Q3 2021 Stellantis NV Corporate Sales Call

Hello, and welcome to the London third quarter 2021 revenues.

My name is Jack and I'll be your coordinator for today's event.

Well the duration of the call your lines will be on listen only.

However that will be the opportunity to ask questions.

This can be done by pressing star one on your telephone keypad to budget for your question at any time.

If at any point you require assistance. Please press star zero on your telephone keypad and you will be connected to an off pricer.

And I'm now handing you I bet, you all hey, Mr. Andrea Bandinelli responsible for Investor Relations of slanted. Please go ahead. Thank you.

Thank you Jess and welcome to everyone. Joining us today is where do you still anticipate results for third quarter 2021 earlier today and the presentation materials used during this call along with the related press release was posted under the investors sexual most Atlantic scope what site today, our call is hosted by rich.

Barbara the group's CFO.

After his presentation, we start bottom and it wouldn't be available to answer questions from the analyst before we begin I want to point out that any forward looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included on page two of today's presentation.

Customary the call we'd be governed by that language now I would like to hand, the call over to Richard Palmer CFO of Synopsys.

Okay.

Thank you Sandra.

Good morning.

So everybody or good afternoon and.

Welcome to the call.

So moving on to.

Page three just want to quickly remind you of the basis of presentation.

After today's shipments and revenues performance.

So how did you most of you're aware, we present shipments and revenues on Q1 and Q3.

And full financial results at the half year on the full year.

In terms of the history of US he stepped onto this started it's at Eagle life from January 16, 2021 from the merger of PSA and FCA mm for accounting purposes.

It was an acquirer designated which was P. S. A and as a result F series results are included in there was also scientists from the first day following the closure of the merger, which was the 17th of January 2021.

So I don't think there was also the continuing operations of PSA all included in the quarter to date and year to date 2020, you're kind of accounting comparative however, take compatibility for us to discuss performance of the business. We are presenting pro forma figures for Q3 'twenty 'twenty. That's why does sort of yesterday 2021 yesterday 2020 in order to show them.

Meaningful results for year over year comparisons the pro forma figures for both periods are presented as if the merger had occurred on January one 2020. Therefore, the year to date 2021 pro forma figures include the results for FCA for the period January one to January 16, 2021, that's representing a full nine months of results.

For scientists on our quarter to date and yesterday 2020 pro forma figures include the results of both FCA on the continuing operations of PSA.

So most of my comments today for the <unk> for the periods will be with respect to the pro forma results in the same way as we did for Q1 and each one of this year.

Moving.

To page four.

We see the highlights of our Q3.

So Q3 net revenues reached $32 6 billion euros down 14% compared to Q3, 2020, and consolidated shipments were down 27% to $1 1 million units.

As you all probably aware of the global semiconductor crisis continues to impact the global industry. During the quarter of planned production was down around 600000 units equivalent to a reduction of around 30%.

The semiconductor.

The losses were a four foot well above what we had outlined at the time of our H. One results cool Oh look to August the third where we indicated around 500000 units, which at the time was based on our expectations of improvements in the situation in southeast Asia in particular, Unfortunately, South East Asia.

Turning to face constraints due to COVID-19 through the end of September and the supply of components from a number of problems in that region impacted our supply chain and.

Started to improve through only towards the end of Q3, that's all our teams continue to manage.

The semiconductor situation on a daily basis to minimize the impact to our volumes onto our results.

Our planning visibility regarding semiconductors continues to be rather limited however, based on the stabilization where you've seen through the end of Q3 and into October.

October so far.

We're seeing some progress with some key suppliers and we do expect moderate improvements in supply in Q4 compared to Q3.

Scientists in the quarter beyond the semi conductor impact.

It's very positive market share trends in some key markets, which is a.

Very important indicators clearly about competitiveness in particular in North America, but I insist achieved encouraging commercial was up results with a 50 basis point sequential increase in U S retail of retail share and this was driven in part thanks to strong demand for the all new Jeep Grand Cherokee L launched in June in fact go out.

Cherokee was the top selling full size SUV in the U S market in the quarter with a 19% segment share.

In the EU 30, we remain the market leader in the important commercial vehicles industry with a 32% share since the beginning of the year our market share in large Europe for passenger cars and light commercial vehicles as angry increased by 30 basis points, which shows the success of our recently launched vehicles.

This also continues to perform very well in South America, where it is a market leader with Q3 share of 24, 4% up over 400 basis points year over year and the two main markets. We grew share with Brazil up 35, 6% up from 25% and Argentina with 31% share up over.

500 basis points.

Maserati also improve sat in shipments in the quarter. Thanks to the success of the recently refreshed lineup and the launch of the MTA 'twenty with shipments up 18% year over year and net revenues up 31%.

We have a clear commitment to provide clean safe and affordable mobility going forward and we are involved thing on electrification strategy, which we outlined at our EV day in July in the last few months, we haven't had in several key strategic partnerships Mercedes Benz will join the ACC Bathory joint venture as an equal partner with the Atlantis and.

Total energies this will accelerate a she sees industrial capacity to at least 120 gigawatt hours of capacity in Europe by 2030.

Last week, we announced that we entered into two M O us with LG and energy solutions and Samsung SDI to fall in two separate battery Jv's in North America, which will provide at least 63 gigawatt hours of total capacity will start production in 2024 and 2025, respectively.

In addition earlier in September we announced a definitive agreement to acquire first lean versus financial services group in the U S. This is a significant step forward to establishing a captive Franco and the U S is a strongly but to support our industrial operations and further extend our financial performance. We expect this transaction.

To close by the end of the year.

Okay.

Moving to page five.

We have an overview of key product launches.

In the full size SUV, a large SUV segments in North America.

These two segments are two of the most profitable U S market and today. Its Atlantis was present with the two Grand Cherokee and the adult Durango, producing around 350000 units in 2019.

The launch of the Grand Cherokee Al in June this year extends the Grand Cherokee coverage into the full size <unk> segment, which is larger than the two one quick Q3 shipments were around 50000 units and as mentioned Grand Cherokee was the top nameplate in the segment in Q3 with 19% share.

In September we started the commercial launch of the Grand Wagoneer, Wagoneer, which take us into the large SUV segment. We're proud we have not been present.

And then late this year, we will start the commercial launch of the old New Grand Cherokee to row vehicle. This vehicle will include a phe version launching in early 2022.

Section from the industry press and from consumers for these new vehicles are safe all being extremely positive.

We don't want to page six we show the shipment and revenue performance for the group. So our revenues in the quarter benefited from strong net pricing actions along with improved vehicle mix mix in particular, driven by our recent new product launches, including the Jeep as I mentioned earlier.

Partially offset the loss of volumes due to unfilled semiconductor orders. This is a testament to the continued strong consumer.

Demand throughout our diverse brand portfolio, demonstrating the attractiveness of our lineup in the different regions.

As mentioned this meant we offset about half of the negative 27% impact in volumes caused by semiconductor shortages with a 14% reduction that revenue level.

These actions can be seen in the performance of nearly all of our reported segments.

By regions, Europe, North America, and Middle East and Africa shipments were down due to the semiconductor shortages.

South America was up due to the fact that it is that in Q3 2020, Covid will start impacting our plant activity. So the comparable is still low and offsets the semiconductor most effect.

Moving to page six we show the walk from the Q3 2020, I'm sorry to page seven we show the walk from the Q3 2020 pro forma revenue of $37 7 billion to the current Q3 number was $32 6 billion down 14%.

<unk> volumes were down 27% to $1 1 billion units. Most impacted region was was extended Europe down 36% North America was down 29% and EMEA was down 22%, while South America was up 10% in China, and Asia Pacific and Maserati were positive.

Vehicle net price and content was again very positive with North America due to the injury increased I'm sorry, the reduced incentives and also improved at myself PS option loads and version mixes South America was also very positive.

Vehicle line mix was mainly due to positive performance in North America with the Grand Cherokee else. The wrangler full by E. On the discontinuation of the Grand caravan and the journey as well as reduced volumes of low a ticket.

Ticket products, such as the Cherokee Compass renegade.

And the extended Europe was also positive as well as all other regions negative FX was driven by USD weakening versus Euro and overall the company continues to act decisively to manage profitability levers as we as we manage the scarcity of semiconductors.

On page eight we look at revenue performance by region.

North America industry volumes are down around 12% year over year, and our sales were down around 20% to 462000 units due mainly to reduce levels of dealer inventories and a fleet sales, resulting from semiconductor shortages, Ron was down 20% and Jeep was down 11%.

Setting, partly the negative impact due to the launch of the new Grand Cherokee L.

Mentioned shipments were down 29% to 394000 units with all brands down as we manage mix to optimize economics and market supply pricing was positive across the lineup for around 7% and positive mix is driven by the new Grand Cherokee L increase wrangler full body and lower volumes of lower ticket lower ticket nameplates.

South America had a very strong quarter on a comparable basis, partly because cable it was still impacting Q3 2020, but mainly due to very strong commercial performance. The industry is plus 4% Atlanta was up 25% due to the significant share gains mentioned earlier.

The market share in Brazil up 36% was more than double the second place to OEM and six of the top selling nameplates in Brazil with the Atlantis led by the Fiat Strada at number one.

He is about 43% with shipments plus 10% very strong net price and product mix improvements offsetting raw material and negative FX impacts of the weaker real.

The extended European industry was down 22% and scientists was down 27% year to date market shares of 22% slightly up from last year shipments in Q3 were heavily impacted by shortages and slow down 36%, although pricing and mix improvements supported revenues down less at 21% or so.

Thanks to the all new <unk> Malka Citron C fall and Fiat 500, D, which reached over 10000 shipments in the quarter.

On page nine we.

We start with a middle East Africa, where the industry was up 11% overall with a different trend in different markets for example, Cherokee down 32% compared to the Gulf countries up 46%.

Most of the prior regions ourselves when I guess, they are impacted by vehicle shortages and were down 27% impact on revenues was limited to minus 10% with prices increase around 9% also a positive product mix impact due to increased volumes of Jeep vehicles, partly offsetting reductions in other brands.

China and Asia Pacific consolidated shipments were up 23% driven by improvements in Jeep compass, and wrangler as well as Peugeot 2008 and 3008.

There are a few shipments improved 18% with Lavazza and Quattroporte I up as well as the first shipments of the MTA 'twenty.

Sales and shipments for the quarter were aligned to fly, but 5800 units revenues were up 31% with improved pricing and M. C 20, <unk> supporting the volume.

Yeah.

Yeah.

Page 10 shows our inventory of new vehicles dealer inventory was reduced to 231000 units compared to June 30, with 60% of the reduction in extended Europe and 30% in North America dealer inventory covers about 40 days of supply in U S retail down from 58 in June but the market has also slowed due to put.

Availability in the industry, we continue to improve dealer turn times and with some improvement in semiconductor availability in October do not expect U S dealer inventory to reduce further.

Group inventory increased from 110 to 148000 units at the end of September which will support some dealer restocking for Q4.

Lastly, we move to page 11 for a look we are confirming our I O a much a OE margin guidance at around 10% on the basis of the H one of 11, 4% and the continued realization in Q3 of strong positive net price and product mix to support revenues, despite slightly worse than expected semi conductor.

Shortly juice.

As mentioned, we are seeing production moderately improving in October and we expect the Q4 shortage right.

Below the Q3 level with volumes also seasonally higher sequentially.

In terms of the market outlooks, we would use the full year outlooks for North America, South America, and extended Europe by around 5% each due to the slower Q3 markets that we saw.

So overall, a strong Q3 revenue performance given semiconductor shortages and sequential improvements in shortages in the last few months indicate Q4 volume improvements versus Q3.

Thank you very much and now we can move to Q&A.

If you would like you ask a question. Please press star one on your telephone keypad.

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Once again Thats Star one if you would like to ask a question.

And the first question comes from the line of George Kelly is from Goldman Sachs. Please go ahead.

Thank you for taking my question rich.

Richard just to start with a rather simplistic calculation, but when I look at the average revenue per shipment in Europe.

It looks like it steps up by more than 20%.

But at the first half and I'll say versus the second half pro forma figures for last year.

Is this purely a function of the battery electric vehicle and plug in hybrid sales, increasing or about other factors and how much of pace should we expect that drop through to the EBIT line.

Can it be to actually you are achieving a higher margin in Europe in the second half than the first half.

And the second question I had was just with respect to guidance you've given around the revenue.

Previously you've said that you're targeting something in the 150 to 160 billion Euro range in light of what you are seeing today with respect to the semiconductors and your revised market outlook do you think it still conceivable it could be at the bottom end of that range or would you provide some kind of update thank you.

Thanks, Joe I'm, sorry in terms of unit revenues for Europe, Yeah, one of the key items as the increase in penetration of our low emission vehicles.

For Europe for this year is to be at about 14% penetration and that's a big increase year over year, which is which is driving a positive impact on revenue per unit on a second.

And frankly in a in Q3, you'll see and also we were impacted more in Europe than elsewhere.

Semiconductor shortages.

And juices the.

You know the denominator on the calculation, but the fact is that we have revenues that are strictly linked to new vehicles. So we have a parts and service used cars.

And so those revenues don't actually.

With.

With volume so there's some effect also of that in Q3, but the main there's also clearly we're working on our price positions.

Some success also in Europe, not to the same extent as in North America, and South America. So far in part also because we have we still have a very healthy order book.

In Europe, and those are customer orders so it takes long.

For actions on pricing to actually come through the P&L.

I think you know.

Those who've revenue activity and and and I think we're quite happy is based on each one with profitability you were saying in Europe you.

You know it's early days post post the transaction in January but I think the trend is good.

Factors that you know Q3 was rather heavily impacted.

Semiconductor shortages.

Terms of.

Revenue guidance, you know based on what we saw in Q3.

I think the low end of that number is probably a good result, so we could be we could be a touch lower frankly I think.

We're saying.

We saw 30% down.

In terms of planned production, 27% down year over year.

Q3 shipments.

Last year, we shipped about just under <unk> on a pro forma basis.

Just under 2 million vehicles in Q4, so you know.

We'll see how much of an improvement we get compared to the 27 of a 30% type.

Reference, but I think.

We're going to see we're going to see a number of my mom 50 over even a little bit lower in terms of revenue, but that's not going to impact significantly our hour.

Ability to maintain margins because of the strong performance on mix and price.

And also frankly, the fact that we continue to work very hard on synergy realization.

I'm not going to update you on our end up with a number because we're not giving you the financials today, but.

We continue to see a positive trend in the realization of synergies.

And part of our activity is also very much.

Looking at continuing to.

Improve our breakeven points.

Across all regions.

Yeah, because the volatility.

Utility was saying in supply.

To send me cut conductors.

It is not necessary.

A short time item I think we still see this continuing for 12.

12 months or so.

Hopefully things start to improve but.

But it's going to be a sort of incremental there's not going to be a big one off improvement I don't think.

And then you know there's going to be some pressure on on the market because of macro inflation.

You know uncertainty because of Covid.

We need to continue to manage the business very aggressively to reduce breakeven points.

Which I think has been a clear focus of this management team in the past we'll continue to be.

Thank you.

Thank you next the next question comes from the line of Patrick Hello from UBS. Please go ahead.

Thank you good afternoon, Richard Patrick from UBS here I would also have two questions.

First one looking at the.

Revenue bridge, the price part was about 4% growth year over year.

Which is a little bit less impressive compared to what we've seen elsewhere and also what you delivered in the first half of the year could you just.

Elaborate a little bit what's going on with a price and that content part here and how has it developed sequentially versus the second quarter and my second question.

He is regarding the outlook for next year I don't expect you to give a precise guidance at this point, but we've heard some qualitative comments also from your competitors for example for it talked about 10%.

Volume growth next year I was just wondering if you can give us your current take on the supply situation I guess demand is less of an issue but how.

How confident do you feel that your growth next year is gonna be clearly in the double digit range.

Okay, Patrick Thank you so on the first question.

On the walk.

I think it's I think it's about five and a half of 6% the overall improvement in pricing the way I calculate it which is the one six.

Of our 37.7 minus the $8 seven of volume because obviously we lost.

A significant amount of those yeah. So yeah, so I think quarter.

Quarter over quarter, that's a pretty good number.

And you know we're seeing very positive.

Rising, particularly in the Americas also Middle East Africa, Asia and Oh.

And.

So India in Asia Pacific. So I think continues to be a very very noteworthy is the ability of the business too.

Rice and on hold the price and they said, it's a mix of.

M S L P improvements and reductions in incentive.

And I think you know.

Some of those may be.

That's an important.

Well you always have to look at it because we clearly are.

Need to look forward and see how how much of this will sort of stick in terms of pricing as volumes improve.

You know as I said earlier I don't I don't see them.

A big Hum.

You know cliff face type improvement coming up I think he is going to be incremental and we were gonna see.

It would be so.

We still supply stabilizing.

Sort of August September October hopefully, we'll continue to see that through the rest of Q4, and then into the beginning of next year, but.

You know at some point as the industry we stocks.

It could be some you know with version two <unk>.

A more competitive pricing environment, and I think you know.

Clearly between hobbies and incentives, we need to we need to try and make sure that we hold.

The pricing improvements that we've managed to put into the marketplace.

I think that's really important going into 2022 also because of the inflation, we're seeing of course more cost raw materials and energy and other elements of the cost equation.

So I think it will give you a better idea as we get through the end of Q4 about alright look for.

Our 2022.

And given the volatility of supply I don't I don't think we're we're not we're not gonna be planning 2022 based on a big increase in volume I think we're all sort of mindset is continue to focus on price mix realization.

Continue to manage the breakeven points down and B, you know it would be well positioned.

From a profitability point of view.

To then see the volume leverage on the business when it starts to improve.

But the visibility for them and as is not is not great. So.

I don't really want to give you any guidance on volumes at this stage I think it's important for us to get get through Q4, and then we will give you a give you a better view as we close this year.

Understood. Thanks, Richard.

Thank you.

The next question comes from the line of Thomas Besson from Kepler. Please go ahead.

Thank you very much.

I'd like to ask a similar question to Joel on.

On Latam piece Oh your market share is no dummy dunson your.

Price realization has improved.

<unk> dramatically.

Yeah. He also believes that the still don't use could be back to the same level of profitability that is how did the bussell or even higher or is it too early to think that may have happened already.

Good questions.

I think.

I've seen the leadership team in Latam is he's really.

Doing an outstanding job frankly, and so you know.

I think it was.

It would be.

Limiting them to say that we don't think we can get up to.

Double digit margins in South America.

The target for the licenses to be at those sorts of levels of the group and we can't have one of the three or four big regions.

Not meet met or not.

Making it so you know I think well be looking at that.

Target I'm not going to give you any timescale on that but I think given the position we have.

You know it was a the shire is impressive.

Our position in Brazil, and Argentina is very strong we still need to improve.

Our performance in the rest of of Oh, South America, where we're not.

As as President frankly from a commercial point of view.

Yeah historically.

Ex FCA business was very Brazil focused.

<unk> experience I was actually better in Argentina, so that sort of coming together.

Our strength in those two countries, but neither of US were particularly strong in the rest of Latin America for various reasons and I think that's the piece of the puzzle. The other team is working on to improve you know nothing about.

The Jeep brand is.

It's been a really good place it's positioned while.

It's obviously the freedom on the off road capabilities.

Work well and in the countries in South America, we're seeing I'll pick up franchise doing really well with with the two smaller pickups and and also right. Now. So you know we have some good leave us I think and I think a double digits that is the target for the group. So I think it's a reasonable time.

And for South America as well.

Thank you.

A question on the free cash flow because clearly your.

Our ability to produce a husband kept substantially.

So just wanted anymore than told it could continue in Q4.

Could you confirm that you still aim at a positive free cash flow. Despite this.

It's a hostile environments in terms. So they are also.

What's kind of sudden negates.

In fact, you should go to the page.

But we're working up overall.

Yeah, it's it's it's a it's clearly a.

Front of mind, given the working capital impacts that we get in the last 60 days of.

Yeah. So you know I think I'm, we're confirming that we expect to be cash flow positive.

The visibility on semiconductors as I said is clearly not as good as we would like.

But the trend we've seen August September October as shown incremental improvements in supply and so you know I think we are on a path.

To be a volume levels that will mean, the working capital shouldn't be.

A reason for us not reaching the target you know clearly the business is performing very well in terms of operating cash flow excluding working capital as we saw also in each one.

I think that each one we had.

Between working capital and provisions there was like five on off $5 7 billion negative.

Yeah, each one with $1 2 billion negative in terms of our free cash flow. So you know because we talked about at the time that was four and a half positive excluding the impacts of volume on the balance sheet and so you know the target has to be too.

To manage through the second half.

Minimizing any working capital effects and then you know using the operating cash flow ex working capital too.

Uh huh assigned to a policy than they used to so I think H two cash flow will be positive.

The working capital piece is still a little bit unclear, but I think we're on the right path to get there.

Thank you very much.

Thank you.

The next question comes from the line of Jimmy <unk> from Jefferies. Please go ahead.

Well, thank you and good afternoon Richard.

Just had a question on <unk>.

Older back with distribution in the U S. Well yesterday Ford was talking about so quite an increase in orders directly from end customers and the growing share of their business I think they mentioned as much as 30% for some of the products I was just curious as inventories remain tight.

You may need to change a little bit on the distributions.

The business model and I'm just wondering if you can tell us on that front, if you're seeing a higher fares.

Direct orders.

And that's the easy oil production, a little bit and the second point was.

As we talk about magnesium now almost as much as semiconductor you I believe you still own takes it.

Very small part of the old FCA is that helpful to have Texas in your portfolio I'm, assuming you still have it and if you can clarify that thank you.

Thank you for that.

Call on the second question, where we are in the process of.

Hum.

Texas.

And part of it where we were in the process of completing a sale.

And mainly on the cost piece of the business, we do have a very small activity on an on magnesium.

But I don't think it's going to be helpful. If there was to be a supply crisis frankly, so I think so far magnesium we haven't seen any significant impacts in the short term I don't think we're expecting any clearly there could be impacts on price.

Obviously, we've been seeing impacts on price of course raw materials now for quite a while.

Dominion, but so far no visibility of any any issue in terms of supply.

North America also U S distribution.

I don't I don't think well, let's say, we have a very significant book of orders from dealers.

Trying to.

So cool allocations because clearly.

As you mentioned our dealer stock is.

Local low levels and so we have a lot of demand from the from the from the dealer body and also from a free customers.

So I think what's what's very healthy is that we're turning vehicles very quickly.

We are managing price mix and that's being seen as you can look at the P&L.

Or just that the revenue line here you can see the impact I don't think we've seen any significant change in the way that the distributions being managed other than it's just a lot more efficient at the moment.

No you know going forward.

While the world we are starting to get more direct sales I think we're getting a lot of inquiries from from.

So we're looking for supply.

But you know our first priority at the moment is as our retail customers and Adina body, because we don't want to lose customers because they are waiting for vehicles for far too long.

And I think some of that impact has been the reason why we saw.

Q3 market and.

In the U S diamond year over year, because there's a there's a lack of supply into the retail channels.

But not nothing significant from what I'm aware all sleep on in terms of the distribution change huh.

Thanks Rich.

Thank you.

The next question comes from the line of Charles Caldecott from Redburn. Please go ahead.

Okay.

Hi, guys. Thank you for taking my questions I've got two please first on raw materials, I mentioned rising input costs.

I think you'd previously said that you sold the headwinds would be one and a half to 2 billion euros. This year.

Does that still hold.

Would you have a comment on how we should think about 2022, so input costs.

And then my second question was going to be on a dime that joining ACC I think they said that they had the best about 500 million euros next yeah.

Too busy in your garage eventually can you just remind us how much the launch has already invested and ACC.

So the investments you're expecting there.

Okay sure. So the first question I think we said that each one was about 750 <unk> H two was double that.

In terms of year over year impact of raw materials, and I think we're sort of sticking to that number for the moment. So Europe for the full year is like two and a quarter.

Of raw material inflation for 2022.

Again, there's a lot going on in terms of looking at securing pricing.

Pricing for 2022, you know some of our contracts.

Some areas of the raw material by I'd have a long you know 12 months type contracts in place. So we're in the process of having some discussions with suppliers you know clearly.

The level of price, we're saying today is significantly higher than 12 months ago. When we negotiated this year as contracts more.

So I think 2022 raw material inflation is going to be significant and that's one of the reasons why.

You know, we continue to focus very hard on price.

Price mix and breakeven points to them to manage our way through this inflationary environment.

So I think we'll we're continuing to do that you're seeing that today in the revenue line.

And we will give you a better view on 2022 and.

In in January but I think it's I don't think the number is gonna be Lola frankly year over year.

And the other question.

Yeah, I I don't have the number in my head as to how much we've invested so far into ACC.

It's it's low hundred millions type number.

And.

We.

We will be investing in a high hundreds of millions through the periods. The same way the Daimler will be.

Given that where you know one third partners with them and with total energies and those numbers are included in our.

Our forecast of around 30 billion number we we gave on the on the EV day in terms of total investments. So yeah, I think the important thing with.

Without walls, you know I'd say.

Validation of <unk>.

The ACC.

Capabilities.

And also I think a very positive indication of collaboration between two large European based Oems.

Oh EMS.

To work on something that you know this is strategic.

So the relationship is very good.

I think we will see benefits in working together on a on a C C.

And Uh huh.

Investments really start now because we've been working on them you know the R&D type investments, but now we start putting more investment into the two plants that have already been identified and and then and then we're looking at a solid one as well for the joint venture. So you know in the next three or four years.

That's sort of.

Shneur 1 billion euros, but it's not far off will be invested in the equity of the of the JV.

Thanks, Thank you.

<unk>.

The next question comes from the line of Harold Hendricks from Morgan Stanley. Please go ahead.

Hi, Richard two questions from me also place one and just magnesium can you just make any comments at all are you worried about any other supply chain problems.

From magnesium or anything else outside of semiconductors, where you know hopefully things will improve so if you can make any comments there.

And then secondly.

Volkswagen This morning highlighted that they had produced a significant number of 19, 9% completed cars waiting for chips and stuff.

Can you talk about that Atlantis for Q3 is our place.

Yeah sure.

Yeah.

So well like I said before magnesium and the.

In the short term, we don't see any issues.

We'll think about them in human.

The other to be localized in all major markets. Unfortunately, China is not a major market for us at this stage.

If you know it's the issues there are thought to can take each of the markets in the medium term, we'll see but we're not seeing anything at the moment.

And in terms of.

In complete vehicles.

Yeah, I don't think I don't think we've been doing anything significant I haven't heard that.

VW.

But you know you saw in our inventory page here that Oh, yeah inventory was up compared to June.

But those those are vehicles that are ready.

Ready for shipment or in transit.

To two sales point, so the danone incomplete.

And so I don't really have I don't we.

We don't have any significant number.

But at the moment, we have been doing some of that obviously to try and manage our way through them.

Yeah the supply.

The supply process and take some level of inventory on board.

We try and prioritize production and be efficient about the management of plants, because clearly caught pas are coming up and going down and as we do that we need to try and level that level out the supply chain process.

But nothing that is noteworthy enough for us to to talk to you guys about I would say.

Okay. Thank you thank.

Thank you.

The next question comes from the line of Horst Schneider from Bank of America. Please go ahead.

Yeah. Good afternoon, thanks for taking my questions to them. The first one relates again to little bit to free cash flow and then also to the restocking that you mentioned, so I just want to understand what what could.

Couldn't get any more precise guidance when we spoke in Q4 and how should we think about your inventory management in the future. So that means also for 2022 went out the door.

What is the normal inventory you would expect going forward.

And the second question that I have relates more to the upcoming events that you have.

So maybe you can give us an update that you can maybe get this so that they can get stretched your plan when exactly you want to communicate that and going back to this merger.

Stops I slip it in mind that you are planning for Tacoma would spin off any any news on that that's about it. Thank you.

Thank you all so.

So the restocking was really what I was my comment was really more about the fact that we don't have we don't we don't expect it to continue to reduce dealer stock and you can see on.

On page 10, we were down 230000 units from June to September we did have a slight increase in our own stock, which should help us to.

To.

Avoid a further decrease in Q4, but you know it is.

It's a number of quarters sequentially that we've been reducing the stock level. So you know the target is to.

To stabilize production and.

And you know.

And basically turn the corner so whether it would be Q4, Q1, or Q2, frankly, not that clear, but I think it's important that you know that we improve our levels of production.

<unk> and as I said earlier the last three months, we've seen some level of improvement and so we were sort of moderately optimistic that we'll start to see a.

Further improvement in <unk>.

Q4, and then into the beginning of next year.

But it will it will still be a lower level than than we would normally.

Expect because semiconductor I shouldn't say it isn't going away in the short term in terms of the events.

As we Oh said, we're going to.

Definitely take you through our business plan at the beginning of next year, we haven't announced the date yet.

Because we are working on that we are pretty busy.

I'm looking at Andre and Valerie here.

Been working on them.

<unk>, we announced it.

In the recent past of completing the merger process the organization getting some very key.

People into this new into this new team, which I think has been really positive.

So oh there's.

There's absolutely focus on updating you on you know the holistic plan for Atlantis, and we will do that beginning next year, we'll definitely give you a date.

As we get through the end of 2021.

In terms of in a similar for the software they frankly.

We're obviously very focused on that to try and give give a clear picture of eyewear in.

Putting into place the organization and sourcing the organization on the priorities that will we will we will get there, but we haven't given a date.

I don't come out.

You know come out it was a interesting business, but we don't want to rush into any type of transaction and you know does the.

The team is is preparing.

For Spain, and so you know, we're still focused on that but.

But we need to get through the end of this year I think and then we'll we'll make some decisions also through the board about what's the best.

The best timing and come out.

So you know we're not walking away from any of these commitments, but you can ask it a little bit of patience with us as we.

Get the sequence of everything into place.

Alright, Thanks for reminding me thanks for reminding me.

Thank you.

[laughter].

The next question comes from the line of Jose Astro Med D from J P. Morgan. Please go ahead.

I retired as close at Jpmorgan three quick ones. Please.

When I look at your door.

Your North American peers, they seem to be pretty good science when it comes to other applications some of them didn't even talking about.

Taking a driver out of the equation.

Can you just give us an update on where you stand in terms of your collaboration and your work that you're doing and whether it's the same priority as.

Within the house as you are too.

North American competitors out there second when.

When we.

I was just thinking in the light of the strong price mix, we're seeing in North America.

Whether it's reasonable to assume that your north American margins have been holding up.

More or less the same level as Q3 last year or is there anything that we should have in mind when it comes to the to the momentum.

Three please can you give us any details with regards to the NIM.

The industrial plant in Europe, a and B.

How you are now.

Managing the polishing capacity are you done with that you know taking down cost in the at the Italian plants are you in energy Division what are you going to be ramping up the capacity of the plant any details with regards to that momentum in the European footprint.

Thank you Jose so.

I know, it's been a big focus for us and I think.

No.

Post merger, we have been converging all activities between X P. S I X FCA and focusing on what's the.

The best way for the new company to our approach.

You know up to level three and beyond so I think when we get to at appropriate time are the software or the business plan and we will definitely get you into a bit more detail of what we are but it's definitely a priority.

Do you have a relationship with BMW, which is very important.

Very positive frankly in the way it's proceeding.

And we have other relationships with companies that they're working on one level for.

F C. I had a long relationship with Weibo and we continue to work with them. So I think we will give you a better view.

When when the more competent people in the organization can explain to you where we are frankly on.

Price mix in North America margins.

Our North America team is doing a very good job.

Commercially speaking.

And in North America I think.

We saw our margins in H, 116%, which was an outstanding AR number I was looking at our peers.

And where they are and we clearly what we're operating at a higher level and I think you know the team is continuing to do a good job will clearly give you a better view.

In a few months' time as to how good that job is but you know I don't see any significant hum.

Forget deterioration in the performance of the business from a from a price or mix point of view.

And you know we also have launched some important vehicles as we mentioned earlier yeah. So the three Grand Cherokee.

The Grand Cherokee L, which are you know goes into.

You know the segment of the full size SUV, which we didn't really have.

A full day entry into before partly because.

But we didn't have the capacity and Jane up.

To make enough cars between the Grand Cherokee to row in the Durango three row. So that's Durango through you I was always.

Sort of you know the victim of being constrained because of the Grand Cherokee to I was so successful so now with with the New Detroit Assembly complex that we put together for Grand Cherokee two and three where we have more capacity, we continue to make the drug.

Hangup as well so I think.

That's going to be a positive for us in terms of.

Profit contribution and mix.

In the back end of this year and going into 2022 as well the a wagon here on the Grand Wagoneer.

Which you know is in the one.

One of the highest segments in terms of profitability and in the U S market.

We didn't have anything there before.

The segment's about half a million vehicles.

And you know Jeep has to go in there and compete with them.

You know the triplets from GM enough.

Lincoln Navigator et cetera, which are great vehicles, but I think we have a great brand and a great couple of vehicles. So that's also going to be.

Accretive to our margins. So I think North America. The business is in a good place.

On price mix continues to be.

Positive.

Then on the European production on the Euro.

Our opinion footprint.

No I think I think where we are.

Doing a very good job of maximizing the efficiencies in the AR and the different clouds is there's clearly it's got a lot of work going on.

Because we as we work through our business planning exercise.

To make sure we are as efficient as possible going forward.

Vis vis the the installations that we have but I don't think there's anything.

<unk>.

<unk>.

That's behind schedule and that will give you a better view of how we think about.

<unk> volumes going forward and the focus of the different classes of problems and platforms. When we get into the business planning discussions at the beginning of next year.

Excellent. Thank you okay. Thank you.

The next question comes from the line of Stephen Reitman from Societe Generale. Please go ahead.

<unk> constantly Richard Thank you I mean, you partially answer my question with your discussions about the the.

The Grand Wagoneer and Grand Cherokee.

So I mean basically the margin you saw in the first 12 to 16, 1% both of them.

Erica what he was not affected by these models wishing he said he commercialized more in the second half obviously being.

Can you tell us a little bit muscles. So he can answer issues could you talk about the order intake. All these vehicles in particular when you look at the Grand Wagoneer, how much are we looking at the really high end versions.

Cool.

Thank you.

Okay.

Thank you Stephen well I mean.

Let me focus on the ground wagon here at the moment, which is the higher end version of the two and Twilio as is often the case with annuity launch vehicle that makes us very positive at the beginning.

But you know.

We don't need to stop we've only just started the commercial launch so its a little bit early to give you numbers order intake.

But safe to say that you know I think.

The write ups I've seen regarding the overall.

Content and presentation of the vehicle.

Both our external Intel and and contenting have been extremely positive.

You know that.

Striking and you know the Jeep brand really.

Absolutely needed to have an entry in a in that segment.

Given.

You know how successful that is.

In the full size segment.

With the Grand Cherokee So you know it.

So that given the you know the.

The demand is very high on the vehicle.

This action has been extremely positive so.

The mix will be very positive going into Q4, as we start shipping vehicles.

Thank you.

Turning to Europe.

Can we.

So I will say that some in 2022, we're going to see the first.

Thanks, FCA brands being produced on.

TSA platform was already I think starting cheeky.

Yeah, I think it's towards the end of 'twenty two beginning of twenty-three yeah, that's right.

Thank you very that'd be cycling.

Thank you Steven.

The next question comes from the line of Martino de <unk> from <unk>. Please go ahead.

Thank you.

Good morning.

Body.

The first these are just a couple of quick follow ups.

The first is on the positive free cash flow for the full year.

How are you moving into Capex assumption or is always the same in the second.

On the last.

Question concerning that the order intake.

You mentioned during the initial remarks of it the order backlog is stronger.

I clearly understand you do not provide the orders for our for the new models, but could you provide any figure on a deal that all our backlog or trend as you prefer.

Hello.

So in terms of I'm, sorry, I was talking to myself on mute.

The Capex numbers all the guidance. We gave is still stands so nothing nothing nothing new there.

And in terms of.

In terms of your second question I don't really want to.

Gave numbers on order backlog I didn't.

And I think it's safe to say that we have significant order backlog on the dealer side in North America and on the.

The retail customer side and in Europe, and so it's the <unk>.

Definitely no problem off of demand the problem for us because they used to is to meet demand and continue to incrementally improve.

Our production levels.

As I've talked about a few times on this call. So I will repeat myself again, but I think that that's created a focused because the demand function for our vehicles in and all of the regions really is very good and.

Middle East Africa, and Asia Pacific.

China also gained hub because we just don't have.

Enough is enough.

Vehicles to get into to satisfy demand in all of those regions. So really the focus there is to from the industrial machine and obviously, it's a big focus for the organization is to continue to improve.

Our production levels and I think you know.

We've talked about already so.

Yes, very clear.

Okay.

On the <unk>.

Could you share with US what is your strategy following the recent acquisition.

Well I mean, I was looking at Jim unfolds numbers for.

So my strategy is to look like them in terms of the amount of money. They make in terms of contribution to that overall profitability from nothing cause.

And cash so you know I just think yeah, we've had a very strong commercial business and in the U S.

The from an industrial point of view as you know, making very good margins and has a great position.

We've been creating a you know a very profitable.

And USA for a finance providers.

So far and we haven't really participated.

In any way in the revenue show the.

The profitability of that activity because you know what.

We've had a we've had partners and they've been.

Very collaborative and worked very well with us, but there's not been a.

A significant share in the economics for us for various reasons so.

You know I think it's really important for the business to have a faint co. It's clearly a big source of profitability in the medium term, it's going to take us a few years.

The activity up to speed in the portfolio to grow.

And you know a good reference I think there is what GM did from 2010 onwards, when they purchased.

I'm married credit I think at the time.

And built their staffing co and you know five or six years, they had a very strong portfolio with a very profitable.

Profitable business and we need to do the same in false or if possible and I think you know it's a <unk>.

Big strategic lever.

Oh so for.

Customer loyalty and.

Communication with customers.

And Oh, so as you go through into a maybe a more of a nobility provision in service provision.

Business model compared to you know the more classic purchasing.

Purchasing of the asset and then there's also an argument for that being an important part of the services that the car companies to provide so I think it's strategically a very good fit.

The type of company, we bought is perfect because we didn't have to.

A huge premium for our book of business that wasn't necessarily relevant to what our captive finkel looks like for a for a car company and maybe it would have been.

More focused on on on subprime and higher Oh.

Roy type paper, which is clearly a great business model for a finance company, but we're interested in providing financing across the whole range of customers, including prime and lease and everything else and that's what we'll do with.

With the with the company Board, which has a good set of systems a good management team and it gives us a good foundation to build the business.

Okay.

Okay. Thank you.

That is all the time, we have for questions today I will now hand, the call back to your high with some closing remarks.

Okay. Thank you everybody for joining the call today and.

The interesting questions and have a great day take care.

Thank you for joining today's call you may now disconnect your lines.