Eric Bosshard: First of all one clarification and then a question. From a clarification standpoint, Jim, you talked about the cost benefit accelerating through this year and then carrying into next year. Does this make next year a little bit more frontend loaded than normal because of the progress you’ve made on costs? I guess is the first point of clarification.
Jim Peters: I would say, listen, from a cost perspective, I think we will start the year and we will show a positive year-over-year cost just because of that carryover going into next year and the trends that we’re seeing. Now the other thing that you’ve got to take into account is just the natural seasonality of our business. And I think we’ve seen the business getting back to what is probably a true pre-COVID type of seasonality where from a volume perspective, Q1 still tends to be the lightest and you see the pickup throughout the year. So, I do believe cost will be a positive going into next year. But when you’re looking at a year-over-year basis, I think we’ve normalized into an environment where Q1 will still be one of our lower quarters from a volume perspective.
Eric Bosshard: And then the other point of clarification, the strategic payback from Europe, I understand and it’s certainly compelling. The EPS impact in ’24, could you just help us I’ll clarify how we should be thinking about this. Is this also accretive to EPS next year as well or how does that work?
Marc Bitzer: You know, it will not be it’s so much accretive to EPS because if you think about it, right now, EMEA is close to a breakeven business. So, it will improve all of our overall margins, it does have negative cash flows that will improve that. But from an absolute earnings perspective, it starts to become a net neutral there. Now, as I said, the bigger lift comes is that it’s 150 basis points improvement in EBIT margins. It’s a reduct or an improvement in free cash flow, and then it’s a reduction in the volatility and the seasonality of our business also. And I think the thing I need to point out on the cash flow is within the year, the seasonality of EMEA’s cash flow is much greater than the single benefit of $250 million that we’re getting. So, the biggest benefit that really comes on the free cash flow side.
Operator: Your next question comes from the line of Mike Dahl from RBC Capital Markets. Your line is open.
Mike Dahl: The first one just to stick with margins and specifically North America, I think the part that I’m struggling with is your cost tailwinds have accelerated through the year. Your margin guide for the fourth quarter is kind of at or below 10%. If we think full year impact ’23 versus ’24, understand that tailwinds have ramped through the year, but full year, your cost out actions probably are kind of equal between the two years, if not still slightly weighted versus ’23. So, the promotional cadence has normalized and is expected to remain steady. The cost takeouts for now have probably reached their peak run rate. The bridge to margin improvement in ’24 in North America, it is — again, it’s cost and volume, but doesn’t that mean it’s really just volume next year in terms of driving the levers? Or what’s the — I’m struggling to see that magnitude of uplift to get from kind of 9 to 10 in 4Q up to 11, 12 next year?
Jim Peters: Yes. Mike, let me start and then I’ll let Marc kind of add on to this. I think, as you even alluded to in your question there is right now, we do see actually cost continuing to drive further benefits, and we will see additional cost benefits coming into next year. And then also you did highlight that as we’ve said, we believe the promotional environment is normalized. So, that should not be a factor in terms of margin impact year-over-year as we go into next year. Cost should be a positive impact. And then picking up additional share and volume will also have a positive impact both on our margins just from the incremental margin that comes from that. In addition to the leverage and benefit we get within our factories and other things, our logistics network from the leverage that we get on that.
And you’ve got to remember today, that today, if we look at our environment, we still have we don’t need to add capacity or anything. So, each unit that we add actually adds an incremental amount of margin that’s above and beyond our margin that we have today. So, those are the levers and the drivers, and Marc, if you can add.
Marc Bitzer: And Michael, just first of all, to clarify, because you mentioned, no margins are at or below. We guided to 10%, and we delivered 10%, so we are on a sustained double-digit margin level and at best Q2, Q3, and Q4, so we feel very good about regaining with double-digit in particular compared to 2022. Now, on the cost side, there’s also another element. Keep in mind what we showed you, we see significant progress on the cost side, but as I think most of you know, given how standard costing works, you’re basically selling Q4, the cost which you had in Q3, because you have 60 days of inventory, and the same is true for when going to Q1. So the cost progress, which we see in Q4, technically will only be fully P&L visible in the first two months of next year.
So that’s just timing that’s normal standard cost accounting, so don’t forget that part of the equation. Now to your point about, it’s only volume. No, we need cost, volume, and product introductions, all three of that. Cost, we feel very good. We have our momentum. We know how to get cost out, but it’s a highly competitive environment where you just need to remain resilient on the cost takeout. Two, volume is, to Jim’s point about re-leveraging and just because it’s at times the capacity which you already paid for, so you get the full leverage. And three, ultimately, you can only get the volume if you have strong products in the market. And as Jim showed early in my presentation, we feel very good about what we launched this year, and there’s a lot of good new product launches in the pipeline.
So again, I absolutely would not reduce it to volume. We need all three components.
Mike Dahl: Yes, that’s helpful. I appreciate the additional color there. My second question, just shifting gears, and I know this is probably some accounting. Technicalities around tax, but it’s such a meaningful number to figure out, I’ll ask you. I mean, it’s unusual to see a net tax benefit being considered part of ongoing EPS, and in this case, it’s kind of like north of $3 a share impact versus your prior guide, this shift in tax expectations. Can you just, maybe give us a little more detail on what’s actually driving this and maybe more importantly as we look out to the 2024 and beyond? Has your view changed on what a more normalized tax rate would be especially post the disposal of EMEA?
