Stellantis NV (STLA) 2014 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to today's Fiat Chrysler Automobiles 2014 third quarter results conference call. For your information, today's conference is being recorded.

At this time, I would like to turn the call over to Joe Veltri, Head of FCA Global Investor Relations. Mr. Veltri, please go ahead, sir.

Thank you, Clodagh, and good afternoon or good morning to everyone. Welcome to the first webcast of our quarterly results for the newly formed company, Fiat Chrysler Automobiles.

The earnings release issued earlier today, together with the presentation material from today's call, are available on our Investor Relations website.

As is customary, today's call will be hosted by the Group's Chief Executive, Sergio Marchionne, and by Richard Palmer, the Group's Chief Financial Officer. After introductory remarks, they will be available to answer your questions.

Before we begin, let me remind you that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included on page two of today's presentation. As always, the call will be governed by this language.

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

Thanks, Joe. I?m going to spend very little time discussing Q1. I think from a Group standpoint we have delivered a decent set of results. Richard will take you through the intricacies of the earnings announcement.

A couple of things that I think you need to keep in mind, I've seen some of your concerns about the level of debt at the end of the third quarter. If you follow the historical pattern of the working capital build in FCA, you'll understand this is purely due to seasonality. And I would not read much into the number as it stands.

The other thing is that what is buried in the EBIT number, and we have not singled it out and Richard will explain, is what I consider to be a significant cost associated with the recall campaigns in the US. We have not flagged this issue up.

We consider this to be sort of part of -- unfortunately part of the normal trading performance. I've mentioned this in the past, but I think we need to get used to a time of adjustment here as we understand exactly how to deal with this increased activity.

I've also been of the view that over time these costs, if they become structural to the business, will end up being part of the pricing mechanism in the marketplace. So, I'm not sure that I would count on these as being sort of permanent deductions from our normal earnings generation function.

It's a big day. I think today we resolved a number of issues that we have been facing here at FCA for a number of years, certainly from the very first time that I joined the group back in 2004.

This whole question about the inclusion of something which is as unique as Ferrari in our portfolio and the ability to maintain that business within the fold, even though valuation metrics are drastically different between these two businesses, has been an issue that we've dealt with and wrestled with for a number of years.

I think today -- the announcement that we've made today and especially, I think, the clarity of intention about the method with which we're going to deal with this asset is going to allay a lot of concerns about what our future looks like. I think we are doing the right thing by giving Ferrari a proper, unique place in the capital markets to be evaluated and valued as a luxury automaker.

And I think the opportunity to do this in an intelligent way, by accompanying it with a mandatory convertible, is probably the best way in which we can guarantee the least amount of dilution, while at the same time providing what I consider to be a more than sufficient equity base for us to execute the plan over the remainder of the plan period.

The other thing that we've done which is somewhat unusual is, in order to sort of allay any concerns that you may have about 2015, we've given you our best read today. Obviously we'll confirm these numbers when we finish off the year, but our first read of what 2015 volumes look like, and they're roughly 5% above 2014 levels.

So, we remain bullish on 2015. I think this is -- I'm expecting a decent performance out of EMEA in the fourth quarter as the Jeep and the Fiat 500 production ramp up. I think next year is going to be a decent year, and we certainly are looking (inaudible -- technical difficulties) the introduction of alpha at the conclusion of the second quarter of 2015.

I have no bad news to give you. I think that the announcements that we've laid out today, including a very clear commitment to remove all ring fencing problems associated with the Chrysler financing, is going to -- certainly paves the way for absolute clarify in the financing structure of Fiat Chrysler now that we are listed in New York.

I think we are continuing to work with a number of advisors to try and find a way to accelerate the timeframe associated with the payment of those bonds, the ones that are callable in June of 2015 and June of 2016. And hopefully, we can remove the last hurdle of this sort of very peculiar financing arrangement that related to a peculiar time in our history.

But, today is a big cleanup day. We've dealt with a lot of residue, and I think we are creating the basis for -- a sound basis for the execution plan going forward to 2018. Richard?

Thank you, Mr. Marchionne, and good day to everybody. I'm pleased to present to you the financial results of FCA for the first time after the effectiveness of the merger of Fiat S.p.A into Fiat Investments NV.

These results are reported under the same accounting standards, IFRS, and are fully comparable with figures previously reported by Fiat S.p.A. Now, let's start from slide four on the third quarter summary.

Group worldwide shipments in the quarter were up 10% year-over-year to 1.1 million units. This takes nine month shipments to 3.4 million.

Group revenues were EUR23.6 billion. Nine month revenues amounted to EUR69 billion.

EBIT was EUR926 million, resulting in nine month EBIT reaching EUR2.2 billion. Our net industrial debt at September the 30th was EUR11.4 billion. Total available liquidity for the group at the end of the quarter was EUR21.7 billion.

On August the 1st, the shareholders' meeting approved the cross border merger of Fiat S.p.A with and into its wholly owned subsidiary incorporated in the Netherlands, Fiat Investments NV. This merger became effective on October the 12th after all conditions precedent had been met. The new company, renamed FCA, started trading on both the New York Stock Exchange and the Milan Stock Exchange on October 13th.

In July, the group issued an EUR850 million bond with a 4.75% coupon and an eight year tenor, which was subsequently reopened and increased by an additional EUR500 million in September.

Also in September, Fiat issued a Swiss franc bond for CHF250 million, with a 3.125% coupon and an eight year tenor.

On the product side, the highlight of the quarter was the launch of the new Jeep Renegade in Europe. The new Jeep is produced in Italy at the Melfi plant, and expands the brand's market coverage by entering the small SUV segment.

On the back of Q3 performance, we are confirming our full year guidance. And in addition, our initial view on 2015 worldwide volumes would indicate that they will be in the range of 4.8 million to 4.9 million units.

Moving to slide five, which shows the group financial performance for the quarter, group shipments were up 10% with all regions contributing positively except LATAM, which declined by 14%.

NAFTA and APAC were up 21% and 22% respectively. EMEA was up slightly at plus 3%, while luxury brands were up 94%, driven by the outstanding performance of Maserati. Year-to-date shipments were nearly 3.4 million units compared to 3.2 million last year, an increase of 7% year-to-date.

Group revenues were up 14%, attributable to the higher volumes in NAFTA and APAC, as well as an increase for luxury brands, up 35%, driven by higher Maserati volume.

Revenues for the components business were up 11% year-over-year.

Group revenues for the first nine months were EUR69 billion, more than EUR6 billion up compared to last year, or 10%.

EBIT for the group was EUR926 million in the quarter, up 7% from Q3 2013. I will provide more details by region on the following pages.

Year-to-date EBIT was nearly EUR2.2 billion compared to EUR2.5 billion last year. Year-to-date EBIT, excluding unusual items, was EUR2.6 billion.

Net profit for the quarter was EUR188 million, in line with prior year. This includes net financial expense of EUR511 million and income taxes of EUR227 million.

Net profit, ex unusual items, was EUR224 million versus EUR190 million last year. Year-to-date, net profit totaled EUR212 million. And ex unusuals, the year-to-date net profit totaled EUR509 million, compared to EUR691 million last year.

Net industrial debt at September end was EUR11.4 billion, up from EUR9.7 billion at the end of Q2 2014, reflecting seasonal cash absorption of EUR1.7 billion, which is in line with the prior year.

CapEx of EUR2.1 billion for the quarter is in line with full year guidance, and up from EUR1.8 billion in the same period last year.

Liquidity remained strong at EUR21.7 billion, including EUR3.1 billion of undrawn committed credit lines, and was consistent with EUR21.8 billion at the end of Q2 2014.

Operational absorption and our bond repayments at maturity were offset by new bond issuances and bank financing, as well as a favorable currency translation impact.

Turning to page six, you can see the year-over-year changes in EBIT for the various areas of the business. All segments were favorable with the exception of LATAM, which continued to experience weak market conditions.

In the blue box below the graphic, you can see performance compared to the sequential quarter. EBIT declined by EUR35 million, driven by seasonal negative impacts in EMEA and components, higher warranty and recall costs in NAFTA, and the negative performance in LATAM, partially offset by improvements in APAC and from luxury brands.

Slide seven shows the drivers of the change in net industrial debt, which increased by EUR1.7 billion during the quarter. Change in working capital was negative by EUR0.9 billion, reflecting the seasonal impact of reduced production and sales levels in Europe and NAFTA.

CapEx spending was EUR2.1 billion, reflecting new product launches and startup costs for the Pernambuco plant.

Now turning to page eight for a review of the performance by region for the mass market brands starting with NAFTA, the industry remained strong, up 8% in the US and 11% in Canada, supporting an 18% sales increase for the group in the region.

US vehicle sales were up 19% to 536,000, with Jeep up 46%, its best Q3 ever, with Jeep Cherokee reaching sales of nearly 50,000 units in the quarter. Ram was up 30% year-over-year and Chrysler was up 11%, allowing the brand to post its best Q3 sales since 2007.

US market share was up 110 basis points versus prior year, driven by a 20% increase in retail sales. Fleet mix was in line with prior year at 18%.

Dealer inventory in the US remained stable at 71 days supply versus 72 days at end of Q2.

In Canada, vehicle sales were up 16% to 78,000, with Jeep sales more than doubling versus prior year. Market share was up 60 basis points.

In the quarter, several of our products received awards from the Texas Auto Writers Association, including the Ram 2500, Jeep Cherokee, and Jeep Grand Cherokee, which was named SUV of Texas for the fifth consecutive year.

Page nine deals with the financial highlights of the NAFTA region. Shipments were up 21% to 613,000 units, with the US up 23%, Canada up 21%, and Mexico down 11%. Revenues were up 20% year-over-year.

EBIT in the quarter was EUR549 million. On a year-over-year basis, volume improved. But, due to an increase in the shipments of 108,000 units, our net price was higher due to positive pricing actions, partially offset by higher incentives on certain vehicles.

These positive effects were nearly offset by higher industrial costs due to vehicle content enhancements and higher warranty and recall costs, principally due to some campaigns. These costs were partially offset by purchasing savings.

Compared to previous quarter, NAFTA EBIT declined by EUR49 million, mainly due to the increased recall costs, partially offset by the better pricing.

Moving on to slide 10, the LATAM auto industry was down in the quarter by 14%, reflecting weaker trading conditions. In Brazil, the industry was down 12% year-over-year and down 30% in Argentina due to import restrictions introduced in 2014 and taxes on higher end models.

In the region, our sales were down 33,000 units due to the general market weakness. Market share, however, was up slightly by 10 basis points at 15.9%.

In Brazil, share was up 10 basis points, and the group maintained market leadership with a 360 basis point lead over the nearest competitor. In Argentina, share was up 170 basis points, with share in the combined A/B segment at 16.7% thanks to strong performance by the new Palio.

Stock levels remained in line with the prior year, at around one month of supply. The upgraded Novo Uno was launched in September with new advanced features and a refreshed interior/exterior design.

Turning to page 11, shipments in LATAM were down 14%, with Brazil declining by 9% and Argentina by 27%, reflecting the overall market deterioration, partially offset by our market share increases.

Revenues were down 12%. EBIT declined to EUR51 million. Impact from volumes was negative with 33,000 units decline, reflecting the worsening trading conditions, partially offset by better mix.

Disciplined pricing actions in Brazil and Argentina nearly offset the increased industrial costs and SG&A, which were impacted by higher input cost inflation, Pernambuco startup costs, and higher advertising related to new product launches.

Compared to the prior quarter, EBIT declined by EUR11 million, despite positive contribution from mix, principally due to FX impact and some restructuring costs.

Moving to slide 12, APAC continued to experience strong industry demand, with continued growth in China, India, and South Korea, partially offset by slight declines in Japan and Australia.

Group sales, including JVs, were 66,000 vehicles during the quarter, up 25% year-over-year and outperforming the industry. Sales increased significantly in China, South Korea, Australia, and Japan, while India was down.

Jeep remained the region's top brand, representing 52% of total group sales and growing by 37% in the quarter, driven by a strong performance of the Grand Cherokee and the newly launched Cherokee.

The Cherokee was also introduced at the recent Indonesia Auto Show, and will be the first model commercialized by FCA in that country.

Fiat brand volumes were up 16%, driven by Viaggio and Ottimo. FCA gained share in all major markets except in India, with Australia having the highest gain at 70 basis points.

Moving on to slide 13, APAC continued its strong performance, with shipments up 22%, with the Jeep, Fiat, and Dodge brands all increasing by more than 20%. Revenues were up 30%, driven by the higher shipment number.

EBIT for the quarter reached a recent level of EUR169 million, primarily on the back of both positive volume and mix.

Net price deterioration primarily reflects the competitive environment in China, and negative FX impacts for vehicles imported to Australia. SG&A increased to support the continued volume expansion.

For the EMEA region on slide 14, the passenger car industry for EU28+EFTA registered its fifth consecutive quarter of growth, with demand up 5%, 3.1 million vehicles. All major markets experienced growth, with Italy and Germany each up 4%, UK up 6%, and Spain up 16%. France remained flat.

Passenger car sales for FCA were up 1% to nearly 200,000 units, with market share at 5.5%, down slightly due to share losses in Italy. Share in Europe excluding Italy was stable at 3.3%.

During the third quarter, the Jeep Renegade was launched, the first FCA vehicle designed in the US and manufactured in Italy for sales to customers in more than 100 countries worldwide.

Prelaunch activities and media drive events were conducted in the quarter, with the vehicle receiving very positive reviews. Market launch in Italy began in September, and will be followed by other European markets during Q4.

For LCVs, the industry was up 12% to 407,000 units, driven by a recovery in all major markets. Italy was up 24%, the UK up 20%, Spain up 24%, Germany up 10%, and France up 1%.

Group sales were up 11% to 60,000 units. Market share increased by 30 basis points to 10.9%, with share gained in particular in Spain, Italy, and the UK.

Moving to slide 15, overall shipments in EMEA were up 3% to 218,000 units, with passenger cars up 1% to 169,000 units and LCV up 13% to 49,000. Revenues grew 6% on the back of favorable mix, driven by Jeep and LCV performance, as well as the higher shipment volume.

These two factors also contributed to the EBIT improvement, along with a further reduction in industrial costs driven by continued efficiencies and purchasing savings, partially offset by the startup costs at the Melfi plant due the Jeep Renegade launch.

Net pricing, however, was negative due to continued competitive pressure in the passenger car segments. The increase in SG&A was driven mainly by Jeep advertising to support brand growth and the launch of the all new Renegade.

On the following slide, we review the performance of Ferrari. Revenues were EUR662 million in Q3, an increase of 24% from Q3 2013. Ferrari shipped 1,612 units, up 8% versus Q3 2013. Shipments of 12 cylinder models were down 10%, while shipments of eight cylinder models were up 15%.

The US, which is the number one market for the brand, was down 14%. Volume was up 4% in the five major European markets, and Asia-Pacific volumes were also up significantly. EBIT of EUR89 million was flat compared to last year.

Moving to slide 17, Maserati shipments for the quarter were nearly 8,900 units compared with around 4,000 units in Q3 2013, driven by the continued success of the new Quattroporte and new Ghibli, with each major market more than doubling its sales.

North America, the number one market for the brand, was up 106% versus Q3 2013. Greater China was up 106%, and Europe was up 177%.

Revenues totaled EUR652, an increase of 47%. And EBIT for the quarter was EUR90 million, more than double that of Q3 2013 on the back of the record volume growth. EBIT margin rose by more than 400 basis points to 13.8%, compared to 9.7% a year ago.

The components business, as shown on slide 18, posted combined revenues of EUR2.1 billion, representing an 11% increase for the quarter, with combined EBIT of EUR48 million, up 30%.

Revenues for Magneti Marelli rose by 15%, with positive performance in North America and Europe offsetting a decline in Brazil, while China was flat. EBIT was EUR37 million, an increase of EUR9 million, mainly reflecting higher volumes.

Teksid revenues were EUR152 million. Volumes were down 12% at constant perimeter for cast iron business and up 17% for the aluminum business. EBIT was up EUR2 million.

Comau revenues were EUR335 million, with a 4% increase mainly attributable to the body welding business. EBIT was EUR9 million. Order intake totaled EUR484 million, a 19% increase over the third quarter of 2013.

Moving to slide 19, which shows upcoming product and post quarter end events, the RAM ProMaster City, developed from the successful Fiat Doblo, will be launched in NAFTA by year-end. It has several best in class features, including best in class fuel economy, torque, payload, and cargo volume, and offers the first nine speed automatic transmission available in a commercial van.

The all new Fiat 500X will be launched in Europe in Q1 2015. This new compact crossover expands the 500 family by offering a unique combination of style and function, and will be available in both 4x2 and 4x4 configurations. Prelaunch activities have already begun across Europe.

We can now move to slide 20 to review our expectations for full year 2014 market demand in each region. For NAFTA, we have slightly increased our estimates for the US industry, now expected to reach 16.7 million units, previously at 16.5 million.

In Canada, the market is projected to be substantially in line with the record levels reached in 2013 at 1.8 million vehicles.

The outlook for LATAM has been adjusted downward to 5.2 million vehicles to reflect the market uncertainties that continue.

The Brazilian market is expected to be down for the full year by 8%, while Argentina is expected to decline by double digits.

In APAC, the industry demand is still projected up by 7%, with improvement driven by China, India, and South Korea.

The overall passenger car industry in the European countries is confirmed up 5% year-over-year. And the LCV market in Europe is confirmed at 1.7 million units, with Italy expected to post a 14% increase.

Finally, turning the page to 21, as stated earlier we are confirming our full year guidance for 2014. Shipments are expected of about 4.7 million units.

Revenues are expected to be greater than or equal to EUR93 billion; EBIT, ex unusuals, between EUR3.6 billion to EUR4 billion; group net profit, ex unusuals, between EUR0.6 billion and EUR0.8 billion; and net industrial debt at year-end between EUR9.8 billion and EUR10.3 billion.

Thank you, gentlemen. I will now turn the call back over to Clodagh and we'll begin the Q&A session.

Thank you. (Operator instructions.) Philip Watkins, Citi.

Oh, yes. Good afternoon. Thank you for taking my questions, Philip Watkins from Citi. I wanted just to ask a couple of things. I don't know if you'll be prepared to comment really, but on Ferrari, I mean, how much do you think it's worth, firstly?

When I look the mandatory convertible of EUR2.5 billion, what is the thinking behind the absolute number? I was looking at your credit ratings and the outlook, and it looks stable. That's quite a bit number. So, what drives that?

And thirdly, actually, on the Ferrari IPO, the proceeds of the 10% are going to go into FCA. Is that the intention? Thank you.

The proceeds of the 10% are FCA proceeds.

The question about how much is Ferrari worth, the best way to look at this, and I think you need -- obviously we have an internal view, which properly positions Ferrari in the luxury goods world. I think you need to wait until the market assigns a value to this asset.

I can tell you that it is drastically different from the valuation that is being applied to FCA today and, for that matter, to any other carmaker worldwide. So, I think we will all be pleasantly surprised when the thing does float and when it's placed.

In terms of the wisdom behind the EUR2.5 billion, we have run some significant stress tests in our system here to find out what is the amount of capital that is required to withstand the most severe contraction of volumes across the business.

And we think that, by the combination of the placement of the 100 million shares and the EUR2.5 billion mandatory, plus the dividend uplift for Ferrari before it gets floated up plus the placement of the 10% of the shares, that we'll have more than enough capital to withstand potential reversal of volumes in the marketplace and to -- gives us all the comfort to go out there and execute the plan until 2018.

It is really designed to deal with a worst case scenario. I think that -- and we had a pretty lengthy dialogue with our Board today. I think we all feel relatively comfortable that we've looked after the worst possible scenarios.

I'm delighted that we were able to get it done, because it -- from our historical position, you understand that if you look at the history of Fiat going back to 2004, other than the [converstando] which existed prior to my arrival, we have not raised a single euro of equity, notwithstanding the turmoil back in 2008 and 2009. And we carried out the acquisition of the remaining interest in Chrysler without raising equity.

So, this is really putting everything in the right place. I think the spinoff of Ferrari gives phenomenal support to the placement of the equity. It's a phenomenal underlying element in the valuation on their mandatory, because of the fact that these -- on conversion, these shareholders will receive FCA and Ferrari shares.

So, I think it's an intelligent way to try and deal with the potential dilution after a mandatory. We'll just have to go out there in the next few days and really try and put the final touches to this document before we hit the street and assess selling it. We'll try -- hope to get done within the month of November.

May I ask as well then, in terms of Ferrari, is it likely to go debt free, or is there any intention to put debt in there?

Our objective is to make sure that Ferrari retains its investment grade status. And so, we're working now with our advisors.

There's no doubt that the business can withstand a level of debt. And so, I think we'll place enough in there to make sure that it looks like a normal business and that it still satisfies the criteria of investment grade.

And then, actually within that, I mean, in terms of net debt to EBITDA, what do you think is an appropriate level to remain -- what do rating agencies think is an appropriate level to remain investment grade (inaudible -- multiple speakers) to debt?

Let's just -- I mean, instead of us trying to peel the onion in that fashion, let me tell you what I think the total package of the operation is worth in terms of capital injection.

Yes.

It's worth in the neighborhood of EUR4 billion all-in when you take all the pieces coming through. The net impact from our debt position today of EUR11 billion, assume that it's at EUR11 billion, we're down at EUR7 billion after everything gets executed.

And one more tidbit of information, which you may just store in the back of your head for cocktail conversation purposes, is by 2018 the impact on our reported earnings -- not earnings per share because obviously we're issuing shares, but on reported earnings is almost negligible.

This operation does not change directionally -- or even from a quantitative standpoint does not change the 2014 to 2018 plan. So, the great thing about this business and the way in which the plan will structure it is, after we finish all this, as a result of the realignment of the debt, the reduction in debt levels, the reduction in liquidity that we'll be able to accomplish through all this, especially after we remove the ring fencing, it's going to have almost a negligible impact on net income for the group going forward.

And sorry, if I may just ask one more on Ferrari, how will it fund credit sales? I'm just thinking about how to think about how much debt might go into that.

As I said, let's not try and second guess that choice. We'll put enough debt in there that it can easily withstand an investment grade analysis. So, just know it'll be evident when we do it.

Thank you.

Fraser Hill, Bank of America Merrill Lynch.

Yes, hi. Good afternoon, Fraser Hill from Bank of America. I just wanted to come back to Ferrari obviously, and to think about the cost profile of the business going forward. I think in the past you've talked about the business possibly looking at being able to sell a substantially higher amount of units, maybe moving from the 7,000 sort of level up to the 10,000 or 11,000. So, can you give us a bit of color around how we should think about that increase in production? What sort of timescale? What sort of investments are going to be required to get to that point? Maybe a little bit of color around CapEx, CapEx to sales, how that should progress.

Next question was moving on to North America and the margins. I mean, you were disappointed with the profitability in Q2. I think you were quite clear on the call on Q2 that you needed to address sort of broad incentive and commercial support for the business. What's -- and if feels as if you should have had some tailwinds from costs falling away, I guess, in terms of launch costs causing a few hundred. So, what was really the bigger weight, and how should we think about that improving, if at all, going forward? Thanks.

Why don't we get the second question out of the way. I'll get Richard to respond, and maybe you can give him some color on the warranty and repair -- and the one-off recall cost, because it's very -- I mean, the number is relatively large when you look to the bar chart and you look to the size of the increase in industrial costs. It's nearly EUR0.5 billion.

So, Fraser, the industrial costs increase, that increase of EUR460 million includes 250 million [chioka] of campaign and warranty cost increase because of recall campaigns principally.

So, if we were to exclude those going forward, as they may or may not be one-offs -- obviously, as Mr. Marchionne mentioned, obviously the whole industry is looking at recall campaigns very closely at the moment to see how the situation develops with the intensity that's being placed on that process at the moment.

But, excluding those items, we would have been up about 2 points compared to where we are. So, the 4% that we ran at would have been nearer to 6%. And so, we would have started to see some margin improvement in NAFTA if we hadn't had those items in Q3.

And some of the issues that you made reference to earlier about my level of unhappiness about pricing and discounts were cured in Q3. So, I'm not -- I don't think there's a relatively large issue on pricing.

I think you'll see a similar performance on that side of it in Q4. That's not the problem. As I said, I think the single largest cause of our sort of depressed NAFTA earnings was due to the recall campaign costs, which are substantial.

The question on Ferrari, let me just give you -- before we start selling the stuff on the phone today, I mean, I'll be on the road with proper documentation of the try and back up the valuation argument on Ferrari so you can make an intelligent decision on the mandatory.

When I made reference to the volume ambitions of Ferrari, I only posted hypothetical numbers on the assumption that Ferrari increased volumes from its current levels of 7,200 cars up to 10,000. I don't think I ever had a discussion about 800,000. If I went back to the May 6th presentation, the highest number on that chart was 10,000 cars.

And it was pitched as a matrix to try and show you what the impact on profitability would be if volumes were to go from the current levels to 10,000. I never made a commitment to increase levels to 10,000, because I think one of the things that we need to be incredibly respectful of is the maintenance of the exclusivity of the brand and any attempt at vulgarizing this through increased volumes.

I was down in California for the 60th anniversary of Ferrari with a bunch of diehard aficionados of the brand and the incredibly proud showing of historical cars. Our customer base of Ferrari is unique and it needs to be preserved as a unique group of people. We can't flood the market.

The only thing that could cause a shift in volumes is an increase in the customer base that wants access to the brand. And what I've said is that if the number of high net worth individuals increases that drastically, we need to somehow deal with that issue on a global scale without increasing volumes in particular jurisdictions.

I think that the number of cars that we're currently selling in the US is a number that going forward, regardless of what we do with overall volumes, is not going to increase substantially.

So, for all the customers of Ferrari, they should never, ever worry about the fact that there's going to be -- this is a supply-based equation. We're going to continue to focus on the exclusivity of the brand. And the associated cost of expanding distribution beyond current levels is not going to have huge capital costs because it effectively is a repetition of current industrial policies, and it will not twist the organization beyond repair.

I think we need to wait until we hit the market sometime in November to try and tell you the full Ferrari story. I can only tell you that we will handle this very, very carefully because we understand the downside risk of making this brand way too accessible. I think we need to remain exclusive. And it's been at the heart of the success of Ferrari so far, and that will not change.

Okay, thanks for that. I just had one follow up, actually, about your comment about the actions you've taken today, reducing net debt by EUR4 billion. Is that over a reasonably long data timeline? Because I guess in the more immediate sense, you've got roughly EUR2 billion on the mandatory, EUR800 million or on the FCA shares, and then whatever it's going to be on Ferrari. I mean, let's call it -- or a EUR500 million, EUR600 million is the stake. I mean, there's a gap there. Is the gap higher Chrysler dividends over time? Is that what you were alluding to in terms of that EUR4 billion reduction?

No, the EUR4 billion number is the number that's going to be hopefully available within the period of nine months from today. So, I really wouldn't worry about it.

I mean, most of the exercise is going to be executed in Q4 of this year between the mando and the secondary offering. All the other stuff on Ferrari is effectively an internal process of leveraging up the house and distributing dividends back upstream and getting it ready for floatation.

So, we should be in the market hopefully by June 30th of 2015 with the 10% of Ferrari. Most of this transaction should be able to be put to bed by Q3 of next year. So, I don't think it's that far off. And the number we're looking at is approximately EUR4 billion.

Okay, great. Thank you.

Thanks.

Charles Winston, Redburn Partners.

Yes, hi. Good afternoon. Just a couple left from me, Charles Winston from Redburn. The terms on the mandatory convertible, I guess there are two ways of pricing that, one of which is to think about what sort of conversion price you'd want and then let the debt markets pick a coupon, or the other one would be to try to find an ideal coupon and then see what sort of conversion price we would be looking at. Any thoughts there in terms of how you would look to price the mandatory convertible, and then sort of what terms we'd be looking at, and then --.

Short-dated paper, maximum upside on conversion.

So, just to max up. Then, in other words, looking at a reasonably high convertible price.

Yes. The whole purpose of this -- we are remaining completely bullish on the plan, as we have been so far. Any equity issuance now has got to protect dilution.

Okay, very clear. And just, sorry, the second question -- sorry.

Charles, it's short-dated paper, so don't worry about it. The coupon won't kill anybody.

Okay, thank you. Just very quickly, is it correct to say that the ring fence would exist until the second refi on the Chrysler bonds, in other words, June 16th? Is that correct?

Unless I can find an intelligent way of getting it done earlier, and until we run crossover analysis on the benefit to us of extending term and getting rid of the restricted payment basket earlier. We're playing with all this now. My hope is that we can get it done before then.

Excellent, very clear. Thanks a lot.

Martino De Ambroggi, Equita.

Thank you. Good morning, good afternoon, everybody. Two more questions on Ferrari. The first is on the voting rights, if you are planning a scheme similar to the FCA with a double voting right for long term shareholders.

Too early to tell.

Okay. And the second is still on Ferrari's volumes, because I clearly understood your answer. This year should be up 5% to 7,200 cars.

Yes.

Should we take this low mid/single digit growth as a reasonable volume growth in order to preserve the exclusivity of the brand?

No comment. We'll talk about this when we get on the road.

Okay. And the second question is on the full year indication of volumes, 4.8 million, 4.9 million. Could you share with us what are the assumptions by region?

By the way, that's a 2015 ambition. It's not a 2014 number. But, maybe if Richard wants to do it. I'm not doing it, but if Richard wants to do it, it's his nickel.

Well, in terms of our market forecasts, I think we -- obviously we think NAFTA's going to continue to be up. I think consensus is around 17 million for the US.

Latin America flat in the first half, some improvement in the second half potentially, but we're not banking on huge growth there. EMEA slightly up, as it has been in the last few quarters, but again, nothing earth shattering.

And Asia-Pacific really continues to grow, but clearly we're not driven by market there. We're small enough to just worry about building our own share.

And I would say that all of the regions are going to contribute to the growth, even if obviously Latin America is the one that's under the most pressure at the moment from a market point of view. But, we have the Pernambuco plant coming on in the second half of the year, which will be the Jeep product coming in for the first time in a localized basis.

We have the Renegade and the 500X in Europe and in North America. We have the new minivan in North America. So, there are a number of product actions, obviously, also to help us to reach those numbers. So, we think that the number is imminently doable.

The single largest shift in volumes, just to give you some granularity, is the fact that the Jeep and 500X plant will be running full cycle in 2015. And I haven't told this to Richard yet, but the actual -- the north Brazilian plant will be up and operational in Q2 of 2015.

So, we'll actually have two and a half quarters of effective volumes coming out of that plant. And that's just defined as shift in volumes year-over-year.

Okay, thank you.

Alberto Villa, Intermonte.

Hi. Good afternoon. Again, on Ferrari, do you plan any change at the governance level? So, Mr. Marchionne, will you keep the chairmanship of Ferrari after the IPO?

Yes.

Okay. And secondly, let's say the interactions at the industrial level between Ferrari and the other, let's say, luxury brands, how should --?

Limited to arm's length providing of engines from Ferrari down, nothing upstream. Everything is down.

All right. Okay. And finally, another two small questions, one on the cost of the recall campaigns you were mentioning before in North America. Can you quantify them in the third quarter and maybe give us an indication of the fourth quarter? Because we are seeing continuously recall campaigns going on.

So, we had extra cost in Q3 of about EUR150 million. And then, we had a EUR100 million of warranty adjustments to some recall levels. So, it was EUR250 for the quarter, EUR150 was pure recall.

And we don't expect to have anything like that in Q4. But, as I said before, these items come up, unfortunately, based on issues in the field that we can't forecast.

So, we have a base level of spending in our accruals every time we ship a vehicle that covers warranty and campaigns, and we don't expect on a long term basis to spend more than we're accruing per unit. But, this quarter we had a number of campaigns that were bunched together, and so it caused us to have to adjust the reserve.

Got it. Very last one from my side, the guidance on net debt for the year-end has been maintained. What is included of the capital actions you announced today in that guidance?

Nothing.

Okay. Thank you.

Max Warburton, Bernstein & Company.

Yes, hi. I've got a couple of questions. You certainly made, I think, a few people's heads hurt in the last couple of hours, so I apologize if these questions are not as conclusive as they should be.

But, the first question is actually about an interview that, Sergio, you gave in October, early October, to Bloomberg where you talked about the need for corporate activity in the industry. And a number of people actually in the industry rather than on the investor side have said to me, did Marchionne just FCA up for sale? Is that something that you actually wanted to telegraph, or do you want to sort of refute that absolutely, that you are sending a signal that the job is not yet done on the corporate side of FCA?

Max, the answer is absolutely the thing is not up for sale. And even if I put it up for sale, I wouldn't do it through a Bloomberg interview. And thirdly, even if I was finished doing what I'm doing, I'm not sure I would put up an up for sale sign. I mean, this stuff is just fiction.

The only comment that I made -- and you would know this as well as I do, and probably better than most, that this industry is a huge consumer of capital and we need to find a way to run it better than we've run it so far.

And aggregation in and by itself is one way in which we can reduce the capital commitment to this venture. That can only happen as a result of aggregation of players.

I wasn't offering myself up. It is what it is, right? If the industry had enough sense, it would find a way to collaborate extensively in the reduction of capital costs associated with its activities. It's prohibitive.

Max Warburton% I mean, the other thing with M&A in this industry is obviously you need leadership to make stuff work. A lot of deals fail because they don't have proper leadership. In the same interview, you said, look, I'm done in 2018. I'm going to retire. From your perspective, would it make sense to do something on the corporate side before or after you leave? I mean, when is the business going to be in better shape to cope with something as disruptive as a deal, with you or after 2018?

I make no comment about my continuation in this business, because I'm truly irrelevant in this process. I think we got to worry about the house as opposed to worrying about the leadership side.

I agree with you that the choice of leadership is crucial to make sure that it doesn't blow up. But, I'm assuming that that issue will be solved by the wisdom that sits in various corporate Boards.

I don't think there is a time -- let me give you a short answer. There is nothing wrong with any particular point in time in our plan period to try and entertain that issue if the leadership is right, not a damn thing. Smart people will continue to execute on our plan, modify it if they saw fit, if it wasn't me.

But, I think our current state, and other people's current states, could allow for aggregation to happen at any time if that was in fact their desire and if it made strategic sense. Not all aggregations make sense. Some of them stink, and we should stay away from those because they will kill the business. And we're not going to look at those if they ever come up.

But, if other do come up that make sense, I'm willing to listen. But, it's not on my agenda. Before you go out there and -- I have nothing on my to-do list on this stuff. I just don't. I have a big to-do list, Max. That is not on there.

Okay. I mean, last related question on this point, my understanding is you have talked to various people in the industry over the years about what might make sense. To what degree does spinning out Ferrari change the attractiveness of the business for another OEM? I mean, when you look at Ferrari as a separately listed entity, do you think it stays a separately listed company to infinity, or at some point some someone buy Ferrari?

Let the market make that call. I'm not the guy to do it.

The only thing I do know is the mass market producer of cars, its relationship with Ferrari is at best peripheral. And I think that the best route, the best future for Ferrari, is to continue to preserve its uniqueness in an environment which is designed to protect it from the contamination of a large mass market producer.

And this is true for us, and especially more true for people from the other side of the Alps. So, I am -- this was an act of purification on our side. It was one more step, probably the biggest and the most consequential step, in a long journey that started back in 2004 to really provide a strategic layer to the business that we're running.

Got it, okay. And one unrelated final question. On the mandatory convert, are the Elkann family going to participate?

There's a press release that's coming out in the next little while. But, I think they'll take the pro rate share of the mando.

Got it. Great. Thanks as always.

Kristina Church, Barclays.

Yes, Kristina Church here. Two question from my side. Firstly, sorry, coming back to Ferrari again, could you just give a feel for what percentage of the business is coming from non-car products, i.e., ancillary products, and where you might see that going to going forward?

And then, on a separate note, could you confirm your liquidity requirements, what you see as the amount of liquidity that you need for underlying business? I know in the past you've talked about a level of around 15% of revenues. Does that still stand? Thank you.

Let me deal with the second issue. It does, roughly. I think one of the things Richard and I sort of agreed to as a token of peacekeeping here is a number like EUR15 billion once all ring fencing is removed. And EUR15 billion is more than enough to deal with doomsday scenarios.

So, I am not -- I think that there's a substantial amount of cash release available from the system, if we were ever able to get to that number. And I think the removal of the ring fencing would facilitate that tremendously.

I think we're talking about a P&L saving of roughly EUR300 million a year. So, I think we need to be -- we need to get off our butts and get that done pretty quickly, because the impact on earnings is substantial.

On the first question, it's your problem, Richard. Go ahead.

So, Kristina, I would say that the car business is by far the predominant business. There's not significant revenues in Ferrari from non-car related activity today.

Yes, let me -- I think that the real unexploited story here is how do you turn that exclusive brand into a full expression of what that brand could be, even outside cars. It's a very tricky act. I think you need a special set of people to get that done. I'm not sure that we have them all within Ferrari, but we can get them.

But, I think that we need to continue to protect Mother Goose, which is the production of cars, and we need to ensure that we go back on the track and start winning again, which has been part of the DNA of the house since it was founded.

I mean, I guess part of the question was looking at, in the past, you've talked about Ferrari being worth a luxury motor pool. Do you still see that as standing, or do you think that sort of the capital constraints, although it still being a car business even with a luxury brand, mean that --?

No, I don't think -- by the way, I actually think that cars are almost incidental to Ferrari. I know that sounds sacrilegious, given what we produce. But, it is truly a luxury brand and it is unique. There's nothing else like it.

Fair enough. Thank you.

You can buy a variety of handbags. You can't buy a variety of Ferraris.

Richard Hilgert, Morningstar.

Good afternoon, good morning, and thanks for taking my questions. On the earlier comments about the EUR4 billion number connected with Ferrari, is that an enterprise value, or is that an equity value?

The EUR4 billion that I talked about was the amount of capital that would be injected into FCA as the result of the issuance of the mandatory, the placement of the 100 million in shares, the leveraging up of Ferrari, the floatation of 10%.

It is total net proceeds to FCA of all the things we've announced today. That's what it's worth. My expectation is that Ferrari is worth substantially more than the number you said.

Okay, very good. We've got the NAFTA industrial cost, EUR466 million, EUR250 million being warranty recall, EUR150 million being recall. On LATAM, there was an EUR83 million industrial cost. How much of that was Pernambuco in the quarter?

Pernambuco was EUR15 million.

Okay. And then, would the rest be -- were the recalls down in LATAM also?

No. No, this is basically inflation costs on input costs for the product.

Okay. And then, the 12% decline in LATAM demand, that was year-to-date or that was in the quarter?

Sorry, Richard. Could you repeat? I missed that question.

The 12% decline in LATAM demand, that was in the quarter or was that year-to-date?

In the quarter.

Okay. And then, the forecast for the year is an 8% decline.

Full year.

Yes, for the full year. Are you expecting fourth quarter to be up year-over-year?

No, we're not. But, the first half was slightly stronger than the second, so we're basically looking at a Q4 which is similar in run rate, slightly improving over Q3, because seasonally that's what would normally happen in Brazil as you go into the selling period of Christmas.

Clearly, the thing everyone's watching in Brazil is the reaction of the economy and the market following the elections of the 26th of October. So, we're going to track that very closely over the next few weeks.

Okay, very good. Excluding restructuring costs then, the total EBIT for the quarter was EUR962 million?

Yes.

Okay. And the restructuring is --.

Well, it's not always -- it's some compensation costs for the exit of the ex chairman of Ferrari, plus some restructuring in Latin America.

Okay, very good. Thank you.

Thank you.

Brian Jacoby, Goldman Sachs.

Thanks for taking my question. Question just regarding the comments around the notes, the secured notes at Chrysler. The language now seems to imply that you're considering redeeming them, potentially, actually before potentially the actual call dates. Is that the right way to think about that?

I think we're going to find ways to accelerate that timeframe if it's economically viable. The call premium associated with an early call today is not digestible.

Okay. Does that apply for both securities, or is that more for the --?

Well, look, the 19%s have got a much smaller cost associated with them, and we're getting relatively close to the call date. So, that's not the issue. The issues are the 16%s, and they're sort of the 21%s that are callable in 2016.

Great. Okay, thank you. And then, one other quick question is just regarding the EUR4 billion number. Obviously we can all kind of back into what 10% of Ferrari might be worth. But, presumably there's two components there. There's the value of the common that will be floated, and then there's the 10% of Ferrari. Just conceptually, that's the right way to think of that, correct?

Just about.

Okay, great. Thanks. Thanks for the questions.

Stephen Reitman, Societe Generale.

Yes, good afternoon. A couple of questions, please. First of all on Ferrari, Mr. Marchionne, you did mention about the profitability of Ferrari could be well north of EUR1 billion if you go to 10,000 units or so.

My question is on the EBITDA of Ferrari in 2013. We know the EBIT was EUR364 million. Could you give us some guidance actually what the actual EBITDA was, what depreciation element was, for that year?

And secondly, looking at -- again at the US operations, we've had a -- we've had some surveys recently, and the most recent one being Consumer Reports. And I think maybe some of the concerns that sometimes get mentioned in these surveys wouldn't necessarily trouble the European drivers maybe, so reflecting something with the US-based on whatever.

But, looking at the survey, I mean, you're in quite good company in the sense that you've seen Mercedes also plunge to levels there. But, your brands are pretty much at the bottom of the pile. What's your analysis of the issues there, and what steps are you taking actually to move up this in terms of perception of the brands?

Yes. Let me deal with the second issue. And I have nothing to -- it was pure mismanagement of the process on our part. We have made leadership choices the same day that the information came out. The function is being restructured.

I'm not taking issue with the survey itself, other than it is clear that we have focused on the wrong things in dealing with some parts of the customer base. And we need to go back in and fix that perception, because I know that from an engagement standpoint, our whole house has been driven and completed from the direction that those surveys are indicating.

So, we have an absolute mismatch of internal evaluation and commitment against what's coming out for the marketplace. I don't doubt at all the reliability of the data. I just think we need to fix the perception and reality problem, and we'll do that with the change in leadership that we've announced.

And I don't want to -- I'm not throwing anybody under the bus. I take full responsibility for what happened. I don't think it's going to -- we are not the only ones that have been put into that position as the result of anomalous performance of particular components in a particular year. But, I think we will fix it and fix it quickly.

On the other issue that you asked about EBITDA, I think the number is about EUR650 million in 2013.

Thank you.

Philippe Houchois, UBS.

Good afternoon. First of all, thank you very much for doing this transaction. I've been waiting for it for a long time, as you know. So, I think that's well done. Thank you.

We aim to please. That's it. My only advice to you, Philippe, is never to sort the stock.

(Laughter.) I don't think I ever did. Right. A couple of questions, though, on the operations. When I look back on Chrysler, since you came out of Chapter 11, you've regained 3 to 4 points of share, much to the dismay of some of your competitors. And I'm just wondering -- for me this is kind of your natural market share level for Chrysler.

Just wondering to what extent some of the weak operating leverage we saw over the years was kind of the cost of regaining some legitimacy in the market. Now you're there. I don't know if you want to gain much more. I guess you do based on your plan. But, are we going to have maybe a bit of relief on your cost base as you maybe are happier at that level of share? You're back in the game. Could that be helpful for the margins is my first question.

The second one is looking at your -- now, we had discussion in Detroit in May. The amount of interest you pay to your creditors is a huge amount of dilution. And now you're addressing that issue today in part with raising capital, etc. Keeping aside number of new shares, etc., what do you think after this exercise your interest expense could be?

Right now we're paying about -- well, you're paying about EUR1.8 billion, which is like 75% of your US GAAP defined EBIT. What could be the number on a pro forma basis, taking into account reduced debt, maybe reduced cost of carrying, refinancing, etc.? If Richard has the number, that would be great.

The answer to your -- to be perfectly honest, I don't think we have ever done anything from a commercial standpoint that had its sole objective that of gaining share as opposed to the production of margins.

The Chrysler story is a complicated story because of the age of the portfolio and the attractiveness of some of its offerings in the NAFTA market. And I think we've paid the price for that in terms of margin generation in the business.

But, I don't think any of us, other than having a healthy competitive spirit to try and get share from everybody we can, has intentionally targeted share as the single largest driver of business development. And it's no use me declaring war on the NAFTA market and say I want to get 5% more share in that market.

I'll remind everybody that on a retail basis at least one month this year we beat out Toyota. That was sort of an unheard of objective if I'd told you this back in 2009. The fact that we were able to do that I think is recognition of the fact that the commercial team is functioning properly.

I think that the ambitions for us in terms of market share grabs are embodied in the plan. There's nothing exceptional about this. A large driver of that growth is the full exploitation of the Jeep brand in NAFTA, the rounding out of Chrysler as a full product provider in the mass market in the United States.

Some of these things are -- I think the sum of all the brands' development get to the number we need to get to. So, I have no market share ambitions other than what I think the product portfolio will bear in the NAFTA market.

And I'm going to pass on the question to -- I'm looking at a number of scribbles on a page that Richard did. That's as good as it gets when he gets to interest calculations.

But, I think he's claiming that it's going to be down to a EUR1 billion after he does all the stuff. So, from the EUR1.8 billion that you said down to EUR1 billion.

And that will be for kind of the 2016 maybe?

That will be a little later than that, as we get the benefit of the generation in 2017.

He actually is basing this on the removal of the ring fencing.

Right, okay.

I think we need to release at least EUR6 billion worth of liquidity out of the system. I mean, it just -- and that hinges on our ability to remove the ring fence. As soon as we do that, you'll see numbers plummet. Let us crack -- let us get a crack at this and move it out of the way.

Yes. Thanks. That's a nice number. Thank you.

George Galliers, ISI Group.

Yes, good day. Two questions from me. The first one is just coming back to the last question and the interest -- the reduced interest expense. Earlier on the call, did you not say or allude to the fact that net income as a result of today's actions wouldn't change versus the plan? And I wonder how that just fits in with the reduced interest expense piece, or is there something I'm missing there?

And then secondly, just following up from what Max said, with respect to Ferrari, the message was very clear back at the Capital Markets Day in May that Ferrari was not for sale. Now you're obviously offering 10%. What probability would you put on making a greater free float in Ferrari available in the future, or indeed in offering stakes in your other brands, Maserati or maybe Alfa Romeo, where we know there is interest from some of your competitors?

I have no plans to deal with any other brand other than Ferrari. And I have no plan to try and expand float or do anything else with Ferrari going forward, other than the spinoff and the 10% equity raise that we have planned for 2015.

Okay. And then, with respect to the reduced interest expense and how that fits into the plan which you presented on the Capital Markets Day?

By the way, somebody just told me that you think that it's only a 10% float of Ferrari in the marketplace. Is that what you thought?

Right.

No, no. There's a full spin of the 90% position that Fiat has in Ferrari, full spin. It'll be -- 80% of the 90% will be given to the FCA shareholders for free, and 10% will be sold.

Okay. That's very clear.

All right? So, 80% for free. I keep on repeating this, underlining you get it for free.

Yes.

And 10% will be floated and paid for. So, if you buy an FCA share, you will eventually get a Ferrari share.

Okay, yes. No, that's very clear.

And if you buy the mando, you'll get a Ferrari share.

Understood.

Alexis Albert.

Hi. Good afternoon. This is Alexis from MainFirst. Thank you for taking my questions. I have two questions. The first one is regarding the EUR4 billion you mentioned. I just want to make sure that the EUR4 billion includes the debt that you are going to put in Ferrari or not. This is the first question.

Yes, it does.

Okay, it does. Okay, very clear. And the second question is back to the question from Philippe, the EUR1.8 billion to EUR1 billion. So, this is after 2016. What about short term, like 2015? I think you said the P&L impact would be EUR200 million to Kristina. Would that be right in 2015?

Why don't we wait until we work our way through the quarter? Let's close up the year and we'll give you guidance on 2015.

Okay, thank you.

Thanks.

Thomas Besson, Kepler Cheuvreux.

Thank you very much. I'll be very quick. Can you please comment on the tax implications of the spinoff, both for FCA and for the investors getting these shares? That will be my first question, please.

There should be no adverse tax consequences to Italian, Dutch, I think American, English shareholders. But, I think they should check with their tax advisors. I don't want to -- I'm not very good at giving free tax advice. I'm not even sure I'm any good at giving paid tax advice, so you should speak to your advisors.

Our view is that there is no adverse tax consequences. Based on what I know today, there should be no adverse tax consequences to FCA as a result of the spin.

Right. I was mostly interested by the impact on FCA. Can you comment on the CapEx plan for FCA for this year? I mean, year-to-date, it's year-to-date flat. I think it was supposed to be a bit higher for the year. Can you give us your best indication for what it's going to be for the full year and for 2015, ex Ferrari for about half of the year, please?

Richard?

This year we're still confirming CapEx of about EUR8 billion for the full year.

EUR8 billion?

Yes, EUR8 billion, which is the number we've consistently given for 2014. And we'll give you 2015 when we come back and give guidance for the year.

Great. And last question, please. Can you explain if the Ferrari spinoff has any implications for the way Maserati is going to be run, or whether there will be any cash -- any link between the two companies post spinoff, please?

I think there will be a collaboration on engines being produced by Ferrari for Maserati. That will continue. It's happened on an arm's length basis up to now, and that's something that's expected to continue going forward.

But, there is no other implication. And it will not have any negative implications for Maserati going forward.

Great. Thank you very much.

Thank you.

(Operator instructions.) Richard Hilgert, Morningstar.

Thank you. Just wanted to get your take on what the environment is currently for the recalls. Have we gotten past the worst of it, or do you think that there's going to be added government scrutiny going forward that we'll need to have more?

Famous last assessment, I do not know, Richard.

And to be perfectly honest -- and I've made these comments before. I think we need to work with the system to try and find the right level of equilibrium. It's impossible for me to predict what the future will hold on this.

I don't think -- it may very well be that we have peaked or getting very close to a peak. But, you can't call this. Every time I read the paper, there's another recall underway, including some of ours.

So, I think that the industry may have overshot the mark in terms of recall activity. I think it may have just gotten hypersensitive. But, I -- let's work our way through here and see where this whole exercise ultimately stabilizes.

Very good. Thank you.

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

Thank you, Clodagh. We'd like to thank everyone for joining the call today. And my team and I look forward to following up with you on any questions you may have later. Thank you, and have a pleasant day.