Stellantis NV (STLA) 2013 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to today's Fiat Group 2013 second quarter and first half-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 Mr. Marco Auriemma, Head of the Fiat Group Investor Relations.

Mr. Auriemma, please go ahead, sir.

Thank you, operator.

Good afternoon or good morning to you all and welcome to Fiat Group's second quarter 2013 results webcast and conference call.

The earnings release issued earlier today is available, together with the conference call chart set, on our website.

As usual, today's call will be hosted by the Chief Executive, Sergio Marchionne, and by Richard Palmer, the Chief Financial Officer.

After the introductory remarks, we will be available to answer all the questions you may have.

Before we start, just on an housekeeping note, let me 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 on page two of the presentation material.

As always, the call will be covered by this language.

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

Thank you, Marco.

I'm going to keep my remarks really short.

Richard will do all the heavy lifting on the call.

But we've had a very satisfactory quarter at Fiat.

I think I'm encouraged by a couple of things.

One, I think that the second quarter at Chrysler was a very good quarter, considering what we accomplished in the first three months of 2013.

The machine is back on.

I know that I mentioned during the Chrysler earlier that the second half of the year is a challenging second half because of the product launches and because of the profit expectations that are embedded in the original target of $3.8 billion for the year.

But notwithstanding all this, I think Chrysler did well.

I'm encouraged, also, by what EMEA has been able to do.

We have substantially reduced our losses, and I think there's no magic to this.

We always had the view that the market was under severe stress, and I think Alfredo has done all the right things to maintain a reasonable cost structure to try and weather the storm and expect -- while we expect this market to recover.

Latin America continues to perform well.

I think pricing pressures, and I think you'll see this when Richard deals with Latin America, but it continues to perform well, certainly on the volume basis, and we expect the rest of the year to be, certainly, in line with prior years in terms of ultimate output.

APAC continues to do well.

The house, overall, is in good shape.

There are a number of operational issues that we face, including a significant number of product launches in the second half of this year.

We remain on track to make the numbers that we outlined at the beginning of the year, EUR4 billion to EUR4.5 billion in trading profit.

And on that basis, I'll pass it on to Richard, who's going to give you the details.

Thank you, and hello, everybody.

Turning to page three, the Group results for the second quarter showed solid progress compared to the previous quarter and to the prior year.

Briefly, worldwide shipments for our mass-market brands reached 1.2 million units in the quarter, an increase of 5% year over year.

Revenues were up to EUR22.3 billion.

Trading profit was in excess of EUR1 billion.

Net profit before minorities was EUR435 million.

Our net industrial debt was reduced to EUR6.7 billion, and total available liquidity, including undrawn credit lines, was EUR21 billion, in line with Q1.

The Group has recently successfully concluded several transactions in the debt capital markets.

In particular, Chrysler Group took advantage of market conditions and improved its -- and its improved credit profile to reduce the interest rate for its $3 billion term loan, and its $1.3 billion revolving credit facility.

In addition, certain loan covenants were amended to be consistent with what is available in the second-lien notes.

The interest rate repricing is expected to reduce annual interest costs by approximately $50 million.

In addition, a one-time call premium of $30 million was paid to investors in June.

Also in the quarter, Fiat S.p.

A. signed an agreement EUR2 billion 3-year committed revolving credit facility, intended to replace the EUR1.95 billion 3-year revolving credit facility originally signed in July 2011.

The syndication was successfully completed with 19 banks on July 18th.

As a result of the positive response, the facility was increased, as of that date, from EUR2 billion to EUR2.1 billion.

On July 12th, Fiat issued an EUR850 million bond with a fixed coupon of 6.75% due October 2019.

Fiat notified VEBA of the exercise of its third call option to purchase a further tranche of the interest held by VEBA in Chrysler Group, LLC, representing 3.3% of Chrysler's outstanding equity, for $255 million.

Moving to slide four, here we're talking about the recent award recognized to the Pomigliano plant in Italy, which is one of the Group's plants in which the implementation of world-class manufacturing, has delivered outstanding results.

After the training period, completed in 2008, the plant reached bronze level in 2009.

With further investments and refurbishment in 2011 to produce the new Panda, in 2012 the plant was awarded silver status.

In the same year, the plant received a prestigious automotive lean production 2012 award in the OEM category for international OEMs.

Last month, as the WCM implementation was accelerated, the plant achieved gold status, the first assembly plant within our group to reach this level of WCM certification.

Last, but not least, as a result of the WCM program, the yearly savings at the Pomigliano plant are above the Group's average.

Moving to page five, a look at the financial highlights.

As we mentioned, Group revenues increased to EUR22.3 billion, driving by NAFTA, APAC, and LATAM, while EMEA reported a 3% contraction.

Luxury and Performance products also showed double-digit increases.

Please note in the financial comparisons here the Q2 '12 numbers have been restated to the adoption of IFRS 19, revised, which resulted in a reduction of reported trading profit for the quarter of EUR63 million, and a reduction in net profit of EUR119 million compared to the prior reported numbers.

Trading profit came in EUR82 million higher than a year ago to EUR1.029 billion, increasing 9% in nominal terms, and 12% at constant exchange.

The improvement was mainly attributable to a further reduction in losses in EMEA, and a strong year-over-year performance in APAC.

Results for both NAFTA, which was up slightly over the prior year, with improved momentum from new products launched in Q1, and LATAM, supported the full-year Group target.

Group net profit was EUR435 million, nearly double the prior year level.

There was a profit of EUR142 million attributable to owners of the parent, compared with a EUR32 million profit for the prior year.

Net industrial debt at June 30th was reduced to EUR6.7 billion from EUR7.1 billion at end of quarter -- of Q1, mainly driven by positive operating cash flow for Fiat, ex-Chrysler.

Total available liquidity inclusive of EUR3 billion in undrawn committed credit lines, totaled EUR21 billion, with a decrease over year end and Q1 driven by negative currency translation.

For Fiat, excluding Chrysler, total available liquidity was EUR10.9 billion and EUR10.1 billion for Chrysler.

Moving to page six, revenue and EBIT by segment, the top line for the Group increased 4%, with all segments growing, except for EMEA.

NAFTA was up 5%, or 7% at constant exchange; LATAM up 8% or 15% at constant exchange; APAC grew 46%; and Luxury and Performance brands were up 14%.

The Group EBIT was 13%, excluding net unusual items, which we will review in a moment.

The EBIT increased 5% over the prior year, reflecting a further reduction in trading losses in EMEA, and strong performance in APAC.

Moving to page seven, we look at the P&L items below the trading profit line.

Net financial expense totaled EUR502 million, EUR17 million lower than prior year.

Net of the marking to market of the Fiat stock-option-related equity swaps, there was a EUR13 million increase.

Income taxes totaled EUR120 million.

Excluding Chrysler, income taxes were EUR90 million and related primarily to taxable income of companies operating outside of Italy.

Moving to page eight, we show the major constituents of the unusual items recorded in Q2.

Chrysler Group, as we mentioned on the prior call, amended its US and Canadian salary-defined pension plan to cease accrual of future benefits and enhance early retirement factors.

The amendments resulted in an adjustment to prior service costs for which the Company recognized a $218 million or EUR166 million net reduction to pension obligation, with a corresponding benefit to income in the quarter.

This was -- is consistent with IFRS reporting, whereas under US GAAP in Chrysler's numbers this gain was not reported in income, but went straight to equity.

The charge of EUR115 million or $151 million represents the accrual related to the voluntary safety recall for the 1993 to 1998 Jeep Grand Cherokees, and the 2002-2007 Jeep Libertys, as well as the customer satisfaction action for the 1999 to 2004 Jeep Grand Cherokees following the agreement with NHTSA in June 2013.

Moving to page nine, if we look at the net industrial debt walk, industrial debt was reduced to EUR6.7 billion from EUR7.1 million at March end.

In the quarter, the industrial EBITDA and working capital combined exceeding the operating needs due to capital expenditures of EUR1.9 billion, interest, tax, and pension fund contributions.

Translation effects from positive mark to market of hedging derivatives also contributed to the overall improvement of net industrial debt.

For Fiat, excluding Chrysler, net industrial debt was EUR5.4 billion, a EUR0.3 billion decrease over March end, with cash from operating activities, including seasonally positive working capital contributions, exceeding capital expenditure of EUR0.9 billion for the period.

Chrysler reduced net industrial debt by EUR0.1 billion to EUR1.3 billion.

Moving to page 11, we start reviewing the performance by region, beginning with NAFTA.

During the second quarter, trading conditions remained strong in the region, with the Group outpacing the growing US and Canada market.

Revenues were up 5% or 7% in US dollar terms, primarily due to the higher shipment volumes.

Trading profit was up 1% over prior year to EUR668 million, primarily attributable to higher shipments following the key model launches in Q1, and improving pricing, partly offset by increased industrial costs related to new product launches and content enhancements.

EBIT increased EUR46 million, mostly due to unusual items.

In Q2 2013, the region recorded the accrual related to voluntary safety campaigns agreed with NHTSA in June 2013, as well as -- this was more than offset by the curtailment gain resulting from the freeze of US and Canadian salaried employee defined-benefit pension plans effective December 31, 2013, for the US and 2014 for Canada.

In the region, volumes were up 4%.

benefiting from full production of the 2014 Jeep Grand Cherokee and 2013 Ram Heavy-Duty pickups, with overall shipments increasing 5% to 468,000 vehicles in the US and 9% to 80,000 units in Canada.

Mexico was down 11%.

Group vehicle sales increased 10% to 582,000 units, with US up 10% and Canada up 9%.

Days supply of inventory at US dealers as of June 30th increased slightly from the end of March to 68 days, mainly due to increased inventory for the new launches.

The walk on page 12 details the EUR46 million improvement in EBIT for NAFTA.

The increase was driven by volume of 23,000 units, primarily related to new vehicle launches, partly offset by the lack of Jeep Liberty production compared to prior year.

Also positive were mix, which mainly reflected higher retail volumes, and net price, driven by vehicle content enhancements on newly launched vehicles.

Industrial costs were impacted by key product launches and content enhancements.

Higher costs to support business growth negatively impacted the SG&A by EUR46 million.

The others include the unusual items discussed on the previous slide.

Page 13, we look at the industry trend and our performance during the quarter in NAFTA.

The US vehicle market finished Q2 up 8% to 4.2 million vehicles.

Group sales were up 10% in the quarter, with June being the 39th consecutive month of year-over-year sales gains, with the best June sales since 2007.

As a result, the Group's overall market share was up 20 basis points over the prior year to 11.4%, driven by a 17% increase in retail sales.

Retail of retail market share was at 11%, up 70 basis points.

The fleet mix was reduced to 22% of US sales from 27% in the prior year.

Looking at performance by brand, Jeep vehicle sales totaled 128,000 for the quarter, up 1%, with increases for all currently produced vehicles, including the Grand Cherokee, up 27%; the Compass, up 30%; the Patriot, up 14%; and the Wrangler, up 12%.

Dodge, the Group's number one selling brand in the region, posted sales of 159,000 vehicles, up 18% from the prior year, mainly driven by the new Dart, the Durango, up 42%; the Challenger, up 20%; and the Charger, up 11%.

The Ram truck brand posted an increase of 31% to 96,000 vehicles, the best second quarter sales since 2007, with sales increases for both light duty and heavy duty pickups, which were up 41% and 12%, respectively.

Chrysler brand sales totaled 84,000 vehicles during Q2, down 5% from the same period last year, primarily due to reduced sales of the Chrysler 300.

The Canadian vehicle market increased 5% year over year to 538,000 vehicles.

The Group's total market share was up 60 basis points, year over year, to 15.1%, mainly driven by strong performances of the Ram Light Duty pickup, Jeep Grand Cherokee, Dodge Avenger, and sales of the Dodge Dart.

The month of June was the 43rd consecutive month of year-over-year sales growth, the longest streak in the Company's history.

Fiat brand sales in the US and Canada were stable, at more than 14,000 vehicles for the quarter.

The new 500L was launched in the US in May, expanding the existing lineup, which includes the Fiat 500 and 500 Cabrio.

Moving to page 14, we review the LATAM region.

The industry performed strongly, increasing 9% year over year, particularly in Brazil, where the market was up 7%, posting the best Q2 ever, and Argentina, which was up 21%.

Group revenues were increased 8% or 15% at constant exchange.

Trading profit was EUR224 million for the quarter compared to EUR234 million for the prior year.

Net of unfavorable currency translation impacts, trading profit was in line with prior year, with the positive impact of higher volumes and favorable mix compensating for inflationary increases in industrial costs and SG&A.

Total Group shipments rose 14% in the region, with Brazil up 11% to 215,000.

Shipments in Argentina totaled 29,000 vehicles, a 46% increase over the same period in 2012.

For other LATAM countries, shipments totaled approximately 14,000 units, an increase of 14% over the prior year.

Sales in the quarter were up 10% year over year.

The Company and dealer inventory slightly increased in the quarter, in line with the competition.

to support the second half seasonality.

The EBIT walk for LATAM is shown on page 15.

Excluding the currency translation effect, the positive impact from 32,000 higher shipments and favorable mix, as well as positive pricing, was offset by inflationary increases in industrial costs, mainly due to higher labor costs and a less favorable manufacturing mix due to the shift of some production to the plant in Cordoba.

Moving on to page 16, the passenger car and LCV market in Brazil was up 7% over the prior year to 921,000 units.

The Group strengthened its leadership in the Brazilian market with overall share at 22.1%, 350 basis points ahead of the nearest competitor.

Group products continued to perform well, taking a combined 27% share of the A and B segments, driven by the continued success of the new Palio.

In addition, the Siena and Grand Siena posted a 44% year-over-year increase and the Strada was up 29% over the prior year to close the quarter with a 53% segment share.

In April, the Group launched the Ram 2500 Laramie, the only full-sized truck in the market.

During the quarter, Fiat brand launched special versions of the Grand Siena and Strada, both the best-selling vehicles in their respective segments.

The Brazilian market is pointing to record sales in 2013, entering the second half seasonally stronger than the first half.

However, Q3 will be impacted by tough comparatives due to an exceptionally strong 2012 after the EP tax cut introduction of the prior year.

In Argentina, where the market was up 21% over Q2 '12 to 240,000 units, Group sales totaled approximately 31,000 units, with share up 160 basis points to 12.8%.

Page 17 deals with APAC.

Regional demand rose year over year, led by growth in China and Australia, while Japan, India, and South Korea were down over the prior year.

Group revenues were up 46%, primarily driven by Jeep, Chrysler, and Dodge, representing over 90% of total revenues.

Trading profit came in at EUR99 million, 1.5 times last year's level, driven by volume growth, which was partially set by an increase in industrial and SG&A expenses to support business expansion.

Trading margin was 8.9%, up 50 basis points compared to prior year.

EBIT was up 27% to EUR76 million, with trading profit performance not fully reflected, mainly due to startup costs for the Chinese joint venture.

Group retail sales, including JVs, totaled 46,000 units for the quarter, a 75% increase over the prior year, compared with 6% for the industry.

By brand, Jeep sales accounted for almost half of total Group sales in the region, which were up 14% over the prior year.

Fiat brand sales were more than triple the Q2 '12 level, propelled by the launch of the Chinese-produced Fiat Viaggio, the Group's second-best-selling nameplate in the region, after the Jeep Compass.

The return of the Dodge Journey to China earlier in the year was well received, with Q2 sales making it the Group's third-best-selling vehicle in the region.

The Group's newly formed sales operations in India completed the transition from the previous joint venture, allowing the Group to take direct control over all commercial and marketing activities.

Industrial activities continue to be managed through the JV with Tata.

Turning to page 18, the EBIT walk for APAC shows the positive impact from 12,000 higher volumes, partly offset by less favorable mix due to higher penetration of sedans and smaller-sized SUVs.

Industrial costs increased by EUR35 million due to higher R&D and fixed manufacturing costs related to new product initiatives and increased production volume.

SG&A increased due to selling expenses to support volume growth in the region and region expansion of the local team.

On page 19 we talk about the market trends and business dynamics for Asia.

In China, the Group's sales were up 2.5 times, posting the best sales improvement in a market growing at 13%, and leading to a share gain of 40 basis points, driven by the recently launched Viaggio and Dodge Journey, and continued growth of Jeep -- of the Jeep brand in the country.

In Australia, the market was up 5% with the Group continuing to gain share on the back of 39% sales growth, with Jeep growing by 18% and a strong performance of Fiat, Alfa, and Abarth brands, as well as the LCVs.

In Japan, the Group's sales were up 9%, primarily driven by robust performance of Fiat brand, despite a normalizing industry following strong recovery in 2012 after the earthquake.

In South Korea, demand was slightly down, with Group sales bucking the trend and posting a 3% increase, driven by the Jeep brand.

Moving on to page 20, we look at the EMEA region.

In EU27 plus EFTA, the decline in the passenger car segment softened in the quarter, thanks to improved year-over-year trend in April, but was again down in May and June by 6%, with the latter recording the worst June since 1996 with registrations below the 1.2 million mark.

The LCV segment performance in Q2 in Europe reflected, again, the sharp decline in Italy.

Group revenues in the quarter were down 3% to EUR4.8 billion.

The trading performance improved EUR40 million or nearly 30% over the prior with a reported trading loss of EUR98 million for the quarter, achieved through continued discipline on costs, and some better mix, which more than offset lower volumes and continued price pressure.

EBIT was negative at EUR74 million, reflecting improvement in trading profit performance, and included a EUR39 million positive result from investments.

In the quarter, overall shipments were down 5%, with passenger cars down 5% to 234,000 units, a 13,000 unit decline, almost fully attributable to contraction in demand in Italy, and supply shortage of components for certain models.

Shipments of LCVs were down 3% to 53,000 units, with improved performance in several EMEA markets partly compensating for 3,000 volume units -- 3,000 volume decline in Italy.

Page 21 shows in detail the EBIT improvements for EMEA.

Negative volumes, reflecting the decline in shipments, were offset by better mix, mostly attributable to the success of the Fiat 500L.

Pricing pressure in key segments continued to remain high, and impacted the year-over-year performance by EUR61 million.

There were positive year-over-year changes in industrial costs thanks to the contribution from the world-class manufacturing program, and a EUR68 million improvement from disciplined SG&A spending.

Other includes the non-repeat of the unusual charge related to the EUR91 million write-down in Q2 2012 of SevelNord, partially offset by unfavorable FX, lower results from investment, and negative non-recurring items in 2013.

Turning to page 22, you can take a look at the passenger car industry in Europe, which registered a further year-over-year decline, with significant decreases for all major markets except Spain, plus 2%; and UK, plus 13%.

The market was down 8% in Italy and France, and 4% in Germany.

For the rest of Europe, demand was down 9% overall.

Group brands recorded a combined 6.3% share of the market, down 50 basis points over Q2 2012, reflecting the continued reduction in Italy's overall weight in the European market, now representing 11.2% of the total.

The 500 and Fiat Panda posted shares of 14.3% and 13.5% of the segment.

The 500L topped 18,000 units during the quarter, competing for leadership of the small MPV segment with a 16.1% share.

The Group gained share in Spain and France and remained stable in the United Kingdom.

By contrast, share in Germany was down.

In Italy, market share was 29.3%, down 190 basis points over Q2, impacted by the recovery of sales delayed from Q1 due to the car-hauler strikes in 2012.

Additionally, the Group's performance in Europe was affected by supply shortages for components of certain models.

Page 23 deals with the LCV market in Europe.

Although the European market negative trend improved compared to Q1, there was a decline of 3% over Q2 2012, with overall demand, as anticipated, again reflecting the 22% decline in Italy.

Fiat Professional closed the quarter with a 13.5% share of the market, in line with the prior year.

Excluding Italy, the Group's European market share was 11.4%, representing a 60 basis point year-over-year increase on the back of 10 basis points gain in Germany, 70 basis point gain in France, 180 basis point gain in the UK, and 240 basis point gain in Spain.

The Fiat Ducato was the most popular model in its segments, with 34,000 units sold, and share up 120 basis points over Q2 2012 to 22.9%.

Group market share in Italy was 43.6%, decreasing 70 basis points over Q2 '12.

Moving to page 24, we can review the Luxury and Performance brands.

Ferrari's second quarter revenues totaled EUR626 million, representing a 6% increase over the prior year.

Trading profit totaled EUR96 million, compared with EUR88 million in the prior year, reflecting both higher sales volumes and strong contributions from licensing and personalization programs.

Trading margin was strong at 15.3%, up 30 basis points from a year ago.

Ferrari shipped a total of 1,969 street cars, a 2% increase over the prior year, driven by positive performance for 12-cylinder models, particularly the F12 Berlinetta.

For 8-cylinder models, volumes were down 5% over the prior year.

The US remained Ferrari's number one market, representing 24% of total shipments.

Volumes were also higher in Europe, with gains in the UK, Germany, and Switzerland more than offsetting contractions in Italy and France.

Results were also positive in the Middle East, with shipments up 13% over the prior year.

In Asia-Pacific, shipments to the dealer network were down 9%.

Revenues for Maserati totaled EUR282 million for the quarter, increasing 34% over the corresponding period in 2012.

Trading profit came in at EUR9 million, decreasing from EUR15 million in Q2 2012, primarily as a result of the higher costs associated with the launch of the new Quattroporte.

Maserati shipped a total of 2,291 vehicles, representing a 30% increase over the prior quarter.

The continued success of the GranTurismo and GranCabrio, in addition to the commercial launch of the new Quattroporte, all contributed to the result, and the brand posted significant year-over-year gains in nearly all markets.

As an update on new products, the new Quattroporte is very well received and orders are coming strong, with 8,000 orders received since launch.

Production of the high-end Ghibli will ramp up in Q3.

This is a model which is expected to generate significant growth for the Maserati brand over the next years, and for which we have already taken more than 2,000 orders.

Page 25 deals with the component sector.

For the second quarter, Magneti Marelli reported revenues of EUR1.6 billion, representing an 8% increase.

NAFTA, China, and Brazil registered increases, while Europe was substantially unchanged over the prior year.

The lighting business line posted revenues up 16% on the back of performance in China, as well as NAFTA, where several new products were launched during the second half of 2012.

In Europe, revenues were substantially unchanged.

For the electronic systems business line, revenues were up 15% year over year, reflecting higher sales of telematics and navigation systems to non-captive customers.

Revenues were also higher for the power train business, up 11%, with sales to Chrysler making a significant contribution.

Trading profit for the quarter totaled EUR50 million, compared with EUR37 million for Q2 2012, with the benefit of higher revenues being partially offset by higher costs associated with the launch of the new high-tech products in NAFTA.

Teksid posted revenues of EUR189 million, a 7% decline over the same period in 2012, attributable to lower volumes for the cast iron business unit in Europe and NAFTA.

For the aluminum business unit, volumes were up 23% over the prior year.

Teksid closed the quarter with a trading loss of EUR1 million, primarily reflecting the decrease in volumes and profitability for the cast iron business.

Comau had revenues of EUR358 million, substantially in line with the second quarter of 2012.

Trading profit totaled EUR11 million, compared with EUR7 million in the prior year.

Moving on to page 27, take a look at the business environment by region, starting with NAFTA.

All our models in the region are performing well.

In particular the recently introduced 2014 Grand Cherokee, refreshed with new front and rear exteriors, as well as new electrical architecture and upgraded telematics, but, more importantly, with a new state-of-the-art 8-speed transmission is gaining momentum.

Also in Q1 we strengthened our product offerings in the truck category with a more competitive model, the refreshed Ram Heavy Duty pickup.

In the second half, launch execution and continual running of capacity higher than 100% are the key challenges for a strong second half, underpinned by the contribution of the two new models just mentioned, along with other key model launches underway, such as the all-new Jeep Cherokee, competing in the largest SUV segment in NAFTA, the Fiat 500L, and the new Ram ProMaster, the first full-size van offering into an expanding purpose-built segment.

Page 28 deals with the recent situation in Brazil and its economic prospects.

Recent mass protests against the service standards have subsided.

Notwithstanding the limited impact of social unrest on economic activities, uncertainty could create a slowdown of the economy.

At the beginning of July, we had to manage a few days of production stoppages due to car-haulage strikes.

The government is managing the inflationary pressure through controlled monetary actions and consumer confidence is currently under pressure, but is expected to return to normality in a relatively short period of time.

The Brazilian economic scenario remains solid, and consensus estimates remain positive.

Page 29 shows the contribution by brand to the 75% sales growth in APAC, driven by the Fiat Viaggio, whose sales are continuing to improve, strong performance of the Jeep brand, with Q2 sales being the 15th consecutive quarter of year-over-year growth, and Dodge brand sales boosted by the recently reintroduced Journey.

The Jeep Grand Cherokee has been rolled out through the key markets in APAC, after its debut in Asia at the Shanghai Auto Show in April, where it was recognized as the most powerful luxury SUV in China by the trade media.

Slide 30, we take a closer look at the key model introductions in EMEA.

The 500 family continued expanding its product offering with the 500L Living and Trekking models, consistent with the brand goal of being distinctive enough in the mass market to differentiate itself from traditional competition.

As said earlier, export of the five-seater version to NAFTA started in the current quarter.

The Living model is the most compact 5-plus-2 seater MPV in its category, combining the charm of a 500, the compactness of a mid-size car, the comfort of a C-segment station wagon, and the versatility of an MPV.

The Trekking model is equipped with Traction+, a smart front-wheel-drive technology which improves grip on snow and rough terrain.

Both vehicles were launched in July and the full rollout in European markets is expected to be concluded by year end.

Moving to page 31, showing our industry outlook by region, the unchanged full-year forecast for the US market for 15.5 million vehicles is consistent with the annualized trend experienced during the first six months, which points to a 15.7 million SAAR.

The Canadian market is expected to be in line with prior year levels, with industry volumes to date supporting the outlook.

Industry trend in LATAM in the first semester is supportive of mid-single-digit growth for the full year, with Brazil set to post another all-time record, and Argentina expected to keep performing positively.

In APAC, the overall industry is projected to increase about 5% year over year, with growth in China and Australia partly offset by contracting demand in Japan and India.

In EMEA, our expectations for 2013 remain unchanged, with the passenger car segment in the EU27 plus EFTA market expected to contract in the 3% to 5% range versus prior year.

The LCV market should post a circa 5% year-over-year decline.

Moving to page 32, the Group is targeting shipments for 2013 in the range of 4.3 million to 4.5 million units, of which 2.2 million in NAFTA.

LATAM and EMEA expected to account for about 1 million units each, and APAC is aiming to almost double last year's shipments level.

So, turning to the guidance on page 33, we confirm our 2013 guidance, with revenues expected to be in the EUR82 billion range, trading profit from EUR4 billion to EUR4.5 billion, net profit expected to be in the EUR1.2 billion to EUR1.5 billion range, and net industrial debt of circa EUR7 billion.

Thank you, sirs.

Now we can get started with the Q&A session.

Operator, please go ahead.

Thank you.

(Operator Instructions).

We will now take our first question from Martino De Ambroggi of Equita.

Please go ahead.

Good morning, good afternoon, everybody.

Thank you for taking my questions.

And two questions on the EMEA region.

The first one is on price.

If you could comment a bit on the environment, which seems did not improve, also, in Q2 in Europe.

I can confirm that.

Pricing is not great.

Yes, but what do you expect, going forward?

Similar conditions for the remainder of '13.

Okay.

Still on EMEA region, I saw the improvement mainly came from SG&A and industrial costs.

What do you expect going forward from this?

Is there any additional room that can be expanded?

No, look.

There's a point in time in which you start cutting bone, and we're at that stage now.

Okay.

And the last question, always on EMEA, is you are improving operating performance, despite no volumes recovery, but what the updated volumes of shipment you are confident to guarantee breakeven for the region?

I think our view on this is -- remains unchanged.

I think the objective is to try and provide industrial -- utilization of the industrial framework in EMEA.

It can only happen with the support of a global market plan which effectively uses the Italian asset base to -- as an export function, and we're far removed from that.

I think for the first time -- and I think I made that comment in my remarks that we were looking at breakeven positions by 2015.

That view is unchanged.

Thank you.

We will take our next question from Massimo Vecchio of Mediobanca.

Please go ahead.

Yes, good afternoon.

On the plan about using the Italian production footprint for Alfa Romeo, I want to know if you have an update after the recent issues with the union and with the Italian system, I may say, overall.

If those discussions are such to change the plan or postpone or to alter it in some way, this would be very interesting from my point of view.

Okay.

Let me try and kill --

Yes?

Let me try and kill your interest.

If the industrial conditions in Italy remain such that it is impossible to properly govern the industrial operations in this country, then, obviously, any commitment that we make to this country is up for grabs.

And I think that I've made it very, very clear.

We're still trying to understand the implications of the latest court ruling on what Fiat is doing in Italy.

I think we are -- as I understand it now, we are in the process now of organizing a meeting with the union which has been at the heart of the dispute with Fiat.

We'll see where it takes us.

I mean, we remain open minded on ways to try and bridge the expectations between what we think ought to be done to get this operation running and what their thinking is.

I don't prejudge the issue.

I just think it -- given the lack of certainty that has been triggered by the latest round of judicial interpretation of Article 19 of the statute, I think we're hard pressed to come up with something that can actually withstand time.

This -- we've been public on this, that that article that has now been deemed to be unconstitutional was introduced as a result of a referendum in 1995.

It's been uphold in numerous occasions by the Constitutional Court in previous instances and we now find that it is no longer valid.

So, we're looking for guidance.

We have urged the government to make up for this deficiency in certainty by introducing some type of legislative measure.

We're waiting for the government to intervene, and I have seen nothing yet that will suggest that that certainty has been provided.

What kind of alternatives do you have to produce the new models, given the pipeline in the US?

Is there any kind of alternative?

And there is a kind of deadline --

There are always alternatives.

I mean, a company that can produce 4.5 million cars globally has got alternatives.

I wouldn't worry about that.

There is a timing deadline after which to kick off the plan and so, basically, it's either in or out for the Italian footprint?

Yes.

There's always a timing deadline.

I'm not sure that a financial analyst call is the environment to have that conversation, to be honest.

Okay.

The second question, on the Ghibli, if you can expand a little bit on the mix of the orders that you have, if it's in line with your expectations, if it's better, worse --

It just -- The Ghibli just started; give it a chance.

I think the initial reaction for a car that's not even on the marketplace is outstanding.

So, I am delighted with the performance of both the Quattroporte and the reception of the Ghibli.

Okay.

So, it'll do well.

Last question, on the European market.

You still stick with your minus 3%, minus 5%.

The market is down, I guess, 6.6% in the first six months of the year.

So --

Welcome to the law of averages.

So, basically, can you share with us the reasons behind your optimistic view in the second half?

I'm not sure it's optimism.

I think it's a reflection of where the second half was last year.

So, you're expecting a flattish second half?

There you are.

Okay.

All right.

Thank you very much.

We will now take our next question from Alberto Villa of Intermonte.

Please go ahead.

Hi.

Good afternoon.

A couple of questions.

First one is on the trading profit target that you did not change, despite the reduction or the introduction of the range for Chrysler.

I was wondering if you can kind of bridge the expectations for the main regions, especially in light of the fact that LATAM second half, to reach the EUR1 billion you mentioned in the previous call, has a target for trading profit that looks pretty challenging.

And then, if you can give us an idea of what the losses in the EMEA region could be, in light of the very good achievement you had in the first half this year?

So, you can give us an idea on that.

And secondly, on the decision of the court of Delaware, I have read some statements are saying that you were expecting a decision by the end of this month.

Is that true?

And secondly, on this same issue, is it that you are continuing to prepare for the IPO process requested by VEBA, if you can give an idea of when, eventually, Chrysler would be ready to IPO in the future?

Thank you.

In terms of second half, most of the improvement in the second half results will come from NAFTA.

Clearly, as we mentioned on the call, the Chrysler call, we have a significant challenge in Chrysler to increase volumes and profitability in the second half, and most of the weight of that improvement will be on the NAFTA region.

So, that accounts for most of the increase for the second half compared to the first.

We expect LATAM to be up, compared to the first half.

The market is seasonally better in the second half.

We're continuing to sell a very high share and perform very well commercially, and so we continue to expect LATAM to be at around the same guidance we gave you three months ago.

Another contributor will be Maserati, because, as we mentioned just now the Quattroporte and the Ghibli are ramping up in the second half, and so that will be a positive contribution second half compared to first half.

I think, in terms of EMEA, we're going to continue to focus on the cost equation and manage volumes, and we'll see where we get to at the end of the year.

I don't think we want to give any specific guidance on that.

It's a month-by-month exercise.

But it's fair to assume that the second half losses in Europe, in EMEA, would be higher than the achievement you had in the first half, or not, because of the third quarter seasonality?

No.

No, not higher.

I don't think you should make that assumption.

Sorry, didn't get you.

Well, you made an -- you suggested an assumption.

I'm suggesting you shouldn't be making the assumption.

Okay, thank you.

In terms of the preparation for an eventual IPO on the Chrysler side, we are preparing the S-1, and so, given the timing of that preparation, the review process with the SEC, et cetera, the timing would be November-December timeframe, because, obviously, the SEC process, as you will -- as you're aware, takes three to four months.

Yes.

And, by the way, just to caution Richard's optimism, it depends on the number of comments that we get back from the SEC how long it takes to clear the documents.

So, under the best of intentions, November or December would be an ideal time, which is also the wrong time, I think, from a capital markets standpoint to do this, but, obviously, by the end of the year, we'll be in a position to move on an IPO.

That's the expectation.

Okay.

Any update on the court of Delaware timing for the decision?

I mean, your guess is as good as mine.

I mean, I -- we are not in a position to utter -- I have no insider information as to when the judge is going to rule, but I think common wisdom would have suggested that this judgment would have come down by the end of July, but it'll come when the judge is ready.

Okay.

I mean, so that we're clear on the call, on these calls.

The calls are -- once the calls are triggered, they're binding and they have no way of being revoked.

So, on our side, once we push the trigger, the call is in place, and it's a time-definite call because it -- the mechanism for pricing the option is set in the agreement, subject to clarification by the court, which means that even if it takes 12 months, the calculation of the actual amount can be done, and it won't change subject to market conditions or changes in performance, because it's a backward-looking test.

So, the important thing from our standpoint, from Fiat's standpoint, is to trigger those call options at the earliest possible time that we can.

So, we've done three so far.

There's another that's available in January and another in July of next year.

So, as long as -- and as long as -- regardless, even if the IPO were to be executed, the call options need to be exercised.

Sure.

Thank you.

We will now take our next question from Richard Hilgert of Morningstar.

Please go ahead.

Thanks for taking my questions this morning or afternoon.

Congratulations on the papal endorsement in Brazil.

Any orders for any bullet-proof Fiats?

We aim to please.

If you'd like one, just let me know, I'll ship one your way.

Okay.

We do have some connections.

Yes, there you go.

That's the secret to why you're doing so well in LATAM now.

I was curious to now what the reason -- or what the impact to the EBIT was in the quarter as a result of the shutdowns in LATAM, as well as the shutdown from Selmat?

In LATAM it was not a significant number in the second quarter.

We had some shutdowns in July.

So, we lost a few days production, but not that significant, I would say, for July, either.

Now, the cardinal rule for suppliers is, never shut down your customer, and since you've experienced some difficulties this quarter and it looks like, just looking at where Selmat's located, you've probably got relationship with them outside of Italy, as well.

Can you tell us --

Actually, we don't.

And this is a matter that's subject to litigation, and, to be perfectly honest, it's not something that I would like to publicly discuss.

The number is sufficiently material in the context of Fiat and Fiat Industrial.

We have no highlighted a number, because it is contained in one of the variances in the charts that you've seen.

It is the subject matter of a damage claim against Selmat, and I think I will stop here, because I think anything that we say here is going to be either used or misconstrued in the litigation process.

It is something which we find incredibly unsatisfactory.

I think the situation has improved.

Certainly in the last 10 days we have seen a significant pickup in performance as a result of the summer shutdown.

We have commitments to close the gap between what was promised and what is effectively being delivered, and I expect, hopefully, that by the end of August we'll be in a position to resume normal production across all the plants.

But the issue of what has been suffered as a loss is an issue that has to be resolved elsewhere.

I'm not sure this call is the right place.

Okay, very good.

And last question, your competitors to the northwest have had many talks, discussions, about headcount reductions, and it seems like you've taken the tack that you can use the Italian operations as a base of export.

Have you decided that there should be no further discussions on potential headcount reductions?

Or is that an avenue that you could still pursue?

I think that option is always available.

I think we have taken the view that we can intelligently use the know-how and the established production base in this country to specifically dedicate it to the production of Alfa and Maserati, which are in the process now of being, at least from an engineering standpoint, of being developed with some intensity, and should be able to put us -- should allow us to be in a position to produce, hopefully, within 2014 and '15.

The biggest concern that I have to what I've just told you is the ability to govern the plants.

It's been the overriding concern that we've had.

I thought -- I thought -- that we had achieved a relatively solid agreement with the unions.

I don't know whether you've followed the latest sort of travel of the judiciary on this, but there's been the latest decision by one of the Italian courts that has effectively opened up the avenue to a different interpretation of that contract, and I think we need to see where it takes us, whether we can effectively restore normal industrial relations in this environment.

If we can, then I think we will feel comfortable continuing the investment cycle that we started.

In the absence of that certainty, then I think we have to sit down with the relevant parties, including the government, to try and find out how we move this forward.

But I -- it we -- there's no guarantee.

As you can see from all this, the ability -- what you see from the numbers and from the performance that we've revealed today, the ability to finance all these activities in these countries depend on the ability of Fiat Chrysler globally to continue to perform.

This is not a self-funding operation.

So, in order for the system to be able to rely on extra Italian funding to try and get this done, we need to have a certainty that all these industrial projects can be executed without disruption, and that's something that's far from guaranteed today.

Okay, very good.

Thank you.

We will now take our next question from Philip Watkins of Citi.

Please go ahead.

Good evening.

Thanks for taking my question.

It was more on the financing side.

I had two.

First of all, I was seeing FGA Capital, and they seem to have lost their investment grade rating from Standard & Poor's, and I was wondering if there was any -- or you thought there might be any implication for that in terms of the European financing?

And the second question was actually on the -- I know you've done progress in terms of the Chrysler loan, the term loan, in changing the covenants.

Is there any prospect to take that out completely, and give you a bit more leeway over the next year in terms of access to Chrysler cash?

Thank you.

Maybe you can explain the second question again.

I'm not sure that we understood it.

So, you still have restricted payments within the term loan.

Oh, we do.

Yes, on the bond.

And, I mean, could you just -- why don't you just buy back all of those loans?

Philip, well, the issue is that even if we wanted to, the buyback of the bonds would be anti-economic until 2015, 2016, because of the make-whole provision until that date.

Yes.

So, the RP on dividends is present in the bonds and we aligned the term loan RP to the same language as the bonds, which expanded our flexibility, compared to the initial terms of the term loan.

So, the term loan was $0.5 billion limit, previously.

Now there's a builder basket, same with the bonds.

On FGA Capital, we're quite confident that we can continue to raise financing, also, given that we have the support of Credit Agricole in the joint venture.

Does that -- may I ask, does that mean that you'll just finance with ABS for FGA Capital?

I know you've done that, a lot of that, already?

But --?

We'll be using ABS.

We're using bonds.

We're using medium-term financing from banks and from FGA, and from Credit Agricole themselves.

There's a mix of instruments that we use to finance.

No material change in your financing costs, then, you think?

No.

Thank you.

We will now take our next question from Max Warburton of Bernstein.

Please go ahead.

Yes, hi.

Good afternoon, everyone.

I got three questions, if that's okay.

The first one is, predictably, on Brazil.

Richard made some pretty optimistic comments about the outlook in Richard, certainly relative to the way the rest of the industry sees it.

In that context, are you still reasonably confident that you can do the EUR1 billion of profit in the region that I think you talked about at the beginning of the year?

I think you said operating profit this year would match last year.

After EUR410 million in the first half, is EUR1 billion still possible?

Or is the second half actually going to come in a bit short of the first half contribution?

That's the first question.

Hi, Max.

Well, given -- given the trend we see in the market to date, and our commercial performance, we believe we can get to the EUR1 billion.

Clearly, it's a function, also, of how the market responds in the second half of the year following the unrest we saw in July.

As we commented, we believe that the market will continue to perform well, and that is, obviously, a condition that's necessary for us to make that number.

Okay, thanks.

Max, the view today is that second half will be better than first half, and we have no indication to suggest that the forecast is not achievable.

And if you look at the volumes, by the way, in the first half of this year, I think they are at a historical high with the run rate.

So, it's not a lack of volume.

The issue that's caused -- that we encountered in the -- in Latin America in the first half is fundamentally a question of cost pass-through, and that's being adjusted as we speak.

Yes, I guess the thing that leaves people like me scratching our heads is your profitability in the region looks more and more like an outlier.

I mean, I guess it's always been best in class, but most others, both incumbents and new guys --

Max, my answer -- Yes, I know, I understand the problem, but let me tell you how I look at this.

If I make 100 and the other guy makes 1, and I suffer a dislocation of 10, the other guy is negative.

Okay.

First, basic starting point is what we're talking about here.

Look, I -- the real problem with this is that if anybody tries to move pricing in an adverse way in that market, given our cost structure, it will be a lot more painful for somebody else than it will be for us.

Okay.

We'll all watch with interest.

The second question --

So am I. I'm actually going to try and help, but --

You're going to try and help with --?

Help in managing to make sure that the 100 is preserved.

Okay.

Second question, a broader BRICs question.

I think all of us spend all of our time worrying about Brazil in the context of Fiat, but looking around the rest of the world, are there other places where we should be getting nervous?

And, particularly, could you remind us where you book all the profit from selling engines in India, all those engines that go to Maruti and Tata, in which volumes are falling?

Is that something meaningful, and where do we see that appear?

The answer is, it's not meaningful.

It should be, but I'm not worried about it.

Okay.

And then, my last question is turning to Europe.

On the quarterly basis, at least, you don't split R&D between Chrysler and Fiat, as far as I can see.

If we were to see pure European or pure Fiat R&D, how is that spend developing?

Is that beginning to tick up as you guys start working on Alfas?

Or is there something where actually where we look at this incredible cost result, particularly in Q2, where you're still managing to reduce R&D spending?

To be frank, we've had a relatively R&D for the last 18 months, probably slightly longer than that, given that we desisted from investing in the European marketplace for a relatively long period of time.

The main impact on cost reduction is a reduction in commercial costs in the marketplace.

Given the pricing pressures and the volume pressures, we've reduced significantly our spending on marketing.

Right, okay.

I mean, on R&D, when is the inflection point?

When do you have to start ramping, and in terms of what your engineers are doing at the moment, I guess, I'm left wondering what, exactly, do all these guys do on a daily basis?

There is so little in the pipeline, that I guess they're going to work, but just describe to me the typical day in the life of a Fiat European engineer right now?

They run financial forecasts and sell them to Bernstein.

I'm just kidding, Max.

I -- the -- no, I mean, when they're idling, which is very rare, they're involved in sort of maintenance programs that relate to exist products there in the marketplace.

There has been -- and I'm not trying to correct Richard -- but there has been an increased utilization of the R&D workforce here because of the commitment that we've made in terms of the two plants that we -- the plant in Melfi, where we're going to be manufacturing both the B-segment Jeep and a B-segment Fiat CUV.

And so, there's -- these -- there are a number of resources that are now being -- that are being directed towards that end.

The utilization of the rest, which otherwise is coming through the P&L, and, potentially, could be capitalized, is totally in connection with the undertaking on the Alfa Romeo project, and that's a very limited scope activity right now, and I -- it's not material to the numbers that you're seeing.

Okay.

It may become -- it will become material, as we go forward, and I think we'll highlight -- we'll highlight those costs as we go forward, but today they're not.

Okay.

I've got a final question.

Just -- I mean, this may be a bit of a strange one for an analyst call, but it's fascinating to me, looking at this company.

How much was saved on the 4C by not tooling up to do some headlamps, and whose decision was that?

It was mine, and the number is about EUR4 million.

And the -- I mean, is the budget on that -- I mean, is the budget in the context of Alfa's re-launch not sufficient to pay EUR4 million to have headlamps, given sort of the press response with people commenting that this thing was done on a shoestring?

To be perfectly honest, if you're buying that car because of the quality of the headlights, you're -- you got trouble.

I mean, the reason why you're buying that car is for completely -- it's the handling capability of the car, and the way in which it functions on the track.

And I actually like the current headlights better than the ones that were offered as an alternative.

Okay.

Personal choice.

So, blame me, if you don't like them.

All right.

Okay.

Thanks for that, and thanks for the other answers.

We will now take our next question from Charles Winston of Redburn Partners.

Please go ahead.

Yes, hi.

Good evening.

Three from me, but slightly nerdy numbers questions, just very quickly.

The working capital move in core Fiat, the EUR853 million in the quarter, looks pretty chunky relative to trying to tie it back to the movements in the balance sheet.

And, obviously, we don't get a Fiat-only balance sheet.

So, I'm wondering if you could just give us a little bit of an explanation as to what the key movers behind that figure was and what your thoughts for working capital in the core Fiat might be for the year?

Secondly, just the Chrysler tax rate looks pretty low, just looking on page seven, comparing Fiat, ex-Chrysler, with the Group.

There didn't look to be very much tax paid there.

Any weird items there I should be aware of?

And then, just finally, on CapEx, if you could, perhaps, give us an update, there's been a few market changes since you gave your initial CapEx plans back at the 3Q results last year.

I guess, particularly, perhaps, in LATAM and parts of the emerging world looking a little bit more difficult.

Any changes on the CapEx guidance in terms of, perhaps, towards the upper end or bottom end of the ranges you gave?

Or, perhaps, if there's any updates on those investment plans, it would be useful?

Thank you.

So, in terms of working capital, as you mentioned, we had a positive impact on Fiat, ex-Chrysler.

It was higher than last year's number, so on a seasonal basis, this is generally a positive quarter compared to Q1.

And the extra performance compared to last year, is driven by the growth in EMEA, LATAM, and Maserati, all contributing positively to working capital, and also to CapEx.

As you mentioned, CapEx is up, but all of that didn't go out as cash, so that increased our payables, as well.

So, there's a switch between the CapEx line and working capital, until we actually make those payments to suppliers.

So, those are the main reasons why we had the positive working capital performance in the quarter.

In terms of tax, we didn't have any unusuals in the Chrysler tax line.

As you know, we're an LLC, so in the US we don't pay taxes.

We continue to pay taxes in China.

There's slightly lower taxes in Venezuela, given the market performance, but the rest is basically pretty much flat.

And in terms of CapEx, we confirm the guidance we gave you.

We are investing in the US, in particular, but also we started to ramp up investments in Latin America for Pernambuco, and we're also starting to spend money on the Melfi plant, as mentioned, for the two products that will come out of there, the Jeep, and the Fiat.

So, no particular comment on any changes to CapEx guidance.

Thanks.

Can I just follow up on thoughts for working cap in core Fiat for the year, at all?

Just given this is a very difficult thing for us to model, because it can swing pretty wildly from quarter to quarter.

I was just wondering where you think it might end up for the year?

Thanks.

Generally, third quarter will be a negative, because of the shutdown in August, and then it should come back in Q4.

I don't think net/net we'll have a significant positive for the rest of the year, but it'll be a negative in Q3, and a positive in Q4.

Okay.

Thanks a lot.

We will now take our next question from Jochen Gehrke of Deutsche Bank.

Please go ahead.

Yes, good afternoon.

Just coming back to LATAM, when you look at the GDP forecast that you put yourself up on the presentation, and, at the same time, you look at the capacity increase that the whole industry has, should we be fearing that there's (inaudible) capacity in the coming two, three years that is grinding down, or do we actually see in the market that some of your competitors are starting to scale down their ambitions to grow capacity in the market?

Secondly, just on NAFTA, what are your expectations in the pickup truck segment, now that your competitors are re-launching the vehicles?

Is some of the caution on Chrysler for the second half or the incremental caution, reflecting potential pricing pressure on Ram, or is this -- is this just a wrong assumption?

And then, thirdly, just a more general question.

Obviously, you have your regional profitability split, and us, on our side, we're very often comparing you to the ones that share this disclosure.

When you look at how you allocate cost regionally in your Company, how the element of royalties plays a very large role, do you really think that is actually right, from our side, to compare you in the various regions to call it a GM or a Ford, do we actually -- when you look at your own comparison, just look at the Group number and compare Fiat overall to what GM overall generates?

Thank you.

Look, just to deal with the last issue on the comparability of our numbers to our competitors on a regional basis, I can only make comments about our numbers.

I have no idea how the others are concocted, so, you're asking me to speculate on their compilation methods.

If they are done on the same basis as ours, the numbers are absolutely comparable, and we don't -- we do not have any what I call extraneous charges coming through from one side to the other to try and effectively -- either shift or realign profits in a way in which satisfies our preordained view of profitability of a given region.

So, I mean, there as honest and as straight as we can make them.

There's no -- nothing else goes through there that is not operationally relevant to that region, issue number one.

On the issue about Ram, there's zero concern built into the caution for the second half of this year about the ability of Ram to compete.

I mean, we have a superior product line, and I understand that the competition is fierce and that it's a very desirable market for all three, for all the major three in this market, but I -- there's no pessimism, there's no caution built on what I think Ram can do.

I think Reid, Reid Bigland, who's now in charge of the brand, will share this level of optimism about what we're doing.

And, effectively, I think we're seeing, certainly, an opening up of opportunities for Ram across the board, including the extension of the Ram brand into the sort of professional area with the introduction of the new ProMaster, which is coming on stream in the third quarter.

In terms of your other question on Brazil, as to whether I think our competitors are toning down their expectation, Brazil and Latin America has always been a saber-rattling environment where people come in and just threaten others with the buildup of capacity and the buildup of additional plants.

You need to look at this from Fiat's standpoint.

Fiat has got a plant in Betim, which is the largest car plant that I'm aware of in the world, and when it runs at peak, it's making about a car every 20 seconds.

And that is a situation that cannot continue for a long period of time, because the level of congestion and excessive reliance on what I consider one production site.

The market, also, in our view I think, is going through a structural shift, and because of the increased economic conditions, one of the things that's on the chart that Richard pitched in the pack is the phenomenal increase in GDP per capita that you see between 2010 and today.

And that relative increase in wealth is also causing a shift in consumer demand, and I think we have now, as a result of the association with Chrysler, the possibility to do some more significant things in Latin America to really try and deal with a market shift beyond the Fiat brand, which has historically been the strength of Fiat in that area.

So, yes, the saber ratting has slowed down.

I think we hear less now about plants being built.

I am less concerned about us having excess capacity in the market to try and deal with that demand function.

I think we remain as confident about the prospects for Latin America as we've always been, and I think it hasn't failed us, certainly in the last 10 years, in terms of performance, and I think that will continue.

All right, thank you.

We will now take our next question from Philippe Houchois of UBS.

Please go ahead.

Yes.

Good afternoon.

I have three questions.

The first one maybe you can start with, for Richard.

On slide 37, you show us the reconciliation, US GAAP to IFRS for Chrysler, and the number we all look for is the capitalization of the ultimate cost, but you give it to us after tax.

Can I ask you, what tax rate do you use?

Because the Chrysler reported tax rate is between 6% and 7%, but the Fiat tax rate is 22%.

So, when we look at -- when we do that adjustment, which tax rate are you using for that particular calculation?

Is it the Fiat one or the Chrysler one?

There's no tax impact on that.

Well, you do a net income --

Yes --

So, it's a pretax number.

It's a pretax number, because the spending is basically in the US where we have no tax impact.

Right, okay.

That's great.

And, Philippe, and the Fiat tax rate is irrelevant to that calculation.

Yes.

No, that makes sense.

I just wanted to clarify that, because I have just asked myself that question a couple of times before.

The other question I have is on Brazil.

We hear you and Renault and Michelin and a number of other players talk about offsetting the currency devaluation in Brazil, et cetera, with pricing.

How does that work?

I mean, you basically -- that, basically, consumers are accepting significant price increases.

Untrue.

Right.

So, how does it work?

Untrue.

I don't know how it works, because it's untrue.

Right.

So, you're taking -- when you report, I think, you just reported EUR22 million loss on currency, there's a translation impact of your business.

That's all it is?

Yes.

Right, okay.

And the last question for you, Mr. Marchionne, if I can, is can you actually explain to me what is strategic about RCS?

Why is Fiat putting any cash into RCS?

Because it reflects a historical commitment to a significant asset in this country, and I think as long as we are who we are in this country, the maintenance of that position and the protection of that asset in this context is important.

Okay.

So, it's not strategic.

It's the tradition.

No, no.

It's --

I mean, you're not trying to influence the price or anything like this.

You're a car maker.

No, but -- I am a car maker.

But tradition does have strategic value.

Agreed.

Because, on the one hand, you made that commitment to RCS, and on the other hand, you're quite harsh on what's going on in Italy in terms of the inability to run a car business.

And I'm just trying to reconcile the two, and I know it's only EUR100 million, but EUR100 million is a lot of money for Fiat.

EUR100 million is a lot of money for everybody, Philippe.

Agreed.

Agreed.

Including UBS.

Absolutely.

Yes, the real question to me is that I think you need to look at this as a single event occurrence, and it's specifically related to an asset class.

We don't have a variety of these asset classes.

We're not confused, right.

So, there are some things that are historically relevant and need to be protected.

That asset is one that required protection.

Yes, I appreciate it.

(Inaudible).

Okay.

Okay, great.

Thank you very much.

Okay.

We will -- I guess that we can conclude the call now.

So, we would like to thank everyone for joining us today.

My team and I look forward to following up any further questions.

The release of the Group earnings result for the third quarter 2013 is scheduled on October 30th.

'Bye.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.