Stellantis NV (STLA) 2002 Q2 法說會逐字稿

Good day everyone ands welcome to the FIAT conference call to discuss the 2002 2Q results.

Today?s call is being recorded.

Hosting today?s call are Paolo Fresco, Gabriele Galateri, Damian Clairmont (phonetic), Jean Carlo Voscedi (phonetic) and Marcello Ledda (phonetic).

Mr. Ledda you may now begin.

Good morning everyone and welcome to Fiat?s 2Q 2002 conference call.

Today?s call will be hosted by senior management.

Let me just briefly introduce today?s agenda.

Mr. Palo Fresco, Chairman and CEO will open the discussions with some remarks and a few important developments of the second quarter, followed by discussion of Fiat?s priorities by Mr. Gabriele Galateri, recently appointed CEO and COO.

Mr. Damian Clairmont the CFO will discuss the second quarter results and provide additional details on the major transactions that were carried out. (indiscernible) CEO will comment.

Complete management line up, also Mr. (indiscernible) Chief Operating Officer appointed in month of June has joined us.

As always, we would be making forward-looking statements in the presentation and Q and A session.

These are covered (phonetic) by the customers (indiscernible) all of our filings with US Securities and Exchange commission.

We start immediately by passing the microphone to Mr. Paolo Fresco.

Good morning or good afternoon depending where you are and welcome to this meeting.

Today, to recognize the main changes occurred since our last discussion, we decided to gather around this microphone, so a good portion of the entire management team.

We also opted for relatively (indiscernible).

Our objective in doing this was to enhance the clarity or communication and have all the key factors (phonetic) to available to answer your question.

So, I expect that our presentation will have a fruitful give and take.

Sorry, slide 3 (phonetic) shows all events occurred in this quarter.

You know all events, I am not going to go through those.

The bottomline area that during the quarter we have strengthened balance sheet by an amount equal to 5.7b Euro, you will see (indiscernible) then we have spent in the management by the addition of (indiscernible) The world economy is in our market going through a rather difficult period and the actions that we have taken both strengthening the balance sheet and the management is aimed at managing our way through these difficulties and not being subject to the event.

Slide 4 shows the detail of the breakdown of this strengthening of the balance sheet by Euros 5.7 billion.

This will allow us to face this difficult business in market situation as we said with a greater flexibility and we reduce financial pressure.

This should give us in other words time and space to make the right decisions so that benefit or the profitability of the business but I assure you we are equal and possible even heightened determination to strengthen further our balance sheet.

In a moment we will give you more information on these particularly the last two.

Let me make just one point that Euros 3 (phonetic) billion that is represented by the mandatory convertible, a reality replaces that with what is the equivalent of permanent capital.

So, it is a substantial change in our (indiscernible).

The slide (phonetic) number 5 deals with the management changes I referred to before now Galateri and Barberi no Fiat level, they had been working with Fiat in the past.

Both have implemented turn around actions.

I just will remind you the Gulbani(phonetic), they sell (indiscernible) on the part of Galateri and the Piaggio turn around on the part of Barberis.

Their organization chart wants to stress the teamwork that we expect the whole mark of this new organization.

We have put my position and the really Galateri position in the same box is not exclusive, it shows that we have been playing by and large the same role we are interchangeable.

And then you see highlighted in yellow, the co-operate committee members Barberis, Bosketis(phonetic), the Lumbare(phonetic), Monterino(phonetic), Gatotori(phonetic), Kloremone(phonetic), Fotori(phonetic), and Baresa(phonetic).

We are establishing something, which is inconsistat (indiscernible) legally different.

Inconsistent to seeing not to what is a German type management board.

We want to share in the most decisions while we want to stress the autonomous delegation to then business mangers for the business entrusted to them.

As far as Galateri and myself are concerned I said we are by and large interchangeable but we have clarified to be sure that we have not booked the case (phonetic) that while we will define together the strategies, I will take lead responsibility for overseeing the implementation of the major transactions portfolio activities while Gabriele will oversee the overall group management.

So, with this introduction, let me ask Gabriele to take it further.

Thank you.

Thank you very much, Paolo.

First of all, I have to say that I am very happy to be here for the first time.

Obviously, I will limit myself this time to some very (indiscernible) remarks.

But I hope to be producing (phonetic) to meet most of you at the long road shows and one-to-one meeting.

We certainly are in front of a difficult market in general and for our company in particular.

But the challenge that we have in front is quite exciting.

I think that the first step is to have three objectives in mind, and for this purpose, I just set together with Paolo some priorities.

The priorities are the following: First of all, we intend to pursue aggressively the (indiscernible) of Fiat Auto, which is the main area of constant debate with a view to become a stronger member of the GM federation as Paolo said recently in an interview with the Financial Times.

The second objective, which is quite important, is the reduction of debts.

Complying with the mandatory convertible financial object, we will speak later on.

DAMIAN (phonetic) will explain what?s mandatory convertible is about.

This is really a key target in the financial arena for this year.

The third priority, we can not forget that there are many other businesses in our portfolio, is to develop the other businesses, but with the essential focus on the one that have greatest prospect for profitability and cash flow generation.

This priority on this indication implied several things.

One among the others is that we will keep on with the program of disposing of some assets (phonetic) that you have been informed about those assets in the past.

I would like not to go back to a list of names, certainly we will go on with that target.

You know, however, very well that today it?s the buyer?s market, so you don?t find (indiscernible) easily not the right value for some assets.

We want to continue with that objective but paying attention to the value, and therefore doing the right thing.

I will now leave the floor to Damian (phonetic), but I will be back at the end of the presentation with some final remarks on, you know, the perspectives of the group.

DAMIAN (phonetic): Thank you, Gabriel.

And Good Morning and Good Afternoon to all of you.

As Paolo Fresco mentioned before, we took significant steps in the 2Q towards the objective of (indiscernible)ning our balance sheet.

Later on I will comment in more detail on some of these transactions but let us talk first of all about the discussions of the financial performance of the Fiat group in 2Q.

Let us move to slide nine.

The 2Q was yet another disappointing one for the Fiat Company.

Group revenues declined by nearly 8% with a bulk of the decline due to (indiscernible).

At the operating level we have recorded a loss of Euro127m against operating income of Euro 403m in the given period of 2001 and an operating loss of Euro 299m in 1Q02.

This essential gain realized on the sales of a Ferrari has offset financially (indiscernible), as a result of that income before taxes was down to Euro 28m positive in 2Q.

Net debt improved in the quarter by Euro 814m mainly as a result of the proceeds from the sales of the second Ferrari we have just mentioned.

Let us move to slide ten. (indiscernible) also accounting 40% of the group revenues, it requires performance of activities.

To make up all the difficulties in our automobile sector.

As you can see we have right (indiscernible) the different performance key indicators (indiscernible) also in the all of our business.

Over news, Fiat has also declined its price 15% from 2Q01; it is half by the sharp drop in the Italian auto market.

The operating loss of Euro 393m in the auto sector although marginally lower than that of the 1Q but (indiscernible) significant tolerance to the overall group performance.

In all new sectors of the company, sales revenue is dropped by just 2% reflecting the difficult general economy environment; however, the company?s performance was substantially within expectation and for the part these businesses out performed their competitors.

Together all these businesses generated positive operating income of Euro 267m.

Turning to slide 11, to a more detailed analysis of (indiscernible) operating performance, it doesn?t come as a surprise to you that the main negative element is a (indiscernible) impact of lower volume as you sense (indiscernible).

The number of units invoice decreased by 90 At the same time, these also draw financing activity lower.

Together these accounted for 323m Euro of the total 414m Euro negative swing in operating (phonetic) the results as compared to 2001.

To a large extent these (indiscernible) volumes reflect (indiscernible) made by Jean Carlo and his team to (indiscernible) and Russian allies stepped out of distribution channel.

Nonrecurring expenses (phonetic) were also negative for Euro 135m as might recall after 2Q (indiscernible) from the partial sale of spare parts inventory to a company in order to optimize their minus (phonetic) rent and not just (indiscernible).

I will leave the discussion on the expected results for 2H of the year for Jean Carlo but let me point out, however, that despite the (indiscernible) action plan implemented to address the structural issues affecting (indiscernible) it will be difficult to yield the (indiscernible) of the 2Q to meet the full year operating profit targets states at the analysts? meeting in May.

As I said the operating income contribution of the other group businesses was positive overall and quite in line with our (indiscernible) compare operating income by sector excluding (indiscernible) is of 2Q?s 2002.

Each of these sectors with the exception of Surow (phonetic) remains firmly and positive (indiscernible) however (indiscernible) even more evato were negatively affected by the general slow down of the major market in which Fia operated Europe and in the US main.

The components and other alternatives business were impacted by the decline in their respective markets but they form essentially in line with temporary as last year and Evato van in 1Q.

The (indiscernible) shop increased in operating trend as savings (indiscernible) posted a sharp increase in operating profits as savings from cost reduction programs offset the negative impact of the depreciation of the US dollar against the Euro.

Surow reported an operating loss this quarter but they rule out to remind you that in 2001 you?re purchasing results of Surow excluding the (indiscernible) state games, which has been a practice.

The wheel chair operating (indiscernible) of surow expected a temporary slow down in 9 (indiscernible) activity but limited to the month of May for technical reasons.

On CNH if we move to a slide 13, I don?t think it is useful for you to spend much time on CNH participated in their conference call last week.

I would like to stress on the strong performance of the company?s agricultural equipment business, the successful new projects enjoying better margin and higher price.

Construction equipment conversely continued to suffer from difficult condition in world market.

The approaching (indiscernible) brand reflect these factors as the impact of lower volumes in construction equipments was more than offset by improved pricing and profit improvement initiative.

I would like to point out that all the decline is due to one recurring factor including addition of pension contribution and other one off items.

While synergies and pricing improvements have more than offset the volume impact, let me remind you of course that CNH figures are here on this slide are expressed in US dollars.

But of course and Fiat group IAS accounting principals.

The vehicle as you can see on slide 14 the vehicle in European markets continued their declining trend inmost segments with the exception of Italy where the market is remaining strong due to tax incentives.

Volume in the Europe Iveco maintains his leadership in the light and medium segment and gain market share in the AV due to new product lines.

The operating profit growth experiences the seven quarters mainly comes from lower volumes in light trucks and engines were intense price pressure was offset by efficiency improvements in overhead.

Despite the residual show by Iveco under the current difficult market condition we would expect Iveco to post lower operating income than in 2001 on the full year base.

Let now move on slide 16 to the bottom points of our P and L. adjustment to the equity portfolio of the interest campaigning due to total unseen words equity markets.

The primary driver for the 121m Euro, net investment loss in this quarter.

Net final show expenses were slightly higher than last year that we benefited from lower interest rate in the US and Europe.

This was more than offset by higher average debt and in addition to that net interest income from interest campaigning was lower than 2001 due to lower invest rate.

Finally the group recorded 515 in net extraordinary income in the quarter. $3m in net extraordinary income in the quarter against 158 million in the same period last year.

The 671 million real or net capital gain relies on the stage was partly reduced by restructuring expenses at some of the group sectors.

As the result of that consolidated profit before taxes was slightly above breakeven and the group share in net loss was Euros 34 million.

If we see on page 16, underlies the change in the net financial position.

Thanks to the proceeds from the sales of the 34% (indiscernible) the group net debt decreased by Euros 814 million during the 2Q.

Free cash flow defined as net change in financial position before dividends and capital contributions were Euros 861 million, which means that excluding the (indiscernible) transactions such as the Ferri (phonetic) free cash flow from operation was substantially breakeven on the port.

Of course the net financial position benefited from the (indiscernible) of the Euros against the dollar when translating the dollar (indiscernible) confident of the group net particularly that of PNH, discounted (phonetic) receivable and (indiscernible) 7.3b Euro. 1m Euro left then at the end of March and perfectly in line with last year end level.

As Steve (phonetic) remind you that (indiscernible) factors will have less than impacted a certain part of the year and we should be able to generate free cash flow from operations in the last half of 2002.

As a consequence of that our, on flight 17 (phonetic) our consolidated gross debt position has improved significantly during the quarter from a easeful (phonetic) reduction of our cash position as we will see on the next slide, securitization of financial receivable and through the free cash flow over the period mainly originated by the proceeds from the sales of (indiscernible).

The slide 18 summarizes our net on debt structure at the end of June.

Short-term financial asset plus cash and marketable securities at 17.6b Euro comfortably exceeded short-term debt at 12.6b at the end of the quarter.

The cash and marketable securities position was done by approximately 800m Euro from the end of 1Q to 4.8b Euro.

However, this of course provides with a comfortable liquidity base.

Let me now turn on 19 for a few of the major transactions carried of in the quarter to strengthen the balance sheet.

We?ll not guess for all of the dealers, but we?d like to provide you with small visibility on the mandatory convertible and the Italian transaction.

As the CNH capital increased under the status of the Ferry State, our purchase carried forward.

On slide 20 you may have the main features of the mandatory convertible.

The proceeds is $3b and will be used to turn out short-term and medium-term debts, thus providing us with a financial flexibility Paolo Fresco was mentioning earlier.

But more important on slide 21 we?ll like to insist on the financial objectives of the mandatory convertible facility.

As you know we?ve committed to reducing our net financial position to 3b Euro and our debt position to 23.6b Euro by the time the 2002 consolidated statement are approved and to retain an investment grade rating.

For the purpose of meeting this financial objective, net financial position will reflect not only cash proceeds from firm asset disposals, but also the proceeds from the Italian Ligia Food Financing, which is discussed in the next slide.

Used by the amount of the proceeds from any commited disposals including debt (indiscernible).

Our debt projections targets from now are expressed on that basis.

We also know about our objective to reach 3 billion net financial position as calculated above.

The commitment allows from 20% flexibility i.e. Euro 3.6b.

Should base objective of Euro 3 billion not be met further disposals would be required and conversion would be accelerated.

Regarding the Italenergia transaction on slide 22, you are already familiar with the terms of the deal I think.

We have received proceeds of nearly Euro 580m from the sales of 14% stakes (phonetic) and we have good (indiscernible) for our remaining 24.6% stake with a floor of Euro 1.150b.

Through financing, we will be receiving cash against the full value of these (indiscernible).

In the 2H02 and as mentioned this cash will be included in the calculation of our net financial position with regard to the mandatory convertible objectives.

This represents a significant premium to the value of Italenergia and now as well as a considerable immediate cash infusion.

I will now pass the phone to Jean Carlo to discuss with you the situation and outlook.

Good morning gentlemen.

Lets go through the fifth half proposal and follow to the key drivers breaking loss driven by low volumes, building a 1000 vehicles less compared to the same period in 2001.

Cost reduction action plan in fact, you will recall when we met on another occasion we had introduced an immediate action, we call it immediate action plan which is worth 566 million Euro and then for different kinds of maintenance and developmental cost improvement, reduction of our strong support warranty cost, we are on track and we have been reaching in 1Q approximately 20%-22% of that problem.

Then reduction in inventory is in schedule due to low volume.

Chart 25, let us have a look to the 1H market scenarios, there is nothing new I guess Italy is 13.4% and Western Europe is what we would expect and Brazil nothing different compared to what is know event.

Chart 26 you will see our car market share where we are talking about Italy, we (indiscernible) 31.9 and then stabilizing at that level being reduction due to the market segment, the (indiscernible) segment, is relatively going down much sharper than other segments.

And declining of quality of sales so that the status of bad debt (phonetic) is down to 40% compared to the last year.

Same happens in, in, in Western Europe where we have been (indiscernible) those sales to 41%.

And, then Brazil maintained its leadership at 26.5%, feeling (phonetic) a bit of competitive pressure from the segment (phonetic) viz.

General Motors and (indiscernible).

Slide no. 27 (phonetic).

An important sector which is not irrelevant in the market today (phonetic) is representative Europe by light commercial vehicles which is not just a niche with thumping (phonetic) which is worth couple of million of (phonetic) where we have been reaching an outstanding position in Italy with 43.8% improving from the 42.5% in the 2H of last year.

And, then maintaining our position in Europe with registering a great success of vehicle Dublo Cargo (phonetic), which has been lately launched in Western (indiscernible) - the fiscal (phonetic) product range and successful in terms of profitability.

Slide No. 28.

This is the key area, and our strategy is new and used vehicles inventory. (indiscernible) starting a very strong action in taking down inventories both owned and dealer (indiscernible) inventories and used-vehicle inventories.

Fortunately, when talking about (indiscernible) times, we can see the impact of that sharp action is going to get results and starting from July and then saw we had a good result end of October.

Talking about used-vehicle inventory, we are down from 99,000 to 88,000, but the action is plan to deliver extremely good results and going to approximately half of that level by the year end.

July 29, we expect to claim some demands.

Okay, Italy continues declining.

Western Europe is even a bit sharper than Turin?s 7%.

Recovering bond about stable in Brazil. (indiscernible) expected market shares that has before stabilizing on (indiscernible) 2% on the Italian market.

Western Europe growing (indiscernible) merchandizing that I?m talking about, and this will be affected by the launch of a new model.

Stilo Station Wagon will be launched in October, and Alfa Romeo will release the (indiscernible) mostly due to newcomers slacks (indiscernible) reaching market-by-market (indiscernible) organization.

We are doing commercial actions, meaning and in preparing with them for the dealers sharing, how to manage, and it was a rolling action, which is probably in July, and we see various start to invest the ordering is growing by 10%-15%.

That doesn?t mean every thing will be like this, it will decline.

We will be maintaining all shade of the market (indiscernible) 531.

So stick on that 2002 we will, in terms of profitability, we will review of the operating loss more than the level of 50% what has been in the H1 and this will to in spite lower than originally anticipate to save volume market, share, and demand but mostly there will be cost reduction.

As go back again to the program, we launch immediate action plan and mention that in the 2Q, 20% of that problem I think was $66m in the area I explained model vehicle refocus in the international (indiscernible).

So we loss something but we were actually we will compact what we will miss with the action did identify the time so get its amount of 400m Euro which we will benefited 2Q that would be helpful with production cost reduction to reach the break level a loss than 50% that we will discuss in the next call.

In terms of cash flow we will generate the positive cash flow and this will be mainly due to the production cost we reducing than.

Talk about the short actions really to give another 75,000 (indiscernible) approximately and then the strong actions used vehicle which will give us a level of 40000-45000 units from that of February of 19000, would you talk of the year?

Okay, thank you gentlemen and now before we take your questions let me wrap up for final remarks.

First we certainly are not receiving any new amount, it is particularly difficult market environment if you know and we worked hard to carry out the goals of recovery plan.

We have been excited (indiscernible) mainly of the growing (indiscernible) markets including construction and represented facts, a structuring form a down cycle.

As referred from (indiscernible) we are absolutely determined to implement the extremes in the action plan to get out which will start to show benefits in the later part of this year.

Cost accounting actions have been very congenial we are determined and stronger.

Though here also we are not expecting any major market reversal, but we hope that the recently introduced incentive symmetry will help support the consumer standing and stabilizing the market.

More importantly we are convinced that we are taking the right steps focusing on the recreating a healthy distribution structure.

Each of the groups of eight units has been given the clear priorities for the coming quarter.

They must focus on generating greater operating cash flow and the reducing the debt liability.

At the group level we are waking on achieving it for the 2H of the year.

It is essential for (indiscernible) either.

Therefore maintaining for the full year the same level of operating loss of the 3H.

We all know that this is a challenging objective; however, we expect continued positive operating income from the other sectors (indiscernible) get all those remaining losses.

To conclude I would like to start (phonetic) that I found here in the sector as well as the group level, things (indiscernible) global (indiscernible) difficult movement that Fiat is facing but then I am convinced that the Fiat group will once again create value and going at (indiscernible).

My colleagues and I are now ready to take your questions.

Thank you.

Today?s question answer session will be conducted electronically.

If you like to ask a question on the phone lines today press star 1 on your touch tone telephone.

Again if you would like to ask a question on the phone lines today press star 1.

We will take our first question from John Luca (phonetic) Credit Suisse first Boston.

Question And Answer Session

(Q) Good afternoon.

Three questions if I may.

The first one on your operating income target.

If I properly understood you are looking for an operating loss for Fiat (indiscernible) of Euro 1.2b and (indiscernible) Euro 15 compared to your previous target, the operating loss target for the Company (phonetic) is around 600m Euro higher, but for the group is only 400m Euro higher.

Where do expect or why do you expect it to improve in which sector?

So, that is the first question.

The second question is on your debt reduction target.

Is it correct to assume that your new target for 2002 and balance consolidated debt is something in the range of 4.5b Euro that means 3.5b Euro included the flexibility plus 1.1b Euro and 1.2b Euro of the quarter, and the last question is on the net working capital.

I remember that you blamed in 1Q on seasonality for the increase in net working capital and 2Q net working capital improved by only 11m Euro.

So, if you can you elaborate on this?

Thank you. [John Luca (phonetic) ?

Credit Suisse first Boston]

(A) Well, I will not answer to the debt reduction topic and I would like to (indiscernible) net working capital then Charles (phonetic) will say something on the operating results and then Mia (phonetic) will say something.

I think you are close to our targets when you mentioned the indication of the (indiscernible) reason at the end of the year, we consider that the actual position should be around 5.8, 4.8 sorry and which we will deduct the transaction and so, we will be around the depleted level that has been indicated.

May be Damian if you want to elaborate on the operating margins.

By me this is (indiscernible).

I want to remind you that when we were speaking of our next best targets, we were assuming that we would be able to book via (phonetic) transaction entirely at the sale.

Now, we are having (indiscernible).

We have four banking targets.

It is the sale.

For the normal reporting, it is not (indiscernible) make for the difference for that one billion (phonetic) price between the three and four and a half (indiscernible) as was mentioned before.

(Q) Okay. [John Luca (phonetic) ?

Credit Suisse first Boston]

(A) Yes.

It?s Damian on the first question you asked.

While we expect some improvement coming from (indiscernible) other sectors such as Fiat Auto and the component side of the Fiat but let me put in the best way, when we announced the (indiscernible) the forecast of the company (indiscernible), we include some difference in terms of so, you are right in saying that now what we are saying is that the global target we have for the full year would be in line with the results of the first (indiscernible) of the hearing that is below the non (indiscernible) for by approximately Euros 400 million.

(Q) (indiscernible) on the net working capital into two? [John Luca (phonetic) ?

Credit Suisse first Boston]

(A) Well, they are not working capital you know that we usually have unfavorable (indiscernible) the first half of the year and then the second part of the year which is very favorable.

On the year-over-year as John (indiscernible) explained you will be 4.

We have launched a very strong action plan for reducing the level of the inventories either of the new car or either on the used car.

So, this year we expect particularly some decrease on the working capital on the second part of the year.

(Q) Thank you.

We will take our next question from Stephen (indiscernible) from Merrill Lynch.

(Q) Yes Kathelin (phonetic).

I wanted to just (indiscernible) could give us more guidance about the channel links in the 2Q.

What progress it has made in terms of increasing the proportion of direct dealer sales and decrease the, if any registration and keep business? [Stephen (indiscernible) - Merrill Lynch]

(A) As far as the channel mix we have introduced the task force to improve it and then what we can say that in 2Q we get substantially, (indiscernible) by Italy and remaining countries of Europe, as far as vehicle is concerned.

We have reduced substantially the sales registration 30%, 40% and then rent a car stage that we half went in that stage and we reduced about 40% sales registration. (indiscernible) the year up the channel registration is completely frozen and rent a car would remain at the same levels of last year.

(Q) Is it possible for you to quantify somewhere there about the, I mean how much you business you faced turned away from, what is the business you turned away? [Stephen (indiscernible) - Merrill Lynch]

(A) We turned away the sales registration business, in any case what we have been loosing share of the market it has been let us 3% points, we lost point we lost in 2Q at least (indiscernible) if considering that we are running at 4% line.

(Q) Thank you.

We will take our next question from John Lawson ?

Salomon Smith Barney

(Q) Thank you and good afternoon, I wondered first of all whether I could ask you to comment on cash flow at the Fiat Auto unit and perhaps enlighten us on the level of debt within that unit at the moment and secondly, could you just tell us the what the size of dollar denominated debt is and how has that changed a lot in the recent reorganization you have done?

The finally, if I could ask you on the used vehicle numbers in the (indiscernible) in both Fiat auto and (inaudible), I was not 100% sure of that negative impact in both of those, can you just elaborate? [John Lawson ?

Salomon Smith Barney]

(A) Well if you, with respect to the comment on the cash flow, the first half of the year for Fiat Auto (indiscernible) Euro 153m then we have the cumulative loss of Euro 1.1b then the variation of the working capital has been negative 134m then we have balance payment dividend to (indiscernible) for 42m and then register the exchange rate, conversion exchange rates on financial position were approximately 100m then getting out (indiscernible) 2b in Europe.

Thank you.

And our next question comes from Stabin Zamal of (indiscernible).

(A) No I think we have not given the other answer to John as far as the dollar debt amount is concerned.

So, to answer your question first of all, John we have reduced during the quarter the dollar debt through the (indiscernible) we have made to CNH of $1.5m approximately.

So, that will reduce the amount of debt by approval (phonetic) half in dollars.

Having taken back into account the CNH net financial position, remaining net financial position is approximately $4b.

(Q) Understood.

(A) And but you have in addition to that a net debt in dollars, which is may be you remind that, hedging the GM shares.

As you know, we have maintain a little bit more than US $2b in front of the GM shares we have just to hedge the dollar risk of the GM shares.

There was company rated to the evolution of the inventory used vehicle.

We have been starting with approximately 100,000 units as of the beginning in 2002.

And we are at the end of the first half of the year 88,000 so it represents 80 million Euro to reduction in inventory.

Where (indiscernible) is concerned (indiscernible), essentially we had assumed that we are going to be able to improve the channel mix of our used vehicle sales.

We have effectively (indiscernible) current market conditions (indiscernible) it was more difficult then anticipated and therefore in the 12 billion that you see there is 1.5 billion which has been realized on used vehicles and 10.5 billion which is an additional standing to a buy back provision.

(Q) Thank you.

(A) John, just to correct what (indiscernible) speaking just to correct my numbers because I gave you the gross financial position is 2.8 after the dollar debt of (indiscernible) after the capital increase 2.8.

(Q) Thank you very much.

And we will now go to Shabim Zamal (indiscernible).

(Q) Hi good afternoon Shabim Zamal speaking, would you be kind to give us the net cash position of your insurance companies, as I remember net cash position of 1.8 billion at the year end of 2001.

Second, Would you be so kind to give us production movement at Fiatal first half 2002 versus 2001.

How much in percentage points you cut production?

And thirdly I didn?t quite catch the explanations for Fiatal to cash flow.

As I understand there?s roughly 800m Euro outflow in 1Q.

What happened in 2Q?

It?s my fault I didn?t quite follow. [Shabim Zamal (phonetic) ? (indiscernible)]

(A) To answer your first question, the net financial position on the news press (phonetic) business we?ve.

The number is 1.3b Euro.

Let?s remind you that we?ve the insurance businesses that pay an extraordinary dividend to the Mother Company.

So, the number you?d in mind 1.8m was the right one before the payment of these dividends.

So, we?ve now decreed that financial position by approximately 600m.

The outlook for first quarter was about 500,600 units.

The second quarter was 439,000 units, compared to approximately 560,000. (indiscernible) quarter of 2001. relevant reduction if you do consider 2Q versus 2Q?s 100000 unit sales.

And what we are doing, we are planning a much larger number shop-day (phonetic) times that we will send according to our ssles (phonetic) revolution, not alone to get the burdened with higher inventory level.

To answer your question about the cash flow on the comp business, I would say that on the 2Q the Fiat (indiscernible) had a negative cash flow of approximately Euros700m.

Negative cash flow.

This is less than in the 1Q; that?s the good news.

And, let me remind you that, as GIAN (phyonetic) CARLO (phonetic) mentioned it before, we expect the cash flow of the comp business to be positive on the 2H of the year to offset that cash burn.

And, this is mainly due to a very strong inventory reduction either of the new cars and either on the used cars.

(Q) You don?t maintain your targets you gave us in May of having just a net cash burning of 1b?[Shabim Zamal (phonetic) - (indiscernible)]

(A) No, that would be, excuse me it?s more realistic to pay back.

The current auto world exceed the little bit, we don?t think its very significant change that number but the cash burn we slightly exceed that number.

(Q) Thank you.

Our next question comes from Masthimo Vaccio (phonetic), Inter Montec (phonetic)

(Q) Good afternoon, I have three questions, the first one is on 3b mandatory convertible, can you clarify who decides the conversion as I understand if mandatory conversion in the case you will satisfy debt reduction target you can pay cash otherwise it?s a conversion?

The second point is on the General Motors deal, what does it mean exactly become stronger than the Gen federation.

Stronger in the sense that you will improve your financial results or did you will revise the corporate deals in the structure of the deal?

And the third question is, should you give us an update on (indiscernible) disposal? [Masthimo Vaccio (phonetic), Inter Montec (phonetic)]

(A) As far as the mandatory conversion is concerns; the conversion means that Gen federation (indiscernible) payment normally will take place through the conversion of loan in to share.

I am not to be in a position to payback retail, just loan containing in investment grade.

As far as the above q0uestion concerns (indiscernible) going to bank.

We are committed to buy 51% of the Company in order to reconsolidate approximately 89b Euro of gross debt and there are also talks with other banks in order to achieve our objectives by selling about all the (indiscernible).

As far as the GM deal is concern, probably I would like Paulo (indiscernible) in order to be precise.

Yes, this is (indiscernible).

You know a stronger member of GM constellation outside the (indiscernible).

He wants to be stronger and the likelihood is that we will continue to do it in the context of a deepened corporation with General Motors.

I think the forms that may take really relevant to the fact or stating our objective.

There has been a lot of discussion about, you know, (indiscernible).

There are many ways that we can strengthen our corporation with GM which might neither beyond to the (indiscernible).

It is not zero or 100%.

There are number of ways to improve our relationship and certainly, the one that we are already pursuing is to stop working on common platforms but the bottomline is we say we want to become stronger and being stronger is improving our operating results using the GM corporation. see that any kind of stronger deal, like for instance, the Northern merger will make easier cost reduction or is just a formal act and doesn?t change anything? [(indiscernible) ?

Intre Monte (phonetic)]

(A)(indiscernible) we will know that.

I don?t think that anybody should proceed all formal acts, which do not change anything.

I believe that cooperation can be achieved by being separate.

They can be achieved by being merged.

The real point at this stage is that we want to get strengthened.

We want to keep our options open.

(Q)Thank you very much. [(indiscernible) ?

Intre Monte (phonetic)]

(A)Thank you.

(Q)Hi, thanks and two questions.

One with regard to the mandatory convertible and then a second one on the Italian car market (indiscernible).

First on the mandatory convertible, is that covenant of $3b something that is effective from the two-year period from the middle of next year all the way out to 2005 or is there only that one-trigger point?

And related to that, I think Paolo Fresco at the beginning, you mentioned that you are almost viewing that as very much committed capital.

And I?m wondering if you look at the company in a few years, do you expect to have a stronger capital base and now is just the wrong time to try and finance that or is that part of the longer-term strategy to more equity?

And then the second question on the Italian-centered Of program, could you give us a quick update as to what you see happening in the market, your competitors have gone much more aggressive and trying to push the price in Italy, can you just give us an update there?

(A) As far as the timing for the financial objective, it has to be complied with by the time of the approval of the balance sheet of 2002 so, it will effective from March 2003 on and for the long period.

As far as the equity is considered (indiscernible) that this is something that is very likely will be transformed (phonetic) into equity I think that is having a stronger equity base and it is going to be the positive for the Company.

So, we consider this deal as an operation that strengthens the structure of the balance sheet.

As far as the incentives are concerned.

Let me add my comment competence subject.

Today this is equivalent to equity in the sense that the bank had obliged for making indiscernible) and the only reason why it will be postponed would be the results are so good bye year 2005 and there is no need to do it.

At the market as such that we want to raise new equity, we might believe a better condition.

So I mean frankly the best of both worlds, we know that we have this equity available and if we perform well we will not use this equity but most probably we will be able to go to the market and raise new equity a better condition.

That is the way I look at that.

Forget about pricing pressure I would say that right from the beginning of the year our first sign that the Italian market was declining sharply when pricing pressure was very high, comparison by competitors was really high.

Then it did get down so that we have been living for 2Q in what you say in fixed time but the pressure wasn?t higher than normal tradition.

Now with the equally extensive, there is a bit of confusion because of some competitors are bubbling the incentive, some other are crippling the incentive.

We feel it just like the beginning that we recorded (phonetic).

Great thanks.

Now we go to Michiana (phonetic)- Commerce Bank and Securities.

(Q) Hi, I have two questions.

Do you provide us update on how much unused credit line you have and if there are any ratings triggering the financial governance and the second question is the regarding FLY-21 (phonetic), now you have this entire energy and 20% reflects margin of error.

What is the significance of the 3.0?

Is there any reason for secondary as opposed to 4.5 (inaudible) like that? [Michiana (Phonetic)- Commerce Bank And Securities]

(A) Maybe we can answer your first question and in the end second.

As long as your first question is concerned we do not have any rating figures or any financial (indiscernible).

In terms of mainly credit lines that have been available the number basically remains substantially same since the beginning of the year.

In terms of the some of committed credit lines that the one we typically refer about, as the number remains well above the Euros 4b that we have mentioned in (indiscernible).

Roughly there would be no significant change in the last quarter.

(Q) Okay.

(A) I think you have a second question.

Could you just clarify your second question?

(Q) I am trying see what purpose, are you basically assuming three billion of the midfinancial (indiscernible) target as opposed to higher number including that there is 20% margin in Italenergia.

I am just concerned if you have taken (indiscernible) moving the reduction target higher than previously? [Michiana (Phonetic)- Commerce Bank And Securities]

(A) No, I think let me just clarify (indiscernible) before.

I am not sure that we are changing the target for FY02 to 20% Is the one (phonetic) reduce it to 20% basically only means that before converting and only then just before converting, the banks (indiscernible) so it is not the number, it is 30001 they converted (indiscernible) but they give us 20% (indiscernible) and that will change the target.

The target remains $3b and we would ask (phonetic) to sale additional offset if we don?t reach these targets.

Under the (indiscernible) aspect, the number has not changed but (indiscernible) for the very simple reason that the $1.1b (indiscernible) it will get in financing assisted by a group.

Essentially if no request (indiscernible) us because if we decide not to rebate (phonetic) we can just (indiscernible) the shares.

So I think the number have substantially changed, it was originally (indiscernible) first to indicated (indiscernible) and between us and the bank (phonetic) basically remained (indiscernible) option not to rebate is entirely up to us.

(Q) Okay.

I (indiscernible) quite often that the (indiscernible) to other potential (indiscernible) functions for your $20b new financial position? [Michiana (Phonetic)- Commerce Bank And Securities]

(A) No I think we can only, when we talked about assets (indiscernible) proceed from asset based that has been already closed but basically only means that assuming we are on December 31st (phonetic) and we are signing a contract which is binding but they are still waiting for down pay transfer solution and (indiscernible) that?s coming general (indiscernible) then it would be unfair consider this amount or at least may be you would not get into right picture.

So, that is basically what it means when we say binding contract is not (indiscernible) we are going to sell company (indiscernible) at discounts.

So, as to be a binding contract only exempted to a certain precondition, which is not depending on either us or the buyer.

On the follow up, you mentioned the possibility of selling other pieces of the business.

As I said in the beginning we are not going to change our strategy, which is as also the awareness affirmed to concentrate in our core businesses and dispose of the business is that we do not have the characteristic of providing long-term value to our share owners and but the point is that now we have gained the time to build on our schedule.

We are going to do it if we sell at the right price.

We are not going to be involved in the fast sale and so it is possible that some of the assets that originally earmarked for this position might be made in our portfolio for a period of time.

If that is the case it is because we will improve that profitability or serve them better (indiscernible).

(Q) Okay.

Thank you very much.

Our next question comes from Derek Ferguson from JP Morgan.

(Q) My questions has been answered.

Thank you. [Derek Ferguson - JP Morgan]

Thank you, we move along to Dean (indiscernible) Marcino from (indiscernible).

(Q) Good afternoon to everybody.

My first question is that is it possible to quantify the impact of Latin America businesses there on your provision (indiscernible)?

Second one is difficult formation, I just want to understand that if in the Europe Euro 3b target was met at year end, did you include debt (phonetic), I don?t know the present value of Italenergia option?

And last question concerns the investments plan because in your presentation you have said that you Fiatauto was able to self finance more than Euro 2b of CAPEX a year, is it something that probably after the downward (indiscernible) is not possible at least in the short term, could you elaborate? [Dean (indiscernible) Marcino ? (indiscernible)]

(A) I will just answer through the questions concerning Italenergia.

Yes, Italenergia also included that in the calculation of the net financial position at the end of the year.

As far as the other two questions are concerned I think my colleague can give you better answers.

On Latin American I would say that we are talking mainly about Brazil because we in the previous forecast we did not expect a loss from Argentina because the prices in Argentina were already (phonetic) expected.

As far as Brazil is concerned the market is down and we expect to be down again the main sector to be involving that and penalized by that will be the Cowm (phonetic) business, and we have revised our previous forecast on the Com (phonetic) business by approximately 70m Euro for taking into account potential prices.

(Q) You are talking about DV (phonetic)? [Dean (indiscernible) Marcino ? (indiscernible)]

(A) Excuse me.

(Q) You are talking about DV (phonetic)?[Dean (indiscernible) Marcino ? (indiscernible)]

(A) Yes, operating results.

(Q) Okay.[Dean (indiscernible) Marcino ? (indiscernible)]

(A) That?s right.

(Q) So, that was 150 at the beginning?[Dean (indiscernible) Marcino ? (indiscernible)]

(A) Well as far as the capacity for Fiat Auto to sell (indiscernible) which was of course in our plan, it will be declared (indiscernible) conditions right at the beginning (indiscernible) they have been changed.

We did realize that.

Our action plan especially concerning cost of action at all level should not be (indiscernible) conditions about what we are elaborating these days.

It is a much stronger action plan on cost cutting and the inventory reduction, further inventory reduction for (indiscernible).

I will say that we can maintain our product plan with the acquisition of (indiscernible).

Thank you.

We will move on to Steve Garvaldi (phonetic) with Ali-am Strasenar (phonetic).

(Q) Yes, hello.

The first question is if I look at your net financial target Which you have to meet at 3b in your currently and roughly 6.

It seems to me like you are going to have to sell these subsidiaries come any price.

I mean if you have got a target for the end of the March, you are going to have to sell roughly 2.8b at any price to meet that target.

Or, do I, am I missing something here? [Steve Garvaldi (phonetic) - Ali-am Strasenar (phonetic)]

(A) I must admit we have been good in communicating, this is Farlo (phonetic) Fresco (phonetic).

Let me repeat it.

First of all, we had it at 5.8 (indiscernible).

We believe that what we know, we have agreed that, for the purpose of this target the entire (indiscernible) will account.

So, down from 5.8 we go down to 4, 4.1.

Then you have operating cash flow, that we will make for a good portion that have difference up to 3.

Now, that?s where we know that we are comfortable, that by these two initiatives we are going to get close to that 3b; certainly within the 3.6 allowance.

But we don?t want to stop there, but we don?t have to sell.

We don?t have to sell at any price as you said, absolutely.

I mean, in fact this package of actions that I have described at the beginning of the meeting, that brings us Euros5.7b made us in no need to rush in this area.

Now, obviously, if our projections operating cash flow while complete than when it started, but today we feel computable in this.

Let me add another feeler rather, which I think is important.

You can count, you just speak of a target of $3b and it?s correct, but keep in mind that lets assume that we don?t reach $3b target.

It means that basically we have no bad debt.

We?ve no net debt, because $3b is equivalent of the convertible, which as I said is our option equity.

(Q) Okay.

But would it mean you?d have roughly $1b after the Italenergia sale to compensate either through cash flow, or through asset sales? [Steve Garvaldi (Phonetic) - Ali-Am- Strasner (indiscernible)]

(A) We?ve already made it very exact.

(Q) I mean you gave an expensive cost reduction plan in May.

Can you update us on that on what type of cost reductions you?re planning for the entire group through the year to give us some targets to work on going forward? [Steve Garvaldi (Phonetic) - Ali-Am- Strasner (indiscernible)]

(A) As I said before as far as 2000 is concerned there?s a long list of actions gained.

Part of this was called an immediate action plan.

They?re moving from warranty cost saved by used resale market manufacturing, product cost, financial achievements.

(Q) Is everything you said in May is that still on track and you still hold those targets that?s my question? [Steve Garvaldi (Phonetic) - Ali-Am- Strasner (indiscernible)]

(A) Ya, we are rightly on track.

We did in 2Q, we had realized 20%-22% of debt program.

We are still working on debt program to find out new actions and then something is missing the area of 40m to 50m, but (indiscernible).

So, it continues but we are rightly on track.

(Q) Okay and ?[Steve Garvaldi (Phonetic) - Ali-Am- Strasner (indiscernible)]

(A) As far as the rest of the book (phonetic) is concerned I mean I don?t know (indiscernible) but where they are going to show you that the cost reduction will be a target and engagement (phonetic) for the entire group including the corporate headquarter.

I think that with the numbers we presented there is no other choice then to pursue a very strict cost control action from all of us, including as I said the top part of the group.

And it can add it up to (indiscernible) since I joined the Company one month ago, but we consider stating (phonetic) in terms of investment controlled in the future and working capital control.

We simply cannot afford to leave any area of non-sufficient (indiscernible) in terms of control of this area of that peak cash.

This is a very strong determination on my side but I would like to say that the first talks with the other members of the corporate committee show that if there is an engagement everyone (indiscernible).

(Q) Okay.

One final question on Steelo (phonetic), can you give us any indication of what your planned volume numbers are in the Steelo (phonetic), and if they are working with your dealers?

You are able to maintain the profitability of that car or are you happy to introduce more low stripped version as percentage goes to maintain your volumes on that car? [Steve Garvaldi (Phonetic) - Ali-Am- Strasner (indiscernible)]

(A) Well as you know we have running these base around 210,000-215,000 units and we are going to launch the special Wagon in October so we possibly reaching the speed in early next year with addition of 80,000 cars.

We have been stable in profitability of the car we are introducing gradually by fabulous starting on October.

Can you achieve our some of the vehicle, which has been de-competitive for some component leveraging (phonetic) some features so we will reach full speed I guess in 1Q next year and we will see the in fact of those let say lower end versions.

(Q) What percentage do you expect of lower end versions to account for of total sales?

And what range of profit on that?[Steve Garvaldi (Phonetic) - Ali-Am- Strasner (indiscernible)]

(A) 20%-25% and then in the level of profitability it does correspond to the average of their range is up-to-date.

We are making a bit of, we are looking to registration rate now.

We have been making steady but not too much but steady improving our share of the market in Europe while we (indiscernible) Euro in Italy.

So , we are reaching there in that area but we are going improve our position there through our marketing policy.

(Q) Okay but the profit will be average for the entire range?[Steve Garvaldi (Phonetic) - Ali-Am- Strasner (indiscernible)]

(A) Yes the profit will be average for the entire range.

(Q) Thank you very much.

We will go next to Machs Verberton (phonetic) ?

Goldman Sachs

(Q) I just have couple of quick question with respect to Fiatauto, on the restructuring plan that you presented was to some extent evolutionary just on the cost of the business, can I ask how close is it to something more profound being considered, I mean you will (indiscernible) particularly is down over 20%, you know three plants are producing that model, what do you think about reconsidering that? [Machs Verberton (phonetic) ?

Goldman Sachs]

(A) We did, what we said there is that we are going to (indiscernible) and of course I agree with you that producing the model in three plants does not make much sense but this is reality.

The situation is being worsened as I said before.

We are examining much stronger action over there and how we use the capacity (indiscernible) for the entire Company.

(Q) If you were to reach a decision, is it possible to (indiscernible) here or is it going to be so complicated that it needs to be pushed out through 2003? [Machs Verberton (phonetic) - Goldman Sachs]

(A) Could you repeat the question.

(Q) If you were to reach a decision, is it possible something to (indiscernible) this year or is it such a complicated issue that it may take longer than that to reach any agreement? [Machs Verberton (phonetic) - Goldman Sachs]

(A) Well I would say that specifically you can identify (indiscernible) with dozen men we are going to shut down the plant forever.

There are a lot of possibilities to be more flexible in using capacity.

So, it?s complex and has to be dealt with cautious on this subject.

We have the general comment.

I think this idea that equally represents a rigid label market frankly is sort of a legend (phonetic) is not true.

There are a lots of built-in flexibility within our system that make it much more flexible, for example, Germany or France.

(Q) Just a second question.

It is another one on the old (phonetic) side.

One of the Mr. (indiscernible) point is splitting Fiat Auto into a Fiat (indiscernible) group.

Is that still being pursued actively or is it something that in some ways (indiscernible) expenses that have to be deferred to a later date?

Is that plan belong to (indiscernible) unit? [Machs Verberton (phonetic) - Goldman Sachs]

(A) Well, it was not just for implementing the (indiscernible) said that business of the brand and I will say that this is going on very well and we will say that the focus of the management team?s each of them directed to all of them brand and will start and it does start delivering result with the take away time of course but we are strongly implementing.

One key aspect is that they are talking about the dealer development and we are heavily busy with dealer development and I will say that a distinctive Alfa Romeo given that is under construction and we feel that?s a good point for this sort of organization.

Operator: Could I ask you that the let me not just the one question please but a few questions.

Sure, thank you.

(Q) One quick question on the cheaper version of Cielo (phonetic) that you are going that you said you are going to introduce or in Germany you have already announcing on that car at a price of roughly 9000 Euro if I remember correct and that pricing something that you would say take all over Europe or what would it be? [Eant Elingforce (phonetic) ?

West Elbe (phonetic)]

(A) For what I know lets see a version of (indiscernible) Euro does not exist in our product and I will be sorry for that.

I would say that when talking about the lower end version it is I would say it is starting from 15 (indiscernible).

This is the minimum price for the lower end of the rate and we will have different version across Europe though when the sale at (indiscernible) lower end depends on many things whether (indiscernible) sort of consensus drawn but basically they are profitable and as I said before, the profit from the lower end is average on the (indiscernible).

(Q) Okay then may be I missed something else. [Eant Elingforce (phonetic) ?

West Elbe (phonetic)

Our next question comes from Marcus (indiscernible) PMP (indiscernible).

(Q) Good afternoon.

As you critical forecast for chapter 2 for 2002.

Given to the (indiscernible) market (indiscernible), could you say few words, I know it is difficult, but could you say few words about what you expect from 2003, even if you give us on your range of in terms of operating income? [Marcus (indiscernible) ?

PMP (indiscernible)]

(A) Well I would say the market is (indiscernible) doing pretty.

What (indiscernible) willing to see is what is fairly shared by all European manufacture that means (phonetic) no recovery in Europe, basically no recovery compared to 2002 but I am sure the market is where (indiscernible) already being declaring stabilizing our shares in markets for 2003.

We will launch couple of new vehicle so that (indiscernible) launching or a couple of new vehicles, we won?t foresee a increase in share of the market.

As far as profitability, we?re trying to make proper calculations.

(Q)(indiscernible) question about retailers unfunded part of the pension fund of the end of 1H, please. [Marcus (indiscernible) ?

PMP (indiscernible)]

(A)Can you repeat the question, sorry?

(Q)Yes, unfounded part of the pension fund at the end of 1H. [Marcus (indiscernible) ?

PMP (indiscernible)]

(A)There?s no such thing.

There is no unfunded pension fund.

May be we can have a common (indiscernible) from CNH.

Yes.

(Q)To that which I mentioned? [Marcus (indiscernible) ?

PMP (indiscernible)]

(A)Yes.

As you know, the pension fund for CNH is detailed in the 20-F we recently filed in terms of its funding status.

That as of year-end 2001, we do not update it on a quarterly basis.

And the US plan is slightly under funded as detailed in the 20-F.

With the present movements in the financial markets, which are going against us in terms of the investment rate assumption on planned assets, we are not required to make any contributions to the plan of this year but if we do not have any contributions to the plans this year and the markets remain flat our pension cost could increase by up to $30m for the next year.

If we contribute to the plans we could reduce that cost.

(Q) Thank you very much.

Our next question goes to John (indiscernible) of (indiscernible)

(Q) Good afternoon.

I am not sure if you could just help me for a guidance (indiscernible) because although you address some estimates.

I wanted you if you could just clarify and perhaps you could try and give us range for 2003 (phonetic).

In May you said that if you were to take 2003 and 2004 together. how it would be profitable.

Can you make any further comments? [John (indiscernible) ? (indiscernible)]

(A) Well, We have said but (indiscernible) 2003 being plus minus breakeven and of course that is said before the situation is worse than we have been discussing today.

Probably start of the year, next year will be a less favorable in any (indiscernible) we have been mentioning that we are going to develop much stronger along corporate actions (indiscernible) speaking.

And, on these things I can not detail much more because it?s a delicate situation.

But we are working very hard to basically reduce our cost basis.

And, with this trying to maintain what we just say last year performance (phonetic) (indiscernible).

You know, as I have said, there are no compelling reasons to change our objectives.

I think we don?t want to engage in estimates when there is such an uncertain market situation.

But there are no reasons why we should change what we have said.

(Q) Okay.

That?s (indiscernible) free for all.

What are you saying the 2002 (indiscernible)?[John (indiscernible) ? (indiscernible)]

(A) I think that, as you have seen on one of the slides, that has been presented in Damian (phonetic) Camos (phonetic) speaking, by (indiscernible) Carlo.

We have given some guidance to you on that.

I don?t think that we should give other more precise guidance.

This is what we have seen on the slides.

(Q) So which slide do I look at? [John (indiscernible) ? (indiscernible)]

(A) Number of the slide is, let me, it?s page 31 where the guidance we have given is expected operating loss in 2H of the year significant endeavor (phonetic) than the 1H.

(Q) And, positive cash flow in the 2H of the year is that correct?[John (indiscernible) ? (indiscernible)]

(A) Ya, that does applies.

(Q) There is another question and that is part of the plan for 2H is to improve the marketshare outside Italy with some commercial actions now.

Okay, this seems to me to be the you know the greatest challenge for Fiat going forward, no I mean the short-term and long-term in order to try to better balance between sales (indiscernible) rest of you.

You know what is it that you can do in a short term but not in (phonetic) long term that?s going to really make a difference to second, the trend in 2H on beyond? [John (indiscernible) ? (indiscernible)]

(A) We are, you rightly saw, we have been reaching 4.0 something instead of the market in 1H of the year.

We are planning be in the area of 4% to 5%.

They say that is, it is a risky area, but what we see is that there were a number of actions to get back on our feet.

It is not that we are going to (indiscernible) compared to what we used to do a couple of years ago.

We just want to improve the quality of Fiat with number of action (indiscernible) organization.

In commercial areas, we have new product, which is Ceilo (phonetic) and then want to capitalize on that.

We are fairly confident that we will be able to reach that position by the end of Long term, that relies mostly with this job we have been able to do in (indiscernible) and the capacity to compete with these new product.

(Q) Premier quality of sales just reduces only as what is happening at the moment then how do you get market shares to go up?

(A) We have been reducing very heavily and this does not really contribute to the market shares.

It is completely improving our organizations like forces, management etc. so that we are fairly confident of the level of 5% is really achievable.

Beyond that that is another story.

(Q) Okay thank you very much.

We will go to Pierre Carry ? (indiscernible) Securities

(Q) Good afternoon , thank you very much.

Looking to the Italian core markets one expects 100,000 units more in 2H of the year, are you still seeing everything in line till the beginning of July and since they will not have any release of (indiscernible) at the end of July, can you give us some guidelines of registration on the market in Italy first and on the Chad performance second, please? [Pierre Perry ? (indiscernible) Security]

(A)One second.

Well, I don?t know whether you?re question is possibly looking into the market development or what the FPF (phonetic) are doing.

(Q)Both, please. [Pierre Perry ? (indiscernible) Security]

(A)So, if we look into our plans, what we had been in 1H of the year, we have been registering 370,000 cars.

What we do foresee for the 2H is less 300,000.

So, I mean, it?s just the other way round compared to what you just said.

And so you know, traditionally, the (indiscernible) is 55% to 60% 1H and 40% to 45% 2H if you?ll respect that apart from the impact of this equaling census, which was delivered to the market (indiscernible) for registering estimated 80,000.

(Q)Okay.

And since the beginning of July, do you have some figures to give us? [Pierre Perry ? (indiscernible) Security]

(A)Why the beginning of July being sensitive is just being introduced into the market.

People do not really know how to do it.

There is a lot of, let?s say, people are really interested in checking who is up for what.

So, first of all, they did deliver additional space, not yet safe space.

(Q)Okay.

Thank you. [Pierre Perry ? (indiscernible) Security]

(A) If you look in to our ordering pack in Italy what we did register of the first 20 days it is the ordering pack is higher is 15% higher than it used to be in June.

(Q) Actually it is not Sheuba Fry, Kay Capital.

I asked you to sum wanted to ask you regarding the Fiat finance unit with the readings for selling 51% what?s the timing, proceeds and if also GM has exercised its right of first refusal I guess that is something that is that they have a right to accept the issues? [Michael Solon ?

Kay Capital]

(A) I hope I can speak the very variety of question you are basically asking what?s the established of the (indiscernible) and what?s the reason behind it and what the progress and so once there a some basically it is because its basic objective is to lower our growth base and to reduce our financial needs and the basic (indiscernible) is that by partnering with the partner with a better rating we can lower our cost and funds and therefore offering downtrend price and more competitive approach to the market.

The experiment if I may call it so that we have done for CNH would be very fast in Europe seems to be bit encouraging in its respect that?s my way of doing the transaction.

As of been discussed before, we?ve an agreement with a group of leading Italian banks, whereby they?d buy 51% and the transaction is being discussed also with General Motors.

You correctly pointed out because that?s part of our master agreement and so they?ll examine and potentially offer an alternative solution as well as there are other European banks that have indicated they?re interested in pursuing this exploration.

But before that they?ve announced between 7.5b Euros and 8b Euros and I think that the timing is basically sometime at the end of 3Q or beginning of 4Q of this year.

Ladies and gentlemen I think this closes our review and conference call.

I hope that we?ve conveyed to you where we?re coming from.

We?re obviously facing a difficult economy and a difficult market for us within that economy.

We?ll like to think what we?ve conveyed to you is that we?re taking actions both in terms of strengthening our balance sheet and therefore reducing our financial exposure.

As on the management team, actions aimed at managing our way through this difficulties rather than being exposed to those.

Managing our way through these difficulties rather than being exposed to those.

One thing I want to add and it is (indiscernible) the general feeling of (indiscernible) you have received I hope you have got that feel that what we have done we don?t consider that enough.

What we are planning to do because it is already in our plans, again we don?t consider it enough.

We are determined to take all the actions that are required to improve our cash position and to reduce our cost structure.

We don?t want to continue to discuss about the red numbers (phonetic) and you can be assured that there would be a lot of vigor in anything we do in this respect.

Thank you very much for participating in this discussion.