Majdi Abulaban: So, Gary, let me first speak to this, and Tim can pick up, okay? So, the cost recovery story, as you can imagine, with everybody, it’s complex, it’s multifaceted, okay? Really two points I want to make with you. Number one is, at the highest level, okay, at the highest level, the company’s normalized margin is — what Tim mentioned, is 23% to 25%. And from there, you can back into what recoveries were in the year, what recoveries were in prior years. But the second point, I think, is more clear. So, for us, Gary, cost recovery is multipronged. But you look at the details, you look at the bridges Tim showed you, 80% to 85% of the year-on-year recoveries are commodities. You put that into anywhere between $240 million to $280 million, Gary.
That’s all that. As you see in Tim’s bridges, 85% of our recoveries are in — is either aluminum or aluminum additives or silicone, (ph) with a balance, which is the dialogue we have with customers on the rest, call it, the (ph), a little bit more maybe, and that’s non-commodity inflation, including energy. And by the way, Tim has been consistent in the last few calls, we have fared very well with energy because we hedged. We did a good job of hedging energy in 2022. And then, what’s left there is paint and other obviously labor and manufacturing costs. And the third piece of that the 15% to 20% is volatility and cancellation. So, what we’re telling you is 85% was indexed. It’s been indexed. Our work with customers was on the 15%. We fared well.
We have to shift some of that focus now from one-time recoveries to putting it in the (ph). And yes, there are some carryover from ’21 that we’re saying is not carried into ’23.
Tim Trenary: So, Majdi, I can’t really improve on that, but I would like to, for a moment, Gary, if I may, just go back to your previous question, which is the guide in 2023 vis-a-vis the company’s performance in 2022, and I think you made reference to how it compares to certain other companies. As we’ve said, our performance in 2022 was somewhat boosted by customer recoveries that were really associated with 2021. I think if you go back and you compare the company’s performance last year 2022 compared to 2021, as compared to our peers, you’ll find that we, for the most part, outperformed because of those — that mismatches, the customer recoveries. So, a better comp is really ’23 compared to ’21 vis-a-vis our peers, and I think you’ll see that we still compare very reasonably in that regard. So that’s a round about what I’m saying 2022 was a little unusual.
Gary Prestopino: Okay. I guess, my way of thinking is that you’re so specialized, high amount of technology, in what you’re producing in the wheels that you have and that you should have some modicum of success because of your portfolio and your technologies in getting these cost recoveries, because where else would the OEMs turn to.
Majdi Abulaban: Gary, that is a great point. That is — we see ourselves as competitively advantaged in many ways. We have the technology. We have the portfolio. We have a team that is executing on all cylinders, frankly. And guess what, we have what we believe to be the most competitive, unique footprint in the industry. Gary, if you look at just this industry from a low-cost standpoint, you could argue that of all the capacity in North America, remember 50% of the wheels comes from China with 27% duties. If you look at only the capacity in metal, we have 50% of the wheel capacity in Mexico. You could look at North America, that’s 30%. That’s a competitive advantage when customers are trying to localize. Now, I shift you over to Europe, and I don’t know if you recall my comments, but last month, the EU Commission imposed duties on wheels coming out of Morocco in addition to duties that were — on wheels coming out of China.
