Stellantis NV (STLA) 2006 Q3 法說會逐字稿

. Ladies and gentlemen, thank you for standing by. Welcome to the Fiat conference call on the 26th of October 2006.

[OPERATOR INSTRUCTIONS]

I will now hand the conference over to Marcello Ledda, Head of Investor Relations. Please go ahead, sir.

Welcome everyone to Fiat's third quarter 2006 webcast conference call. Today's call will be hosted by Sergio Marchionne, Chief Executive Officer of Fiat. And other management representatives will be available in the room to answer your questions. The press release and material that will be used during this call has been posted on our website at www.fiatgroup.com. Usual Safe Harbor statements for any forward looking statements, please refer to our 20F filed with the SEC. I'll turn the microphone over to Mr. Marchionne, Chief Executive Officer for remarks. Thank you very much.

Hello everyone [inaudible]. Good afternoon. I guess you have had a chance to look at the press release and preliminary review of our slide presentation today. It has been a good quarter. It's been a good continuation of the process that was started at the beginning of 2006. We've had significant growth in the top line of roughly 12%, most of which has been driven by the car and truck businesses of Fiat. More significantly, I think trading performance has gone up some 84%. We are now at 427 million for the quarter. Margins are 3.6%, the equivalent number in 2005 was 2.2. So we are moving margins in the right direction at group level.

The car business has not completed a full 12-month cycle of profit generation and we started in the fourth quarter of 2005 and so we conclude now. And I think we've got relatively good evidence of the fact that the car business has actually learned how to generate profit out of its operations. I think that we have broken the historical trend that characterized the performance of this group certainly in the late 90s and the early part of the 2000s. And we will come back to this in terms of actual details, the performance of the car side. I have had a chance to look at some of the comments that have come out, post the release of the earnings and there were some concerns of the operating leverage impact after the 2 million - roughly 2 million cars on an annualized basis, e appear not to be able to generate more profits than we are. And I'll address this going forward.

The star performer for the quarter has been Iveco truck business has delivered continuing growth in earnings from 79% to 156 and somewhat disappointing has been the performance CNH. Maybe because of weak performance of the Ag sector in North America mainly the Case IH brand which we will talk about as we go forward.

The components business have done well. Comau continues to struggle in a very difficult market. And we have started the process of reshaping these activities. Most of these activities will be concluded by Q4 of '06.

Net income of 200 million is up some 400 million over [comparable] '05 once we exclude all the unusual items that impacted Q3 '05 performance such as the unusual gain on the conversion of the [mandatory convertible] and the Energia [technical difficulty] transaction. Working capital build caused negative cash flow of some 0.3 billion and this is normal and it is probably a [technical difficulty] expectations for this time of the year. And so net debt stands now at 2.6, sufficient cash resources of 5 billion at the end of this year. We keep on paying down the most expensive part of our debt portfolio which Mr Francescatti will speak about Hopefully in a few minutes.

But we did exercise the call to bring our interest in Ferrari up to 85%, this is something less than EUR900 million that we'll spend in the first week of October, which is not reflected in the indebtedness level at the end of September. Notwithstanding this and in anticipation of the closing of the Swedish transaction at the end of the year, we are confirming debt levels of around 2 billion by the end of '06. We are also confirming all operational targets here. All the ones that we laid out at the end of Q2.

Let me make some comments for a moment about, there was also some noise out there about the fact that we did not increase guidance for '06 after [technical difficulty]. We will look at this when we look at the nine months. But right now we are sitting at roughly 1 billion and some change in terms of trading profit [technical difficulty] [600 million] of net income for the nine months ending September 30th. The fourth quarter is traditionally a very strong quarter for this group. We are not going to sit here and try and revise numbers but you can tell by the [technical difficulty] difference between the targets that we set and performance to date.

That achievement of the early targets is going to be relatively [easy]. The extent to which we will be able to [surf] past those numbers is something that we will have to see when [technical difficulty]. Certainly we will not be revising those numbers when we get together on November 8th or 9th. We are too close now to the end of the year to try and adjust these forecasts. So we will leave them as they are. I think it is sufficient to say that nine months performance provides a sound platform for the achievement of full-year targets that we set out [technical difficulty].

We can move on to page three of the presentation. This is just a decomposition of our revenue line. As I mentioned earlier, the most significant growth has come on the car side roughly 1.2 billion most of which has come from Fiat Auto. Ag and CE shows a negative number, although in dollars it has been a flat performance. Trucks has gone up by almost a quarter of a billion. So it has been quite a good quarter from a volume standpoint. This is, notwithstanding the fact that the markets in which we have operated, trucks excluded have been relatively flat. The car market has been relatively unexciting in Europe and as we can see in a moment from the volumes, coming out of Fiat Auto we have been able to achieve significant market share gains across most of the European countries including Italy.

On to page four, this is the decomposition of our trading profit line. And the biggest swing of 136 million has come from the car side. Trucks have contributed some 70 million and there has been some improvement out of Ag and construction equipment business. But most of this is originating from the capital side of the business and therefore is not of an industrial nature. But overall, it has been a good quarter; 427 million as I said earlier, margins of 3.6%.

Move on to page 5, a comparison of the first three quarters of this year in relation to the first three quarters of '05. We have nearly doubled operating margins from 1.9 to 3.7. Obviously, we are fully in line with the achievement of the early targets on operating margin.

Moving on to page 6, this is the Fiat Auto revenues were up 27.6% for the quarter. But it is a consistent number with [upper] growth with 2 quarters of the share. First nine months were up nearly 24%. And it appears to be car [technical difficulty] the biggest driver of this volume growth has been the Fiat brand, the Grande Punto effectively delivered on the volume expectations that we set out last year in launch with 360,000 cars for the year. Continue to sell the old version of the Punto roughly 90,000 cars are expected for 2006. That will continue for 2007.

We are -- continues to be slow but steady progress in production of the 159 for the station wagon. It launched as 8C Competizione which is a unique car, it is a limited edition car which is not going to be profit accretive, but it certainly is designed to reestablish the brand in anticipation of the entry of Alfa Romeo in the U.S. in the early part of 2009.

The other good part of the performance relates to commercial vehicles, where we have grown share in both Italy and the rest of Europe.

Moving on to page 7, tells you where both by region and by brand where we have grown. We have grown across all geographical regions as you can see. Nearly 23%, Western Europe outside of Italy and all brands have contributed to the growth. Although obviously, the Fiat brand is the one that has caused a bigger shift in volume. We're at 460,000 for 2006 in the third quarter, with about 1.5 billion vehicles for the nine months we are on target to achieve the 2 million targeted.

Page 8, third quarter margin performance for car is typical as it relates to seasonal dip in Europe, third quarter. But as you can see from composition or the reconciliation of Q3 '05 trading profit to Q3 '06 trading profit, we did benefit obviously from the volume increase of roughly 85 million, 40 million came from pricing in terms of the mix of products that we sold. The absorption number the 40 million that we have identified as being the impact -- the operating leverage impact on results [technical difficulty].

We have probably over the last 12 months devoted an inordinate amount of time resources and people to try and impact on the manufacturing capabilities of the [new models]. So we will talk more about this when we meet on the 8th and the 9th. But I think the staffing that has been assigned to these plants is probably in excess of what would normally be required to run operations in a steady state. This has purely been done in order to achieve levels of manufacturing efficiencies going forward to allow us to effectively produce the volume aspirations that were outlined. So the absorption number is not a steady state number. It is somewhat polluted by the attempt to try and deal with the inefficiencies that were built into the system at the time which we began this reshaping exercise in 2004. We would expect that the operating leverage of this {house] will really pick up the speed up after this process is complete.

I think I'll leave it to discussion on November the 8th and the 9th as to what that ultimate impact show you. As we look forward as to what the impact will be going forward year-by-year between now and 2010.

Before the question does get asked; we have been impacted by raw material price hikes. The number for Q3 is roughly 100 million. We have been able to recover most of that increase, [through] technical savings and purchase negotiations. Full-year impact of these raw material hikes is roughly 300 million and I will expect it to be between two-thirds and 80% of this number will be recovered through negotiation and technical.

On page 9, is today we're showing the new pictures of the Bravo which will be launched on January 29th. I have Luca de Meo with me who is the head of the Fiat brand. I'm going to ask him to talk to you about the car. He's a lot better at this than I am.

Thank you very much. And good afternoon to you ladies and gentlemen. I would just like to comment on the two big news of the day for the Fiat brand. The first one is as Mr. Marchionne said before, is the fact that we actually unveiled the first image, official images of the new Bravo that will be replacing the Stilo from next year. We think we have designed a serious challenger for the leaders in this segment. We think that also based on the research that we did before the launch of the car that the styling of the car is pretty exciting.

By the way I would like to underline the fact that we are trying to build a identity for the Fiat brand. So the design of this car is of course, building on the Grande Punto that has been a pretty successful car from a styling point of view. We are shooting for a very high level of qualities both in terms of reliability and perceived quality. So you can not see the interior, but I can tell you that the interior will be even better than the exterior if possible.

And the third point is that as all the Fiat cars that we've been launching in the last year and half, everyone is in the top ranking for safety. So we are shooting for the five stars with the EuroNcap and possibly we will be announcing that at the launch of the car on the 29th of January.

This platform will be the first one to adopt a new family of downsized turbo charged gasoline engine. Very high specific power but very low fuel consumption. So for the first time we are also investing heavily after the multi-jet technology.

Our target is 120,000 average sales per year, as a starting point. You know, by the way that this is probably the biggest segment in Europe with 25% of the market. So we want overnight that the potential of the Fiat brand could grow by 25%, which I think is very important for us. We will try to seize this big opportunity. One thing that is also highlighted in the slide is that this is one of the fastest product development processes in the industry with just 18 months from design freeze to commercial launch. And I think this is a very good sign of the effectiveness of our technical organization.

If you move to slide number 10, you will see the new logo of Fiat. Just a very short comment on this. We think this is the right moment to change the logo. We see it as almost as a signature of the end of the period of re-launch. The new starting point for the new phase for the Fiat brand. So we tried to combine the tradition of the logos of Fiat with some signs of modernity. The red and the shape was the logo Fiat from 1931 to 1968. So for basically 60 years we used that kind of identity for the logo and we tried to rework in a contemporary way. Thank you for your attention.

Just to go back to the size of the volume expectations on the Bravo. Investment has been sized in order to deliver returns, adequate returns of 120,000 but actually our capacity is more. Certainly the plant to which this asset has been allocated has the capacity to produce more. I think that the reason why we are targeting 120,000 as being sort of average sales per year for the vehicle, is to insure that on the basis of some rigor and discipline, avoid the historically bad habit of overinvesting on development. The system does have capacity to produce more. With minimal investment we could achieve a number like 200,000 in the C segment. This is the biggest segment and we have to enter it with care. Our experience in this area of the market has been uneven I think is the kind word. And I think that we will rebuild our credibility, I think this car is the first step in this process in anticipation of Lancia's introduction of the Delta, the upcoming introduction of the new 147 at the end of '08, beginning of '09.

If we could move on to slide number 11, there is not much to be said about Ferrari, I think that's just a difference in trading profit Q3 '05 to Q3 '06 is a rounding issue. This is a seasonally weak quarter for Ferrari, [technical difficulty] is expected to be better. The news on the Maserati side is that we are narrowing the losses, the acquisition of Maserati from Ferrari. We expect that Maserati will be earnings positive in 2007, but the introduction of the new automatic transmission, Quattroporte coming into market at the beginning of '07 and the new Coupe which will be introduced in the summer. Both of these vehicles are going to provide a significant shift both in product quality and in terms of image of the cars and I think that our aspirations to try and deliver some profits out of this business in '07 are relatively assured.

Moving on to page 12, which deals with Ag and construction. As I mentioned in my opening remarks it has been on a dollar basis a flat revenue quarter. We have had the Ag market in the U.S. is down, but we have also not been able to keep up in terms of market share positioning in Ag. Mainly in the North American side. As a result of some manufacturing realignment on the construction equipment side, specifically the closure of the Berlin plant, transfer of that volume of business to other European sites. We have not been able to fill all customer orders at the end of Q3 and this had a negative impact on performance, all of which we expect to be recovered, by the end of '06.

Financial services business continues to do well. CNH, the capital side is quite strong. Effectively it the sector that was responsible for the trading profit shift the Q3 '05 to Q3 '06.

Moving on to page 13, I keep on making reference to this slide, which is effectively confirmed by the recent earnings releases of our competitors about the ability to pass on prices as a result of raw material shifts. We have been able to do the same thing in Q3. To the tune of some 55 million and obviously the volume impact of the operating volume leverage in this business is substantial. So, the 71 million loss is purely attributable to the fact that we have missed volume expectations for the quarter. Most of those will be recovered at the end of Q4, but we continue to make changes in terms of the composition of leadership team and in CNH we continue to improve the bench. And I'm relatively comfortable that we are setting the base to deliver some significant growth both in top line and earnings performance in 2007 and 2010. But we will talk more about this when we get together in Balocco the early part of November.

Page 14, which is the truck side of the business. Top line growth of 14.4%, unit sales were only up 5, which would suggest very clearly that we up at the higher end of the product offering. We are having good success in terms of placing both the medium heavy end of the truck offering with Iveco. We've done this while holding onto a relatively decent market share position of roughly 11% in Western Europe. Market has been overall flat. The good thing about the Iveco business and I've read some bizarre comments this morning from some of the analysts that suggest that Q4 is going to be a flat quarter for truck demand. Our backlog is as strong as it has ever been. We have very strong visibility going forward, certainly into the first half of '07 to suggest at lest the first semester of '07 is going to continue along the same lines.

We continue to make good progress in the strategic development of this sector. We signed this agreement with SAIC and with Chongquin and NAC, which is going to give us an opportunity to develop a full range of products going full line to heavy. And really reposition Iveco in China with the expectation in the medium to long-term we will deliver volumes equal to if not in excess to European presence of Iveco today.

The new Daily was launched in May, it has had good market reception. There appears to be good orders, so the 90,000 target has been set for the year, certainly within reach.

If you look at page 15, we have been able certainly in this quarter, to move margins up already into the '07 range of 7 to 7.5%. But positive news is that while this has been going on we have been able to move pricing in the right direction, obviously volume and mix have helped. That is quite positive we have been able to hold down the pricing gains that we have made and there is no indication that that pricing strategy is subject to slippage. Certainly not for the remainder of this year or the early part of '07.

Components on slide 16, this is the Fiat power train technologies, relatively decent numbers. We are still well below the '07 targets of roughly 5% but certainly within range of the '06 targets. This is a sector that has been inversely impacted by raw material price hikes, especially aluminum and oil, which are an integral part of the offering back to the customer. And as a result of the relationship with both our third party customers meaning, General Motors and Fiat, these price increases have not been able -- we have not passed them through to the customers as most other people have not. We do expect as we go into '07 to restore the pricing mechanism back for the internal transfers so margins should go up, normally to what we expect to be a normal trading range of roughly 5%.

As part of the transaction with Iveco we did sign a memorandum of understanding with SAIC to develop heavy and medium diesel engines in China. That production is expected to go on stream probably at the latter part of 2008.

Moving on to slide 17, the other components business. We'll talk about Marelli and Teksid which are relatively easy. They have had good quarters and they continue in their good performance. Comau on the component side has been the black sheep of the family, posting a negative trading profit of 8 million compared to 25 million for the prior year. If you were to adjust for this actually the other two businesses improved year-over-year. The Comau business continues to suffer from an incredibly competitive environment. We are addressing this from an industrial standpoint, resizing and reshaping these activities to insure that we maintain with the framework of Comau what we consider to be an effective set of [competitive] tools in the marketplace. We are aligning as many of the resources of Comau toward the requirement of the group. And we will continue to sign third party services only to the extent that we find these to be profit generative.

Page 18, is just a takedown from trading profit to net results. There is really nothing unusual in these numbers other than the Q3 '05 numbers which include this one off gain on the conversion of the mandatory convertible.

Slide 19, is a cash flow statement, there is really nothing exciting. I was going to pass it to Mr. Francescatti, but I think there is really nothing to say here. I think there is a normal working capital build and I think the 300 million in debt increases is purely due to the seasonal impact of operations. As I mentioned earlier, we do expect to end the year with a net debt balance of roughly 2 billion even after the acquisition of Ferrari and the assumption that we close the Swedish transaction by December 31st.

Slide 20, deals with -- it is a repetition of the slides that we have been historically showing about our group objectives. We are confirming the 2006 targets and there is really not much else to say. Hopefully when we get together in Balocco we'll show you a similar slide with 2007 to 2010. We will be able to put these to bed.

I think that is about all in terms of the formal presentation. I'll pass it on to Mr. Ledda and then I will take questions.

we are ready to take questions. Operator?

Thank you, sir. [OPERATOR INSTRUCTIONS]

Thank you, your first question comes from Mr. Paolo Mosole. Please state your company name, followed by your questions.

Good afternoon. Congratulations on the good results. I have three questions if I can. The first one is on the marketing charges for the Fiat Auto. I would like to understand if this is the third quarter now that you see marketing increase. Is this a trend we should expect for the following quarters? And this should make you see the 2007 margin rather on the 2% level rather than the 4% level that you are pointing for in 2007?

And the second question is related the inventory that I see in the appendix which have remained pretty stable versus the second quarter. How should we interpret that? Is that a good sign for the fourth quarter or not? And the third one on the guidance, you have already booked 1.4 billion trading profit in the first nine months so it means that in fourth quarter you just have to make 450 million trading profit. Which is a similar level than the third quarter. What makes you so cautious on that, the Comau, is that raw material costs or what else? Thank you.

Just interest in the marketing charges of the advertising programs. I think it is fair to say that as we try and drive volumes and the commitment of the group is to [ technical difficulty] advertising and marketing is not directly proportional to volume build. Though there is a point in time in which we will be able to benefit from scale effect. One of the reasons, like 2007, because it was built on the back of a very clear desire especially in the case of the Fiat brand to establish the brand itself as a viable sustainable brand going forward. And I think it was based on the introduction of the Punto[technical difficulty] a huge amount of functioning in terms [technical difficulty].

We think that certainly with the introduction of the Bravo and with the platform that has been based and platform that has been built as a result of the Punto success, our commitment and percentage of sales to this activity is going to decrease. But I think it is fair to say that year-over-year we will see a significant - we'll seen an increase in the spend but of a lesser nature than you see so far. I think '07 numbers but it is based on - sorry, '06 is only based on relatively low level numbers the first nine months of ['05].

In terms of inventories, there is really nothing unusual in the inventory position and I don't think -- I think there was a very clear attempt on our part to provide, especially on the Italian dealer network sufficient number of vehicles to try and deal with demand and anticipation of changes in legislation on car registration fees. This appears to be somewhat of an unclear issue in Italy now pending resolution of the budget. I think it is purely temporary and therefore, expect these numbers will [have come] down by the end of '06. We have taken down some production for three or four weeks in the fourth quarter this year to try and adjust these levels.

And on the third item which is the 1.4 billion number that we got for the nine months. The Comau is not causing us a concern in terms of having to adjust our profit expectations for the year. I think we are so close now to the completion of the year and to the meeting with markets on November the 8th and the 9th, I think it would not be prudent and it would probably be unwise to try to justify [technical difficulty] increase. At a group level we feel quite comfortable of 1.850 billion target in terms of trading profit. Read this as you wish, and if there is an adjustment [technical difficulty] in our view it would not be so significant as to require forecast.

The '06 needs to be understood so that in terms of continuing process, profit deliver of the [technical difficulty] 2010 targets which will be announced in Balocco in November. The focus - I mean to focus on '06 as being the basis to sort of revise the earnings capacity of the [sas] is probably one of the things that will hopefully become clear as -- higher in Balocco in November. Earnings and cash generation capabilities of the collection of assets that we have inside Fiat is probably in excess [technical difficulty] so I'll wait until then to try and pitch that case and I think [inaudible] in '06 at the end of that presentation.

Okay, thank you.

Thank you. The next question comes from Mr. Max Warburton. Please state your company name followed by your questions.

Yes, hi, it's Max from UBS in London. Can I just say that the broadcast seems to be cutting in and out. I don't know if that's just a problem on my phone or whether it is broader. But there seems to be some sort of technical issues certainly in my ability to hear what is being said. Just two questions, I know we are going to meet in Balocco in a couple of weeks and talk about targets et cetera, but there is a couple of things from these numbers that make 2007 look interesting. Just firstly on Fiat Auto we talked about this at Q2, to get to the top end of the target range 2 to 4% I think missed your mark again of 250,000 extra units. If Bravo provides maybe 70 to 80 of those, can you remind us of where else you expect grow in Fiat Auto to get us to that kind of volume. That's question one.

I mean one of the things that we've noticed and I think Mr. de Meo can speak about this probably better than I can. After the Punto, marketplace has not just been that the fact[technical difficulty] Punto sold. It is a fact that it has actually placed the Fiat brand as a viable auto consumer brand in the marketplace. So it's had a beneficial impact from its introduction across all offerings. We are launching two more things, actually with Fiat brand in 2007. One of which is the Cinquecento which will be launched in September. It will be a face lift to the Bravo of the Croma which will be launched [technical difficulty] in the marketplace every day.

I think the first thing is that in 2007 we will have the first full year of Punto in the whole market. So our forecast is probably the volume is Grande Punto is contents like that that may grow this year. The other source of additional volume as Mr. Marchionne said, are of course Bravo and Cinquecento and also we will have more production of the SUV, the Sedici which have very high backlog in terms of orders. And so with the additional production I think we can sell more cars. Having said that I think that we see a growing intention to buy, because of the image of Fiat improving and improving in basically all the markets. And we mentioned before, we will be pretty aggressive also in terms of marketing and communication also in 2007 with more investment commitment in advertising. So we believe in the growth of number. Of course I'm speaking for Fiat brand.

Just too sort of give you the final piece of the answer in terms of [technical difficulty]

Can you still hear me? Great just a second question is on CNH. It looks like the agricultural markets are a little bit difficult at the moment. It looks like the residential construction end of things is slowing down. The CNH target for next year we are really talking about 35% plus increase in profit. Are you still comfortable with that and could you just help us understand a little bit better how you deliver such a big improvement with these end markets?

Well, one of the things that was announced yesterday by [technical difficulty] were a number of initiatives that were done to bring down the cost of execution or shape these structures [technical difficulty] we are caring out some [technical difficulty] at a white color level. There has been a lot of work that has been done in the past nine months to bring down both the governance cost associated with CNH, bring about some rigor and discipline in manufacturing combination of CNH and Iveco in terms of purchasing effort. Probably for the first time in a long time CNH has been able to avoid just seeing off a quarter. So it has been a significant [technical difficulty] the real issue and I don't want anybody to misread, I think what I consider to be probably fortunate Q3 performance in terms of market penetration.

Indicative capacity of the house to try and place products in [technical difficulty]. I wholeheartedly agree with you that there are indications the Latin American market has been flat in '05 and flat in '06 in our view there will not be a substantial improvement [technical difficulty]. I think that the Ag market has been particularly weak '06 in North America, a situation we don't expect to see potential demand increases in '07. But I think that the issue of the residential market being down is purely a U.S. issue. We have experienced significant growth both in the light and heavy end construction equipment [inaudible] both in Europe and other parts of the world where we cover. So this has been simply a U.S. issue. And I would not, I really would not bank - count on that situation as being the cause for a pessimistic view of outcome for both the [inaudible] and the Case brands.

The confidence we have in the margin targets that we set for '07 for CNH continues. I think that one of the things that we need to watch very, very carefully is exactly the type of [inaudible] increases that we can expect in '07. And that is the only issue that I think we need to deal with going forward. I don't, there certainly has been some internal debate, but where the market will be in '07 and what portion of the market will be able to take. But I think the '07 numbers that we are playing with now suggest that we will have some profit share growth across the brands, both in construction and in Ag. So, whatever you will see on November the 8th and November 9th, will be consistent or relatively close to a double digit margin performance for the sector.

Very helpful, thanks.

And sir, your next question comes from Mr. Stephen Reitman . Please state you company name followed by your questions.

Thank you. Stephen Reitman from Merrill Lynch in London. I have a couple of questions on the sales figures. In the past you've given us at least all the figures for some of the new model launches, like the Grande Punto and the 159. I was just wondering if you could actually give us some of the dealer order figures for where you with the Grande Punto so far this year and how it relates to the 360,000 units target. I'm also interested in what you can tell us about the 159 as well from a dealer order status.

My second question relates to the launch of the Bravo. I understand the speed in which you've brought this vehicle you will bring this vehicle to the market is impressive. Can you tell us about the steps you are taking to insure that the quality and that the quality is actually there for the vehicle as particular to seeing larger companies and very technology driven companies like Toyota actually even now expanding their development periods because they've actually run into quality problems when they try to rush products to the market. I'm talking particularly about Corolla in the U.S. Thank you.

Our people are collecting the data on the Punto and the -- so I'll sort of come back to this in a moment. But just go over the quality issues. As you know, post the creation of the new management team for Auto we created a separate function for quality which has probably attracted the highest number of headcount additions of any sector of the car business since [inaudible] Fiat. This has been a very pervasive intervention of quality starting from supply qualification to interactions with engineering and design. To actual plant supervision of production.

For me to describe the quality process would be inappropriate. I think that we understand that in broad terms we know that this process is totally outside of the historical quality approach that Fiat has taken. I can only give you the assurance that if this quality does not meet quality standards it will not be launched. We are in production now with the car in Casino I think we are producing between 5 and 10 cars a day. We have been in this condition now for the last 30 days. And we are going ramp up production after about the middle of December. We have a continuous review of this process to insure that we are meeting quality targets and we are putting a huge amount of pressure on the suppliers to insure that we - they conform both our standards in terms of quality and in terms of timing.

The thing that I think we also need to make drastically clear is that this new Bravo is based on the Stilo platform. It is a minimum 60% carryover from the old car. So, the components, a large portion of the components associated with this car at least underneath the car come into the old Stilo, Stilo had been debugged over a number year since introduction. So I think there is a high degree of confidence that on January 29th when the car gets launched it will actually be able to place with the dealers within a week. And I think that is probably the phenomenal part of this launch is not necessarily that we are launching with an 18 month after Stilo freeze, the fact that we are going to commercial distribution within a week after launch. So that tells you the degree of confidence that we have in the growth itself. In terms of the numbers as of October 20th, you're talking about dealer orders, yes?

Yes.

399,000 and on the Alfa 159 it's 74,000.

Excuse me.

Is that clear.

Can you repeat that what was that again.

74.

Stephen Reitman. 74 filled and you actually have the, so these are the orders. Do you actually have figures for the actual sales? Because these dealer orders don't equate to the 360,000 target for Grande Punto for example 399 they're not the same apples and oranges here are we?

No, we're not let these guys with the numbers and come back to you.

Thank you.

Thank you. The next question comes from Mr. John Lawson. Please state your company name followed by your question.

Thanks very much. John Lawson from Citigroup in London. At the risk of being a little presumptuous, I'd just like to suggest that if Mr. Marchionne would change his microphone it might just help the audio quality a little. I think all of us on the call heard his dealer order number for the Alpha 159 as 4,000 which I'm sure we were quickly corrected on.

The first question I would like to ask is just on the restructuring issue. Uniquely, method your disposal gains in restructuring in the third quarter. Has there been any rethinking on just what the outlook for restructuring charge is going forward, do you still need any. And I guess that you do have a bit of disposal activity in the fourth quarter. And following on from that would you just remind us please on the -- since you made the 2 billion net debt target, conditional upon the Credit Agricole deal closing. Can you just remind us of the net impact of that transaction. I guess you'll exercise your call on FRI at the same time as the 1 billion comes in. And that has a significant cost to you. How profitable is the remainder of the portfolio which also goes to credit agrical when deal is completed? Thanks.

I'm only going to give you part of the answer on the Credit Agricole stuff and then I'll pass it on to Mr. Francescatti to answer the issue on profitability. And then I'll come back to the issue of restructuring. There has been -e the Credit Agricole transaction, there is going to be a cash in flow of about 1 billion, or over EUR1 billion offset by disbursements of roughly 1/2. So the net cash impact of this transaction on the group is going be between 450 and 500 million and I'm looking to Mr. Fancescatti for confirmation.

Overall around 450.

Around 450 million. And that is the number that will be the swing factor if it is not closed by the end of the year.

Yes.

In terms of the profitability of the business going forward and what we are transferring over to the joint venture and I will leave Mr. Francescatti to very delicately describe the difference in settling the requirements between the joint venture and the previous structure. In fact the bottom line of Fiat as the result of the joint venture. Very delicately.

Well in terms of funding basically the retail business today is already AEB with for Italian banks, so that is already funded by those currencies. We have still on balance the dealer's portfolio and the [randel] business. The amount that is going to be the list is something around, something north of 3 billion and for the randel is something in the range of 1 billion. That is the amount of the overall portfolio that will be transferred to the future JV. The financing will be given by Credit Agricole which will refinance the company for the portion that is currently financed by the Fiat Group. And therefore repaying the outstanding amount that we are currently financing through our central treasury for an amount of around 2.3, 2.4 billion.

Understood.

Just to come back to your restructuring question. It is possible and we are still looking at some additional restructuring initiatives that we would like to implement in Q4 of '06. I've been in business long enough to say that it is never finished. But in terms of what I know today, the completion of the sector of restructuring should complete all the restructuring that is required for the group going forward. And I think we've done a significant amount of right sizing of some of these businesses both in terms of headcounts and governance costs.

And the fact that you make reference to the fact that we miraculously to zero out to the one-offs and one of things that we have done are in connection with the Comau transaction is that we took a very hard look at our UK and German operations. And we said for example, given market conditions that we will not be in a position to support the current value with the goodwill associated with the UK side. So 150 million is taken as a one-off gain part of that gain was offset by 25 million non-cash charge to earnings associated with a goodwill run off. So these are not cash flow items, the are things that are being done and it's not really going to impact us going forward anyway, because goodwill is not depreciable.

But these are things that are being done for good governance sake in terms of cleaning up whatever we need portions with [inaudible] we continue to examine. There is nothing major coming forward that would suggest that it is going to be a significant asset reevaluation associated with any of our businesses. And we continue to drive for efficiency. I think the last quarter of this year is probably, is going to represent I think the final phase of this right sizing exercise and I would not expect any charges to come through in '07. But that speaks to what I know today. So, is that helpful?

Yes.

Thank you, sir. The next question comes from Mr. Philippe Houchois. Please state your company name followed by your question.

Yes, good afternoon. Philippe Houchois, JP Morgan. I have two questions, please if I could start with the first one. It is about going back to the, you kind of brought it up yourself the issue of the rather weak operating leverage we saw in Q3. About 10 plus percent in my calculation I would expect 22, 30% at this stage. So should we just look at this excess labor which I can understand as the overriding reason why the operating leverage is not coming through? Or was there another reason. And also should we not expect a better tax from Brazil in this stage. We have four give us very good margins in Brazil, market is doing quite well, pricing is better, and interest is coming off. So should you do better in Brazil in this stage? And I'll ask the second question afterwards, please.

You can ask as many questions as you like. Just back to the issue about inefficiencies at plant level. The introduction of the headcounts into the plans is to try and deal was the quality in manufacturing efficiency objectives. And it has a double impact, one is obviously the cost associated with the additional headcount which is being born by manufacturing.

The other part of it is as we come through the efficiency blends and the portion of quality that has a negative impact on manufacturing efficiency itself. I think one of the things we have found and is relatively a consistent phenomenon across all our plants especially on the Italian side. And is the drive for quality gets pushed into the plant it causes what I consider to be unusual manufacturing backups and that is going to cost. Until this house gets used to cycling with this kind of quality expectations in-house, the cost associated with those interventions is going to be in excess of the labor attached to the process.

It is the first and foremost issue that I have on my table now in terms of the car business. I'm a lot less concerned strangely enough about car portfolio and commercial launches. I think the biggest -- the largest shift in profitability of the car side is going to come from the application of some other rigors and disciplined manufacturing approaches to the Italian car plant. So it is the main issue. There are no others, I think it has cost us a significant amount of resources, but financial and human. Trying to get this issue where it can be put to bed and put to bed quickly. But I think we'll talk more about this when we get together in Balocco. Because I think the issue is not just a car issue. I think it is common with other manufacturing infrastructures of the sectors. And I think the Fiat Group needs to embrace a consistent approach to this issue.

And in terms of Brazilian operation, I think these assets are contributing well. And before anybody asks me the question, the European office I was told was not earnings positive in Q3. So we will expect better as a result of seasonality and otherwise. But my expectation is that Europe will be earnings positive in Q4 so we are looking and we have looked over the last quarter of losses. And those losses are -- I made the comment on previous earning calls that we could have made money if we wanted to [audio dropped].

I lost you at the end. Can you hear me?

Thank you ladies and gentlemen, please continue to hold the conference will resume shortly.

Thank you sir, please go ahead.

Hi, is Philippe Houchois there? Can you reconnect Philippe? Hello operator?

Thank you, sir. His line is now open.

Philippe?

Yes.

Can you let us know more or less what you heard and what you didn't hear before were disconnected.

I heard most of my question. Is the call still going on?

Yes the call is still going on, the lines got cut off.

Okay, if I can go back and listen on the call, I have another question to ask that would be fine.

Okay, can you ask your question?

Now?

Yes, I'm here.

Okay, sorry about this. The other question was on Ferrari. What is the plan for Ferrari, because you bought back 28% or some of the stock? It is not exactly a cheap price, which you bought a stake, so you must have something in mind to boost the value for Ferrari, if you could help me there that would be helpful.

I think that Ferrari in terms of profit generation is not yet what I consider to be at a mature stage. I think we will show some projections of where the earnings of that house will end up by 2010. I think it is still premature to try and discuss sort of strategic moves of Ferrari, we consider it to be good addition to the car portfolio of Fiat. We actually do believe that these prices in the mid to long-term the acquisition of earnings accretive. I will -- with the fact that we bought it, but we bought it back from a factory pre-established price and it was effectively the disposal price plus carry.

So from our standpoint as long as there is a significant amount of arbitrage carried out by the person that held the assets since 2002. So, I think the [inaudible] of Ferrari today is really fundamentally out of place. I think we need to support that house and its growth plans. And it does see a substantial role from both top line and earnings going forward, from the changes that have been made to F1 going forward from 2007 on they are going to be beneficial in terms of the cost associated with that venture. So we do see good earnings coming out of Ferrari going forward. But I think it is premature.

Okay, thank you.

Thank you. The next question comes from Mr. Albrect Denninghoff. Please state your company name followed by your question.

Thank you Mr. Denninghoff, please go ahead with your question.

Albert Denninghoff, I have two questions. First, why is there no operating performance put out by activity segment? You have previously split up segment by P&L and for the balance sheet. And second I have a cash flow related question, excludes the changes in working capital. You had acquired strong cash flow in the second quarter and still a considerable free cash flow in the first quarter. But in the third quarter it is diminished to some EUR67 million. That means that the overall cash flow potential is now reached EUR750 million do you have a considerable ongoing free cash flow enhancement, if one excludes further growth in unit sales.

If you could just repeat your first question and then I'll have Mr. Francescatti answer the second.

Okay, the first was related in the previous entry reports you had split up operating performance by activity segment, which means by industrial business and the financial business both for P&L performance and the balance sheet form. This has been dropped in the third quarter; I wanted to know what the reason is and if this data will be available later on.

Mr. Ledda can talk to you about this off line on this issue. But our earnings release is identical in terms of structure between Q3, Q2 and Q1 of this year. We have not changed anything. So if you can speak to Mr. Ledda off line on this he will provide you with whatever details you have previously that I'm not part of or what I have in front of me.

Okay.

And in terms of, I'll give you some general comments in terms of transfer generation of the business. There is a seasonal element to working capital reductions and build quarter-over-quarter and I think Q3 is reflective of a seasonal pattern of working capital usage. I don't think you should take whatever number you have determined as being considered operational cash flow being indicative of the operational cash flow [inaudible] of the house. I think it is obviously is contingent on the operating performance of the businesses and as you correctly pointed out; it is subject to working capital build associated with [inaudible] increases. But the other things that hopefully will become clear as we go forward with our target is that we will be able to point out where that level will be in our view between '07 and '10. And as to the amount of cash flow generation of this business will become clearer in connection with those projections. But I'll transfer it on to Mr. Francescatti.

I think [inaudible] in terms to explain the seasonality. Working capital absorption of three quarters basically linked to the fact that in August our Italian plants are closing. So the invoicing levels that Fiat Auto and to certain extent the other sectors are drastically lower than any other quarters. While of course payables are running to the same speed. Do actually in the third quarter we have been paying payables relating to the spring purchases while the collections were referring basically only to months. So that is the explanation. And in terms, of course, as Mr. Marchionne was saying the speed of the machine is fundamental in order to build up working capital generation or not. In general terms, we have been generating in terms of working capital this year because there have been increasing in the level of activity. The level we will have in the future will depend on which the speed will be compared to this year or for 2006 [inaudible] we expect fourth quarter to reverse the absorption or more than reverse the absorption in the third quarter.

Just to go back to the other question, my people checked the numbers on the [inaudible] that you requested in terms of the extension between industrial and financial. And now that information is contained in the appendix of the presentation that has been posted on the website, so you do have it. But it is in the appendix and not in the main presentation.

Okay.

Now, I'm going to try and answer this question about volumes of Punto 159 and if it doesn't answer your question, either we have not understood it or our people can not add. And pardon me it is probably more than like the second alternative. Nine months sales in 2006, nine months sales of Punto were 263,500, nine months. Nine month orders are 270,000. Alfa 159 is 46,000 for both sales and orders. So I would suggest that if this doesn't answer your question, that Mr. Ledda would be more than glad to, he has it all written down in his book, I've seen it so he can answer it for you.

Thank you, sir. The next question comes from John Marc [inaudible]. Please state your company name followed by your question.

Hi, it's John Marcholone, John Marc from [inaudible]. A couple of questions, if I may. First, you did not refer to the [inaudible] agreement for Fiat Auto and Fiat Power Train and I understand that this is just a matter of intent or memorandum. Could you give us a little flavor when you expect this agreement to be signed? What the impact will be, when this 150,000 cars, 150 engines et cetera that you expect to come through at Fiat Power Train, how that will make an impact in 2007, 8, et cetera. And also give us a little bit of flavor of the time frame on this agreement whether you actually see this more as collaboration or more really as a strategic alliance? Thank you.

I think the details of the engine deal with [inaudible] are in the process of being finalized. I think that we do need to start producing engine. Out of the Fiat structure in the fourth quarter of 2007 and we will supply that demand under one of the existing installations of SPT. This plan was come into operation in 2008. And so, we'll talk about this in terms of where we see these volumes when we get together in Balocco. The amounts with -- the number of potential alliances with [inaudible] is relatively large we are dealing with them across a variety of issues.

The engine side is one possibility, we've made reference to the fact that we are now working on the potential reutilization of our quarter plan in Argentina. We are trying to produce product for South American and export purposes. So we continue to look at as standard but our initial is collaborate and I don't know whether you call this sort of strategic or operational or alliance, but it is multi-faceted. And it is the type of alliance that we are actually encouraging across the selected number of competitors in the [inaudible]. The one that appears to offer the greatest degree of opportunity is the [inaudible], but it is not he only one, but it is a significant piece. I think it is a significant [inaudible] in the international and Spanish Fiat group. And as a result, we expect to be able to provide benefits to sort of like the western European basic operations with the group both with sourcing and product development. These are all things that are medium to long-term.

I think you will see some benefit in terms in numbers coming through for FBT in the strategic plan after 2010, but it is not going to be the single largest driver of the profit shift of the sector. Just a general comment. I think that the collective impact of all these strategic alliances are not going to be visible in a significant way in the plan that we are putting together between 2007 and 2010. Some of these are medium to long-term engagements. If you just look at the [inaudible] which is going to be produced in our Polish plant where we be producing the [inaudible] that car will go into production in 2008. So it is 100,000 cars out of a total volume of roughly 460,000 for the plant, it will have some impact in terms of fixed cost absorption across the full-range.

But the profit ambition that we are targeting are going to be well in excess of the synergies that one would expect from these strategic alliances. Which I still think are absolutely crucial in terms of the long term viability of this business. And the production of business that we on and I think that we need to be very cognizant of the fact that the tying up with competitors or both in terms of [inaudible] and geographical coverage is going to be the only way in which we are going to guarantee long-term survival of Fiat. I don't think it can be accomplished without it.

And is it fair to assume now that you sold the actual business the Iveco business in India that maybe there is some opportunities on the Iveco side with [inaudible].

I think there are opportunities with Iveco business, period. I would not suggest to you that is [inaudible] or anybody else. I think certainly the removal of the equity interest has given us back the freedoms to try and move in the engine market as we with. In fact it may be one of the alternatives that we will focus on. But it may not be the only one, in fact it isn't.

Okay. And then an additional question on the working capital. The [inaudible] was fairly strong given that Fiat Auto had a negative working capital. I guess we should again expect a very strong reversal in the fourth quarter of 2006. Would you -- is it fair to assume we should actually see a cash inflow from working capital for the full-year?

I think it is fair to see a cash flow certainly in the fourth quarter and for the full-year. I think that is fair.

And it basically means that if you expect further strong growth at Fiat Auto that we should similar improvement in networking capital also in 2007?

If the [inaudible] aspirations are delivered. Then you assumption is correct.

Okay. Now CNH announced yesterday a restructuring and they spoke about $70 million pre-tax of restructuring charges, which would book in the fourth quarter. The one 129 number that you booked in the third quarter, is this belong to this. Or should we expect roughly this amount at least in the fourth quarter as restructuring charge?

No, it's the same charge.

Oh, that's the same charge?

Yes.

So the one that CNH will book in the fourth quarter, you booked in the third quarter?

Correct.

Okay. And the final question, the [inaudible] looks great and I guess it will be quite a successful car. In theory that should also help your Comau sales that you already have, or I guess you will have a strong C segment car. Your D segment car should also start to perform better. Is this a fair assumption?

I'm looking at Mr. di Meo and he agrees.

Okay. Thanks a lot.

Thank you.

Thank you. The next question comes from Mr. Adam Jonas. Please state your company name followed by your question.

Hi, good evening. Adam Jonas, Morgan Stanley. Two quick questions as I appreciate this call has been going on a long time. The first on Ferrari, we've seen the press release that Jean Todt will become the next CEO of Ferrari. Is this, can you confirm this release which I believe came out yesterday and if so what does this mean for the position and the role of Luca di Montezembo is he going to be co-CEO with Jean Todt or does he remain chairman and not CEO, could you just elaborate there. And if there are changes of management at that level what are we to read into that. And then the secondly on unit composition of this year, of the 2 million units can you confirm the split between [Fiat LCV Alfa Rancha] the competition of the two million for the full year and also similarly the composition for 2010 the 3 million target which you've stated many times between Fiat Alfa [Rancha LCV] roughly what split do you envision there. I know you said 2 million Fiat, but can you confirm the other brands and LCV within that as well. Thanks.

There is a very intelligently craft question, yes. Just [inaudible] on target, I've never confirmed 3 million. Okay. We need to get together to discuss this when we see each other in Balocco. There is a number that was raised in the press and the only thing I said was that it could either be higher or lower than that number in 2010. So, you have to wait for the decomposition of that number when we get together in about 3 weeks. The issue for now and we are trying to get the numbers now for the Rancha off Fiat LCV split from results and actually we already have it. It's about 1.4 million for Fiat about 120,000 for Rancha, 163,000 for Alfa Romeo and 317,000 for LCV, that's roughly the numbers.

317, I'm sorry, 370?

You didn't hear them?

I didn't hear the LCV one, I'm sorry.

317, 3-1-7. The question about Jean Todt, he has been appointed CEO, Luca di Montezembo is staying on as chairman. The appointment of Todt is simply a reflection of the fact that we Luca no longer has the time to act as the CEO as Ferrari and we needed somebody in place to run the business. He is also chairman of [inaudible] as you well know and he is also chairman at [inaudible] and it his time just prevented him from taking on full operation or responsibility for the business. And so I would not read anything into the appointment and Luca is staying on and he is going to play a significant role in terms of the development of Ferrari and he will continue to do this from his position as chairman as opposed to CEO. But I would read this as a strengthening of the management structure of Ferrari going forward. [Inaudible] oversight with the [inaudible] activities of Ferrari. So these are all positive things in my view.

The other things is that we have appointed as a result in connection with the CEO we've appointment Mr. Felisa as the general manager [inaudible] also be responsible for [inaudible] car sales for a number of years. And I think the crystallization of these roles in an affective structure is a good sign.

I forgot to ask, was there any severance in the share that Mr. di Montezembo had in Ferrari as a result of his changing responsibilities?

No.

Okay, thank you very much.

Thank you. The next question comes from Mr. Thierry Huon. Please state your company name followed by your question.

Hi, this Thierry Huon speaking. Just wanted to come back to this [inaudible] the line was pretty bad when you answered the question. About CNH, you said that going forward we should have some restructuring and then you expected there was a fixed cost base of the business to achieve the 10% margin. Is that right?

I think we've been saying this now for a number of months. If you look at the earnings release of CNH of the third quarter you'll see a significant achievement in the third quarter was the improvement in gross profit margins in a business. And this is a reflection of [inaudible] done both from the purchasing side and in terms of the production costs associated with what we sold during the quarter. This is still a business that requires -- it is volume dependent and although it is not as high as it is in Auto it is a business that suffers from the improper use of operating leverage.

And I think what we see in Q3 is exactly this and there is why I think we have missed the simple fact that we missed market share targets for the quarter, internal market share targets for the quarter. As reflected in the 7 million plus loss of volume that you saw in the [inaudible]. All areas across these businesses, I think again, it may be worth while to wait for Balocco with the trends for this issue. But all areas of business are being addressed, reshaping and resizing of CNH is going the way we recruit the cost we book them before we book them now. But we are taking the overhead of the business and we continue focus the commercial transition and market share retention and growth. So these are things that in the forecast for 2007 to 2010. And we feel that we can have double digit for 2007 is going to be approximately achieved. Whether we are dead on or not is really a matter of issue. But it is going to be relatively close.

Okay. Thank you.

Your next question comes from Mr. [Horace Schneider]. Please state you company name followed by your question.

Good evening, this is Horace Schneider from West LB. I have two questions; firstly maybe you can provide us a volume outlook for heavy trucks in 2007? And secondly a question that is maybe more relevant for the capital markets in Balocco. Been hearing from [inaudible] your competitor that economies of scale are getting more important in the industry and [inaudible] tries to achieve more economies of scale by the merger of [inaudible]. And I would be interested in view of the importance of the economies of scale here in European truck industry and if [inaudible] needs to show any direction to the growing size of competitors in Europe. Thank you.

I'd prefer to give you more projections when we get together in November. I think that we'll layout what '07 then. Otherwise we're going to open up the whole [inaudible] in '07. So I'd much rather prefer to deal with it in one shot when we get together. Having said this we do expect the market to be slightly up in '06. We'll deal with this when we get together in '07 versus '06. In terms of the [inability] development. As a general statement [inaudible] is important. And so what is driving the urge to try and consolidate heavily in this spectrum is least in principle in the house they move. I think what complicates matters in this type of business including the cost side, is that the brand issue and the market positioning of that brand is crucial as the [inaudible] managers of industrial and engineering elements.

One of the biggest fears that I have when I hear these arguments is somehow the [inaudible] this will be an efficiency driven exercise, which that's ultimately the market relevance of the brand. So we have seen this and I'll make a comment about Fiat, because I think we've had a significant amount of experience in the integration of acquired brands into this house and our experience has not been great. I think the acquisition of [inaudible] in 1999 and the ability to continue to preserve the integrity of these brands in the marketplace in the seven years that we've owned the [inaudible] has not been great. I think of all the work that we are now carrying out to redesign to reverse some of the industrially efficiency moves that ultimately ended damaging the integrity of the brand

And so I'm very, very careful as I said of predicting the benefit of scale when a brand is better positioning is so crucial to the success of the business. And to that extent I think and to tie it up to [inaudible] I think conservation in this industry is not crucial to [inaudible] success going forward. It really is not integral part of its strategy going forward having said this; I think the desire to achieve scale can be achieved through other conservation and the total market. And that is why I think [inaudible] intelligently driven is the first step. The expansion of the [inaudible] in the Far East with one unresolved issue being its ultimate potential presence in the U.S. It's an issue we are going to have to deal with on a case-by-case basis going forward. But I'd much prefer to take a look at the potential for the context of geographical expansion than in terms of industrial conservation and manufacturing assets in Europe.

Okay, thank you.

The next question comes from Virginia. Please state your company name followed by your question.

Yes, Bear Stearns. I have two questions please. One is whether you could provide some guidance on Cap Ex for Q4 or whether I should assume roughly the same level as in Q3? And the second question is on slide 20 where you confirm your targets for net industrial cash flow of 1.2 billion this year. Just to confirm that this is before of the impact of the exercise of the Ferrari corruption, please.

The answer to your question is, yes, on the last one. And the try to give you some numbers on Cap Ex. Total year number is roughly 1.5 billion. No.

$1.5 billion for capital expenditures for Q4? Did I understand this correctly?

The total number for the year is 3.2 billion.

Okay, thank you.

Which should tie back to your [inaudible] numbers so you can back off what ever Q4 is. Normally these numbers are exaggerated because we've learned delivering these numbers in the fourth quarter. But internal forecast suggests that we will have 3.2 at year end.

Okay, thank you.

The next question comes from Mr. Serge Ecude. Please state your company name followed by your question.

Serge, this is going to be our last question.

Good afternoon everybody. It's Serge Ecude UBM. I'd like to ask Mr. di Meo to give us some highlights on the network upgrade especially in France, Germany and U.K. And if you can you mentioned the new opening in this year or in the quarter if possible. And I'd like to know what on slide number 9, makes you so confident on the [inaudible] quality indicators in especially if you have some survey on the quality perceived in the new Punto. And I'd like to know also if you have a survey or do you know your customer if the buyer for Fiat Punto is old owner of Fiat. And then is there new customer wide [inaudible] substitutions [inaudible] in Germany, many of the cars that have been sold by Fiat are substitution. Thank you.

I'll try to be fast because the answers are all -- I think we will have all opportunity in Balocco to develop the issue of the network more extensively. This is of course of one of the commercial side one of the most important challenges that we have. We see a lot of improvements in the dealer network especially in the relationship that we have with dealers. Because they are seeing [inaudible] this year, they are ready to invest. We have started a new identity, corporate identity project which has been accepted by [inaudible] and we have opened as a group around 100 dealers already now. We are more less on target with our objectives. And the good point is the 60% of them are coming from competition.

The second question was about quality of the perceived quality of the Punto. I think it is probably one of the best cars in the Auto Fiat. The only point that was criticized by the press was about the finish of the interior. And as we try to get reactive and fast, already at the beginning of next year we will be launching a model year of Grande Punto with an upgrade in terms of quality especially in the interior. But this to me is a sign of understanding and listening to what the market actually asks. On the other performances of the car, we feedback that we get back from the market is that the car is actually meeting the expectation of the consumer.

The third question was about [inaudible] the reason the mechanical and historical issue about loyalty that [inaudible] makes the launch of the car. I want to say at the beginning first 6, 7, 8 months of a commercial performance of product when the car is launched. Normally you get your customers. So we are expecting to grow especially outside of Italy the confidence level that already is pretty good. One thing which is very encouraging is that we have probably three or four times the young people, the show of young people. So their about 30 years old compared to the previous generation of Punto. Which I think is a very good indication that our marketing strategy and the product are in line -- I mean we are getting the result we wanted with the Grande Punto with image. Thank you very much.

Thank you very interesting.

Operator, this is our last question so we will end this call. And of course we are available to take your questions back in the office. You guys know where to find me. Thank you.

Thank you. This concludes he conference call. Thank you for participating.