Ronald Epstein: When you look back on this situation, right? I mean, my understanding is, it first kind of creeped up, call it, the 2015 timeframe. And here we are today, what are the lessons learned? Like, on a go forward basis, because perhaps a going concern, there’ll be new engines in the future. What are the big takeaways to not have this happen again?
Christopher Calio: Hey, Ron, this is Chris. Yes, the incident that led to all of this was in March of 2020. And it wasn’t until after we went through sort of a rigorous records review and did all of the investigation and the metallurgical analysis. Did we actually come to realize this was an incredibly rare defect. We hadn’t seen it before. And then we were able to go back and trace it to 2015. But again, we didn’t we didn’t have that, the data in hand to make that determination until again much later into 2020. And if you just sort of step back and say, okay, once you figure that out, what would you guys do about it? Well, we made a number of systemic changes, you know, a Pratt powder metal processing facility, both manufacturing process changes and inspection techniques, we’ve gone through a rigorous safety risk assessment.
I think you’ve heard us describe before, which incorporated all of the learnings from all of our inspection data into our models, right across every one of our programs. And you’ve seen us kind of go through those one by one as we prioritize the most impacted fleets. But again, it gets read across every single engine program that we’ve got. And then of course, we’ve responded by developing comprehensive fleet management plans that have a combination of the enhanced inspections that we’ve developed and the life limits on the parts. I would say maybe more broadly and unrelated to powdered — the powdered metal situation. We’ve continued to leverage outside resources and expertise. We’ve got a product safety review committee comprised of outside industry experts and veterans that come in, look at our key engineering processes, do site visits, interview senior management and then below trying to understand culture and processes and what we can do better and they make recommendations.
And we implement those. And that’s something we do on a regular basis. Again, unrelated to the powdered metal, but we’re not afraid to go leverage outside resources to give us another perspective.
Ronald Epstein: And does that mean kind of going forward in just sort of the nuts and bolts of Pratt? It’s just going to require some more investment in, you know, I don’t know, infrastructure engineering or whatever to just, you know, kind of make sure everything’s where it should be.
Christopher Calio: But we’re going to continue to invest, Ron, in automation for sure, both in terms of manufacturing process, and our quality system. I’ll tell you, we’re also making investments in machine learning so that we can look at all of this, the thousands and thousands of inspection records and data that we’ve got, you know, in house to help us better identify anomalies get out ahead of issues before they, turn into something, unfortunately, that has an impact on the fleet and on our customers. So we’re going to continue to invest in those areas. We’ve had those investments plans in place. We’re going to continue to accelerate those. Again, all part of the modernization of our footprint, and how we do things better, faster, leaner.
Ronald Epstein: Got it. Thank you.
Operator: Thank you. Our next question comes from the line of Seth Seifman of J.P. Morgan.
Seth Seifman: Thanks very much and good morning.
Gregory J. Hayes: Good morning.
Seth Seifman: Maybe a small bundle here of questions about cash. I mean, given what the consensus is next year, $5.2 billion, you’re buying back $10 billion stock or you’re accelerating stock repurchase. I mean, is it pretty fair to assume that, you know, streets not going to be disappointed in what you guys have to say in January regarding cash. And then when we move out to 2025 and we think just about the impact, the change in R&D and the change in the interest expense that you’ll have from the share repo. How should we be thinking about the 2025 target versus, what you told us last month.
Neil G. Mitchill: Okay. Set. Thanks for the question. You know, we’re not going to get ahead of 2024, but we do see free cash flow stepping up. We are comfortable with our $7.5 billion 2025 free cash flow target that we’ve talked about. And as you think about what is going to be higher interest and increased benefit from the R&D impact. Those will just about offset in 2025. And so that’s why today, I feel comfortable staying with the $7.5 billion target for 2025. Of course, there’s a lot of time between now and then, but those are the two moving pieces we see today.
Seth Seifman: Great. Thanks very much.
Gregory J. Hayes: You’re welcome.
Operator: Thank you. Our next question comes from the line of Kristine Liwag of Morgan Stanley.
Kristine Liwag: Hey, good morning, guys.
Gregory J. Hayes: Good morning, Kristine.
Kristine Liwag: So maybe moving to a defense question, you know, the White House is requesting $106 billion (ph) in supplemental spending for a number of national security priorities, which includes over $50 billion in investment for the U.S. Defense industrial base. Looking at this request, you’ve got equipment for Ukraine, air and missile defense for Israel, and replenishment of stockpile for both. And this seems to fit quite nicely with the Raytheon Defense portfolio. So how much of this opportunity is addressable to the company and if the dollars are appropriated, when would be the earliest you could see this convert to revenue?
Gregory J. Hayes: Kristine, let me start on that. So as I think I mentioned earlier in the conversation, we’ve seen about $3 billion of orders so far related to Ukraine replenishment. And that’s really the replenishing U.S. war stocks. We expect another $4 billion of orders in the next two years. And most of that will play out over the next 24 to 36 months in terms of delivery. So you won’t see a big revenue pop, even next year from this. As we think about this next tranche, the president’s $100 billion plus request, which is more than $40 billion for Ukraine. What you’re going to see is the same things that we have been seeing but in much higher quantities. So obviously, NACAM systems, which is the short range air defense system, and the Amram, munitions that we’re using there.
