Stellantis NV (STLA) 2011 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to today's Fiat S.p.A. 2011 fourth quarter and full year results 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, Nali. Good afternoon to you all, or good morning, as the case may be, and welcome to Fiat's fourth quarter and full year 2011 results Webcasting conference call.

As usual, today's call will be hosted by the Chief Executive, Sergio Marchionne, and by Richard Palmer, the Chief Financial Officer. They will use the material you should have downloaded from our Website fiatspa.com. After 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 I will turn the call over to Sergio Marchionne.

Good afternoon. I think it's fair to say that 2011 has been, for a variety of reasons, for Fiat-Chrysler -- it's been an outstanding year. We've had, in addition to the numerical achievements, revenues of nearly EUR60 billion, a trading profit of about EUR2.4 billion, the fact that we ended up with a net of EUR1.7 billion. If you take out the unusuals of roughly EUR1 billion, we still end up with over EUR700 million net after all this. The fact that we've got EUR20 billion worth of liquidity in the system -- these are all things which are absolutely consistent with the view that, notwithstanding the very difficult trading conditions, and we'll talk more about this as we go forward -- but the very difficult trading conditions that we're all experiencing in Europe, Fiat-Chrysler is on solid ground and that it can face the next phase of development in Europe with some serenity.

I think we are engaged on a number of fronts internationally now. You'll see as we go through the presentation that we're really now talking about a global car company and no longer one which had two fundamental themes, an underperforming European set of assets and a set of assets in Latin America that continued and are expected to continue to perform well. But we're now -- we have been able to flank that with a phenomenally strong North American operation, which has allowed us to devote resources both in terms of time and technical resources to development of our position in Asia Pacific.

So, we told you when we presented our plans a few months ago that we'd be targeting about 4 million cars this year. That's the number that we've hit.

But, more importantly, it allows us to look at 2012 with some level of confidence. I know that, and I certainly have read from the preliminary remarks that have come forward, that there's a lot of skepticism about the ability of any European carmaker to effectively post a decent set of numbers in the current year. I think it's fair to say that, if Fiat-Chrysler was purely a European player, that we will be looking at a completely different reality going forward.

The combination of Fiat-Chrysler now allows us to look at 2012 with the guidance which, for those of you who remember the old Fiat before the de-merger in 2008 had achieved about EUR3.3 billion worth of operating profit -- We're now looking at a car company alone without the industrial side that will produce a number in 2012 in excess of that target. We've put in a number of EUR3.8 billion to EUR4.5 billion. We've had to caution the range, which is probably the first time that, certainly, I've had to do here -- I've had to do this since I've been here in 2004, where we've had to put brackets or, at least, a set of ranges around an outcome because of the uncertainty that surrounds the rate of recovery of the euro zone.

Having said this, we're still forecasting a net income between EUR1.2 billion and EUR1.5 billion. We're going to have -- there's a likelihood that we may grow that to around a EUR6 billion number, purely because of the size of the capital expenditure profile that we're contemplating for 2012.

And the last bullet on page 2, which deals with the fact that we've now achieved a 58.5% equity interest in Chrysler, is now -- it's history. We got the last 5% in January by meeting the last of the equity events, the ecological event. And so we now are left with VEBA as the other shareholder. It's a shareholder on whose position we have a set of call options which expire in 2016 and allow us to buy up to 40% of their interest.

If I can just get to page 4, and we'll use this as a basis, I'm sure, for some of the Q&A that will be directed after the presentation, we tried to give you an idea of the profit split for this new global car company. The left-hand slide -- the left-hand portion of the slide deals with the revenue side. You can see that, effectively, the integration of Chrysler -- and these have been done on a pro forma basis, including Chrysler for the whole of 2011. The NAFTA now accounts for nearly half of the overall volumes of the combined Fiat-Chrysler Group.

And then, when you look at the profit origin of the trading profit associated with Fiat-Chrysler, again on a pro forma basis on the assumption that we had owned Chrysler throughout the year, you find that there's almost a negligible slice of that pie which has been labeled EMEA car. And EMEA car, unfortunately, is made up of a couple of items. It's made up of a number which reflects our luxury brands, and then there's a number which is the mass market portion of the European operations. You can see relatively clearly that the mass market business in Europe has lost nearly EUR0.5 billion -- or about EUR0.5 billion in 2011. The picture will be changed drastically if you compare to 2010. But it does reinforce our view that the structural imbalances that exist within the European market are things that need to be addressed, and they need to be addressed in a particular way.

Fiat-Chrysler has chosen a particular method of addressing this issue. It's begun to look at the European asset base as an extension of the global manufacturing base of Fiat-Chrysler. And it's made a commitment to try and develop these assets in a way which is absolutely consistent with and is in accordance with the product development plan which is driven not only by EMEA, by the European market, but it's also driven by demand in other parts of the world.

In order to get that done, we -- and let me deal with sort of the propaganda slides -- let me deal with slide number 5, which tells you that we're now credible players. We're number seven on a list of global car producers.

And I'm not going to try and tell you the information on slide 6. I mean, we've announced our group executive council formation in the second quarter of 2011. The integration activities continue unabated. I mean they're picking up in intensity and strength. I expect to have half of the work of integration in terms of making this look and smell like -- as one car company by the end of this year. Hopefully, we'll be able to exceed that target.

There's a lot of information on page 7, which may require that we spend some time getting to grips with this. The left-hand side is our best approximation of what the utilization using harbor definitions -- is of the various geographic areas within which we function. You can see there on the North American side, in 2011, we're roughly 90% of capacity utilization. Our Fiat-Chrysler world utilized the asset base in the US, Canada, and Mexico at about the same rate. We were about 92% using the same, standard definition.

When you look at Europe, you can see that we had an 82% utilization rate using harbor. On an Italian basis, that number ended up being 50%. And, if I look to the rest of Europe, which, obviously, has got as the main production assets, our Polish activities, we were well above 100%. And it's been over 100% now for a number of years. This kind of structural imbalance in terms of the productivity of the Italian asset base and what is available around Fiat has been at the heart of our attempt over the last few months -- probably a couple, two, or three years to bring about a fundamental change in which we interface with the trade unions about the fact that we tried to get to a new pact on how to run these operations and bring the highest level of flexibility and the highest level of flexibility from the plants that we run.

It is -- if you move on to slide number 8, you can -- we'll give you a summary of what we have been able to accomplish to date. We were able -- for a variety of painfully necessary reasons, we were able to shut down our Sicilian plant, which, unfortunately, because of geographic location, could not be saved. There was nothing I could have done. Even if I had increased volumes, if I multiplied the economic activity in the plant, I could never ever remove or reduce the operating losses with the running of an operation.

We also exited the employer's association here at the end of 2011 to gain the necessary contractual freedom to try and engage directly with our trade unions and establish a set of working practices and agreements that would allow us to begin the process of restoration of what I call globally competitive manufacturing assets in this country.

These are some of the things that we were able to negotiate with the trade unions. I think we are happy with what has been accomplished so far. And, certainly, these initiatives are totally in line with the strategic objectives that we have set back for ourselves in 2010, which looked at the near full utilization of the Italian asset position going forward.

So we are at the beginning of a cycle now which hopefully will be completed, certainly, within 2014, which is drastically changing the economic picture that you saw on the pie charts on the previous pages. We need to remove this imbalance. We need to remove the fact that we've got the mass car market in Europe, which is economically unproductive and which, just in raw, pure economic analysis, does not deserve capital allocation of any kind. And so we need to work with the system to try and bring about a change. We think we can do this in conjunction with Chrysler and the rest of our global activities. But that work must be done with discipline. It must be done with rigor. We cannot waiver, and we cannot back track on the commitments that we've made so far.

So I'll be more than glad to take questions on this issue. But we are at the beginning of a longer-term process which will not be completed until 2014.

So, on that note, I'll pass it on to my friend, Mr. Palmer, who is going to razzle-dazzle you with a bunch of details about 2011 performance.

Good afternoon, everybody. A couple of comments on page 9 on the new Panda in Pomigliano. As mentioned, this is the first plant which is benefiting from the new contract and really is an indication of how the Group intends to proceed with retooling and improving the ability of the Italian production system to improve capacity utilization going forward.

If we go forward to page 11, we'll start to talk about the financials. As mentioned before by Mr. Marchionne, all targets were achieved or exceeded for the year. Revenues reached nearly EUR60 billion, with Chrysler contributing EUR24 billion for the seven months it was consolidated. Fiat ex Chrysler revenues were EUR37 billion, up 4%, and revenues for FGA were resilient, remaining in line with 2010, despite the difficult trading conditions in Europe. Luxury and performance brands and components achieved double-digit growth in revenues.

Trading profit came in at EUR2.4 billion, of which EUR1.3 billion is a result of the consolidation of Chrysler. Excluding Chrysler, trading profit was EUR1 billion, broadly in line with last year.

Net profit of EUR1.7 billion included EUR1 billion of unusual income, mainly related to the re-measurement of the ownership interest in Chrysler at consolidation in Q2, net of other unusual charges, and a EUR0.1 billion loss on the mark-to-market of the stock option related equity swaps. Excluding these items, net profit was EUR0.8 billion. On the same basis, the full-year net result for Fiat, excluding Chrysler, was substantially breakeven.

Net industrial debt was EUR5.5 billion, compared to EUR0.5 billion at yearend 2002 (sic - see Slide Presentation) and down from the EUR5.8 billion at the end of September 2011, principally reflecting consolidation of Chrysler's net debt, EUR3.9 billion, and the purchase of the UST and Canada stakes, EUR0.5 billion. For Fiat, excluding Chrysler, net industrial debt at yearend was EUR2.4 billion, and, excluding the purchase of the additional interest in Chrysler and negative noncash items, net industrial debt for Fiat, excluding Chrysler, was around EUR0.7 billion, well below the EUR1.5 billion to EUR1.8 billion guidance given at the beginning of last year.

Total available liquidity, inclusive of undrawn committed credit lines for EUR3 billion, stood at EUR20.7 billion and, on the Fiat side, EUR12.3 billion of cash.

Moving to page 12, Fiat-Chrysler continued to manage costs rigorously while aligning production levels with market demand. WCM savings of Fiat and Chrysler combined amounted to EUR480 million, around 7% of transformation cost. And the target for 2012 is in excess of EUR400 million.

Gross purchasing savings in 2011 were just over 2% on EUR43 billion of annual purchase value, but, due to raw material price increases, net performance was slightly positive for the year at EUR80 million. Net purchasing savings extended for 2012 are expected to be in excess of that number, given that the raw material increases suffered in 2011 aren't expected to repeat.

Integration between the two companies is well on track, as mentioned before. The EUR1.4 billion cumulative synergies achieved to date benefit of around 50% as reduced cost of P&L, while the remainder was savings in cash capital expenditure.

In the year, Fiat successfully issued new bonds for an aggregate amount of EUR2.5 billion plus the syndication of a three-year revolving credit facility, which is an amount equal to 100% of the bank maturities due through end of 2012.

Given Fiat's desire to maintain a high level of liquidity and that certain restrictions exist on the ability of Chrysler to pay dividends, the board of directors decided not to recommend a dividend payment on Fiat's ordinary shares. However, the board announced its intention to propose to shareholders at the annual general meeting a total dividend on special classes of shares only of EUR40 million.

Slide 13 deals with the constituents of the revenues and the trading profit for the full year. Fiat Group Automobiles' revenues were up, in line with 2010, with a more favorable product mix, offset by a 2% decline in volumes. Trading profit was impacted by volume declines for passenger cars in Europe, higher advertising costs related to new model launches, and R&D expenditure for future products, partly offset by the efficiencies in purchasing and world-class manufacturing mentioned before.

Chrysler revenues were nearly EUR24 billion in the seven months on the back of 1.2 million shipments in the period. Chrysler trading profit was driven by continued positive trend in volume mix and price from the new vehicle launches.

Ferrari and Maserati, along with the components business, had a good performance in 2011, recording increases in both the top line and trading profit.

Slide 14 deals with the P&L from trading profit to net result. Unusual items, net, includes the unusual income of EUR2.1 billion recognized in Q2 and mostly related to the fair value re-measurement of the ownership interest held in Chrysler prior to acquisition of control and of the right to receive an additional 5% ownership interest following achievement by Chrysler of the third performance event, which was completed in January 2012. Unusual expenses of EUR1.2 billion, of which EUR700 million are noncash, were attributable to the impact on Fiat's business of strategic realignment with Chrysler's manufacturing commercial activities and to one-off charges related to realignment of certain other minor activities of the Group.

Financial charges amounted to EUR1.3 billion and, excluding Chrysler, to around EUR800 million, compared to EUR400 million last year. Net of the mark-to-market of two option-related equity swaps which amounted to a gain in 2010 of EUR111 million and a loss in 2011 of EUR108 million, the remaining EUR177 million increase relates principally to a higher cost of carry in 2011 due to the higher average cash levels in the period.

Net income, as mentioned before, totaled EUR1.7 billion, up from the EUR222 million a year ago. And, excluding Chrysler, unusuals, and the mark-to-markets of the equity swap, the result was substantially breakeven.

Page 15, cash flow. I'll concentrate on the fourth quarter in the left-hand column. Change in net industrial debt was positive [for EUR200 million] in Q4, thereby reducing Group net industrial debt from EUR5.8 billion as of the end of December to EUR5.5 billion at yearend. The above-mentioned positive cash flow comes from a EUR300 million positive cash flow from operating activities net of CapEx, reduced by a negative exchange translation effect of EUR123 million related to the US dollar moving from $1.35 to $1.30 on Chrysler's net debt. Net of this impact, Group net industrial debt would have been at EUR5.4 billion at yearend.

Moving on to page 16, the market status and also forecast, in the US, the industry in 2011 grew by 11% in 2011 versus 2010. In particular, the truck segment was up 13%, while the passenger car market was up 8%. For 2012, the industry demand in the US is projected at around 13.8 million units, which is in line with Chrysler's November 2009 plan. The Canadian market recorded a 2% increase over 2010, and we expect stable demand through 2012.

In Europe, the industry in 2011 was down 1.4% to 13.6 million units with a more pronounced decline of over 3% in Q4. The increase in Germany wasn't enough to counter the double-digit decline in Italy and Spain and negative performance in France. LCV market in Europe was up nearly 8%, driven by all major countries except Italy, with double-digit increases in Germany, UK, and minor markets. For 2012, as mentioned before, we see persistent difficult trading conditions in Europe, and the passenger car industry is expected to further decline, in a range between 12.9 million to 13.4 million units. LCV market demand is projected down 3% to 5%, with Italy to contract the most, expected down around 10%.

Overall demand for Brazil reached a record high in 2011, with 3.4 million units, or 2.9% growth versus 2010. Argentina was up 29% versus prior year. The Brazilian market is projected to around 3.6 million units, or 5% growth versus 2011, supported by GDP expansion expected.

On page 17, look at the US and Canada share performance. Strong performance of Chrysler Group products in the US and Canada, outpacing industry growth, with December marking the 21st consecutive month of year-over-year vehicle sales gains on the back of the momentum of the 16 new and significantly refreshed products launched. Full year 2011 share was at 10.5%, up 130 basis points versus 2010. Retail sales were up 43% for the full year, and retail of retail market share was up 200 basis points to 9.4%. Fleet mix was at 28% for full year 2011, compared to 36% a year ago.

In Canada, full year 2011 share was up 130 basis points to 14.3%. Retail sales increased by 13% in the year. Retail of retail market share was up 150 basis points, with Q4 share at 12.9%.

Page 18 graphically represents some of the main contributors to the growth in the US and Canadian volumes in 2011. You can see all the products launched, the Chrysler 200, the Dodge Durango, Jeep Grand Cherokee, the two small CUV -- SUV. The SUV products, the Compass and the Patriot, and the Wrangler, and the Ram, all contributing very positively to the 24% growth overall.

Page 19, dedicated to our new compact sedan, the Dodge Dart, which was unveiled at the Detroit auto show earlier this month. The vehicle is being introduced into the single-largest retail segment in both the US and Canadian market. It's based on the Alfa Romeo Giulietta platform, modified for the US, and will offer three world-class engines and three transmissions, including the 2-liter and 2.4-liter Tigershark and the 1.4-liter MultiAir turbo engine. The vehicle was named the Most Significant Vehicle at the Detroit auto show by Autoweek editors and Smash Hit of the Show by Motor Trend magazine.

Page 20. The full year 2011 EFTA share in Europe was 80 basis points lower than 2010, substantially driven by unfavorable country and segment mix. The weight of the Italian market, as you can see on the top, right-hand corner of the chart, reduced by 130 basis points, accounting for less than 13% of the total European industry.

The combined A and B segment weight in the whole European market was down 350 basis points, accounting for 60 basis points of EFTA share loss. In particular, full year share in Italy was down 90 basis points to 29.4%, primarily as a result of the 2.3 percentage loss in Q1 2011 compared to Q1 2010, which was benefited by the tail of the eco-incentives.

Considering the A, B, and C segments together, their weight in the whole European market was 380 basis points lower than last year, and, as a result, share declined for Fiat by 30 basis points. It's worth noting the positive performance in the C segment, where Fiat had a segment share gain in excess of 100 basis points thanks to the first full year in the market for the Alfa Giulietta.

Slide 21 deals with the EFTA passenger car brands in Europe. Fiat was the most impacted brand for the unfavorable segment and geographic mix mentioned before. However, within its core segments, Fiat maintained a leading position. In the A segment, Panda maintained number-one position, and [Fiat] ranked number two. Punto entered the top-five ranking with over 6% share in the B segment. Freemont had a very good reception in a booming SUV segment, which grew over 21% in Europe.

Alfa Romeo sales in 2011 rose 19% to 131,000 units thanks to a full-year contribution of Giulietta.

Lancia full-year share was flat at 0.8%. Sales were down 6% but with a sequential quarterly improvement driven by very good market acceptance of new Ypsilon launched in June. In fact, first half was down 17%; the second half was up 11%.

Jeep sales in 2011 in Europe were up 62% versus 2010 on the back of the rejuvenated product lineup and stronger distribution base through the FGA network. Full-year share almost doubled, admittedly from a small base.

Page 22 shows Fiat professional performance, where sales growth in Europe grew by 5.6% to 224,000 units with volume gains in all key markets except Italy and Spain, whose decline is fully attributable to deteriorated market demand in Q4. Full-year share, impacted by unfavorable country mix, was at 12.5%, substantially in line with last year.

Slide 23, focusing on Latin America. Fiat and Chrysler combined full-year share was at 16.8% in the Latin America region, with Chrysler sales up 33% to 56,000 units. In Brazil, Fiat was again confirmed the market leader, as it has been for nearly a decade. Full-year share overall was 22.2%, in line with expectations, while maintaining price discipline. Inventory remained at a healthy level, with dealer stock at 25 days' supply at yearend.

More in detail, the Fiat brand in Brazil experienced a market share growth in core segments for the full year. Fiat share in the A/B segment was up 100 basis points, reaching 28.2%, driven by strong performance of the new Uno and the [Chincochento]. Robust sales of the Bravo drove share to 7.5% in the C2 segment. Fiat entered the SUV segment with Freemont, achieving a nearly 3% segment share in just four months of sales. Strong product momentum drove sales of Chrysler brands up, particularly Jeep, with Cherokee growing twofold in 2011 and Grand Cherokee more than 3 times.

Worthy of note on the product side is the achievement of two consecutive awards of Carro do Ano. The 2011 edition was awarded to new Uno and the 2012 edition to new Palio, which was given five additional awards, including Best Compact of 2012.

Slide 24 shows the most important product introductions that occurred in 2011 by region. In particular, Lancia/Chrysler brand in Europe benefited from the launch of the all-new Ypsilon and the expansion in the product offering with Thema and Voyager derived from the recently launched refreshed products in Chrysler in NAFTA. Fiat Freemont achieved a good performance after being launched in the second quarter. Four cars were launched under the high-performance SRT brand in NAFTA. Also, the Fiat 500 and Freemont were launched in Brazil with very good initial receptions. Both models are imported from Mexico, benefiting from the free trade agreement between the two countries, and, therefore, the cost base is now more competitive to the regional 500 imported from Europe.

On page 25, the key product launches for 2012. In Europe, we are launching the new Panda as we speak. In Q2, Lancia will introduce the Flavia convertible and the Thema all-wheel drive. In Q3, there will be the launch of the new Fiat compact MPV.

In Q2, the Dodge Dart will be launched in the NAFTA market, and the refreshed Ram light-duty pickup will also be launched in Q3. The Dodge Viper will also be launched at the end of the year in Q4.

In Latin America, we will have a significant product line renewal with the introduction of five new models plus seven refreshed versions of existing models.

Fiat Freemont will be available in China in the current quarter, followed by Chrysler 300 in Q2. The new Q3 -- the new Fiat C-Sedan will be introduced in China in Q3 of this year, the first vehicle produced by the JV with GAC.

Page 26 shows the 2011 shipments and the walk to the 4.1 million to 4.4 million guidance for 2012. We're targeting 4.1 million to 4.4 million sales in 2012. Volumes in the EMEA region are difficult to forecast, as we discussed earlier, being subject to the level of uncertainty regarding economic activity in the euro zone. Expecting growth in NAFTA as market increases and also share. And shipments in Latin America should be close to the 1 million mark, with the increase being driven both by Brazilian market growth and also an increased focus in other Latin American markets.

Moving to slide 27, Ferrari recorded over 17% revenue growth in the year. Ferrari shipped 7,200 units, up 9.5%, driven by 12-cylinder models, the FF in particular. 8-cylinder models accounted for about 80% of total shipments in the year. Also, in 2011, North America continued to be Ferrari's number-one market, representing 27% of shipments.

2011 trading profit was up to EUR312 million, of which EUR100 million was generated in Q4. The full-year improvement is attributable to higher sales volumes and a more favorable product mix, partially offsetting higher R&D expenditure.

Maserati shipments increased 8.5%. North America grew by 20%, and China shipments nearly doubled over last year. China, Hong Kong, and Taiwan now represent around 14% of revenues. Maserati full-year trading profit was 1.7 times higher than last year, moving to EUR40 million on the back of improved mix and further optimization of operating costs.

Slide 29, the components side. Magneti Marelli in 2011 had revenues up 8.5% to nearly EUR6 billion, reflecting strong performance in lighting and electronic systems in Germany, Brazil, and China in particular. Demand in the LCV market also made a positive contribution.

Full-year trading profit nearly doubled to EUR181 million. Increased sales volumes and manufacturing efficiencies more than offset cost pressures from raw material price increases.

New orders reached 1.9 billion in the year, a strong performance in terms of order intake.

Fiat Powertrain, on page 30, had revenues of EUR4.4 billion, up 6% on higher volumes in Latin America, partly offset by decline in Europe. Engine volumes were substantially flat at 2.4 million units. Transmissions were up slightly, at 2% more, at 2.3 million units.

Trading profit was EUR131 million. Favorable sales mix and efficiencies in overhead and manufacturing costs partially offset higher raw material costs and higher R&D associated with new products.

During 2011, the diesel engine portfolio for both FGA and Chrysler Group was rounded out with two state-of-the-art products through the acquisition of Penske Corp's 50% stake in Group VM Motori, jointly managed with General Motors.

Our long-lasting relationship with Suzuki was reinforced with an agreement in June for the supply of 1.6-liter MultiJet II diesel engines and with a three-year agreement to supply Maruti Suzuki India up to 100,000 1.3-liter MultiJet 75 engines per year.

Slide 31. In 2011, Fiat kept its leading position for the third consecutive year in the Dow Jones Sustainability World and Dow Jones Sustainability Europe Indexes. Fiat obtained a final score of 93 out of 100 and reached a maximum score for its performance in carbon emission.

Page 32 talks about the 2012 outlook. As Mr. Marchionne mentioned earlier, given the uncertainty in the European marketplace, we're giving the range of numbers you've seen on the page before for revenues in excess of EUR77 billion, trading profit in the EUR3.8 billion to EUR4.5 billion range, net profit between EUR1.2 billion to EUR1.5 billion, and net industrial debt between EUR5.5 billion to EUR6 billion.

Thank you very much. I'll hand it back to Mr. Marchionne or to Marco.

Now we are ready to start the Q&A session. Nali, could you, please, retrieve the first question? Thanks.

(Operator instructions). Charles Winston, Redburn Partners.

Just two or three questions from me, if you don't mind, all slightly dull, accounting things. But could you just highlight the gain on the Chrysler numbers from the move from US GAAP to IFRS? Obviously, we talked about this at the third quarter in terms of the capitalization of R&D. If you could just perhaps run us through that for the full year, I'd be grateful.

Secondly, just in terms of tax rate, looking at the numbers, it looks as though, if we put to one side the roughly EUR1 billion of one-time gain in Fiat, the underlying tax rate in Fiat is about 100% and about 10% in Chrysler. Is that right? And, if it is, what are your expectations for those tax rates for 2012?

And then, finally, just in terms of production, your presentation suggests that in the fourth quarter you produced, I think, 490,000 units. Sales were just a little bit under that. So your inventory as a proportion of sales, the presentation suggests, is 2.1 months, which, as I look at it, is the highest you've seen since the fourth quarter of 2008 at the crisis. Why didn't you destock? Why didn't you cut production? It just seems quite weird to see that figure, given what we've been seeing in terms of your sales in recent months. Thanks a lot.

I'll start with the tax rate. On the Fiat side, we clearly have the imbalance of -- we make money in Latin America and we pay taxes. And, in Europe, we don't make money. We have significant tax loss carry-forwards, but we can't utilize them, given the level of income. So our tax rate as a result looks extremely high and is.

On the Chrysler side, our status as an LLC -- basically, we don't pay taxes in the US. Our tax characteristics are basically passed through to our owners. And, at the moment, anyway, the owners have losses that have been accumulated through the first two and a half years, so they won't be paying taxes on the income anyway. But that's their issue because, being an LLC, they're passed through. The taxes paid in Chrysler relate to international jurisdictions such as China and South America.

So those rates going forward -- we should probably use something similar in 2012 in our models?

I think the best way to look at this issue is that, until the structural problems in Europe are solved, the best we can hope for is to use the operating profit or the taxable income coming from the luxury brands to offset the losses that originate from the car side. So, at best, it's going to be a zero sum gain in Fiat -- that it has not and it will not -- it has not (inaudible) on board here, but it has not booked any debit in connection with Italian losses on the basis that we cannot prove recovery on a foreseeable -- on a reasonably foreseeable basis.

So the answer to your question is -- you need to look at the tax streams as really being jurisdictional in nature. I think you should be guided by what Richard said about the US for 2012, certainly in terms of utilization of flow-through of income up to the partners, who will not be required to pay taxes.

And so that you understand the operating agreement, and I'm looking at Richard to get confirmation, as I understand it, to the extent that the members need to pay taxes, there is a requirement that Chrysler make a distribution to even them out. Is there not? So we're not in that position yet, and it's certainly not a 2012 event.

On the European side, whatever profits we deliver out of the luxury brands are totally offset either by losses that are coming out of the region or the preexisting tax loss carry-forwards. So, effectively, they will not be paying taxes other than employment taxes, which, this year, amounted to over EUR100 million. I'm looking at (inaudible). How much was --? It was about EUR120 million, so I wasn't that far off.

In Latin America, these are standard OECD rates. They're not phenomenally different from where we are. .

In APAC, it's a new game because of the fact that we're relatively fresh.

So, when you take all these things into account, you're going to end up, by accident, into a reasonable rate because of the US position, which is getting larger in nature. We'll have almost no tax burden offsetting what you correctly said is 100% they have out of Europe. In some cases, it's even worse than this because, effectively, the number may even have been negative at a point in time. So, in the average, you will end up with the decent rate. But the origin of that mix is so bizarre that, until we resolve the European issue and, especially, utilization of the Italian asset base, the tax position in Italy is going to continue to be very difficult.

That's clear. Thank you.

As it relates to the IFRS adjustment, you can see on page 37 there's a reconciliation for the quarter. And, for the quarter, in euros, the number is about EUR300 million add back to net income for -- basically, driven principally by the capitalization development costs under IFRS, which are expensed under US GAAP. So, for the seven-month period, that number is about EUR750 million. Is that clear?

Yes. Thank you. Yes. Oh, hey, that's post-tax. But, if we apply the Chrysler very low tax rate, we can get to the pretax figure. Is that logical?

Yes.

Cool. And, finally, the production side.

In terms of inventories, we're not concerned about the 2.1 months. You're right. It is slightly higher than it has been in the last 12 months or so. It's not at the 2.5 months that we had in the period you were discussing, being critical. We're launching Panda and Ypsilon. We have some volume in the LCV part. If we need to take production out going forward in some of the passenger car markets, we will. But we're not concerned with the 2.1-month number.

We are as watchful as you are of these numbers. I mean, we understand the issue. I don't think there was any intention of sort of clogging up the arteries on distribution. If you want my honest opinion, I think it was probably a misjudgment as to where December would be in terms of our overall volumes. But the number is going to adjust, certainly, within the first quarter.

So, can I have just one last follow-up? And then I'll shut up. Just in terms of the tax side, how much more of cumulated losses are there in Chrysler before Chrysler would need to start paying a more normalized rate?

I think -- now I'm going by memory. I know there's no issue in 2012. And, based on what I know, there's no issue in 2013. But we'll come back to you on the first quarter call and give you a better view on this.

That's clear. Thank you very much.

Massimo Vecchio, Mediobanca.

I would like to focus on the European issue as you described, starting from slide 4, where you gave an indication of the loss of the European activity. Can you share with us what was that figure in 2010? Was it much different than what you just presented?

It was lower than it was now, but the number was still negative. I won't give you the exact number. I think it's no use trying to revisit the past. I'm not going to talk to you about 1997 volumes either. The reality is that I'm starting my life with a 2011 bench. That's the reality. And we need to fix that bench. I can't go back and reconstruct 2010. I can tell you that the pricing environment in Europe in 2010 was drastically different than it is today.

I was trying to understand what can be in 2012. But that's fine. I understand your point.

I could tell you one thing. It's going to be a lot less than the one that we pitched in 2011, come hell or high water.

The solution to the European issue, as you were describing it, can be either closing the plant, and, in this case, I would like to ask what kind of savings you're going to have on a recurring basis, or to be --

Let's not start speculating about plant closures on the call. This is bizarre. You're an Italian. You know exactly what will happen if we start debating this issue. Right? I mean, it's nonsense. I mean, we have already done a lot, I think, in terms of bringing about some sense -- some structure to the manufacturing asset base in Italy. The closure of Termini Imerese and the handling of that asset was a significant step forward. We took out over 100,000 in capacity out of the Italian system.

I think our objective, and, if you go back to what I said back in 2010 when we presented a strategic plan of Chrysler and Fiat, was that we will be using these assets in conjunction with the development of the product portfolio and the market requirements of Chrysler in the United States.

And so one of the things that we need to learn how to do is to effectively use these assets in a way which reflects the same level of dexterity and flexibility that we're currently getting out of the American production system and expect that performance out of Europe, so they can match and compete with the same working practices they have and deliver the same type of output costs that we've got on the US.

It is the only saving grace to all this. In the absence of an achievement of a competitive benchmark in terms of production costs, these plants don't have a long future. It's not because I say it. It's because I don't know how to sell the products that they make. So, at the end of the day, we cannot continue to subsidize a suboptimal, inefficient manufacturing asset base on the basis of ideology. Reality is what it is.

So we need to face it. We need to move it on. I think that we've made a significant investment in Pomigliano, which is an indication of the extent to which we're willing to go to change that reality. But it can't be done by Fiat alone and needs to be done together with our workers. And, to the best of my knowledge, as of today, we have the majority of the people on our side.

So, basically, from the Fiat point of view, with the new labor contract, you already laid down the base for sorting out the European issue from Fiat point of view. You only basically need volumes to saturate the capacity. So, if I understand correctly, it's also on the hand of your competitors to sort out their production capacity issues. Is it correct?

I think that's a very good conclusion to come to. I cannot be responsible for over capacity on our competitors' side. I can tell you that it exists. The chart that I showed you that showed the European situation, which is on page 6, which shows an asset utilization of 82% using harbor in Europe, is a composite of a variety of European producers, a lot of which reflect a significant export function out of Europe into Asia Pacific. If that market, for whatever reason, were to dry up, that position would substantially change, and the economics of that manufacturing asset base will significantly change.

I think we all, collectively, share that problem. I think we all need to do what needs to be done to bring it about -- to bring about a rationalization of the position and a redirection of these assets in the proper direction. It cannot be done by Fiat on its own. I think we have found our solution, at least for the time being, to this problem.

One of the solutions [you hinted a] short time ago was an agreement with another European carmaker, being it on the production side and the cost sharing side several ways. My question is, whatever you're going to do on that front, won't it be a key factor for you to extrapolate the full value of Ferrari? So the question is what is currently preventing you to do so?

I think those two -- that question is disjointed from the problem that you posed. I think the question of extraction of values is something we ought to do as managers anyway.

Is the fact that you have different share classes in Fiat preventing you to fully extrapolate the value of Ferrari, or it's not an issue?

Why that's even a more far-fetched connection. The simplification of the share structure was designed as a market-friendly move to really bring up to date our capital structure. We've done that. Now we look and smell like everybody else, and that's exactly the way in which the world will look.

We could have done your value extraction of Ferrari even without the three separate classes of shares and without the unification process. It would have -- it could have happened any time. That issue still remains an objective and an option for Fiat at the relevant time. Today is not the relevant time. I mean, we've -- as you can see from the cash reserves and the liquidity positions that Fiat-Chrysler have, we have in excess of EUR20 billion of cash on our balance sheet. It was designed to give us the highest level of flexibility to try and deal through this transitional period until 2014.

Okay. Last question, if I may. What is the CapEx that you look for in 2012?

To begin with, it's too much. But I'll leave it to Richard to tell you exactly how much it is.

About EUR7.5 billion.

Thank you very much.

Martino De Ambroggi, Equita.

The first question is on the cost synergies. There is a slide where you are giving an overview for how things are progressing. But, apart from the additional savings on purchasing, that is the only net figure that you quantify. Can we have an idea what is included in your full-year guidance as additional net savings?

The total synergy number for 2012 would be about EUR1 billion, which is similar to the EUR900 million we had in 2011, and that includes a large part of the purchasing savings, which obviously are fruit of the synergistic process between Fiat and Chrysler.

Okay. And the second question is on the pie chart on slide number 4. I was wondering, based on your plan, when do you think the EMEA car business, the slice which is extremely small today, will be positive?

Our target is to take it to breakeven by 2014.

Sorry. 2014?

Yes.

That's including luxury and mass market?

No. No.

Okay. Only the mass market.

Yes. The mass market, which you see there, is a EUR0.5 billion loss. Take that to a positive number by 2014.

Okay. And a last question on Ferrari/Maserati, because, if you look at your performance so far, last year, you were able to generate EUR100 million of excess performance in terms of trading profit versus the guidance. Is this the case also going forward for the Maserati and Ferrari division?

No. Maserati is going through a transition year as it renews its product portfolio. We will not see the full potential in Maserati until the new four-door gets launched and until the Kubang comes into the market at the end of 2013. So I think that 2012 is not going to be the exceptional year for Maserati.

Ferrari will continue to do well. Certainly, the order books continue to be full. I have no cause of concern for the performance of Ferrari. I don't expect it to be significantly larger for the numbers that you're using compared to 2012.

Okay. Thank you. And I was looking at your last sentence in outlook, the guidance. You will revise long-term targets in Q3 this year. I was wondering if the breakeven target for the mass market is still the renewed target.

You don't have to worry about that target moving. I mean, I think what Richard should have told you is that we will get to breakeven no later than 2014. And the real issue for us that, if we see that there's a structural change in European demand which is permanent and thick, then even the best intentions on the part of Fiat cannot resolve the issue. So we will have to take other measures. And that's why we have gained -- we've agreed internally, and I think we are advising you externally, of the fact that we need to watch performance of the European -- of the euro zone over the next six months to really draw the proper conclusions.

I mean, most of you are probably as concerned and as unclear as I am about where Europe is going from here. I think we have seen a lot of significant moves in the right directions. We still appear to lack the kind of united, unified answer that is required to move Europe out of the doldrums that it's in. Until we see these things being actioned, it's very difficult to call the market.

And that's why -- I've never called a range that wide in a profit forecast in my life, to the best of my recollection. So I think we need to be very, very watchful, and it is my sincere hope that Europe finds the will to really lay down the basis for a unified Europe. But, until we see it in reality, I think everything else is absolute speculation.

So what we've built into the number, on the assumption that there's going to be no contagion effect between Europe and the rest of the world, are two-point extremes in terms of the possible range of outcomes. We'll see what happens.

Okay. Thank you very much.

Stuart Pearson, Morgan Stanley.

I had three questions left. The first one -- you gave us a pretty good steer, I think, to the Chrysler contribution for the year, the range of guidance that you've given for this year. So just on a couple of the remaining parts, firstly, on the component business, obviously you had a pretty decent year in 2011. What are you expecting for that business in 2012, given the outlook in Europe?

(Inaudible) more importantly, in Latin America, if we do go back to that slide 4 that you indicated we would earlier, if I do some back-of-the-envelope calculations, which may or may not be accurate, it looks like you're earning around 11% margin in Latin America for the full year 2011. So I just wondered if that was broadly correct, how that might have trended into Q4, and, given what we saw, I guess, from some of the US makers in Brazil recently or Latin America recently, what your assumptions are into 2012 for that region.

And then, finally, just on the cash flow side, obviously, you've [helpfully] given a range of EUR5.5 billion to EUR6 billion for the full year. But I wonder if you could share with us where you might think that figure could peak during the year and in which quarter. You mentioned inventory still needs to come down. Thank you.

The first question, on the components business, we expect Marelli, as obviously the largest piece of that business, to continue to improve performance in 2012. Obviously, the size of the numbers is not enormously material to our forecast, but we expect -- they doubled the profit through the year, so we expect a good increase also in 2012, not to the same extent, clearly.

Latin America?

If you can just finish the Marelli story -- you asked what is the impact of the European situation on the Marelli numbers. Even at the low end of our expectations, it will not materially impact Marelli performance; one, because of the geographic footprint of Marelli today and, secondly, because of what they've done over the last three or four years, which is effectively prepare or have available a portfolio of products that serves the upper end of the mass market, if not the premium end. So I think they are going to be immune to what I consider to be the range of outcomes in Europe. So I feel relatively comfortable that you'll see a margin improvement in 2012.

In Latin America, we basically expect to generate a similar level of income in 2012 as we did in 2011. The Brazilian market projection is up around 5%. We expect to be able to leverage our new product and also the Chrysler Group products in countries ex Brazil in Latin America to also grow volumes. So we expect some volume growth through 2012.

The pricing discussion that you mentioned -- clearly, there has been some pricing pressure through the second half of 2011 due to import manufacturers being aggressive. To some extent, we expect that to abate in 2012, given the new EB tax, which is basically going to start to have a serious effect in the first quarter of this year as the inventories that they imported under the lower regime are exhausted and the 30% tax takes a toll.

So, for that reason and along with an aggressive product plan that we have for 2012, which will mean that we have a full year for the new Uno, a full year for the new Palio, and we have other product launches through the year, both from the Fiat side and from the Chrysler products side, that we expect to be able to maintain our income through 2012 at a similar level to 2011.

And the last question was just on the CapEx -- sorry, the net debt.

Seasonally, the peak of the net debt number would be Q3. Given the seasonality in both the US market with the model year changeover and the European market with August being a holiday month, that would be the peak of net debt.

Any sense on how high that number could peak at?

Not really.

Yes, he does. He's just shy to tell you. It will be in excess of EUR7 billion at peak.

(Inaudible) inventory, which obviously was relatively flat, as someone pointed out on an earlier question, how much do you think you might need to reduce that by, say, during Q1?

We're running at 2.1 months of inventory. As we said, we don't want the number to get higher. So I don't think -- we're tracking it. I don't think there's going to be a serious adjustment unless Q1 sales in the European zone are seriously impacted by the macroeconomic scenario.

By the way, just to make people even more nervous, the numbers are being released as we speak today. So the Italian numbers shall be out by about 51 minutes from now. France, I think, released this morning, and the market was substantially down year over year. I'm still waiting for the German numbers to come in. The European zone is not in good shape, and I think you're going to see compared to 2011, at least for the first quarter of this year, a substantial decline in volumes across the euro zone.

It is my view that -- and, by the way, this has been built into our production schedule, and we have taken down plants as required. The only plants that are really running at any type of sort of full utilization are the light commercial vehicle plants that we have. All the car plants are being adjusted and have already been adjusted throughout the month of January.

So I don't expect that we will inherit this problem by the end of Q1, and it's built into our forecast as to what the utilization rates would have been. This is, at best, a temporary issue.

We know for a fact that the Brazilian matter in terms of dealers being long in their inventory has already been addressed by what Richard made reference to in terms of the IPI coming into force. Let's watch the Q1 numbers, but I don't think it's going to be materially -- it's going to be impacting materially on Q1 performance.

Okay. Thank you.

Max Warburton, Bernstein.

Two questions from my side. The first is on revenue guidance. The second, inevitably, is on Brazil again.

Just on revenues, I'm slightly apprehensive about asking this question because I've got a feeling I'm going to make a fool of myself. But I'm taking the Chrysler revenue guidance given today for 2012 and reversing it out from the Fiat revenue guidance. And, just to give light to my simple arithmetic, you say Fiat is going to aim for revenues of about EUR77 billion. Chrysler is aiming for revenue of around $65 billion. If I translate the Chrysler number into euros at a $1.3 rate, I get EUR50 billion. So that leaves Fiat ex Chrysler at EUR27 billion for this year, which is 25% down on what Fiat ex Chrysler did in 2011. There must be something wrong in my arithmetic. Is this an issue with the exchange rate I'm using? Is it how the accounting works? If you could, just explain what the non-Chrysler revenue guidance looks like year on year.

Before Richard gets water all over himself, if you look at the guidance, what you should be guided by is the greater-than sign in front of the number.

But then I guess we're talking about a range. So, in the worst-case scenario, we're talking about a 25% revenue decline? I mean EUR36 billion seems to be the number for 2011 ex Chrysler. EUR77 billion minus EUR50 billion is EUR27 billion, obviously.

Yes. You're right. The Chrysler side reflects an increase in the units from the 2.3 million to 2.4 million number, and so, obviously, a 0.3% to 0.4% growth, whereas, on the Fiat side, we've basically taken out some revenue for the downside on the European business at the low end of the range. But we've been very prudent on the Fiat side, to be honest with you, overly so probably.

Okay. And the EBIT guidance? Again, if we were to split the EBIT guidance or trading profit guidance, rather, between Chrysler and Fiat, is the bottom end of that range really consistent with a 25% reduction in revenues? I mean, you're sort of saying that Fiat Auto would be breakeven in that scenario. It looks --

I think you need to disconnect the two numbers, Max.

Really?

The number that you need to rely on is the trading profit guidance.

Okay. Okay. I mean, normally, the two things kind of match, particularly -- you're the man who gives the idiot's guide to operating leverage, so the idiot's guide to operating leverage would say it doesn't look like it's zero in that revenue scenario.

Max, let's make a couple of points. The only guy that got embarrassed out of all this is me and not you on the call. But, secondly, I'm going to have to give my friends next to me an idiot-proof guide to revenue reconciliation. We'll do this after the call, and we'll update it when we get together for the first quarter call.

Got it. Perfect. Okay. Thanks.

The second question is probably more straightforward in some ways, back on the subject of Brazil. Again you're sounding confident on Brazil and the written statements point to Europe as being the big swing factor in Q4. If we look at the profit deterioration in Fiat Auto in Q4, it's EUR150-something-million swing. Could you split it for us? I mean, is that 100% Europe, and Brazil was rock solid? Or is it sort of half Brazil, half Europe? Just a bit of flavor of what's going on in Q4. Thanks.

There was some reduction in Q4 in Europe and in Brazil as well. So let's say 50/50 in the quarter.

Okay. Again, the reference to GM and Ford and the pain they're seeing -- from your point as competitors, do you think they've got company-specific issues, or is there -- and they're going to turn that around? Or is there something generic going on there that we should really be aware of? I mean, the GM swing is, what, a 12 percentage point margin swing in a year? It is difficult as outsiders not to be concerned about that.

Yes. Max, I can't comment on the GM 12% swing because I've never had 12% one way or the other. So I wish I could swing that far.

But the only comment I can make about the European situation is that what they're experiencing, to me, at least in my view, is very similar to what we're seeing in the marketplace, which is a degradation of pricing discipline and a time to chase volumes. And I think the margin generation on whatever you actualize as a sale in the European market today is certainly below what we had seen in 2010 and substantially below what we saw in 2009 and past years.

So this is a market that is looking for a point of equilibrium between demand and supply. And all these processes of adjustment are, by definition, neither pretty in nature, nor are they painless. So the fact that we are -- I don't think that the GM number hides anything nefarious in it. I just think it reflects the deterioration of normal trading conditions and a market which has become hyper-competitive.

We've -- Just for your information, we have refused to engage in some of the trading practices that we've seen in Europe because of the fact that we found them to be financially unrewarding even on a variable contribution basis. And so we need to be very careful that this doesn't -- those games don't last very long because the losses that they generate against the fixed-cost structure similar to the ones the Europeans are carrying is very short-lived. And it's going to become very, very evident in a short period of time. So I don't read anything bad in any of the competitors' numbers. Just take it as a sign of a bad health situation. It needs to be cleaned up.

Okay. And (inaudible). I'm going to be greedy here and ask for a follow-up on that. This is really a question I'm getting from investors in the last couple of days. You referenced the French numbers that came out this week with the market down heavily. But I think Volkswagen was up 23% in a French market down over 20%. I don't want to point fingers here, but are we seeing VW get even more aggressive in Europe, or is the blame really elsewhere at the present time?

No. I think they are getting a lot more aggressive. I mean, to be perfectly honest -- and I'm not here to criticize Volkswagen's commercial practices. Everybody makes their own bed, and they sleep in it. Right? The question is whether you're trying to preserve brand equity or whether you're going to become anybody. And they can do whatever they like.

But, you know, it's impossible -- let's be perfectly honest. In a down market, you get significant market share swings of that caliber when you've got fundamentally a level playing field on technology. It ain't brand equity. I mean, the last time I checked and I went to France, it wasn't because of the fact that we were -- they're all wearing lederhosen that made them buy Volkswagens.

We're all speaking German now. I'll leave it at that from my side. Thanks.

Congratulations on your linguistic development.

Erich Hauser, Credit Suisse.

I refrain from asking a question in German. It's a very straightforward question though. I was just looking at --

I will answer you in German, Erich.

Okay. I was just looking at page 55 of the pack, and, in there, you're saying that in 2012 you've got refinancing needs of EUR4.8 billion for Fiat ex Chrysler. And this number was EUR2.9 billion at the end of Q3. So I was just wondering whether Q4 maturities have been pushed from Q4 2011 into 2012 and how you plan to deal with these maturities if we were to assume that the credit market remains shut. Thank you.

It's just a rollover on some maturities from Q4 to Q1, no continual renewal.

But was this -- sorry to interrupt there. But was this something that you've planned to do, because it gave me -- and the end of Q3, you said we're going to do EUR2.9 billion over the next three months. And did you decide to roll these over because you didn't find the liquidity to do it in Q4? Or was it sort of more of a deliberate decision?

No, no. We just roll them over on an ongoing basis, nothing different to our past practice on that particular type of debt.

Okay. And, if you assume that the credit markets remain shut in 2012, these EUR4.8 billion, would this be a number that you think you would need to refinance out of existing gross cash levels? Do you think this is something that would present a problem at one stage?

On the -- we have EUR2 billion of undrawn, committed lines that we can draw down on if we need to. And, obviously, we're holding a lot of liquidity. So, at the moment, we don't see any criticality, even if the markets totally freeze.

Having said that, on the bank side, we've never had any problem historically, and even in the last few months, we raised the RCF through our bank relationship. So we don't consider that we're going to have a problem on the bank debt.

On the capital markets debt, we're obviously tracking the market like yourselves. We have one significant maturity in July that we will look to refinance if the markets are open and terms make sense.

So you're basically saying, look, the EUR10.3 billion of gross liquidity that I see today, even if ever had to do all of these upcoming maturities out of this level, there is still enough with EUR5.5 billion. Let's assume you burn through, call it, EUR1 billion in gross cash over the course of 2012. The EUR4.5 billion in gross liquidity that you would be left with is not a number that you would be concerned over.

No. In that terrible scenario, no.

Okay. Thank you.

Thierry Huon, Exane BNP.

First of all, I would like you to repeat the CapEx number you are forecasting for 2012 because I didn't pick it when you mentioned it.

And the second question is about the new labor agreement you've got in Italy. Do you think this will be enough to address the over capacity situation you are facing, or it's just a way to mitigate this situation?

And a last question about the new Panda produced now in Italy. Could you share with us if you have better construction for this car than the one you used to have for the previous generation produced in Poland, or it's a bit -- or it's higher?

It's higher.

And this is due to the product, or it's due to the fact that the production is localized in Italy?

Both.

Okay. Thank you.

CapEx is EUR7.5 billion.

EUR7.5 billion?

Yes, total, obviously (inaudible).

Okay. Thanks.

Philippe Houchois, UBS.

A few questions. The first one is -- I've always assumed that your currency exposure at Fiat was a translation issue. Now that you've changed the shape of the Group, et cetera, is there any transaction exposure that we should be aware of, either on the real or on the dollar, as you increase some of the exchange within Fiat and Chrysler? First question.

The other one is on financing. Do you see any kind of deterioration in your competitiveness? I know you do your financing through Credit Agricole. That seems to be going well. Have you had discussions with them about the LTRO reliance and things like that to improve competitiveness? Or which way would you stand on this?

And the last point is on the valuation thus far. You've been very vocal for a long time that Ferrari is worth a lot of money. I would kind of agree. At the same time, over the past few years, we've seen some of your competitors on the premium side creep up in margins to a level not far from where you are in Ferrari. So what needs to happen to really get the kind of valuation that you're thinking about, considering that you think about something that would be a multiple of what is achieved by carmakers which are, as I said, kind of creeping up in margins?

As regards FX, clearly, going forward, we're going to have interchanges on dollar/euro. And our plan would indicate -- obviously, at certain times, we could have different imbalances. But, in reality, we're going to be making cars both in the US and in Europe for distribution in other markets.

Having said that, at the moment, we clearly have more exposure on the dollar than we used to have from a transaction point of view.

The Group, net, is long dollars now on a flow basis. That hopefully will change as we get the industrialization up. But, right now, it's long dollar.

Right now, we're looking at EUR3 billion or EUR5 billion, the kind of magnitude of this long dollar exposure?

It's a net number. They don't have it here.

Okay.

On Credit Agricole, for the moment, we're basically operating as we have been. They obviously have some funds within their overall asset base to reduce the asset levels. We obviously discuss with them the business model with -- on the wholesale and retail financing side. And they like the business, and they're continuing to operate as our partner as we make money. And so far so good.

You don't see that at a disadvantage compared to some of your German competitors in particular?

No. Not really. There's never been a scarcity of funding for the car operations in our business. And that's only the true benchmark of performance.

And do you still have within the Group somewhere a banking license in Europe that would enable you to access the LTRO directly?

I think we do. I'm looking over at Antonio. Yes. We have one. We do have a banking license.

Right. Have you looked at how much you could --?

You're not suggesting I open up an investment bank, do you?

No, no. Not at all. I'm just wondering how you and your competitors might be looking at the next round of LTRO in late February as a source of optimized funding. Let's call it that way.

Antonio Picca Piccone, who's the Treasurer.

I think (inaudible) inventory is able to fund itself on a standalone basis. Furthermore, it benefits from funding [for the bank itself].

Okay. Thanks.

And you wanted to know about Ferrari.

I'm just (inaudible) about the closing of the gap in margin between you and your competitors.

I don't think -- I think we need to be careful about two things. The valuation of Ferrari is -- goes beyond the margin performance of the business. I mean, it's the uniqueness of the asset and the continuity of that earning stream which is much more important to us than the ability of somebody to match it on a 12-month basis. So I think we're looking at resilience which is yet unmatched by anybody else, and we're talking about a uniqueness of a brand which is also unmatched. But I'll pass that comment on to Mr. Montezemolo. I'll remind him of the fact that he's got competitors chasing him up his tail and that perhaps he could improve performance. I'll give you his cell number so that he could call you and give you his personal views on that.

I would love that.

Good.

All right. Thank you.

Richard Hilgert, Morningstar.

On the utilization, you've got several moving parts going on. The numbers that we had in the presentation, first of all, on slide -- I think it was 7 -- the numbers on the left -- are those the same measurement as the blue bars on the right?

Yes, they are.

Okay. So then you've got a better-than-industry utilization rate in the rest of Europe. But you've moved the Panda out of Tychy and into Pomigliano, and that's about 230,000 units this year you're expecting for 2012. Longer term, I think the target was 270,000 to 300,000 units. Is that right?

Yes, if the market is there. Yes.

Okay. And, for 2011, let's see, Termini's utilization was 9%. It's capacity was 140,000 units. You've got a new labor agreement in place for 2012. Is there any reason why we shouldn't see the Italy bar of 50%, the blue bar on the right side of that chart, starting to look a bit more like the 82% industry average beginning in 2012 because of all of those different moves that you've made?

The answer is yes. You will see a gradual shift of the Italian curve if we're successful towards the European average.

Okay. But this should occur in 2012, even though --

In part. Well, it's part in 2012 because the thing that you need to take into account is that the market is going to be down year over year anyway.

Right.

And so there's going to be an under-utilization caused by a shrinkage of market demand on the one side. There's going to be a shrinkage in the European market overall, which is definitely going to impact on utilization of the remaining assets in Italy, which is going to be offset by the full utilization of the Pomigliano investment. But the net of those two numbers should be still positive for the year -- for the year.

Exactly. Right. For the full year --

For the full year, it should get better.

You've got a -- the breakeven point on the Italian asset base should substantially improve, offset by the loss of operating leverage because of the loss of volume in Italy for the full year. Correct?

Yes. You need to be careful. Look, we have taken an existing model out of an existing infrastructure that was blowing the lid off the harbor definition. And that's why we're in the 100-plus. That number is, by definition, going to grind down because the vehicle is gone. And so that number is going to start looking slightly more human. And you will see a restoration of the Italian number up to scale until you get to European average.

That transition in our plan will take until 2014 to complete because it needs to impact all the plants and not just Pomigliano. It's a long haul. I'm confident that I can reduce the number that I've told you about in terms of the loss from the mass market in Europe within 2012 and that we can start dealing with much more manageable numbers in a reality that starts making sense.

All this depends on how Europe overall as a trading block decides to function going forward. If you get an implosion of the European market with dislocation and uncertainty, then any volume projections about what Europe will do in 2012 or later years is up for grabs. I need a slightly higher degree of confidence in the performance of the market going forward than I've got today.

Okay. But suffice it to say, even on the low end of expectations, the blue bar on the right for Italy at 50% utilization -- we should come out in 2012 somewhere in between that 50% on the right and the 82% blue bar on the left.

Yes. You choose what in between means. But, yes, it will be there. And it will be offsetting a decrease in the blue bar in the top portion of the graph -- bottom portion of the graph, which deals with the rest of Europe because that number is going to grind.

Right. Exactly. Okay. As far as the question about European unit volume is concerned, would it be fair to say that, realizing that all of the austerity measures that are being taken would substantially reduce the probability of any type of tax benefit program to incentivize the auto market -- but, having said that, what about the potential for a scrappage program in any of the countries in Europe, since you have the VAT that could offset the cost of the program?

Let me tell you what's wrong with your argument. And I'm glad you brought it up because there are rumors that are buzzing around about politicians envisioning scrappage schemes to try and help industry along. Any scrappage scheme that gets introduced today is going to be the most unhelpful tool to be given to this industry that it was ever given. We ended up creating a number of years of what I call hyper demand, totally induced by the zero-sum gain that you just made reference to -- about the fact the VAT was in excess of the subsidy being provided.

The guys that got left holding the candles were the car producers because, at the end of the day, they had installed capacity which all of a sudden dried up. If you're looking for a 12-month mandate, it may be the right answer.

If you're looking for a long-term solution to this problem, this is not the answer. Forget about scrappage schemes. They just do not work. Let this industry settle. It needs to settle at the right level of equilibrium between demand and supply. It cannot be induced. It cannot be forced. And, if you induce it, it needs to be a permanent inducement. And all scrappage schemes, by definition, are not.

Okay. Good. This is more a question for Mr. Palmer. In the US and in GAAP and recognizing that there's a difference between the captive FinCos at the US manufacturers versus the way that your structure is set up with your financing operations, in IFRS and in the European situation and given your capital structure or your structure for the FinCo, would you be taking any charge offs for credit losses, given your assumption that you're going to have lower unit volume, you're going to have weaker economic conditions in 2012?

No. No charges on either side.

On either side?

Not in Europe and not in the US.

I realize, in the US, you wouldn't be taking any. You might be reversing some in the US.

We don't have --

-- because of the increase of volume.

We don't have a captive finance company in the US, and we don't have a captive finance company in Europe either. We have a JV with Credit Agricole. So, within the JV, if -- obviously, if losses were to go up, then we'd have an impact as a 50% shareholder in the JV.

And just to remind everybody, the chief risk officer that sits within the joint venture is a bank appointee. This is another decision that is induced by commercial practices of Fiat. But we have never ever been tempted to influence that credit scoring process to create, potentially, a bad book of business. It's a screen -- I mean, we're bound to have some. Nobody's perfect in the assessment. But it's not going to be abnormal.

Okay. So is there --? I guess, then, let me rephrase the question a little bit. Is there a difference between the way that losses are recognized when you assume that your losses are going to go up? Is there a difference between GAAP and IFRS in that you recognize before the losses happen in GAAP, and you do take a charge off in advance?

You do the same thing under IFRS. All these things are booked as bad debt provisions at a time in which there is an indication of the fact that these advances have gone south. There's no difference here. There's no difference to the book that's in Latin America. And there's no difference in the US.

Okay. And have any provisions been taken then for Europe already?

More than adequate to deal with the order book that's on hand at December 31, 2011.

Okay. Great. Thank you very much.

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

Thank you, Nali. We would like to thank everyone for joining the call today. We'll be communicating shortly. Bye.

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