Stellantis NV (STLA) 2010 Q1 法說會逐字稿

Ladies and gentlemen, good morning and welcome -- it's actually good afternoon, and welcome to you all in turn. It is quite appropriate that we are meeting once again at this historic site of the Lingotto factory (technical difficulty) future as it is symbolic of Fiat's roots and the journey that we have made in (technical difficulty).

One of (technical difficulty) is to draw your attention to our safe harbor statement. We ask you to please read it. It is contained in the documentation that we provided you, and especially as it relates to any forward-looking statements that we may make during today's presentation.

Before getting started, I'd like to make some comments about the changes that were announced this morning in the corporate governance of this Group. Luca Cordero di Montezemolo, our Chairman since May 2004, has decided to step down after six years of service to this Group.

Luca came to this role at approximately the same time that I was appointed Chief Executive, and those were the darkest times. And both of us took on our roles out of a sense of duty to Fiat; this institution which had for so many years been at the heart of the development of the automotive industry globally, and, equally important, has always been an integral part of the social fabric of this country.

We're here today because we were successful in pulling Fiat out of what appeared to be a fatal tailspin. And during that time, Luca and I worked closely together to lay the foundations for today. And I want to thank him publicly for his personal support to me during the initial phases of this transition at times that ultimately allowed us to become friends.

And effective this morning, the new Chairman of this Group is John Philip Elkann. John, come up here. John, come on; they can take a better picture of you if you're up here.

(interpreted) Thank you. Thank you very much. Thank you very much, ladies and gentlemen.

I met John some seven years ago when I joined the Fiat Board. And he and I, with the help of Gianluigi Gabetti, who continues to be my closest friend, have navigated the last six years through some pretty shark-infested waters. And John and I have both grown as human beings and as leaders.

And notwithstanding his young age, he has now reached the right level of seasoning and of maturity to assume the role of Chairman. His appointment is a further indication of the commitment to Fiat by the shareholderer reference, Exor. And I, on behalf of Group Executive Council, the leadership of this house, and the men and women who work in Fiat, we all warmly welcome you as Chairman.

Before getting started on the five-year plan, I would like to give you a brief overview of the Group's first quarter results, which represent the first small step in the work that we all have ahead of us.

In Q1, there were higher year-on-year volumes across the board, and all businesses contributed positively to trading profit performance. Group revenues came in at EUR12.9 billion, representing a 14.7% increase over the first quarter of 2009 when all sectors were experiencing very weak trading conditions as a result of the financial crisis.

The Automobiles business enjoyed the strongest increase with revenues up around 20%. And volumes, for FGA in particular, reflected the residual benefit of eco-incentives in several Western European markets that brought us into Q1 with an incredibly strong order book.

At EUR2.6 billion, revenue for CNH were flat against the first quarter of last year. In dollar terms, however, the sector achieved a 5% increase.

An 11.2% increase in revenues for Iveco, which booked EUR1.7 billion in turnover for the quarter, signals the beginning of a recovery in demand, but the truck market still has significant ground to make up after a rather calamitous 2009.

And volume increases achieved Group-wide were able to drive trading profit to EUR352 million, compared to a EUR48 million trading loss last year, with a trading margin of 2.7%.

The Automobiles business contributed more than half of that result and benefited from a more favorable sales mix than Q1 2009 with a pick-up in higher margin light commercial vehicles.

And CNH reported EUR127 million in trading profit, with costs containment actions taken over the past year, as well as an improvement in the fixed cost absorption for the Construction Equipment business, more than making up for the negative volume performances and the less favorable mix for the AG business in North America and in Europe.

Iveco booked a EUR3 million trading profit, in contrast to the EUR12 million loss for 2009. And, again, the improvement was mainly attributable to a pick-up in volumes, as well as further production efficiencies.

The bottom line was essentially a break-even, with a clear improvement over the EUR411 million loss which we experienced in Q1 of 2009.

The costs of maintaining high levels of liquidity, which are now in excess of EUR11 billion, are estimated to be about EUR400 million a year and continue to weigh on our financing costs and our bottom line.

Net industrial debt was up EUR300 million due to typical first quarter working capital build. And the increase was relatively contained, however, as we continue to exercise discipline in both production and the maintenance of minimal inventory levels.

Liquidity remains strong at EUR11.2 billion, as I mentioned earlier. And the decrease over the year-end figure of EUR12.4 billion was almost entirely due to a EUR1 billion bond repayment which was made during the quarter.

The Group continued to move forward on the strategic front. In Russia, we signed a letter of intent with Sollers for the local production of cars and SUVs in February. And then, in March we finalized the JV agreement with KAMAZ, who will be our partner for the production and distribution of agricultural and construction equipment.

An integration of the distribution activities of FGA and Chrysler in Europe is proceeding apace. At the beginning of April, FGA now provides support for the sales and service activities for Chrysler Jeep and Dodge in several European markets.

And overall, we're confirming our previous 2010 guidance of trading profit above EUR1.1 billion and net debt slightly over the EUR5 billion mark.

And so, looking at the revenues and trading profit by business, the Automobiles business continues to be the biggest source of earnings for this Group.

The key development for CNH in the first quarter was an upturn in the Construction Equipment business, which, of course, this time last year was in the throes of an incredibly deep recession.

Iveco also experienced a partial recovery from the dramatic volume declines experienced last year. However, demand still remains at very low levels.

The Components business recorded double-digit top line growth, which was driven by volume increases and trading performance, also reflected the benefit of additional efficiencies that kicked-in during the quarters.

Going from trading profit to the net result, net unusual items were essentially at zero this quarter.

Net financial charges were up EUR40 million year-on-year, with the difference being attributable to a EU27 million swing in the mark-to-market value of two stock options we did in equity swaps, and higher interest rates following the capital market transactions that were completed in the second half of 2009.

There was net investment income of EUR55 million, compared with a loss for the prior year, representing better results from our joint ventures as economic activity has rebounded.

Cash flow from operating activities was positive, and the seasonal working capital build typical of the first quarter was, indeed, contained. Destocking actions initiated in 2009 were completed, and disciplined management of inventory levels continued.

Recovery of amounts receivable from the government in relation to the 2009 eco-incentives was accelerated, and we expect to bank the remainder by the end of the third quarter of this year.

CapEx, which will return to normal levels in 2010, was in line with depreciation and amortization.

And as already commented on at the beginning, the quarter ended with net industrial debt of EUR4.7 billion, with the increase over year-end reflecting purely our seasonal working capital requirements.

Now let's take a more detailed look at the industry outlook and sales performance, and particularly our expectations for the full-year. For Fiat Group Automobiles, the quarter was somewhat anomalous because, with the exception of Germany, we continued to benefit from the tail of eco-incentive schemes that in most markets had already come to an end.

And looking at the full-year, we expect the car market will experience a contraction over 2009 levels of around 15%, principally as the result of a fall in demand in Italy that will begin to show in the second quarter, and in Germany, where the effects are already clearly visible.

Without support from eco-incentives, sales in Italy over the next three quarters are expected to drop around 30% over 2009. But we believe that FGA's market share will be consistent with the segment and market mix.

For light commercial vehicles, the contraction in the European market is expected in the second half, mainly reflecting a negative trend in Spain and France, while volumes in Italy and in Germany should remain at around last year's levels.

Fiat Professional is in a position to increase its market share, however, driven by new product releases. And we expect our growth in Brazil to be in line with the overall market with the incremental benefit of the new Uno, which is going to be launched in May of this year.

Fiat FGA's expected total sales for 2010 are around 1.930 million vehicles.

Worldwide Agricultural Equipment sales were up 14% for the quarter, with strong growth in Latin America and moderate increase in North America, and a sharp contraction in Western Europe where general economic conditions continue to be weak.

CNH. CNH's market share for tractors was down in North America, particularly in the under 40 horsepower segment, where the sector is selling off existing inventory in anticipation of new model launches later this year.

Share was flat in Europe, and down in Latin America where there is an aggressive price competition in both the small and the mid-sized segment.

The sector share in combines was up in all regions, supported by its competitive range of products and improved customer focus. And for the full-year, we expect the overall market to be in line with 2009.

Demand will remain strong in Latin America, and conditions are expected to ease in North America in the second half, while the outlook for Europe assumes economic conditions will continue to be weak.

For the construction equipment industry, Q1 saw a return to growth after two sequential years of decline. Globally, the industry was up 31%. And overall, CNH market share was stable for heavy equipment with gains in Western Europe and Latin America, with the sector succeeding in significantly reducing inventory levels. In the rest of the world, where CNH has a limited presence, the share remained more or less stable.

The full-year outlook is for an increase in demand globally, led by growth in Latin America and the rest of the world.

With continued tough trading conditions in Western Europe, Iveco succeeded in increasing share by 0.7 percentage points, primarily on the back of performance in the heavy segment. And during the quarter, the Company completed its destocking programs for both new and used vehicles, including the reduction of dealer inventories.

As far as the demand curve for the remainder of 2010 is concerned, we expect the industry to remain at H2 2009 levels, with signs of full scale recovery not beginning to materialize until the second half of this year. As confirmation of that trend, we expect to see sales of trucks with commercial vehicles outpace registration.

Purchasing efficiencies totaled EUR162 million for the quarter, representing a net reduction of 2.8%, which is totally in line with the target that we have set for ourselves.

For financial year 2010 in total, we expect further efficiencies, both technical and commercial, to produce net savings, despite anticipated increases in certain raw material prices.

And by way of an update on costs and production levels, the principal developments during the quarter were as follows. An increase in the workforce of approximately 5,700 people, or roughly 3%, that was primarily related to in-sourcing of certain logistics activities in Italy involving some 2,600 people; the inclusion of the 900 or so employees at our new plant in Serbia; and new hires in Latin America as we staff-up to meet growing demand.

We continue to exercise extreme discipline in maintaining production levels totally aligned to demand. In some cases, this has resulted in production stoppages at plants with the use of temporary lay-off schemes, such as cassa integrazione in Italy. And in cases where these was increased market demand, we made use of overtime out of extra shifts.

We are also working closely with the Italian government, local authorities, and unions on the reorganization of the Giambattista Vico plant in Pomigliano d'Arco that we plan to elevate to a world-class facility. Investment in the project will top EUR700 million, and the necessary precondition to move forward with such a commitment is the guarantee of labor flexibility.

Also in Italy, we have reached agreement with the unions in our redundancy plan for approximately 1,000 people who are nearing retirement age.

And the world-class manufacturing program is proceeding on schedule and in line with the target to reduce manufacturing conversion costs by about 6%.

In January, we characterized 2010 as being a year of transition and of stabilization. We expect all sectors to improve on 2009 performance as the global economic activities normalize. The exception is the Automobile business, where performance will be impacted by the reduction or elimination of eco-incentives in Western Europe. The business will still make a positive contribution nonetheless.

Our targets are based on a continuation of the rigorous cost containment actions that were initiated in the late part of 2008, and that were maintained throughout 2009.

Capital expenditure programs for all the businesses will return to normal levels, increasing in the aggregate 30% to 35% over 2009 when we severely curtailed investment plans in response to the crisis.

So, we confirm the 2010 guidance given at the beginning of this year of revenues of around EUR50 billion; a trading profit between EUR1.1 billion and EUR1.2 billion; net profit around the break-even level; and a net industrial debt level above the EUR5 billion mark, but not far off it.

We closed a crisis year with more than adequate financial resources, and the Group now is in a strong position to transition to what is expected to be a normalized trading environment in 2011 and later years.

At this point, I want to talk to you about the financial performance of Chrysler Group LLC.

Much has been written in the last few months about Chrysler and about its prospects for the future. It is understandable because the future of Chrysler is of crucial significance to the American automotive industry, and more importantly to the organization itself, and to all of its stakeholders including, and especially, the men and women who work in it.

The financial analyst community has been particularly active in anticipation of today's event. And to be honest, some of the reports that I've read, from what I used to consider intelligent and reasonable people, have taken on the tinge of boulevard press writings. The most benign interpretation is that they abused Albert Einstein's maxim that imagination is more important than knowledge. But as we all know, in business, ultimately, it's only facts that prevail.

The alliance with Chrysler has also greatly interested investors and to the stakeholders of Fiat, and I want to take this opportunity to brief you about the financial results that Chrysler is issuing today. All of the information that I'm about to discuss is now available on the Chrysler and on the Fiat websites.

These are the first financial results published for the new Chrysler and cover the periods from the June 10, 2009, which is the first day out of bankruptcy, to December 31, 2009, and also the first quarter of 2010. The financials are presented in accordance with US GAAP, and my main focus this morning is really on the first quarter of this year.

Both US and Canadian market share improved significantly through Q1 compared to the 2009 reporting period. This was driven by strong performances in all brands as the repositioning efforts and investments in marketing campaigns started to improve customer traffic in dealerships, and in particular in the Ram brand due to the successful launch of the all-new heavy-duty truck.

Net revenues were $9.7 billion for the first quarter of this year as the Company shifted 380,000 vehicles in the quarter. There were no increases in base sales and system stock, which remained flat at 58 days.

Modified EBITDA for the first quarter was $787 million, representing an 8.1% margin.

But the most significant information for this quarter and on this slide is that operating profit was positive at $143 million. Chrysler earned the profit for the quarter from selling cars. And this positive operating result is a concrete indication for customers, to dealers, and to suppliers that the 2010 targets that Chrysler have set are achievable.

This improved operating performance drove the net loss for the first quarter of 2010 down to $197 million.

Cash flow for the period was also positive at $1.5 billion, improving the cash balance at March 31, 2010 to $7.4 billion. The generation of cash will finance the investments which are being made in product portfolio and brand repositioning.

Total available liquidity reached nearly $10 billion at the end of the quarter.

And here's the liquidity picture showing the cash balance on hand at March 31 of $7.4 billion, and the amount available under the UST and EDC loan agreements of $2.4 billion.

The cash flow generated in the quarter was driven by strong EBITDA performance and by working capital due to higher production volumes in March compared to December 2009. And this cash generation was partly utilized in capital expenditures as the [product] plan investments continue to be executed.

As a result of the first quarter 2010 numbers, Chrysler Group feels confident in reiterating full-year 2010 targets when the Company expects to sell 1.6 million vehicles and make a minimum of a break-even result at operating level.

And given the strong cash performance to date, Chrysler expects to have a negative free cash flow of below $1 billion for the whole year, which is significantly ahead of earlier guidance.

Now, Chrysler Group will be hosting a conference call on May 10 to discuss the Q1 results in more detail. And going forward, the Company will issue a quarterly earnings press release and hold a conference call.

And this disclosure process is being instituted in the spirit of increasing the transparency around the Company's financial position that has been a point of contention with stakeholders in the last few years, and certainly before the filing for bankruptcy in June of last year.

Now, coming back to Fiat, many of you were here four years ago on November 8 and 9, 2006 when we presented our plans to transform Fiat into a major international Group. Many of you were also with us at Balocco a couple of years before that when we presented a Fiat turnaround plan which would rescue it from the grasp of what may have seemed to be its inevitable demise at the time.

Many of those who heard, and later reported, on our plans labeled them ambitious, several even going so far as to say that they were thoroughly unrealizable. In the end, however, everyone has had to acknowledge that up until recent events forced us to operate outside the predictable boundaries, every single target in terms of revenues, trading profit, and margin net result, debts levels, and cash generation was achieved, if not exceeded.

From 2004 until the first half of 2008, our Group accomplished step-by-step everything that it had promised. And that was possible because behind our plans were two key factors that numbers alone cannot explain. First; a team of leaders for whom courage has become a way of life. And the team leading Fiat is a team of determined individuals who have embraced global competition as a challenge rather than as a threat, and who, like a hurdle runner, see obstacles as an opportunity to demonstrate their worth. And second; a cultural responsibility where the vision of a better future is not a mere dream but a goal, an objective to be realized.

These are the most important and powerful attributes that an individual or a whole enterprise can wield as they're also the attributes that enabled Fiat to break with the past and lay the cornerstone of a new era.

The course that we plotted down to the most substantial detail, then followed with resolve and determination, was abruptly halted on the homeward lap by the global prices which [rained] down on markets and economies around the world.

The crisis which erupted in the latter part of 2008 swung the pendulum of the markets back to the middle-ages. The shockwave it created hit the world so hard that only a war could have been more devastating. Its victims were not only the industrial world; hundreds of thousands of families are still unjustly bearing the brunt of a crisis that it never created.

The shockwave that knocked markets flat, and was of a scale that nobody could have foreseen, obviously had a significant impact on our Group as well.

In 2006, when economic conditions were stable, and in fact everyone expected robust growth for the next several years, we conducted a simulation of the potential impact on the Group in each sector of a cyclical downturn assuming a 20% fall in markets for all of our businesses. It was a purely hypothetical and econometric scenario beyond all reasonable expectations and even our most pessimistic assumptions.

We used it to illustrate how our businesses would perform in the most extreme situation imaginable; it was our meltdown scenario. And, unfortunately, our simulation, which seemed completely unrealistic at the time, was later proven to be too conservative.

In 2009, demand for Construction Equipment plummeted 38%. For Trucks, overall demand halved, and in the heavy segment it fell as much as 62%. Performance for the Automobile sector was varied. While the hemorrhaging of the passenger car market was stemmed by the introduction of eco-incentives, deliveries of light commercial vehicles were down by 25%.

And I'm not quoting these numbers to offer excuses, but rather as a reminder of how steep the crevasse that had opened up on the road ahead of us really was.

However, I'm convinced that such a traumatic shock also serves to test the solidity and the ability of an enterprise to react. Fiat never stood still. We reacted swiftly and decisively. We implemented rigorous cost-containment measures for all of our businesses, and in 2009 we reduced SG&A expenditures by more than 15% over 2008.

And we worked diligently to align production levels with demand. We put an enormous effort into reducing both our own stock and dealer inventories, and that rigorous management of working capital enabled us to generate EUR1.5 billion of cash.

Discipline guided every one of our choices to ensure that energy and resources were never wasted. We re-thought our plans to adapt to the crisis. We explored every possible avenue to strengthen the Group until we established points of certainty in a market which was thoroughly shaken by uncertainty. And one of those avenues was the alliance that was struck with Chrysler.

It had become imperative that we find a more efficient way of lowering the risks associated with the capital-intensive nature of our business of making cars. And the partnership of the US auto maker represents a fundamentally important step for the future of Fiat that will give us the critical mass necessary to achieve significant economies of scale to increase volumes for each individual platform, fully leveraged synergies, and to expand our geographic reach.

Compared to the cyclical downturn we had modeled on our 2008 targets, Fiat Group closed 2008 with the highest trading profit in its 111 years of history. And it finished 2009 with positive margins in all major sectors even though some, such as Iveco, had to operate under extremely difficult trading conditions.

All of this provides clear testimony to the fact that rather than yielding to pessimism that would have caused many to give up, optimism powered a determination to survive and to succeed. For a company, crisis can also bring out the best, like a period of reconstruction after a war.

Today, we're here to present what we believe Fiat will accomplish in the next five years. And over the course of the day, we will be laying out sector by sector sales targets, earnings targets, and international development plans for all of our businesses.

In the afternoon, later in the afternoon, we will dedicate time to [purchasing] progress of the world-class manufacturing program in our engineering and design activities.

And then, before taking your questions, I would like to present the Group's annual targets up to 2014 and outline the strategies that Fiat will implement to ensure that the development is, in fact, robust.

It is time now, finally, to turn the floor over to Paolo Monferino, who's Chief Executive of Iveco. Paolo?

All right, I'll start taking questions. Number one. We'll go in numerical progression here; it's the only thing I know.

Good afternoon. Martino De Ambroggi, Equita Sim. Inevitably, the first question is on the news of today. So, have you already planned what is the IPL financial structure of the two entities for the spin-off, first?

Second, what's your attitude towards the present [CG] shares? I clearly understand why you distributed three classes of shares, but what's your view going forward?

And just a technicality. I presume there is no [whether you're right], but just a confirmation of this; while on the industrial plan, the second question is, if I compare the two business plans, this one, particularly for some sectors, like Iveco, Magneti Marelli, and CNH, you are presenting target in terms of return on sales which are lower at the same, or in certain cases even higher sales. So, I was wondering if it's something that can explain in just a few words this difference versus the previous plan presented in 2006 for the raw materials as I don't know. Thank you.

Let me deal the questions [about cap], the allocation of the debt. This is, as you know, going to happen as a butterfly transaction, which means that we will emulate the capital structure of the current Fiat and the Fiat Industrial. So, they will have all three classes of shares as the current Fiat organization have; it will just be mirrored.

My personal views about complicated classes of shares is that I don't like them. That's my personal view. The question is do I have to deal with that issue today? No. Is it offensive to Fiat going forward? No. Would it be fixed over a time? Probably, yes. But it's not the first thing that I worry about in the morning. It may be of interest to some investors, but it's really irrelevant to the industrial strategy of this Group. So, [it will eventually be anyway].

In terms of the allocation of the debt between the two organizations, it's something that we're playing with now. If you had to ask me today, and you had to forward with a rough indication of the allocation, if you took a 50% number of the debt and allocated it between the two organizations, you wouldn't be far off. But it's just a rough approximation. The exact number will be determined at the right time.

I think you asked a question about the recession and the answer is it has no application.

And I'm not sure that I understand the question about the margins of Iveco, CNH, and Marelli, which are really fundamentally different businesses. Maybe if you stand up it will helpful.

Just comparing the previous business plan with --

The 2006 plan?

The 2006 plan. I see basically with Iveco, Magneti Marelli in particular, with higher sales you have lower return on sales target. I understand it is a totally different world, the world has changed, but probably there are two/three reasons explaining these difference between the --

No, I don't think there's two or three reasons. I think that is a reflection of the comparative nature of the marketplace. We're seeing -- we have seen -- a lot of bucolic innocence that was embedded in the 2006 numbers in terms of what we thought we could do at the time in terms of margin expansion we have tried now, certainly in the CNH side, which I can speak to you probably with a greater degree of knowledge than I would be able to do in the case of Iveco. But I think that the attempt -- and I don't remember. I think that [we] had the same margin target in 2006 on the Iveco side, so I'm not sure it's true.

Certainly, in the case of CNH, we have found that there is a sound barrier to the margin generation business today. And I think that we've built in enough conservatism in the projections to ensure achieving the numbers.

If you remember, in 2008, we had the highest trading profit in the history of CNH; we booked EUR1.650 billion in trading profit. That number was dead on in terms of what we had forecast as an absolute number for the period, but we missed the margin target.

And I think that there is some history that we've just lived through that is jaundicing or coloring our view about the ability to boost margins above a certain level. But certainly, double-digit numbers for both of these capital [goods] businesses are significant margins.

They will certainly be in the top 25% of the competitor class. So, I -- we may not be the best by 2013 but we'll certainly be among the top three, then I'll be happy. They'll certainly be numbers in -- which have been historically in excess of what Caterpillar has done. I'm not sure if it's true of John Deere, but certainly is excess of what Caterpillar's done.

I think that covers all of your questions. Number two.

Bruno Lapierre from Credit Agricole Cheuvreux. One question for you as CEO of Fiat; will you remain CEO of Fiat Industrial? Or would you just [take] the CEO job of Fiat Group?

Mr. John Elkann and I are going to share our future on the car side. He is going to stay Chairman of Fiat, and I'll stay the CEO of the car side. I'm already the Chairman of CNH, and I'm the Chairman of Iveco, and I will continue in that role for FI. So, I'm not abandoning the business but my operating responsibility will sit with car.

It is the single largest project. I'm not trying to minimize the importance or the efforts required to push the margins of Iveco and CNH to double-digits, but you're talking about a fundamental game changer here on the car side. And I think if I have any talent at all, it would have to be devoted to the revival of the car business.

And a second question on the timing of the spin-off.

December 31, 2010.

But why, in fact, doing the spin-off at this time of cycle when 2010 is a difficult year for the car business? And --

It's the perfect time to do the spin-off. If you can do it now you'll weather anything. It's not -- by the way, if I've done it at the top of the cycle, you would have just jumped all over me [because you'll say], look at this turkey; he's doing a -- creating a problem going forward. Doing it at the bottom of the cycle only tells me that I'm going to do it much better as I go forward so I'll take it now.

And at a time when the industry is consolidating, do you see the need for the new Auto business with FGA Chrysler to find another partner?

To find another?

To find another partner?

I think that the optionality that this demerger creates is something -- is fundamental to the future of both businesses. And I -- without discussing who/what could happen, I think that one of the things that we need to recognize, and it's effectively built into the analysis that I showed you, is that the biggest benefit of the demerger is giving strategic optionality to the two sides.

And I don't want to call the future; I'm no good at this. I'm relatively decent at picking opportunities that come along the way, but to try and call the market in terms of consolidation, I still think this is a business that could not -- unless it changes the rules of engagement. I go back to this. I know it's going to become sort of a mantra; unless it changes the rules of engagement it can (inaudible) you guys won't fund it. And you haven't, as you've done -- as you've proven in the States, right? You [tanked two of them]. And I think that there's a big lesson in all this.

Number four.

Yes, good afternoon. Massimo Vecchio, Mediobanca. I have one question on the spin-off. And in particular, you said that the car business was not able to repay the cost of capital, which is true on average, but Japanese players probably did because they have an EBIT margin of at or above 10% before the crisis.

I wholeheartedly agree. In fact, if you look at the return charts and you go back about 20 years, you will find that the only one that ever did up 'til the recent crisis were the Japanese. Now, with all due respect to Toyota, I'm not sure it's true as of today.

No, [credit] before the crisis, I agree.

Which crisis, the Toyota crisis or the financial crisis?

Both.

Well, no, these are two different things, right.

But the question is what is in your -- from your point of view, the gap between the Japanese and the others? And will you be ever able to close it? Put it in another way, with your 5% EBIT margin target for 2014, will you be able to repay the cost of capital or --?

The answer is yes.

Yes.

Do you know why? Because you are going to be the one that [finds the equity value in advanced stocks, right]. At the end of the day, you will drive the cost of equity; it won't be me. I know what the banks want. The great thing about efficient markets when they work is that they actually tell you what you need to do in order to be acceptable in society until you guys screwed it up the last time.

So, you get the good cost of capital also because you reduced the capital employed, if I'm right?

[Yes.]

And second question, on the Fabbrica Italiana issue --?

You love it, correct?

I love it because I think the inefficiency of your Italian footprint is the main reason --

It's a reason; not the only reason, but it's a big reason.

I guess it's going to be worth EUR1 billion of additional operating profit roughly. The question is --

I think Mr. Monferino showed you a chart on what happens to his fixed cost structure when he goes from 2009 levels to 2014. The kind of spread of fixed cost to order base becomes tremendous. The operating leverage in this business, both trucks and ours, is tremendous so I wouldn't -- the number is not far fetched. It's probably in excess of that number when you simulate it.

Looking at your financial target, it looks like you embed in your guidance success in what you just proposed in terms of Fabbrica Italiana. So, basically, unions, governments, and everybody agreeing on the flexibility you are just showing; is it correct? And what you could do in case you will not get the collaboration that you are requiring?

Well, I think you will be incredibly foolish if you thought that I did not have plan B, and plan B is not a nice plan.

Great.

And it's no use testifying; it's not the issue. I'm walking into this with the best of intentions. I've been -- I've agonized over this choice for a long period of time. If I told you how many times I've gone home at 11 o'clock at night and just -- absolutely disgusted at what I see from the industrial relations standpoint. This is not the way to create a great Company.

There are a lot of horror stories that have moved around Europe about the nefarious nature of the UAW and how they were responsible for [tanking] the car industry in United States. I can only tell you, from my personal experience, I've now dealt with the UAW, with Ron Gettelfinger and General Holyfield, for the last 15 months, and there've been meetings between me and General that probably cannot be repeated in polite company, especially because of the tone and the language that was used back in the early part of 2009.

But once that issue got resolved, and once we agreed on a plan forward, I haven't had a single objection from the UAW about moving that organization forward and turning it into a world-class competitor; not one. And I just -- my sincere hope -- because I'm not trying to bring the United States or American thinking into this environment, it doesn't work, that's not the issue, but the willingness and the openness to accept change is fundamental to this deal. There is no Fabbrica Italiana unless everybody makes a clear commitment to change.

Number four, again.

Hello. Laura Pennino, Banca Leonardo. I had a question regarding the demerger on the side of the CNH and Iveco. Can you tell us what will be the future of these companies you see; how they're alliance is or whatever for the future?

I think that both Mr. Monferino and Mr. Boyanovsky were incredibly clear in terms of outlining the positioning of these businesses on a global scale. The CNH Ag business is -- at worst it's number two worldwide and there's a -- in my view, we probably are number one if you look at geographic distribution.

I don't think that these businesses need to go marrying anybody. I think that Iveco has obviously a hold on the United States. It doesn't have distribution capabilities in the US, but there is a market that is potentially accessible to Iveco for a variety of means, some of which may involve a transformation transaction, some of which may not. But I -- it's the only geographic hold it has.

And people are talking about the fact that Iveco is [sub-opal] and it's just nonsense. The biggest player in the truck market has got 18% or 19% market share; where are we, 12%/13%?

Everybody goes around playing King Kong here, but this is a very segregated -- very segmented industry in Europe. And unless somebody -- and we've seen the issues now with MAN and the rest of the Northern contingent. This is going to be a very difficult aggregation game going forward. And the best thing for us to do is to stay off the map and let other people get a bloody nose. We will go play somewhere else.

Okay. And another question with regard to the cost savings, like the world-class manufacturing program, which is going to be continued, as we have seen, through two companies. Can you give us more indications how it will go on, and how the --?

There will be contractual agreements between Fiat Industrial and Fiat that will ensure that we carry on exactly as we are and that either party has the right to withdraw on 12 months' notice.

But the agreements that we have in place, including the purchasing organization that John and me have put together, will continue to go forward. And we'll continue to buy on behalf of both; it doesn't really matter. So, those things will be contractually governed and nothing will change in that world.

There's nothing will change on the R&D side in diesel. We have made huge steps forward in terms of developing this technology and making it accessible to both the industrial and the passenger car side. I think it'd be stupid to lose it so all those things will continue. Whatever I have in place now that we manage on the Group Executive Council position will continue to be managed contractually.

And the good thing about this is that the ultimate shareholderer reference continues to be Exor. So, we will have the ability -- my sitting on the Board, and being the Chairman of FI, and running the car business will continue to make sure that this thing happens. I think a rational human being will agree that that's a good thing to do. We both saved money; wonderful.

And the last question regards Brazil. During the last conference call you were saying that without -- even if nothing changes and also in Brazil there are going to be more competition also on pricing. Do you can see it also in Europe and in this year or not?

Look, I think that this issue in Europe is going to become an issue. I've made -- look, we're making steps in the right direction. Opal has now announced a final agreement to deal with the overcapacity issue by closing Antwerp. We have made a determination we cannot work Termini Imerese plant.

There is a process underway, which is beginning to work at the edges of the capacity issue in Europe, because the stated capacity that we talked about and utilization of the plants that we've got here we have -- none of our numbers envision an increase in capacity, nothing. This is existing capacity on the ground. It always existed. So, we need to take out some brick and mortar around this business. We've done some. Opal is doing some. I think it's over to the Germans and the French to do their part now, don't you think? I think it'll be a wonderful idea.

Okay, thank you.

If they don't and they want to fight this on a pricing basis, it's going to get pretty ugly.

Now, we've seen some numbers come out the last couple of days, saw the financial performance in some of these businesses, and unfortunately, because of the international position of the reporters, some of the numbers may be clouding -- and covering up the real problem because European trading margins are nothing to shake our stick at.

FGA will lose money in Europe in 2009/2010. Overall, I won't, but FGA Europe will lose money because at these levels it can't make it. It's going to lose 30% of the Italian market between April and December of 2010. And since I only account for 30% of the Italian market, there is 70% of this market that belongs to somebody else, which is ultimately going to end up in the French and the German shoes, right?

We're all going to be playing at chasing the [storm]. And when it gets tough, we have to [play]. But we're not backing away from the fight, but there needs to be a structural fix here, realistically. We're doing our part, I think all products are moving in the right direction; I think it's up to others now to do their part.

Was that helpful in answering your question?

Perfect, thank you.

Thank you. Five.

This is Pierre Bergeron from Societe Generale on the fixed income side. I have one question on the allocation of debt. Do you believe that this 50%/50% allocation of the debt applied also on the bond side, meaning that we have a 50%/50% allocation of the bond?

I'm sorry, the echo [in this room is awful]. Do I believe that the 50%/50% allocation?

For the debt will be applied for the bonds issued by Fiat Finance trade and Fiat [customer car].

No, the bonds home is with Fiat. That's who they were issued by and that's where they belong.

Okay. And regarding the cash, may I assume also 50%/50% allocation of the cash side?

No, I think that the issue is slightly more complicated than this because we look at net industrial debt. I worry much less about -- and I think both organizations will have enough liquidity in terms of net cash to operate. And what I suggest is that the best indication today of how the net industrial debt will be allocated is on a 50/50 basis.

[Debt] needs to be finalized. We need to go through a very thorough analysis of what is required and what can be transferred from one side to the other.

And last question on the ratings front. Assuming that the five-year plan will generate cash flow, and this cash flow will be split between Fiat Industrial and Fiat S.p.A, may I assume that we have to expect a recovery of Fiat S.p.A ratings in the investment grade category just in the coming years? Or assuming that the high margin business will be in the Fiat Industrials, that could be delayed to, let's say, three or five years?

Sorry, you're talking -- sorry, is the question about the investment --?

Investment grade ratings for Fiat S.p.A. Fiat is already ( multiple speakers).

Investment ratings?

Yes.

Rating?

Yes.

I think we're going to plan this very carefully. It is not my job here to do the -- to assess -- I think we understand the rating methodology of the agencies. And I think we're going to set up a capital structure that will deliver the highest possible rating given the constraints that we have on the demerger.

The objective is to take both of these organizations to investment grade as quickly as we can. That's the only objective I have. We've done this before, if you remember, in 2007. So, we're just going to try and follow the same path to bring it up to investment grade and move on.

And maybe another question on Fiat Industrials. Do you believe that Fiat Industrial will be a rated company or non-rated company?

It will be rated.

Thank you.

We've exhausted all the questions, I'm impressed. We must have been so clear.

You know, what I find incredible -- I'm just going to make a comment -- these are the questions, by the way. We have opened up the questions the people who could not make it. That's incredible; we just presented a plan that takes the combined revenues to EUR93 billion and every question on here is about the demerger.

In the envisaged demerger of the groups, where do you plan to place the Group's outstanding credit debt?

We're going to leave it exactly where it is, which is in Fiat S.p.A. I think we showed a graph, a chart, that showed the demerger of the vehicle CNH and the part of FPT Powertrain Technologies that deals with industrial and marine engines. That's the stuff that will be butterflied out. The shell of Fiat S.p.A will continue. And it will continue to hold the Automotive businesses, including the [parts and suspension] at Chrysler. So, nothing changes.

Have the rating agencies given you any indication of what sort of impact this may have on your credit rating?

And the answer is no.

For the credit investors out there, can you please clarify where the bonds sit? Will they be paid out by the earnings stream of CNH, Iveco, or by the Automotive business?

They will continue with the Automotive business.

Can you please reiterate your plan to launch Alfa Romeo in North America? And will the brand be produced in Brampton, Ontario?

This must be a Canadian that's asking the question. We're going to be in the US by 2012. And when you saw that the car who had a blue and a white slash, had to do with a spider, that's the car they make, eventually may go to Brampton, I don't know. But right now, there are no plans to produce the [CDL] segment vehicles in the Chrysler plants.

What does this mean for existing CNH shareholders?

Everything will stay as it is. Nothing is going to change. CNH will continue to be a publicly listed company with a minority float, and life will go on.

And would you still have a US ADR?

To the best of my knowledge, Fiat does not have a Fiat -- doesn't have a US ADR, unless you've found one that I'm unaware of.

Are there any more questions? That's it. There's one more question; number four, again.

Still Massimo Vecchio, Mediobanca. It's probably too early to say, but don't you think you need a partner also in Asia where, despite the developing plans you just presented, you may need some more presence in China and India?

We have one.

Yes, but you sell 20,000 cars probably in India, I guess.

Are you talking about India or China now?

Both.

In India, we have a partner. We have a good relationship with Rata Tata and the Tata organization, and we're going to build the business off that base.

In the case of the China operations, we now have a formal relationship with Guangzhou. And I think that that relationship will yield what we invest in it.

It's a market that's going to grow to 14 million. In 2010, it will probably be the biggest market in the world, and I think we have a right to participate in that growth. As we see the development, our investment in that plant, I think our partners will be as committed as we are to fuelling the growth. But I think we need to be active.

And to be perfectly honest, call it mismanagement on our part, I actually think it's bad luck. We've ended up dealing with a couple of potentials that were not up to [scratch]. We inherited one that was already within the system. We found the second one in the last six years that didn't pan out.

And so, it took us a long time to identify [that] and to find a way to go forward. And so, we remain committed to that partner. We will do with them what is required to maintain a strong position in the country. I don't think I need anybody else.

Plus, you've got to be careful. China has got a number -- the chairs are taken; the musical chairs game is over. All the big guys have found partners. It's no use me showing up and saying by the way I'm here to dance.

I was actually thinking about enlarging or improving your relationship with Tata, which is probably going to be [Fiat's] partner for the --

Then, you should ask me directly instead of dancing around the Asian market. Look, I think we remain committed to working with Tata to find optimal ways of developing the business. But I don't think -- for the time being, I do not envision, nor is there any plan in anything that you see, to build a business with the Tata organization.

I think we're satisfied with the arrangements that are currently in place. We're satisfied with the prospects of that business. But to be honest, we don't see the necessity of the expansion today.

When you even look at the European presence of Tata, Jaguar and Range Rover, we have equivalent brands now within the fold. We have the Jeep brand; we have Alfa Romeo, which we've committed to deploying and developing it. The area of overlap is pretty severe, so I wouldn't go forward.

And on Chrysler, am I right in saying that the first quarter net debt is $3.8 billion?

Yes.

And the full-year guidance is $8 billion?

No, no. We [made a couple of reserves]. Look, I know I've been away for a couple of weeks from the US, but -- this only happens in the banking world; when you go away for a day and find -- (multiple speakers). But no, it's impossible. What we said was that we're going to have negative cash flow of less than $1 billion. So, at worse, it could deteriorate from that number.

So, the improvement in the guidance is from a negative cash flow of about [$1 billion] to --

Yes, which is going to work its way down.

To below $1 billion?

And understand, the net debt position is made up by a sum of variety of things, the VEBA note, which -- by the way, I just read one of the press clippings, some intelligent journalists claimed we lost all this money in 2009. It was a mark-to-market adjustment of a note on an opening balance sheet. This is not CDL stuff; it's just accounting numbers. So, we have to mark-to-market and life went on. It's not a real loss.

But the business continues to produce cash. I think it's going to absorb some cash as the capital investment programs roll out at the end of 2010, but I think it's in good shape.

And if I understand correctly, the VEBA are not the issue in all the pension liabilities.

Look, if you don't understand it after the financials that we've just published on the web, I think you have an issue.

No, no, it's all clear. I just wondering, after the EUR3.8 billion, you don't have any more unfunded pension liabilities sitting on your account?

No.

Right, thanks.

No, what you see is what you get. Number three. You don't have to get up. If you're comfortable with your binder, go ahead.

Thank you. Monica Bosio, Banca Imi. You said that this was the right time to demerge. My question is, is there a right time to see the two Automotive businesses, Fiat Auto and Chrysler, combined together? And maybe later down the market, is it feasible? Do you see any obstacle or a timing?

Let's be absolutely clear about this. We have a commitment to monetize the VEBA first in Chrysler. They are the majority shareholder of Chrysler, and we have an obligation to provide cash into the trust.

So, our objective is to try and float this and satisfy the obligation that VEBA agreed to convert into a shareholding position of Chrysler. It needs to monetize and the money needs to be put in. So, the Board of Directors of Chrysler needs to look at this issue as totally independently of Fiat. And it needs to determine the timings and how and when they will take Chrysler public.

Fiat is quite content in that process to remain a 35% shareholder as long as it continues to have access on an arms-length basis to the development opportunities that exist between this organization and that one.

There's really no need to merge. This is completely different than the relationship that used to exist between Renault and Nissan, where effectively there was almost a Chinese wall between these two places. These operations are fully integrated, strategically and operationally. And I think there is a divisional labor which has been agreed between us and them, which I think is going to be benefit, as you've heard from my colleagues.

Okay. So, we will have a Chrysler for a time or forever, and Fiat Auto separately for a time or forever?

There you are, you've just given yourself all the opportunities.

Okay.

You've done a great job. You've [told us] forever. No, but it's true; I could not improve on your definition.

Okay, thank you.

I'm humbled. Thank you, you did great. Number one.

Chrysler has been clear extent from all interesting ownership, workers ownership; can you do the same for Italian workers going forward in [Grimaldi]?

Only to the extent that owners have an outside monetary claim against the organization. Don't forget how VEBA ended up being a shareholder of Chrysler. They were owed nearly $9 billion, actually, it was in excess of $9 billion or thereabouts, in unpaid contributions into the VEBA trust.

And I think VEBA and the UAW made an incredibly courageous decision at the time to take half of that note and convert it into an equity position in Chrysler, which was -- as most of you would have assigned a relatively low value to, because of the riskiness of the venture. In hindsight, it was a brilliant move.

But the right to participate, as VEBA has, doesn't exist in any other industrial context in Europe. To the best of my knowledge, we owe that population nothing other than currently unpaid wages for this week, which I think we would do on a normal basis anyway, so I don't know where this came from. I heard this from one of the reports that -- and it may have been one of the banks that suggested it would be sort of a collective -- I don't know what you call it, sort of a joint cooperative. I don't know what the term is.

How do you get into Fiat unless you buy stock? If they want to participate in the capital, we'll listen to it. But based on what I know today, there is no need for the conversion. There is nothing to convert. Number three.

Why am I answering all the questions?

Good afternoon. Gabriele Parini from UniCredit. Another question on the demerger.

No?

Sorry. If I look at your target for the new Fiat and the Fiat Industrial, I see a new Fiat with a lower trading profit if compared with Fiat Industrial, but with [definitely] higher level of CapEx needed. So my question is splitting the net [financial] debt 50/50, could be, let me say, too risky for the new Fiat or not?

I think we're going to do the prudent thing and allocate debt as required between the two organizations.

Your insightful observation about the fact that the car side requires a lot more capital than FI, and is by definition riskier, is at the heart of the demerger argument. It's what you guys have been pushing us forever to do. This process is designed to achieve your objectives. So, the effect that we will separate the risk profiles of these organizations, they'll be no longer [coming] risk, they'll be no longer cross-subsidize one activity with the other; that's the whole objective.

I understand that it's a historical shift in positioning, but the numbers that you see reflect not only the future. If you go back and you look at the historical reality of these businesses, the car side has for a long period of time relied on the support of the industrial side, which is unfair. It's unwarranted and it's unjust, so we're going to move on.

We're not going to do anything that is going to put either F or FI in a precarious position. Is that helpful? We will create the capital -- it's not just to the fact that we need to mirror the capital structure on the share side. Everything else will be done to preserve the ability of the organization going forward. Helpful?

Thank you.

Are there any more questions? They came all the way up here, and they sat up here for an hour; you should ask them a question. No questions? More questions.

Well, this is one way to start the afternoon. What makes you believe that Fiat will be able to reach the ambitious volume targets in China, India, and Russia?

In China, you've changed three partners in the past five years, it's like talking about somebody's marital history; in India you're partner is still the same; and in Russia you're partnering with the weakest local player. That's a very interesting analysis of relative strengths. Compared to all the other Western manufacturers, you're starting from a highly disadvantaged position.

Well, let me deal with the easiest one. I'm totally satisfied with the Indian position. I think that we're making -- the numbers are not astronomical. We're not trying to conquer the world. We're not occupying double-digit positions in the market.

I think one of the reasons why we have chosen Tata to be our partner is because they do have a distribution network. And I think we're going to jointly develop a development plan, as we've outlined today, which is going to get to that number. Of all the numbers that we're talking about, that's probably the one that, at least confrontationally vis a vis our partners, probably the easiest to achieve.

The China position is simple; I'm not going to deny the fact, I mentioned it earlier, that we ended up having three partners in the last five years. Actually, it's a bit longer than that because one lasted for a lot longer. But what is clear is that I think we have found the right one now, and we're starting a process of industrialization under the joint venture. Time will tell.

This is a market that is exploding. It's gone from seven million vehicles to eight million vehicles to nine million vehicles to 10 million vehicles to 11 million vehicles, and it's going to eventually get to the point where it will hit the 14 million number. At 14 million, selling 300,000 cars in a market that size is not -- shouldn't be that problematic; this is not a shrinking position.

I totally disagree with your assessment of Russia and that fact that we've picked the weakest local player. Give me the strong local player, which is the other way of defining weak. I don't find that the other ones are either in better position than Sollers or really have the heads-up over that organization.

And one of the reasons why we preferred Sollers as a player is because it allowed us to start our activities with a clean sheet of paper that did not have what we considered to be legacy issues from manufacturing facilities that required severe intervention in terms of updating. And, actually, the number of people associated with these plants were relatively large.

I mean, Renault was not the only one that looked at the AvtoVAZ transaction. Fiat was on the page and [Luca] did not want to conclude. It didn't find a way of creating value. I left it to Carlos to try and transact the deal. But of the two positions today, given the way forward, I actually think that ours gives Fiat a much better opportunity and a faster route to growth than the others. So, I'm relatively comfortable that we've made the right choice.

And I think -- I acknowledge, very clearly, that the single largest -- one of the misses that we've had in the commitments that we made in 2006 was the non-achievement of the 300,000 number in China, and so on. I think given what we've laid out as foundations now, I feel a lot more comfortable than I did then.

Our strategy in electric cars, we may be clear on this; Chrysler is much more advanced in this area than we are. We do have equivalent technology to everybody else. We continue to be concerned that people are focusing on this as being the only alternative to combustion going forward; that is true, in our view.

I think that we need to continue to provide a wide array of technological solutions. And the initiatives that Alfredo talked about, about the downsizing efforts that we undertook back in the mid-2000s, was effectively designed to make combustion compared to both from a consumption standpoint and an emissions standpoint.

I feel comfortable that what we have on the electro side is enough to compete, and I think that we will -- the proof is in the pudding. There will be an electro 500 that will be in the US market within the next 24 months.

Your bank debt, the same question as the bond about the issue of S.p.A., will this stay at Auto, be transferred to Fiat Industrial, or be paid down?

I think this is subject to the bilateral discussions with the lenders, which is something that we'll start doing tomorrow morning as soon as this wonderful gathering is over. But we do need to sit down with our lending partners and discuss the way forward. And [luckily], we'll find an eminently acceptable solution to both us and them.

Are you planning to develop FPT within Fiat Industrial to a global leader in powertrain technologies? What happens to the FPT operations in Chrysler?

There are no FPT operations in Chrysler. There are power-train activities; you call them FPTs, but there are Chrysler activities in power-trained, have always been part of Chrysler and will remain there.

Obviously, the objective, and what we've been working on now with FPT for the last little while, will continue. We will try and continue, and we will look for ways to find customers to share our technology and get paid for the investments that we've made. I think that this is not going to change. It will just be done, perhaps even in a coordinated way, across the two businesses, but it's something that economically makes sense and should continue.

Can you please summarize in a few sentences how the plan you presented today changes the rules of engagement in European auto industry? How does this plan differ from other management plans we've seen over the past years that were based on higher profits through higher unit sales and better mix, and eventually failed to deliver?

Thanks. Well, the issue is relatively simple. The reason why it changes, in our view, the rules of engagement is because the dialog and the dialectic between us and our workforce, between the organization and the workforce, needs to drastically change to embrace this (inaudible) utilization. And the flexibility associated with the work rules that we currently don't have in the Italian system have made this an incredibly unproductive set of assets, and so we need to go back and address this issue.

There is not a single doubt that your reference to the fact that we have higher volumes built in, and, therefore, higher profits, is no different than everybody else. And I suggest to you that if you take a look at the aggregated demand functions -- sorry, the aggregated sales of all the competitors in Europe, you sum them all up, you're going to end up with 250% of the market by 2014.

Everybody in this business thinks of conquering the world. What makes this plan totally different is that you now have an organization which is sharing its architecture, [fire cranes], know-how, components, purchasing, within other organizations in the US, and is able to deliver -- to derive the highest possible benefit from the alliance.

That is not something that either Renault has been able to do with Nissan to date, although that may change going forward, and it's not available to any other European player. It is going to change the rules of engagement if nobody else does this.

So, it may not be enough, and you may find the volume aspirations optimistic, but I think that only requires if you adjust your forecast going forward as to whether we'll be able to do it or not.

You make a compelling case that Europe suffers from over-capacity and players need to get realistic, yet at the same time Fabbrica Italiana, basically apart from Termini Imerese, plans to grow [C] share to fill two factories. Why not go for additional capacity reduction instead of hoping for market share growth?

Well, the real issue is that everybody's in exactly the same box, except that we do have an opportunity. And when you look at the utilization of the plants on the European side, we're talking about almost 250,000 cars being exported out of the Italian side into the United States. It is not being targeted at European market coverage. So, it's a question you should be asking the other competitors not Fiat. They're the ones that are unable to export out; we are.

What makes you believe that Fiat will be able to reach -- we've said this already. Done; we have answered all the -- there's more. Okay, we're going to close all the stuff.

You want to know how I am going to allocate the best people across F and FI. Where are they now? What is the challenge to reverse some of the aggregation that has happened over the last five years?

We're going to preserve what is right in the present sharing arrangement. And so the best people are on both sides of the fence, and they will continue to do what they've done so far on behalf of both organizations, and I really wouldn't worry about it.

I think we understand the operational tricks here. We put the structure in place in 2004; we've been able to extract all the synergies efficiently between then and now, and I think we'll continue to do so.

What is the current thinking of how Alfa should be sold in the US? Will it be combined with the Maserati dealer [that happened] with the Maserati dealer network?

Well, I think the single largest source of distribution capability will come through the Chrysler organization. And effectively, the agreement actually I think we have with the OSD and with Chrysler requires that we allow Chrysler to distribute outside the United States.

Projections show that growth in vehicle volumes over the next five years will almost be the same for the depressed mature markets as for the emerging markets, while the value from emerging markets is lower. Should you not concentrate on fixing over-dependence on Italy and Brazil?

The answer is yes, and we are. The plan clearly addresses the over-dependence on the Italian market, and that is why it is exporting this large -- 65% of the Italian capacity will be exported out.

Doesn't the CO2 challenge give you more chance to gain share in Europe, outside Italy, more than any time in the past?

And the answer is yes, and it's something that at the end of the day this is going to become a level playing field. We are going to maintain leadership in CO2. I think there is a humungous drive on the part of all competitors to try and drive down CO2 levels, and I think we're going to keep the edge over them. But ultimately, we're all going to have to work incredibly hard between now and 2015 to meet the European targets.

Even Mercedes, for the big S class, needs to find a way to try and meet the emission targets otherwise the level of taxation associated on the CO2 basis is actually going to be tremendous.

So, we can think about this until we're blue in the face. And I think that one of the things that we've done is provided a comprehensive power plan that effectively accomplishes the brand holes that we have, and that we've acknowledged publicly have existed since we arrived here in 2004.

I think that the association with Chrysler gives us an opportunity to fill all those holes. The opportunity with Chrysler allows us for a distribution -- access to distribution in the United States, Canada, and Mexico. I think it's a solid plan which relies on the markets going back to a normal level of activity, which is around [60 million] cars by 2014.

It's not a phenomenally bizarre number; it's a number that we've seen before. And the only thing that we're trying to do is to participate in a part of the market that historically Fiat has been in, and that over the last 10 years we have lost interest in.

There is a CNG segment in Europe which we need to occupy, and we've allowed the German contingent to occupy and dominate that market. I think we have the technology, and the know-how, and the brand to do that with through Alpha Romeo. And I think we need to put some [posts] on the ground and drive the business forward.

That sort of answered the question, doesn't it? Do you want to add anything to this Alfa story?

Look, I've got a couple of closing remarks that I'd like to make before we move on here. Number two, hello.

This is Gabriele Gambarova with Banca Akros Esn. By creating this Fiat Industrial, you are keeping together Construction Equipment, Agriculture, and Trucks, which is a, I would say, pretty peculiar mix of products. I wonder if you see any possible competitive advantage versus any other player on the market.

Nobody's doing these three things together; I wonder if you see any synergy opportunities. I'm thinking of Iveco going to the North American market through the dealerships of CNH, or something similar.

I think it's probably easier if you were hypothesizing distribution in the US, to achieve distribution through the Chrysler organization than it is through the CNH brands, simply because of the location of the dealers. And especially on our side, which is not necessarily the travel route of most [tractors] that it will be in the case of car dealerships.

Your comment about the fact that we represent a weird aggregation of capital [goods] is not quite true. For example, Volvo is both in the construction equipment business and in trucks. Nobody's absolutely pure.

What is the common linkage in these businesses is knowledge of large industrial engines and diesel technology that drives both of these businesses.

There is an area which, by the way, continues to be a sufficient link across these businesses to drive them. Rationally, we shouldn't even be in the construction equipment business when you look at the performance of Ag. You can get to a level of purity that becomes absolutely unmanageable from a manufacturing infrastructure.

I need a certain base-load of engines to try and drive the business. And so, we've been looking for applications for the trucks, the special purpose vehicles, through Construction Equipment and Ag to justify the investment, and the technology, and utilization, and the manufacturing infrastructure. And the economic cycles associated with this business, if you look at Trucks and Construction Equipment, are not phenomenally different.

The one that has been completely out of sync with traditional GDP cycles has been the Ag side. And the Ag side has suffered -- has benefited from a very unusual performance over the last 10 years where the economic cycle has gone right off the hinges. If you go back 20 years, you will find a much closer correlation between Trucks, Construction Equipment, and Ag; they all went through the GDP cycle.

The movement of commodity prices in the utilization of food products has completely changed the demand function and has shifted the dynamics of the market into a completely different direction. But the underlying industrial reality supporting all three businesses is the same. I wouldn't get that pure.

You can get yourself to the point where you get so pure that you have nothing; you have a business which is marginal, and it would be uncompetitive going forward. Does that answer your question?

Absolutely. But just to follow-up, don't you see -- from the Iveco standpoint, the North American market, is it interesting or --?

The answer is yes. One of the great things about the North American market is it is an incredible predictable cycle. It [trends] the year after new emission standards are introduced. It's just -- it's like clockwork. So, if you like that kind of economic cycle, you should be there.

On the average, the returns of the American truck makers have been above European standards for quite a while; if you look at [Buckar] and what it's done, and, certainly, the European players that have got American operations. I think it's an interesting market. And as you well know, there are potentials in terms of transactions going forward. People that may be interested in us, and I think that we'll (inaudible) that if and when that happens. We like the business; we like trucks, believe it or not.

And, sorry, a very last question. On India, always on Iveco, I saw that your projections on this particular country are very cautious. I wonder if the spin-off of Fiat Industrial may in some way improve the situation. You, several years ago, signed with Tata, [and then] [more understanding trends], and there was also mentioned Iveco.

I don't think that's going to go anywhere; my honest assessment. I think that Tata has a strategic interest in developing that business on its own merits. I think it's highly unlikely that it will see dovetail with Iveco's interest in [the area].

So, and I think Iveco will do comparatively what it needs to do in India. And if it wants to go play and find another partner, it will do so. And I think that we're open to discussions with people other than Tata to participate in that market.

The fact that Ratan Tata is on our Board, doesn't mean that I need to do everything with Ratan when we go to India. We are promiscuous.

Okay, thanks.

Any more questions? No more. All right, I just want to be able to read this, as I did four years ago, and then call it a day.

Well, we've come to an end of what has been a particularly intense and incredibly long presentation, and it's incredibly hot up here. I want to begin my concluding remarks by thanking everyone at Fiat who has worked incredibly long hours, through very many long nights, to help the management team prepare and make this event possible. They're not on the podium right now, but they do deserve to be here upfront and in the center, and I want to thank them on behalf of all of us sitting here.

Last night, as I was thinking of how to fittingly draw today's -- draw a close to today's presentation, and as I got to 2010 plan, this quote from Mark Twain came to mind. When I was a boy of 14, my father was so ignorant that I could hardly stand to have the old man around. But when I got to be 21, I was astonished at how much the old man had learned in seven years.

We have also learned much in the last few years. The world has changed since we last met together in this room. The points of reference for the global automotive industry were swept away in just a few short months. One example is sufficient.

In 2005, General Motors was the largest auto maker in the world; a company which could afford to pay $2 billion not to buy Fiat out of business. In 2008, that same company reached an important milestone.

This is a full-page ad that appeared in Automotive News on September 15, 2008 as Fiat congratulated GM on its 100th anniversary, for a company reaching 100 years has a significance that goes beyond commemorating a date. It represents experience, reputation, and stability. And yet, shortly after that General Motors went into bankruptcy, just as Chrysler did.

And this is how violent the crisis was that even under those circumstances some of you were bold enough to accuse Fiat of not having reached some of its 2008 and 2009 targets; targets that were set not just a few months away, but back in 2006.

I don't want to comment on, or respond to, any specific reports that were published, but I do believe they speak for themselves. And I also believe, at least the first time, such comments can be excused as inexperience; a second time, they need to be clearly labeled as being ignorant.

The crisis, as I said at the beginning of the day, has sent the markets back in time. It was responsible for an abrupt and unimaginable regression that forced every industry to operate in a drastically different and leader environment. But the experience that we have accumulated in the years leading up to the crisis, and the powerful experience gained during the crisis, were not all in vain.

And I don't say this to brag, because this is not our style, but we've demonstrated that we know how to create a solid business. We have the experience of the Balocco 2004 plan, and a turnaround which was achieved in spite of the many gainsayers who were circling around us. We have the experience of the plan that was presented in 2006 that we realized target after target, record after record. We have the experience of the crisis, of the devastating storm that hit us last year.

And rather than allowing ourselves to be overwhelmed by it, we reacted with decisiveness and with clarity of purpose, forming an alliance with Chrysler in achieving results that were amongst the best in the sector. But we don't look back on any of these achievements with complacency; to do so would be to take time and energy away from the work that remains to be done.

We look back on what we've achieved only to remind ourselves of where we're headed and to keep ourselves on course. But while it's true that experience has enormous value, the greatest power is the power of innovation. And that is why we're now ready to move forward to the next step.

In life, there are moments when all of us make quantum leaps forward. It never happens in a linear or continuous manner, but such leaps forward often coincide with reaching a certain maturity with an encounter or a particularly significant event.

They are critical moments because they cause us to see things from a totally different perspective. They force us to grow; they give us the strength to change our lives radically and to improve them. Often, people remain anchored to the present, or even worse to the past, because they are not capable of imagining anything else different. And, in fact, it is difficult to see the future seated in an armchair. It is much easier to envision if you get up and start creating it.

For Fiat, today represents one of those quantum leaps forward. What we have laid out today is a new vision of our Group; it's a new enterprise. We have presented a plan that sets out our commitment in our ambitions for Fiat globally.

We have presented a plan for the creation of two companies that will each finally have full freedom to move in their own direction. Two companies with the ability and with the determination to compete on an international level.

We have presented an Auto division which as a result of what has been accomplished in recent years, the technological developments, the alliance with Chrysler, no longer needs crutches to walk, or rather is fully capable of charting its own future.

Today, we move the hands of time forward. Our Company, or rather our companies, will be able to move significantly faster than ever before.

I would like to close my remarks by dealing with perhaps one of the most sensitive issues relating to the proposed demerger. It should be clear that decisions of this caliber, yielding such far reaching implications, are not taken easily. We took them notwithstanding the consequential loss of identity of a Group that has operated as a whole for more than a century.

And there is undoubtedly a justified emotional reaction to the loss of identity of a Group which was started here some 109 years ago, and which has been at the heart of the international automotive development throughout its history. But just as the Fiat leaders who preceded us had the foresight and the tenacity to develop this business in anticipation of changing market conditions, the obligation is on us to do the same.

I've already outlined the change in dynamics that work in our marketplace, and we no longer have the luxury of looking at these activities in terms of historical boundaries or legal domicile. The challenge is much wider and much more complex, and requires a strategic solution which is sufficiently powerful to redefine the industrial landscape.

And by definition, it must rise above the understandable feelings of comfort and custom, the result from the association of a particular set of activities with a particular entity. This is why this demerger is a bold demonstration of the willingness of organizations to transcend traditional boundaries and join to reshape an industry.

All-in-all, the obligation of business leaders is not to the assets that they manage but to the people in their organization. The proposed demerger is intended to provide them in the medium to long-term with a safer harbor from the often unpredictable results of an unmanaged and misunderstood competitive environment.

The threat of becoming marginalized in our business carries a much greater risk for our people than it does for any other stakeholder of this Group. And the better way to assess the value of this demerger is in terms of the opportunity for personal development that it will afford our employees.

Fiat has historically developed a high caliber of human resources, covering not only technical and professional competencies, but more importantly, the comparative spirit and strong leadership qualities that will influence the development of each of the demerging companies. The qualities of this leadership represents the greatest and most sustainable endowment that we can provide Fiat and Fiat Industrial.

In conclusion, the 2010 to '14 plan, including the proposed demerger, provides the impetus for a huge leap forward to the future, a future which begins today.

Finally, I would like to take the time to thank, for the last time, the members of the Group Executive Council who have been with me from 2004 until the present. Today, Fiat enters a new chapter in its history and will take on a new shape. Embarking on this path and facing the challenges ahead would not have been possible without their intelligence, work, energy, and dedication.

I thank you all for coming, and safe travels home.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.