Stellantis NV (STLA) 2011 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to today's Fiat S.p.A. 2011 Second Quarter Results and First Half Year Conference Call. For your information, today's conference is being recorded.

At this time, I would like to turn the call over to Marco Auriemma, Head of Fiat S.p.A. Investor Relations. Mr. Auriemma, please, go ahead, sir.

Thank you, Rita. Good afternoon to you all or, more likely, good evening for most of you, and welcome to Fiat 2011 second quarter results Webcast and conference call. The Chief Executive, Sergio Marchionne, and the Treasurer, Antonio Picca Piccon, will host today's call, as usual. Also with us is Richard Palmer, the Chief Financial Officer of Chrysler. They will use the material you should have downloaded from our Website, fiatspa.com. After the introductory remarks, they will be available to answer all the questions you may have.

Before moving ahead, let me just remind you that any forward-looking statements we might be making during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement language contained in the presentation material.

So, now we'll turn the call over to Sergio Marchionne.

Thank you very much, and good afternoon.

I think that, overall, the quarter has been a significant quarter for Fiat for a couple of reasons. One, I think we've been able to improve operating performance of the underlying Fiat businesses. But, more importantly, it's the first time that we're seeing the impact of Chrysler in the consolidated accounts of Fiat.

We've had a lot of discussions internally as to whether we should be segregating the Fiat numbers from the consolidated numbers because of the fact that-- I guess the intention is to try and provide traceability of the results going back to the past. The reality is that, right now, Fiat is sitting on a 53.5% shareholding of Chrysler. Hopefully, it will get to 58.5% by the end of this year.

In the next few days, we will be announcing a new leadership structure that will manage these businesses on a combined basis across the global network that Fiat-Chrysler now represent. And so it is nearly impossible, I think, to start looking at Fiat in terms of its past. We need to start looking at this in terms of what the consolidated entity is doing, especially when you think that, in 2011-- If I were to go back and include sort of the annualized results of Chrysler, Chrysler on its own on a trading profit basis will make in excess of what Fiat S.p.A. will do on a standalone basis.

So there's been a significant shift in the configuration of Fiat S.p.A., which-- Now I've had a chance to look at some of the comments that have come across after we've released earnings. I think-- To be perfectly honest, I think you're underestimating the impact of what's happened here. I realize that we only had one month worth of results for Chrysler. On its own earnings call, it's confirmed guidance for the year. It's going to be making about $2 billion worth of operating profit. That number is in excess of the previously issued guidance by Fiat.

And so the statement that we have made and the fact that we're upgrading guidance goes beyond the technical issue as to whether we're consolidating data between the two organizations, and it's a reflection of the combined earning capability of this Group, which is going to post trading profit this year with seven months' worth of Chrysler in the numbers at EUR2.1 billion at a minimum.

For those of you who have been Fiat historically, you might remember that the last time that we were able to post a number over EUR3 billion on a trading profit basis was in 2008, and it was at the peak of the economic cycle before all hell broke loose in the second half of 2008. That number, for those of you who care to remember, was the highest trading profit of Fiat in 109 years' worth of history.

Yesterday, we've issued guidance for Fiat Industrial, and we've targeted a minimum of EUR1.5 billion. It doesn't take a rocket scientist to add two numbers together and realize that the combined entities post the merger are going to produce now more in trading profit than we produced at the peak of the cycle back in 2008.

But, more importantly, we've ended up posting this guidance and these numbers with debt levels, certainly at the end of June, which are below what they were at the end of 2008. We haven't spent an ounce of equity to try and get this organization-- to get it what it is. It's all been done with internally financed acquisitions of our Chrysler interest and out of internally financed development programs which have brought the sales to where it is today.

Some people may have run the numbers in terms of sort of adding the two organizations together and trying to find out what the impact of the consolidation means. You may have forecast, for whatever reason, a number that resembles the one that we put together. The thing that it ignores is the fact that the investor reality that underlies the consolidation is real and that this machine now is operating in absolute unison, in tandem with Chrysler.

So I think it may take a while. It may take a couple of quarters before, I think, this notion sets in and people start understanding the impact that this integration will ultimately deliver.

There's a chart on page 2, which I'm not going to belabor you with. I've already told you we're sitting at 53.5%. I see no reason why we should not be at 58.5% by the end of this year. There are a number of call option rights that were granted to Fiat back in 2009 out of the VEBA interest, which entitled it to acquire 40% over a period of time until 2016.

We laid these out not because of the fact that they're an indication of (inaudible) VEBA. Our objective has always been to allow VEBA a proper exit to monetize the position and effectively fund the trust. We will do this in accordance with the agreement that we've reached with VEBA, which says that there cannot be access to the outside market until 2013. And so this is not an immediate issue for us to try and deal with, although I think that there are some certainties that have been granted to VEBA going forward, which, in time, will guarantee it an exit at a price. That's all we really need to know. It's not a pressing issue for Fiat going forward today. I think that we are the only-- Together with them, we are the only remaining shareholders of Chrysler, and I think that we will look at ways in which we can exit them from the position, which is really their ultimate objective, in the appropriate timeframe.

If you look at slide number 3, which deals with the consolidated results, EUR13 billion in revenues, over EUR0.5 billion in trading profit for the quarter. We've got margins now, on a combined basis, of 4%. As a result of the exercise of the call option on the 16% of Chrysler, the accounting requires that we step up-- as part of the consolidation exercise, that we recognize the inherent gain that we've had. That's given rise to roughly a EUR2-billion, unusual income number, which has been netted by a number of one-offs, which Antonio will take you through later on in the presentation. But net profit came in at about EUR1.2 billion.

The other important thing is, on a net industrial debt basis, we're at about EUR3.4 billion. We are below EUR1 billion for Fiat on a standalone basis; the rest of it is sitting within Chrysler. And the EUR979 million includes the disbursement for the-- I'm sorry. I'm reading the note here. It's improving the-- before the EUR881 million, $1.268 billion, cash. It includes the payment for the incremental call option.

Yes. It's included.

That's a very bizarre of expressing (inaudible), but it does include the disbursement.

On the liquidity side, we have EUR19.2 billion worth of cash on our balance sheet, and this does not include the recent issue, which was closed on July 8, of two bond issuances totaling EUR1.5 billion. And so we have more than adequate liquidity to deal with all the capital expenditure profiles and whatever else the Group might need.

I think we have been consistent in the message, both at Chrysler and within Fiat, that what we consider to be adequate cash requirement for a business this size is anywhere between 15% and 20% of turnover. That number would yield, just based on raw calculations, in excess of roughly EUR10 billion from the cash position that we have today.

And so, over time, we will work that cash reserve down to a point where we feel adequate. I think we want to maintain, certainly going forward, adequate cash resources, especially as we move through this European issue, which I'll spend some more time on as we go through the presentation.

Slide number 4, which is a summary of revenues and trading profit. Obviously, the bulk of the profit has come from the car side. This includes EUR150 million out of Chrysler. But the component business has posted a significant rebound from 2010. The luxury, performance brands have done well, as we'll discuss in a few moments. But, more importantly, the underlying economic activity of the components business has improved. We're seeing the impact on the operating profit line of these businesses.

Slide number 5, which deals with raw material costs. Notwithstanding the headwind on raw material prices, we've been able to contain and improve our purchasing position, which saved about EUR48 million in the first half of this year. We expect that number to hover around EUR80 million for the full year.

The Japan situation is subsiding. I think that we've made reference that we're going to have a potential loss of anywhere between 10,000 to 15,000 units that will impact Q3 production. I think we're working back into a level of normality in Q4.

We continue to make progress on the WCM issue in terms of our world-class manufacturing initiatives, and, certainly, we're totally in line in terms of the expected savings that we'd set for the program.

Now I'll pass it on to Antonio, who can deal with the next few slides. Then I'll come back and deal with the business.

The next couple of slides are guiding you through the P&L; first of all, for the second quarter and, then, for the first half of this year on a pro forma basis.

So slide number 6 is basically showing you what happened during Q2, taking into account the P&L of Chrysler for one month only. Below the trading profit line, which has been commented before, we see accounted unusual items for a bit more than EUR1 billion on the total consolidated Fiat with Chrysler, which is made up of total charges of more than EUR200 million on Chrysler, basically resulting from the one-off charges on the revaluation of the inventories, which is coming out from the purchase accounting upon consolidation, while, if you look at Fiat for the second quarter 2011, you see an unusual item of EUR1.3 billion, almost, which is made up of a gain on sale, which I will comment later on, of EUR2 billion, net of some unusual charges, again, that I will comment later on.

I think the only remaining portion to comment here is financial charges, which are basically better than last year if we look at Fiat on a standalone basis and mainly as a consequence of the positive behavior of some (inaudible) equity slots in our books compared to last year, whereas-- meaning the cost of carry, which is slightly higher than last year, is netted off against this lower level of investments.

Slide number 7 shows you on a pro forma basis the results of the first half of this year. I will not go through the unusual items again. I think all the comments I made before as to financial charges apply also to this construction of the first half.

What is probably more important to comment is the fact that, on a pro forma basis, the consolidated trading profit would be EUR1.6 billion made up of slightly less than EUR1 billion on Chrysler and about EUR600 million on Fiat on a standalone basis.

Slide number 8 explains what happened from consolidation with Chrysler, basically taking into account the acquisition of the 16% upon exercise of the incremental equity collage and then taking into account the potential voting rights arising from the possibility to acquire another 5% of Chrysler going forward, with the intent to have acquired control of Chrysler according to IAS 27.

From an accounting standpoint, this had to be done. It was, first of all, the definition of the fair value of the equity of Chrysler, which we are forced to consider based on the price paid upon exercise of the equity call option and which resulted in a total value for the total equity of Chrysler of EUR8.3 billion based on the US dollar price. Based on this and due to the accounting treatment upon consolidation, we recognized EUR2 billion unusual income resulting from the re-measurement of the 30% ownership interest we already had and also the 5% ownership interest upon achievement of the third performance event.

On the same day, the non-controlling interest of 54% as of the day resulted into an evaluation of EUR3.1 billion based on the same fair value of total Chrysler equity.

Finally, fair value evaluation of assets and liabilities of Chrysler resulted in the recognition of the goodwill of EUR9.2 billion.

As a result of all of the above, Fiat's consolidated equity increased by a total of EUR5.1 billion, of which EUR2 billion is related to unusual income and EUR3.1 billion to the non-controlling interest revaluation.

Slide number 9 goes through the breakdown of unusual items. We already commented the one-- the unusual gain which is resulting from the re-measurement of the 30% ownership interest in Chrysler. We already commented when we went through the P&L the unusual charge of about EUR200 million due to the impact of the immediate revaluation of the inventories and then, basically, charged to the P&L in consideration of (inaudible) inventory turnover immediately in the month of June.

The resulting total unusual net items of a bit more than EUR1 billion are made of noncash items for slightly more than EUR0.5 billion and cash items limited to slightly less than EUR200 million.

Slide number 10 is about the cash flow of the Company. Here, once again, we made an attempt to show what happened at the consolidated level and separately, without taking into account the month of June for the prior standalone.

I will start commenting Q2 for Fiat on a standalone basis. Basically, the result of the management of this quarter was positive, basically, mainly based on the behavior of the working capital, which, net of the impact of CapEx, generated almost EUR400 million. Then, taking into account the disbursement for the 16% equity stake in Chrysler, the overall impact becomes negative, resulting in an increase of our net debt from slightly less than EUR0.5 billion end of March to less than EUR1 billion end of June.

As far as Chrysler is concerned, on top of the column, you see the impact of consolidation, which resulted in additional debt of EUR2.9 billion as of the beginning of the period, meaning end of May. Then we have a positive cash flow of about EUR0.5 billion during the course of the month, which resulted in EUR2.4 billion net industrial debt at the end of June.

If we could move on to slide number 12, there's a lot of information on here, and I will not deal with the items on these charts line by line. I'm just going to give you some general comments. And then we can deal with details as you like on the Q&A.

But it is absolutely clear that the European market is not in good shape. I think that we have seen levels on the European side, as it says here, that have not been seen since 1996. This is-- The Italian situation is particularly acute. I think that the forecast for the year-- I've said this publicly. I said it on the second quarter call-- on the first quarter call that we expect numbers around the 1.8 million market, plus or minus 50,000. I think that that number is not going to materially change over the remainder of the year. I think it reflects a weakness in the trading conditions of the car side, which are pretty acute.

And I know a couple of you have been interested in pricing conditions in the market. The only thing I can tell you is that the pricing conditions are not healthy. It is one of the reasons why I think we have been incredibly disciplined in terms of production to make sure that we have not engaged in what I consider to be reckless commercial practices. But the trading conditions are not good, and we don't expect them to recover in any substantial way, certainly in the segments in which we're active over the remainder of 2011.

The bright spot of all this is our activity in light, commercial vehicles. I think we continue to perform incredibly strong in the sector. We have another quarter of recovery in Europe, which has been the fifth consecutive quarter of year-over-year growth. Fiat light, commercial vehicles continues to perform incredibly well, and we expect the performance to continue unabated for the remainder of this year.

Brazil, the industry is strong. We have spent the last three or four days here in Brazil reviewing operations and meeting with the respective boards of Fiat and Fiat Industrial. I think that second quarter demand was quite strong, as you can see from the chart. Volumes were up nearly double digit the first half of the year. I think we're expecting that market growth to slow down in the second half of this year. And our forecast for 2012, which is a question that's been asked, obviously because it is the single-largest profit contributor to FGA's trading profit, is that we still expect the market in 2012 to be up over 2011 in the range of 3% to 5%. So both light, commercial vehicles continue to be the bright spot, together with Brazil, and that is expected to continue well into next year.

Slide number 13 talks about market share and where we are. The typical propaganda on the slide-- I'm making a comment to Marco on the slide here about the fact that we have to highlight our strength in The Netherlands. I'm not sure that's going to change the profit forecast, with all due respect to the Dutch. But it tells you how difficult it is to find sort of bright regions in Europe that would encourage anybody to make great forecasts about the remainder of the year.

I think that we continue to make progress. As you will see in a couple of moments, we are undertaking a couple of major, structural changes on the FGA side, including the restructuring of the Italian network, which I think is something that was long overdue, and it's being executed as we speak now. But, as we cleaned up the Fiat portfolio with a number of vehicles coming off the offering roster, I think that we have maintained decent share, although I think margin, certainly in the European market, has suffered as a result.

Slide 14 is the positive side of Europe. It is the light, commercial vehicle business, as you can see. We're 45.5% market share in Italy, which is probably is not nearly near being an historical high. And we continue to make progress in Europe, where 44% is the best European share that we've had. And we continue to improve the product offering of the Ducato and the rest of the product offerings. I think that the success of this vehicle and the ability for this thing to be commercially viable expands beyond the European confines. We've had-- Even in Russia, we've had good activity. This is part of the technology transfer that went on as between Fiat and Chrysler with this vehicle probably being industrialized in Mexico for NAFTA and Latin American distribution.

Slide number 15, which deals with Latin America. As it says on here, overall industry was up 15.4% to 860,000 vehicles for the quarter. We did see continued strength across both the passenger and light, commercial vehicle side. Market share continues to be strong. We're at 22.6%. We retained market leadership in a growing market. These are all good signs. And, again, over 200,000 shipments in the quarter, which was nearly 7% up on the prior year. And we've continued to improve on the product portfolio.

I think that we are reviewing and have reviewed over the last couple of days the prospective investment in Pernambuco, as you can see from the next slide, which is the expansion of our production capacity in Brazil. It is considered to be absolutely essential.

For those of you-- I think that we're going to have to arrange for you guys to come down here and take a look at this facility because it is a unique facility in the world. It is the biggest car plant that I know of. It makes 3,000 cars a day, which is almost-- When you look at the complexity of the industrial structure that supports that kind of volume, I think you would be absolutely amazed. Any time I come down here, I'm left with no option but to continue to compliment the leadership team here for the work that they've done, both in terms of managing the investor complexity associated with the operations here and maintaining market leadership in the country.

Argentina continues to perform well. Our activities in Cordoba at the production site are going well, and they do supplement well the production capacity here.

But, as it says on page 16, our prospects for the Brazilian economy going forward continue to be quite strong. I indicated back in April of last year when we laid out the plan that we will be seeing volumes in excess of 4.5 million in the Brazilian market by 2014. Based on what I see today, we're probably going to be in excess of that number by then. I think that we need to get ready with the right production facilities to try and accompany the growth of the Brazilian and Latin American market we'll see over the next decade. And so we are going to make a substantial capital commitment to this country. I think it more than deserves it, based on the operating profit that it's generated and, more importantly, on the cash generation of these businesses, which have been crucial to the performance of Fiat as a Group historically and, certainly, going forward.

Slide 17, which deals with the Fiat brand. We continue to maintain leadership in the A-segment. We have now introduced the first offering from the Chrysler-Fiat alliance in terms of the Fiat Freemont, the vehicle that was developed for Dodge for NAFTA distribution, which is now being distributed both in Latin America and Europe as a Fiat. The initial orders for that vehicle in Europe actually are incredibly good. We've seen more than 13,000 orders coming through for the vehicle. To be honest, the numbers are in excess of what the US requirement for this vehicle are, Canada, et cetera. Canada continues to like this vehicle very much, and it continues to perform well in that market. I think we're beginning to see Europe catching up and giving additional volume to the production facilities here in Toluca, Mexico.

Page 18 deals with the new B-segment introduction by Lancia. It's the new Ypsilon. We've taken more than 15,000 orders to date. It was just recently launched with intent to sell on a full-year basis, peak, at about 120,000 vehicles a year. I'm not going to try and sell you the car, but it is undoubtedly a significant improvement over its predecessor, being a five-door vehicle, which was one of the biggest handicaps of its predecessor.

Slide 19. The Giulietta continues to perform well. As you can see, this is reflected in the residual value that the car has been assigned, which I a reflection of the level of technology and the refinement of the architecture, which is at the heart of the C- and D-segment development here in the United States and which has been transferred to Chrysler as part of the initial endowment of technology from Fiat to Chrysler.

Slide number 20, which deals with Jeep. As part of the relationships between Fiat and Chrysler, Fiat is undertaking the distribution of Jeep products in Europe. We had a very successful launch of the Jeep brand in Europe. I think that a number of product improvements have been brought about to make these viable competitors in the European market, especially the Grand Cherokee, which has been launched in Europe as a 3-liter diesel. It's earning a large degree of success. And, as you can see, year-over-year improvement in performance is significant.

If we can just deal with slide number 21 in a very brief way-- We keep on showing this because we needed to somehow show what has happened to the European market. You can see that it has been-- In the post-incentive regime, you've seen a significant shift in product mix, away from the lower-end segments, which had been historically incentivized, to the mid-sized and full-sized segments. And so this is an area where, historically, Fiat has not been very strong in. It is an area which is the single-largest strength of the Chrysler organization because that's the heart of the American market. Obviously, as we continue to develop these two organizations together, we see that significant benefit will come from the product development and the capabilities of Chrysler in helping us deal with these market opportunities in Europe.

I made reference of slide 22 already, to what we're doing in terms of the Italian network. It was announced in late June and really designed to deal with the long-term viability of the dealer network, which, in the face of declining volumes, as we've seen in 2011, has in spots (inaudible) suffered. And so we need to be able to resize the dealer network to deal with what we consider to be continuing market conditions in Europe and effectively establish a solid base for restarting their activities in a healthy economic fashion.

Slide 23, which deals with capacity utilization. You can tell from the chart that the Italian system is severely underutilized. We're at 43% capacity utilization, while the rest of Europe is at 82%. We actually are 37% in this quarter, compared to 43% in the prior year. That's a declining number which reflects the decline in market activity and market volumes on the European side. As you can see-- What you see on the charts is what I've stated publicly and repeated on numerous occasions about what the objective is in terms of the restructuring of the Italian industrial framework.

Some of you may have followed what has happened in terms of the negotiations that have gone on between Fiat and the various interested parties for the social discourse here. But just the last event, which has triggered a lot of speculation about what Fiat may or may not do going forward, it's associated with a judgment that was issued by an Italian court in Turin in connection with the agreement that was signed a number of months ago in connection with the plant in Pomigliano d'Arco, which is designed and slated to make the Panda and put it in production by the end of this year.

That investment has already left the barn. So we are going to complete it, and we're going to continue to develop that vehicle, regardless of what the outcome is ultimately of the clarification that is required to make some sense of the judgment that was issued.

But I just want to make a couple of comments about what Fiat's view is of the current state of the Fabbrica Italia program and where we intend to take it forward. Just to remind everybody, including ourselves, of the fact that, as a result of the three labor agreements that were signed in connection with (inaudible), with Mirafiori, and with Grugliasco, the majority of the workers signed and agreed to a set of conditions that will guarantee Fiat the minimum requirements for governance of these plants and the driving of operational efficiency to the point where it could become competitive on a global scale.

To go back to what I said earlier about the fact that people are underestimating the impact of the consolidation of Chrysler within Fiat's accounts, one of the things that's fundamentally changed from what Fiat was two years ago to what Fiat is today is that its manufacturing footprint through Fiat's own manufacturing plants and Chrysler's manufacturing plants has fundamentally changed the optionality involved with the (inaudible) of events.

This is something that should not be underestimated. It cannot be underestimated because the Fiat of today, on a combined basis, is a 4-million-car-a-year producer. And that's a different story than being a bipolar organization that relied on Latin America and Europe as being (inaudible) compete in the automotive market. Fiat is not and cannot dictate the timing of market conditions. This is an incredibly competitive sector in which we are required to compete as the market demands. It is not our option to choose that timing. Our only option we have is whether we engage or not engage.

So we have come to the conclusion, and we have repeated this on numerous occasions, that the industrial reality that we need to manage to allow us to be successful cannot function in the face of industrial instability. It cannot be to the decisions that are made by the majority of the workers and which have been ratified by all the parties involved and which have been supported by the majority of both unions and the workers in these plants-- it cannot be the majority. That view is overruled by a very loud minority.

And so, regardless of the requests that have been made directly and indirectly by that minority to reopen discussions vis-a-vis these contracts, the answer is that it will not happen. Fiat will not engage in a re-discussion of the terms which have been agreed by the majority. I think it would be unfair to the process that we've gone through. It would be unfair to this organization, given the optionality that it has in terms of making choices vis-a-vis production allocation issues.

I think that what Fiat needs is a very clear indication by the system at large-- I mean the political side, the unions, and so on-- that they share the commitment that we're making to public Italia, of the commitment that we're making to the industrial network in Italy, that says unquestionably, unequivocally that the terms and conditions of these agreements will be respected by all and that we will not enter at any point in time in discussions as to what the application of these rules entails. It cannot be the case. We are not required to do this in any other part of the world.

The board that was here for the last two or three days has experienced firsthand what it's like to run an organization that produces 3,000 cars a day in an undisturbed but in a very organized, very procedural, very rigorous fashion and that allows the organization in this country to maintain leadership in the market.

This reality, like the American reality that we're developing, like the other realities that Fiat has confronted and developed internationally, are at a stark contrast to the alleged dialogues that are going on between us and the Italian counterparts. And that cannot be the case.

The issue is not with Fiat. Fiat has done much more than any rational economic player would be expected to do. It has made an open commitment to this country to help it turn the corner on industrialization and move it on in terms of the modernization scale. It cannot do more.

And so, if the system does not want Fiat to carry this on, then fine. Fiat will have to exercise options wherever it has them. But it will not engage in the continuous renegotiations of issues that have been decided and moved on. And so it would be regrettable, I think, if the system on the Italian side were to abandon or not utilize this opportunity that's being offered. These things don't happen every day.

The Chrysler opportunity for Fiat was made available in 2009. We were courageous enough at the time to seize that opportunity. I think Italy has the same opportunity to join in the bandwagon. If they don't want to do it, it's fine. We'll move it on. Fiat is not threatened by that movement. Fiat is not going to be threatened into a position of submission. It won't. And it will exercise whatever options it has available to move it on.

Mr. Palmer, maybe you can talk to us about Chrysler.

On page 24, we have Chrysler Group sales performance for Q2-- sales of 486,000 units, a 19% increase compared to Q2 2010. And, as you can see on the left-hand side, sales by market, all markets contributed, with the US and Canada driving 20% growth each.

On the other side, by brand, you can see that, in particular, Jeep had very strong growth, as did Ram and Dodge, as all brands start to benefit from the launch of the 16 products that we made in the first half of the year. The only brand with a negative number is Chrysler, as we continue to launch the Chrysler 300. But, overall, obviously, there's a good performance across all brands, driving sales.

If you go to page 25, we can see for the two principal markets, the US and Canada, the US market in the quarter grew by 7%, and the Chrysler Group sales grew by 20% with a market share increase to 10.6%, up 120 basis points. And, within that increase, very importantly, retail sales increased by 36%, and fleet sales actually were slightly down as we pushed the launch of the new products into the retail channel, improving our mix. Fleet mix for the quarter was at 32%, down from 40% in the prior year.

And Canada also had a 4% growth of the market. We actually had a 20% growth with market share increasing 200 basis points to 14.9%. Retail market share was up, slightly above 200 basis points, with Jeep and Dodge driving that growth.

Turning on to slide 26, which is probably the easiest slide in the deck, which deals with Ferrari, they had an outstanding quarter again. Volumes are up. Profits are up. I really have nothing else to say about Ferrari. I mean, we cannot expect them to do more, other than perhaps win the F1 championship, which I think they're working very hard on right now. Having said this, as you know, this is star performer and has been now for a while. It continues not to disappoint.

Maserati, on slide 27, is also making good progress, notwithstanding the fact that we're living off, still, a set of architectures which I think are in need of an upgrade. That was the opportunity that was given to the Grugliasco plant in terms of playing in the revival of the expansion of the Maserati brand. We will see how that develops. But, obviously, it is something that needs to be actioned, and, hopefully, by the end of 2012, we will be able to see new models will be coming into the marketplace.

Slide 28, which deals with the components businesses, Marelli. Marelli has had a good quarter of revenue. We're up 10%. We've got growth pretty well across the geographies that Marelli is involved in. Trading profit nearly doubled to EUR50 million, still below what I think it needs to be in terms of a structural, sort of performing target, but it is on a recovery path. And I think that the encouraging thing is that the order book keeps on strengthening, and it's a reflection of the strength of the automotive industry, which is, I think, certainly, on a global scale, on a recovery path.

Fiat Powertrain. Again, some rebound in top volume, not a huge amount but some. It had a positive impact on trading profit, which is now up at EUR46 million. And we continue to develop the ability for strategic alliances of Powertrain. We signed a new deal with Suzuki to supply to them a 1.6-liter MultiJet diesel engine. And we continue to keep this business at the leading edge of technology. You can see that the sub-1-liter engine, a 900-cc engine that was launched recently, has been named engine of the year. It's got one of the lowest CO2 emission characteristics of any engine offering, certainly in the traditional combustion area.

Slide number 30, which deals with the outlook, is relatively clear. I've seen some relatively-- some remarks saying that we didn't upgrade guidance. Well, the answer is that we [didn't] upgrade guidance. To begin with, we're reporting numbers on a consolidated basis.

The trading profit number for the combined entity is expected to be, hopefully, in excess of EUR2.1 billion.

The capital expenditure number that we put in here is at the upper limit of the sound barrier (inaudible) can spend. I think that the number that we spent up to now is less than EUR2 billion for the first six months, and so there's a significant ramp-up of expenditure that's required to meet the EUR5.5 billion number. My expectation, off the record, is that, probably, we'll come in under that number overall for the combined entity.

And net industrial debt, on the assumption that all that capital to spend is spent, is going to be in the EUR5 billion to EUR5.5 billion.

I make reference again to the question about the issue of liquidity, which is expected to be in excess of EUR18 billion. Debt has got a huge cost to us. Antonio can give you his views on this, but I think of it-- this issue is costing us between 450 basis points and 500 basis points in terms of carry. Any amount that's got-- If the excess is close to EUR10 billion, then it's probably costing us between EUR450 million and EUR500 million on a pretax basis every year.

We need to do this as we work our way through-- as we see through, clearly, the options that are available to the Group, both in terms of the industrial footprint in Europe and in terms of the ultimate resolution of ourselves from a corporate governance system vis-a-vis Chrysler. I've been very clear that Fiat is not a buyer of the VEBA interest and that we see the exit for VEBA as being a capital market introduction that will effectively allow them to monetize it. We need to find a way, ultimately, to get there, but the cash resources and the cash resource that we've got on the balance sheet are required to allow us to make this journey for the next 12 to 18 months. So, hopefully, we'll be able to restore cash balances and normalize levels at the end of 2012. But, in the interim, I think we have enough resources to try and deal with our own commitments.

I have no more comments to make. I think we'll be more than pleased to take questions. I'll pass it on to Marco.

Now we are ready to start the Q&A session. Rita, please, retrieve the first question.

(Operator instructions). Philippe Houchois, UBS.

First if I can-- I know it's no longer a Chrysler call, but my question about the mindset of UAW-- how the early discussions between you and the UAW are happening at Chrysler. If you don't mind answering that for me, that would be helpful.

And, if I just quickly get a number from you-- if you can give us a sense of how much of a currency gain you're still getting out of Brazil at this stage with the strong real. That's it for me.

Neglect the currency gain. It's a de minimus number in the second quarter of this year.

In terms of the UAW negotiations, I think that the issue is way too early to call. We started our meetings yesterday. These are-- I think they have a traditional tempo which is a multi-week event. It almost works like a fair, but it's going to go on for a while. I think there are a number of subcommittees that are working on particular issues with a labor agreement. All indications so far suggest that there's at least a shared intent to keep these organizations highly competitive in the marketplace.

I think that we are protected in a couple of ways. The first one is that it's mandatory arbitration on the contract in the event the talks were to break down. And, secondly, there is a commitment that, whatever wage rates are agreed to in terms of a package, they'll remain competitive for the rest with the American landscape-- across the American landscape, not necessarily by focusing on a particular player.

So we have some comfort to suggest that there's going to be reasoned judgment applied on both sides to make sure that we end up with the right economic results.

I have always been-- I make this comment, and I've made it publicly in the past that the ultimate resolution on this issue on the UAW wages will ultimately involve a co-sharing of risk with our people. I think that our organizations need to be ready to pay more when the organizations performed well but also share in the downside, paying with the workers to a point where, effectively, it makes all of us co-responsible for the economic performance of the organization. And this remains the key objective.

I think, ultimately, the resolution of this thing will provide a stability in terms of the labor negotiation process. I think that-- I grew up in North America. I still remember the sort of periodical, biannual or tri-annual, ritual of having people go out on strike to prove a point in order to force people back to the table. I think those days are gone. And, certainly, from the UAW leadership, I notice a willingness to accept the challenge that we all face in terms of keeping this industry competitive.

Thank you.

Alberto Villa, Intermonte.

Pardon me. Philippe, just to clear up the issue on FX, I have the exact number. It's EUR5 million for the quarter.

Okay. I wanted to ask one question on the CapEx side. Are you planning any investment in the CapEx projection for the end of the year in Russia? And can you give us an update of what are your plans there if there is any change or any update on this issue? Thank you.

There is no CapEx forecast for Russia in the 2011 plan. We're still in the midst of negotiations now in terms of selecting a potential partner for us to develop activities in Russia. We continue to be committed to the market. I think we need to find the right way to get it done, and I think we do have some time before the curtain closes on this. But we've got a number of people working on this. I have nothing to announce until that search process is completed.

And the second question is on the cost inflation side. Can you give us a flavor of what are you expecting throughout the second half of the year in terms of impacts of raw materials cost?

It's not going to be net positive for the second half. We're looking at a number of roughly EUR40 million-- between EUR35 million and EUR40 million for the second half of the year as a saving, not as an increase.

Okay. Thank you.

Jochen Gehrke, Deutsche Bank.

Just two quick questions. First of all, in Brazil, Mr. Marchionne, I wonder whether you could just give us some comments on what you think about Brazil currently-- of the production hub in the light of this strong real. We've seen some competitors of yours noting that, in particular, imports are driving the market performance of this year. Are we seeing the same inside Fiat? Is there a business case already for imports into Brazil on the mass market? And, if so, what should that mean for market profitability, knowing that capacity by most of your competitors is going up very significantly?

And, secondly, as you alluded to and we all know, you have decided to include Chrysler without issuing fresh equity. Obviously, we've been through a quarter of very high volatility on financial markets. Why is that as a rationale that Fiat is not-- and I'm not talking huge here-- but not partially allocating fresh equity for this combination; in particular, when looking at your net indebtedness compared to most of your global competitors?

And then, finally, just understanding that net debt number that you've given, the EUR5 billion to EUR5.5 billion range, is that in comparison to the EUR6.3 billion that you gave in the pro forma document as of your Website, and does it include all the adjustments that were made in the calculation of that number? Thank you.

The answer to your last question is yes. It's absolutely comparable to the EUR6.3 billion.

Just to give you on the second issue, which I find a bit perplexing because I think I've been clear on this issue, one of the reasons I think would be-- One of the things that would be incredibly unfriendly from a shareholder standpoint is the issuance of Fiat equity. I'm not trying to sell you swampland in Florida here. To try and issue Fiat equity in a market like this with the kind of valuations that we've seen, notwithstanding the underlying performance of the business, I think would be absolutely-- it would be thoroughly against any type of value discussion that we've been carrying on consistently now for the last seven years. I believe you would be softening value dilution purely to accommodate the need of a particular person to find an exit from an arrangement.

I remind everybody that, when VEBA signed on to the deal back in June of 2009, most of you-- most of the civilized world did not believe that this thing could be resurrected. I think that VEBA committed to this transaction knowing fully well that the position that it had inside Chrysler was going to be split between an unsecured debt position and a residual equity holder bearing all the risks associated with the economic performance of the business.

I think that, if we extended sort of the value and the power of Fiat equity into VEBA, I think we would be destroying value on the Fiat side-- certainly, not at current valuation levels. That is a broad statement.

The other one that I think is more problematic is that I think that we would be issuing equity knowing fully well that we have unexpressed value inside the Group that is not reflected in the share price. I don't want to belabor the point what the Ferrari valuation that could potentially be worth. But, unfortunately, what is embedded today in the valuation of Fiat almost neglects in its totality the valuation that is associated with probably the most prized industrial/luxury asset that we own within the Group. Let's not even go there. We're chasing the wrong end of the rainbow.

As far as your parallel with other industrial/automotive companies that have done this, I'm not sure that our track record historically in this industry in terms of share issuance just to get this done has really been beneficial. The last time I remember anything of this size being done was in connection with the Daimler acquisition of Chrysler, which I don't have to remind everybody as to what the economic consequences of that piece was. We're going to try not to repeat that event if we can.

And, more importantly, I think that there are other examples in the marketplace where these relationships do continue. The relationship between Renault and Nissan is a classic example, where there is still a shareholding external to Nissan, which functions well within the Renault world.

Right now, the important thing-- I think we've gone a step further in the Fiat-Chrysler alliance, whereby we're putting together a management team that will be responsible for the management-- for the co-management of these assets under one set of leaders. And that's something that even Renault-Nissan have not been able to do or have not done for whatever reason.

In terms of the impacts on Brazil of imports, that threat is always there. And, certainly, the strength of the reais is unhelpful.

I think that it's clear from the (inaudible) that have been made even before the appointment of President Dilma Rousseff, even at the time that Lula was President here, that the automotive industry has been-- continues to be viewed as a strategic positioning of the country. I think, in that sense, certainly the politicians here and the authorities know fully well that the unrestricted opening up of these markets to foreign imports would sort of damage, at least at this stage of growth, the positioning of the local producers. I doubt it very much that we're going to see any type of adverse movement in terms of imports coming in and destructing the local supply/demand function.

Having said this, we're beginning to see people coming in. We have seen others trying to come in and put together a [CKD] to try and deal with local requirements and, thus, avoid the import duties. I think we need to play this out, and I think we need to learn now in the broader context of the global organization how we can emulate the CKD argument by effectively doing the same thing with Chrysler or Fiat production, which is made and which is in areas which are currently not covered by the product offering of [Fiazza]. And they would certainly benefit in terms of the expansion of the product offering.

It's too early for us to make that call. But, certainly, based on discussions that we've seen, I am not threatened by that issue [other than] 2011 or 2012.

As far as your comment that you made about the fact that there is a structural expansion of capacity in the country, I'd just like to remind you that, even with that expansion, there's little still relying in that particular case, for example, on the, roughly, between 150,000 and 200,00 vehicles that are manufactured in Cordoba and which are coming in to supplement local requirements. Even the capacity that has been announced in terms of being put on stream is not sufficient to deal with the expected market growth going forward. If the forecast were to change, I think the issues would follow. But I think that there's enough flexibility within the industrial framework in Latin America to deal with that issue.

Okay. Thank you.

Charles Winston, Redburn Partners.

Actually, my question was about the longer-term capacity expansion in Brazil. So that's been addressed. Thank you very much.

Martino De Ambroggi, Equita.

I have a question on Fiat net debt, Fiat standalone. The implicit cash burn in your guidance is, in the second half of the year, between EUR500 million and EUR800 million. I understand it's mainly due to CapEx, which are delayed or concentrated in the second half. So the first question is-- what's the assumption on net working capital underlying your guidance?

First of all, in terms of cash absorption, you're right. It pretty much depends on CapEx trends, which is normally exponential and forecast to grow significantly in the second half of this year. So, based on the guidance we have given as to the total level of CapEx here, you have here the result. In terms of working capital, we'll be (inaudible), taking into account the important fact that it is (inaudible) of the $700 million for just the (inaudible), which occurred last week.

Okay. So net working capital will absorb cash in your assumption in the second half.

No. (Inaudible).

Okay. And, still on CapEx, I heard what you told about the EUR5.5 billion is the maximum possible. My personal feeling is that you will spend less than EUR5 billion. Could it be a reasonable estimate for the full year of the combined entity?

The guidance we have given is basically based on historical trends we have seen, taking into account how much we spent so far. We believe that the amount which has been given is not inconsistent with the trends we have seen.

Okay.

Having said this, I believe that there's a level of optimism about the ability to issue checks here between now and December, which certainly may not be totally warranted by historical practice. I think these are truly conservative numbers. I mentioned this in my opening remarks. I think we're seeing the upper limit of the sound barrier. We're not going to spend more than that come hell or high water. But I think that the real number is going to be lower.

Okay. And the very last question on the price mix. It was slightly positive for Fiat Auto in the second quarter. What's your expectation? And, if you have something-- anything to elaborate on the second half of the year?

I'm not sure. (Inaudible). You need to yell louder.

The expectation for price mix of Fiat Auto standalone in the second half, following (inaudible) performance in second quarter.

I don't think you're going to see a much different performance. If you look at a breakdown of the profit decomposition and the (inaudible) that we have-- I'm looking at Marco. What page is it on? 36. I don't think you're going to see a deterioration in terms of-- the numbers might change slightly, but I don't think you're going to see a major deterioration in the composition of the trading profit (inaudible). I think we can probably improve in the mix, but it's simply because of the abandonment of some old products and the fact that we're dealing with, certainly, in terms of what's left with a newer product offering than in the past.

Okay. Thank you.

Stephen Reitman, Societe Generale.

My question is regarding slide number 25, which is on the Chrysler group. You've very kindly given the fleet mix for Chrysler for the second quarter of 32%, down from 40%. Mr. Marchionne, you've often commented that fleet is not bad and not a bad business. But it was quite apparent, at least for the 2010 results, that, within that fleet mix, was a very high rental element. I think it was about 29% of your total sales last year actually went to the rental fleet according to your 10-K. Could you therefore give us some granularity on this 32%-- how much of a needle are you still putting into-- How much are you still putting into rental fleets? Thank you.

I'll pass it on to Richard, but I will come back to you on the question as to whether it's a desirable part of the business or not. But, Richard, if you want to, provide whatever granularity we can.

I think the number's-- About three-quarters of that number is still to rent-a-car fleets. Clearly, we now have a new product lineup, but we obviously need to get into commercial customers and convert them to our vehicles. So that isn't an immediate process, but, obviously, with the renewed fleet, we are focusing on that.

By the way, just to go back to your comments, the if factor of those choices is all reflected in the trading profit number. I mean, let's not sort of fool ourselves. And so the question-- I've always said and I continue to repeat the fact that these are not undesirable sales for a couple of reasons; one, because they have certainly here in our dark days in the Chrysler times-- they've provided good support in terms of the volumes required to run the machine. We have been fully cognizant of that fact, and we continue to purify the fleet number not by necessarily restricting capacity for those customers who have been close to us historically but by increasing that portion of the business which offers better economic returns. We have said historically that we don't think that the absolute number is going to change overall. But, as we grow volume across the top line, that number is going to become less and less significant.

I understand your concern, and I share it. But I think, as we work through the product rejuvenation, it will give us a lot more optionality than we've had so far.

Thank you.

Stuart Pearson, Morgan Stanley.

I have three questions. First, just coming back to your cash flows in the old Fiat business for a second and returning to slide 10, if we strip out the cost of the incremental call for Chrysler, which obviously is re-consolidated-- but, for a second, just stripping that out, you'd almost been debt free at the end of Q2 as old Fiat, which any of us would have forecast at the start of the year. I understand that CapEx needs to ramp up, and working capital has been a large part of that. I always come back to the working capital side. I'm just trying to understand how it's been so positive in H1 and your earlier comment that it should remain positive in H2. Looking at your production, it does seem to have run above your sales for the last eight quarters in a row. So I wonder if you could just understand what's going on with the production and how that's impacting working capital and whether you're comfortable with the level of inventory that's resulted you to that relatively high production forecast. That's my first question.

The second is just on the improvement in the SG&A margin in Q2 versus Q1. Just, if we think about the different elements of SG&A, I would have thought that Europe would be flat, at best, in Q2 versus Q1. So, perhaps you could just help me understand what's improving in the quarter, whether it's Alfa, whether it's Brazil, even though we (inaudible), or whether there's some contribution from early Chrysler synergies and that.

And then the last question, if I may, just on Opel, obviously a business that Fiat has looked at in the past-- I suspect probably not one that you'd (inaudible) again. But I was wondering if you could just share your thoughts on how-- what impact there could be on the European market if either Volkswagen, Hyundai, or a Chinese maker would acquire that asset from GM.

Let me deal with the third issue. The palette of choices that you gave me in terms of potential acquirers is so wide and so diverse that I'm struggling here trying to give you an answer that makes sense.

I think, if there were to be a European-- If the asset were to be for sale, which I understand has not been confirmed by General Motors-- but if the acquirer were to be European, I think you would get a completely different response than if it were to be an Asian player because I think that the Asian player would probably have less interest initially to any stability across the rest of its European businesses. And so I think, of all the possible choices, an Asian acquirer may not be the best solution for the European market, but that's just based on the discussion over a beer in a bar. Without having additional details, it would be very, very difficult for me to forecast the impact on this.

I think anybody who's running this business ultimately need to make money. So the question is how do we get there, and how long will the process of adjustment by the acquirer-- how much time will they need to adjust to the European economic environment?

In terms of the second issue, I think that you are-- that margin improvement has been fundamentally to the introduction of, certainly, the Ypsilon and the continued strength of the Giulietta as it makes progress in the marketplace. And the continuing strength of the Brazilian side, which I think will show, hopefully, by the end of the year an improved operating performance--

In terms of your first question, I'm not sure that I agree that we've been overproducing to demand the supply for-- I'm not sure. I think you made the comment about the fact that we've done this for eight quarters running. I mean, there is a chart in the pack that shows a month's supply of inventory in the system. And you can see that we've stayed well below the two months' number. That's not in the pack, I'm telling you. But I can tell you that, in the pack that I have, it's showing that we're not lengthening the month's supply in the system. We're well below the standard that Chrysler uses in the US marketplace. And I don't think that we're building or stocking the system up with undesirable inventory. So I-- That's why the industrial utilization numbers that you saw in one of the charts in the pack indicated such a significant decline in the utilization of the Italian assets, which are now below 40%. It was (inaudible) designed to make sure that we would match demand and supply and we will not clog up the arteries.

Okay. So, seasonality aside, the production rate that we saw in Q2 is something that could continue in the second half of the year?

Yes.

Okay. Thank you.

Max Warburton, Bernstein's.

Just one question from my side. Could we come back to this discussion about increasing the Chrysler stake, buying the VEBA stake? Mr. Marchionne, you said something just now on the call about not being a buyer of that stake. And you also said something, I think, last month saying you won't risk Fiat's credit rating to do a deal. Could you just flesh out a little bit what the rating agencies are saying to you, because, just doing the math on it, I would have thought consolidating EBITDA properly at Chrysler would, in some way, actually make the credit impact quite neutral.

And, secondly, I guess the way Fiat finances itself-- I'm wondering. Does your official credit rating really matter? So, could you just give us more detail of your thoughts on this subject? Thanks.

Max, I better qualify the second question because you made it sound almost [notorious] to learn which Fiat finances itself. It's as if we're getting money from the underworld.

But, given the way in which we publicly raise capital in the capital markets and the fact that our funding exercise probably doesn't reflect the skepticism that the rating agencies have expressed, either openly or otherwise, vis-a-vis Fiat's interest in Chrysler, I think (inaudible) that we do have access to capital, that we can fund this acquisition if we wanted to.

I think that-- as a matter of fact, to be perfectly honest, there's enough cash resources on the balance sheet that, if want to action that item on terms that we thought were value-accretive to Chrysler, we could. I think it would be not sensible for us to open a discussion about acquisitions of interest in VEBA, given their expectations of what we think the business is worth.

I'm not trying to make (inaudible) on the phone, but just to make sure that we understand the parameters, we acquired an interest in Chrysler through the [USD] and Canadian side, which were not based on creating EBITDA numbers. They were based on open-market references for the value of that equity.

If you apply that criterion to the valuation of the 41% stake in Chrysler, you're talking about a value slightly in excess of [EUR3 billion]. And I know, at least, initially, when the deal was put together, the expectations that VEBA has placed on the economic stake is in excess of that number because of the notional conversion of a debt number out of the old Chrysler into an equity position.

So, as long as we live in a world where there's a dichotomy of views-- one that says there's a market reference that says that the value is slightly in excess of EUR3 billion, and somebody else thinks they are sitting that's worth more-- so how do you (inaudible)? There's going to be a convergence of views on value. And that's why I've always been insistent on the fact that the best possible exit mechanism, which effectively will result (inaudible) for the value of their equity stake as to the capital market side.

It's very, very important to happen, and I think that there are a number of things that are available to see, including what it might do (inaudible), including the positioning of Fiat in that event. We have in the scheme of things-- I mean, given the speed at which we operate, to us, 18 months is an incredibly long-run life. We don't have to hit that hurdle until January 1, 2013, when VEBA is in a position to require registration and, possibly, a capital markets move on the part of Chrysler.

And so we're going to use this time between now and then to explore all possible ways in which we can get to what you consider to be the right answer, which is that of providing a combined, structurally integrated-- also from the capital market standpoint position that effectively looks at these two entities as being one.

The way which we do this, the timing of that move, what the implications are-- I've got a variety of options, all of which are under consideration, none of which are actionable or auctioned today. It's not for me to make the decision on behalf of VEBA. VEBA needs to do whatever it needs to do, and I think it needs to live by the terms of the contract.

Yet, as (inaudible) when he came into this deal back in 2009-- and it's not going to bargain him off. So there's a piece of that equity, which is roughly 60%-plus of the VEBA position which is subject to a par right that Fiat intends to hold. And, regardless of the desire to try and monetize it to the outside world, that equity must be available at all times were Fiat to be called. And I'm not (inaudible), Max. I'm just telling you that the (inaudible).

So, at the end of the day, we will do everything that's required to try and put money in the pocket and do it in an intelligent way, where it's one that needs to reflect underlying value and not assume value calculation.

As far as your comment about the fact that I stated publicly that I would not risk the rating, the answer is absolutely true. I won't risk the rating. I will not do anything that will undermine Fiat's rating.

And I also agree that I think the rating agencies' views of the combined EBITDA of this organization is actually quite positive to the rating and not negative. So we need to continue to work with the counterparties to make mention of that fact, and we're not there yet.

Okay. Thanks. I'm sorry to ask a blunt question. But it helps. I appreciate the candid answer.

A follow-up. I've got your second quarter press release in my hand. I don't know if it's right in front of you, the actual, sort of long-worded version. And there's a statement on the front of there in italics, explaining that, even with the accounting consolidation, that Fiat and Chrysler will continue to manage financial matters separately. Can I just ask out of interest, just to get the subtleties of this right, who decided to put that on the front of the release, and who is it aimed at? It's the italic statement towards the bottom of the first page.

By the way, let's agree that, whoever put it on the press release, it's got my name on it. But the reason why it's there is, when we raised financing in the United States and we did the bond and the note offering, it was absolutely clear that one of the requirements that we had to provide the funders of Chrysler was a guarantee that there would be no seepage, no leakage of financial resources from Chrysler back onto Fiat that effectively undermine the capability of Chrysler to repay its debts. And so, as long as those positions-- those debt positions within Chrysler, the financial integrity of Chrysler as an organization which is, effectively, firewalled from the financial influence of Fiat is undisputed-- it needs to be firewalled.

Now, all these things are relatable in time. So, at the end of the day, if I can collect enough cash, I get to recall those (inaudible). The requirement goes away. But these are all optionalities that are available at the right possible time. So I think it's important that we need to maintain the financial integrity of Chrysler on a standalone basis. We can't (inaudible).

Now, all cash that accrues that's generated inside Chrysler is ultimately for the benefit of the shareholders, regardless of-- as long as it doesn't have to pay back its debt holders. But anything which is cash generated with Chrysler is for the benefit of Chrysler shareholders. And we know now fully well that VEBA is capped in terms of its potential interest in the [animal].

Okay. And, then, a final, final follow-on because this is important. You just raised an important point I think. If we still have this standoff and this stalemate about the price of the extra stake, at what point does Chrysler look at paying dividends to all those shareholders, including Fiat?

Within the terms allowed by the declaration. And there are some severe restrictions of dividend paying capability until the debt is effectively [put off]. I'm looking at Richard. Do you remember? He's going by memory. He's closing his eyes.

I think we can provide you with the information. But I can tell you right now that they are severe.

Okay. I'll leave it at that. Thanks very much.

It doesn't-- Nothing prevents me from accumulating cash. What I am prevented from doing is distributing it.

Okay. Very clear. Thank you.

Stefan Burgstaller, Goldman Sachs.

Given the talk about optionality, can you just discuss a bit the timing of the exercising of all the options in the last few months to take the stake to 53%?

And, second, given that the dichotomy, as Bloomberg just reports, or the flavor on the Chrysler value, why did you choose to pay EUR75 million for the equity recapture agreement? How could this become important in the way this deal is playing out in the future?

And, thirdly, given the shares are at EUR7--and you hinted on Ferrari, and, without belaboring the Ferrari issue, can you just remind us what other structural, value-creation options you still consider in order to complete the value transfer you started since you've joined-- signed on as the CEO of Fiat, way back in the last decade?

And then, finally, you titled the presentation "Building Blocks in Place for a Global Car Company." So, what's the blueprint? Maybe you can just very briefly compare and contrast who you inspire to be going forward. Thanks.

Stefan, before I answer, what was the last question?

Just basically saying you're, in the presentation, highlighting you've got the building blocks-- (inaudible) building blocks in place for a global car company. And I'm just trying to see where is your thinking going in terms of a blueprint for this global car company. If you look around and, if you want to, just use the opportunity to compare and contrast where you see your strengths and what is the benchmark, if there is one.

The last question. I'm going to try and get to the end as I try and answer your questions.

I think we've been public on the fact that there are assets within the Fiat Group that-- and I've always talked about the unexpressed value of Ferrari, which I still think is a unique asset which is an asset that is available. And it's not-- Again, I repeat this before we starting getting the jungle drums beating on us-- I don't have a project on my desk. I don't want to talk to any bankers that don't have any idea about this, including yours, Stefan.

But the fact that we can monetize the stupid thing and we all can get rich and move to Florida and retire-- We understand the intrinsic value of Ferrari. We understand it probably better than anybody. And we understand the opportunity to mix what is available to Fiat.

Given what Fiat has today-- focused liquidity in terms of the prospects, in terms of cash generation going forward, there is no necessity today to try and action that issue. Let's take that off the table.

But that is one-- I've also been public on the issue of Marelli. Marelli doesn't have to be a 100%-owned entity within our world. We could monetize part of that position and create cash. So there are other expressions of value. The system appears to be valuing a dollar for a dollar. It doesn't appear to be valuing a cash flow stream for a cash flow stream. It may be worthwhile to try and get the [$8] to try and dispel those evaluations.

So there are other things that are potentially available within the Group that could get us to, at least, a crystallization of some of the unexpressed value of Fiat that would go a long way in closing the gap.

In terms of your last question, the model is a very simple one. I mean, I look at these two car companies as being contiguous, both in terms of product offering and geographic coverage. And while we needed to try and create a global car company, one that is capable of operating in a variety of segments in a variety of geographies, are all present within the Chrysler-Fiat world. It's that simple.

And I would add nothing to that reality, and I will take nothing away from it. They're all a necessary ingredient for what I consider to be a viable, global, car company.

Now, you ask me-- who is-- where is the role model? There are a lot of successful companies, including some companies across the Alps, that have done this in a very successful way. They may even have reached the territory that doesn't belong to them. But, fundamentally, auto-making is (inaudible) could be on a fully developed basis-- it's available on the marketplace, and there are others that have performed well in this segment. Well, I'm not sure that I'm going to answer your question. But I don't know. This blue print that you're looking for is something that we've continuously reiterated as being the ultimate objective of the strategic re-alignment of these two groups.

And just a sentence on the equity recapture agreement, the fact that you paid EUR75 million for the rights.

Yes. I'll tell you that, and then you'll want to know about the steps. I'm not sure that I can help you anymore with the steps. The steps are outlined in the first page of the presentation.

What in particular did you want me to answer vis-a-vis that sequence of events?

I'm just-- It's my understanding this equity recapture agreement-- there's a value specified for VEBA, and you have the right to buy the stake off VEBA at this pre-specified value, which seems to be $4.25 billion, plus interest from January 1, 2010. Now, given that there is this dichotomy in valuation, as you've highlighted earlier, I was just curious as to why you chose to spend EUR75 million to get the rights to exercise this option.

Well, there are fundamentally two reasons. One, you need to understand the purchase in the context of the five-year, industrial plan that Chrysler has laid out. If, effectively, one were to achieve the 2014 numbers that are available to Chrysler, then, even if I were to accrue a 9% a year on a nominal basis, even using current valuations, I would get in a relatively short period of time-- a short period of time is a subjective call-- a relatively short period of time, I may end up running into the threshold amount. And, certainly, if we exceed expectations, we could get there faster. That's one issue.

Since the access the capital markets is not available until 2013, there's at least 18 months' worth of operating performance that are going to go in support of a valuation story.

And so it was relatively cheap. It was relatively cheap for us to make sure that we would-- that anybody (inaudible) above and beyond the notional amount in the event that we were proved to be successful would accrue to Fiat and not to anybody else. It was consequential money in the scheme of things.

For the second (inaudible), it eliminated another party at the table because one was USD had the equity recapture. They were an interested party in anything that Chrysler was doing going forward. And I think that the fact that we built it out and that it belongs to Fiat has clarified the shareholder position and has maximized the potential value of (inaudible) Chrysler going forward. It's that simple. We didn't spend EUR0.5 billion; we spent a limited amount of money. We spent EUR75 million, of which EUR60 million went to the USD and EUR15 million went to the Canadians.

To effectively value a potential right of value accretion, which one can express by option pricing-- If you were to option price that equity recapture, you would find that the amount of money that we paid was quite reasonable, given the expectation.

Okay. Thank you very much.

That will conclude the question and answer session. I would now like to turn the call back over to Marco Auriemma for any additional or closing remarks.

Thank you, Rita. We would like to thank everyone for attending the call with us. We look forward to following up any questions. Enjoy the rest of the day. Bye.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.