Stellantis NV (STLA) 2020 Q2 法說會逐字稿

Good afternoon or good morning, ladies and gentlemen, and welcome to today's Fiat Chrysler Automobile Group Result for Second Quarter 2020. For your information, today's conference is be recorded. At this time, I would like to turn the call over to Joe Veltri, (inaudible) FCA Global Investor Relations. Mr. Veltri, please go ahead, sir.

Thank you, Roberto. And welcome to everyone joining us today as we review FCA's Second quarter 2020 results. Earlier today, the presentation material for this call as well as the related press release was posted under the Investors section of FCA's group website. Today, our call is hosted by Mike Manley, the group's Chief Executive Officer; and Richard Palmer, the group's CFO. After both Mike and Richard present, they will be available to answer questions from the analysts.

Before we begin, I'd like 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 on Page 2 of today's deck in the safe harbor statement. And as customary, the call will be governed by that language. So with that, I'm going to turn the call over to Mike.

Well, thank you, Joe. Good afternoon, good morning, everybody. Well, before Richard and I take you through our results for the quarter, I wanted to provide you an update on our actions related to the COVID-19 pandemic. As a lot has changed since our last call. Now to begin with, I cannot praise enough, the level of commitment, solidarity, determination and efforts exhibited by everybody in our company during these months to help our local communities and support first responders and health care workers. The extraordinary way our employees have mobilized has proven once again that the FCA family is capable of applying its ingenuity to any situation.

And as always, they make me proud to be part of this team. And I'd like to personally thank all of them for their continued dedication, resilience and flexibility. We've also been highly focused on implementing our rigorous plan for getting the business back up and running in each region. Always keeping the safety and well-being of our employees and local communities at the forefront of our efforts. Most of our plants are back up and running in all regions under a comprehensive multi-layer program of health and safety protocols. And we were able to adhere to our previously communicated restart schedule.

Now in North America, LATAM and APAC, our plants are back to pre pandemic shift patterns, and we expect EMEA to achieve this level during this quarter. And in fact, in North America, we are currently running production at pre pandemic levels with the exception of our Warren truck and Toluca plants, which are both currently down for planned retooling activities related to future product actions. There have been no significant production disruptions due to COVID-19. And based on the tremendous efforts of our suppliers, we have not had any significant supply chain issues. And I'd also like to thank them for their help and support. And overall, we've been very pleased with the restart of our operations. Now our teams have worked tirelessly to create an environment that can keep everyone safe, and our employees have done their part by following the new protocols and our suppliers have worked hard to support our plans.

We've also fully resumed our product development activities in each region as we continue to invest in programs as part of our plans to enhance our product portfolio. And as a result, our full year 2020 CapEx spending is expected to be between EUR 8 billion and EUR 8.5 billion. Now some of you may remember that as we came into this year, we had a CapEx expectation of around EUR 9.5 billion. So we will have reduced that by around EUR 1.5 billion, but not jeopardize the launch of important white space products in North America or our electrified product in EMEA. And talking of EMEA, we'll be launching 5 new high-voltage EVs, 4 of which are made in Europe, and I'm going to give you further details on these launches later.

Now for the Jeep brand, we'll start production of some new high-volume, high-margin products next year, a new 3-row full-size SUV in Q1. The all-new Wagoneer and Grand Wagoneer in Q2. And as you know, all 3 of these vehicles will go into high-margin segments that we do not play in today. And then, of course, the next-generation Grand Cherokee around Q3. Now along with the restart of production, I'm happy to state that substantially all of our dealers are open for sales and service in all regions. And while the in-person sales process is now again available to our customers, the advanced digital solutions we have developed will continue to be valuable tools to conduct sales remotely going forward.

So now turning to the business highlights. We knew that pandemic would have a significant impact on our second quarter performance however, our overall results have been better than expected. Our adjusted EBIT was down EUR 2.5 billion year-over-year. However, due to stronger-than-anticipated retail sales rebound in the U.S. During May and June remained profitable in North America. Despite our shipments being down over 60% year-over-year. While the disruption in demand and local restrictions in all regions impacted our sales, our commercial teams were able to deliver several bright spots during the quarter. For the first time ever, we achieved market leadership in LATAM with 15.9% market share, up 190 basis points year-over-year, and we also maintained our leadership position in Brazil with 19.8% market share up 100 basis points. And in the U.S., our retailer retail market share was up 10 basis points to 12.5%, primarily driven by the Jeep brand, especially with Wrangler and Grand Cherokee, and of course, our Ram heavy duty pickup.

Now in addition, at the end of June, J.D. Power announced that Dodge became the first domestic brand ever to achieve a #1 ranking in its annual U.S. initial quality study, and this was followed by the Ram brand tying for the #3 ranking. In fact, FCA's overall performance showed significant progress, improving by 5 spots and outperforming the industry average for the first time in its history. Now given the unprecedented nature of the pandemic, we took quick actions to safeguard our earnings power, preserve cash and strengthen our financial flexibility, which included a new EUR 3.5 billion bridge credit facility, which was syndicated in April, and remained undrawn at the end of June. And then this facility was replaced in July with the issuance of a new EUR 3.5 billion term notes and a new innovative EUR 6.3 billion credit facility that we signed in June with Intesa Sanpaolo, which is fully dedicated to our operations in Italy and to support the restart and transformation for more than 10,000 small and medium enterprises that are a critical part of Italy's automotive sector.

Our industrial free cash outflows were EUR 4.9 billion in the quarter, which was better than our previous expectations. And as a result of the significant liquidity actions we completed during the quarter, our available liquidity remained strong at EUR 17.5 billion, which, by the way, excludes EUR 4.5 billion that remains undrawn under the new EUR 6.3 billion Italian facility.

Now during the quarter, we successfully launched our first plug-in hybrids in Europe. And as we began production in June with the new Jeep Renegade and Compass plug-in hybrids in our Melfi plant and as already announced in May and in light of the impact from the COVID-19 crisis, the FCA Board of Directors and PSA's managing board each resolved not to distribute the respective company's EUR 1.1 billion ordinary dividend related to fiscal year 2019. And finally, last week, we announced an expansion of our successful autonomous driving technology partnership with Waymo. And I would like, if I may, to provide you with more details later in this presentation.

So let me turn to our commercial performance during the quarter. As you all know, the overall market was down significantly year-over-year in each of the regions due to the impact of COVID-19. And correspondingly, our sales were down significantly as well. Throughout the quarter, we were able to accelerate the deployment of a complete online retail experience to our customers, with our dealers quickly progressing to online sales channels. And today, nearly our entire global network is able to sell cars online compared to less than 10% pre pandemic. In North America, our sales were down 40%, mainly due to a more than 80% reduction in our U.S. fleet volumes primarily within the daily rental channel. This quarter demonstrated the resilience of U.S. consumers with retail sales rebounded since April as the reopening of the economy, steady gas prices and access to low interest loans per consumer demand. And we gained 10 basis points of U.S. retailer retail market share year-over-year.

Now for APAC while activities were gradually improving in China, throughout the quarter, the negative impact of COVID-19 were progressively ramping up in countries outside of China, which significantly affected our business in the region.

Now in EMEA, our sales were down nearly 50%, which largely reflects the impacts of the pandemic in several of our key markets, especially Italy. In fact, in the quarter in EMEA, we kept our plants down for a longer period than was mandated partly because we saw demand in Italy coming back slower and partly because we wanted to ensure our dealers destocked to a safe and viable level. Now obviously, this impacted EMEA's quarterly performance.

Now a highlight for the region, however, was the improvement we're now seeing in the dealer retail sales channel. This, as you know, has been a focus for the team for a while. And although at the moment, it does not make up for the volume drop due to our move away from lower-margin channels, it is progress. And in Europe, our LCV sales performance remained strong as our sales declined 33% year-over-year, while the industry was down 41%. This moved our LCV market share in the EU, up 190 basis points versus last year to 14.5%.

Now in Latin America, which continues to be hard hit by COVID-19, our sales declined 60% year-over-year. However, as I stated earlier, we gained significant market share in both the region and Brazil, achieving leadership positions in both markets. As I said, Richard will take you through the financials in detail. So I'm just going to give you a quick overview of our results, which I noted earlier, was significantly better-than-expected as North America, the market recovery in late May and June was stronger than anticipated. I also want to point out that we saw an improving trend towards the end of the quarter in each region, which we expect to continue into the second half of the year. And with North America delivering a profitable quarter despite, as I mentioned earlier, our shipments being down significantly. You can clearly see the benefits of the work we have done to lower the region's breakeven, all of which will continue to significantly benefit us in the second half of this year.

Our combined shipments were down 63% year-over-year, mainly due to the temporary production stoppages and the disruption in demand experienced in all regions due to COVID-19. While our consolidated shipments declined 65%, our net revenues deterioration was limited to 56%, primarily due to improved sales mix and pricing actions taken in North America during the period. Our adjusted EBIT was down EUR 2.5 billion year-over-year due to the dramatic drop in our global volumes. And as noted earlier, our industrial free cash outflows were limited to EUR 4.9 billion, and the decrease in our available liquidity was limited to EUR 1.1 billion.

Overall, despite our results being down year-over-year, our entire team did what I think is a phenomenal job with executing our production restart plans effectively and efficiently, resuming full-scale industrial activities across all regions and all functions. This, along with the cost saving actions, taken and actions to maintain liquidity helped minimize the negative impact of COVID-19 during the quarter. And with that, I'd now like to hand over to Richard who will take you through in more detail our performance. Richard?

Thank you, Mike, and good afternoon, or good morning to everyone on the call. I'll continue a little bit on Page 6. As Mike mentioned, consolidated shipments were down 65% as most of our facilities had enforced shutdowns through April and large part of May. Revenues were down 56% as the shipment reduction was partly offset by positive mix and pricing. Adjusted EBIT was a loss of EUR 928 million, down due to the loss of volumes from EUR 1.5 billion profit last year. Adjusted net loss was EUR 1 billion, driven by the negative adjusted EBIT. Finance charges were reduced year-over-year by around 10% to just under EUR 240 million, and adjusted tax were a benefit of EUR 126 million compared to an expense of EUR 340 million last year due to the reduction in EBT. The effective tax rate is around 11%, lower than our expected rate of around 26%, due mainly to deferred tax assets not recognized on losses in our Italian and Brazilian operations.

Unusual operations in this -- sorry, unusual items in this quarter were insignificant. As Mike mentioned, industrial free cash flows were negative EUR 4.9 billion, driven by working capital and provisions unwinding for negative EUR 3.5 billion and CapEx of EUR 1.7 billion. Available liquidity at June 30 was EUR 17.5 billion, composed of EUR 14 billion of cash on the balance sheet and EUR 3.5 billion of undrawn of the undrawn bridge to bond facility. This liquidity excludes the EUR 4.5 billion undrawn portion of the new EUR 6.3 billion Intesa Sanpaolo facility entered into in June. So all in all, we have a strong liquidity position. To also note that in July, we completed a EUR 3.5 billion bond offering, which successfully replaced the bridge to bond facility syndicated in April.

Moving to Page 7. We show the adjusted EBIT by operational driver. Consolidated shipments were down 736,000 units, with EMEA down 70%, LATAM, down 68%; North America, down 62% and APAC down 50% due to the different timing of the in forced shutdowns of the plants and varied impacts on demand. That drove EUR 3.1 billion of negative impact on adjusted EBIT. Net price was positive due to North America actions, partially offset by negative price in other regions.

Industrial costs were slightly negative, with EMEA negative and other regions substantially flat. SG&A costs were reduced by nearly EUR 600 million, with all regions contributing positively as actions were taken across all cost categories, particularly on advertising spending.

Moving on to Page 8. We show the industrial free cash flow performance, which was negative for the quarter at EUR 4.9 billion, obviously heavily impacted by the impacts of reduced negative working capital and changes in provisions, as I mentioned earlier, for a total of EUR 3.5 billion and CapEx spend of EUR 1.7 billion. With EBITDA reduced to EUR 0.3 billion, down EUR 2.5 billion from Q2 last year. The negative EUR 1.9 billion of working capital was driven by a reduction in payables, offset by reduced vehicle inventories and reduced work in progress as well as a reduction in used cars and other receivables.

The change in provisions of negative EUR 1.6 billion was driven by reduced dealer and fleet incentive provisions and warranty provisions as dealer inventories destocked in all regions due to continued retail sales admittedly at different levels and the interruption of new vehicle shipments.

To summarize our first half negative cash flow was EUR 10 billion, of which EUR 7.3 million due to working capital and provisions impacts. If market conditions continue to improve through the second half, we would expect a substantial part of the EUR 7.3 billion to reverse positively as we restore production levels and also dealer inventories, especially in North America. We closed Q2 with a net industrial debt position of [EUR 5.1 billion] compared to 0 at the end of Q1 due to the negative free cash flow as well as FX and lease additions of EUR 0.2 billion.

Moving on to Page 9. We summarize the adjusted EBIT performance by region. The North America region remained profitable despite the substantial drop in volumes or as the others recorded losses, although the trend in the quarter was positive for all regions as the manufacturing plants ramped up through the end of May and June.

Moving on to the individual regions. Page 10 deals with the North America performance. Shipments were down 62%, while North America industry sales were down 36%. The U.S. total industry was down 34%, with the retail industry showing resilience, down 23% compared to fleet down 70%. Our sales were down 40% and with retail share up slightly, as Mike mentioned, but fleet sales down more than the market due to lower rental sales.

Importantly, our North America dealer inventories were reduced significantly from 635,000 units at the end of Q1 to 450,000 (sic) [452,000] units at the end of Q2, leaving us well positioned for the second half. Of these North America inventories, U.S. dealer inventory closed at 389,000 units, down from 553,000 at March.

Revenues were down 53% with positive mix, including lower GDP fleet shipments as well as FX, partially offsetting the shipment reduction. Despite the 62% reduction in shipments, the North America adjusted EBIT was maintained positive. The volume impacts discussed were offset partially by positive mix of retail market shipments increasing compared to fleet market shipments and positive car line mix as well as positive pricing, mainly on Jeep and Ram products.

SG&A savings were significant at just over EUR 350 million, driven mainly by advertising spend and a reduction in G&A costs. Industrial costs were slightly negative due to the non-repeat of the prior year Cafe fine rate reduction of EUR 150 million, which offset cost savings on purchasing and reduced personnel costs.

Moving to Page 11, we review the Asia Pacific results. The consolidated shipments were down 50% due to COVID-19 related production restrictions in India as well as reduced import shipments to the region due to restrictions in our production sites in North America and EMEA. As well as demand impacts outside of China. This reduced shipments to 11,000 units with the Jeep brand down 9,000 and Alfa down 1,000. Combined shipments were down slightly less at 41% (sic) [40%] due to the China JV shipment reduction of 28%. The adjusted EBIT loss was EUR 59 million for the quarter, with volume mix impact of negative EUR 68 million, partly offset by reduced SG&A costs.

Moving to Page 12. We show EMEA's results. Here, consolidated shipments were down 70% or 250,000 units with all brands impacted. Dealer inventory was reduced to 174,000 units from 257,000 a year prior with day sales at a level we consider appropriate for current consumer demands. Net revenues were down 60% due to used car sales and parts and service sales being less impacted than new car volumes. This reduction in volumes was the main driver of the reduction in adjusted EBIT to a loss of EUR 589 million. Industrial costs were negative EUR 60 million, driven by the impacts of compliance and purchasing inefficiencies due to the nonrepeat of savings achieved in Q2 last year and a minor impact of raw material inflation due to PGMs. SG&A cost actions were significant, both on marketing and on G&A costs. And the other impact was due to reduced results from our joint venture investments.

Moving to Page 13. We look at the LATAM results. LATAM region and Brazil, in particular, as you know, is slightly behind the other regions and its progress out of COVID-19, and that is reflected in shipments down 68% with plant suspensions as well as impacts on demand with the industry sales down 66%, impacting the volume performance. Net revenues were down 77%, with negative FX impact as well as the reduced volumes.

Adjusted EBIT was down EUR 206 million (sic) [EUR 96 million], principally due to the volume impact. Industrial cost actions were offset by purchasing cost inflation and price was negative due to the nonrepeat of a credit in Q2 '19 related to indirect taxes. Cost actions in SG&A were again significant to partially offset the volume impact, and the other impact was due to FX translation of the weaker real.

On Page 14, we show the Maserati brand. Sales were down 51%, with all regions down, EMEA 69%, North America, 44% and China down 41%. The models were similarly impacted. Shipments were down in line with sales, with net revenue slightly better, down 46%. Adjusted EBIT loss was reduced from last year's level to EUR 99 million due to the non-repeat of North America residual value adjustments last year.

Global network stock was further reduced to just under 6,000 units compared to 7,000 at the end of March and 11,000 a year ago. This trend is important as we prepare to launch the MCAs for the Quattroporte, Ghibli and Levante and the Ghibli mild hybrid.

Moving on to Page 15. We show our market outlook for the full year 2020. Obviously, the big unknown continues to be how the markets will perform and whether there will be any significant disruptions to the demand improvement trend we saw in June and July. Clearly, the market situation is very fluid. So our current expectations are subject to the risk of significant fluctuations. As a result, our position on guidance remains unchanged in that we withdrew our guidance for the full year, and we are not going to provide any guidance on our future financial results until circumstances stabilize.

Our current market assumptions show U.S. SAAR in the second half at around 14.5 million vehicles, down 70% -- 17% year-over-year. This would represent a continued moderate improvement from the 13.5 million we saw in June and the 14 million expected in July and will get us to a full year SAAR of about 14 million, down 20%.

For EMEA, we assume the EU 28 plus EFTA region at EUR 13.4 million for the year, down 26%. The month of June was down 23%, but we expect July to be down much less year-over-year as demand continues to improve. LATAM, we assume at 2.8 million units down 33% for the year and 27% for the second half. Based on these market assumptions and supported by the operating performance trend we saw in June and July, we anticipate a significant improvement in our financial performance in H2 with strong positive cash generation driven by the restoration of a significant portion of the EUR 7.3 billion unwind of working capital and provisions we saw in H1. And EBITDA generation that we expect will offset the CapEx spend and the cash taxes and financial charges in the second half. This obviously assumes no further disruptions in our supply chain or in production as well as the continuation in the recent demand improvement trend. Also just to be clear, we do not plan to provide interim updates to these expectations notwithstanding the potential for continued market volatility. Thank you very much. And with that, I'll turn the line back to Mike.

Thank you, Richard. So as I mentioned earlier, we're focused on our commitment to deliver a portfolio of high-voltage electrified vehicles, which will obviously help ensure that we meet the increasingly stringent emissions and fuel efficiency regulations around the world. Our electrification is already at the core of our strategy and is growing significantly during 2020 with the addition of several new electrified options. And we've obviously spoken quite a bit in the past about our plans and when they begin to roll to market. So obviously, we've now reached the stage where that begins to happen. And the all-new 500 full battery electric vehicle whose first limited edition was launched in March, will be available in our European show in September and combines a clean and sustainable soul, but with the unmistakable fair design and attention to detail.

Now the Ducato BEV, a fully electric version of our segment leader in Europe and currently sold in more than 80 countries around the world, will become Fiat professional flagship for electric mobility and will be launched in Europe in Q4. Jeep's electrification plan is well underway, and an all Jeep electrified vehicles will carry a new 4XE badge, starting with the plug-in hybrid electric versions of the Renegade and Compass which are leading the way for the brand's entry into the EV market in Europe. And production began in June for both vehicles, and they are both currently available for ordering across Europe. Also, Jeep's icon, The Wrangler will arrive on the market with a 4XE version that will be in the front line of our electrification strategy in North America.

We plan to globally reveal the all-new plug-in hybrid in the third quarter, and the vehicle will arrive in our showrooms in the U.S. by the end of the year and in Europe and China early next year. So we're doing a lot on the electrified vehicle front and early orders from our partners and customers are coming in strongly. In fact, I think we can confirm that we fully expect to be compliant in Europe with the combinations of our strategies. But we're also doing more now because we've embarked on for electrification does not consist only of electric vehicles, such as the one that I talked about. It actually involves the entire customer experience by taking a completely different way of looking at vehicle use and mobility in general. As you've seen, we have a number of new electrified models coming out soon.

And of course, there will be even more to follow. But these first models represent a fundamental move in a comprehensively developed strategy. And our strategy results in a new way of conceiving mobility that puts the environment at the center and adopting new technologies such as vehicle to grid and supporting energy transition. All of this is done without losing site of the customers' needs, such as reducing range anxiety as well as enabling access to the largest public charging network available across Europe.

FCA with its E-Mobility and Leasys division is, therefore, working to create a true ecosystem of products and services to meet the expectations of those who will use electrified vehicles. So that their use becomes widespread and well established. Now to ensure that the customer experience is well executed, FCA has adopted holistic view on electrification, offering mobility services that encompass advanced tools, ranging from digital tutorials to smart access to cities as well as recharging networks, both public and proprietary and all with a view to always keep the customer first. I'm just going to quickly talk about a few examples that are part of our E-Mobility ecosystem.

Now thanks to the presales app, Fiat GOe LIVE and GO 4x,E, our customers are provided with data on trip simulations, incentives, charging network availability as well as advice on electromobility behaviors. As a member of the Turin Geofencing Lab, FCA's piloting a patented digital solution to allow plug-in hybrids to behave as BEVs in restricted low-emission traffic zones. This pilot, we believe, is a world's first.

Furthermore, through the service, my EZ-Charge, we will provide our customers with access to the largest European network of public charging points, which is expected to reach 200,000 by the end of this year. And lastly, Leasys, our European mobility and rental division keeps on expanding and electrifying its network of Leasys mobility stores across Europe, which is targeted to reach 500 locations by year-end. And will be equipped with 1,700 proprietary charging points.

Now in addition to this news on electrification front, we've also been enhancing our efforts related to autonomous driving technology, with the recent expansion of our successful partnership with Waymo. FCA became Waymo's first automotive partner in 2016. Since then, the 2 companies have worked closely to integrate the Waymo driver into SGA vehicles and have made self-driving history in the proven capable L4 ready

Chrysler Pacifica Hybrid minivan. This partnership has already led to the first commercial autonomous ride-hailing service, including the offering of fully driverless service to riders as well as driving in dozens of cities across diverse geographies in challenging weather conditions.

Now as part of the next significant step in the expansion of this successful partnership, FCA and Waymo announced last week an agreement which includes us working exclusively together on the development and testing of L4 autonomous technology in Class 1 through 3, light commercial vehicles for goods delivery. The first application is targeted for our Ram ProMaster van. In addition, Waymo has committed to deploy its L4 autonomous technology across FCA's full product portfolio as FCA's exclusive strategic partner. Our strategy in the area of autonomous technology has always been based on leveraging strong partners and there is no stronger partner in the L4 technology space than Waymo. So now looking forward to the second half of the year.

Based on the actions taken, the resilience and flexibility demonstrated by our global team and our current market outlook, we expect a significantly improved profitability and positive free cash flows. We have already planned to shorten or eliminate the usual summer production shutdown at most of our plants in North America, which will allow us to satisfy stronger-than-expected consumer demand. So far, year-to-date, we have destocked our dealers by over 300,000 vehicles. And our dealer inventories around the world are in good shape.

Now this, coupled with higher-than-expected consumer demand and markets recovering more quickly than anticipated, has resulted in us having a significant order book. In fact, in North America, EMEA and LATAM, our order book is stronger than it was pre COVID-19. We're also on track to achieve our stated target of reducing overall costs for 2020 by around EUR 2 billion. And as I mentioned on our Q1's earnings call, we expect between EUR 600 million and EUR 800 million of these cost savings to be carried over into 2021, depending on how the industry develops. Now one thing this crisis has done has forced us to relook at just about every facet of our business. And every day, the teams are finding new opportunities to gain efficiencies. Now H2 results will be impacted by some planned plant downtime.

Warren Truck will be down for 14 weeks from late June until early October for retooling to facilitate the production of the all-new Wagoneer and Grand Wagoneer. And Toluca was down for the month of July to get ready for the Jeep Compass mid-cycle refresh. However, we have several key new product actions that will provide momentum in the second half. Starting with the all new Fiat Strada, Brazil's best-selling pickup truck now for almost 2 decades, where production essentially began in May as part of our plant restart, and I'm happy to report that demand for the new truck has been very strong. And we also have several other key vehicle launches occurring throughout the remainder of the year. We'll begin production of the all-new Ram TRX pickup truck at our Sterling Heights plant beginning in Q4. And lastly, Maserati will benefit from several new models, which all go into production this quarter.

Mid-cycle freshenings of the Ghibli, Quattroporte and Levante along with the new Ghibli Mild Hybrid, the first Maserati model to adopt hybrid electric propulsion, combining high-performance, low emissions and Maserati fun to drive. And the new Ghibli Trofeo, which is the first offering with a V8 engine. We expect the launch of these vehicles and numerous other actions, the new leadership team has and continues to take to have a solid impact on their financial performance in the fourth quarter.

Now we're looking forward to the much anticipated Maserati day that will take place in September. The event will set out the future of the brand, introducing exciting new products innovation plans and customization programs, and we'll start with a supercharger reveal of the new MC20 super sports car and the new 100% Maserati powertrain. Last but certainly not least, we continue to make good progress with PSA on the merger process. And recently, we announced with PSA that when the transaction is completed, the new group's corporate name will be Stellantis. Of course, the great brand names and logos from each company will remain unchanged. Preparations for the merger are advancing well and are on schedule. Antitrust approvals have already been granted in 12 of 22 jurisdictions, including the U.S., China, Japan and Russia.

Our last month, European Commission initiated its Phase II review of the merger project with a focus on the light commercial vehicle business in Europe. And this review is not expected to delay our timetable to completion and both companies will continue to engage with the EC in the same constructive spirit that has defined our proposal from the onset. And let me end by reaffirming our shared objective to close the transaction by the end of the first quarter 2021, and in the meantime, we will maintain our focus on the flawless delivery of our commitments. And Joe, with that, I think we should open up the Q&A session.

Thank you, Mike. Roberto, if you would, please, let's open up the line for Q&A.

(Operator Instructions) We will take now our first question from the line of Thomas Besson from Kepler.

The first one on the U.S. performance, which was against Stellar. Can you discuss your inventory target by year-end and talk about the assumption you're using, the 14 million SAAR. Given the decline in consumer confidence we've seen and the fact that pandemic is still quite strong there. With also a challenging competitive landscape with the -- notably with the Bronco relaunch? And I have a second question. Should I ask it now or I'll ask it now. Second question is on Stellantis. Clearly, the pandemic, both for Peugeot and FCA has had big consequences in terms of cash burn. Both Peugeot and FCA have done better than expected, but both companies have done a substantial amount of cash this year. Could you talk about your view or FCA's view on what's needed in terms of starting net industrial cash position for Stellantis? And whether you think there may be ways to eventually adjust the cash components of the dividend getting into the deal and transform it into something else eventually? That's my 2 questions.

Thank you, Thomas. This is Mike. I'll deal with the first and quite possibly the second of your questions as well. So when I think about inventory levels at year-end, I'm very pleased with the levels that we have today and the days of supplies because it means our dealers are in a healthy position. And the demand that we have seen and our production outlook for the balance of the year means that there will be some slight increase as we begin to fill in some of the inventory holes that we have. But we do not anticipate a significant inventory build. We think that the demand will continue. And I know your question in terms of our assumptions for SAAR. I mean, the reality is each day brings different information to us. But when you think about how the U.S. SAAR has performed really since April, where there was kind of an implied SAAR of around 9 million. And then in June, up to 13.4 million. And even though we haven't closed July yet, I think it will be solidly above 14 SAAR for the month, and we'll see it at the end of the day. So I think our outlook is reflective of the fact that there are going to be some ups and downs, I think, but I think it's a reasonable assumption going forward.

In terms of the competitive nature of the markets. Markets are always competitive. We play because of our portfolio of products and our brands in some of the most competitive segments, yet we were able, as you've seen, to improve retail share in the quarter as well as improve transaction prices as well. So we live in a very competitive world. We're a competitive company. We have a very competitive spirit. So I'm not particularly worried about that.

You mentioned the opening cash position of Stellantis. I'm sure you'll recognize that I'm not going to give you an answer on that because it's certainly part of the discussion and planning process that we're going through. And as you know, John Elkaan will be the Chairman, and Carlos will be the CEO, and I'm sure when they're ready, they'll talk to you in more detail about that. But I do want to take this time just to thank the teams that have been working incredibly hard on this process to get us to closing. As I mentioned during my opening remarks, we've already cleared a number of the hurdles that need to be cleared, and we're working very closely with the EU on addressing some of their concerns. But pleased to be able to say that we are on track.

And as Carlos and I have said, the creation of Stellantis isn't a 1-year, 5-year project, this really is bringing together with, I think, 2 very, very strong OEMs in their key regions. EMEA for PSA and North America for us. And that logic clearly has not changed. And in fact, if you think about the pandemic and the results that have been processed, if anything, it's been reinforced as we go through this process. So I'm sure there'll be lots of speculation between now and when we finally come together. But I think we just have to get this year finished up and see where we are. But at this moment in time, as I said before, we're -- we expect a much, much better second half.

Our next question it came from the line of José Asumendi from JPMorgan.

The first one, can you speak a little bit about this profile of working capital coming back in the second half? And then you can address it a little bit with how you see production coming back specifically for the third quarter across regions, but with emphasis on North America, obviously. And then second, the spirit of the question goes in the lines of, if you're using the crisis to improve some of the operations quicker. And this goes in the line of APAC and Maserati and whether you have done -- whether you have done maybe across both regions, some asset write-downs that could improving substantially the profitability going forward?

Richard, I think you can pick up the working capital question?

Sure, Mike. So as we talked about regarding Q2, we've seen a significant improvement through the quarter. I think our volumes in June reflected the fact that we now have, in our key market in the U.S. and North America, a very healthy order backlog and a very positive trend in terms of the ramp-up of production. So I think that, along with the improving demand, we're also seeing in EMEA. I think makes us relatively confident that based on the market assumptions we discussed, which clearly, as we said, they're our current assumption, but there clearly are risks out there for all of us. But based on those, I think we expect of the EUR 7.3 billion of negative working capital and provisions that we saw in the first half of the year, we expect a very substantial portion of those to reverse into -- in the second half. Clearly, that reversal will be somewhat weighted into Q4 just because of the normal seasonality of Q3, where we have shut down for model changeovers in North America and vacation periods in Europe. But I think with some reasonable assumptions about volumes going to the second half, which are down about 15%.

Overall, you can do the math on how much the negative working capital position comes back. We're also working very hard on further improving our inventory positions. The inventory positions last year improved quite significantly. In Q1, they increased also significantly because of the late shutdown related to COVID. So our inventory went up over EUR 1.5 billion in Q1. We brought it back down in Q2 to basically eradicate all of that. And I think in the second half of the year, we expect to continue to reduce the inventory positions as well because, frankly, we have opportunities on both new car inventories and logistics of the delivery process, particularly in Europe and on worldwide exports of vehicles and on our used car position. So I'm not going to give you a number, Jose, but I think you can understand all of those things would give us a substantial restoration of the impact that we saw in Q1. Sorry in H1.

Thank you. Mike, with regards to the opportunity?

Yes. Sorry, that's the second part of the question. With regards to the opportunity to maybe do some asset write-downs across maybe APAC and Maserati and probably improve the profitability of both items.

Obviously, we review our assets and the life of those assets. And as I look at it, Richard, you can comment as well. Over the coming quarter, I don't see some substantial asset write-down for either Maserati or APAC?

No. I mean, we've taken, as you know, Jose, a number of write-downs on Maserati in the last few quarters. As we define the strategy going forward in terms of the vehicle launches that Mike mentioned earlier that we'll discuss at the Maserati day. And I think we have a very clear plan for Maserati now. And frankly, my accounting team would be upset if I didn't point out that we don't do opportunistic write-downs. We just do write-downs when we see that the assets are impaired, and frankly, we -- our aim is clearly to create cash flow so that, that doesn't happen. And in Maserati, I think we have a great plan. I think the new team is putting together a great product plan and cadence of product plan. I think that will be part of the discussion we'll have with yourselves and other guests at the Maserati Day.

Let me just add to that, Richard. As you know, you've been -- many of you have been following our quarterly calls and experienced the pain I had to go through as we've spend time trying to structurally create our business with Maserati in a very public fashion because of the way that we report it. A lot of it relied on the product investments that we needed to make really to refresh its product range, but do so in a way that it gave us a regular cadence of news, which I think is very important for a brand such as Maserati. We're now getting to the point where those investments will begin to hit the marketplace. And as I mentioned in my opening comments, my expectation and in fact, the expectation of the leadership of Maserati with (inaudible) and his team is that we'll begin to see some solid progress on that front in Q4, which will continue as we get through to 2021. But as Richard said, you'll all get the opportunity in Maserati Day to understand in much more detail what we're planning. So I look forward to sharing those plans with all of you then.

The next question came from the line of Adam Jonas.

First question is on the company, the name of the new company, Stellantis. Can I ask -- it's a serious question, but can I ask how you -- how you got to that name, what it's trying to -- how you settled on it and what it's trying to communicate?

Adam, how are you?

I'm good. How are you? Hope you're well.

No, I'm well, thank you. Thanks for the question. I have to tell you that naming of a new company, it is -- there's no doubt, it's a process for sure. And in instances, many instances, it could be a very painful process. And I've watched with interest some of the reaction of the new names. Of the new name. And I actually remind people when they first heard of Google or Uber, I wonder what their reaction was. But in general, I would say on balance reaction has been good. Our thought process was really, really very simple. We have a stable of some fantastic storied historic brands. We knew from the beginning that we didn't want to use those brand names as our corporate name, but we did want something that represented an aspirational coming together of 2 organizations that really spoke in our mind anyway to the future possibilities. And the roots of the company, the new company named come from the concept of a galaxy of stars. And as poetic as it may seem, and I'm not a particularly poetic person. We strongly believed that our brand portfolio some of which are already very, very strong brands and some of which have a very strong future is probably the best way we could describe how we feel about them and the investments that we're going to make. So but it was a process, Adam, and I'm very pleased with where we ended up.

I think you're more poetic than you think, Mike. That was -- I like the answer. Follow-up just on batteries, a lot of OEMs, well, I don't want to say a lot. Some OEMs are taking the vertical integration approach. And seeing some of this -- I was about to say something I shouldn't have said. Extremely generous valuations out there for some businesses that are putting invested capital towards energy storage and kind of owning the IP and the software on that behind it. You're not doing that, but I just wanted to -- and I know I've asked you this in different ways before, but I would love just your latest thoughts now that Elon's offering to supply his cape boards to everybody, and that's probably not a surprise of how Stellantis is thinking or FCA leading up to that is thinking about that make or buy and how you see -- why it's optimal for you to not own that part of the IP?

Well, I think -- and I'll talk a little bit about, obviously, FCA first then come back to Stellantis. And I noted that Carlos in his quarterly call and with his interviews has talked a bit about the European battery initiative and PSA's involvement in that. And obviously, these are long-term commitments. So they will flow over to Stellantis. From my point of view, when I look at -- and this may be a little bit long-winded answer, Adam, because I would never say never because when I look at what has happened over the last few years with regard to the portion of the entire value chain that OEMs have played in, with the exception of Tesla, it's been a shrinking universe. And I think that's a dangerous thing, and I think it needs to be reversed. And therefore, I think ultimately, OEMs will progressively get into the make side of batteries, battery assembly, pack assembly and everything else, and that will apply -- that would apply to FCA as well as to Stellantis in my view. And I think it's -- you will see from us further information of that as the year progresses. But that's the way I think that OEMs should go personally.

That's great, Mike. And by the way, I do like the corporate name. I think it's cool. And it's nice to try something new.

We will take the next question from the line of George Galliers from Goldman Sachs.

The first one, actually just continuing with the new technologies and Waymo, could you give us some insight into the commercial arrangements of your agreement with Waymo? Are you agreeing to sort of manufacture the vehicles for a fixed return? And then if yes, how does that compare to the margins on your existing business? Or is there some kind of profit share element to this based on the service that Waymo ends up providing to the end customer?

George, this is Mike. Well, we'd previously announced, in terms of vehicle availability, we previously announced that we'd reserve capacity for Waymo. But I would -- obviously, at this stage, I will not give you a huge amount of detail in terms of commercial arrangements. But what I would tell you is that the view of the future and the potential from John Krafcik and his Waymo team is very similar to mine, particularly in the field that we are going to concentrate on and announced our partnership, which is commercial vehicles. What we want to achieve is a situation where both of the organizations benefit broadly as equally as possible in the opportunity that that presents. So as we begin to talk more about what that looks like. You will understand that it will be a relatively unique relationship in that area. And I think that's very, very appropriate, given the fact that a vehicle alone I think will not be as successful as the combined vehicle with the best driver in the world, and that's Waymo's driver.

And then the next one was just returning to Stellantis. Obviously, on the [project] call, Mr. Tavares referred to the net cash position of Stellantis at inception. I guess the question I had was when determining the affordability of the EUR 5.5 billion dividend that has been proposed, will it be the net cash position of Stellantis that ultimately determines whether that is paid? Or will it be related to the respective cash flow performance of each company during the course of this year? And with this in mind, from FCA's perspective, if the net cash position of Stellantis isn't sufficient to pay that dividend in full, do you have a certain amount of flexibility?

Well, you can imagine, George, given where we are in the year and the forecast for the balance of the year, that question is actually very complex. So I'm going to try and break it down and just give you my view. Obviously, we want to make sure that Stellantis is born in a very healthy position. And therefore, when Carlos referenced the cash position, I don't think it's a surprise to anybody because he has been very vocal on making sure that the company has all of the resources that it needs to be successful. And none of us really know how 2021 really will develop, although I have to say, personally, I remain very positive about the outlook for '21. But there are a number of factors in your question. And I think there are too many moving pieces at this moment in time for me to give you a comprehensive answer other than to say that we clearly have an agreement agreed with the Board. Fundamentally, both FCA and PSA want to make sure that Stellantis is born in the right and appropriate way. And as we progress through this year, we'll understand more what that means and what it looks like. And beyond that, I think the rest, George is just speculation.

We will take now our next question from the line of Martino De Ambroggi from Equita.

The first question is on the second half performance. If I can ask you for an extra comment on the performance, particularly in North America and EMEA. And specifically on North America for the Q2 performance, could you separate quantifying the fleet decline weight contribution. So just to understand if it was particularly relevant, supposing this will not be repeated in the next few quarters? The second question is on the prices. Because they are holding well almost everywhere. So if you expect any additional pressure, particularly in Europe.

Martino, this is Mike. And I'll give you my answer and Richard, feel free to supplement it as you will. Firstly, the fleet decline from our point of view, was very explainable. And as mentioned, it was mainly in the daily rental channels. And part of that was because demand, obviously, in those areas had shifted, but the big part of it was the fact that we needed to direct available production capacity to the replenishment of our retail inventory with our dealers as they continued to sell above expectations throughout the quarter. To a large extent, that diversion of vehicles to the retail channel is going to continue as we get through this quarter because, as I mentioned before, levels of inventory at the moment are healthy, but we do have significant order bank now in the U.S., and there are certainly pockets of inventory that need to be refilled. But that -- those 2 factors explained the fleet drop that we experienced.

So I think, conscious decision to focus on retail during the period, and you see some of that in the results. In terms of the pricing environment, we did see good pricing, particularly in North America, increases in our customer-facing transaction price over and above how the segments performed. The segment has actually performed well. As well. We saw some improvements in pricing in EMEA, partly offset by some increased incentives, but I was pleased with the work that our Fiat brand had done during the quarter to improve their margin, for example. My outlook on pricing is always linked to how the demand continues -- demand continues to hold up. I think if we're right in terms of the forecast that we gave you for SAAR, it means that I think we will be able to be -- continue to be disciplined with pricing. In the third and the fourth quarter because, as I mentioned earlier, particularly around North America, we do not anticipate -- we will see some increases in inventory, but we don't anticipate building inventory with the current levels that we see.

Just remind me, Martino, was there another part of the question that I didn't answer?

Yes, just if you could elaborate on the second half performance expected in North America and EMEA?

Well, as I said, obviously, this is reliant on our view on the industries. And I spent a little bit of time with -- on the previous question, talking about the U.S., both EMEA and North America, have more healthy order books than we had pre COVID-19. So I think our outlook is broadly reflected by the dealers in the regions as well. Obviously, in EMEA, it's very -- the dynamics of EMEA, as you know, there is a very high country of origin bias in terms of sales performance, and we saw Italy come back a little bit slower than the other -- some other, not all of them but some other European markets. And I think that there is a degree of demand in Italy that will be progressively released as we get through the second half. And obviously, our teams are tasked to make sure that because it's our country of origin that they maximize that opportunity.

And in North America, as I said, we've seen increasing implied size over the last 4 months. And even if that sells in around where July is, it will put us on track for the -- for the SAAR that we forecast of around 14 million in the U.S. and then if you combine that with, as you mentioned, the pricing environment that we're in and the cost that we were able to remove from the business, I think the formula is there to give us a strong second half performance. So long as the way we see the market continues.

Okay. If I may a follow-up on the net working capital reversal. I'm doing my math based on your assumptions. Am I totally wrong or far from reality, if I assume a EUR 5 billion, roughly EUR 5 billion reversal in the second half?

Not totally wrong, I would say, based on our scenario that we outlined.

We will now take the next question from Philippe Houchois from Jefferies.

A couple of questions for me. Maybe one simple for Richard first is would you disclose how much cost you were able to externalize in Q2 by using the temporary work schemes available in the U.S. as well as in Europe?

No, I don't think it would be appropriate, Philippe. No.

Yes. Okay. And another one for Mike. '21 is a big year, I think, for you in many ways, of course. But on the one hand, you're getting a bit more competition from Ford to Jeep with the Bronco. At the same time, you're launching -- you're reentering -- you haven't been in there, the full-size SUV segments. I'm just trying to understand, am I wrong in assuming that the full side, the profit pool that we can allocate to the full-size SUV segment is probably 16% to 20% of the North American profit pool. If you have a view on this, it would be very interesting to me.

And I was just wondering as well, we've seen a lot of announcements, tangible and more promises around electric pickups. You haven't -- FCA hasn't told us anything about this. Is it because you think it's just premature? Or do you have any kind of reservations about the ability to do a full-size pickup that would be battery powered? Thank you,

Philippe. You're right. I mean, 2021 is a big year. It's not just the Grand Wagoneer and the Wagoneer that to your point, will go into the -- one of the highest margin segments within the U.S. So you can imagine the expansion of that opportunity for the Jeep brand. But also in Grand Cherokee segment, 60% of that segment is 3 row and obviously, Grand Cherokee therefore only plays in 40%, the residual 40%. So to a large extent, the 3 row SUV that we talked about today and in previous sessions, is also going into a white space that offers the potential for a very strong margin. So notwithstanding the fact that we talked a little bit about competition, we're very used to competition. And I think our products and our people have proven that they are up to that challenge. So I view '21 very positively, I've got to say. And frankly, the activity that we've got in the second half of this year will help our momentum as we get into '21, I mentioned the TRX launch that we have.

We have some Maserati product coming through. Our plug-in hybrids are now hitting the market. Our iconic 500 will be a BEV, and we have a number of additions that will be supplemented in the U.S. in terms of model life cycle maintenance. And then you asked about electric pickup trucks. The reason we haven't spoken too much about electric pickup trucks is that -- not that we view that market as nonexistent. I mean we've always had a slightly different view in terms of timing and adoption rates. Particularly in North America in terms of full electrification. We are very committed to an electrification strategy, most of which we have revealed. We haven't revealed everything. But obviously, pickup trucks is a key franchise for us, and we're not going to sit on the sideline. If there is a danger that our position gets diluted going forward. So I'll leave you to speculate what that means, but it should be relatively clear.

The next question came from the line of Monica Bosio from Intesa Sanpaolo.

I'm sorry. [Jeff], I mean, yes, excuse me. Can you hear me?

Yes.

Yes, we can.

Can you please elaborate a little bit more on the EUR 2 billion cost saving plan, how much of these costs saving plan have you obtained in the first half? And how much do you expect for the second quarter? And do you still confirm a retention of EUR 600 million also for the next year? And the second question is on the retooling of the plants in the third quarter in [NAFTA] for the new models. Can you give us some more color on the impact on the trend for the NAFTA in terms of profitability for the third quarter. Thank you very much.

Richard, do you want me to answer the cost question? Or are you going to step in?

I can step in Mike, you can add to my comment. So obviously, Monica, the large part of the cost actions are Q2, Q3. And then they start to reduce in Q4. As we imagine that the market becomes more normalized. As we said earlier, Mike said earlier, we do expect EUR 600 million to EUR 800 million of these cost savings to remain into 2021. And obviously, we're working extremely hard to ensure that happens. Market conditions allowing. So I think there's been -- you've seen the performance of our regions and the amount of effort and cost they've taken out, particularly in SG&A. And so we expect a good piece of that to stick into 2021. As regards to the retooling, the bigger impact that we have is downtime, as I mentioned, in Warren Truck in Q3 in preparation tooling for the Grand Wagoneer launch next year.

So that means that we will have our light duty classic vehicle down for Q3. And that will clearly have some impact in Q3. We get it back in Q4. And so that's part of the reason why also our cash flow performance would be stronger in Q4 than in Q3 because of that working capital impact. But there's also the 1-month for the Jeep Compass in July now. So shouldn't have a significant impact on working capital for Q3, but will have an impact on margin performance, but we expect to have a very strong Q3 in North America, nonetheless.

Let me just add to, Richard's. It's a classic truck, it's going to be between, I would say, 30,000 and 38,000 trucks out. And from a Compass perspective, probably just over 20,000 Compasses. So that will happen in the quarter.

We will take now our next question from the line of Charles Coldicott from Redburn.

My first one was just on the cost savings, the EUR 600 million to EUR 800 million for next year. Do these in any way encroach on the EUR 3.7 billion of synergies you've targeted with Peugeot? Are they from similar sources? Or are they completely separate? And then my second question was, I was just wondering if you could update us on your purchases of regulatory emissions credits in Europe and the U.S. So what has been the P&L and cash impact of these purchases so far this year and what do you expect for the remainder of 2020 and 2021?

Richard, I'll do the first one and you can pick up the second one. The short answer is that no, they do not encroach at all on the forecasted synergies. And in fact, if you looked at the source of the majority of the savings from this point going forward that will -- we anticipate, given current conditions will go into next year, the vast majority of it is going to come from North America. So that helps reinforce the first part of my answer. And Richard, do you want to address the second part of the question?

Yes. The first half of this year, we had cash out for just under EUR 400 million for credit purchases related to both North America and EMEA. And we expect a similar number in the second half.

We will now take the last question from the line of John Murphy from Bank of America.

I just had 2 quick follow-up questions. First just on the regulatory credit question. I mean, Mike, you said that you would be regulatory compliance, and I apologize, you seem to miss the timeframe in your commentary. When do you think that would be -- does that mean both in North America and Europe? And is that under the umbrella of Stellantis or before you get there? I'm just trying to understand timing when these regulatory credit purchases hopefully go to 0?

John, different timeline depending on the -- depending on the region. And these were as standalone FCA. So obviously, when the merger closes, this will change and probably be accelerated. But the anticipation was that as we get into 2023 in the U.S. We will basically be 0 reliance on credit. Our electrified fleet will carry all of the burden of compliance. And then in Europe because of the focus that we have put in terms of electrification, by the time we get to the end of 2021 as we enter 2022, we expect the fleet to be able to keep us fully compliant in EMEA as well. And that is with what I think is a very reasonable forecast to take rates of both our plug-in hybrids and our battery electric offerings.

That's incredibly helpful. And just on that, I mean, is the bulk of the purchase on these reg credits in EU or the U.S. at the moment? I don't know if you can give us a rough split, maybe not exact.

I'm pretty sure Richard doesn't want to do that.

Sorry, John (inaudible) .

Okay. Got it. Yes. No, that's fine. Yes. And then just quickly on Slide 10. You have mix and price together in the same bar. I'm just curious if you can give us the benefit of mix in the quarter? Because it looks like it's probably -- it might even be as much as $1 billion-plus for North America. Just trying to understand what mix is of that bar that offsets the volume decline.

Over to you, Richard.

No, it's not that significant, John. I think it's about EUR 400 million of mix. Related to retail and name state channels, but then there's also some negativity because of lower parts and service business. Because we don't tend to talk about this very much, but obviously, with customers not going into dealerships and a lot of dealers shut for some of the quarter. We didn't have as much parts and service business, which is coming back a lot now but that offset some of the positive mix on the vehicle side.

That will conclude the question-and-answer session. I would now like to turn the call back over to Mike Manley for additional or closing remarks.

Thank you. And firstly, I'd just like to thank everybody for being on the call today and for your questions. Hopefully, Richard and I were able to answer them and give you the information that you need. But I am going to just a few minutes just to summarize, based on what we have line of sight today. So Q2 clearly is expected to be the worst quarter of 2020. And even though we do remain cautious on the continued impacts and uncertainties as a result of the pandemic, you've heard, and I think we've demonstrated we believe the second half will be a strong finish to the year. And it's often said at times of crisis reveal a true character of an organization and its people. And I believe that our second quarter was a period during which the employees of FCA have shown a resilience and spirit that we'll all remember for many years to come. And our commitment to all of our stakeholders and to each other has been steadfast, and we've become even more creative and flexible in the way we approach each and every day.

The last months have expressed the very best of who we are, and I'm proud of how our company has responded in all fronts. And as I said before, I don't think I'll be able to thank each and every one of employees enough for the extraordinary way they've reacted, adjusted, mobilized and executed. And these past few months have put our spirit to the test, but at the same time, we've been an incredible learning experience for our company and for all of us as individuals, across our brands, regions and functions, we've truly used this time to learn and apply new ways to make our company more effective and efficient. The way we've collectively risen to these challenges, tell me that despite the testing months that still lie ahead, we will come out of this stronger than ever. So again, with that, I'd just like to thank you all for joining us today, and hope you and your families keep well. Thank you.

That will conclude today's conference call. Thank you for participating. Ladies and gentlemen, you may now disconnect.