Stellantis NV (STLA) 2013 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to today's Fiat Group 2013 first-quarter 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 Group Investor Relations. Mr. Auriemma, please go ahead, sir.

Thank you, Sara. Good afternoon to you all, and welcome to Fiat Group's first-quarter 2013 results webcast and conference call. The earnings release issued earlier today is available, together with the conference call chart set, on our Investor Relations website.

As usual, today's call will be hosted by the Chief Executive, Sergio Marchionne, and by Richard Palmer, the Chief Financial Officer. After introductory remarks, who will be available to answer the questions you may have.

Before we begin, 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, including the presentation material. As always, the call will be governed by this language.

With that, I would like to turn the call over to Mr. Sergio Marchionne.

Thank you, Marco. I was just deciding -- discussing with Richard that he is going to go through the whole presentation all by himself. I'll be more than glad to take questions at the end. I'm just going to give you a couple of comments to cover the quarters, at least from Fiat's standpoint.

We went through a rather lengthy discussion with -- on the conference call with Chrysler about two hours ago. But I am going to fill in the rest of the picture with our global operations.

I'll just give you -- let's deal with the easy stuff. Obviously, we continue to make progress in Asia Pacific. I think the results are indicative of the substantial effort that's going on in that region. I think the success of the joint venture that we've established for the production of the Viaggio beginning to show some fruit. And obviously, equally important, if not more important, is the attention that we are placing on the Jeep brand and its potential introduction as a locally-produced vehicle in China at the relevant. The indications that we are getting back both in terms of profitability and market success and access are quite good.

Latin America, volumes are coming back in; I think we are working through the last pieces of the old regime before the restrictions on imported cars came into play, which Richard can explain this in more detail. But I think we are encouraged by the volumes that we're seeing in Brazil. We are encouraged by the market share gains that we've been able to achieve. And I think it is a confirmation of the fact that our renewed commitment to Brazil through the opening up of a greenfield plant up in the state of Pernambuco by the end of next year, that confidence is well-justified in view of volumes and the results that we are getting.

I am also encouraged by EMEA. I think strangely enough the European [side], notwithstanding the fact that the market continues to show a decline year over year-- and for all I know, we probably have not in the bottom of this market. We'll probably see it sometime in the second quarter, on the assumption that the European political leadership gets its act together and starts moving an agenda that starts promoting growth now as the key objective as opposed to austerity.

I'm encouraged by those numbers; we've been able to reduce losses. We are -- in relative terms compared to our competitors, I think we were wise in not committing capital to that region in the absence of some very clear direction as to where the market will be moving going forward. So we have stayed away from continued massive investment in the mass market, and our work to shift the focus of our industrial operations away from that market and more focused on the production in the premium end is something which we continue to believe in. There is a phenomenal amount of work that's going on now inside the house to redefine the architectural framework for the development of both Alfa and Maserati, and that process will continue unabated for the rest of 2013.

I think we will have certainly a better view by the end of this year as to what we can spell out as a product portfolio in terms of ambitions and volumes coverage and the cadence of the product introduction of that portfolio.

We know how Chrysler performed. We released the numbers early this morning. We know that because of the product launches and the impact on the industrial structure here, we fell short of the market that we had established in 2012. Having said all this, we understand what needs to be done over the next nine months. I think we've confirmed guidance with both Chrysler and Fiat Group overall in the absence of earthshaking revelations in the next little while. But we believe we can still get to the number that we laid out at the end of 2012 as being our target for the year.

The rest of the year is going to be challenging. I think that we are fully aware that these are unsettled markets. We are comforted by the fact that there is strength in the NAFTA markets and that we have a product offering that is having a good degree of success.

I think the commercial organization here has done a great job on the NAFTA side to keep the momentum going. We're going to see numbers being released Wednesday morning in terms of volumes of market share. I think we'll do well. I think it is a good introduction into the second quarter, which remains a big quarter for us, both in terms of volumes and in terms of testing the success of the relaunches that we've accomplished in the first quarter of this year.

A number of questions came up during the conference call on the VEBA stuff. I'll leave that until the end, if there are any questions. We continue to work with VEBA on the IPO alternative. I think that we remain ready to take this thing public, subject to the filing requirements and all the other regulatory needs associated with an IPO of this size.

At the same, we think Fiat as it works with VEBA on the IPO is making itself available to discuss other options with VEBA. I remain, as I've always been, of the view that these two companies need to be brought together, we'd find a reasonable way to get that done. If that can be accomplished, then I think it will be a great step forward. If not, we will take it to IPO and we will be ready to assist VEBA in monetizing their interests.

On that basis, I'll pass it on to Richard, where I'm sure he's going to razzle-dazzle you with details on the quarter.

Thank you. Good morning, afternoon to everybody. I'm going to start on page four. Group revenues were EUR19.8 billion for the quarter, down 2% year-over-year, flat at constant exchange, as increases for Latin America, APAC and Luxury & Performance brands almost fully offset NAFTA and EMEA reductions.

Please note that in the financial comparisons here, the Q1 2012 numbers have been restated for the adoption of IAS 19 revised, which resulted in a reduction in reported trading profit for the quarter of EUR16 million and a reduction in net profit of EUR117 million compared to the prior reported numbers.

For the quarter, trading profit was down EUR188 million versus last year, attributable to a lower contribution by NAFTA, which posted a EUR397 million profit. LATAM performed to expectations, with a trading profit of EUR186 million, down from EUR235 million in the prior quarter. Net of currency translation impacts, the trading profit was down 10%, due principally to lower volumes for Chrysler parts in Mexico affected by import quotas introduced during 2012 by both Argentina and Brazil.

APAC contributed EUR100 million, an improvement of EUR23 million over the prior year, posting a 10% margin. EMEA reduced losses by EUR50 million over the prior year to EUR157 million loss, with discipline in SG&A spending and a better product mix more than offsetting the impacts of the continued deterioration in trading conditions in the market.

Luxury & Performance Brands' trading profit reached EUR76 million, essentially in line with Q1 2012, with Ferrari posting a 43% improvement and the result from Maserati affected by the ramp-up of the new Quattroporte. For Components, Q1 trading profit was EUR33 million, also in line with a year ago.

Group net profit was EUR31 million for the quarter, down from EUR262 million in Q1 2012, driven principally by the reduction in trading profit. There was a loss of EUR83 million attributable to owners of the parent compared with a EUR35 million profit for Q1 2012. For Fiat excluding Chrysler, the net loss was reduced by EUR41 million over Q1 2012 to EUR235 million.

Net industrial debt of 31 March 2013 was EUR7.1 billion, up from EUR6.5 billion at year-end 2012, and total available liquidity increased to EUR21.3 billion, mainly due to positive exchange-rate impact on the US dollar. Of total liquidity, EUR11 billion related to Fiat excluding Chrysler and EUR10.3 billion to Chrysler.

Moving on to page five, revenue and EBIT by segment is shown here. The top line decreased 3% to EUR10 billion for NAFTA and 4% to EUR4.4 billion for EMEA. LATAM reported revenues of EUR2.5 billion, a 5% decrease in nominal terms, but up 6% at constant exchange rates. And APAC increased more than 35% to EUR1 billion.

Luxury & Performance Brands were up 4%, driven by Ferrari. For Components, revenues were down 4% to EUR1.9 billion.

In the quarter, Group EBIT was EUR603 million, a EUR232 million decrease, mainly reflected lower trading profit in NAFTA and LATAM, with earnings from mass market decreasing 36% in NAFTA to EUR400 million and 46% in LATAM, or 21% excluding the effect of EUR59 million unusual charge related to currency devaluation in Venezuela.

For APAC, EBIT increased 15% to EUR98 million, while EMEA reduced losses by EUR59 million to EUR111 million. For Luxury Cars and Components, EBIT was EUR76 million and EUR35 million respectively, in line with the prior year.

Page six shows the P&L [license] below the trading profit line. Investment income includes a EUR38 million income from EMEA, broadly in line with the prior year, while other investments contributed positively, mainly driven by the reduced loss on the [Alfia] stake.

Q1 2013 unusuals include the impact of the currency devaluation in Venezuela for EUR59 million, while Q1 2012 included the reversal of some restructuring provisions for EUR11 million.

Net financial charges were EUR443 million, in line with EUR432 million in the prior year. For Fiat ex-Chrysler, financial charges were EUR200 million and includes a [EUR15] million gain in the mark-to-market of the Fiat stock-option-related equity swaps. This compares to EUR165 million in 2012, which included a EUR38 million gain from the same instruments. Net of the impact from the equity swaps, the EUR12 million increase in net financial charges for Fiat ex-Chrysler reflects the higher net debt level.

Chrysler's net financial charges were EUR243 million, slightly lower than the prior year. The EUR129 million in income taxes primarily relates to taxable income of companies operating outside Italy and [important] related taxes in Italy. For Fiat ex-Chrysler, taxes were EUR100 million, lower than prior year.

Moving to page seven, net industrial debt at quarter end was EUR7.1 billion, EUR0.6 billion higher than December end. Consolidated EBITDA contributed positively for EUR1.6 million, fully offset by capital expenditure for the quarter of EUR1.6 billion, of which EUR0.7 billion for Fiat ex-Chrysler and EUR0.9 billion for Chrysler, both values in line with prior year.

Financial charges and current taxes explain the bulk of the net industrial debt change in the period, while the net effect of the positive change in working capital reserves and other operational items netted to an immaterial number.

The EUR0.6 billion increase in the consolidated net industrial debt at quarter end is entirely attributed to Fiat ex-Chrysler, where the increase in net debt for the quarter was reduced by EUR0.7 billion compared to Q1 2012, mainly due to reduced negative working capital impacts. Chrysler contributed positively with EUR0.1 billion.

Moving on to page nine, we review the performance by region. Page nine deals with NAFTA. As said earlier, the quarter was impacted by ongoing launches of the new 2014 Jeep Grand Cherokee and the 2013 Ram Heavy-Duty Pickup line, and by no production of Jeep Liberty at Toledo North, as the plant prepares for the start of production in Q2 2013 of the all-new 2014 Jeep Cherokee.

Revenues were down 3.5%, primarily due to lower shipment volume, partially offset by favorable pricing. Trading profit was down 35%, with trading margin down to 4%, due to lower volumes and to industrial costs related to the launch of new products, partially offset by continued pricing.

Overall vehicle shipments were down 2% in the region, with a slight decline in the US, but more significant in Canada and Mexico due to some product shortages. During the quarter, the Group recorded strong vehicle sales, which were up 7% from Q1 2012 to 508,000 units, despite some stock issues in Jeep and Ram brands.

Sales in US were up 8%, mainly driven by the 12% increase in retail sales, while sales outpaced the industry also in Canada, posting a 4% growth in the quarter. Sales for combined US and Canada were up for all brands with the exception of Jeep, whose sales decreased 10%, primarily due to the reduction of Jeep Liberty sales as we await the all-new Jeep Cherokee to be launched in Q2.

The walk on page 10 details the reduction of EUR225 million in NAFTA EBIT. The launch of the key products mentioned before, namely the Jeep Grand Cherokee and the Ram Heavy-Duty, had impacts on both volume and industrial costs. The decline in volumes of 9000 vehicles, which would be 23,000 vehicles adjusted for GDP shipments, accounted for nearly EUR100 million reduction.

The adverse impact of nearly EUR280 million in industrial costs was due to the startup costs related to the new Jeep Grand Cherokee and Ram Heavy-Duty and to vehicle content enhancements on the newly-launched products and on the Ram Light/Heavy-Duty truck. Industrial costs also included EUR30 million of higher R&D amortization. The positive impact from net pricing reflected pricing actions primarily driven by the same vehicle content enhancements.

Moving to page 11, we look at the industry trends and our performance during the quarter. The US vehicle market closed the quarter up 6%, 3.7 million vehicles, with cars up 3% and trucks up 9%. The Group's sales were up 8% versus a year ago, with March being the best month since December 2007 and 36 consecutive months of year-over-year sales gains. The Group's overall market share was up 20 basis points over the prior year to 11.4%. Retail of retail market share was up 40 basis points to 10.4%.

Jeep vehicle sales totaled 101,000 for the quarter, down 12% year-over-year, primarily due to the phaseout of the Jeep Liberty pending launch of the all-new Jeep Cherokee, and to a 12% declined for the Grand Cherokee, attributable to the changeover to the new 2014 model.

Dodge, the Group's number-one selling brand in the region, posted vehicle sales of 159,000 units during Q1, up 26% from the prior year, mainly driven by the sales of the new Dart, the Avenger, the Challenger, the Journey and the Durango.

The Ram truck brand posted a sales increase of 14% to 79,000 vehicles, reflecting sales increases for Light-Duty and Heavy-Duty up 19% and 18%, respectively. Chrysler brand sales totaled 80,000 vehicles during the quarter, up slightly from the same period last year. Fleet mix reduced to 28% from 31% in Q1 2012.

The Canadian vehicle market declined 2% year-over-year to [363,000] vehicles, with cars down 5% and trucks flat. Similar to Q1 2012, the Group is the market leader in Canada. The Group's total market share was up 100 basis points year-over-year to 16%, mainly driven by strong performance for the Ram truck, Jeep Compass and new sales of the Dodge Dart. Retail of retail market share was 14.1%, up 90 basis points. With March sales, the Group posted the 40th consecutive month of year-over-year sales gains, with best March sales since 2000, and also the best month ever for Ram Truck sales.

Page 12 deals with the LATAM region. The key markets in the region held up well in the quarter, with trading conditions particularly good in Brazil, driving the market to an all-time record. In Argentina, the market was in line with the prior year. Instead, other LATAM countries are down 3%, mainly due to political uncertainty in Venezuela.

Revenues were down 5% due to negative currency translation, but were up 6% at constant exchange, reflecting overall shipment volumes improvement.

Trading profit came in at EUR186 million compared to EUR235 million last year, with a trading margin of approximately 8%. The results for operations in Brazil were in line with the prior year. Net of unfavorable currency translation impacts, trading profit was down 10%.

Total Group shipments were up 7%, with Brazil up 8% and Argentina up 14%, compensating for other LATAM markets, which declined 24%. The Group outpaced the industry in both Brazil and Argentina, reaching the best Q1 share in Brazil since 2010.

We ended the quarter with solid levels of Company and dealer inventory of about 30 days' supply, with sustained industry trends supported by the recent extension of the IPI tax reduction.

Moving on to page 13, the EBIT walk for LATAM shows the positive impact of volume growth, which was more than offset by higher industrial costs resulting from a less favorable production mix due to shift of annual shutdown of Brazilian plants from December to February 2013 and lower volumes of Chrysler products due to effective import quotas introduced during 2012, in addition to the costs of some advertising campaigns in Brazil. During the quarter, we started recording some benefits from the Inovar Auto Program incentive scheme.

The Other column mainly relates to currency translation effects and EUR59 million unusual impact related to the February currency devaluation in Venezuela.

Moving to page 14, our sales in Brazil, notwithstanding longer downtime at Betim for the yearly shutdown, increased 3% versus a year ago, driving the Group to achieve the best Q1 ever. The Group strengthened its leadership of the Brazilian market with overall share at 22.9%, the best Q1 share since 2010, an increase of 20 basis points over Q1 2012 and 300 basis points ahead of the nearest competitor.

Group product continued to perform well, taking a combined 27% share of the A and B segments, driven by the continued success of the Novo Palio. In addition, the Siena and Grand Siena posted 115% year-over-year increase, and Strada sales were up 6% and closed the quarter with a 49% segment share.

In Argentina, where the market was in line with the prior year, Group sales totaled approximately 29,000 units, with share up 10 basis points to 12.2%. In the A&B segments. share was 15%. with the Palio recording significant year-over-year growth.

In May 2012, the Brazilian government had reduced its IPI tax by up to 7% to boost vehicle demand. The reduced rates were originally set to be phased out during the first half of 2013, with progressive quarterly rate increases starting in January. In March 2013, the government extended the scheme to the year end of 2013, and as a result, the partial increase has been applied only in January.

Moving to page 15, we see how the APAC region continued to show good demand conditions, with double-digit growth in China offsetting weaker demand in India and Japan. Group revenues were up 36%, with a similar growth of constant exchange rate on the back of a 28% increased in shipments, primarily driven by Jeep, Chrysler and Dodge, which together represent 90% of total revenues. Trading profit was EUR100 million with a double-digit margin. The 30% increase was mainly driven by volume growth, partially offset by increased industrial costs and SG&A to support business expansion plans.

Retail sales, including JVs, were up 45%, with continued share gain for Jeep, which posted a 26% growth versus prior year. Fiat, the region's second best-selling brand for the Group, was up 71%, driven by the recent launch of the Fiat Viaggio. During the quarter, the Group increased focus on development of Fiat, Alfa Romeo and Fiat Professional brands in the region, targeting significant growth in the Australian market. In South Korea, the Fiat brand was reintroduced with the launch of the Fiat 500, 500C and the Fremont.

Moving to page 16, EBIT in APAC increased from EUR85 million to EUR98 million thanks to a nearly [EUR50] million improvement from higher volumes, industrial costs impact mostly due to higher R&D related to new product launches and fixed manufacturing costs. There were higher selling expenses in support of volume growth and continued regional expansion, including the introduction of the brands mentioned before in several key markets.

In APAC, page 17, the Group sales including JVs were up 45%, outperforming the industry, plus 6%, driven by strong performance in China and Australia. In China, Group sales were twofold last year's levels, driven primarily by Jeep and Fiat brands, representing best sales improvement in the market, growing by 18%. Jeep Compass and Fiat Viaggio were the top-selling nameplates.

In Australia, Group sales were up 65%, outperforming the industry, up 5%, and posting a share gain of almost 110 basis points. Q1 represented another good quarter for Jeep, which recorded strong growth with a share gain of 580 basis points in full-size SUV for the Grand Cherokee.

Group sales in Japan continued to be driven by the Jeep brand, which grew 3% despite the normalizing industry after the strong recovery in 2012.

In South Korea, demand was slightly down, with Group sales bucking the trend with growth of 20%, driven by the Jeep brand and the launch of Fiat in February.

Moving to page 18, the EMEA region, where the persisting difficult trading conditions led to the 18th consecutive month of market decline. The LCV segment was also weak, mostly reflecting a sharp decline in Italy. Revenues for the Group were down 3.5%, mainly reflecting volume declines in a highly competitive market.

The trading performance improved EUR50 million, or nearly 25%, over the prior year, with a reported trading loss of EUR157 million for the quarter. That result was achieved on the back of disciplined SG&A spending and some better mix, mostly related to the Fiat 500L, which more than offset lower volumes and continued price pressure. The reduced EBIT loss reflected also an improvement in investment income, with JVs contributing EUR38 million in the quarter.

The 6% decline in shipments for the quarter was mainly attributable to Italy. Our shipments in the passenger car segment were down 8% to 195,000 units, while LCVs grew 5% to 50,000 units, with increases in Europe excluding Italy more than compensating for the decline in the domestic market.

Company and dealer inventory remain at around two-month supply at the end of March. The utilization rate in our plants in EMEA, including JVs, remained stable at 65% under the Harbor definition.

Moving to page 19, shows the nearly EUR60 million improvement in EBIT for the region. The impact of the volume decline reflecting lower passenger car shipments was more than compensated for by some better mix, mainly due to the Fiat 500L and LCVs. The continued pricing pressure impacted for approximately EUR50 million, while industrial costs were slightly positive thanks to efficiencies from the WCM program.

The disciplined SG&A spending, backed up by actions undertaken in the latter part of 2012, contributed positively for nearly EUR90 million.

Going to page 20, we look at the industry for passenger car in Europe, which registered a significant year-over-year decline of 10%, with sales down in all major markets except the UK, where there was a 7% increase. In Italy, the market was down 13%, reaching the lowest level since 1980, despite improved demand for LPG- and CNG-powered vehicles. There were double-digit decreases also in France, Germany and Spain.

Q1 Group sales were down 9% to 197,000 cars, with the Fiat brand flat versus a year ago. The 110 basis points share gain in Italy, driven by performance in A and small-MPV segments, was largely offset by the further reduction in the weighting of the Italian market, now representing 11.5% of the total European market, leading therefore the Group to a small gain in share of 10 basis points in Europe.

In the quarter, good results were achieved in the European city car segment, with Fiat Panda and 500 being ranked number one and number two, respectively. And the Fiat 500L, just a few months after launch, was ranked number two in its segment for the quarter.

Page 21 deals with the European LCV market, which posted a 10% decrease over Q1 2012 to 376,000 units, with overall demand again reflecting a sharp decline in Italy of 24%. Fiat Professional closed the quarter with an estimated 11.6% share in the market, a 40 basis points increase over Q1 2012, driven by positive performance in all major European markets. Excluding Italy, the Group's European share was 9.4% for the quarter, representing an 80 basis points year-over-year improvement. Group share of the Italian market was 43.5%, representing an increase of 120 basis points over last year.

With 25,000 units sold, the Fiat Ducato was one of the most popular models in its segment, with a nearly 20% share, or 180 basis points segment share gain compared to last year.

Moving to page 22, Luxury & Performance Brands, we can review the performance in the quarter of Ferrari, which posted revenues up to EUR551 million, an 8% increase over the same period in 2012. The brand shipped a total of 1798 street cars, representing a 4% increase over the prior year, driven primarily by eight-cylinder models and in particular the contribution of the 458 Spider.

For 12-cylinder models, sales were in line with the prior year, with positive performance for the new F12 Berlinetta. The USA remains Ferrari's number one market, with 492 street cars shipped during the quarter, up 14%. Volumes were also higher in the Asia Pacific region, with a total of 336 cars shipped, up 18% on the back of double-digit growth in Japan and continued positive performance in Australia. In China, shipments were in line with the prior year.

In Europe, there was a decrease in shipments over Q1 2012, with positive performance in Switzerland only partially offsetting declines in other major markets, particularly Italy, where the downward trend registered in 2012 continued.

In the Middle East, volumes were up 74%, and in South Africa, up 45%. Trading profit totaled EUR80 million compared to EUR56 million for Q1 2012. The increase reflected the higher sales levels, as well as contributions from licensing and personalization programs.

During the first quarter, Maserati shipped 1304 of vehicles, a decrease of 5% over the prior year. Volumes for the Quattroporte were down year-over-year as a result of the changeover to the new model. As a consequence, shipments for the quarter were down in China, Japan and in the Middle East. By contrast, shipments in Latin America were up 56% and in Europe up 42%.

Maserati posted revenues of EUR157 million for the quarter, down 4% over the prior year. The trading loss of EUR4 million compared with the EUR16 million profit for Q1 2012 reflected the lower volumes and higher costs associated with the launch of the new Quattroporte.

Moving to page 23, we can review the quarter for our Components and Production Systems operations. Magneti Marelli reported a revenue increase of 1% to EUR1,469,000,000 over the same period in 2012. Positive performances in NAFTA, China and Brazil were partially offset by continued contractions in Europe.

The lighting business posted higher revenues, up 7%m, as well as NAFTA was up, where several new products were launched during the second half of 2012.

Revenues for the power train business were also higher; the remaining business lines reported decreases. Trading profit for the quarter was EUR30 million, in line with Q1 2012.

Teksid posted revenues of EUR173 million, a 22% decline over the same period in 2012, with lower volumes for the cast-iron business unit in both Europe and Latin America. Teksid closed the quarter with a trading loss of EUR6 million compared to a profit of EUR3 million in Q1 2012.

Comau revenues were EUR307 million for the quarter, a decrease of 14% over the prior year, attributable primarily to power train systems and service activities in Latin America. Trading profit was EUR9 million compared to EUR3 million for the prior year. The increase was mainly attributable to body welding operations' profitability.

Moving to page 25, take a closer look at the business environment by region, starting with NAFTA. Since we've been discussing the launch of the Jeep Grand Cherokee and the Ram Pickup, page 25 gives some key features on these new vehicles and power trains, with the 2014 Jeep Grand Cherokee completely redefining the premium SUV segment. Production and shipments of these vehicles have been ramping up throughout the first quarter. These vehicles have many best-in-class capabilities, including MPG and towing on the Grand Cherokee, and towing and trailer weight on the new Ram.

The slide also shows the all-new Jeep Cherokee, which was revealed at the New York Auto Show a month ago. This brand-new vehicle will compete in the largest SUV segment in the United States. The vehicle has an all-new design which will have trail-rated capabilities and best-in-class towing. Additional features include the first application of the state-of-the-art nine-speed automatic transmission, and which with the 2.4 Tiger Shark MultiAir engine, has improved fuel efficiency of 45% compared to the predecessor vehicle.

On the right-hand side of the page are shown the major contributors in the quarter to the 7% growth in US and Canada sales versus a year ago. The Dodge Dart was a significant contributor, Ram Pickup, Dodge Avenger, more than compensating for the Jeep Liberty phaseout.

Page 26 talks about some of the fundamentals of our position in the Brazilian market, where we have produced more than 13 million vehicles since 1976. Thanks to Chrysler Group's branded products, we are expanding towards higher segments, also leveraging on the most extensive distribution network in the country with more than 600 dealers.

On the industrial side, we produce a vehicle every 20 seconds out of our Betim plant, and starting late next year, we will count on additional production capacity of 200,000 to 250,000 vehicles a year in Pernambuco to expand product offerings in higher segments of the market.

Page 27 looks at our Chinese operations. We are still a small player, but our sales are on the increase, more than doubling in Q1 2013 last year's volumes. While Viaggio sales continue to gain momentum since the launch in September 2012, in February, the Dodge Journey returned to the Chinese market. The JV expanded further the Fiat brand dealer network during the quarter, now having a coverage in more than 80 cities, with 120 points of sale across the country.

The Jeep brand continues to perform well also in China, where sales grew 25% in the quarter. The product lineup will soon be further enhanced by the all-new Jeep Cherokee, presented at the Shanghai Auto Show alongside the new 2014 Jeep Grand Cherokee and the Jeep Wrangler Rubicon 10th anniversary special edition.

Jeep dealer network continued to expand its presence in new and existing cities across China, exiting Q1 with more than 150 points of sale in 90 cities.

Page 28 deals with some key products for Fiat in EMEA, as well as the world's premier of a halo-car for Alfa Romeo. The Fiat 500L launch in Q4 last year throughout Europe was well-received by the market and achieved good results during the quarter, with a segment share of 17% in Europe and reaching the leadership in its segment in the month of March.

During the quarter, the Fiat brand presented the 1.6-liter MultiJet II diesel and 0.9-liter twin-air turbo gas engine versions of the 500L, as well as unveiling the Trekking model at the Geneva motor show, which will be available in market from Q2.

Later this year, the seven-seater version will enhance further the offerings for the model in Europe, while the global reach of the 500L will expand with the export for NAFTA of the five-seater version at the end of the first half.

In the quarter, Panda was again the most sold city car in Europe, maintaining leadership in the A segment. Alfa Romeo unveiled the 4C Sport Coupe in Geneva, to be released in the exclusive launch edition, following a few months later by the standard production version.

Page 29 shows the supercars of our Luxury & Performance brands, which all will soon be in the market. During the quarter, Ferrari presented a new limited edition LaFerrari at the Geneva Motor Show. Only 499 units will be made, and orders for more than double that amount have already been received.

The Maserati plant in Grugliasco started work on a two-shift basis to support increasing volumes for the new Quattroporte and the preparation for the start of the launch of the Ghibli. The new Quattroporte production was launched in January and is expected to reach run rate from Q2.

Page 30 shows our industry forecast for 2013 by region. Based on the annualized trend during Q1, the full-year outlook for both US and Canada remains unchanged, with about 15.5 million units for the US and 1.7 million for Canada. The market development in LATAM experienced during the quarter is supportive of an unchanged full-year industry outlook, implying a mid-single-digit growth for the region. In APAC, the overall industry is expected to grow about 5%, with the improvement driven by strong growth in China and Australia.

After a weaker than expected start to the year, we have revised downwards the projection for the European market. The passenger car segment in EU27 looks set for a further contraction after 5% down. We have also reduced the market outlook for Italy, which is now projected at 1.3 million units for the year. The market average for the LTV segment remains unchanged with a 5% year-over-year decline.

Moving to page 31, the first quarter, I said earlier, shouldered the impact of an aggressive product launch schedule for the Chrysler Group, namely the new Jeep Grand Cherokee and the Heavy-Duty truck line, and the preparation for the launch of the all-new 2014 Jeep Cherokee. Therefore, Q1 revenues were down 6% attributable to the new vehicle launches as well as reduced shipments in Europe and Latin America.

The trading profit for Chrysler under IFRS was EUR593 million, which represents a decline of 27% when compared to Q1 2012. The decrease is attributable to industrial costs and lower shipment volumes.

For the second quarter, we expect to increase shipments compared to Q1 now that the Jeep Grand Cherokees and Ram Heavy-Duty pickups are at full production rates. Also, we will not have the excess launch costs incurred in Q1. With the new launches complete in the first half of the year, we will be positioned for a strong second half performance.

Moving to page 32, the Group is targeting for 2013 shipments of 4.3 million to 4.5 million units, of which nearly 2.2 million vehicles in NAFTA. LATAM and EMEA are expected to account for about 1 million units each, and APAC is earned aiming to almost double last year's shipments.

On page 33, we confirm our 2013 guidance, with revenues expected to be in the EUR88 billion to EUR92 billion range, trading profit from EUR4 billion to EUR4.5 billion, net profit in the EUR1.2 billion to EUR1.5 billion range and net industrial debt of around EUR7 billion.

Thank you, sirs. Sara, now we can get started with the Q&A session. Please go ahead.

(Operator Instructions) Martino de Ambroggi, Equita.

Good morning, good afternoon, everybody. The first question is on the business in Europe, because we clearly understood in Chrysler's conference call Q1 is affected by mainly nonrecurring events and items.

But could you help us in understanding how much of your European performance improving year on year despite lower volume has to be considered as recurring. And specifically on SG&A, which improved significantly in Q1, and related to the mix effect, if it's sustainable as positive and able to offset the negative volumes for the rest of the year.

And the second question is always on the business side, so I set aside VEBA questions. Net working capital was likely positive in Q1. Why last year up more than EUR200 million? Trying to understand what are the dynamics in Q1 and what should we expect in the second quarter and for the full year for the working capital. That I would have expected to see [absorbing] cash due to the decline in volumes. Thank you.

In terms of the EMEA income statement, the SG&A improvement is the result of actions that we started to take through 2012, particularly in the second half of the year. So the comparison year on year with Q1 and to some extent with Q2 will continue to show an improvement year-over-year. Then the level of improvement will be lower in the second half of the year as we had already taken some significant actions on the cost side in the second half of 2012. Having said that, in absolute terms, this is a sustainable level of SG&A given the level of the market demand today.

In terms of volume and mix, the mix improvement is related to the 500L and the high LTV mix and some lower sales of cars, which have very low margin. Going forward, I don't think we are going to have significant mix improvements until we continue to renew our product line-up, in line with the strategy we outlined to you the second half of last year. But I think the important thing is that the cost performance is a sustainable SG&A level.

If I may, Richard, on mix, so you expect for the rest of the year, mix would be enough to offset the volume negative?

No, I think if the volume continues to go down, we will offset some of it, but we won't offset all of the volume issues that may occur because of the market reduction.

And if I may, one more follow-up on this. Is there any new action that you are planning in order to reduce costs? Because you are projecting lower volumes than for the whole market -- lower volumes than initially expected.

We can reduce costs up until a certain point, and then obviously, you can't just manage the business with no cost. So I think we have a very lean operation in EMEA. We can continue to take some cost out going forward, but we're not going to see the same low of improvement we saw this quarter.

Okay. Thank you.

Fraser Hill, Bank of America.

Good afternoon. I've just got three questions, please. First, you've got a provision release of about EUR166 million. You can see that is with your cash flow. Just wanted to know what that was and where that benefit came through the regional operating profit disclosure. When you look at it on a P&L basis, where was that benefit seen?

Second question, on the -- effectively the one-off costs that you've been flagging in NAFTA and Brazil and the product changeover costs and I guess the production issue in Brazil, but if you could quantify that in terms of an absolute euro amount of headwind. Specifically in NAFTA, how much did that actually just depress NAFTA profitability by in the first quarter?

Third question, on cash flow, both CapEx and working capital, I guess. CapEx was broadly flat in the quarter, but you have got a guidance range that goes from EUR7.5 billion to EUR8.5 billion. Is this an indication that we're going to be closer to EUR7.5 billion, or should we still expect that to increase later in the year? And with working capital, that is positive at EUR4.8 billion now, which looks like quite an extreme. Is it possible to improve that any further, or should we start to see some of that, with some headwinds now in working capital, particularly with payables, which look quite stretched up towards I think 82 days now in the first quarter, how should we think about that going forward? Thanks.

So the question on the cash flow, those are just changes in deferred revenues and deferred taxes. There aren't any significant throwbacks of reserves to the income statement. They are just seasonal changes in those levels because of fleet business and tax impacts on deferreds.

In terms of working capital performance, I think the important thing is that in the quarter, particularly for Fiat ex-Chrysler, the year-on-year performance was significantly better than last year. So we had a net negative impact on working capital on the Fiat side, but it was EUR800 million less than last year. So in terms of performance for the rest of the year, I think the working capital is clearly not going to be anything like the drain on cash that it was in 2012.

And on the Chrysler side, we had a lesser positive impact on working capital over last year because of the volume impact that we discussed, I think at quite some length. But as we are launching vehicles in Q2 and in Q3, we expect to build volumes through the year, which was not the case in 2012; they were more flat through the year. We will get some positive impacts on working capital in the second and in the rest of the year for Chrysler.

And then we had -- the costs on the industrial side of changeovers, we had some in Brazil and some significant ones in NAFTA, which we mentioned on the Chrysler call. So NAFTA was $60 million and Brazil was a much smaller number. Most of the cost increases in Brazil were actually related to inflation on the cost side. There's probably [EUR10 million] of cost in Brazil.

Okay, thanks.

Erich Hauser, Credit Suisse.

Good evening, gentlemen. Quite quickly from my side, I had three very quick questions. Firstly, looking at your presentation, it looks as if inventories for you in Europe were flat, they are down somewhat in NAFTA, and up a little bit in Latin America. Yet on your balance sheet, there is a EUR774 million swing in inventories, which I think is probably about 40,000 units. I was just wondering if you could explain what is behind this swing and where these inventories are sitting?

Then secondly, we have heard recently from -- that the Italian government is willing to redistribute about EUR14 billion to Italian enterprises -- or basically pay unpaid bills into the private sector. And I was just wondering if this is something that Fiat would also benefit from, and if so, to what extent?

And Mr. Marchione, I noted you've mentioned on the Chrysler call that you are very confident that you will make your full-year target, but I still try my luck, to find out how comfortable you are, particularly in the light of a weakening yen. And we've heard from Ford early last week, when they released their numbers, that they are starting to see first signs of Japanese competitors being helped by a weaker currency.

So I wonder if your planning does sort of make contingencies for what could be a deteriorating pricing situation in the US. Thank you very much.

In terms of inventory, need to be careful when we are looking at the statistics. On the NAFTA side, we have basically -- we had an improvement in dealer inventory from 73 days to 66 days. But we actually had a negative impact on our own balance sheet with inventory growing because of the product launches we mentioned, both because of industry or increase for the production, and also because we were holding some products in quality hold as we contain them prior to putting them through into the retail channel. So basically, the increase in inventory is largely related to the launches in NAFTA, whereas the retail side was down for the same reason.

As you said rightly, in LATAM, in Europe -- in LATAM, our inventories are slightly higher, but basically, some seasonality because of the sales increase going into the second quarter. Nothing untoward. And in Europe, inventories were basically flat.

Your question on how comfortable I feel with the forecast, let's just agree that we are of the view that the numbers we laid out at the end of 2012 are eminently achievable within the structure, subject to what I said earlier, which is the execution risk on the US, which is not inconsequential. I think everybody understands the significance and the importance of the execution plan and the fact that we cannot fall off of the rails. I mean, the number of cars that need to be shipped between now and December is relatively large.

Just in terms of your comments on the Ford commentary, on the first evidence of yen weakening on the US market, we've not experienced -- and part of it may be due to the fact that Ford probably has a much larger exposure to the passenger cars than we do. I'm not suggesting that their comments are not reflective of our experience; it just isn't -- we haven't seen it as yet. Certainly as of the last couple of days, when we checked the market conditions and as of this morning, I haven't seen undue pressure on prices.

And as far as your question as to whether our forecast includes a reversal of pricing power in the US market, the answer is no. So if that were to happen, obviously, it would put pressure on performance. But to be perfectly honest, I don't think, given our portfolio of products today, that even if it were to happen, that we would necessarily be negatively impacted as much as some of the other guys would be.

That may be untrue in 2014 as we relaunch the Chrysler 200, which make us a lot more exposed to that sector than we are today in terms of portfolio sales.

The number is ambitious, and I reiterate what I said on the Chrysler call. There is a lot of work to be done, but I don't think that the current exchange rate situation is going to impact our forecast.

Thank you.

Stephen Reitman, Societe Generale.

Good afternoon. Thank you. Again, returning to EMEA and the improvement in SG&A, could you please give a bit more granularity on that and to what extent that was an improvement in selling costs or on G&A expenses? Thank you.

It is both, Stephen. I don't really want to get into details of how much is which, but we have been making efficiencies across the board in the distribution process and also in the sales and marketing area, given the receptivity of the market to that level of -- that sort of spending. Notwithstanding how we've launched the 500L in the process.

If I can just add some color to this issue about EMEA, because I think we need to be very careful here that we're not going to try and skin this cat in 14 million pieces to find out how much I'm spending on postage here and see whether I'm doing the right things.

I can tell you that the organization now has been -- at least from a cost standpoint, has been realigned to the point where I think it is rightly sized to deal with market conditions as we see them. You can't forget that as part of that cost structure, which is directly or indirectly associated with the development of our premium brand strategy, which really centers on Alfa Romeo and, now to a lesser extent, on Maserati, given that is in the process now of finalizing the launch of the second car, the Maserati Ghibli, which was, again, shown in Shanghai and in [Canada] two weeks ago.

I think we need to be careful that we don't start eroding the technical capabilities of the house. We do have a lot of work that needs to be done with our industrial base in Europe, which impacts both the architectural development of the architectures and the power trains associated with it. And that is going to have a lumpy cost as we go forward. We are not thinking about adding additional resources, but part of that resource -- part of that resource pool needs to be redirected, and it is in the process now of being reconstituted in such a way that it properly supports the development of Alfa.

This is not an inconsequential task. It is something that we need to handle very, very carefully, because the Alfa Romeo brand has had a number of false starts in the past, some of which have been on my watch, to be perfectly blunt. I think we've tolerated a number of things with Alfa that I cannot tolerate for the reintroduction of Alfa in a real way going forward.

So I don't expect miracles out of EMEA going forward. We're going to try and keep it as lean as we can without derobing the technical capabilities of the house, and that is important.

One more comment about the EMEA profitability, we still expect to improve on 2012 performance in terms of reported trading loss. And the other thing is, obviously, the EMEA experience is not being handled by EMEA by itself. There is a strong organization here in the US which is going to assist -- from a resource standpoint is going to assist EMEA as it works its way through this issue. Obviously, the issue -- there is cross-building that will go on for the support function. But the bench is a lot deeper than EMEA has to offer and needs to be noted to complete the undertaking.

Thank you. And on the 500L, could you give some idea of the prices you are realizing, average prices on this car in Europe?

To be perfectly honest, I don't know. If I give you a number, I would be close, but I would be wrong. And I would much prefer that Richard can get back to you with a real answer on this one.

Thank you.

Richard Hilgert, Morningstar.

Thank you. Good afternoon to those in North America and good evening to those in Europe. On EMEA again, setting aside the SG&A, the volume and mix number, even with unit volumes being down as much as they were, coming up with a EUR15 million positive in the volume and mix really sounds pretty good compared to where you've been previously. And with the 500L being a smaller vehicle, it makes sense to me that there had to be something going on production-wise or within your facilities that also made that change possible. Can you give us a little bit more color there, please?

Nothing went on inside the plant that is not normal fare for industrial operations in Europe. You need to be very careful. And I also would suggest it may be helpful not to use American standards to classify the size of the vehicle. The 500L by European standards is a relatively large car. And you're benchmarking against smaller cars, like the Punto, which may have taken -- may have taken a less prominent role in the portfolio.

The 500L is a minivan by European standards. The fact that it's available in five- and seven-seater versions should tell you something about what the ambitions are of that car. It's intended to cover a very large range of customers with a variety of needs.

So it will extract a price which is well in excess of what the older portfolio without the 500L would have extracted. Regardless -- and we're checking the numbers now about what the average transaction price has been for the 500L in our experience in the first quarter of this year. But I can tell you that it's creating at a multiple of what a Punto would normally trade at; but not a fraction of, it's a multiple of. The car is much, much larger.

So I -- this is true mix. And obviously the other thing that is helping is the commercial vehicle performance, which has improved -- in proportion, it has improved the overall performance of the sector. But it is due to larger vehicles. There is nothing industrially motivated in that shift.

Okay. In China, the joint venture with GAC, you've got some government approvals that you have to get through, and I think some of the comments have been that you are going to be entering that process sometime late spring/summer. Any ideas on what the time frame is for that kind of approval process, and once past approvals, how quickly you might be up and running with production?

I'm not going to answer the question as to who our desired partner is in China; we haven't made that determination. We signed an MOU to move it in a particular direction. That issue is not finalized.

I don't think that the regulatory process of approvals is going to take a long period of time. I think we will do it relatively quickly. I think the project is ready to go. I expect the vehicle to be in market, out of a local production, in 2015. And in the interim, we will supplement it with exports out of the US.

When it comes to the Chrysler debt, (multiple speakers).

Just to finish answering the other question, the average price for the 500L in Europe is about EUR18,000.

EUR18,000, okay.

EUR18,000, so the geography required is much larger than you think. I invite you to drive one in the US when it hits there in the third quarter.

Okay. On the Chrysler debt that has the covenants on it that restricts cash, is there anything in that debt, Richard, that would trigger some kind of an early repayment fee if it were to be paid off? And if so, how much would it be?

So (inaudible) the debt on the (inaudible) side between the term loan and notes? On the term loan, there is an early prepayment penalty of 102. Today, we would pay back at 102 compared to nominal 100. And that will drop down to 101 at the end of May of this year.

On the bonds, as we speak, the make-whole provision is through 2015 and through 2016 for the two bonds, and that would make any prepayment today economically not an interesting proposition.

Okay. And then you saw very, very good interest in the debt issue that you did this quarter. Is there that kind of appetite going forward -- if you were to be able to at some point get to restructuring your capital as a global entity, including the operations of Chrysler, is that kind of appetite available to you, you think, going forward, that you would be able to see pretty efficient capital markets even though we've got such anemic economic conditions in Europe?

I'm going to make a couple of points. I think somebody asked me on the Chrysler call as to where I see the development style of the Fiat-Chrysler organization once this combination were to be consummated. And my answer at that time, which I reiterate now, is the thing that would certainly be the single largest factor in our consideration is the adequacy of the capital markets to support operations going forward. And I'll leave it to you to decide where that market is.

But fundamentally, once a consummation does happen, you end up with an organization that's going to sell in excess of 4 million vehicles this year. We should be selling close to 4.3 million, 4.4 million vehicles. So whether we're the sixth or the largest car company in the world as a result of all this, it really doesn't matter. This is -- we're not running league tables here.

The only thing that does matter is that we do have, within the combined entity, sufficient mass and sufficient geographic coverage to call ourselves a global car company. And when you look at that reality and you refocus on Europe and you start recognizing the fact that in the first quarter of this year, every other region, APAC excluded, has produced more cars than EMEA has, then you realize that Europe is becoming a much less and less relevant fact in the scheme of things. That is a takeaway from our historical roots. I think it's a recognition of the economic conditions and it is reflective of the ability of this house to shift its interest and shift its resources to markets that are much more rewarding in terms of investment of returns.

Italy in 2012 represented less than 10% of the overall sales of this Group. And I think that is a stark reality for somebody who has been a Fiat aficionado all his life. This is a different -- it's a different house. It looks at the world in a completely different way. And on the basis of that positioning and that opening to the rest of the world, I think you should be able to drastically change its credit profile. And our risk characteristics should drastically change as a result of the combination.

So I do expect that once we get this issue resolved, for the benefit of Chrysler and for the benefit of Fiat, the combined entity will be able to attract capital at reasonable rates to try and finance intelligent growth, which I think is part of our plan.

Very good. Thank you for taking my questions.

Charles Winston, Redburn Partners.

Good evening. Just one follow-up question for me, and it's really just trying to understand the movement in payables. If I go back and look at the first quarter report last year at trade payables, EUR16.4 billion into EUR16.8 billion, so roughly EUR400 million. This year, it is 16. -- call it 5 billion -- to about EUR17.9 billion, so a much bigger increase in payables in a period where, as I understood it, Chrysler has slightly undershipped, no significant inventory change in the other side of Fiat. Can you explain that very different movement in payables between the first two quarters, just so I can kind of understand what the main drivers are? Thank you.

The main factor is timing of CapEx spending. In 2011, we had a higher CapEx run rate in the European and Brazilian -- mainly the European business. So we had a much higher payment in the first quarter 2012 on CapEx than we had in the first quarter this year on the Fiat side. So that is the main impact of the change in the cash add-on payables in Q1.

So the build in the balance sheet value of payables is a reflection of -- sorry, I'm being dense -- is a reflection of the difference in that lack of CapEx? So -- I'm not following it.

We had a higher CapEx payable at the end of 2011 than we had at the end of 2012, and so we had more cash out in Q1 of 2012 than we had of cash out in Q1 of 2013.

Okay, I'm probably going to have to come back to you off-line. I'm genuinely not following (multiple speakers).

Marco is more than happy to go through it with you (multiple speakers).

Okay, thank you.

And Marco understands it.

Hopefully.

[Johan Gecher], Deutsche Bank.

Good afternoon. Just two quick ones. Mr. Marchionne, I think during the speech, you said you anticipate the trough in Europe to be reached somewhere in the second quarter. Is this a change in your tone? I think you were quoted not too long ago that you can't really see the bottom in European sales. Am I too picky here or has something changed to make you more confident, anything other than just the political change in Italy we saw over the weekend?

And then on the second part, how should we be thinking about the IPI tax development going forward? Obviously, for this year, it is pretty clear. But do you anticipate that the government is making this permanent and keeps on rolling this throughout the years? Or should we expect that at some point we are reversing back to the original starting point? Thank you.

I don't think I've changed my mind about where I think the European market is. These are perceptions that we keep on adjusting based on what we see out of the development of the economies in Europe, and also obviously, the relevance of the resolution of political issues in terms of leadership.

I make the comment now I made again on the Chrysler call, about the fact that I found encouraging the resolution of the political impasse in Italy over the weekend, because that's certainly one huge step forward in trying to at least present a unified voice to the European table about what needs to be established now of the European agenda going forward.

I think that there is -- the reason why I have softened my negativity on Europe is because I think that there -- we are beginning to develop a collective view across Europe now that austerity in and by itself is a meaningless exercise, that it really doesn't accomplish much. We have seen much more benign tones coming out of Germany -- not all corners of Germany, but certainly from a large portion of the German political and economic environment -- that suggests that there ought to be some relaxation on that objective.

We have seen the European union be a lot more benign in terms of the treatment of Spain by extending its timetable by two years, to try and bring itself back within the limits. This is a recognition of the fact that I think Europe at its unusual unfortunate not lightning speed is coming to grips with the issue. And I think there is a change -- there's an upcoming change in the political world in Europe to move the agenda in the right direction. I think they are beginning to listen and I am hopeful that that will provide a basis for growth sometime in the second half of 2012. You're not going to see -- 2013.

I don't think you are going to see any staggering, mind-boggling results the remainder of the year, but I think you will see bottom being touched, if I'm right. And to be perfectly honest, we are not the only ones that reported earnings in the last four or five days. One of my favorite European car companies has also reported this morning. And I noticed even from those results that nobody is immune from Spain.

So sooner or later, I think it's going to have to be a collective realization by all automakers that these set of circumstances cannot continue forever, because we are causing an irreversible, indelible damage to the fabric of this business. And I think we are now at that stage -- not everybody has got the degrees of freedom and the flexibility that Fiat has, strangely enough now, in terms of redirecting its resources and its efforts toward the development of a premium brand strategy out of Europe, and at the same time, executing, I think, on a North American strategy and a Latin American strategy which has so far paid out.

So I think that the combination of all these things will end up determining a different tone and a dialogue and a discourse that will go on in Europe that is going to be a lot more positive in terms of tone and in terms of direction. And I think that will be the first step towards a recovery of the European market, and I think all the conditions are in place today for that to happen.

The other question on Brazil, I was going to give it to you, Richard. Richard wants to give it to me. I'll give you an answer. Without dealing with that specific issue, I can tell you right now -- and I am on my way down to Latin America at the end of this week -- the view that we have, which I think is a consolidated view certainly out of our Brazilian leadership and most of the economic agents in Brazil, is that the government will continue to pursue whatever set of policies will support the development and the growth of national car producers.

I think that is -- what manner that takes and whether it is a continuation or non-continuation of the IBI structure is almost irrelevant. I think there is a very clear determination on the part of the Brazilian government to favor the development of the automotive industry in that country and it will do all things that are required to support it.

Okay. Thank you.

Philippe Houchois, UBS.

Good evening. Two questions for me. The first one is kind of a usual one for me, is I assume again you refinanced without having to provide securities and that we should conclude from that that your secured borrowing capacity is still intact for any next steps [strategic] regarding Chrysler.

That is true.

The second question is we've seen a couple of your competitors recently having to refinance directly or indirectly their financial servicing business to meet Basel 3 requirements. You don't own a finco, but you have a partner who is not necessarily committed long-term to (inaudible) you financing. So how do you look at the future, as we continue to see restricted financing or outcomes as requirements on capital that means that the returns on [confidence] may come under pressure?

In other words, what is your Plan B if Credit Agricole doesn't continue with you or what is the risk there?

I think it would certainly be inappropriate to discuss a Plan B in connection with a financing partner, because the last time I had a conversation with them, which was not a long time ago, there was zero indication on their intention to exit this business, which they fundamentally like.

I think that one of the things which is obvious, and it was bound to happen, given the emphasis now that from a regulatory standpoint has been placed on the usage of capital, all financial institutions, including yours, Philippe, is that utilization of the balance sheet and the resources of any of the banks in Europe today is somewhat limited. So one of the things that we have agreed with our partner that we would -- to the extent possible, without undermining the integrity and the efficacy of the business -- that we will try and look at third-party capital market solutions for the funding of the operation, something which has been happening now probably for the last 18 months.

And obviously, it has a P&L impact in terms of the results that we achieve from the operations, but it doesn't impact on the efficiency and the efficacy of the financing operations. Unless you know something that I don't know about Credit Agricole's desire to stay in as partners with us.

No, I don't. I just look at the returns on financing that is more -- the return on financing generally is less attractive going forward than it has been for a number of years.

That may very well be the case, and I think it's only a reflection that there are a number of transactions in the financial sector that happened a number of years ago that will probably not be able to be replicated today. And so we would just change the parameters of the deal and the likelihood of them happening will change.

I can only make reference to what we've done here in the United States as of late, which is this arrangement with Santander, and the fact that the structure itself can be replicated in some way, subject to changes that are reflected in market conditions. But the joint venture arrangement, which I favored for a long, long time, to keep ourselves away from the financing sector of car sales, that structure works. It works here, it works in Brazil and it has worked very well for us in Europe. It has never impeded any of the commercial operations that we wanted to carry out.

So I have no intention of changing my mind, unless Credit Agricole comes back and says they have. And I have no information to that effect.

If I can squeeze one last question in. You've got a pretty aggressive CapEx plan for this year and next. How much flexibility is there in that CapEx plan without you not delivering on your Maserati and Fiat plans, including the reinvestment in the Italian facility, not all of which is confirmed, but certainly there are some commitments that are(inaudible) there.

There is flexibility in the plan. I like the fact you referred to it as impressive. I find other words to describe the capital expenditure plan, which I probably would not use in polite company.

But I think we have flexibility. I think one of the virtues of this house subject to us continuing the investment in Pernambuco and completing some of the initiatives here in prior launches -- there are things that were by definition hypothetical in the plan. We had some discretion as to whether they would be executed this year or next. And so we still have the capability of turning down the investment cycle if we have to. But I think it will be probably improper for me to give you the range of flexibility in the plan, because I think we're going to stick to the number that we gave you.

Understood. Thank you.

As there are no further questions in the queue, I would now like to turn the call back to Mr. Auriemma for any additional or closing remarks.

Thank you, Sara. We would like to thank everyone for joining the call today. My team and I look forward to following up any further questions. The (inaudible) of the Group earnings results for the second quarter 2013 is scheduled in July 30. Bye, and a good night.