And when you come through a negative year that you don’t have as higher payouts in some of those areas, it gives you a positive in the next year from an operating cash flow perspective. So, it’s a good question in that it doesn’t really become apparent, but that’s the biggest driver within that bucket that you will see. Then, also, throughout the year, there are just some non-cash items that affect that differently here and there. But that’s the biggest drivers. The change is in those other types of accruals that don’t necessarily sit in working capital.
Operator: Your next question comes from the line of Jason Haas from Bank of America. Your line is open.
Jason Haas: Hey, good morning, and thanks for taking my questions. I’m curious if you could talk about what impacts, if any, you’ve seen from the disruptions in the Red Sea, and just global container costs starting to increase here?
Marc Bitzer: Jason, it’s Marc. So, obviously, in particular with our heavy footprint on the Americas, the impact for Americas is less. Yes, there’s some — it impacted a little bit some of the East Coast shipments, not so much in cost, more in time. So, there’s a one or two weeks later time. It could and will start impacting the European business. Right now, we’re still in pretty good shape for Europe, but obviously, that brings uncertainty more on the European supply chain to much, much less extent of the North America supply chain. Container costs have been so far pretty stable for us. Again, also put a bit of context, they came from excessively high rates in the COVID and post-COVID environment and now to more normalized rate, and the broader impact of the mix is limited.
Keep also in mind, compared to any of our competitors, we are much more North America and Americas production based. So, relatively speaking, the container cost impact us a whole lot less than most of our competitors.
Jason Haas: Got it. Thank you. And then, as a follow-up question, I’m curious if you could remind us what your sourcing exposure is to China? And if you had any thoughts on, if we were to see higher tariffs placed on China, what would be the impact to your business and the industry overall?
Marc Bitzer: Yeah. So, Jason, I mean, first of all, split into two pieces. There’s finished products and there’s components. On finished products, our exposure is relatively small. We import microwave food combination and some refrigerators into the Americas and into Europe, and some dishwashers also into Europe. So, on finished products, it’s actually, frankly, in particular for Americas, not a very big number. Components, in particular in electronics, you have exposure, like everybody else, to China or broader Asia, I would say, because it’s not just China, it’s also Vietnam, Thailand, et cetera. Again, back to my early comments, in the competitive landscape, we’re by long shot, the least exposed to China. And it’s just because of our historic strong footprint in the Americas, our focus on producing in Americas and sourcing from Americas, except for electronics where you just have a limited supply base in the Americas.
Operator: Your final question comes from the line of Eric Bosshard from Cleveland Research. Your line is open.
Eric Bosshard: Thanks. Two questions. I’ll give the both to you. The first is the other half of the free cash flow question, I understand the bridge within the cash earnings. Can you just give us a little bit of context of the $200 million to $300 million Europe cash usage that is alluded to in that slide? I just don’t exactly know where that fits within the moving pieces. And then, the second question relates, Marc, you talked a lot about the focus on margin progress, the flat margin in 6.8%. Related to that, I guess, the core of it is that you still have this 11% to 12% long-term margin guide, and just wanted to see if that is the number that you’re still aspiring to and aiming to. Thank you.
Jim Peters: Yeah. So, Eric, this is Jim, and I’ll start with your first question there on EMEA. And typically, if you’d looked within a full year, EMEA over some of the past years has consumed around $200 million of cash and whether it’s due to restructuring, it’s due to some legacy liabilities and matter to the operations of the business. Now, as we look to close the transaction in the Q1 of the year, typically, that negative cash flow actually did occur much earlier in the year and then they would gain cash throughout the year. So, to begin with, they start the year with a negative cash flow as they begin to build some working capital. The second piece of that though that comes along with it is that also within there, we have some various working capital financing type of programs that are related to accounts receivable and other things that we will unwind as we do this transaction and then as we contribute this business to the new company.
There will be other things that might exist within there, but there are just some things we need to unwind as we go through the process. So right now, we look at it as possibly having an impact at least on our cash flow for the year of a negative $200 million to $300 million. But once we get closer to the close, we’ll update that number.
Marc Bitzer: And Eric, just maybe adding a comment on — to Jim’s point, to put it simply, the $550 million to $650 million cash flow, excluding Europe, on a normalized basis, it would translate into $800 million-plus. That’s essentially what it means, because we have to unwind these working capital financing activities and some other elements. So that’s what it really means. Now, to your second point about the margin progress, and again, I want to also highlight our upcoming Investor Day where we give an update with the segments about our mid and long-term value-creation goals. But in short, and Eric, that’s consistent with what we said before, we absolutely don’t see any reason why the margins which we have pre-COVID are not in sight.
So, i.e., in particular for North America, for years, we have been operating on 12% or 12%-plus operating margin in North America, and that’s certainly what we see absolutely possible. Right now, we’re working through. I mean, as you all can see, it’s a very negative macro cycle. I mean, our industry is heavily impacted by existing home sales, and existing home sales in the course of 20 months went from 6 million-plus units to 3.7 million. So, that’s impacting us. But we know how to work through these cycles, and that’s why we’re very confident that we, over time, can reestablish these margins as we were experiencing them before. But again, much more perspective on this one at our Investor Day. I guess with that, we’ve come pretty much to the end of our session.
