Stellantis NV (STLA) 2013 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to today's Fiat Group 2013 Third Quarter Results Conference Call.

For your information, today's conference is being recorded.

And, at this time, I would like to turn the conference over to Mr. Marco Auriemma, Head of Fiat Group Investor Relations.

Mr. Auriemma, please, go ahead, sir.

Good afternoon or good morning to you all, and welcome to Fiat Group third quarter 2013 results Webcast and conference call.

The earnings release issued earlier today is available together with a 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 introductory remarks, we will be available to answer all the questions you may have.

Before we start, just on a 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 2 of the presentation material.

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

Also, Chrysler Group LLC recently filed a registration statement with the US SEC to (inaudible) securities portion to a contractual demand from the VEBA Trust.

Under US SEC rules, we are not permitted to answer any questions relating to the registration statement or the IPO described therein.

We would appreciate if you could respect this limitation and not ask any questions during the Q&A session on these topics, as we won't be able to answer these questions.

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

I'm going to spend a few minutes talking about some of the elements on slide 3, which are -- which contains sort of the executive summary of the performance in the third quarter and, I guess, some of these about the future, certainly about 2013.

I've had a chance to see some of the comments that have come in from the analyst community as a result of the issuance of the press release.

And I'd like to at least clear up a couple of issues that appear to have gone either unnoticed or misunderstood.

We had a rather lengthy presentation today on the Chrysler call on the industrial issues that Chrysler faced in Q3 of 2013.

I think we're all aware of the fact that there were delays in the launch of a significant product in the Jeep lineup, which has now been resolved, and cars are making their way at a pretty rapid clip into the US dealer network.

That issue is an issue which has caused, certainly, a lumpy working capital build in the end of Q3.

It's worth probably about EUR0.5 billion in terms of net impact on debt for the -- when I compare them year over year.

And so that explains the less than spectacular performance in terms of cash flow generation of Chrysler.

That has had, also, an implication in terms of where the net debt position for Chrysler -- for Fiat overall has ended up.

And, if you add on what I would consider to be the one-off, unusual part of our capital expenditure profile, which is a build-out of our Pernambuco plant, which is worth in excess of EUR0.50 billion as of September 30 of this year, we're looking at a combined impact on net debt of roughly EUR1 billion, a number that we should be able to absorb as part of working capital reversal fourth quarter of this year.

So some of the signs of alarm that I've seen come out from at least the initial assessment of our leverage position I think are probably misplaced.

And I think we can provide color to the significance of those events as we go through the presentation.

The other thing that I noticed coming back in from the initial remarks is that somebody appears to believe that somehow we have changed guidance.

I think we have been incredibly and, probably, [piously diligently] in outlining our guidance at historical rates -- how that was framed and what the impact of FX movements have been on the guidance as of the end of September.

We are effectively confirming guidance within the foreign exchange limitations associated with the original forecast.

Effectively, the numbers that we are re-pitching now incorporate the FX movement, and there is no change in guidance consistent with what we've done with Chrysler on the earlier call.

We're relatively satisfied with the development of the markets.

Obviously, issues have come up in the third quarter which are somewhat distant from the views that we expressed about Latin America in the second quarter and which Richard will take you through as we go through the presentation.

And we'll come back to it if there are questions.

But we're encouraged by the improvement and performance in EMEA.

I think the fact that we keep on reducing our operating losses in EMEA in this environment is a good sign, especially in view of my own personal conviction that we will not see a restoration of healthy markets going forward, either in 2013 or in 2014.

I think we're looking at pretty much of a flat line or, at best, a very marginal improvement over current levels.

APAC continues to perform well.

I think that we're also encouraged by the progress that has been made there.

Enough has been said about NAFTA, especially in view of the presentation that was done with Chrysler.

We continue to perform as forecast and in line with the guidance as was given.

The investments that we're making, some of which are outlined here on slide 3, especially the further redeployment of the Mirafiori plant towards the production of an SUV, which has finally been announced and is being actioned as we speak, is a further confirmation of the fact that we're moving away.

And, effectively, we are moving away from the traditional utilization of our industrial assets towards the premium strategy, which has been outlined earlier on our calls.

The car that's being added to the Maserati platform is a necessary ingredient for the filling out of the brand.

I think it's because of all the work that's gone on with Maserati in the last three years.

This is the normal, natural extension of its activity.

I think we will be producing a unique vehicle which has unique attributes and which is consistent with the brand heritage and the positioning of the brand today.

What's not on this slide is the fact that we continue to work in a pretty determined fashion in trying to reshape the Alfa Romeo platform.

That's something that I think we'll be in a position to outline more fully when we put together this investor meeting, which is now forecast for the end of the first quarter of 2014 and which is going to be the occasion where I think we will give you an opportunity to look at a five-year plan based on the thorough assessment of the brand potentials and not just in terms of Alfa Romeo but also in terms of the other Chrysler and Fiat brands.

It's going to be an important day for us.

I think we started a dialogue with the board this morning about where we're taking this business going forward.

I think it will be an interesting -- it will be interesting for two reasons; one, because I think you'll be able to see in some higher level of detail than we've provided so far a delineation of the premium brand strategy and some of the timings associated with the execution of that strategy.

But, equally important, I think you'll be able to see what we're doing from a geographic expansion standpoint.

My instinct is to hold the meeting in Latin America because I think that that is an area that is either misunderstood or sufficiently far away from most people's purview, where we keep on getting a lot of noises from that region about what performance would look like in 2014 and 2015 going forward.

I think we need to see how Fiat and Fiat Chrysler have effectively set up an industrial infrastructure to try and deal with the shift in demand that is now becoming visible in the marketplace and which has been a missing part of the product portfolio in that region now for a number of years.

I'll make one comment.

Other than the fact that we obviously have finalized all the partnership arrangements in terms of the financing activities of both Latin America and Europe, and that was -- the conclusion of the deal with Santander that we've done in NAFTA.

We have a complete footprint to try and deal with the financing side without having the Fiat or Chrysler commit to its own capital for those activities.

As Marco said, we're going to refuse to make comments about the S-1, other than the fact that we filed.

We're in the process now of clearing comments with the Commission.

It's a process that I think we're going to work that diligently.

The only thing I can tell you is that I think, and it is my sincere hope, that we'll be able to execute the IPO within 2013.

And I think the machine is ready to get it done.

I think we have done all the necessary work -- all the necessary spadework to get this issue on the road.

And, hopefully, we'll get it done before the end of this year.

I really have nothing else to say, other than wish Richard good luck in trying to explain the quarter to an unsuspecting public.

Go ahead.

Moving to slide 4, our revenues were up 1%, or 8% at constant exchange rates, with growth from our mass-market brands in all regions except LATAM, which, at constant exchange, was down slightly.

Strong performance by luxury brands was driven by the Maserati brand.

Net of EUR80 million of negative currency translation in the quarter, Group trading profit was in line with prior year at EUR816 million.

Net income came in at EUR199 million versus EUR171 last year and also improved for Fiat ex Chrysler, which reduced losses by EUR37 million to EUR247 million.

The EUR0.8 billion decrease over June end in total available liquidity reflected in EUR0.4 billion of negative cash flow from operations, net of CapEx and financing, and EUR0.4 billion in negative currency translation.

Moving to page 5. On the lower part of page 5, EBIT, as mentioned, totaled EUR856 million for the quarter, compared to EUR830 for Q3 2012 restated (inaudible), with the decrease in trading profit more than offset by lower unusual expenses and improved results from investments.

Regionally, EBIT declined in NAFTA and LATAM with the decreases further accentuated by unfavorable exchange, while EBIT improved in APAC and EMEA, both continuing their year-to-date trend of year-over-year improvement.

Luxury brands were up strongly, by EUR42 million, mainly due to more than twofold improvement in volumes at Maserati.

(Inaudible) improved due to non-repeat of some unusuals last year and improved results from investments.

Moving to page 6. We've already gone through most of the metrics on here.

So let me give you some (inaudible) on a few items of the P&L.

Financial charges for the quarter were EUR489 million, compared to EUR464 million last year.

Net of the positive contribution from marking to market a Fiat stock option related equity swaps, there was a EUR48-million increase over the prior year, mainly attributable to higher average net debt levels and exchange rate impact.

Consolidated income taxes totaled EUR178 million.

For Fiat excluding Chrysler, income taxes were EUR71 million and primarily related to taxable income of companies operating outside Italy (inaudible) in Italy.

Slide 7 shows the drivers of the EUR1.6-billion increase in net industrial debt, mainly driven by seasonal factors.

For Fiat excluding Chrysler, the cash used in operating activities driven by the seasonal Q3 working capital swing represented a EUR0.1-billion improvement over the prior year, offset by the increase in capital expenditure of EUR150 million to EUR1 billion for the quarter, driven by Pernambuco.

The investments were EUR220 million.

For Chrysler, the EUR1.3 billion positive contribution from operating activities before working capital represented improvement of EUR0.4 billion over the prior year, which was offset by negative working capital performance net of lower CapEx.

At Group level, the industrial EBITDA positively contributed in the quarter by almost EUR2 billion, 7% higher than Q3 2012, with financial [charges impacted taxes] absorbing EUR0.6 billion.

Capital expenditures were EUR1.8 billion, bringing CapEx of EUR5.3 billion for the nine months to September, nearly 70% of the total spend expected for full year.

Full year CapEx is still expected at around EUR8 billion.

Change in working capital was negative by EUR1 billion, of which EUR0.6 billion related to Fiat excluding Chrysler, consistent with the Q3 seasonality of the European market and production levels, and EUR0.4 billion for Chrysler due to the shipment of the new Jeep Cherokee.

Both impacts are expected to reverse in Q4.

Investment, scope, and other includes the consolidation of VM Motori in the light of the recent announcement we acquisitioned a 50% stake from GM, completed in October, and investments in [RPS].

Moving to slide 8, the Group continues to pursue its historical commitment to sustainability.

In fact, Fiat launched its first environmental reporting more than 20 years ago and is now at its ninth sustainability report.

Since 2011, sustainability is a joint effort for Fiat and Chrysler.

Conducting our business with sustainability front and center has been rewarded by the confirmation by two of the most internationally recognized sustainability rating indexes, the Dow Jones and the Carbon Disclosure Project.

On slide 9, there are a few examples of our commitment to sustainability.

Moving forward to slide 11, we look at the mass-market brand business by region, starting with NAFTA, where trading conditions were again solid through the quarter.

Shipments for the Group were flat year over year, partially reflecting the lack of the Jeep midsized SUV supplies.

US dealer inventories were steady at 62 days of supply, remaining at relatively low levels.

Regional revenues were up 2%, or 8% in US dollar terms.

The drivers of the trading profit and EBIT walk are shown on slide 12.

EBIT change benefited from minimal volume growth, better car line mix, as well as more retail versus fleet shipments, contributing EUR129 million.

Pricing was also positive, driven by vehicle content enhancements on recent launches, in part reflected in the industrial costs, which increased by about EUR500 million, including key product launches and costs associated to the delay in the commencement of shipments of the new Jeep Cherokee to Q4.

Unfavorable FX translation impacted by nearly EUR30 million.

US industry for Q3, shown on slide 13, was up 9% versus the prior year.

The Group performed substantially in line with the market, posting an 8% increase in sales, with September marketing the 42nd month of year-over-year sales gains.

Retail sales were up 16%, with retail of retail market share up 50 basis points to 10.7%.

The fleet mix reduced from 24% to 18%, our lowest level.

In Canada, Q3 industry was up 6% versus prior year.

Group share stood at 14.3%, mainly driven by the strong performance of the Dodge Dart, Ram light-duty pickups, and Chrysler Town & Country.

Moving now to the LATAM section on page 14, the quarter was characterized by a decline in the overall industry, driven by Brazil and Venezuela, despite growth in Argentina and other countries.

In particular, Brazil experienced a tough comparison with last year, which had benefited from the introduction of the sales tax incentives on IPI late in Q2 2012.

The trend in Venezuela was impacted by political and economic uncertainty, which drove a 24% decline in market demand.

Group shipments were down 13% versus a year ago, with growth in Argentina and other markets unable to counter the decline in Brazil.

Inventories remain stable at one month of supply at quarter end.

Group revenues in the quarter increased 17%, or 3% at constant rates -- decreased 17%, or 3% at constant rate.

The trading profit reduced from EUR341 million to EUR165 million in the quarter, which was impacted also by unfavorable FX impact of EUR30 million.

Trading margin was 6.7%.

Slide 15 shows the drivers behind the operating performance.

The decline in volumes and the less favorable market mix impacted negatively for EUR87 million.

Industrial costs were higher due to inflation impacts on input costs and the less favorable production mix.

Also, the spending related to the Pernambuco project started to weigh on the industrial costs.

Net price was slightly positive thanks to continued disciplined pricing behavior.

Moving to slide 16, the industry for passenger cars and LCVs in Q3 2013 was down 3% to 1.5 million units, mainly as a result of the 10% decrease in Brazil versus last year's fleet; however, up 5% versus Q3 2011.

Group sales in the region declined 15%.

The market share in Brazil was down against an exceptionally strong performance in 2012 when the Group was able to react faster than competition to the increased demand.

Group products continued to perform well, supporting our continued market leadership, at 300 basis points ahead of the nearest competitor in the quarter.

Moving now to APAC on slide 17, regional demand was driven by continued growth in China, partially offset by a weaker Indian market.

Group shipments were up 73%, and revenues were up 50% (sic - see slide 17), primarily driven by Jeep, Chrysler, and Dodge.

Trading profit increased more than 30% to EUR96 million, or an 8% trading margin, with the improvement partially offset by negative impact from FX.

Moving to slide 18, the impact of higher shipments contributed to an improvement of nearly EUR140 million in EBIT.

Increased industrial costs were negatively affected by higher R&D and manufacturing costs related to the new product initiatives and increased volumes, the SG&A increase to support volume growth, and continued regional expansion.

On page 19, Group sales, including JVs, were up 92%, outperforming the regional industry, which grew 7%.

The Group outpaced all markets where it competes, with the exception of Japan, where our sales were in line with market growth.

Performance in China was driven by the Viaggio, the Dodge Journey, and continued strength of the Jeep brand.

The new product lineup launched in India drove sales up 34%.

Turning to page 20, the passenger car segment in EMEA improved slightly in the quarter, showing a reversal in trend after seven quarters of negative performance, although with mixed trends across the region.

The LCV segment also had a similar trend.

Shipments were up 4% overall, with growth driven by a 6% increase in passenger cars.

Inventories remain stable at two months of supply.

Revenues were slightly higher, and trading loss continued the pattern of improvement, being about 30% reduced compared to a year ago.

The EBIT walk for EMEA on page 21 shows positive contributions for all areas except for net pricing, which reflects still difficult trading conditions in the region, representing a EUR30-million headwind in the quarter.

Higher shipments, better mix, and continued push on industrial costs, as well as procurement savings and disciplined SG&A spending, all contributed to the positive -- to the improved performance.

Mass-market brands for EMEA on page 22.

The industry for EU27 + EFTA was up 3%, with UK and Spain leading the increase, while Germany and France were both down 1%, and Italy was down 3%.

Group sales decreased 3% with a share loss in EU27 + EFTA countries, reflecting the performance in Italy as a result of the Group decision not to engage in value-destructive price competition.

Outside Italy, the share remained stable thanks to gains in Spain, France, and the UK.

Slide 23 deals with the business dynamics for the LCV segment.

Industry for the quarter was flat year over year.

Group sales remained stable at 39,000 units.

Share gains in Italy and UK were unable to counter the declines in France due to the timing of the renewal for the Group's fleet contracts and Germany driving to a 30-basis-point share loss in the EU27 + EFTA.

Moving to slide 24, we review the performance of luxury brands.

Ferrari remains committed to the strategic target to maintain 2013 production at the prior year's level to preserve brand exclusivity.

Revenues in the quarter were up 6%, with 12-cylinder models up 72% and 8-cylinders down 21%.

Despite strong demand, shipments in the US were capped to a 4% growth.

The trading profit increased 16% to EUR88 million, posting 150 basis points improvement in trading margin to 16.5%, reflecting better sales mix and contribution from licensing and personalization programs.

Revenues for Maserati were 2.4 times higher than a year ago on the back of nearly 4,000 shipments with the increase driven by a strong performance of the new Quattroporte.

Trading profit came in at EUR43 million, or over 3 times last year's level, with a nearly 10% trading margin 260 basis points higher than Q3 2012.

Maserati's new products are gaining momentum.

The new Quattroporte collected nearly 10,000 orders at the end of September, while the new Ghibli just launched achieved nearly 8,000 orders.

Moving to page 25, the components business as a whole was basically flat year over year with trading profit level, notwithstanding a moderate decline in revenues.

By business, Magneti Marelli had substantially flat revenues but 4% higher at constant rates.

The trading profit stood at EUR29 million with slightly improved trading margin of 2.1%

Teksid revenues were down compared to a year ago due to the decline for the Cast Iron Business, offset by a 16% volume increase for the Aluminum Business.

The trading result reflected the business trend.

Lastly, Comau.

Notwithstanding a decline in revenues, there was a EUR4-million improvement in trading profit, benefiting from the improved performance of its Body Welding operations.

Focusing on business environment by region, starting with NAFTA, on page 27, the Ram brand had another strong performance thanks to significantly refreshed products, resulting in an 18.4% share in the US large pickup segment, up from 13.5% in 2010.

Furthermore, Ram is enlarging its product offering by entering the commercial van segment with the ProMaster, which already achieved 4,000 shipments since launch.

Jeep sales in Q3 were flat in NAFTA, primarily due to the lack of the Liberty/Cherokee sales in 2013.

Cherokee shipments have been delayed to Q4 for the need to update the software calibrations on 9-speed transmissions.

In Q4, the Jeep Grand Cherokee started offering the 3-liter EcoDiesel, the cleanest diesel engine in the full SUV segment.

Moving to page 28, the Brazilian economy is projected to keep growing despite increased uncertainty due to the 2014 elections.

The graph on the left end of the slide shows the historically erratic behavior in the quarterly Brazilian GDP change.

Inflation is under control, and unemployment is forecast to remain at or about its 10-year historic lows.

Consumer confidence, although currently under pressure, is expected to return to normality, and disposable income is expected to continue to grow.

Also important, the overall credit operations in Brazil as a percentage of GDP continued to increase, supporting future development.

Page 29 shows a breakdown of the 25,000 unit sale increase in APAC.

The Fiat brand contributed 12,000 units thanks to the Fiat Viaggio.

The Jeep brand reached its 16th consecutive quarter of growth in the region with a 6,000-unit increase.

And a 5,000-unit increase was contributed by the Dodge Journey.

Slide 30 deals with EMEA.

Taking a closer look at the focus and realignment of the Fiat brand product portfolio in Europe, which continues to yield results.

The Fiat 500 has remained in the top three models in its segment since 2007, and it's currently holding the segment leadership for two consecutive quarters in 2013 in an increasingly competitive "A" segment.

In the quarter, the Fiat 500L achieved leadership in the small MPV segment with a nearly 19% share just 12 months after its introduction.

The new models have now expanded to the lineup with the 500L tracking available throughout in Q3 and the 500L (inaudible) launch in September.

We'll now move to slide 31 to review our expectations for the market demand through the end of 2013.

For NAFTA, we have slightly revised upward the industry outlook for the US market to 15.8 million units.

Cars are projected to grow by around 6% and trucks by 8%.

Canada full year for 2013 industry is expected to be in line with prior year's levels at 1.7 million.

The industry outlook for LATAM has been reduced with demand now expected to perform in line or slightly down with 2012.

In Brazil, the full market is expected to reach 3.6 million units, similar to 2012 and beneath the year-over-year comparison projected for Q4.

Argentina should continue to perform well also in Q4.

The industry outlook for the full year in APAC remains unchanged, partially -- projected to increase around 6%.

For the EU27 + EFTA, the market outlook has been revised up slightly from the prior forecast as a result of improved prospects of passenger cars.

Italy is confirmed at 1.3 million units.

The outlook for the European LCV segment is expected to decline around 5% versus last year's level, with Italy contracting the most among the major markets.

Slide 32 deals with Group shipments expectations for 2013.

NAFTA should grow to around 2.2 million units.

LATAM is expected a similar level to last year, about 1 million units.

APAC should almost double to about 0.2 million units.

EMEA to remain flat versus a year ago at around 1 million units.

Slide 33 deals with the revised guidance for 2013, reflecting the exchange differences.

It has been revised down due to the exchange rate movements through the first nine months of the year.

The revenues are expected at around EUR88 billion, compared to EUR84 billion to EUR88 billion range at current exchange rate.

Trading profit in the EUR3.5 billion to EUR3.8 billion range, compared to EUR3.7 billion to EUR4.2 billion range at current exchange rates.

Net profit around EUR1 billion, and net industrial debt in the EUR7 billion to EUR7.5 billion range.

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

Deidre, please, go ahead.

(Operator Instructions).

Richard Hilgert, Morningstar.

On the industrial costs in NAFTA, I'm assuming that large swing there was mostly attributable to the Cherokee launch, the delay.

Going back over time, I'm looking at quarterly slide decks going back.

And industrial costs have been negative in that region, negative in Brazil, negative in APAC, and, one time, in the first quarter of 2012, they were positive in NAFTA.

But, for EMEA, each quarter, it's been positive.

I'm wondering.

What would it take to turn the negatives on the industrial costs -- ? Aside from the major Cherokee problem in the quarter, what would it take to turn those industrial costs positive for the rest of your operating segments outside of EMEA?

And how does that industrial cost column change as unit volume comes back and we get into a nascent recovery in EMEA?

I think we talk about the individual regions.

So, as we discussed on the Chrysler call, Richard, in response to a similar question you raised, obviously, NAFTA is bearing the brunt of the investments in extra shifts and the inefficiency due to supply chain and the management of the capacity running over 100% utilization.

All those costs are included, predominantly in NAFTA.

And, therefore, that is driving a good piece of the industrial costs.

Another piece, as you mentioned, are the vehicle launches.

And another significant piece also is the extra content that we have on the new vehicles that we've launched in the last 6 to 12 months.

All those factors are impacting industrial costs.

In part, those are being offset by the pricing in NAFTA for the new products but not all of that because of the fact that we're in the launch process of these vehicles.

In Latin America, the negative impact on industrial costs is principally due to inflation, which is a part of the environment in Latin America.

And that is being managed with as much rigor as we have in EMEA in terms of managing costs through world-class manufacturing, et cetera.

But the fact is there is a significant component of inflation in Latin America, which impacts our operations every year.

In terms of Asia-Pacific, we're investing in that region to accompany the volume growth and the new product introductions.

And so, whilst there's been big volume improvements, those need to be financed, if you wish, with investments in the product side.

So I think, going forward, clearly, we have opportunity, in particular on the NAFTA side, as we work through the normalization of the industrial footprint that we've been discussing on the last few calls as the product renewal cycle comes to a more normal cadence and also the supply base gets up to the levels of capacity we need to run at with these new shifts and extra capacity going through the system.

Okay.

About the guidance, the revised guidance being lower than what you've put in for the change column, where you say range at current exchange rates.

Does that mean, then, that the revised guidance is taking into consideration a further negative impact for exchange rates beyond what the current exchange rates are?

Is that why it's lower?

In part.

But, in reality, obviously, we're firming up the guidance also based on our trading performance in the last nine months.

So there is -- there's been -- compared to our original guidance on the Chrysler side, we said EUR3.8 billion at the beginning of the year.

Then we moved to EUR3.5 billion to EUR3.8 billion in June -- EUR3.3 billion to EUR3.8 billion.

So we're being a little more prudent on that guidance, consistent with what we did in Chrysler in June.

The answer to your question is that there's nothing reflected in guidance on the FX side that is not visible year to date.

Does that answer your question?

There is nothing that is forecasted in guidance that suggests that the foreign exchange will shift again in the fourth quarter to change the averages year to date.

Okay.

I guess what I'm getting at is that, on slide 33, for example, you've got under trading profit -- you've got the revised guidance column, and you've got the change column.

In the change column, you've got from EUR4 billion to EUR4.5 billion.

Then you've got the EUR3.7 billion to EUR4.2 billion at the current exchange rate.

But the revised guidance is below what the current exchange rate is.

It's EUR3.5 billion to EUR3.8 billion.

So it looks like you're going down more so than what the currency effect is in your change in the revised guidance.

Do you see?

Yes, Richard.

It's true.

I mean, it reflects some of the trading performance through the first nine months of the year.

Okay.

The revised guidance is our view for the year now.

If you were to go back and look at the change, which reflects the historical guidance adjusted for foreign exchange rate, our current guidance is within the limits of the revised original guidance, which is now adjusted for foreign exchange shifts, which goes back to what I said.

We have not moved guidance because it's within the brackets we originally said we will be achieving, reflecting an assumed exchange rate at the time.

Once I go back and take a look at that -- those two [photo] points of guidance and I adjust them for the shift in foreign exchange, the current guidance that we're giving you is within that range.

So we have moved nothing.

Okay.

And then, last, I just wanted to follow up on the shift over to Maserati product.

You've got the Ghibli that's currently being launched, the SUV that you're working on in the Mirafiori coming up in 2014.

I wondered how those programs are progressing -- on track, ahead of schedule, delayed, where it's at.

Also, on the orders, you've got the large order book that's built up.

I wondered if you could talk a little bit about what your expectations are on the operational ability to get those orders filled.

What's the timing on that being able to happen?

I think that the plant is now running two shifts.

And, given the labor-intensity of the process itself, it is not typical of a traditional installation.

We've always been public with the fact that the nameplate capacity of the plant is between 50,000 and 60,000 units a year they can produce.

So there's nothing that we know that will prevent us from being to cycle the plant and effectively get rid of that backlog in a reasonable timeframe.

These are luxury goods, and so the distribution of these orders across the network has got a lot of built-in leeway in terms of time expectations from the customer base.

It's very, very different from the mass-market.

It's no different than looking at the order book for Ferrari, which, in some cases, is like two years long.

People will wait to get their vehicle.

Maserati's fortunately enough around that category.

Obviously, they're not as -- the timing is not as long.

The indulgence that customers will give Maserati is not as long as they would give to a Ferrari, but it's similar.

And so I see no problem in terms of getting our plant to deliver and effectively clear the backlog.

And you will see -- we'll take a look at that number again at the end of December, and we should measure it against shipments made because, obviously, the objective is to try and keep that backlog as open and as large as possible throughout the life of the product.

So I sincerely hope that we will not see a substantial deterioration of that backlog as of the end of December.

We'll just be able to replenish it with new orders.

I have nothing bad to report on that issue.

I think it will be fine.

And I think it's in line with expectations.

I'm encouraged, by the way, by the profitable performance of Maserati in the third quarter.

I mean, this is a plant that is still sort of going through growing pains in terms of capacity and the launch of two vehicles in relatively short order.

So I think the margin performance is appreciative of -- I think it can do a lot more.

And that was the basis on which we made the investments in the plant.

Okay.

And the launches' status?

The launch status -- both cars are launched, and they're in distribution mode now.

Okay.

And Ghibli is at your volume expectations -- running at your volume expectations now?

I think the order book is.

The production side isn't because (inaudible).

But the orders coming in -- and that's the car, by the way, that I think is probably going to have the widest appeal because of its price positioning and its size.

So we have a lot of hope for the Ghibli.

The Ghibli is certainly receiving some very good reviews both in terms of the specialized press in terms of the customer base.

We'll do a specialty one in China, I think, and in the US.

So we'll see what happens.

Okay.

Great.

Thank you.

Martino De Ambroggi, Equita.

Two issues, one on the industrial side and one on the M&A side.

On the industrial side, focusing on LATAM, if you could, provide us an update on what is your guidance for or target for the current year following Q3 results.

And, still on LATAM, I understand it is not the right moment to ask you anything about next year.

But, ex currency effect, do you believe to be able to recover a lot in terms of operating profitability?

Or do you see something that has structurally changed in LATAM, which can avoid such a recovery scenario?

Let me give you an answer to the second part of your first question.

As Richard mentioned in his comments about Latin America, I think we're living through a period of uncertainty in Brazil, which is very untypical of what we have seen out of Brazil, certainly in the last six to seven years.

And I think it is -- some of it is undoubtedly related to the 2014 election coming on.

History proves to us that, certainly, in the year of elections, conditions are created for markets to -- especially on the financing side -- to try and facilitate purchases.

So I do not expect that the market will deteriorate.

I also don't think that 2014 is going to be -- I think it will be up on 2013, but I do not think that's it's going to be phenomenally higher than current levels.

I don't think anything has happened structurally to the business itself other than -- and I made this comment on the Chrysler call.

I had a chance to spend a week down in Brazil recently, like last week.

And I think that I walked away with one further confirmation of the fact that there is a fundamental shift in the portfolio that needs to be offered to Brazil as the purchasing power of the middle class keeps on improving.

And I think that the investment that we started making in Brazil back in 2010 with the new plant in Pernambuco is an absolute necessary extension of both capabilities and offerings to the Brazilian market.

I think that, when the plant comes on in 2015, it will be hitting the right side of the market because the demand is there.

We have seen encouraging signs of development of the higher-priced vehicles in Brazil.

And I think we need to complement the work that's currently going on in Belo Horizonte, which is going to continue to focus on the "A" and "B" segment in a very significant way.

I'm also encouraged by the work that has been done on the product development side of the "A" and "B" segment.

I think that we'll be able to launch in short order some significant product improvements in the portfolio.

I think we should leave the details of all this for when we get together for our Q1 2014 presentation, where we lay out the product portfolio.

But I do not think the market itself is going to go through a radical change in the foreseeable future.

And I think it's in line with what have always been our expectations for the development of that market.

Okay.

For the current year, it will be--?

In terms of the fourth quarter, it's going to be lower than last year, for sure.

And the second half of this year is going to be lower than the first half, given the trend we've seen in Q3, which (inaudible) basis obviously because the market is a little nervous coming up to the elections next year.

That's clear.

Thank you.

On the M&A issue, without making any reference to the IPO process, I was wondering if there is any step ahead in the negotiation with VEBA for the remaining shares; so, not including what is involved in the IPO process.

And the second part of the question is if you are planning any divestitures in relation to the Chrysler deal that will maybe happen sooner or later.

Thank you.

Let's deal with the easy stuff.

I'm not selling anything; nor do I think we need to do so.

The other -- the answer to your first part of the question.

As I mentioned in my opening remarks, we are now bent on executing the IPO.

It's still my expectation that we'll be able to get it done -- I hope that we can get it done by the end of this year.

So the implications of this is there's nothing in parallel going on with anything.

The horse left the barn.

So let's just keep on trucking.

Okay.

Thank you.

Kristina Church, Barclays.

Two questions from me.

Firstly, I know you can't comment on the SEC document.

But (inaudible) the initial wording in it on one of your new products is a significantly refreshed product.

I was just wondering not in reference to the document but just generally.

What's the cost differential between a brand-new product and a significantly refreshed product?

And, then --

$0.5 billion of capital.

Okay.

Thank you.

And then my second question is -- you've obviously got a very high level of net liquidity right now.

What do you think the normalized level is, cash for ongoing business?

Do you still say it's around 20% of revenues?

Yes.

It's probably 15% to 20% of revenues.

Thank you.

Alberto Villa, Intermonte.

I have a couple of questions.

The first one is on EMEA cost efficiencies.

I was trying to wondering how much of these cost efficiencies you're gaining and that are allowing you to reduce significantly the losses in Europe are structural (inaudible) and so to figure out, in the event of a pickup in demand, how much is the operating leverage or if some of the cost efficiencies would be have to considered as temporary.

So, if you just can give us an idea on that side, it would be helpful.

Look, I think it's very -- Richard made reference to the fact that we have refused to engage in value-destructive -- I think he called them value-destructive pricing practices, which is a very elegant way of describing price bashing in the marketplace.

I think one of the things that we have refused to do is to engage in commercial practices that have two objectives.

One is to effectively remove the brand of any type of value and, secondly, of running pricing in such a way where we price everything on the last marginal unit is being produced and effectively destroying the underlying base of our pricing strategy.

In order to get that done, we have obviously refrained from doing everything which is fundamentally unnecessary in the business.

It is very difficult to tell today if you were to ask me how many of these costs would actually turn back on if the market came back to a buoyant position.

I think some of them will -- some of these savings and some of these differences in practices will stay.

I think you're going to see a significant ramp-up of other costs when the machine goes back on.

And, as I said earlier, I don't think it's a 2013 or 2014 event.

But I think you will see a ramp-up of costs, certainly on the marketing and positioning side of the brands and the distribution side.

They will cost overlap.

But, at that particular point in time, hopefully, pricing will be sufficient to be able to absorb the increase.

But I would not suggest that we have done anything drastic in terms of the removal of costs which are endemic.

Nobody can in an environment which is as plagued as the European market, especially the Italian market, by a lack of volume.

So we're going to be religiously zealous about this in terms of turning the cost structure back on.

But some of these -- it might be probably more than half of the savings will have to come back on at some point in time to justify commercial activity.

Hopefully, we'll be looking at an economic model that's substantially different from the one that we're facing today.

That's helpful.

The second one is just curiosity.

The timing of your presentation of the forecast for the next five years -- many things might happen in the coming weeks and months with the Chrysler stake eventually going public or not and so on.

So I was wondering if that's not something that could impact your forecast on the five-year plan.

If you're right, that's one more justification to hold it at the end of Q1 of next year because, by then, all the smoke will have cleared.

Sure.

Thank you.

(Inaudible), Merrill Lynch.

Just a quick question.

Can you confirm that your CapEx guidance for 2013 is for EUR8 billion?

I hope you said EUR8 billion because, if you said EUR48 billion, the answer is no.

I said EUR8 billion.

It's EUR8 billion.

Okay.

Thank you.

Charles Winston, Redburn Partners.

I just want to go back to talking about Brazil and Latin America, if you don't mind.

I'm surprised about your comments about credit price as a percentage of GDP and talking about that being supportive of growth.

At some point, does that not become a concern?

I was sort of wondering what point that would be.

In other words, credit price as a percentage of GDP historically -- in the recent past, hasn't been all that good for a number of other economies.

Secondly, could you just give us a phasing on the costs of the new plant opening there.

When will we start seeing sort of peak preopening costs?

And just the cost schedule of that ramping through would be useful.

And just finally, I guess, why the comment just on Brazil?

You talked a number of points about the demand side.

The supply side has changed in terms of new entrants, some of them pretty aggressive from South Korea and Japan.

We've moved from a market that's been a net export market to being a net import market.

I'm, again, slightly surprised about your comments saying that you don't think there's anything structurally changed in Brazil when -- forgive me.

I think quite a few things have structurally changed, particularly more on the supply side and the competition side and maybe, necessarily, the demand side.

But I would perhaps just be interested, really, in your comments and thoughts on that.

Thank you.

There's no denying that we have seen new entrants in the Brazilian market, and it's something that we've always acknowledged as being one of our forecast assumptions in looking at market share and performance of our Latin American business.

What you describe as aggressive from new entrants in the marketplace we can debate as to whether we think that the behavior of the new entrants is unnecessarily aggressive.

I think that, when you look at what I call the established three top players in Brazil, which is ourselves, Volkswagen, and General Motors, we have -- the collection of the three have a long history of presence in Brazil.

And, when you look at capacity within those systems, there's not a single doubt that there's marginal capacity left in our competitors.

And there's not a single doubt in my mind that we have zero marginal capacity left in ours.

And so the issue that we face about how to develop our Brazilian activity really had to do with what we did in terms of the product portfolio and whether we continue to focus on what has been the historical strength of Fiat in that market, which is in the "A" and "B" segment.

It has been the heart of the success of the brand going back to the 1970s.

And I think that the thing that has changed is that the volume assumptions that we've got in front of us will eventually deliver volumes around the 4.5 million mark, which is a number that I've talked about in the past and which I think has been delayed in terms of delivery.

But I think it's certainly possible within the next five or six years.

The problem with the 4.5 million number, even if I'm wrong in terms of overall size -- if it's anything over 4 million -- is what is that composition of the 4 million, and what areas of the market could Fiat in its present configuration play in.

And the answer is that it can't because the market is developing in a way that effectively has overrun the present architectural capabilities of our plant in Belo Horizonte.

And so, in our view, we have to create the alternative.

And we have to defocus not necessarily from a profit standpoint, but we have to defocus a concentration on the "A" and "B" segment by creating alternatives in the higher end.

And I think the plant in Pernambuco, which, hopefully, you will see in 2014, is an indication of the way in which the market itself, I think, will shift from an offering standpoint.

The other thing that you need to realize is that, when you look at the historical numbers of the performance of Fiat in Brazil and you compare them to the relevant competitor class, one of the biggest safeguards that our activities have had against the competitor class is the cost structure of what we run in Belo Horizonte.

And we have historically always run these businesses at a significant spread to the best-available competitor class.

And, to the extent that a market is efficient in terms of product and offerings, even in the mass-market side, you're going to see -- whatever shift you're going to see in margins in our business has got a consequential margin shift which is almost a scale shift onto the competitor class.

And so, if I lose -- if I go from double-digit margins to single-digit, that shift is going to be reflected basis point by basis point to the margins of others.

In an equilibrium environment, that will happen.

And I've seen nothing in terms of what is available in the marketplace from new entrants or the current, established producers in Brazil that will suggest that the Fiat will lose that advantage against the competitor class.

The most significant bet that we've taken, and it's not inconsequential and it's undoubtedly been helped by the easy -- by what you call relatively unhealthy financing arrangements, which I don't think are necessarily true because 85% of the investment in Pernambuco is effectively being financed by -- through a set of government-arranged financing structures, which, together with a set of tax incentives, have made the payback of the investment probably the most reasonable payback that I've ever seen in my career in this business of an investment of that size.

So the bet that we've taken is that the market will develop in that area and that we'll have sufficient volumes to try and deal with that demand.

I am not as negative as some people are on what the mid- to long-term performance of Brazil ultimately is going to be.

We're going through live through periods of volatility as some of the political uncertainties in Brazil crystallize and they get worked away by the electoral process.

But, fundamentally, the underlying economics are in good shape.

And I would not read too much on this availability of credit on the consumer side as being the driver of growth.

It is no different than the kind of availability that is present in US market in an efficient environment today.

That is what is fundamentally driving a lot of the consumer purchases in the US because of low interest rates.

So I don't overbill that case by suggesting that the market has been dragged or induced into unnecessary purchases because, if that was true, then the margin retention for the producers would be a lot more squeezed than it is today.

Richard may have some information on the costs of the project that he's willing to share.

I don't know whether he has or not.

Charles, the timing of the costs will be through 2014 and beginning of 2015 as we train, obviously, the new workforce that we need to have in place for the launch of the first vehicle in 2015.

I think we can give you a bit more guidance around the entity of those costs when we meet in the beginning of next year because they'll be weighted towards the second half of next year and the first half of 2015.

Okay.

Clear.

Thank you for that.

Stephen Reitman, Societe Generale.

Two questions.

Comparing the order intake in Maserati, looking at the H1 presentation and this latest nine months or Q3 results; particularly, first of all, with the Quattroporte, I think it looks like we've gone from around 8,000 units since launch, which was the figure given for, I guess, end of June, to 9,900 units.

How is that in line with your plans?

And, similarly, with the Ghibli, it was over 2,000 orders, I think, at the end of June and 7,900 units at the end of September.

How does that compare to your annual production sales targets on that vehicle?

And, secondly, looking at Fiat in the United States, there was quite a sharp contraction on the 500 in September.

You do talk about you've had a lot of consecutive month-over-month growth there.

You've got a 500L there, but the brand is still down.

What are you telling your dealers about what is coming up?

And what is their profitability looking like (inaudible) specifically on Fiat?

Thank you.

For the year, we're looking at Maserati volumes -- I think we're looking at a number around 15,000 -- just north of 15,000 units.

And I think the order intake that you're talking about is consistent with continued growth on that number going into 2014.

I think, to some extent, we're going into new territory for the brand, so we will see in the next three months how the Ghibli gets received in the marketplace.

But, obviously, the early indications are very positive given the order intake.

And I would expect, by the way, when we get together for our analyst call -- analyst meeting in Q1 of 2014 to take you through a more detailed view of Maserati and volume ambitions not necessarily on a calendarized basis but in terms of what the brand can do at maturity, which is probably about three years away from today.

Understood.

On the Fiat side -- look, we have -- when we launched the 500L in the US, there was not a single doubt in our mind that we would be somehow impacting on the 500 because of the larger size of the vehicle and the fact that it has a number of attributes that the original 500 does not have.

What we have been telling the American dealers, and I think it will be confirmed by Jason Stoicevich, who's the head of the Fiat brand in the US, is that there's a car coming out of the Italian operations in 2014 which will augment the offerings.

There's the 500X, which is the CUV for Fiat that will be coming to the US markets by the second half of 2014.

And we will continue to build on that success -- the success of the 500 and the expansion of the product ranges into the L and into the X.

There's also a lot of work that's going on on the inside of Fiat.

We'll be in a position, I think, to outline this later.

But with the success, effectively, what we're doing to the 500 to keep the product alive in a significant way in the global market --

The issue with the Fiat dealers -- I made the comment.

I think that it was clear when we started this franchising activity back a couple of years ago that one of the things that we wanted to see is sort of the best of the best perform with the Fiat brand so that, when we approached the US with the Alfa introduction subject to Fiat and Chrysler resolving the distribution terms of that agreement, that the best-performing Fiat dealers will be the ones that will be entitled to have a crack at the Alfa Romeo distribution.

And that's something that, I think, given what I said earlier about what we would like to talk to you about in Q1 of 2014 is best reserved for that time.

But I think our intentions are unchanged from the way in which we approach the distribution network in the US.

I think we're confirming today that, subject to Fiat and Chrysler resolving issues relating to distribution of Alfa, that that strategy will be executed throughout 2014 in anticipation of products hitting the US shores in 2015.

And, given the fact that the -- as you mentioned, the 500L is maybe a car that, on the face of it, is more suited in terms of size to the American consumer, do you predict that the 500L will eventually outsell the 500?

Difficult to tell.

Certainly, our internal expectations for 2013 and 2014 do not make that call.

Understood.

Thank you.

(Operator Instructions).

Jochen Gehrke, Deutsche Bank.

Just two quick ones, one coming back on Brazil.

It's just a quarter.

But, in response to the Q3 reportings, it looks as if the American competitors of yours have performed significantly better in LATAM.

Do you see anything in the market -- ?

I don't know about that because I haven't done the translation into euros.

I saw the numbers flash on my screen this morning.

I'm not sure (inaudible).

At least in terms of GAAP.

I'm not sure that we're materially off, number one.

And, secondly, I don't think that they have the startup costs associated with a new plant in Pernambuco.

But, subject to those adjustments, even if we assume that we performed even-Steven, it is an area of concern because I think it certainly blows a hole in my theory about the distance in basis points and margins between ourselves and the next guy.

So we're going to study those numbers very, very carefully as soon as this call is over because we need to understand how that happened.

Okay.

And jumping on to the second part, I think now it's been a number of years where -- and not just on a standalone basis and appreciating the one-time aspects of your debt increase.

But Fiat on a relative basis against most of your global competitors is one of the most leveraged entities.

And, while you're struggling to generate cash flow, pretty much most of your competitors are currently higher cash generators and are therefore much more in the position to continue to invest in the business and even in areas where, from at least your perspective, it doesn't make a ton of sense, like in EMEA.

Why should we not be afraid that, if this gap continues to widen, that, with the current net debt position of Fiat, your competitiveness is getting structurally impaired?

For one very simple reason.

The amount that's left in terms of the investments that you're making reference to post decision to postpone investments in EMEA -- the number is, at best, marginal.

So I really wouldn't worry about impairing anything, unless you're suggesting that the strategy of moving upscale in Maserati and the impending expansion into the premium brand with Alfa is born -- is effectively born with a structural flaw and therefore would require a write-down thereafter.

I'm not sure that we're talking about significant impairment of any assets that are left over.

You got to remember that the most significant investment that we've made in the last five years on the European side has been the introduction of the Panda (inaudible).

And that brand is performing well.

We have refused to invest and renew any of the other product lines in our midst because of the inability to recover, never mind the cost of capital, but just recovering capital exactly for the point that you've raised of avoiding impairment charges, which would have become inevitable going forward.

The general comment that you've made about us being excessively leveraged -- we can have a lot of discussion about what the proper capital structure is for Fiat compared to our competitors.

There's also not a single doubt that we do have a large amount of debt, which is also coupled with a large amount of liquidity, which is unusual for somebody in our position.

We were born with a different capital structure than most others.

And I agree with you that we have not generated sufficient cash out of the current business to try and -- out of the mass-market business to try and justify having an optimistic view of the future of Fiat's involvement in the mass-market.

That is a view that I have, by the way, across all the competitors in the mass-market side.

It's not just a Fiat view, which is the reason why we have slowly but surely kept on defocusing the mass-market from the EMEA side of operations and tried to build an industrial strategy that matches the brand development of two of the brands within the fold, which have gone, so far, unexploited and which are capable of internationalization.

That process has started, and it's, by far, not complete.

And I think it will be incredibly premature and undoubtedly unwise to start forecasting impairment of capital yet to be committed in view of doubts that you may have about the route to success of the strategy of repositioning the Fiat as a Group -- all of Fiat as a Group.

So I would wait before I sort of express the final view on this, especially in view of the numbers that have been released by Maserati as an initial indication of the relative success of the strategy that we've outlined.

But it doesn't take away from your fundamental contention about the fact that we are levered more than most.

But the difference, I think, between us and anybody else who has played historically in the mass-market is it's something that we're trying to leave behind because we realize that it's an incredibly unrewarding activity.

It's unrewarding in terms of not just pricing; it's unrewarding in terms of recovering capital and the cost of capital associated with that commitment.

We cannot do this anymore.

And so I won't, which is the reason why we've attracted a sufficient amount of criticism from, I think, spectators and other people alike on the wisdom of this strategy.

The reality is that we have to protect the house.

And the only way to protect the house is to move the sandbox and go play somewhere else.

The sandbox today in Europe is completely overcrowded.

And I have seen nothing, and I repeat this categorically, I've seen nothing in terms of industry movements in Europe that would suggest any level of optimism of [outperformance] in 2013 or 2014, regardless of what you're hearing from anybody else.

We live in the marketplace every day.

Some of the pricing practices that I've seen across Europe are things that I've never, ever seen since I came here in 2004.

But this cannot continue.

Something's going to have to give, and it's not going to be Fiat.

All right.

Thank you.

Philippe Houchois, UBS.

Two questions from me.

Can you clarify?

You're telling us IPO this year.

The process is underway.

That's fine.

Can you confirm, though, your preferred scenario is that you end up owning 100% of Chrysler, and, therefore, you are preparing to, I think, preempt an IPO [in the end] and, in fact, your process is a price discovery mechanism in your mind.

Has this changed or not?

I will never make the second statement in view of the first part of your statement, which confirms my intention to take this thing public.

Fair enough.

The other question I have is, if I follow up on Jochen's question, finding more leverage (inaudible), et cetera, in the past, (inaudible) before you and under you, the way Fiat de-levers is by -- with the negative working capital requirements.

In effect, it's like an iceberg.

You reduce the debt, but you massively increase the debt to suppliers.

So you basically transfer debt from one side to the other.

And you're not the only one like this.

Peugeot and Renault are in the same situation.

So, at one point, something's got to give, and you need to de-lever some selling assets or raising capital in the same way that Renault has.

Hold on to your horses for a moment.

Welcome to the car business, to begin with.

A substantial portion of the financing structure of any carmaker is the ability to continue to work off a working capital position which is fundamentally in steady-state markets -- a fundamental element of the capital structure.

It's the way in which the business runs, which, by the way, also has the negative consequences of maintaining large amounts of liquidity around to try and deal with the boomerang when the volumes drop, issue number one.

Issue number two, the boomerang can only happen if you have a reversal of the demand function effectively start shutting down the production capacity of the system.

I know of nothing else that I could have done to shut down the production capacity of the system in anticipation of lousy market conditions.

A lot of our production facilities today are running at historical lows.

In the event of -- even in the case of the Panda, which is still the most successful car in the segment, the volumes are not where they need to be, given where demand is across Europe.

The (inaudible) plant is in the process of being reconverted now to try and deal with both the Jeep and the Fiat CUV that are coming to market in 2013.

We have the Cassino plant, which no commitments have been made.

And we have the Mirafiori plant, which is run seldom because it's only making the Alfa Romeo MiTo.

So it's not as if I've got large volumes coming through the machine that are creating negative working capital position supporting my capital structure.

I cannot get to your answer because I've done all the pain unto myself that I already do.

I can't do anymore.

I think I could slash my wrist, but it would be unhelpful vis-a-vis the capital structure.

I'm not the guy that you should really worry about.

Anybody who's now running an industrial machine that may have to stop is going to have an incredible boomerang on the other side that will be incredibly painful.

But it's not the EMEA operations of Fiat that will suffer that fate.

I don't disagree with you at all.

And, just looking at the (inaudible).

You've been more conscious about excess capital spending than anybody else in the industry, and that's good.

At the same time, you've been vocal about excess capacity.

You've talked about it more than anybody else publicly, et cetera.

Today, you have the worst excess capacity problem in Europe, and you are doing the least about it compared to even Peugeot, GM, Renault, and Ford.

Philippe, let me tell you something.

When you have $100 worth of available demand and you've got $200 worth of available supply, the only thing I could have done to worsen the situation is by turning on additional capacity to make the number larger than $200.

So, if I played the game that you're suggesting, and I've been in the market like everybody else has, and had invested equally to the competitors and I present the products fighting for the same market for which the current market participants are having a phenomenal difficulty in trying to acquire, we would have only made the situation worse.

My investment, which, by the way, has been redirected and not postponed, has selected a strategy whereby the mass-market presence of Fiat is going to get seriously, sequentially, and in a very disciplined way reduced over time.

Whatever capital I need to spend, I need to spend on premium brand for which I have a higher level of certainty that they will have commercial success at a price.

It cannot be done by continuing to repeat the historical mistakes that we've made here, and I will not allow Fiat to do it.

I just won't.

So, regardless of what everybody else thinks about whether we have -- we're spending EUR8 billion worth of capital across the organization.

That is not chicken money.

On the one side, I keep on being a fact of overspending in the US, and, on the other side, I keep on being told that I'm underspending in Europe.

I got it.

But the investment to me is absolutely fungible, and it's absolutely transferable.

I don't particularly care where I invest in the architecture, as long as I invest in it.

Once I have that architecture established and installed, it can be replicated at a fraction of the cost anywhere else.

The issue is who can afford that installation.

Is it EMEA or is it some other part of the Fiat world that can carry the burden?

And, if the answer is that it's some other part of the Fiat world, let the other part carry it.

But I cannot keep on fooling myself that Europe one day is going to wake up and make money at the other side of the channel.

It won't.

And, by the way, just to remind you, last year, four of the large European mass-marketers, including Fiat, lost $8 billion at operating level in running these operations.

And I don't know of an industry other than banking that can take that kind of punishment and survive it in the long term.

I don't think I'm suggesting what you think I'm suggesting.

I'm just trying to draw you somewhere you probably don't want to go to.

It's the fact that you have not addressed the excess capacity you've inherited in Europe.

And, until you do so --

Philippe, listen to me.

The question is -- one day when we've got time, I'll tell you the joke about Harold and the Lord.

The question is -- why me?

But others are doing --

Ask yourself the question.

The inherent problem with overcapacity in the European context is the first-mover disadvantage.

The minute that you shut down, you benefit everybody else, which is the reason why I've been calling for coordinated activity across Europe to avoid any single company having to bear the burden of an industry restructuring which is European-wide.

So now you've put your bloody finger on the bloody problem again.

And I'm not the guy who was opposed to this.

As you well know, the opposition has come from another country in a very consistent way about this being addressed.

And I'm sitting here as the only automaker in Italy representing a relatively feeble force across the European context.

The recent activity on the CO2 issue and the dominance of the German coalition (inaudible) tells you exactly where the power sits in the running of the businesses across Europe.

We have nothing to say.

And I'm not going to be the facilitator of the strengthening of that position out of Germany.

I will not be the guy.

We will not be shutting down plants to facilitate the domination of the European car market by Germany.

I will not do it.

And so we will shift our production capacity in accordance with the premium brand strategy, and we will utilize what we have in defense of what we have.

But, unless Europe stands up and takes this issue and makes it its issue and makes it a European issue, the solution is not going to be readily available.

And it's not going to be readily available out of this house, never.

Okay.

Thank you.

That' very clear.

You haven't lost your fighting spirit.

That's for sure.

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

Thank you.

Thank you, Deidra.

We would like to thank everyone for joining us today.

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

Have a good one.

Bye.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.