Rafael Santana: Thank you.
Operator: The next question comes from Ken Hoster with Bank of America. Please go ahead.
Kenneth Hoexter: Great, good morning. Just two clarifications, I guess, before I jump in. Is this a legacy contract on international locomotives or is that just structurally lower margins? And then mix, John, you mentioned, I think, three times already that the mix within category like equipment, is that because you have lower margins on MODs versus new equipment or is there something else that I’m missing? Just if I can understand those two.
John Olin: So Ken, I think that the first question is just the cadence of the way the orders unraveled. So we’ve got various orders coming or various international locomotives being built for around the world. And we have a period of delivery in the back half of 2022 and the front half of 2023. That’s a little bit lower margin, and we’re seeing some of that progress through the system. Other than that, the book is typically lower margin for both MODs and new locomotives versus the company average. So when we talk about things such as an increase, a strong increase and the volume related to that, it translates into lower margins within the groups that house those. So I called out equipment and services, equipment is where we book new locomotives and the services business kind of houses the modernizations. So with those growing very strong in the fourth quarter, that brought those margins down in those groups and that’s what drove the mix unfavorability.
Kenneth Hoexter: Okay. I got that, John. I just thought you meant within the group. But if you just mean one group being equipment versus services, then I get that. And then Rafael, you talked about the $600 million kind of run rate per year. I think you got a question on that earlier. Is there any reason you don’t give number of MODs or new builds in order to track how you’re doing versus that historical level, obviously, we know when it was zero it becomes irrelevant, but as it scales and gets larger, is there still a competitive differentiation in giving that number to understand when we’re getting back towards a normal run rate as we get into the few hundred in that mix?
Rafael Santana: We think there especially when it comes down to the number of customers that we have out there. So we do see this as an element of competitive nature that we do not want to not disclose. On the other side, I think we’re trying to really make sure we provide greater visibility in terms of what we’re seeing in terms of the demand, especially with regards to MOD — and also new locomotives through that process. So does that answer your question?
Kenneth Hoexter: Yes. So you’re saying even to break it out — even to put them together, both MODs and locos, it’s still…
Rafael Santana: And the way to think about it today, to a larger extent, we’re utilizing the same supply chain for that. So a lot of the plants that were originally really thought around just dedicated to new units, I mean we’ve gotten those now and really able to flex between those two. So I think it makes sense to up those two together. And just I think through that process, gives you at least visibility here in terms of how utilization looks like for the company.
Kenneth Hoexter: And then my just last one on the — John, you had a question before about the progress on the expense cost specifically in 2023, right. Obviously, you had $46 million. Are you not talking specifically to a number and kind of what’s in that guidance just so we can understand and then you talked about two plants being shut down or I think it was four plants you mentioned. What are the — are there big projects coming in 2023 that we can kind of look at as far as where you get those synergistic gains?
John Olin: Yes, Ken. So the overall program we’re expecting a onetime spending of $135 million or investment of $135 million to $165 million. We saw the $46 million in 2022, we would expect 2023 to be higher than that and then we start to taper off in 2024 in terms of our investment. And at the same time, we would expect to see those savings escalate. Now with the $43 million of restructuring investment that we made in 2022, $32 million of it came in the fourth quarter. And again, we talked about the teams have been very good at lining up the projects. And an example of those were three that we were doing, two would take out on four facilities. They were both in Europe and looking at streamlining some of the network there, manufacturing network and then the distribution in North America. So that they were kicked off in the third quarter. That’s when a lot of the reserves are set up, and we’ll begin to see the savings in 2023 and 2024 from those.
Kenneth Hoexter: And are those in SG&A and corporate costs or is?
John Olin: No, no, no. I’m sorry, maybe we’re not talking about the same thing. The $46 million is integration 2.0 savings and they’re not in our adjusted numbers. They’re in our GAAP numbers. And then we’ve got a bridge in the financials that show the bridge between adjusted and GAAP. And that’s where this investment is recorded — reflected.
Kenneth Hoexter: Thank you.
Operator: The next question comes from Matt Elkott with Cowen. Please go ahead.
Matthew Elkott: Good morning and thank you. First, just a quick follow-up to the competitive landscape question earlier. Historically, how much have you guys done in the line of upgrading non-Wabtec locomotives and do you think there are opportunities there going forward?
Rafael Santana: We do have opportunities there. We have call — started a process around those, and we’re currently upgrading units to non-Wabtec. So that’s certainly an opportunity that we look at it, and we look at it not just in North America, we’re also doing the same internationally.
