Stellantis NV (STLA) 2020 Q3 法說會逐字稿

Good afternoon or good morning, ladies and gentlemen, and welcome to today's Fiat Chrysler Automobile Group Results for Third Quarter 2020.

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, Andrea, and welcome to everyone joining us today for our review of FCA's 2020 third quarter results.

The presentation material that we're going to use today was posted under our website earlier, and you can find it along with the related earnings press release under the Investors section of our group website.

This call is going to be hosted by Mike Manley, our Group CEO; and Mr. Richard Palmer, who is our CFO.

After Mike and Richard do a brief presentation, they will be available for question-and-answer from the analyst community.

Before we begin, I need to point out that any forward-looking statements that might be made during today's call are subject to the risks and uncertainties that are noted in the safe harbor statement, which is included on Page 2 of today's presentation.

And of course, the call will be governed by that language.

Now with that, I'm going to turn the call over to Mike.

Yes.

Thank you, Joe.

Good afternoon and good morning to everybody.

Welcome to the call, and thank you for joining us today.

As customary, I'm going to take you briefly through our operational highlights for the quarter and then Richard will walk you through the financials in more detail.

And as Joe mentioned, we'll then end with our normal Q&A session.

So to begin with, obviously, I'm pleased with our results as we delivered a record quarter for the group, which I think was well above expectations.

And I want to stress that these results were achieved whilst maintaining our first priority, which has been and will continue to be to ensure the safety and well-being of the FCA family and our communities.

As I mentioned before, all of our plants are now back up and running, and they all have a comprehensive multi-layer program of health and safety protocols.

And really most of them now have returned to what I would call near pre-pandemic production levels.

And on the back of an industrial machine, which is now fully operational, and thanks to our team's tremendous performance in North America, we achieved record group adjusted EBIT at EUR 2.3 billion, which was up 16% over last year and a margin of 8.8%, which was up 160 basis points.

And as I noted, North America continued to be a standout for the group, delivering a record adjusted EBIT of EUR 2.5 billion and a margin of 13.8%.

These results were achieved despite having 2 plants down for planned retooling activities related to future product actions.

And as you know, during the quarter, we had 14 weeks of downtime at our Warren Truck plant to retool for the upcoming launch of the all-new Grand Wagoneer in Q2 next year; and a full month of our Toluca plant, which was retooled for the refreshing of the Jeep Compass.

Now in addition, our operations in Latin America returned to profitability during the quarter despite significant challenges as the market continues to be hard hit by COVID-19 and the Brazilian reals continue to weaken.

Now as Richard guided during our last call, we had a strong rewind of working capital during the third quarter, which, coupled with our robust operating performance, resulted in an all-time high industrial free cash flows of EUR 6.7 billion.

This strong cash flow was achieved while we continue to make substantial investments in our future products as CapEx spending for the quarter was EUR 2.2 billion, which, as you remember, is consistent with prior years.

And thanks to the decisive actions we took during the early stages of the pandemic to preserve cash, increase liquidity and strengthen our financial flexibility, our available liquidity was up nearly EUR 10 billion from last quarter to just over EUR 27 billion at the end of September.

And this puts us in a strong position to address future challenges from COVID-19 and as we transition into Stellantis.

In addition to our strong operating results, we also performed very well from a commercial standpoint in our key markets.

In Latin America, we maintained our market leadership in the region, gaining 430 basis points of market share year-over-year to a record 18%.

We also maintained our leadership position in Brazil with our share increasing by 540 basis points to 23.8%.

Now this remarkable performance was driven by the success of the all-new Fiat Strada pickup truck, which became the overall best-selling vehicle in Brazil for September as well as share growth from our Jeep products and our Fiat B segment hatchbacks.

Now this has enabled our Betim plants to run-up production levels even higher than before the pandemic.

In the U.S., our Q3 retail share was up 40 basis points year-over-year to 12.3%, which was primarily driven by stronger demand for Ram and Jeep vehicles.

In fact, the Jeep Wrangler had its best-ever sales month in September.

In addition, this marks our second consecutive quarter of year-over-year retail share growth in the U.S. And in Europe, notwithstanding the general disruption in demand, we were able to deliver positive news during the quarter.

Our strong sales performance resulted in our LCV market share increasing 130 basis points year-over-year, while our share in passenger car market increased by 30 basis points.

And I do want to say that I was pleased to finally see progress on margin, sales channel and dealer retail that the team have been working so hard on.

And I think that this bodes well for the fourth quarter.

Now moving on to our future plans.

Based on the tremendous progress we've made at our new Mack Plant in Detroit, the successful retooling of Warren Truck and the collective work done by our product development teams, we confirm that all 3 major Jeep launches for 2021 remain on track.

And this includes the all-new Grand Wagoneer, the all-new 3-row full-size SUV as well as the next-generation Grand Cherokee with the full-size free-roll SUV being the first to go into production in late Q1.

Now as you know, in mid-September, we announced an amendment to the terms of our combination agreement with PSA, which I will cover in more detail later.

But let me just say that this represents yet another sign of each company's commitment to finalizing the merger within our planned time line.

So now turning to the product side.

We have an exciting quarter with a number of important introductions to the group that are the result of all the extraordinary work our teams continue to carry out despite the new working protocols resulting from COVID-19.

These new products showcase our brand diversity as well as the reach of our portfolio and we'll continue the momentum of our electrification strategy.

Now not only are these products moving us into new segments, they will also make measurable contributions to our future profitability.

During an impressive event held in Modena, Italy on September 9, we unveiled the all-new Maserati MC20 Super Sports Car, which marked the beginning of a new era for the brand.

And it also represented a tribute to the extraordinary spirit of Maserati and his new team.

In early September, we also revealed the highly anticipated Grand Wagoneer concept, providing a truly contemporary expression of what is widely acknowledged as the original ultimate premium SUV with Wagoneer and Grand Wagoneer arriving mid next year.

Jeep will make his long-awaited return to the premium SUV segment, a segment which it created almost 60 years ago.

We also revealed the all-new Ram TRX, which began production earlier this month, equipped with a 702-horsepower supercharged Hellcat engine, the quickest, fastest and most powerful pickup truck in the world.

And the groundswell of demand for the launch edition validated the end product because orders were 100% filled in only 3 hours.

And finally, last month, we revealed our fourth plug-in hybrid vehicle for the Jeep brand, the Wrangler 4xe, which joins the already available Grand Commander in China and Renegade and Compass being sold across Europe.

The Wrangler plug-in hybrid remains true to the iconic Wrangler while providing new levels of efficiency, environmental responsibility, performance and capability, both on and off-road.

And this was recently proven as the Wrangler 4xe successfully completed the legendary Rubicon Trail with all events performed in pure electric mode.

Therefore, with this launch, we've shown that electrification is a natural evolution for the Jeep brand and it's nearly 80-year history.

So we go into the next page, and I'll turn to our commercial performance during the quarter.

And with the exception of Asia Pacific, the industry in each region was down year-over-year due to the impact of COVID-19.

And while our overall market share in North America was flat, we gained share in the critical U.S. retail segment of the market as we prioritized production for dealer deliveries to fulfill the strong level of dealer orders.

Also, our U.S. dealer inventories remained low with dealer stock at the end of September just under 390,000 units, which was substantially flat from the end of June, but down nearly 200,000 units from the end of December.

For APAC, while the overall industry showed a slight improvement over last year, our sales were down year-over-year, reflecting lower sales of both locally produced and imported jeep vehicles.

In EMEA, our performance outpaced the industry, which was down 5% year-over-year.

And as I mentioned earlier, we were able to gain market share in Europe for both passenger cars and LCVs, thanks to higher sales for the Fiat and Fiat Professional brands.

And finally, in Latin America, as noted, we remain the overall market leader in the region on the back of a significant share gain of over 400 basis points, while the industry was down 26%.

And once again, we continue to have the highest share in important segments such as SUVs with the Jeep brand and pickup trucks with the Fiat brand.

Now as I said, Richard will take you through the financials in detail.

So I'll just give you a quick overview of our results, which, as I noted earlier, were exceptional and significantly better than expected thanks to the solid performance by our teams.

Despite our consolidated shipments being down 6%, we achieved record group adjusted EBIT and margin thanks to prioritizing dealer deliveries with dealer stock levels actually ending the quarter in all regions versus the end of June, down, whilst we also maintain disciplined pricing and continued our focus on strict cost containment.

Now as I noted earlier, North America delivered a record adjusted EBIT margin despite shipments being down 8%.

And as anticipated, we experienced strong industrial free cash flows, which amounted to EUR 6.7 billion for the quarter.

This not only reflected the positive impacts from our strong profitability but also working capital rewind of EUR 5.6 billion.

And now, as you can imagine, I was pleased with this because it represented a very nice turnaround to the cash burn we had in the first half of the year due to the pandemic.

And lastly, we significantly strengthened our available liquidity from the end of June to more than EUR 27 billion at the end of September.

And overall, our teams around the world, I think, did a phenomenal job with resuming full-scale industrial activities across all regions and all functions.

And above all, create an environment in which we can keep everyone safe.

So with that, Richard, I'm going to hand over to you.

Thank you.

Thanks, Mike, and good morning or good afternoon to everybody.

I'll continue a second on Page 6. As mentioned by Mike, our consolidated shipments were down 6% year-over-year.

But increased nearly 2.5 fold compared to the prior quarter to 967,000 units.

Group revenues reached EUR 25.8 billion, also down 6% year-over-year with positive mix and price, mainly in North America, offsetting negative FX translation.

Adjusted EBIT was EUR 2.3 billion with a record margin for the group of 8.8% and drove adjusted net profit to EUR 1.5 billion, up 21% year-over-year.

Finance charges were up EUR 15 million year-over-year due principally to actions to bolster liquidity, offset by lower interest charges on pension and OPEB.

The adjusted tax expense was EUR 450 million with a 23% effective tax rate compared to EUR 417 million and 25% in Q3 last year and in line with our expected effective tax rate of around 26%.

Net profit included EUR 325 million of unusual charges related mainly to a EUR 220 million estimate for settlement of U.S. investigations on diesel emissions and EUR 90 million of impairment charges.

Industrial free cash flows were very strong, as mentioned, with working capital rewinding as volumes recovered and included EUR 2.2 billion of CapEx investments.

As a result and also due to a further EUR 3.5 billion of drawdown of the Intesa Sanpaolo facility, the available liquidity end September was EUR 27.1 billion, increased by EUR 9.6 billion from end June.

Moving to Page 7. We review the adjusted EBIT by driver.

Consolidated shipments being down 6%, equated to 64,000 lower shipments and then approximately EUR 300 million negative impact to adjusted EBIT.

That was, however, offset by positive mix, mainly in North America.

North America volumes were down in large part due to the Warren Truck plant being down for the whole of Q3.

Net price was positive due to North America and EMEA performance.

Negative industrial costs were driven mainly by increased cost of product in EMEA due to launches of electrified powertrains and cost inflation in Latin America.

SG&A cost reduction continued across all regions, although spending was up compared to Q2 levels as marketing spending was increased to more normal levels as markets recovered.

Next on Page 8. We show the industrial free cash flow for the quarter, which as commented previously, represented a very strong performance as the operations returned to more normal levels compared to the first half.

Adjusted EBITDA was EUR 3.4 billion at a 13.6% margin, up 1.5% from prior year.

We continue to invest in key products and technologies and spent EUR 2.2 billion of CapEx in the quarter, in line with prior year and focus on some of the products Mike mentioned earlier.

On our Q2 call, we had indicated that we expected a substantial part of the first half negative working capital to reverse in H2, and in fact, substantially all of that happened in Q3 as production levels were restored, generating EUR 5.6 billion of cash flow in a quarter, which is typically seasonally negative due to summer shutdowns and model year changeovers.

Almost all of the decrease in working capital was due to a restoration of accounts payables balances.

Our shipment levels for the 2 months of August and September were around 700,000 units, 50,000 below the same period of last year.

We finished the quarter back in a net industrial cash position of EUR 1.3 billion from the net industrial debt of EUR 5.1 million at the end of June.

On Page 9, we show the adjusted EBIT by segment.

All segments showing improvements from Q2 levels with North America at a record 13.8% margin and LATAM back in profit as well as EMEA showing a significant quarter-over-quarter improvement.

On Page 10, we review North America performance in what was a very strong quarter.

As Mike mentioned, our U.S. retail share increased and our overall North America market share was flat in an industry that was down 10%.

Our U.S. retail sales were down 2% with industry down 5%, while our fleet sales were down 40% compared to industry down 35%, mainly due to us favoring our retail channel to fulfill dealer demand.

Our shipments were 554,000 units, down 8% due to the Warren Truck downtime and the discontinuation of the Grand Caravan product.

Our U.S. dealer inventories were basically flat compared to June 2020 at 387,000 units, as mentioned.

Revenues were down 3% with positive mix and price offsetting some of the 8% shipment reduction and negative FX translation due to a weaker dollar.

Adjusted EBIT increased to EUR 2.5 billion, up 26% versus a strong Q3 in 2019.

The lower shipment volume was more than offset by positive mix from more U.S. retail and less U.S. fleet, and better carline mix due to fewer light-duty Classics and Grand Caravans.

Net price was positive, driven mainly by Jeep and Ram brands, and SG&A benefited from reduced advertising spend and reduced G&A costs for the remainder of the quarter.

Other was due to FX translation, as mentioned, due to the weaker U.S. dollar.

Next on Page 11, we have Asia Pacific's results.

Consolidated shipments were down 12% due to lower Japan and China volumes.

The China JV shipments were down 44% to 10,000 units from 18,000 units last year.

As a result, combined shipments were down 29%.

Revenues were down 17% due to shipment volumes down 12% as well as negative FX.

Despite some improvement from the Q2 loss of EUR 59 million, the adjusted EBIT was still a loss of EUR 32 million, down EUR 22 million versus last year due both to reduced volumes on consolidated business, partly offset by cost actions and a EUR 10 million deterioration in the FCA share of the GAC JV result.

Turning to Page 12.

We can review EMEA's numbers.

Combined shipments were up 10%, primarily due to a strong performance of the joint venture in Turkey.

Consolidated shipments were down 5%, consistent with the EU27+

EFTA industry sales for Q3 and at 240,000 units were below consolidated sales at 261,000 units.

Therefore, dealer inventory was further reduced compared to end Q2 to 159,000 units, and is down from 250,000 units a year ago.

Net revenues were flat at EUR 4.6 billion, with lower volumes offset by positive channel mix and net pricing, partly related to shipments of newly launched jeeps, Jeep PHEVs and BSG units.

Industrial costs were negative due to product cost increases for technology for emissions compliance and emissions credits costs, partly offset by reduced SG&A spending.

On Page 13, we look at Latin America.

As Mike mentioned earlier, our team in Latin America had a very strong commercial performance with improved share, allowing sales to be down just 2% to 147,000 units despite the industry being down 26% due to a strong performance of the new Fiat Strada pickup in particular.

As a result, shipments were down just 3%, revenues were down 30% due to FX translation as the Brazilian real weakened significantly year-over-year.

Adjusted EBIT was EUR 46 million with 3% margins.

Negative industrial costs driven by FX and inflation were set off by aggressive price recovery actions in the quarter.

However, the adjusted EBIT was negatively impacted by the non-repeat of our 2019 indirect tax credit of EUR 60 million.

On Page 14, we turn to Maserati.

Sales were down 17% with China down 13% and North America down 20%.

For total sales of 5,000 units, shipments were at the same level and up 7% versus last year.

Revenues were flat year-over-year.

Adjusted EBIT was a loss of EUR 70 million, down EUR 19 million from last year due to increased incentive spend to complete model year '20 sell-out prior to the MCA launches in Q4 with model year '21.

Global network stock was 5,500 units compared to 5,700 units at the end of June and 9,500 a year ago.

On Page 15, we review our outlook for the rest of the year.

It is important to note that in these uncertain times, our outlook assumes no further significant disruptions from COVID-19.

That caveat aside, following the strong Q3 performance and with 2 months of the year to go, we feel the business is performing well and we expect a strong Q4.

In terms of the group's main markets, we expect North America and EU27+

U.K.+EFTA to be down around 5% with Brazil down 10% in Q4.

Based on these forecasts, we see our full year adjusted EBIT to reach EUR 3 billion to EUR 3.5 billion, implying a Q4 of EUR 1.6 billion to EUR 2.1 billion with the top end of the range in line with a strong Q4 of last year.

In terms of industrial free cash flow, we forecast the full year to be between minus EUR 1 billion and 0 with substantially all the negative EUR 10 billion in the half of H1 recovered in H2.

That means the Q4 industrial free cash flow of between EUR 2.2 billion and EUR 3.2 billion compared to EUR 1.5 billion last year.

And with that, I will hand the call back to Mike.

Yes.

Thank you, Richard.

So I'd just like to talk a little bit about Maserati.

As I mentioned earlier, after we initially delayed it because of the coronavirus outbreak, we hosted the much anticipated Maserati brand event at the beginning of September in Modena.

And I talked openly in the past on the calls about the challenges Maserati is facing and the things we needed to fix.

So in addition to our plans to expand Maserati's portfolio with the reveal of the all-new MC20 Super Sports Car.

And of course, the teaser that we showed of the all-new Grecale SUV, we laid out our plans to bring Maserati into its new era and provided ambitious, yet I think, achievable targets for the brand.

The key elements and expectations for our plan for Maserati include targeting at least 1 major launch per year starting next year, electrifying over half the brand's portfolio within the next 18 months and equipping all Maserati nameplates with a BEV offering by 2024 when we expect to have completed the renewal of the entire lineup.

And from a financial perspective, targeting Maserati to return to profitability next year and achieve an adjusted EBIT margin of approximately 15% by 2023.

And I'm more than confident than ever that Maserati's new course for the regular cadence of new product launches, cutting-edge technology, genuine innovation and a new strategy for electrification will restore the brand to its rightful position in the global luxury segment.

And I believe that these elements, coupled with Maserati's new management team will successfully execute this plan.

And just as important, we will have laid the foundation to ensure the continued success of this iconic luxury brand.

And lastly, before we move on to Q&A, I'd just like to provide you an update on the status of the Stellantis merger, including some comments on the important agreement we announced in mid-September with PSA, which amended certain terms of our combination agreement as well as our announcement made earlier today regarding changes in the distribution of PSA stake in Faurecia.

Now I believe these changes, which were approved by the boards of both companies and with the support of their reference shareholders, are a smart and responsible solution to address the liquidity impact of COVID-19 that both companies have experienced.

And to ensure that Stellantis does not acquire control of free share, consistent with the terms of the original combination agreement.

The changes were specifically designed to ensure that Stellantis has a strong balance sheet while preserving the original balance, value equation governance set out in the original agreement.

Now as you know, one of the key provisions of the amendment relates to a change in the special dividend to be distributed to FCA shareholders.

The special dividend will now be EUR 2.9 billion versus the previously announced EUR 5.5 billion.

And as a result, Stellantis will have EUR 2.6 billion more cash on its balance sheet at inception to create additional value for all stakeholders.

However, the balance in provision to the special dividend reduction is that PSA will now distribute its current 46% stake in Faurecia to all Stellantis shareholders after closing.

And that distribution will be in 2 forms.

The first will be the proceeds from PSA selling the equivalent of up to 7% of Faurecia's total shares outstanding prior to the merger closing.

And the second will be the distribution of the unsold portion of PSA's current 46% stake in Faurecia.

In addition, the revised annual run rate synergies are now estimated to be over EUR 5 billion, up significantly from the EUR 3.7 billion originally estimated, which is a clear indication of the excellent progress already made by the various merger work streams over the past several months.

There's also a potential for additional shareholder upside if the boards of both companies agree that the conditions permit for the distribution of a EUR 500 million dividend to each company's respective shareholders prior to the closing, or a distribution of EUR 1 billion dividend to all Stellantis shareholders after closing.

Now that we're at the threshold of finalizing this merger, I believe, this solution provides additional important clarity and momentum, and is a strong indicator of the focus both companies have on moving forward and completing this deal, in spite of everything that's happened in the wider world since our original announcement.

Now there's been a lot written regarding the antitrust review currently underway in Europe.

And as you know, the Phase 2 competition review by the European Commission is ongoing.

And I'm pleased to say that the exchange has so far have been very constructive.

And as previously announced, FCA and PSA have offered commitments to address questions raised by the Commission.

These commitments are currently being evaluated by the Commission, and we expect to reach a satisfactory outcome with the Commission well within our merger closing timetable.

So let me end by reaffirming that preparations for the merger with PSA are advancing well and our shared objective to close the transaction by the end of the first quarter of 2021 remains intact.

And most importantly, we're equally committed to put Stellantis in the best possible position to create long-term value for all of its stakeholders.

And Joe, I think with that, we can move on to Q&A.

Thank you, Mike.

Andrea, I think you can now proceed to the queue and we'll start the Q&A session.

(Operator Instructions) We are now taking our first question from the line of Horst Schneider from Bank of America.

Yes, impressive results, I've got to say.

And of course, I'm looking at the new guidance that you provided for the full year.

I don't want to be greedy, but of course, it implies that Q4 could be a little bit weaker than Q3.

So could you maybe explain what could be the driving factors then in the fourth quarter?

Why the results could be weaker?

I know you have offered the range, so maybe Q4 won't be that different.

But I just want to understand what will be the drivers in Q4?

And to what extent was Q3 really exceptional?

And to which extent will the business normalize?

And in that context as well, maybe you can update us on the cost savings.

I think you targeted for the full year, something like EUR 2 billion.

And, yes, to which extent that has been achieved now?

What will be the reversal in Q4?

And do you stick to the assumptions that you made in Q2 regarding cost reversals in 2021?

Horst, this is Mike.

Richard will -- I'll speak a little bit and then Richard will obviously correct everything that I say.

Firstly, Q4 last year was a strong quarter for us.

So when you look at the end of the year and the guidance that's been given, I think the range suggests that -- and Richard confirmed this in his commentary that if conditions remain as they are today.

And I think that's obviously the thing that we're watching on a day-by-day basis in Q4, we're expecting to be strong this year as well.

Obviously, even though there's only 2 months really left to the year, obviously, the conditions make people, I think, understandably cautious in terms of any guidance that they've given, which is why it's always coveted in the way that it's coveted.

But it is true to say that the momentum that we had in Q3 continues at least through the opening part of Q4.

So I'm expecting the quarter to be a good one as well.

With regard to the cost actions, we are on track with the numbers that we've talked about before, very close to EUR 2 billion with somewhere between EUR 600 million to EUR 800 million at this current moment, flowing through into 2021.

What is true, though, is that the cadence of those cost savings is very different between the quarters because as we see much more commercial activity in Q4, some of the savings that we were able to deliver in Q2 and Q3 will be released back into the market to make sure that we remain competitive, particularly with regard to the promotion of our brands and the maintenance of our retail position, which we feel has been one of the strong parts of our performance across the regions, in particular, North America, LATAM, and as you saw, some -- what I thought was really good progress in EMEA.

Hopefully, that's kind of my commentary.

Richard, do you want to add anything with regard to guidance and moderate anything that I've said?

No, Mike.

I think you hit the high points.

We clearly need to try and maintain the cost benefits as much as possible going into Q4 and then into '21.

And that's clearly a factor in Q4 potentially being a little bit weaker than Q3.

And when you look at North America's margin at 13.8%, and you're the CFO of this company for the last X years.

You're a little bit prudent about just projecting 13.8% forward, Horst.

So I think 13.8% number obviously benefits from a number of actions on costs, some of which will not be long term, mainly due to sales and marketing spend coming back up in Q4.

And also some fixed costs as parts continue to increase their output.

It's also true that we have Warren Truck back up in Q4 which will help us.

It's on a ramp-up.

So we won't get a full quarter of volume.

And then obviously, the 13.8% is also benefiting from a very strong mix, as I mentioned, which is very much biased towards U.S. retail and fleet is down from sort of 23%, 24% of volume in the U.S. to 14%.

So that -- as long as it lasts, will obviously help our margins, but will start to normalize, I assume as the COVID situation improves, we will hope.

And then our pricing has been very strong as well and we need to obviously maintain the strong pricing.

And trying to tell how much of that is because of the market conditions and how much is also because we have reduced our dealer stock significantly.

And so there's a much more efficient distribution process I think we'll see as we go forward.

So I think the guidance on the adjusted EBIT is a little bit prudent, maybe if we can do a good job in Q4 and conditions allow us to.

But I still think we're pointing towards on the high end, a very strong quarter at EUR 2.1 billion.

On the cash side, we're trying to get to basically zero out the cash burn we had in the first half.

And that would mean that in Q4, we have to have a pretty strong cash flow generation.

So I wouldn't underestimate EUR 2.2 billion to EUR 3.2 billion of cash flow with our working capital position.

We pretty much already reversed in Q3.

It's basically something that we're pushing very hard for, but it's not a walk in the park.

That's great and very helpful.

Just a quick follow-up on this working capital.

Since the reversal is not done, we should not expect another positive effect in the fourth quarter, right?

I don't -- I think we will get a bit because there's a seasonality in Europe, which is normal seasonality.

So in August, our production was very low compared to what it will be like in November.

So we will get positive working capital from EMEA.

We'll also get some positive working capital from North America with Warren Truck back and Toluca back.

So we expect positive working capital.

Also, we're still pushing very hard on continuing to reduce our on-balance sheet inventory.

And also the seasonality of shutdowns in the end of the year normally give us some positive working capital and work in progress, et cetera.

So we still expect a strong contribution from working capital, but not as obviously anything like the size we saw in Q3.

We are now taking our next question from the line of Charles Coldicott from Redburn.

Congratulations on a great result.

I had just a couple of questions on EVs and CO2 actually.

So on electric vehicles, you've only sold a small amount of Fiat 500 electrics and plug-in hybrid Jeeps so far.

So I'm just wondering if you could give us some sort of expectations on the volume for those models once production is fully ramped up, and particularly in Europe, I guess.

And then on the CO2 side, so for 2021, can you just clarify, are you locked into paying Tesla for the benefit of the European CO2 pool, which I think you previously said would be a sort of EUR 400 million to EUR 500 million cash payment next year?

Or is it conceptually possible that you could pull with Peugeot and therefore, comply with the regulations as just Stellantis and, therefore, not require the Tesla at all?

Sorry, Charles, this is Mike.

Obviously, with -- so close to the launches, you're right, in terms of the actual sales of our plug-in hybrids.

But what I would tell you is that if we look at all of our electrified vehicles, including mild electrification, obviously, our share, as you've seen across Europe has increased fairly significantly.

And electrified vehicles in the quarter, something like 12%, 13% of our total sales.

That focus being on the very mild hybrid.

Dealer orders, however, and advanced orders for Fiat 500 are well in line with our expectations and what we were hoping for, particularly with the 500 BEV.

And as you know, it's really just making it commercial, its market debut with progressive launches across Europe.

So I have to say that I'm pleased with the volumes.

They are, in some instances, ahead of where we thought they would be, which is why we think that the combined strategy we put in place will be successful for this year.

In terms of volumes for the next year, I don't want to forecast those at this moment in time.

But it does lead into your second question, which is are we locked with Tesla?

Yes, we are.

We put in a multiyear strategy, which enabled us to, as I've spoken to in the past, transition to fully compliant with regard to our product plan because we've worked very hard to address our European product plan, in particular, because of the investments that were originally directed towards North America and to some extent, Latin America left EMEA behind.

They're rapidly catching up now with the launches that you've seen and upcoming launches that will happen over the next 12 months, but we are effectively locked with Tesla.

And we look to continue the growth in our electrified vehicles to make sure that we're complying '21 as well.

We are taking our next question from the line of Martino de Ambroggi from Equita.

The first question is a follow-up on the North American retail sales.

I understand it is difficult to have a precise indication of all the exceptional variables in Q3.

But within normal market environment, do you think that being able to achieve the double-digit retail sales in Q3.

And in your guidance, is it still at double-digit Q4?

Mike, do you want me to go?

No.

I just don't know if the question relate to me, Richard, because I couldn't clearly hear it.

I think the question was in a normal environment, can we continue to achieve double-digit margins in North America and...

Yes.

That's correct.

For sure, we can, in my opinion.

And I think we've got the product portfolio and the momentum to prove that.

And when I think about our performance in Q3, which has always been one of the stronger months, obviously, with model year changeovers.

I think that -- and all this -- the question about guidance on how Q4 looks, I think, as we said, we've come into Q4 with some good momentum.

So we'll see how we end up.

You can handle the second part of the question, Richard.

Yes.

I mean we're expecting double-digit margins, Martino, in Q4.

And I think the other thing is -- exciting is the fact that the products Mike talked about at the beginning of the presentation hit North America next year.

And should allow us to continue to operate with the strong double-digit margins for 2021.

So the margin story has been very positive over the last couple of years with North America and it should continue.

Okay.

And the second question was on the net working capital.

You mentioned Q4 should be once again positive.

I remember in the previous call, you mentioned the EUR 5 billion in the second half.

So if I ask you, what could be the -- or what is the underlying assumption in your guidance in terms of working capital in Q4?

And if you confirm CapEx, maybe they are confirmed during the presentation, I missed it probably at EUR 8 million, EUR 8.5 million.

Yes.

CapEx is confirmed at EUR 8.5 million, and working capital plus provisions should be around EUR 2 billion positive.

Okay.

And very last on the financial structure, indirectly.

Because you are guiding for 0 to minus EUR 1 billion free cash flow.

PSA is guiding for positive free cash flow.

Is it an effort to think about the second portion of the extraordinary dividend?

Or is there any other condition to be achieved?

And I suppose the visibility on the market and so on.

What -- I think the...

I'm Mike, I'll take this one, Richard.

Go ahead.

Obviously, we're in a much better position with regard to the potential for the Boards to pay the additional dividend than we were a quarter ago.

We said in the second quarter that we expected a positive rebound in terms of cash and we've seen that.

What we -- obviously, it's going to be a long 2 months to close out the year.

But I think it gives the Board more options than they had before.

They'll make the decision with the same prudence that they've made decisions in the past, and that's to make sure that Stellantis has all of the resources that it needs to get off to a good start and be successful.

So I don't want to preempt what the boards do.

We're just giving them more optionality.

And if we're able to maintain our performance, which I expect us to, we'll continue to build on the position that we're in today.

We are now taking our next question from the line of Stephen Reitman from Societe Generale.

Yes.

A question about North America again and industrial costs.

So obviously, a very strong performance despite downtime at Warren and Toluca.

What was the impact of those downtimes, roughly, if you could quantify the cost?

And also, could you just repeat again the net financial position at the end of September?

It went very quickly.

You can do this one, Richard.

Yes.

So the net financial position at the end of September was EUR 1.3 billion, I believe.

And the impact of -- obviously, we lost volumes, Stephen.

But aside from the impact of volumes, I think the actual impact of costs, as we work on both plants, was about EUR 50 million.

All right.

And can you give some idea as well of next year about the ramp-up cadence on Grand Wagoneer and on the reworked Cherokee as well, Grand Cherokee?

Yes.

Sorry, this is Mike.

We have some issues with my microphone.

As I mentioned before, we will launch the 3-row full-size SUV first, which will happen end of Q1 into Q2.

And Grand Wagoneer will effectively come on stream in the first half and ramp through the various models through the back half of next year.

Obviously, I don't want to give you indications or our expectation for volume, but both of those products are white space for us.

So we're pretty excited about that.

And then as we get towards the end of the year, Grand Cherokee will be -- the new Grand Cherokee will be added to our fleet.

We're now taking our next question from the line of José Asumendi from JPMorgan.

José, JPMorgan.

Can you -- just a few items, please.

Can you just speak a bit about where you see -- what was production in Q3 across Europe and North America?

And where do you see it in Q4 in terms of output?

Second, can you speak a bit about the industrial costs in Europe, Richard, please?

And maybe just give us some color as to what happened there in Q3?

And how do you see those industrial costs evolving in the fourth quarter?

And then, Mike, on strategy, can you speak about -- a little bit about FCA Waymo?

Where do you stand on the collaboration?

What have you achieved, let's say, in the last 12 months?

And as we think also about hydrogen applications, either on the passenger car or light commercial vehicles, can you speak about a little bit how do you see this segment?

And do you think you have the right toolkit to -- also to approach this segment going forward?

I'll talk about production, and Richard, you can take the second one, and then I'll come back and pick up the third one.

As we've talked about, our plants really are, if not approaching post -- pre-COVID production levels, particularly with regard to shift patterns all the way across the world.

So the -- our expectation if conditions remain as they are and as we have to caveat every forward-looking statement, particularly with regard to the plants with that way that we will reach the pre-COVID production levels and efficiency levels that are very, very similar to pre-COVID as well because we have constantly and continued to refine the things that we are doing in our plants to lay ensure safety of our people.

But also make the working conditions as efficient as possible for everybody.

So the actual annual impact in terms of our production really is related to that end of the first quarter through the second quarter, which will be about a 25% impact, for example, for the full year in our North American plants.

And a similar number, I think, for our EMEA plants, but we're expecting, as I said, if current conditions continue to reach production levels that we've seen before.

Over to you, Richard.

Yes.

Thanks, Mike.

Yes.

So regarding our industrial costs in EMEA in Q3, as I mentioned, the main drivers of the costs were compliance costs, about half of them related to shipments of vehicles between mild hybrids and PHEVs in the quarter with the delta cost.

And then you can see also in the walk, some of the price recovery we're getting on those technologies in the marketplace.

And then on -- and the rest of it is basically credit purchases under the pooling agreement with Tesla.

Going into Q4, we expect the industrial cost to be actually more negative because we're going to have more shipments of PHEVs and BEVs in Q4.

Got it.

Mike, can you come back, please, to the Waymo collaboration, please, and on hydrogen?

Strategically, how do you see these 2 elements?

Sure, absolutely.

I'm mostly going to comment on some of the industrial costs figures that's come up on a couple of occasions, obviously for next year because of our levels of electrified vehicles continue to grow and we launch more electrified vehicles.

Our view in terms of the use of credits dropped year-over-year sequentially.

And I've talked about this before that, obviously, this year, a peak year next year dropping as we increase and ramp up our level of electrified vehicles that are sold.

So on Waymo, I've got to say that since our announcement in terms of the expanded partnership, we've continued to work very well with them.

They remain and our -- if you like, our Level 4 plus solution going forward.

And the work has started, albeit very early stages, with regard to the commercial vehicle project that we announced in terms of testing Level 4 autonomous technology for deliveries, particularly utilizing our ProMaster fleet.

So the relationship that we've had over a long period of time, I think, just continues to get deeper.

And as you saw, Waymo also expanded their autonomous operations, which I think really clearly indicates that they not only maintain their leadership in this area but are also accelerating their deployment as well.

So I was very pleased when we were able to expand the partnership and I'm pleased with the early development that we've had.

And frankly, I continue to put a lot of pressure on the teams because I think even though it's not clear when this will be deployed on that.

So I think, increasingly, with the use of geofencing, particularly around commercial vehicles, there's an opportunity that will come maybe sooner than people expect.

And in terms of our toolkit for the future.

People have often looked at our strategy and compared and contrasted it with a number of other OEM's strategies and their plans.

What I've tried to communicate is that the end we all have in mind is very, very similar in terms of electrification, the technology that you're going to need for that area.

The only difference really has been a difference of opinion in terms of how fast we can get there.

So notwithstanding the fact that we are now in the process of ramping up and launching our electrified vehicles, given the range of vehicles that we successfully build and sell today includes very heavy-duty pickup trucks, for example, our toolbox has to envisage different technologies that will also continue to meet the consumer demand in those segments, whilst provide either significant or complete reduction in CO2.

And ultimately, that brings you on to hydrogen.

Again, we could spend much time debating about when that will be.

But we obviously have technical skills in FCA as we sit today and partnerships as well.

So I'm comfortable that we have all of the tools.

I'm hopeful that we have forecasted and predicted the transition in the right way.

And I'm pleased with the work that's happened and the ramp-up that we're now seeing with regard to electrified vehicles.

We are now taking our next question from the line of George Galliers from Goldman Sachs.

If I may, I really want to revisit North America and focus on this mix effect.

So Q3 was obviously a record result and record margin.

But even backing out the SG&A gain and the positive pricing, you would have been at an 11%-plus margin and very close to 4Q '19's record EBIT despite the negative FX translation effects.

So mix must have played a huge role here.

And historically, you've talked about the opportunity to increase fleet share.

However, has 3Q and the strong mix effect made you rethink this strategy and whether you might actually want to pull back on fleet going forward?

I mean if we look over the last decade, a change in strategy led to an adjustment to mix, which played a big part in FCA's North America margins growing from 4% to 6% to a kind of 8% to 10% range.

I mean based on what we learned today, could a shift in strategy not see your North America margins grow from 8% to 10% to 10% to 12% and maybe even mid-single teen in the future?

So George, this is Mike.

I'll pick up the second half of the question, and Richard can pick up the first half of the question.

I think we have all learned a huge amount during this year and we've been forced into doing things in a different way.

And I think that your observation is a very interesting one.

We've always tried to change our mix of our fleet being less reliant on the retail side -- of the rental side of the business and performing better in commercial and government.

And that will not change.

I think some of our product changes, for example, the loss of the Dodge Minivan, which was very heavily in rental forced a mix change on us in terms of not just our fleet business, but also our ability to fulfill that business.

I think what we have learned is that if we balance dealer inventory well, and the market remains reasonably buoyant, then it is clearly our best channel is through the dealers.

And that has led us to be able to, as you've mentioned, improve not just on transaction price.

But it has also helped us get a lot more stability in terms of our supply chain, which obviously helps us with our cost base as well.

So I think continued focus on the right fleet business will be part of our strategy going forward.

But we're going to obviously try and maintain the discipline that we've put in place in the business in North America to drive our margins up.

And then finally, in terms of what's the potential for margin, the 2 white spaces that we will enter into next year have historically been very high-margin segments.

We have not played in them and we expect them to remain strong margin segments when we enter them.

So I think that, that's clearly upside potential for us in North America going forward into the latter half of 2021 as well.

Richard, do you just want to answer the specifics on the mix question?

Yes.

Well, yes, George, the mix number, you can see on Page 10, we have EUR 100 million of volume and mix.

Volume was down about EUR 300 million and mix was up about EUR 400 million.

And the mix being up about EUR 400 million, half of that was related to lower shipments of Grand Caravan, which is a discontinued product and the Classic Ram DS, which, whilst it makes very good margins, is still lower than our average margins because of the channels historically it's gone into.

And then the retail piece, which is the other half, is a 10% shift from fleet in Canada into U.S. retail.

So those are the mechanical reasons why we had the positive mix in the quarter.

We are now taking our next question from the line of Monica Bosio from ISB.

Monica, are you there?

Sorry, I was on mute.

Most of the questions have been already answered.

But I would like to ask you your view on the raw material scenario, the impact for this year?

And what do you view for 2021?

And the second question is on Maserati.

Can you give us an update on the inventories level at the dealer inventory level?

And what do you expect for the fourth quarter of the year?

Yes.

Sorry, I was on mute as well.

This is Mike.

In terms of purchasing, obviously, we've had a very significant headwind with regard to PGM.

I think the purchasing team have done a good job and continue to do a good job trying to offset that with our other technical teams to obviously minimize the impact.

And they've performed, as I said, I think, well in regard to that.

But I do see continued pressure as we get into 2021 in that area.

From Maserati's perspective, their inventory ended Q3 around 5,500 units, which is very much contained.

So that's about, I guess, 4,000, 4,500 something lower than it was Q3 last year and broadly in line with the end of Q2 this year.

So one of the things that Maserati, and we've talked about in the past is the discipline of making sure that our shipments and our sales are in line so that we don't build.

We've reached the level of inventory that I think there are pockets that we need to slightly rebuild.

But it's in line with where we wanted it to be at this point.

And absent of building some inventory levels as we now ramp up the launch of the refresh models and new models, carryover models, my expectation is inventory levels will remain, as I say, in line with our sales.

Our next question comes from the line of Patrick Hummel from UBS.

Congrats on the great quarter.

A couple of questions remaining on my side.

Regarding the EU clearance of the deal, there were some headlines in the last few days that clearance could be just around the corner.

So if you were to receive EU clearance really quickly, would that change anything regarding your Q1 2021 deadline?

Is there any chance to bring that closing date forward?

My second question relates to the cost of electrification.

How long will it take to see any meaningful contribution from using PSA platforms in powertrains?

Is that more a 2021 theme -- sorry, 2022 theme?

Or will we already see something next year as far as technology transfer is concerned?

And very lastly, regarding Maserati.

Mike, you touched on it, and I'm happy to take your private view because you're not going to be executing on it, but do you think Maserati should be part of Stellantis in the long term?

Was that sort of the pitch in September for being a stand-alone company?

Yes, Patrick, this is Mike.

Obviously, Europe is just one of the jurisdictions that we're going through various filings and antitrust reviews.

I think we're making expected progress in all areas.

So I would say that, that's why, not just we, but also PSA are expressing confidence of our forecasted close in the first quarter of Q1.

We still have a number of things to go through.

Everything at this moment in time is on track with that.

So I think I'll leave it at that.

The -- what was the second question?

Being -- regarding the cost of electrification and the contribution from PSA powertrains and platforms, when that would kick in?

Yes.

I mean, assuming that -- that really will begin to kick in some towards the end of 2021.

But obviously, rapidly accelerating as you get into '22 and '23.

And Maserati?

Maserati, yes.

From my perspective, we've got all the building blocks in place that we talked about for Maserati.

I think the onus is on us to demonstrate to the market, to our shareholders that we have the right formula, not just for short-term profitability for that brand, but for long-term profitability.

And I think that that's the most important thing for us to demonstrate, and that will be demonstrated in Stellantis.

What that means in terms of options into the future, let's accomplish the first thing, and that's a strong 15%-plus margins, sustainable levels of profitability.

And as I said, return in Maserati to where it absolutely should be as one of the premier luxury brands in the world.

We are taking our next question from the line of Philippe Houchois from Jefferies.

Congratulations.

A couple of questions for me.

One is if we think about the North American situation and the pace at which the industry is rebuilding normal production, when do you think that inventory at dealer levels will actually normalize?

Now let's keep COVID caveats out of the picture for a moment.

But is it possible that we could be tight in terms of dealer inventory through the summer of 2021?

Or are dealers considering or revisiting the historic level inventory?

Do they want to carry less inventory than they did in the past?

Or do they want to go back to the levels of 90 days or so that we've seen historically in the U.S., is my first question.

Then the second one is, so hopefully, we're close to get EU approval for the merger.

I think the situation in Brazil is still pending.

You have a strong position there.

Peugeot has a decent position there.

Renault is pulling back, Ford has pulled back, both are yet not clear what they're doing in Brazil.

Is there an issue from an approval standpoint that you are potentially, as Stellantis is quite a large, I wouldn't say dominant, but quite a large player in the Brazilian market and would that be an issue in terms of securing approval?

Philippe, this is Mike.

The inventory -- let me address the inventory question first.

I don't think our dealers want to go back to historic inventory levels.

There's always been a distinct difference between the, what I would call the domestic U.S. players and the historical imports in terms of their approach to inventory.

And I think that was driven by 2 key things.

The first one was differences in segments that they play in, truck segments and other body-on-frame segments often have a higher degree of complexity.

And therefore, many, many more commercial combinations than other segments, for example.

I think what we've seen from all of the domestic OEMs in the U.S. is a big focus on reducing that level of complexity in commercial combinations.

And with that, means you can increase your churn rate, as you know, and reduce your inventory.

So what I think we see now is somewhat closer to the new normal of inventory levels that I sincerely hope it is.

There is no doubt there is pockets of inventory that does need to be increased because if you look across the country, we are -- although there are various trims or models that we are short on, and there are various geographies that are shorter than other geographies.

So we certainly have to continue to work hard to rebuild certain portions of the inventory.

So I would see if conditions continue as they are.

Lower levels of dealer inventory for sure into the first half of next year.

And if we see retail continuing for a prolonged period beyond that, and I think we get more and more used to turning that inventory quicker as we put more and more efficiencies into our supply chain to get our vehicles to our dealers.

So that for me is -- and it's a good change.

And I think our dealers are benefiting from it.

With regard to Brazil, we are still in the middle of that process.

We are working through it.

I don't see any particular issues with regard to getting the approvals that we are seeking.

But we obviously are working very closely with the authorities.

And that all of the jurisdictions are factored into our forecast of a close in Q1 next year.

Right.

If I maybe squeeze a last one.

I think on the Q2 call, I asked you a question about electric pickups, and I got a bit of a cryptic answer.

I'm just wondering if you have more to share about how you see Ram, an electrified version of Ram.

Now since we last spoke, we had the presentation of the Hummer as well as the Lordstown.

And so has your -- are you willing to share a bit more about how you see around electric?

I didn't mean my answer to be cryptic.

Apologies for that.

I do see that there will be electrified Ram pickup in the marketplace.

And I would ask you just to stay tuned for a little while, and we'll tell you exactly when that will be.

We are taking our next question from the line of Pierre-Yves Quemener from MainFirst.

Pierre-Yves, MainFirst.

First, a general but a crucial question for both of you.

Both of you have might (inaudible) in turning around FCA.

Still, we don't have a clear picture of what would be or could be a future within Stellantis.

The only thing we know that we could have expected Mike to be appointed at the Board of -- the Board of Stellantis.

This is not the case.

So first question would be what's going to be your future roles and position within Stellantis, if you have some more color to share today?

The other 2 questions, I would say, are on the -- bridge related.

I understand your comments and explanation on the EMEA bridge, which has been burdened by electrification costs and also purchase of credits from Tesla.

Going forward into 2021, do that addition electrified vehicles prevent the region to be profitable before end of '21 or before 2022?

Because I think the more -- the higher the share of electrified vehicle, the higher the industrial cost and the lower potentially the [actual] purchase from Tesla.

But I think that could continue to be a significant headwind.

Last and third part of my question, I would be on Latin America.

Could you come back on the [EUR 77 million] industrial cost headwind in the quarter?

And how should we think of these industrial costs going forward, once again, not into Q4, but into 2021?

So to have a flavor of the profitability trends of the region.

Thanks, Pierre, it's Mike.

The -- with regard to Stellantis, I've worked very hard with my colleagues on putting this together, I intend to be part of the group.

I've been very clear with regard to that.

There will be a moment in time, not yet, when roles are announced.

And you will have to wait for that time to understand what my role will be within the organization.

But as I said, there's many of us that have been working hard on this.

We believe it's for sure, the absolutely right thing to do.

I want to make sure that I'm part of this transition.

So with regard to the industrial cost walk.

I don't know, Richard, do you want to handle that one and pick up the LATAM one as well?

Sure.

So Pierre, obviously, in terms of the EV challenge and the pricing for the product, I think that's a theme through the industry.

And so we're seeing, in EMEA, an increase in the level of electrification that will continue going into next year, and we will continue to put out great products that we can market and recover price to cover the cost increases.

And that is obviously the challenge for everybody.

So I think stay tuned on that.

And clearly, as we get more product into the marketplace, I think we'll all be very focused on the market pricing as a result.

In terms of LATAM, LATAM historically has always had inflation on the cost base that we have always -- our team in LATAM has always been very effective at managing through price and mix.

And this quarter was no different, but actually also very negatively affected by the devaluation of the real through the year, a 30% devaluation of the real against the euro hit the cost base very hard for those important components for LATAM.

So I think the team did a really good job offsetting a lot of that with price.

You don't see that in this walk because last year, we had a positive good guy for a credit -- a tax credit that we didn't have a repeat of.

But if that hadn't been the case, you would have seen 90% of the industrial costs actually being offset by pricing actions.

So I think the 3% margin for the quarter was a good one.

And I think our North America -- sorry, our Latin America team is very focused on continuing to improve our profitability in LATAM going into next year with the launches of the new pickup that we talked about, the Strada and the continued focus on Jeep.

And obviously, hopefully, the FX headwind will abate.

I think the LATAM team has done a tremendous job.

Just imagine the conditions that they work under, not just in terms of FX, but the effects of the pandemic in that region.

And I think for them to turn their business around in the quarter and produce a profitable result just talks to the quality of the people that we've got there.

And my congratulations to all of them.

And one thing I would tell you about those guys and girls in LATAM is they're determined to continue to grow their profitability regardless of the conditions as presented to them.

So we've got a very strong team.

Okay.

Just one last I would like to squeeze in on the EMEA.

Is it reasonable to assume that you will still be on an ongoing basis, loss-making in EMEA next year?

That's what you have in your budget?

Or do you have now more aggressive...

It's not reasonable to assume that.

No, it's not reasonable to assume that.

Our final questions come from the line of Cosman, Henning from HSBC.

Yes.

Mike, and Richard, it's Henning from HSBC.

I just had a follow-up on -- for Richard, maybe about the reversal of provisions.

As far as I remember, you were commenting at the H1 stage 2 reverse the EUR 1.8 billion or so of provisions from the first half as well.

And I think Richard, you said in an earlier answer that you're expecting EUR 2 billion for working capital and provisions combined.

I just wanted to clarify if that was a statement for Q4 alone.

And if that doesn't make the full year free cash flow guidance appears a bit lower then I just wanted to completely be able to reconcile that.

That's my first question.

And then maybe 1 for Mike on the synergies.

I think in your opening remarks, Mike, you said that the teams have obviously made great progress in the work streams around the synergies.

I was just wondering if that also enables you, if you would, to give us a bit of a cadence about when those synergies would materialize and how they would phase through the first few years of the combined company?

Richard, you can answer the first part of the question.

Yes.

So in terms of the EUR 1.7 billion on provisions, because then obviously, mostly, that is basically related to incentive accruals and warranty accruals related to dealer stock.

So at present, as Mike mentioned, we don't expect dealer stock to increase significantly through Q4.

So really, the level of impact from provisions in Q4 is relatively minimal.

Most the EUR 2 billion I talked about is related to working capital payables because of EMEA and inventories because of continued reduction in inventories.

And that EUR 2 billion will be hit in Q4.

So no longer a reversal of the provisions of H1?

I don't know if I misunderstood that at the H1 stage.

But was that the indication at the time and is no longer true?

Or did I misunderstand it at the time?

No.

I mean I think we've talked about -- sometimes we talk about working capital and provisions as in aggregate because this is sort of the balance sheet in general.

So we had EUR 5.6 million of working capital and EUR 1.7 million of provisions.

We've always talked about a large proportion of the working capital reversing.

But I don't think we've been specific about the provisions because, frankly, the dealer stock levels have never looked like returning to anything like the levels that they were at the end of last year, also because, as Mike mentioned, we don't necessarily want them to in most of the regions.

Henning, with regard to your question, I think we said before that we anticipate that 80% of the synergies to be realized in the group by year 4, the improvement in the synergies that we've identified, the cadence hasn't really changed materially.

So we're expecting a similar delivery over those first 4 years in terms of the synergies to Stellantis.

That will conclude the question-and-answer session.

I would now like to turn the call back over to Mr. Mike Manley for closing remarks.

So thank you, everybody, for your time and your questions.

And I'm just going to wrap up by saying that from our perspective, this was a remarkable quarter for our group despite the lingering effects of COVID-19.

And I talked about LATAM and how pleased I was with their work.

But frankly, deliver a quarter like this with everybody working exceptionally hard, and I'd like to thank each of our employees for their contribution to achieving these record results and their continued dedication, resilience and creativity.

And as I think Richard and I have tried to communicate, we remain committed to building an even stronger future that provides additional value for our shareholders.

And that's demonstrated by our introduction of several key new products, laying out the new strategy for Maserati as well as effectively amending our combination agreement with PSA.

And as you've seen, our maintenance of our investment in terms of CapEx, making sure that we continue to invest in the future.

So I think we continue to navigate through this crisis by taking decisive actions and has always been the case in the start, these actions are taken while always keeping the safety and well-being of our employees and communities at the forefront.

And through all of this, we remain committed to executing the FCA and PSA merger by the end of the first quarter 2021.

A lot of questions on that topic as we can completely understand.

But we're obviously clearly excited about the future prospects of being part of Stellantis, and we're even more convinced than ever of the potential this landmark merger will give us.

And finally, while the last quarter of the year will have its own set of challenges, we believe we're going to have a strong finish to the year, successfully positioning us as we embark on this new era as a combined entity.

So once again, I'd just like to thank you for your time, attention and questions, and wish you a good remainder of your day.

Thank you, everybody.

That will conclude today's conference call.

Thank you for your participation.

Ladies and gentlemen, you may now disconnect.