Stellantis NV (STLA) 2013 Q4 法說會逐字稿

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

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

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

Mr. Auriemma, please, go ahead, sir.

Thank you, Barbara.

Good afternoon, or good morning to you all, and welcome to Fiat Webcasting conference call.

As announced earlier this week, we are conducting a combined event for the review about Fiat Group and Chrysler Group fourth quarter and full year 2013 results.

The news flow has been pretty intense today.

All related press release, together with the conference call charts, are available to you on the Fiat and company Website.

As usual, today's call will be hosted by the Chief Executive Officer, 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 announced earlier today that it would market debt facilities to refinance the note held by the VEBA.

Because this will be private offering, there is a strict limit under the SEC rules on what Chrysler or Fiat can say about the proposed transaction on this call.

So we will not be going into details or answering questions on the offering on this call.

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

I'm going to try and limit my comments to the first two or three pages of this deck, and I'll get Richard to do all the heavy lifting through the details.

But slide number 3 deals with the conclusion of a saga that started back in 2009.

All of you know that, on January 1, we announced the acquisition of the remaining piece of equity that was sitting with the VEBA, and we were able to close the transaction mid month.

We paid $3.65 billion for this acquisition, and Chrysler undertook a series of obligations in exchange for promises from the UAW to carry out and extend the application of WCM.

But I think, from a structural standpoint, it completed a project that saw its beginning back in June of 2009 and on which we have worked pretty diligently over the last four and a half years to try and bring together these two car companies.

I am delighted, to be perfectly honest, that we were able to close the deal on January 1 more than for anything else because it removed all the complexity of trying to run two separate organizations with two separate governance systems that made decision-making, especially allocation of potential opportunities between the two houses, increasingly difficult.

As a result of the completion of that step, we were able to reorganize Fiat.

We've announced today, and the details are contained on page 4, that there will be a merger between a company called Fiat Chrysler Automobiles N.V. and Fiat S.p.

A. Fiat Chrysler Automobiles will be incorporated in The Netherlands.

They will be tax resident in the UK.

They will have listings in both New York and in Milan.

It will have as part of its structure a loyalty scheme associated with the voting rights of the shares, similar to what we introduced in C&H Industrial last year.

And, hopefully, we'll be able to close the transaction before the end of the year.

We've allowed for the exercise of dissent rights to EUR0.5 billion.

I think it's going to be highly unlikely that anybody will exercise them.

Obviously, they have the freedom to do so, but I think we've created a basket that's sufficiently large to deal with the potential disinterest of some shareholders in continuing to stay on.

In the typical style of the south, we'll try and get this done as quickly as we can.

We have the end of 2014 here.

I think it will be great.

And I make this comment to Palmer, who's sitting next to me.

Hopefully, I'd like to replicate the listing in New York as of October 1 of this year.

We'll see whether we can get it done.

It's a relatively large undertaking.

But I think we have done a lot of work, certainly in connection with the IPO of Chrysler, which was -- thank God it was stopped early enough.

And so that should come in handy now in the preparation of the SEC filing documents, the documents that are required to be filed with the SEC in 2014.

Page 5 has got our new logo.

I think, if you're interested in finding out more about this application, I think we do have a short film on our Website that describes how the potential fine-tuning of the logo -- it certainly is a break with the traditional, historical symbols that have been associated with both companies.

And it was designed, effectively, to provide a linkage between the two houses as opposed to the retention of one organization over the other.

We just completed two days of Group executive council meetings.

I feel incredibly comfortable about the fact that the team now is working in unison.

We do have, I think, the leadership skills now to try and manage the seventh-largest automaker in the world.

A couple of words about 2013, on page 6.

We're relatively happy with the performance of the Group for the year.

I can spend a lot of time trying to tell you why we didn't make all the numbers we were supposed to make.

I think we were slightly short, about 50,000 cars short of a number that would have allowed us to certainly exceed Chrysler guidance.

And that's due to a number of technical reasons, some of which you're aware of, including the delay in the launch of the Jeep Cherokee, which came in the market in October of this year; fundamentally, almost four months late when we originally envisioned launch date.

Having said this, Jeep has had a tremendous year.

We've had 732,000 cars sold globally.

The target this year is to hit 1 million, which is nearly a 50% improvement over 2013.

And this is on the back of a full year of production of the Cherokee and the launch of the smaller Jeep, both in Europe and in the US, out of our Melfi plant here in Italy.

I think one of the things that hopefully will become evident as Richard takes you through the deck is that the first encouraging signs of the potential of the premium strategy have now become visible.

You can see in performance in Q4 of Maserati, which has had an outstanding quarter.

We'll have to see whether they can maintain the space and, certainly, this type of operating margin performance for the rest of 2014.

But, for anybody who's sort of playing historical records here, Maserati had higher operating margins than Ferrari in the fourth quarter of 2013.

So it is a good indication of the fact that, if we execute well on our plan, that we'll be able to bring up a big portion of our product portfolio to the type of margin generation that we have been talking about now for a while and which, hopefully, will be visible as we present our plan in May of this year, the multiyear plan that we'll be presenting to the markets.

In terms of guidance for 2014, I think we've been cautious after numerous discussions with Richard Palmer about what is really safe.

I think he feels safe with the numbers that he's giving you.

Revenues were over EUR93 billion, a trading profit of about EUR3.6 billion to EUR4 billion, and a net industrial debt of potentially below EUR10 billion up to about EUR10.3 billion.

We understand -- and I'll make this comment, and I'm sure there'll be questions on this issue in the Q&A.

We understand the notion of leverage and the fact that we are carrying a substantial amount of debt on our books.

I caution you on two things.

One is that, obviously, what's in that number is also this VEBA note which we've issued a press release on and which we intend to refinance.

And there will be a much longer date of maturity than -- certainly, not longer than the VEBA note but certainly in line with the maturities of the previous debt offerings that Chrysler issued in the spring of 2011.

But the other thing is that there's a portion of this debt which is structural and which relates to the buildup of our facility in Pernambuco, which has got -- it's associated with state financing and, therefore, has much longer maturities and an interest profile which is completely different from what would be otherwise available in the marketplace.

So part of this debt is benign debt.

It's not offensive, and it's not going to be sitting on our shoulders in terms of other immediate repayment or in terms of onerous interest rates.

Having said this, we understand that, on a comparable basis, these numbers do look relatively high.

I made a commitment, and I made this point relatively clear, even when I was down at the Detroit Auto Show, that we will be looking at our capital structure post migration into Holland, and we will be looking for ways in which we could strengthen our capital base in a way which reflects the true, underlying potential of the equity going forward.

And so we would be doing nothing that we consider to be value destructive in terms of a straight rights issue or a straight issuance of equity because we think that current levels do not reflect what ultimately would be the value of equity going forward for FCA.

And, on that note, I pass it on to Richard, who's going to enlighten you with the details of the 2013 performance.

So, moving on to slide 7, Group revenues were up 3%, or 7% at constant exchange, to EUR87 billion.

The growth in NAFTA and APAC more than offset decreases in EMEA and LATAM.

There was a strong performance from luxury brands, with Maserati more than doubling over the prior year.

And our components businesses were flat in terms of revenue in nominal terms.

Group trading profit was down 4% but, net of unfavorable currency translation, was up 1% versus prior year.

That also included EUR300 million in higher R&D amortization due to the launch of new products, principally in NAFTA.

The EBIT result for the Group in 2013 included EUR0.5 billion in net unusual charges, which we will review in a few minutes.

Net industrial debt at yearend was EUR6.6 billion.

Net of equity investments, the cash flow during the year was a positive EUR0.1 billion.

The strong Q4 cash flow generation drove net industrial debt down EUR1.7 billion since September.

Liquidity remained strong at nearly EUR23 billion, a EUR2-billion increase over December 2012.

And, for Fiat, ex Chrysler, total available liquidity was EUR12 billion, for Chrysler EUR10.6 billion.

The Group net income was nearly EUR2 billion, of which EUR900 million was attributed down into the parent.

Income taxes were positive EUR943 million, including a positive one-off of EUR1.5 billion in net deferred tax assets following the release of valuation allowances related to Chrysler.

Net of the positive one-offs, taxes were a cost of EUR557 million, of which EUR240 million for Fiat, excluding Chrysler.

Excluding special items, Group net income was EUR943 million for the year, down from EUR1.1 billion last year, due to the reduction in trading profit.

Page 8. EBIT for 2013 was EUR3 billion versus EUR3.34 billion in 2012.

Net of unusual items, EBIT was EUR3.5 billion versus EUR3.6 last year.

Regionally, EBIT declined in NAFTA due to launch delays and industrial costs, as well as increased R&D amortization.

And, in LATAM, the decrease was due to the more difficult trading conditions in the market, while EBIT improved in APAC and in EMEA, both regions showing a year-over-year improvement in all quarters for 2013 net of unusuals.

EBIT rose significantly for the luxury brands, driven by Maserati on the strength of the new models introduced during the year.

Moving to slide 9, as far as unusual items for the year are concerned, net unusual expense of EUR519 million included EUR390 million in asset write-downs, mainly related to the rationalization of architectures associated with the new product strategy, particularly for the Alfa Romeo, Maserati, and Fiat brands, as well as charges related to asset impairments for the cast iron business in Teksid.

In addition, there was a EUR56-million write-off of the book value of the equity recapture agreement right, considering the agreement closed in January 2014 to purchase the remaining minority stake in Chrysler from the VEBA trust.

Other unusual charges in the year were the EUR115-million related to the June 2013 voluntary safety recall in NAFTA, booked in Q2, and the EUR43-million charge related to the February 2013 devaluations of Venezuelan bolivar, offset by the EUR166-million gain following amendments to Chrysler's US and Canadian salary-defined pension schemes.

For 2012, there was net unusual expense of EUR244 million.

Going forward, these unusual items will have a cash impact of about EUR100 million.

Moving to slide 10, a few items on the P&L.

Financial charges for the year were just short of EUR2 billion, EUR79 million higher than last year.

The increase is mainly related to the higher average net debt level, net of favorable re-pricing of Chrysler credit facilities.

Slide 11 shows the components of the EUR1.1-billion increase in net industrial debt to EUR6.6 billion 2013 yearend.

Chrysler ended the year in a net cash position of EUR0.2 billion.

Operating cash flow for the year at Group level was slightly positive, driven by industrial EBITDA, together with a positive change in working capital, which more than offset costs for financial charges and taxes and higher CapEx.

CapEx was EUR3.9 billion for Fiat, excluding Chrysler, and EUR3.6 billion for Chrysler.

Change in working capital is positive for both Fiat ex Chrysler and Chrysler.

Moving to slide 12, the pension and OPEB status at yearend.

Chrysler reduced its deficits by about EUR3 billion compared to 2012, driven by a higher discount rate, moving from just short of 4% to 4.7% on the pension scheme and 4.1% to 4.9% on the OPEB liabilities and also due to contributions in the year of EUR500 million on the pension plan, together with asset returns of about 7%.

Moving to slide 13, this deals with today's announcement that Chrysler plans to refinance the existing VEBA trust note in the capital markets.

The total due under the VEBA note is EUR4.7 billion of principal and EUR0.3 billion of accrued interest.

There is no penalty for early repayment, while both principal and accrued interest are tax deductible upon repayment.

The refinancing will be composed of up to EUR2 billion in secured loan facilities, term loan B, and up to EUR3 billion of secured senior notes, which are going to be add-ons to the existing notes maturing in 2019 and 2020/2021.

The transaction will bring three main, key benefits -- immediate, positive impact on earnings with pretax interest expense benefit of approximately EUR130 million per year; improvement in projected cash flows, together with the tax deductions of about EUR2.5 billion over the next three years as a result of the tax shield and the interest costs; and terming out of principal payments.

And, in addition, the transaction results in no additional debt at a Chrysler or Fiat level.

Moving to slide 15, reviewing the performance by region, in NAFTA, the industry remained strong throughout the year, supporting a robust level of sales for the Group.

Revenues were up 5%, or 9% in US dollar terms on higher shipments.

Full year trading profit was down 9%, or 6% on a currency-adjusted basis.

Trading margin for the year was 4.8%, compared to 5.6% a year ago.

Full year shipments were up 6% versus prior year, primarily reflecting increased shipments of Jeeps and Ram 1500 pickups and also Ram heavy duties.

Group vehicle sales in the region were up 8% to 2.1 million vehicles, outperforming both the US and Canadian industry trends.

US dealer inventory was at 79 days' supply at yearend; Q4 exit reflecting the seasonal increase in US inventory, plus effects of the launch of the all-new Jeep Cherokee and the build-out of the 2014 model year, Chrysler 200 and Dodge Avenger, in preparation for the launch of the new Chrysler 200 in the first half of next year.

Slide 16 shows the walk of EBIT for NAFTA.

The EBIT was impacted by unfavorable FX of about EUR80 million.

Among the positives, we recorded higher volumes and positive mix on the back of higher retail volumes and lower fleet mix and positive pricing due to the new vehicle launches.

Instead, the adverse impact in industrial cost was due to the vehicle content enhancements on those new launches, along with higher manufacturing launch costs, particularly in the first half, and higher depreciation and amortization, partially offset by purchasing savings.

SG&A investments increased due to increased advertising spending.

Page 17.

The US industry was up 7% versus prior year, with cars up 4% and truck up 10%.

Group sales outperformed the market with a 9% growth, resulting in a full year share increase of 20 basis points.

December sales reflected the 45th consecutive month of year-over-year sales gains and the strongest annual sale since 2007.

In Canada, industry recorded the highest full year levels of sales ever, up 4% versus prior year, with the Group outperforming the market with a 40-basis-point share gain to 14.6%.

In 2013, we recorded the best full year sales in Canada since 2000.

In LATAM, on page 18, the industry in the LATAM region was up 1.3% for the full year, with Argentina at a historical peak and Brazil at similar levels as the prior year.

Group revenues declined 10% year over year.

Excluding the impact of unfavorable currency, they were up 1%.

Trading profit reduced 41%, or 33% at constant exchange rates, with the decline mainly attributable to the Brazilian operations due to input cost inflation, also due to the weakening of the real, affecting prices of imported materials, unfavorable production mix and lower volumes as well as initial startup costs for the Pernambuco plant.

Increased manufacturing efficiencies and product mix only partially offset the above headwinds.

Venezuela profit was down, mainly due to reduced volumes and negative mix, as foreign currency restrictions limited supply levels.

The other LATAM markets improved.

Trading margin was at 6.2% for the year.

EBIT was down and reflected the reduced contribution from trading profit, as well as net unusual charges; namely, the devaluation of the Venezuelan bolivar, and asset impairments due to the streamlining of architectures and models associated with the region's refocused product strategy going forward.

Shipments decreased 3% to 950,000 units, down 7% in Brazil, when the Group reacted promptly to increased demand last year following the implementation of the IPI incentives.

Argentina shipped 111,000 units, up 32%.

The other LATAM markets were up 7%.

Slide 19 shows the walk from 2012 to 2013 EBIT.

The decline for the region reflected lower trading profit and the impact from the net unusual charges mentioned earlier.

The performance in the LATAM region was also impacted by EUR85 million of unfavorable foreign exchange translation.

The operating performance was negatively impacted by nearly EUR260 million of higher industrial costs due to labor and input cost inflation and less favorable production mix between Argentina and Brazil, as well as startup costs for the plant in the Pernambuco state.

Negative volume and less favorable market mix impacted for a further EUR100 million.

SG&A, driven by new advertising campaigns in Brazil, was also negative.

Pricing was positive but not enough to cover the inflationary increases on the cost side.

Moving to slide 20, the market demand in Brazil declined 1.5% compared to a year ago.

The Group retained its leadership in the Brazilian market for the 12th year, with an overall share of 21.5%.

The continued success of the Palio and Uno supported to take a combined 25% share in the A/B segment.

Siena and Grand Siena recorded a combined 25% year-over-year sales increase, and the Strada was up 5%, boosted by the contribution from refreshed single- and double-cab models launched in Q4.

In Argentina, Group sales for the year were up 30%, resulting in a share gain of about 140 basis points.

As per the recent announcement by the Brazilian government, the reduced IPI tax rates will gradually return to pre-incentive levels during 2014.

An increase from 1 to 2 percentage points, depending by engine, displacement, fuel, and the vehicle type occurred on January 1, but a further and last increase is expected on July 1.

Moving now to APAC on slide 21, the region was characterized by strong, overall demand in the year, driven by growth in China and in Australia, while India and South Korea were down versus the prior year.

The 48% increase in Group revenues was primarily driven by higher shipments for the Jeep, Fiat, and Dodge brands.

EBIT performance for the full year reflected a 38% improvement in the trading profit, partly offset by startup costs incurred by the Chinese joint venture.

Retail sales, including JVs, were up 73% to 200,000 vehicles in the region.

By brand, Jeep was up 26% over prior year, Fiat was at five times last year's level, driven by the Fiat Viaggio in China, while the Dodge Journey became the Group's fourth-best-selling vehicle.

Strong sales momentum continued in Q4, up 79% versus a year ago, to 62,000 vehicles.

Moving to slide 22, the EBIT growth for APAC was driven by the positive impact of higher volumes and better mix, mainly on the back of higher penetration of SUVs.

Pricing was impacted by a more competitive environment, particularly in China.

Industrial costs increased due to higher R&D and fixed manufacturing costs from new Group product initiatives and higher volumes.

The SG&A increased to support volume growth and increased continual regional expansion.

Other primarily reflects unfavorable FX impact and higher losses of the Chinese operations, including startup costs for the launch of Fiat Viaggio and Ottimo.

Moving to slide 23, The Group sales, including the contribution from our JVs, significantly outperformed the industry, driven by strong performance in China and Australia.

In China, the Group sales for the full year were up 125% versus the 17% market increase, resulting in a Group share gain of 40 basis points, with Viaggio, Dodge Journey, and continued growth of Jeep brand driving the increase.

In Australia, the Group sales posted a 53% growth, significantly outperforming the market, which recorded a modest growth, mainly thanks to Jeep, up 31%.

Also, Fiat, Alfa Romeo, and LCVs performed well, supported by the consolidation of the sales and distribution activities of the Group into one company.

The Group sales also increased in India and in Japan.

Moving now to slide 24, trading conditions in Europe remained broadly weak throughout the year, where their market declined for the sixth consecutive year in a row.

Although mixed across markets, the overall industry showed some stabilization in the second part of the year; in particular, the Q4 passenger car segment in the major markets posted a second quarter of year-over-year gain, except in Italy, which was still negative.

The LCV industry was flat in 2013 versus the prior year.

Group revenues for 2013 were slightly down compared to a year ago due to lower shipments.

The trading loss of EUR470 million for the year shows an improvement of EUR233 million, or 33%, over the EUR703 million loss recorded in 2012.

EBIT also improved over the prior year's level, mainly reflecting the improved trading result and slightly lower contribution from equity investments.

Unusual charges were flat at EUR195 million and included for 2013 the write-off of previously capitalized R&D related to new product development for Alfa Romeo products, which have now been switched to a new platform considered technically more appropriate for the brand.

Overall shipments were down 3% to almost 1 million units, with passenger cars down 4%, mainly attributable to lower volumes in Italy.

LCV shipments were stable at about 200,000 units.

The EBIT walk on page 25 details the improvement in the year driven by better mix, mainly 500 family and LCVs, which more than compensated for the impacts from negative volumes and negative pricing, which was more concentrated in the first half.

The improvement in industrial costs were driven by the world-class manufacturing program efficiencies and purchasing savings, partly offset by higher R&D amortization.

Reduced SG&A spending contributed for about EUR200 million in the year.

Turning to page 26, the industry for the passenger segment in EU27+

EFTA countries was down 1.8% to 12.3 million units in 2013.

The positive performance in second half was unable to account to a 7% decline in the first half.

Among the major countries, UK grew by 11% and Spain by 3%, negative performance in Germany and France, with Italy suffering the most at minus 7%.

The Group sales for the full year were down 7%.

The Group's share in Europe was 6% with a 30-basis-points decline, principally attributable to the unfavorable market mix.

The Italian industry troughed at the lowest level since 1978 and now represents 11% of the total European industry, or 500 basis points lower than where it was in 2007.

Our share in Europe, excluding Italy, was similar to the prior year.

Slide 27 deals with the LCV segment.

The industry gradually improved throughout the year, with Q4 up 9%, being the first positive year-over-year industry gain.

The market concluded the year at the same levels of 2012; however, with mixed trend among major markets.

Group sales for the full year were 182,000 units, flat over prior year, with a share gain in Italy and a record share of 9.4% in EU+

EFTA, excluding Italy.

Outside Europe, there was strong share performance in Russia.

I'll now move on to slide 28 to review the performance of the luxury brands.

Ferrari revenues increased 5% in 2013 to EUR2.3 billion.

Consistent with the 2013 announcement, the production will be maintained below the prior year's level to preserve the brand's exclusivity.

Ferrari managed shipments to the network down to nearly 6,900 street cars, down 5% year over year, including the first 20 units of the special edition LaFerrari.

Shipments of 8-cylinder models were down 12% over the prior year.

There was a 19% increase for 12-cylinder models attributable to sales of the F12 Berlinetta.

Trading profit rose 9% to EUR364 million, thanks to better sales mix and contribution from licensing and personalization programs.

The trading margin increased 50 b ISP to 15.6%.

Revenues for Maserati totaled EUR1.7 billion for the year, an increase of 120% over 2012 on the back of more than 15,000 shipments, a nearly 150% improvement over 2012, driven by the success of new Quattroporte and Ghibli.

Maserati closed 2013 with full year trading profit of EUR171 million, or 10.3% margins, representing a EUR114-million increase over the prior year.

In Q4, the trading profit rose almost 10 times versus last year at EUR123 million with a 15.9% margin.

The EBIT for full year, which included a EUR65-million write-down of previously capitalized R&D, has now totaled EUR106 million.

Shipments for the newly launched products were strong, in line with our targets, around 8,000 for the new Quattroporte and 3,000 for the Ghibli.

Slide 29.

The components business as a whole posted EUR8.1 billion in revenues with a trading profit of EUR201 million.

Revenues for Magneti Marelli were up 3% to EUR6 billion, driven by lighting and electronics systems growth, and trading profit was up 18%.

The top line growth was only partially offset by higher industrial costs associated with the new product launches in NAFTA.

The trading margin increased 40 basis points to 2.8%.

Teksid revenues were down 12% year-over-year with the Cast Iron business posting a 7% decrease in volumes in Europe and the Americas with lower demand in all segments, particularly light vehicles.

By contrast, the Aluminum business posted a 13% increase in volumes.

Trading loss for 2013 of EUR13 million, compared to breakeven for 2012.

The decrease was primarily attributable to volume declines.

EBIT was a negative EUR70 million, including EUR60 million in unusual charges related to the impairment of assets in the Cast Iron business unit.

Comau revenues were up against prior year with a EUR15-million increase in trading profit, primarily driven by Body Welding operations.

Moving on to slide 31, looking at the business environment by region, the all-new Jeep Cherokee started shipping at the end of October and, in just two months, sold 29,000 units worldwide, most of those in NAFTA.

The Group has entered the new Chrysler 200 at the Detroit Auto Show, which will be available in the first half of 2014.

The benchmark features on this vehicle include a 9-speed, automatic transmission, four-wheel-drive systems, and high-performance engine offerings.

The production will start in the Sterling Heights assembly plant at the end of Q1.

In LATAM, on page 32, the key launches in fourth quarter were the new Strada, which continues to have 50% segment share in the pickup market in Brazil, and we launched two refreshed models with single cab in October and a double cab in October for the ramp-up of production.

The new Fiorino will be launched -- was also launched at the end of the year.

The Pernambuco project is proceeding.

CapEx spanning through 2016 of about EUR2 billion in the 2012-2014 period, with Fiat to receive financing for up to 80% of the total investment.

The start of production is expected in the first half of 2015, and the initial annual capacity will be 200,000 vehicles.

Moving to page 33, on the left-hand side, you can see where the growth in the APAC volumes came from, spread across the Fiat brand, the Jeep brand, and the Dodge brands.

Fiat brand sales were up 160%.

There was a strong performance from the Jeep brand with its 17 consecutive quarters of year-over-year growth.

On the right-hand side, the newly launched Fiat Viaggio is performing well in the marketplace, and the Fiat Ottima will be launched in early 2014, produced off the same platform.

Moving to page 34, the strategic refocus and realignment of the Fiat brand in EMEA continues to proceed.

The Fiat 500 family now represents 33% of the brand sales from 20% in the prior year thanks to the expanding product portfolio with the 500L, including a Trekking and the Living variants.

The latter topped 1 million units sold in Europe since launch in 2007.

Three out of four 500s are sold outside of Italy.

2013 saw two top positions in the ranking for our products in the A segment with the Fiat 500, the first time since its launch, and in the BMPV segment with 500L.

Slide 35 shows our expectations for the market going into 2014.

We see the NAFTA market in a growth situation with the US above 16 million (inaudible) and with the Canadian market basically flat.

In Latin America, the Brazilian industry expected to grow about 3%, in line with GDP whereas the Argentine industry is likely to decline due to the import restrictions and the high sales taxes.

APAC will continue to grow, and the Group is targeting to increase sales significantly through the year, whereas, in EMEA, we expect the market to be substantially flat, both in Italy and in the rest of Europe.

Moving on to page 36, our volume guidance for 2014 shows an increase from the 4.35 million cars in 2013 to a 4.5- to 4.6-million range in 2014, with most of the growth driven by NAFTA and APAC.

Moving to page 37, it shows the 2014 financial guidance.

We are targeting revenues of EUR93 billion, about a 7% increase over 2013.

We are targeting a trading profit in the EUR3.6 billion to EUR4 billion range.

Consolidated net profit is expected between EUR0.6 billion for 2014, lower than the normalized result in the prior year.

The contribution from improved trading profit will be more than offset by higher deferred taxes as a result of the reversal of the deferred tax assets recognized in 2013.

The EPS is expected to be in the EUR0.4 to EUR0.6 range from EUR0.1 on a normalized basis in 2013.

Net industrial debt is projected in the EUR9.8 billion to EUR10.3 billion range, compared with the EUR9.7 billion normalized at December 31, adjusted for the cash outflows for the January 21 closing of the purchasing -- for purchase of the remaining 41.5% minority stake in Chrysler from the VEBA for EUR2.7 billion and the EUR0.3 billion impact starting from 2014 due to the adoption of IFRS 11.

The key cash flow movements for 2014 include higher industrial EBITDA, a positive change in working capital, and a higher level of CapEx than 2013.

Financial charges are expected stable year over year.

Thank you, and pass the call back to Marco.

So, I'm moving on to Chrysler, to give an overview of Chrysler performance in US GAAP, dollars.

So, on page 2 of the Chrysler deck, you can see Chrysler's full year results compared to 2013.

Net revenue totaled $72 billion, 10% higher than 2012, primarily driven by a 6% increase in shipments led by the Ram 1500 and Jeep Cherokee.

Worldwide shipments totaled just short of 2.6 million vehicles in 2013 versus 2.4 million in 2012.

Modified operating profit was $3.2 billion for the year, an increase of 9% versus last year's $2.9 billion, resulting in an operating margin of 4.4%.

Modified EBITDA was $5.9 billion, or 8% of net revenue.

Both increases versus the prior year reflect the higher shipments, stronger market mix, and positive net pricing, partially offset by higher industrial costs, which includes the charge taken in the second quarter for the voluntary safety recall of older Jeep products.

Net income for 2013 was $2.8 billion and includes two infrequent items.

The largest item, which is noncash, is the release of valuation allowances on deferred tax assets of $962 million, partially offset by a EUR24-million loss on the extinguishment of debt related to the two re-pricings of our term loan B in the year.

Excluding these infrequent items, net income was $1.8 billion, compared to $1.7 billion in 2012.

Cash increased by $1.7 billion for the year.

Accordingly, we are now in a net cash position versus the net debt position at the end of 2012.

Moving to slide 3, it shows the drivers of the $264-million increase in year-over-year modified operating profit.

GDP-adjusted shipments increased by 110,000 units, while mix was also positive, partly due to higher retail and lower fleet volumes.

The positive net pricing of $1.2 billion reflects positive pricing actions throughout the year, in large part driven by increased vehicle content in vehicles such as the new Grand Cherokee and the new Ram heavy duty.

Industrial costs for the year were higher by EUR1.8 billion, and, as stated previously, includes increased costs for additional content, along with higher manufacturing launch costs, particularly in the first half, and higher depreciation and amortization expense.

Also, this column includes the $150-million charge taken in the second quarter for the voluntary safety recall and a customer satisfaction action related to the older Jeeps.

Overall selling, general, and administration cost was slightly positive versus the prior year.

The category primarily relates to the exchange loss related to the devaluation of the Venezuelan bolivar.

For the fourth quarter, the walk was very similar.

Volume and mix increased, primarily reflecting the increase of 113 million vehicle shipments versus prior year and a higher level of retail mix.

Moving to slide 4 (sic - see slide 5) , it shows the change in cash and free cash flow for the full year and for the fourth quarter.

Free cash flow was a positive $2.1 billion for the year and $1.9 billion in the fourth quarter, raising cash to $13.3 billion at December 31.

During the year, as shown in the walk, modified EBITDA added $5.9 billion to cash, partly offset by capital expenditures of $3.4 billion.

Positive working capital effects added another $1.7 billion, partly reflecting the strong shipments of the Jeep Cherokee, which were on shipment hold until the end of the third quarter, and the build-out of the Chrysler 200 and Dodge Avenger to prepare the plant for the all-new Chrysler 200 being launched in the first half of 2014.

On slide 5 (sic - see slide 6) , we see the composition of the total financial liabilities at carrying value, which decreased only slightly from September.

However, as discussed, cash increased about $1.9 billion from September 30.

Accordingly, our [formally] net industrial debt figure of $888 million at September 30 and almost $1 billion last year now has become a net industrial cash position of over $1 billion, the first time Chrysler Group has reported a net cash position.

Turning to slide 6 (sic - see slide 7), Chrysler Group's worldwide sales for the full year 2013 increased 9% to over 2.4 million vehicles versus almost 2.2 million in the prior year, primarily the result of a 14% increase in US retail sales.

US market share increased 20 basis points to 11.4% for 2013 versus 11.2% in 2012.

(Inaudible) and Canada market share also increased to 14.6% from 14.2%.

Worldwide Jeep sales increased 4% due to increases in [AllCo] and (inaudible) products and the start of sales of the all-new Jeep Cherokee during the fourth quarter.

Worldwide Dodge sales increased 13% with the Darts, Durango, and Journey, contributing large increases year over year.

Ram truck brand sales increased 19% year over year, led by the Ram 1500.

And Fiat sales increased by 13%, including contributions from the Fiat 500L.

Lastly, Chrysler brand sales were up 1%, primarily due to an increase in sales of the Town & Country.

Slide 7 (sic - see slide 8) shows the continued reduction in our percentage of US fleet sales to total US sales on a year-over-year basis.

(Technical difficulties) percentage went down from 26% to 22% for the full year.

On the right-hand side of the chart, it shows that the days' supply of inventory at US dealers as of December 31 increased to 79 days from 73 days at the end of last year and 62 days at the end of September.

The days' supply increase reflects seasonality and also the shipping and filling of dealer orders for the Jeep Cherokee being launched and the build-out of the 2014 model year Chrysler 200 and Dodge Avenger, as we're ready to certainly (inaudible) its assembly plant for the production of the new Chrysler 200.

Slide 8 (sic - see slide 9) shows the new guidance for 2014 for the Chrysler Group.

We expect to ship approximately 2.8 million vehicles worldwide, generating approximately $80 billion of net revenues.

We are also projecting modified operating profit to be between $3.7 billion and $4 billion and adjusted net income of $2.3 billion to $2.5 billion.

Lastly, our free cash flow is expected to be between $500 million and $1 billion.

Thank you.

Thank you, sirs.

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

Barbara, please, go ahead.

(Operator Instructions).

Rabih Freiha, Exane.

Thank you for taking my questions.

I have a few of them, actually, maybe the first one on the unusual items that you give the breakdown of on page 9. I see a big chunk of those is coming from Alfa, Fiat, and Maserati repositioning.

Would you mind elaborating a bit on those write-downs?

And can you give us also a rough estimate for the unusual lines will be on 2014?

Then my second question is -- looking at the IFRS versus US GAAP profit at Chrysler, we see that the (inaudible) came down significantly in the past two quarters.

Should Q4 be taken as a sort of indicative run rate going forward?

And will the New York listing lead maybe to US GAAP accounting for the Group?

And, lastly, on North America, we can see that there is a lot of capacity coming on stream between 2014 and 2016.

We're talking roughly 1 million units per year.

We're also hearing mounting concerns about rising inventories and pricing pressure by your peers.

Do you share these concerns on pricing?

Thank you.

I think I'll take most of your questions.

On the pricing side in the US, just to give you our views as to how we see the market, we have seen nothing anomalous, and we have seen nothing which is of a concern today.

In terms of our view about 2014, certainly the indications that I can give you is sort of up-to-date information as of yesterday.

We have seen the market continuing to be relatively strong, and we have not seen what I would -- what I consider uncontrolled, competitive behavior in the marketplace.

There's not a single doubt that there may be spots where particular automakers are long a particular nameplate, but I don't think it's a general condition.

And, certainly, it's not indicative of a return to the kind of pricing tactics that we had seen in the marketplace in the mid 2000s.

In terms of the capacity coming on, I think you need to be careful about what kind of capacity you're talking about.

I think that a number of us, and Chrysler, for one, as -- continues to find ways to try and extract additional production out of existing installations.

We're putting on additional shifts to try and meet market demand.

But, with exception of a couple of cases that I'm aware of, I have not seen anything which is of significance.

I know there are some foreign competitors that have come into the US.

I think a lot of it depends on how successful their commercial activities are going to be in the US anyhow.

So I'm not sure the capacity in and by itself is an indication of increasing pricing pressure.

In terms of the question that you asked about IFRS, I'll ask Richard in a moment to give you his answer about whether you should take these quarters as being indicative of anything.

But the question about IFRS/US GAAP is an issue that we're looking at right now.

Whatever choice we make, we'll provide US GAAP reconciliation, even if we stick to IFRS as the primary reporting standard.

But we have not made a final determination.

I think the house is capable of complying with both.

In terms of the unusual, Richard can give you more technical -- more numerical details about the unusual charges.

I can give you sort of the underlying thinking behind the write-downs.

One of the things that's happened as a result of our rethinking of the premium strategy, which will be an integral part of the plan that we present to the markets in May, is it afforded us the opportunity to take a look at the architectural status of both the Maserati and in the Alfa Romeo brands.

And there are a number of conclusions that have been sort of finalized as part of that and which are at the basis of a hope out of engineering and development work that's going on right now within the Group, which has effectively abandoned some of the architectures as being at the core of the development of the brands going forward.

And it's impacted mainly Alfa Romeo and Maserati because these are the ones where some work and, in some cases some substantial work, had gone on in a particular direction before we'd had a chance to purify our architectural choices.

I think we're starting off the plan and we're starting off our delineation of the development programs for both Alfa and Maserati now with a clean sheet of paper without dragging any history.

And anything that we're doing now is building on what we consider to be the mainstay architectures and key component elements of these brands going forward for a number of years.

But we did clean the decks.

And I think all of this stuff reflects activities which are no longer relevant to the direction that the brands have taken.

But I'll leave it to Richard to give you an answer on --

In terms of the R&D trend, you have to be careful because the disclosure is net of amortization.

So, clearly, we are launching products.

And, as we launch, we start amortization of the capitalized R&D.

So the capitalization rate is pretty constant.

What is increasing is the amortization year over year, which was about [300] million of increase in 2013, and we're looking at probably another [100 million to 150 million] increase next year.

So the R&D (inaudible) will continue to increase year over year.

And, obviously, we'll tend towards the same number as a capitalization of R&D.

In terms of the unusuals, I think we've given a pretty detailed explanation of the numerical composition.

So I haven't much of anything to add.

Okay.

And to 2014?

How do you see the unusual items line maybe, roughly?

Is there going to be a I guess gap between EBIT and trading profit, or should it (inaudible)?

I'm going to step in here.

There's going to be some.

I mean, I think there's going to be some residual transaction costs on the closing of the VEBA transaction, which will bump up.

But it's nothing of significance.

And I'm not trying to play King Kong here, but I don't think it's going to be a material number.

It will be relevant, but it will not be material.

Okay.

Great.

Thanks.

Philip Watkins, Citi.

I don't know if I could just follow on on that issue on US GAAP versus IFRS.

I don't know if you'd be able to give us a flavor of how different your accounts would look now if you were to report under US GAAP.

I know the sort of differences around R&D, I struggle a bit with the pension and the tax issues whether it would look materially different.

I think we've got to be very careful about speculating about what the adjustments would be because we're not going to get ourselves into a bind here.

I think, obviously, we have modeled potential economic results based on the adoption of one standard or the other.

The fundamental difference and the biggest one is the way in which R&D gets treated under IFRS and US GAAP.

I mean, it's a question of balance sheet and costs and amortizing over time as opposed to (inaudible) the P&L is incurred.

I have a lot of -- and I'm not trying to be disrespectful of US GAAP, but I do understand the conceptual underpinnings of the capitalizing argument.

And, instinctively, I prefer that route because I think it properly reflects the way in which economic activity is carried out.

But I think it would be improper and probably premature for us to give you an indication on which way it's going to lean one towards the other.

My gut tells me and, based on the analysis that I've seen, is that US GAAP would be somewhat punitive to the results that we're showing, but I think we need to spend more time.

And I don't think we're going to make the choice on the basis of the [pain] that one shows or the other.

I think we're going to show our reconciling numbers in the financials, regardless of which standard we pick.

So it won't matter much.

Okay.

Can I ask on South America?

I mean, the margin's down quite a lot, obviously, versus last year.

What kind of margin do you think you can make there next year?

Well, 2014.

Is the impact of cost inflation so much that it will stay around the 2%, or can it creep up again to 5% do you think?

We had this conversation with the board, and, obviously, it's something that we analyze internally at some length.

Our view is that we'll probably, in terms of absolute numbers in the absence of further aberrations and exchange rates from current levels, that we should be able to produce about the same level as we produced in 2013.

I can only tell you that, regardless -- and there's no doubt that I think 2013 has been an unusual year, and 2014 is starting off with -- not necessarily in the best of conditions, at least in terms of exchange rates.

Our assessment of the operating environment is such that volumes remain unaffected.

(Inaudible) indications in terms of January as the month is going to define.

We have no early indications of the fact that the market will deteriorate going forward.

If, in fact, the exchange rates keep on moving towards an equilibrium point which is above the current one -- we have now [pushed] some significant barriers in terms of dollar/reais.

And, if the dollar continues to strengthen against the Brazilian currency, I think you're going to see inflationary pressures come into play in Brazil.

And the question that we're all asking is whether we're going to have an ability to recover that price inflation in price.

In an ideal world, I think you will.

I think, in reality, over time, we will.

But the problem is that I think there are disastrous implications associated with runaway inflation, which is going to push a whole pot of other adjustments in terms of interest rates and so on.

And so it's very early for us to make the call.

The basis on which we have made the forecast that was built into the 2014 guidance is an assumption of a market that is up on 2013.

I think some of the reactions that we're seeing in the foreign exchange markets in terms of adjustments -- I just saw the news flash on the Russian ruble.

I think we need to be careful.

I think we're watching a bunch of overreactions and adjustments and realignments of portfolios.

I don't know how much of this will stick.

What I am relatively comfortable at is the fact that there is going to be a fundamental revaluation of the reais against the dollar over 2014 to [2013].

If it's a rational adjustment, I think that the system will be able to contain it.

It's not just our activities.

But I think the Brazilian economy will be able to adjust.

The only thing I can tell you is that we have no indication today of either deterioration in pricing above and beyond normal activity or a substantial decrease in volumes that would cause us a concern.

The overall picture and the commitment that we have made to Brazil goes beyond this current (inaudible) issue.

One of the things that has been underpinning our analysis and the development of a strategy for the Latin American market is that Brazil in and by itself has developed a social class that is -- that we cannot satisfy any longer out of the current production structure that we have in Betim in the state of Minas Gerais.

And the choice of vehicles and platforms that we have and which have been at the heart of the development of the Fiat brand in Latin America is no longer adequate.

The build-out of the plant in Pernambuco was clearly designed to deal with an emerging social class in Brazil, which requires larger and more complex vehicles.

The architecture that is being installed in Pernambuco is one that reflects state-of-the-art technology and reflects what we consider to be a relevant demand coming from a growing and significant portion of the buying public in Brazil.

That plant will be up and running in the first half of 2015, and we have high expectations that whatever volume decrease we may suffer as a result of a contraction.

And the base market will be picked up in 2015 by the production of the Pernambuco plant, including the introduction of Jeep as a brand in Brazil at that time.

I don't know whether I've answered your question.

I know it's quite uncertain.

But maybe I could just ask one more, if I could, on capital.

I know you talked about -- (inaudible) taking up too much time.

But, on the --

Go ahead.

I can only think of an equity like (inaudible).

And, quite frankly, I can only think of a mandatory convertible in terms of what you're talking about to improve the balance sheet, because I could imagine that, whatever instrument you wish, you have to have some form of delayed equity to be positive for the credit.

Are there other alternatives to something like that?

Well, look, no doubt, there's an alternative.

There are alternatives to everything in life.

And I think one of the great things about FCA is that the degree of optionality that's built into the system now is phenomenal.

And, since you've asked me for tangible proof of alternative, I'll give you one.

It's a highly unlikely alternative, but it's possible.

To the extent that one can monetize any of the luxury brands inside this organization, and, in particular, people keep on harping about Ferrari, one transaction would exist in the net industrial debt of this house.

And, if I were to play earnings against proceeds, I'd win day one.

And, in terms of royalty valuation, I mean, you would be up by a mile.

I'm not sure that it's an advisable thing to do; nor do I think that we will not be paying a price in terms of the strategic positioning of the automotive house.

But it's possible.

And I think we need to be careful that we don't sort of start convincing ourselves that there is an inevitable capital call coming down the line for Fiat.

I try to give some warnings back to some people when I was in an investor road show by the fact that I will not be advising people to go short the position of -- you've got to be very careful.

We have been able, I think, over the last ten years to execute a variety of things that some people may have thought to be undesirable or undoable at the time.

And we have been able to execute.

And I'm not telling you this to boast.

I think that we have optionality within the system.

I think we can execute a number of alternative transactions in the absence of a straight capital call.

And the only thing I'm suggesting to you is that these are all things that will be looked at as we move into Fiat Chrysler Automobiles N.V. I think all these things are connected to a US/Milan listing.

And we need to wait 'til then.

We will be doing our homework in the interim to find the right answer going forward.

It could be convertible into some portion of shares of that business?

It could be a variety of things.

And I think you need to leave it to our creativity to come up with what I consider to be the most shareholder-friendly solution for everybody concerned.

Thank you very much.

Martino De Ambroggi, Equita.

On the strategic issues, what are the next steps you have in mind?

You already mentioned some M&A deals, but I understand --

I think you've going to have to wait 'til the plan in May.

We're not that far away.

We're one quarter away and a few days, and then you'll know everything.

Okay.

And always on the strategic issues, are you looking for or searching actively there is a possibility of finding a new partner, possibly, in Asia, where you have a limited exposure?

It's something that you believe is possible over the next -- I don't know -- few quarters, or it's something that it's really, really difficult?

Well, just to start answering your questions backward, I don't think it's difficult.

As you well know, we have established a very strong relationship with GAC in China.

We are now in the process, hopefully, of finalizing plans to develop the G brand in China, including local production of the vehicle.

That continues to be the biggest unexploited potential that we have currently in our hands.

In terms of your broader question about whether we're interested in strategic alliances, whether it be in Asia or otherwise, I reaffirm what I said now for ten years.

We remain totally open to any ways in which we could strengthen a competitive position in the marketplace.

And so we are in continuous dialogue with a number of other automotive houses, either on specific projects or on broader-term alliances, none of which today I would be willing to subscribe to or suggest they're likely.

But the dialogue continues.

It's in the nature of the industry.

And I think our people are actively involved in the dialogue.

And, at the relevant time, we would announce whatever has to be announced.

But I have nothing today of significance to tell you.

Okay.

And a specific question on Maserati.

You already commented about the change in programs with write-down of R&D.

Is this affecting your 50,000-units target for 2015?

And what could be the cap in terms of profitability for Maserati that showed already a very good profitability in Q4?

Look, if I were to -- you know, 18% to 20% margins in that business will be ideal.

I think, if you start going above that, you'd be sort of scraping the sky.

I'm looking at Alfredo, who's sitting over here dreaming in Technicolor of numbers like that coming out of EMEA.

But, one, I see no technical or commercial limitations to a 50,000 number by 2015.

We continue to work on the development of the SUV for Maserati.

That's something which has got the primary importance of the completion of the premium end of that brand.

And we're well on track to get that done.

So all the signals in conventional Maserati are positive.

I think we're getting phenomenal market acceptance of the product, and I think we have some very clear ideas now how to develop the remaining portion of the portfolio, which is what's led the abandonment of previous architectural choices that have been made.

Okay.

And, if I may, a very last -- when you announced C&H (inaudible), you mentioned that financial cost savings were the first upside, EUR140 million or EUR150 million in two or three years.

What could be a reasonable gain for the new, combined entity, Fiat Chrysler?

And is there anything else, apart from financial cost, that could be an additional upside which is not possible having 100% of Chrysler and that maybe before was not enough developed or exploited?

Well, I may have made the comment earlier in my opening remarks.

But I think that one of the problems that we were running into is that, to the extent we were trying to keep -- that we had to maintain, because of the different ownership structures -- the issue about how we allocated corporate opportunities across the globe and in recognition of the value of the contributing brand had become an increasingly important problem.

There was no immediate way of resolving the potential conflict.

And it added on an inordinate amount of time in terms of the decision-making process.

All that stuff is behind us now.

I think we can move with execution at the speed of light, and that remains the key objective.

So, in terms of the impact on our ability to move forward and to achieve target, it's a faster way than separation would have allowed.

I think we have resolved a large portion of the stumbling blocks, and all that stuff is part of history now, which is making me a lot more comfortable about some of the assertions that we've made, including the ability to sell over 1 million Jeeps in 2014.

In terms of the interest cost structure, I'm going to take Richard off the hot seat here, because I know for a fact that he hasn't had the time to go through this.

But I think, as part of our presentation in May, we'll show you what I think we can do in terms of capital structure and reallocation of cash and debt.

And then I think it will give you a better indication as to where interest costs will go, subject to whatever IS-19 in terms of the inherent pension (inaudible).

But I think we'll have a better view by then.

And I hold him from answering that question until then.

Okay.

Thank you.

George Gallier, ISI Group.

I have two questions, just following on from the first question on North American capacity and, specifically, in relation to the Dodge Ram.

Third-party data seems to suggest you're running at a very high utilization rate.

To what extent can you increase production on this product it required, or are you effectively maxed out?

Well, to begin with, I'd like to correct you.

There's no such thing as a Dodge Ram.

There's a Dodge car, and there's a Ram truck brand.

So, if you're asking me about trucks, I think we have enough capacity in the system to try and get to -- I don't want to start giving you some numbers because we're debottlenecking the plant on a continuous basis.

We have put in some money in terms of improving the operating efficiency of the plant.

We have and continue to look at a possibility of setting up another truck installation to try and deal with this issue.

I'm of the view that we should not be doing it and that we will not exceed to this potentially alluring concept of creating additional truck capacity either in the United States or in Mexico.

I much prefer to run the plants flat out and not build brick and mortar capacity in the system.

So, as much as that may have been sort of raised as a possibility, I think the likelihood of that happening is certainly less than 50%.

I do think that we have got probably in the neighborhood of 15% to 20% additional capacity that is available from the system.

Okay.

Thank you.

And then, secondly, Mr. Marchionne, you have achieved a huge amount during your tenure at Fiat, often against the odds and expectations.

Do you ever give consideration to handing over the reins to someone else?

And when would be a good time for such a transition?

Or do you feel there are still plenty of challenges you wish to continue to meet as you move into the new era with Fiat Chrysler Automobiles?

Let me tell you.

One thing is absolutely certain.

The number of challenges is not going to decrease.

I think, at the Detroit Auto Show, I confirmed the fact that I would be committing to a minimum of a three-year term with FCA.

I stick to that commitment.

I think one of the things that I have been lucky in doing is surrounding myself with a bunch of leaders that have developed incredibly well, certainly over the last five years.

And my successor will come from that population.

And it's not to entice people to kill themselves to try and get to that role.

I wonder why anybody who has a minimum sense of sanity would want this job anyway.

But, on the assumption that somebody was willing to do so, I think it would be improper, to be perfectly honest, to try and pick somebody from the outside, given, I think, the bond that has been created within the organization and the strength of this leadership team.

I think it would be improper to give the right -- the lead to anybody else.

I think we have a number of candidates on whom I'm working diligently to sharpen the skills.

And, at the relevant time, I will pass on the leadership to them.

But it's not going to be for the next three years.

Very clear.

Thank you.

Charles Winston, Redburn Partners.

Two quick ones from me and then, perhaps, a slightly longer one.

Just can I confirm the EUR2.5 billion cash flow gain on the VEBA refi?

That's including principal payments avoided, I'm guessing.

And, therefore, what would be the (inaudible) to look at the impact on net debt?

Is there anything at all?

So that's question one.

Question two, just on Chrysler GAAP numbers, depreciation costs.

Very, very sharp turnaround.

Big, it increase in the second half.

And, actually, in the first half they were down.

So, within the year, huge ramp-up in depreciation.

Is that something one should read in terms of going forward instead of -- should I be looking at the average for the year as the guidance?

Or is the second half of guidance for the depreciation there?

Then, I guess, the final one, which is perhaps the longer-term one, which is -- and I've asked this question before.

It's about the Chrysler gross margin.

I mean, the gross margin fell again this year and looks to me around about 100 basis points in total since 2010.

Chrysler as a house has seen 70% revenue growth, good pricing, but the gross margin's down about 300 basis points.

I understand that there are a number of cost issues there and the capacity constraints and a number of issues behind it.

But very few auto companies would see a 70% increase in revenues with good pricing and see their gross margins down 300 bps.

You know, what can you do to turnaround this gross margin?

And when are we likely to see it?

I mean, is it because everything's been run so tightly that, actually, you're running into inefficiencies and, therefore, actually, capital spend would address this in terms of actually helping improve the gross?

I just don't understand it.

It may well illustrate my own lack of understanding of how this industry works.

But 70% revenue growth and 300 bp growth decline just seems weird.

And, if you could help me understand that and how it might correct, I'd be very grateful.

Okay, Charles, I'll start with the easy one.

The EUR2.5 billion is including the principal payments that we obviously won't be making any further on the VEBA note.

So that includes those payments we won't be making.

It includes the impact of pulling forward the deductibility of the tax attributes of the notes.

And it also includes the interest savings on the period.

There will be no impact on net debt.

We're switching one debt for the other.

So there's no impact on debt.

But, obviously, there's an impact on liquidity as we go forward through 2015 and 2016.

In terms of Chrysler depreciation, we are basically continuing to launch new products.

As we launch those new products, our depreciation will be going up.

I think the second half of the year is a relatively good indication of run rate.

But, basically, depreciation will continue to increase also in 2014.

We are spending around $3.5 billion to $4 billion of capital a year, and we have been for the last couple of years.

And our depreciation for the full year was just stark of $2.8 billion.

So, obviously, the law of mathematics indicates that we will continue to increase the depreciation charge for the next few years.

In terms of gross margins, we've had this discussion on a number of occasions.

I mean, we do have inefficiencies in the industrial system as we launch these vehicles.

We had delays on the launches.

We had a very intense process of addressing the issues on the vehicles and getting them to the quality levels we needed to launch.

We are running a number of our plants, as mentioned already, at very high capacity levels.

And our supply chain for a few years was not used to (inaudible) making its numbers and actually exceeding them in terms of capacity allocations.

So we need to work on the efficiencies going into 2014 because it represents an opportunity to improve margins.

That's clear.

Can I perhaps take that very last comment of guidance that you think that the gross margin at Chrysler under US GAAP might actually go up in 2014?

I think we need to increase the margins in 2014.

Yes.

The answer is yes.

Okay.

Thanks.

Alberto Villa, Intermonte.

Not many questions left.

The first one is on the targeted net debt at the end of this year.

Can you give us an indication of what the CapEx implications are in this target?

And the second question is on the negotiation you announced today on the Chrysler debt.

Can this include in the future maybe a negotiation of also the senior notes that are bounding you to get total access to (inaudible) cash generation in the future?

Is this something that you are planning to do or impossible in your view?

Thank you.

So, in terms of CapEx, we're looking at CapEx for the full year 2014 of around EUR8 billion, about EUR0.5 billion higher than we had in 2013.

And, in terms of the second lien notes, I think, as you're aware, the second lien notes have a (inaudible) provision on early repayment, which extends through 2015 for the 2019 notes and 2016 for the 2021s.

So, as we get through 2016, there could be a much more economical, interesting argument for looking at repaying those earlier than their maturities.

And, clearly, there would also be a benefit to consolidating the debt structure of Fiat Chrysler Automobiles at a single level, which would be much more efficient for all sorts of reasons.

So we will be looking at that going forward.

We have no plans today to do anything because, obviously, it's too early.

But there's an opportunity there as we move forward.

Okay.

Thank you.

[Thomas Chandell], Golden Tree Asset Management.

I just want to clarify if I can the pro forma balance sheet of Chrysler.

You spent in cash for the purchase of the minority interest of Chrysler's EUR1.9 billion plus the EUR175 million initial payment.

Is that correct?

And then, I guess, just a pro forma for the financing.

We just add in the EUR4 billion, plus, of new securities.

Part will be term loan, and part will be senior secured notes.

Is that correct?

Yes, basically.

But the last part of your statement, the additional financing that we're talking about is designed to extinguish an existing debt.

Right, to take out the VEBA note.

Which is part of the debt structure of Chrysler today.

It's not new borrowings.

It's just -- it's the repayment of a note with an (inaudible) of instruments.

But I think what Richard mentioned, which I think we should pay attention to, is that, at the end of December of 2013, Chrysler was in a net cash position for the first time in its history.

So, since you're doing pro forma numbers, I mean, it actually has zero industrial debt.

Right.

That won't change.

It will just be more senior in the capital structure with some collateral.

Yes.

It's going to improve over 2014.

Yes.

Okay.

But the change in cash from yearend is simply the EUR1.9 billion plus the EUR175 million first payment?

Yes.

That's correct.

Okay.

Good.

I'll change subjects now.

In terms of the December sales figures that were released a little bit ago, Jeep is great, Ram is great.

There's some softness in some of your cars -- the Chrysler 200/300, the Dart.

I was wondering if you can address, you know, trends in cars, car sales and I wasn't at the Detroit sale, but, if the new announcements are meant to alleviate that --

The answer to your questions backwards.

Yes, they're designed to alleviate the problem of -- the Chrysler 200 and the Dodge Avenger are two of the oldest cars that we have in our fleet.

We did a lot of work back in 2009/2010.

But the new Chrysler 200 is intended to replace both of them in the marketplace, and so we have -- we think we now have a competitive vehicle to really give us a significant presence in what is the largest passenger car portion of the US market.

So we needed this car.

The initial reactions to the car have been phenomenal.

We will be in market by the end of Q1 of this year, beginning of Q2.

So I think we'll start -- we should be able to see the results of this in the first half of 2014.

You know, the stickiness that you made reference to -- you've got to be careful because we have actually been long those cars intentionally to make sure that we can deal with the transition in the plant from the old Avenger or old 200 to the new one.

The plant will be out of circulation for roughly 30 days, and it will take some time to ramp it up to adequate production cycles.

So we will not -- if you were to add on an additional 75 days for the time we take the plant down before you can start seeing some semblance of what I consider to be an acceptable operating performance out of a Sterling Heights plant, it would be helpful.

So, once you start knocking off that kind of space from the calendar, you've got to make sure you've got enough coverage on the ground with dealers to try and bridge you over.

And that's why, when you look at the inventory number even at the end of December, it was exceptionally high for that time of the year and, certainly, unusually high for us.

And how about the Dodge Dart?

I think --

(Multiple Speakers)

People and us on the inside have greater expectations in its performance.

I keep on saying what I've repeated now on a number of calls.

I think we have a phenomenal car at an incredible value.

But the car is over-contented for the market and for the segment in which it plays.

And I think the challenge is on us to find a solution to that over-contenting.

We're working on this, so hopefully it will be evident within 2015.

Okay.

Great.

Last question.

As recent as the third quarter earnings call for Chrysler, the guidance for operating profit was slightly higher than the actual that you did.

The guidance was [3.3 to 3.8, and you did 3.2].

What happened between the time of the earnings release and yearend that led to slightly missing?

I think we basically expected to ship a few thousand more vehicles.

We're short 50,000 cars against the internal forecast at the end of Q3.

It's that simple.

Okay.

All right.

I appreciate it.

The number is exact and at 50,000.

I won't tell you which ones they are.

It doesn't take a rocket scientist to figure it out.

But we're short 50,000 cars.

That's the single largest difference between September and December.

Okay.

Thank you.

I appreciate it.

Max Warburton, Bernstein.

Can I just start asking a question on Brazil?

And then I've got a few questions -- some more positive questions on Asia.

On Brazil, you talked about some of the near-term issues with FX and the economy, et cetera.

But, essentially, profitability for everybody in that market has been on a downward trend for the best part of five years.

Simplistically, do you think this can ever be a double-digit margin market again for Fiat?

(Technical difficulties).

Well, I normally don't disagree with you, Max, but I think it's untrue that it's been a declining profit market for all of our competitors.

I think I'd have to go back and look at GM and Volkswagen over that period of time.

But I -- certainly, in terms of our experience, we've been able to -- over the last five years, we have had double-digit margin years.

And we have only experienced a severe contraction of profitability in the fourth quarter of 2013, which is anomalous and certainly out of series with what we've been able to do in the past.

In terms of your question about whether I think, in the next five years, it will be able to do that, I have a high degree of confidence that we'll be able to do it.

And it's not because of the fact that I think that the market itself is going to be incredibly generous with us going forward.

I think that the composition of our earnings profile coming out of Brazil will substantially change once the Pernambuco plant goes on stream for two reasons; one, because the margin retention capability from the product portfolio that is being launched, both through the Fiat -- the larger vehicles for Fiat and, more importantly, for Jeep -- that margin profile is substantially different than for the mass-market production that comes out of our Betim facility.

But, more importantly, because margins will be positively impacted by the way in which the tax regime works for any car that is produced out of that state for the first five years of production.

So my expectation is a full cycle in 2016.

You will see a completely different composition of earnings coming out of Brazil and a more-than-likely restoration of double-digit performance in the area.

You're either stunned or incredulous or the line went dead.

No.

His line is still connected.

Mr. Warburton, are you on mute?

Can you hear me now?

Sorry.

We've got a few technical issues.

Can you hear me now?

Yes, we can.

Turning to Asia-Pacific and the way this region has sort of crept up on us and has become a really quite important part of Fiat's earnings -- obviously, a lot of companies make large margins in the region, but how is it so profitable?

I mean, is the accounting fair?

Are you properly loading central costs into the units being sold in Asia-Pacific?

Does that margin you're reporting really accurately reflect the pricing environment and the proper profit contribution of those vehicles?

Well, the answer to your question is that, obviously, not.

You can't load all the central costs associated with running a EUR2.6 million car company into products that are being sold into Asia.

But we are properly loading the product cost of those cars, ignoring what I consider to be the rest of -- I mean, we sell Jeeps in China.

There are a lot of costs that are incurred by the Jeep brand globally to maintain brand recognition and brand presence.

We don't allocate all those costs to China to try and justify the value of the brand in that jurisdiction.

I mean, it's part of a -- it's the result of a global effort to effectively internationalize Jeep, and it's benefiting our position in that jurisdiction.

But it doesn't -- if you were to carve out APAC, you can forget about those margins.

They will never happen.

I can't spin off APAC and say -- here, you just do this.

I mean, it would be the most profitable operation we own.

I'd like to own it personally.

But it's got limited capital commitments, and it makes great margins.

It's a hell of a business.

But you can't disconnect it.

But it does reflect proper product cost allocation and proper execution costs in the region with the sales that we are transacting in APAC.

But that's all it reflects.

It can't exist without mother ship.

So, without Auburn Hills, without the rest of the Jeep brand, it can't deliver what it delivers.

Okay.

And, just to understand what's in that number -- I've asked about this before.

But, in diesel engines being sold to other companies in India, is that included in the APAC number, and is it significant?

And is the arrangement with GAC -- even if, in China, it's not yet possible, is it contributing a sizeable chunk of EBIT to FCA as supported in that number?

The answer on the GAC side, not.

And, in terms of the engine, I don't think I moved the forecast based on a profitability of the engine transfer.

It's product related to the number of cars that are being sold.

God bless them.

Okay.

And then just a final question.

You're very close to announcing something on Jeep.

And there's been a lot of reports in China about whether the product can go down the same line as the Fiat product because it's got a shared platform -- whether you're going to be forced to either take on another of their assembly plants or build a new one in Guangzhou.

Is this a big issue for you?

Does it affect the economics of the project for you?

Not at all.

I think it just shortens the time to market.

And, to be perfectly honest, as long as -- I mean, this is capacity that already exists, if in fact the Guangzhou plant were to be the victim of the intervention.

And I think you're probably right.

But I don't think it's going to be -- I mean, it's not going to be detrimental to us, and it's certainly not going to be detrimental to the joint venture.

It just accelerates the introduction of the product, which is what I want.

And the product's the Cherokee.

Right?

The new Cherokee?

It's a version of the Cherokee.

Okay.

Thank you very much.

The Jeep brand is capable of doing just more than the Cherokee.

But it is a version of that platform.

Got it.

Thanks for the answers.

George Dieng, Natixis.

I have three questions.

First of all, on the emerging market currencies, I was wondering if you could give us some color on your sensitivities to the main currencies and, in particular, whether the valuation of the Argentine peso could have a similar impact to the one you felt from the Venezuelan bolivar this year.

I can put your mind at rest.

Nothing will be as disastrous as the Venezuelan bolivar.

Our earnings would not materially change as a result of the devaluation of the Venezuelan -- of the Argentine pesos.

Okay.

Fair enough.

A second point on -- a follow-up on LATAM.

You address a number of midterm issues.

I was wondering, just short term, whether there are any countermeasures that you can implement very shortly to offset some of the issues you're facing, especially in Brazil and Argentina.

(Multiple Speakers)

I think, on the Brazilian side, we've got a very keen interest in maintaining profitability, so we will apply price increases as required.

And, if necessary, we'll curtail production if capacity becomes an issue.

We have not seen that issue in the marketplace; certainly, not in the beginning of 2014.

And we've been successful in pushing through price increases to reflect underlying inflation and component costs.

But, so far, so good.

And so -- but we will respond at the speed of light.

It is a market that doesn't hold a lot of inventory through distribution, so it's a market that will require and adjustment and that we can adjust to relatively quickly.

But we have not seen an indication of either a collapse of the demand or necessarily aggressive positions from our competitors.

Okay.

My last question is on Europe.

Well, basically, when we look at the numbers, you've done a pretty good job in terms of the losses in the region.

But I'm wondering whether you've grabbed the low-hanging fruits or if -- whether there are loss of levers that you can use to take the region to positive territory very shortly.

And, in particular, I'm wondering whether the industrial or the distribution structure needs to be further downsized or if the next step is basically just a function of growing the volumes.

I think the next step in fixing Europe is utilization of the industrial network to produce something other than mass-market-bound cars.

We've been clear on this issue.

We do not see a future for the continuation of this industrial framework -- to try and satisfy demand in the market, which is over-serviced.

And so we're slowly moving our production assets towards that end.

You've seen from the margins that we've been able to extract out of Maserati as to what is potentially doable if these assets are utilized for the right brand for global distribution.

I think you need to give us time to continue to develop the rest of the network on that basis.

I think, on completion of the plan, we will be more than in positive territory.

But it's not going to come from the traditional application of the traditional brands in the European market.

They just won't happen.

And I continue to be incredibly negative about the possibility of this market effectively coming back in and producing margins that allow anyone to recover the capital costs associated with the investments.

So we had to get out of the sandbox.

We've had this discussion before.

I'm as convinced now as I've ever been about the fact that our strategic direction is correct.

But it's going to happen selling mass-market cars.

I can tell you it won't happen.

There's not enough margin left in the business to try and get that done.

All right.

But, even if we look and admire the strong performance of Maserati, I don't find in the charts the update on utilization rates and so on and so forth.

But I was wondering, if you look at the industrial system today in Europe, what needs to be done?

I mean, do you still need to adjust capacity, reduce work force?

And, also, is there anything to be done in terms of dealership network, for instance?

Is it right-sized, or do you need more downsizing there?

Well, no.

I think that we need to redirect and reshape the distribution network in terms of what we're doing with Alfa Romeo, which we'll hopefully be in a position to discuss more openly when we get together in May.

But I don't know how to answer your question.

The answer is -- if I could do anything I ever wanted, would I keep the industrial network that I've got today?

And the answer is absolutely not.

You'll get that answer from me, and you'll get it from the CEO, Pedro (inaudible).

You get it from the CEO of Renault.

You'll get it from everybody.

Everybody understands the issue of overcapacity in this market and understands that it's -- you know, we're dealing with shark-infested waters.

Unless you have optionality within an industrial network, I think you're fundamentally in deep doo doo.

And we have been able to find a way to extricate ourselves from that predicament by developing brands that are available within the Group and which have a completely different market application in Europe.

If you look at the Maserati volumes, these are not European volumes.

A small portion of these are Europe-bound; the rest of it is for distribution across the world.

And we need to be able to replicate that with Alfa Romeo and, over time, deal with the issue of saturation of the industrial network.

But it's going to take time, and it's going to take patience.

And, you know, we need to wait for that to happen.

It's not going to happen in 2014; I can tell you.

We're going to see some significant improvement, I think, in 2015.

But 2014 is a transition year.

Okay.

That's pretty clear.

Thanks very much.

[Alessandro Filetti], Bank am Bellevue

I have two little understanding questions.

When I look at a presentation of (inaudible), where you have stated a net cash position of $1 billion and then, the other one, EUR215 million, what am I not understanding here?

This is the first question.

And the second question on the tax.

You're guiding for 2014 for basically sort of a tax gain of around EUR500 million, which seems to be a reversal of the -- sorry -- of the additional tax charge of EUR500 million, which seemed to be a reversal of the EUR1.5 billion gain that you booked in 2013.

We have to expect another two charges of EUR500 million in 2015 and 2016?

Thank you.

Hello.

The difference in the net industrial cash position is basically that we have a lower carrying value for the VEBA note in Chrysler's US GAAP (inaudible) as compared to Fiat's IFRS accounts because the first accounting exercises were carried out two different dates.

And the result of that, between 2009 and 2011, was that we booked it at face value in Fiat's books and at carrying value, which was a discount, in Chrysler's.

So the it's the first accounting difference in the valuation of the principal on the note.

To translate all that gobbly gook in plain English, when Fiat booked a VEBA note, it booked it at nominal value, which is the amount -- the face value of the notes when the original account was done.

For Chrysler, obviously, given the degree of uncertainty about the ability of the Company to repay its debt, the discount rate that was assigned to the valuation of that note was much higher than the one that's associated with (inaudible).

And so it got booked at a much lower value.

But that difference is a difference between two set of accounts, but it's pure accounting gobbly gook.

We owe them the nominal value of the note, plus accrued and unpaid interest.

And that number as of the end of December is very close to $5 billion.

All right.

Thank you.

Stephanie Renegar, JPMorgan.

Thank you very much for taking my questions.

Some of them have already been addressed a bit.

But just you mentioned talking about potentially in the future consolidating the debt at Fiat Chrysler.

And I was wondering if we could initially look at the example of Fiat Industrial in terms of this reverse merger for what happens to, in particular, the Fiat bonds.

And then, also, with the secured issuance that you're planning to take out the VEBA note.

I think, on past calls, you had talked about liking that note because it was an unsecured note.

Can you talk about your plans in terms of secured issuance in the intermediate term?

I'll give you the short answer, and then Richard can give you a longer one.

I think we're done after this issuance on the secured note side.

Look, if you look at the history of Fiat, Fiat has not raised debt on a secured basis and, certainly, since I've been here.

And I don't think it's done as historically.

So the Chrysler deal was certainly anomalous and reflective of the times.

I think we find it expedient, efficient, to access that pool of financing today.

I think you need to confine it to debt structure and utilization of that access that a repayment -- what I consider to be a market condition, high interest cost note with VEBA.

And I agree with you that sort of the fact that it was unsecured and it had to sign even a repayment schedule that was going out to 2022, removed any repayment pressure from the structure, but it's economically unwise to keep it in place.

When you run through the numbers and you look at the net present value, and I hate using this nonsensical stuff -- but, if you look at the actual economic benefit of Chrysler of prepaying those notes, accelerating a tax deduction of the note, and lowering the interest yield, I mean you're talking about a number in excess of EUR1 billion.

And leaving EUR1 billion on the table with the ability to try and execute it within the next 30 days, that route gets the prize all the time.

For EUR1 billion, I'll move at a speed of light.

I'll do it for less, in case you're wondering.

But, for EUR1 billion, for sure.

Thank you.

And, in terms of the bond structure at Fiat S.p.A., because there's a lot of outstanding notes, I was just wanting to get your thoughts about if those bonds are staying where they are or if the guarantee is moving into this new entity.

I think the guarantee of those bonds to the extent that a guarantee was originating at Fiat S.p.

A. will pass to the successor company.

Thank you very much.

[Heinrich Muller], King Street Capital.

I've got two questions, and the first one relates to the temporary redundancies in Italy.

I was wondering whether you can quantify, roughly, what the P&L impact would have been in 2013 if there was no redundancies.

And then the second question with regard to depreciation.

If you look at your depreciation, excluding unusuals, it's roughly EUR4 billion below CapEx.

I'm just curious of what your sort of long-term depreciation number should be.

I'll just be a second.

EUR5.5 billion of DNA.

It's not net of anything.

So that's the DNA we're running through the income statement today.

Obviously, we're running at a higher level of CapEx than that because I told you, for 2014, we're going to be EUR8 billion.

So, clearly, we're going through a large reinvestment cycle.

We're not going to run at EUR8 billion forever.

But I think there will be some increase in the DNA over the next two or three years as we complete the product actions we've discussed in the last few calls.

Maybe on the DNA, then, to rephrase it -- sorry to interrupt there.

If I take the EBITDA of about EUR7.5 billion, deduct the trading profit, then I get to about EUR4.1 billion.

So that ignores the unusuals.

If you would have looked back historically and not have made many impairments, what would that DNA have been, the ongoing DNA, not the one-off unusuals, which you've booked some this year as well.

To be frank, if I go back and do that -- I haven't done that exercise, so I don't know the answer to the question.

But I don't think it's particular relevant inasmuch as the DNA today, ex unusuals, is lower than our CapEx run rate, and I expect the DNA to go up by about EUR300 million or EUR400 million next year and probably a similar number the year after as we complete the launches of the new products we've been discussing.

Okay.

But it won't be (inaudible) to the EUR8 billion CapEx.

No.

No.

But we won't be spending EUR8 billion ad infinitum either.

So there's a point in time (inaudible).

Okay.

Well, thanks for that then.

The other one is the temporary redundancies in Italy.

I'm just curious what the cost would have been if none of those redundancies were taken during the 2013.

What would be the additional and staff costs for 2013?

We have never given out that number.

Let me see whether we have access.

It's under EUR100 million.

That's a rough number.

We normally don't give it out.

But it's under EUR100 million.

I would not -- I wouldn't swear by the number, but it's roughly right.

Okay.

Well, thank you.

Richard Hilgert, Morningstar.

I was curious to know a little bit more about Jeep potential.

We were talking about 1 million units for 2014.

Is that kind of a stretch number, or is that kind of a goal that you view as being solidly attainable?

And how much of that includes unit volume headed for Brazil?

Little to Brazil.

And the number is attainable and a stretch.

Attainable and a stretch.

With the import tariffs in Brazil, along with your increases in capacity in the region, is there opening for Jeep production in Brazil?

Yes.

And it will go in production in 2015.

In 2015.

Do you have to bring in Grand Cherokee, or is the plan down there to have the Cherokee and, potentially, a smaller unit at a later time?

The Cherokee will not -- neither the Cherokee nor the Grand Cherokee will be produced in Brazil.

We're talking about smaller-segment cars, both in the B and the C segment or the medium in the small segment.

Everything else that comes into Brazil will be an import out of the US.

Okay.

Then, with respect to the debt, the change -- the refinancing has no impact on the covenants that already exist in that limit cash flow between Chrysler and Fiat.

However, the covenants that are already in place -- they include a $500 million bucket, along with rolling, cumulative net income from Chrysler.

Does that net income from Chrysler -- ?

Up to 50% of that net income.

Up to 50%.

Okay.

And what you paid out or what was paid out in dividends from Chrysler --

$1.9 billion.

$1.9 billion?

Correct.

After -- did that include net income through-

The best answer to your question is that there's additional, unused capacity within the basket.

And does it keep accumulating as Chrysler makes net income for 2014, 2015, and so on?

Correct.

There you are.

Okay.

Very good.

Thank you.

Stephen Reitman, Societe Generale.

Apologies before for the technical problems.

A couple of questions on Chrysler.

On the fleet in the US, you were 22% in 2013.

Could you give us some idea what the daily rental proportion was?

And do you think your fleet mix is going to decline in 2014 as you launch the 200, which, presumably, you have a higher retail target for than the current model?

Look, I've always -- to begin with, the number for 2013 was 22%.

I just wanted to be clear.

We were the lowest if not one of the lowest; certainly, of the Detroit Three.

75% of that what you call daily rental.

We've always had the view that we will try and keep that number in absolute terms fixed.

So, by definition, the percentage of total sales would go down.

And that's our expectation in 2014.

We need to be careful because the 200 is a car that has a significant relevance in the rental market.

And we got to be careful that we don't choke off some of our significant customers in that business.

So some portion of it will go there.

My expectation, although we don't have sort of refined forecasts yet, is that we will be below the 2013 percentage number.

Right.

Moving on to Jeep, on the Cherokee, I think the retail was about $15,000 in the US and, I think, $17,000 for the month across territories.

What is a figure that we could expect as you get to full production on the -- at the plant and the monthly selling rate?

It would be an indicative level of the Cherokee's potential in the United States, would you say?

That's a tough question.

And I'm not sure that [Mike Banley] has given you an indication of overall retail volumes that we expect for the car.

I can tell you that we have an incredibly strong order book, probably enough to fill the plant for the next 75 days, which is unusual, given the way in which the dealer network places orders, which is much shorter in duration.

So I much prefer to give you a confirmation of that number by the end of Q1 after I've seen February and March.

Obviously, we have high expectations of the plant, in principle, to make about 240,000 cars a year for global distribution, including NAFTA.

Let's see how many -- and, obviously, I prefer to sell as many retail in NAFTA as I can.

Let's wait 'til the end of Q1 before we give you a firmer number.

It's doing well.

I don't want to jinx it with a forecast.

Thank you.

Just, finally, on Brazil, I understand your guidance for what you expect the Brazil market to do in 2014.

Just so that I fully understand what you're also saying about Fiat, we saw in 2013 that, in the passenger market, Volkswagen and Fiat took quite a hit in terms of volume falling significantly, more than the market itself.

You alluded to the fact that the market is changing, and your new plant will certainly address that from 2015 in terms of having models which are more relevant to the change in society in Brazil.

Does that mean that you expect in 2014, at least, to see still -- not to be able to match the market development?

That's a willful choice on our part of not playing.

I think we need to be very careful here that we don't start twisting ourselves into market share gains.

It's not worth it.

So we're going to transition through 2014.

I think we'll hold our position.

But I would not say 2014 is indicative of anything because I think that the real issue is what happens in 2015 when the new plant comes on.

And how does that change the dynamics of the business?

And, I mean, just going back -- sorry -- just on Brazil.

I mean, clearly, we've seen some significant gains from the companies that have set up more localized production.

I'm thinking particularly of Hyundai and Toyota, who had the significant gains in 2013.

Have they changed at all the dynamic, you think, of pricing in the market?

Or are they -- ? Is that having an impact as well?

Or is it otherwise?

It is business as usual?

No.

I really don't think it impacts pricing at the current portfolio of products.

I think they brought in some newer products.

You got to be careful when you talk about capacity expansions as to whether they're truly comparable to the kind of production capacity that we're installing at Pernambuco.

And I don't want to be disrespectful on my Asian competitors, but, at least in connection with one of them, I think there is an issue as to effectively -- as to whether there's effective production in the country or not.

They may be more of a CKD operation, which obviously has got some very negative implications in terms of margins.

But I'm not concerned about the fact that they're coming on.

I think the ones that you made reference to are not indicative of the ongoing competitive battle between ourselves, GM, and Volkswagen.

I mean, those are the three players that I think have sort of carved out a particular space in the marketplace.

And the decision as to who takes what is limited to those three.

I don't think that the Asians are today disruptive of that competition because they're almost playing on the side.

I'd be much more interested to see what happens when Pernambuco comes on and how we handle the additional volume and the presence in the marketplace.

That's why I said I think 2014 -- I would be happy if we maintained sort of 2013 operating performance and started tackling 2015 with, certainly, a different view.

It's very difficult to call Brazil in 2014 because of all the things that are going on.

There's a presidential election at the end of the year, the World Series.

There are a lot of extraneous factors that are going to impact the performance of that market, most of which are designed to be -- I think are intended to be positive.

And so I remain cautiously optimistic.

The forecast that we gave you, I think, is a balanced view.

It may do better than that.

But you're asking me to start taking you through the intricacies of the way in which we manage Brazil, and I think that I've given you as much as I can in terms of the broad lines.

It is a competitive market, but I think that there is an understanding as to -- in terms of the other big players as to what the implications are particularly offensive practices.

And the market is disciplined.

So let the market adjust.

It's in the process of doing that now.

Thank you.

Sorry.

Finally, just on Maserati, congratulations on that fourth quarter margin.

Certainly, it's been achieved on a relatively low volume compared to the 50,000 target you have for 2015.

So what was it that drove such a high level, the margin, in the fourth quarter?

And, considering that you will have a much higher volume in 2014, if we (inaudible) -- why can we not take the closing quarter as a baseline for looking into 2014 then?

Don't, because there's development work that's going on at Maserati.

I mean, that's why I said -- I mentioned that in my remarks in the opening.

Don't take 15% margins as being sort of expected performance quarter by quarter.

There will be ups and downs as we work our way through 2014.

The volumes will be up, but it will be additional distribution costs associated with that entry.

And we continue to develop the next generation of cars inside Maserati.

This is at additional cost.

We are building capacity within the system together with the development of Alfa.

These are all things that will ultimately impact on performance.

Be very careful about sort of extrapolating that going forward.

I think we'll have a much better view after the Levante comes on stream in 2015.

Then you'll see full cycle and potential earnings coming out of Maserati because then the expansion of that product range is going to be limited to, potentially, a coupe to replace the Gran Torismo, which may happen in the later part of 2015 or early part of 2016.

So I would caution you against using the margin generation on the Maserati in Q4 as being sort of indicative of baseline performance throughout 2015 -- throughout this year.

Look, the best thing for us to do is to give you better guidance when we get together in Q1.

And then we'll give you a better indication as to where we think we can take margins.

But the quarter was exceptionally profitable.

I think we had -- we shipped everything we had.

We run a very lean machine.

I think that cost structure will levitate up in 2014.

And that negatively impact margins for at least part of the year.

Thank you.

Thank you, That will conclude today's question and answer session.

I would now like to turn the call back over to your host, Marco Auriemma, for any additional or closing remarks.

Thank you Barbara.

We would like to thank everyone for joining us today.

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

We look forward to seeing you in early May for the capital market day.

Have a good one.

Bye.

Thank you.

That will conclude today's conference call.

Thank you for your participation.

You may now disconnect.