margin standpoint, if you look at our U.S. powder business, for example, on a net margin standpoint, it’s one of our more profitable segments across general industrial. And the reason is we target specifically the higher end of the powder portfolio, there’s liquid-like appearance, there’s metallic powders, those types of things that command a higher margin because they’re more technology advanced from a formulation standpoint.
So we’re specifically targeting the higher end of the segment. Longer term, one of the reasons we are investing in powder for the future is, it is more sustainable solution for our customers. So you’ve got the short-term focus that where we’re driving share gain by targeting the higher end segments of margin for powder. Longer term, you will see more and more customers converting from liquid to powder because of the sustainable solution that it provides.
Operator: Our final question today comes from the line of Arun Viswanathan with RBC. Arun, please go ahead. Your line is open.
