Mike Dahl: Got it. Okay. And again, I appreciate that. I think some of those things are probably debate rather than absolute and timing still seems like a question from our standpoint. So the follow-up I think from my side would be it seems like by the second half of the year, you’re assuming that industry volumes get closer to things like for your own volume assumptions, there’s an assumption for a share gain, so potentially a little volume growth that will help drive some of the year-on-year capability in margin as the year progresses. So if the demand side doesn’t come through as expected in the second half, how should we think about margin impacts or decrementals, given there’s obviously a lot of moving pieces around the cost side as well. So if we’re trying to isolate kind of the volume side and how that plays into it, how should we be thinking about that?
Marc Bitzer: So Michael, maybe it’s just — and again, we only talk about North America right now. We — in — on this Page 19 in our presentation, we guide — or our assumption for our market is minus 6% to minus 4% on North America on a full year base. Keep in mind that comes on top of a 6.5% down in ’22. So to Jim’s earlier point, at one point, you just reach a floor of what is replacement market. Replacement markets are now already 55%. So the pieces which can move, i.e., the discretionary purchase. At 1 point, you’re at such a low level that a further downside risk is realistically fairly small. I would say from today’s perspective, if at all, I would more see upside risk, I wouldn’t probably call it risk but right now is there’s a lot of arguments to be made by it will start recovering.
To your earlier point about, yes, we can all argue about the timing of a slow consumer recovery. It doesn’t change the fact that the mid- and long-term fundamentals are strong ones. And just people want to bet against the U.S. housing market. So be it, we do believe that the long-term U.S. housing market is a very strong one and will fully recover.
Operator: Our next question comes from the line of Susan Maklari from Goldman Sachs.
Susan Maklari: My first question is, given your background and experience operationally, with the business in various regions that have faced different challenges over time. How do you think about the North American operations today, the opportunities there and the opportunity to hit some of those initiatives that you outlined in your comments?
Marc Bitzer: Susan, I think that’s obviously a very macro question with a pretty big time horizon. But I would actually come back all way to our decisions and what we plan with our portfolio transformation I am a firm believer in the long-term fundamentals of North and South America, coupled with an exceptionally strong market position which we have in both parts of the world. So will the North America market go for some cycles which are largely driven because we’re still living a post cohort world in the interest rate shock, yes, it doesn’t change my fundamental perspective about the long-term health of this market. The long-term health of our position in the market and our ability to deliver very strong margins in the market.
And we will deliver it and we will demonstrate it. But again, it’s — I’ve been observing I was responsible for North America ever since 2008 or 2009. So I’ve seen the ups and downs of the housing market. I think I have pretty good access to 1 or 2 of the numbers of the housing market; you can’t ignore the market that has been undersupplied for 15 years but at one point, it will recover because we won’t think interest rates don’t impact our demographics, okay? And the demographics in North America and household formation is solid and there’s quite a bit of pent-up demand. So I know I’m repeating myself and met optimism but — so that explains why I’m fundamentally bullish on the mid- and long-term prospects of North America.
Susan Maklari: Yes. Okay, I appreciate that. And then one of the things that we’ve seen in some of the other product categories that are promotionally driven or can be exposed to more promotions is that the demand dynamics over the last 2 years, they’re just not necessarily having the same effect on the consumer as they did pre COVID. Would you say that you’re seeing something similar in your industry? And is that impacting how you think of the level and the range of promotions and incentives we could see this year relative to the pre-COVID norms?
Marc Bitzer: I think, Susan, you’re raising a very good question or observation. And I’d just comment on the hindsight because as always, we don’t comment too much on I mean, promotion plans or whatever going forward. But on hindsight, so kind of in particular as you look at ’22, I think the traditional way how we would have looked at responsiveness to promotion or price elasticity has somewhat changed through COVID and also in this post-COVID world and in particular, in an environment where replacement market has such a big share because of the fact that discretionary part is much smaller, by definition, what you can tap into with promotions is smaller. Replacement market in its own historically is not very by definition, not very responsive to promotion because people replace the product and it needs to be replaced.
So that probably explains what you described where traditional responsiveness in the market to promotions may be less than it was in a pre-COVID environment. And again, in our case, that’s largely driven by a much higher share of replacement market.
Operator: Your next question comes from the line of Eric Bosshard from Cleveland Research.
Eric Bosshard: Two things. First of all, on the price/mix, you talked about the second half of ’22, the promotions were as expected. There was a step down pretty meaningfully in price/mix from what you targeted in the second half. And so what I’m curious about, I see you’ve guided it down 200-some basis points in ’23. I’m curious, within that, we’re seeing retailers who accepted cost base price increases on the way up now asking for a return of that as costs come down. I know you’re also assuming a favorable mix but it seems like there’s some trade down going on with a bit more cautious consumer. And so the question is, with that context as you look at that negative 200 or so basis point price mix in 3 what are the moving pieces? And is there more upside or more downside to that with less some perspective on that?
Marc Bitzer: So Eric, first of all, as we look in ’23, you’ve got to keep in mind that you’re lapping now against 3 rounds of price increases. So by definition, at 1 point, the positive price mix will, by definition, just go down to 0 because you’re comparing against prior year significant increases. What we have factored in is kind of promotional levels which are similar to the levels which we see in the back of ’22, so that’s fully incorporated. At the same time, we do strongly believe we in particular, have mixed opportunities. Also if you look at our Q4 and you guys know from your operational perspective, when our business is the lack of supply which we had in Q4 didn’t help us on the mix side because products which we particularly couldn’t deliver where we nonpromoted items and the high value mix items.
So we do expect, in particular, as you come from Q4 into Q1, Q2, sequential improvement of mix and that’s our opportunity to protect pricing also as we look in ’22 — ’23 while, of course, taking into account that there will be a promotional environment similar to the back half of ’22. So again, there are several factors playing into road. This is a highly competitive environment and I think we took the reasonable assumption in this.
