Full Year 2021 Stellantis NV Earnings Call

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Hello, and welcome to the Atlantis full year 2021 results.

I will now hand over to your host Andrea Bandinelli head of Investor Relations to begin today's conference. Thank you.

Thank you Suzanne and welcome to everyone joining us today as we review still anticipate full year 2021 results.

Earlier today, the presentation materials for this call as well as the related press release was posted under the Investor sections of <unk> Group website today, our colleagues all seed by Carlos Tavares, The company's Chief Executive Officer, and reach our partner the company's Chief Financial Officer after both Mr <unk> and Mrs.

Palmer presented they will be available to answer questions before we begin I want to point out that any forward looking statements. We are 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 and is custom.

The call will be governed by that language now I would like to handover to Carlos Tavares seal of cylinders.

Thank you Andrea and good morning, good afternoon, and good evening to you all.

Welcome to this 70, <unk> 2021 financial results announcement session rich.

Richard Palmer and myself, we are delighted to host you today and it is our privilege to present to you some highlights and a few comments about this year as a result 2021 results. Please.

Be aware that we really appreciate your time and we know that your time is very valuable and I would like to thank you accordingly for your interest in stat Auntie's. So indeed 2021 was <unk>.

Very heavy year, a year, where we had to do.

Do three different kinds of things first one.

In January 2021, we created <unk>, we had to set up a new business governance way with nine dedicated committees, we set up the top leadership team of this company and we created new organizations up to CEO level.

Minus three.

With more than 2500, new assignments in the company. So we started a very busy year.

In setting a brand new company called Certainties that spine number one point number two we have to fight all the headwinds that you know mainly three the semiconductor supply shortage, the raw material cost inflation and more and more stringent skew to regulations those would that Heather.

It's that we had to face and point number three we spend significant amount of time working with our cross functional teams on the long term initiatives that I will be presenting to you on March the first meeting next week to describe what our long term strategic plan is.

And what are the initiatives that we are going to take over the next few years. So those three layers of activities represented for our teams and for our employees are very significant workload and I would like to take this opportunity to thank them all very sincerely.

We warmly I very much appreciate what they have done I thank them enormously.

Enormously and I congratulate them for the results that you already know.

As you know the results for 2021 were very encouraging.

With the nearly the double of the operating income amount the triple of net income compared to last year a record.

Operating income margin of 11, 8% and also quite rewarding $6 1 billion euros of positive free cash flow.

Those are the results you know them you have seen them in India in the press release, what I would like now to do with the ritual is to commence some of those results. So that you can understand how we could as an organization come up with those numbers. So beyond the record 11, 8% adjusted EBITDA margin. It is fair to.

Two notice that on the second half of the year, we were even slightly better with 12, 2%, which says a lot about the initiatives that were taken in the company.

Needless to say that we were able to finish this year with a breakeven point, which is below 50%.

Which as you know is a very important.

<unk> for the way we are managing the company. It is also important to see that the $6 1 billion euros of industrial free cash flow were significantly supported by a very significant level of cash synergies no less than $3 2 billion euros, which is align.

And.

With what we have committed to the market which is the.

Fact that the merger will generate on a run rate 5 billion euros per year, which represents.

At 25 billion euro value creation as the result of this merger and of course. This first result of three point too.

Just means that we are going to deliver.

On our commitments I hope this is not going to surprise you. Because this is the pattern of our management. We also could demonstrate that our low emission vehicle sales are growing significantly by 160% year over year to reach 383 hundred 88000 units in 'twenty one.

And we can say that we are now moving and moving faster and faster on the <unk> sales, which is of course good news when we anticipate what may happen very soon in the markets, where we operate we were still and I would say even more the leaders of the RCV Mark.

That's in our Europe , and South America, with respectively, 33, 7% and 39% market share. We are very solid leaders and we have a very strong product plan as you will see later wrong with perfect.

Perfect coverage of the market not only on vehicles themselves, but also on powertrains.

Last but not least as you already know we were pleased and privileged to present to you in July our electrification day.

Electrification journey during the capital day and in December we.

Could present to you the software the software capital. They are software plants to give you two of the most important pillars of what will be the framing of our long term strategic plan last but not least we have made several deals in 2021 with some highly technological partners with whom we.

Wants to accelerate our transformation from a legacy carmaker to an automotive Tech company, which is what we are doing right. Now. So those are some of the highlights and again I would like to express to our employees to our management team to our top leadership leadership team to you the investors.

<unk> to the media and to the board members all the support we received from them over this quite critical year. The first year of guarantees with record results. This is what I would like you to keep in mind that you see on this slide also that we are going to bring Maserati back to racing it.

As a significant opportunity for our company. It's the unique luxury brand of guarantees and we are going to make this brand of course electrified and bringing back Maserati to the World E. Formula Formula E Championship is also meaningful of the strategic direction that we are taking for this luxury brand that's me.

Move to the next one.

And comment on the regions, let's start of course with North America, why because North America is right now the most profitable region of the company with a record $16 3%.

<unk> margin, which says a lot about the way our north American team is mastering the business model of North America, it's important that they take the best out of the market conditions and this is exactly what they have been doing that we can see it that we have been able to deliver the high.

<unk> you.

U S retail average transaction price amongst the Detroit three Oems with a significant improvement of 20% year over year to reach no less than $47000 per car significant result that also highlights highlights. The fact that our north American teams are mastering.

The business model.

We have entered into at least two separate.

And we'll use for battery joint ventures, with the Korean partners to bring to the North American market the appropriate level of battery supply no less than 63 gigawatt hours by 2025. This is as you may imagine is strategically important to secure the profitable growth of our <unk>.

Actually fight vehicles in the near future.

We can also demonstrate that we have been launching very successful products, starting with two white space products like the Jeep Grand Cherokee long version and also the vacco near and Grand Wagoneer. Those are white space products that are very profitable we have launch those products and we expect that to be.

Significant profit contributor for our North American operations.

Our all new Jeep Wrangler full by he is now the number one selling ph V. In U S retail, which means that the brand. The <unk> brand has been able to make the appropriate and the right decisions on the right timing to be.

Demonstrating our competitiveness in the market right now with the number one selling position on the ph UV for the U S. Retail it is important to see that the Jeep brand is absolutely on the right temple to surf.

On the successful.

Electrified technology of our company. We can also see that in terms of sulfur the highly profitable pickup truck.

Market, we have been delivering the best ever.

U S commercial fleet market share at 18, 7%, which represents an improvement of 340 basis points year over year. So as you can see North America, it's a record profitability with some significant sales and marketing successes.

Good strategic agreements to support electrification in the near future and the best average transaction pricing against the Detroit three in.

In the marketplace. If we move now to the next region, which is in large Europe .

We can say that to Europe as demonstrated a very strong profitability.

With no less than the nine 1% NOI margin for the full year, but also in the second half an improvement to nine 4%. So some of the initiatives that we're taking to improve the efficiency of the business model are now visible we see that we are now in Europe totally compliant in terms of SKU.

<unk>.

On a standalone basis, meaning that stellar <unk> is now able to embrace the full scope of our iconic brand portfolio, while being fully compliant and we are delivering a good result at 110 six grams per kilometer.

Which is a little bit better than what we expected and that's that's good it means that most probably we are in the leading pack if not the leader in terms of fuel to emission reduction in European market, which is some of our DNA.

In Eurasia, we are growing we grew to one 6% market share 50 basis points year over year and I'm sure that you'll have some questions about that later on so I will skip here on the European market our market share was stable at 22, 1% we.

We see that the <unk>.

Some of our western competitors of lost market share some of our Asian competitors were able to gain market share.

As it.

Regards certainties, we were stable at 22 point to 1% market share, which represents the number two position in the European market. We also see that we have been making very significant improvements and progress on our LNG sales mix in Europe , and we moved in one year.

The 9% sales mix to 18.1% sales mix, which means that we are moving fast and strong in our ability to sell pure Leds.

Which is good because of course the market one day will turn totally to the LTV technology, which means that we are now ramping up fast and strong in Europe from 9% to 18% LTV sales mix over the year.

Last but not least we completely reengineered our distribution model.

In fact, we are currently discussing with our dealer network dealer associations in a highly constructive and I say I would say encouraging way to adapt our distribution model to a higher level of quality in the way, we make the customer enjoy its journey with our company and with our brands and at the <unk>.

Same time reduce the costs of these two Houston as we need to fund the electrification of our portfolio. So this is for Europe . If we move now to the other regions starting with the South America South America is a.

A strong winner.

It's a number one in Latin America for <unk>, It's number one in Brazil for Certainties, It's number one in Argentina for certainties with respectively, 22.9, 32.0, and 29, 1% of market share. So we are the clear leader in la.

And American markets. It is it is good because at the same time, where we are leading the market increasing our market share against last year. We have also significantly improved the profitability as we are now multiplied by five the amount of profit that we could extract from the Latin American markets, We Didnt haywire.

<unk> of eight 3%, which is much much better than what we could experience in the past while this was happening fear towards the number one selling brand in South America and in Brazil.

Enjoying namely the success of struggle as the top selling vehicle, So South America, a leader more share more profitability and number one selling brand we'd see it a big success.

Let's move now to Middle East and Africa here, we have also a very rewarding double digit Oi margin of 10, 5%.

Which nearly doubled against.

Against the previous year.

We are have the potential to grow market share in some markets major markets. We we had some headwinds in Egypt, and Turkey, but for the other markets, we could increase the market share significantly and we are now introducing out of Morocco.

Oh, Paul Rocks E, which is a downtown mobility device that has been facing big success under the <unk> brand as the CTO and army and as each win.

Ami cargo, which is the LCD variation of the city of Miami, We see that the production is growing we see that this is <unk>.

<unk> and that we have good potential to continue to grow profitably on this down.

Downtown mobility devices.

Last but not least China, and India and Asia Pacific So the Asian regions, we see that the Oi margin is also quite rewarding with north of 11% NOI margin.

Which combines with our retina revenue net revenue.

That is up by 24% which is good.

We see that we are now clear on the agreement.

We have with <unk> to create.

Talent is a.

Jeep JV that we will control in China to add to their very profitable Jeep CPU business. Some.

TKD complement from this JV and the despite summer some bumps in terms of communication. The deal is inked and we expect now that the Chinese authorities will approve the deal. So that we can go live.

And last but not least the inner in India, we have they're all new see 'twenty, three which has been developed.

From India to India and to other parts of the World. It is a very cost competitive project with a very more than an attractive design as you can see on this photo we expect to launch this program from each one and 2022 and that will give the company a significant capability to bring high value and affordability.

<unk> products for the overseas markets and not only of course, but mainly for those market now we have this very important tool to grow profitably on some overseas markets moving forward. So that was for the regions. Let me now move for the brands and of course start with Jeep or global.

SUV brand.

A lot of great things in terms of achievements for this brand first of all let's keep in mind that Jeep means freedom.

It's all about the very sharp positioning on the market place all over the world the pricing power is fine either better than the benchmark or very close to the benchmark, we see that in 'twenty. One we could launch the compass renegade and the wrangler full by E variations in four regions, which means that electrification.

Of the Jeep brand is now a reality, it's not a plan. It's a reality and you can see it because if I take the example of European market, we have a 25%.

LTV mix in Europe , whereas the total sales.

Of Ltvs in Europe represent as I said, 18% LTV mix. So GPS pooling the LTV mix of guarantees in Europe up which is a great thing.

We see that this is a trend that we will reinforce in the near future as it is exactly what the customers are expecting from US. We also Canada noticed that the Grand Cherokee has delivered the best U S sales since 2000.

That we are with the G brand the SUV market leader in South America, with 14.1% segment share in 2021 and that we could also enjoy the highest ever wrangler Jeep wrangler sales in middle East in 'twenty. One so you see a lot of great achievements in terms of sales and marketing in <unk>.

Himself electrification needless to say that this is a very profitable brand needless to say that the positioning of Jeep is the same all over the world, including in China, and he has demonstrated a high potential for profitable growth in our company. If we move to the next brands, which are the American brands.

While we are preparing the rebound of Chrysler.

With some exciting products that we have been discussing design studios.

We noticed that the brand Seo from Chrysler as announced that the brand will be 100 per cent BV from 2028, the pricing power is fine and the Pacifica is achieving the best U S sales.

On record for this brand with a ph D V variation in which means that we the ph UV electrified aviation we are doing fine in terms of sales Ron is a success story.

Significant success story with the best full sized pickup share ever Ethernet states with an impressive 26, 2% share in 2021, so it's a growing share. It's a growing profit the products are extremely appealing and the customers are very excited about all the variations that we.

We have been bringing to the marketplace pricing power is ahead of the benchmark and we have with the ramp 1500, the highest U S average transaction price with a $51000 per unit number in 2021, which means that we are taking the best out of the market given.

The appeal and the market conditions that we have right now.

Last but not least the Dodge brand.

Very high satisfaction with the fact that the challenger was the number one selling muscle car in the U S, which means beating flawed with the 54000 units sold in 2021, a very nice pricing power seven points ahead of the benchmark.

And for Charger and challenger the highest ever.

Market share with more than 50% market share in their full sized sedan segment in 2021.

Not only those numbers are extremely rewarding, but we are very very excited about the electrification of the Dodge brand, which is coming up very very nicely and I can tell the fans of this brand that they will enjoy even more excitement and thrilling experiences with electrification of judge that will bring the.

The American E muscle car to the market.

If we move now to the upper mainstream brands with two European brands are German brand Opal delivered.

Our market share that was up in Europe , and Germany with respectively for three and six 2% market share. It's good that we have an improving market share in the home country of the brand, which is Germany that demonstrates that we are properly rooted in that market.

The market E model was awarded the Golden steering wheel in 2021, best scar under $25000, which is a tribute to the very attractive design and the performance of the scar, which I believe is a great success pricing power is at the benchmark level.

And we have also to mention that in their respective segments.

Corsa was number one sales in Germany and in the U K with 16, 5% and 15, 1% segment share.

Which means that the course, which is as you know well a derivative of another car from our company has been delivering very high.

High level of appeal.

Quality and a great performance to our customers and you can see it as it is the number one selling selling car in Germany and U K in its own segment, beating of course, the equivalents of other brands, including including the German brands.

If we look at the rope is always also a bigger big success with the.

Two oh wait, meaning the number one selling vehicle.

In our Europe .

And the 2008, the number one selling b SUV in Europe , which means that they are demonstrating a very nice overall package design appeal performance.

Rarely ability and quality, we also see that Peru has now become the number one brand in France.

Which didn't happen for many many years, who pursue is now number one in France for this important market for this whole market.

Globally worldwide sales were up 5% the pricing power is above the benchmark.

And we see that the Euro 30, a levy order is increasing.

This means that.

Those are all very soon we will have a total market share of LNG in the <unk> market, which will be above the total market share of this brand in in Europe , which is rewarding.

We moved from 9% order mix to 25% order mix on the LNG for this year of 2021, so moving fast and strong on the electrification without of course forgetting the very nice start of the peripheral throwaways brand new Brazil that is.

Attracting a lot of customers, thanks to a very attractive and aggressive design.

If we move to the next one.

Let's talk about the core brands.

Namely Sichuan and Fiat.

Each one has been enjoying a great success with the C segment C. Four hatchback top selling C hatching, France, and Spain for 'twenty one.

But also a very nice performance on the BV variations, which were multiplied by four year over year with the EC four at eight 7% of its segment.

In terms of the competition. So they're easy for is a is receiving very good support from the market and from the customers. The share in South America is up and the pricing power is above benchmark so more to come on the Citron brand, but already with a C for a big success.

Right now see.

As demonstrated our strong leadership.

The three remarkable results.

Market leader in Brazil, as a brand.

Market leader in Italy, as a brand and market leader in Turkey as a brand.

Overall number one brand in South America with 13, 9% share in 2021, so great achievement from our teams in terms of leadership for those markets. The 500 E is now the number one selling BV in 12 countries for the <unk> segment, so perfectly in the leading seat.

For the electrification of yet pricing power ahead of the benchmark and a commitment from the brands you that we would be 100% divi portfolio by 2027 in Europe , which means that we have now in the pipe all the pure EV products that we need to be having a strong position in the different <unk>.

<unk> in which the Fiat brand is operating if.

If we move to the next one we can now address the light commercial vehicle business.

Highly profitable, where we are perfectly leading Europe with a 33, 7% market share in South America with a 39% market share.

We have sold.

One 9 million cars.

Globally, which means this is a big big business for our company we.

We are also now preparing the all new.

Roadmaster BV Ren Van <unk>.

Which will be launched in 2023.

With Amazon as our first commercial customer which means that.

We were able to convince Amazon that we had the best event with the best features.

Quickly suited for the logistic expertise that exists in our in our customers and we are meeting those needs with a very fine tuned and very sharp.

Then in this in this process starting of course with the EV powertrain that we will bring to the to the United States in 2023.

We are also in Europe , the number one B V C.

<unk> position on vans, which just demonstrates that by having the evaluation on the three vans compact midsize and full size. We are now leading the market not only on total share but also on the BV sales for electrified vans in Europe .

We could also.

Delivered the best ever.

The performance in terms of sales for the pickup sales with one more than 1 million vehicles sold in 2021, which demonstrates that we not only our vans are extremely successful mostly in Europe are pickup trucks are now demonstrating on compact again at mid size.

And full size pickups that we are extremely competitive and by adding the vans to the pick ups, we will be soon competing for the number one position in the world It.

It is also clear that one of the good things that was brought by the merger is the fact that we are now launching and as you can see very fast the all new Fiat scudo and yet you lease as a derivative of.

The other events of our company. It has been launch it will bring even more competitiveness and surely more profit to celanese last but not least in December 2021.

We delivered two offers customers are midsize van with the hydrogen and fuel cell technology. It was delivered in December we are now moving up both in the orders and the manufacturing capacity and next week I will tell you more about this but I just want here to put a stake in the ground.

By saying that in December 2021, we start selling midsize Vance hydrogen powered.

In the seventies.

Brand portfolio here you have the picture for the Opel, but it also exists for other other brands in Europe . It is a significant technological leadership.

We are focusing on the ltvs and I'm, so glad that our teams could deliver those first events in December 2021.

If we move ahead, we can now talk about the premium brands.

Saying that.

After a meal brands U S committed that he would be 1% divi portfolio from 2027.

And that.

He is now not only fixing the business model as he was able to bring.

The Alfa Romeo brand to profitability in 2021, moving from Red ink to black ink with the pricing at the benchmark level and it's clear that the turnaround is on track and we are now gaining new momentum with the launch of the Alfa Romeo finale that will happen.

In the 2022 with its first electrified vehicle, which means that electrification journey of Alfa Romeo is just starting which means that we have significant potential to grow profitably with this brand now that the business model has been fixed.

For the launch of our brand that we are now preparing for the rebound.

We can say that will be 1% electrified in 2024 and that from 2026, all the launches will be purely BV. The pricing power is minus 20% against the benchmark, which is a way to say that there is significant potential.

To improve moving forward, which is great news and this is exactly what we are going to do and that means that the luxury brand will represent a significant profit driver for the company moving forward. While we are preparing for this rebound I think we need to congratulate debenture teams for the fact that the lunch Epsilon is steel.

The number one selling car in Italy in the B segment, which is a very significant sales and marketing performance with a six 3% share in 2021.

Last but not least the D. S brand, yes automobile the unique French premium brand will make 1% BV launches from 2024.

Is better than the benchmark in pricing power and that is the second best LTV sales mix of the premium.

Industry with no less than 37% mix for 2021. So here is one other brands that is bringing the <unk> sales mix of talent is up with a quite impressive 37% sales mix.

To finalize this spot I think we are going to commence now the Maserati brand the unique luxury brand of guarantees.

The first the great news is that we were able to bring the brand back to the black with a 5%.

A wide margin in 'twenty, one needless to say that our goal is to bring the profitability of Maserati in the midterm above 15% of NOI margin saw a significant potential to improve it is clear that the Maserati team has been doing a great great job because they were able to grow the sales by 41.

Per cent to grow the market share globally in North America, and in China and at the same time improve the profitability.

Which is the perfect demonstration that they are creating value for the company.

While we are doing is we are putting the level of demand on quality at a very high level.

We are demonstrating that we are absolutely stiff.

In quality, making sure that any new model that we are going to launch in any brand of sell antiques and specifically on Maserati will be meeting all the very demanding standards quality standards that we have in the company. This is the reason why we decided to delay a few months the all new Greek Holly we want the car to be perfect.

We have tested the car many times and now the car is ready and it will be unveiled in March 'twenty two.

Deliveries will begin by mid 2022, so the all new Greek Hardie is of course, a turning point a cornerstone for the Maserati brand ads.

I already mentioned on the opening will bring Maserati to the World Formula E Championship in 2023, as a testimony of our electrification and the fact that we love to compete on this brand which is positioned as the Granturismo brand of certainties in.

In 2023, we will also bring the all new Granturismo.

Which is right now on track the car is gorgeous and you will see that you will be surprised when it will come up to the market at a moment, where we will consider that the quality is top notch meeting all the standards and therefore at the right level to be enjoyed by our customers. So of Maserati is.

The starting point of a great story.

<unk> sells more market share more profit more quality and more competition. This is what we are now doing and I'm quite convinced that this is going to be a success story for the future.

So those were the brands.

For the cause in the products lets now talk about the services.

The mobility business is now expanding.

The good news is that the growth is there.

And the numbers are black.

It is important in the way, we think that we grow our performance.

While we keep things in the black which is quite rare.

Our competitors in this kind of services as you can see free to move is now growing by 38%.

While we keep the business in the black thanks.

Thanks to the fact that we are introducing more and more cities, namely in the United States that can enjoy this mobility service, we see that the long term rental originations are growing up 15%. It is also the case on the leisure side with an even more impressive number of 45% driven by a b to C growth.

We see that the growth is there both in the free to move in leases in both cases, we are in the black and we will keep it in the black there is some acceleration to come.

In terms of.

Electric mobility as you can see the mix of LTV is growing by the day not only on the leases lease sales, but also in short and midterm rental. It is also the case on the leisure side, but on top of that on the leisure side, we have made some acquisitions.

As we can see here easy rent in the U K and subtle rent in Portugal to expand our mobility ecosystem. The reason why we are aggressive on these areas because we believe with some humidity.

We have found the way to keep the business profitable and at the same time grow our presence, which is from my perspective, the right way to go and I'm very pleased with this direction and let's continue to do more of the same so that we can enjoy a better business from this mobility services activities.

If we move now to the affiliates.

Three major businesses. One are one is the financial services, we were blessed to create the Sterne entities U S financial services from the acquisition of an existing entity and this captive is now formed and we are moving.

Ahead, and I think that we will start seeing the first benefits of this strategic move from next year.

So certainties as now our financial services in the U S to support sales, which is going to be a great tool for our sales and marketing people.

We are also creating a fully dedicated multi brand leasing company in Europe .

Which will go live in.

In the beginning of 2023, there is enormous potential here compared to our peers and this is something that we are very excited about trying to move as fast as we can.

And we will do this in partnership with the cardiac CT.

We have achieved while we were completely reengineering our strategy in terms of sales finance.

We are achieving a record profitability with no less than 662 million euros in 'twenty, one which is a tribute to the expertise and the focus of our financial teams and congratulations to them.

If we look at the pre owned vehicle business of course, the business model has been improving given the market conditions.

It's good that we do it and we didn't do it only on the top line and we did it also on the costs because we could reduce the logistic cost by 40% by executing a certain number of synergies coming out of the merger. We had a very successful IPO of the Army's group with evaluation of the company.

At 1.9 billion euros, knowing that our initial investment was a two digit number so a limited investments debt.

Triggers a lot of value creation over the years, so a successful IPO of Artemis.

And we will continue to expand our pre owned.

Car brand called spotty car across the different countries and here. We are now starting the operations in Turkey, which is a significant market for us.

In the parts and service business.

They enjoyed double digit sales growth.

Which is not very common significantly fueled by the independent after market business, which was up by 25% and by the circular economy business, which was up 40% weaker.

We could create through the merger of three entities that we had acquired in the past the fourth largest.

I am a distributor in China with a sales growth of 30% and the global business is in the black even though it's not a big number it's still in the black and we are growing as a distributor in China, which is a.

Our success office tenant is in China, right now and we selected more power as the brand to sell the OEM parts when needed to some of our partners. So this is a significant profit provider for <unk> and as you can see through the different columns here everything was growing.

Profitably, which is of course contributing to the excellent results that you could see this morning.

Let's move to the next one which is about electrification I know that this is a topic that is very important for you and I wanted to give you more transparency and more details.

About what is going to happen in the next couple of years first let's just recognize.

That as we speak.

We are selling 34 ltvs.

In the markets, where we operate which include 19 the evs.

So as we speak.

We are selling 19 bvs all over the World 19.

19 BV is included in 34 Ltvs as you know for US Ltvs means bv's plus ph Evs. So 19 D. These are actually and right now on sale for the different selling these brands.

If we look at what is going to happen this year.

And next year.

Within 'twenty, two and 'twenty three we are going to add to those 19 bvs.

13, additional bvs, which means that by the end of 'twenty three.

We will have 32 bvs on sales.

Which means roughly one third of the total model portfolio after Atlantis.

Which is I believe a significant achievement from our engineering purchasing and manufacturing teams and I would like to thank them and congratulate them for that.

So please keep in mind right now 19 BV is on sales on sale and for the next couple of years 'twenty, two and 'twenty three we will add 13 more and will therefore have by the end of 'twenty three thirty-two bvs on sale. This is what we have in our pipe you can see through these slides the power of guarantees.

Our 14 iconic house of brands, we have a very powerful capability to launch new technologies and cover the profit pool of our markets. So please keep in mind the thirty-two bvs that will be soon on sale and right now 19, no less than 19. This is too.

If I one of the questions I got from you after the EV capital day.

We got the feedback that you wanted more visibility and more transparency on the pure BV launches. This is the answer hopefully it is clear enough for all of you let's move on.

Let's now move to the numbers in the for the numbers that needs a lot of rigor and focus and I will be happy to handing over to our CFO Richard Palmer, which are please thank you very much Carlos.

So just quickly to remind everybody given the merger.

Numbers will be focused on today are the pro forma numbers for 2021 and for 2020, which effectively means that they are prepared as if the merger had occurred on Jan one 2020, so including <unk>.

F series numbers in the 2020, comparative and including the first 16 days of 2021 for FCA in the 2021 numbers all adjusted for PPA purchase price accounting exercise. So we can move.

To the next page.

So here we show the main financial metrics as we mentioned consolidated data shipments increased 4% to $5 9 million units with the impact of unfilled semiconductor orders largely offsetting the reduced impact of COVID-19 compared to 2020.

North America, and the extended Europe regions were down two and 3% respectively with strong growth in South America, China, and India, and Asia Pacific Maserati and Middle East Africa.

Brands were up except for adult due to discontinued Grand caravan in journey Alpha due to brand repositioning and discontinue discontinue giulietta and Opel Vauxhall revenues were up 14% to 152 billion euros due to strong commercial performance on pricing and product mix.

This strong commercial performance drove AOE to nearly doubled year over year to 18 billion euros with margins at a record level compared to prior PSA or FCA performance at 11, 8%.

Industrial free cash flows reached $6 1 billion euros up 85% year over year due to the strong margins and to the synergies and industrial net financial position, therefore improved to $19 1 billion euros of net cash.

Industrial liquidity at year end reached nearly 63 billion euros of which $12 7 billion related to the Undrawn nausea and committed credit lines.

On page 20.

We show the rest of the P&L H, one and 2021 included unusual charges of $1 1 billion due to the inventory fair value adjustments for PPA.

0.5 billion restructuring of 0.7 billion in gains for resolution of tax matters. It matters in South America or 0.2 billion in the full year. The unusual charges totaled $2 7 billion with an additional $1 6 billion H two due to further restructuring of 0.3 billion a change in accounting estimates for certain types of warranty.

<unk> or 0.7 billion and asset impairments of 0.3 billion.

Financial charges for the year was $746 million up 11% versus 2020, mainly due to lower levels of interest capitalization on investments and progress and lower yields on cash balances.

Full year tax expense was $1 9 billion with an effective tax rate of 13% and included the deferred tax assets recognized for tax loss carryforwards of around $1 4 billion euros. Excluding this one off DTA amount and some other smaller tax adjustments the ETR normalized would've been around twenty-three per.

Sent.

As a result, the net profit for the year as Carlos mentioned nearly tripled to $13 4 billion.

Turning to page 21, we show the drivers of revenue growth for the year, which drove a 14% increase or 16% ex negative FX impacts mainly due to the U S dollar versus the euro the real versus the euro and the Turkish lira full.

Full year volumes were up 207000 units driven by South America, 100, plus 270000 units with China, and India Asia Pacific EMEA, and Maserati, all positive offsetting North America down 32000, and extended Europe down 80000.

Net pricing was strong throughout the year with all segments positive and North America, So South America and EMEA the standout performers.

Vehicle line mix was also strong and driven at 65% by North America, and 30% by extended Europe .

Moving to page 22.

Focus on the alloy development as we said volumes were up around 200000 years of 4% with significant production losses throughout the year due to ship chip shortages in this context, we focused on margin maximization. The commercial teams did a great job with a net price of around six 5% for the group and all regions positive vehicle line.

Mix was also very strong, particularly in North America, where we had key new products with the Grand Cherokee and Grand Wagoneer and also focus production through the year on the higher margin vehicles in particular Ram.

These top line actions offset raw material inflation for the year of around two and a quarter billion euros and industrial inefficiencies due to the stop go nature of 2021 due to chip shortages inflationary pressure and FX impacts, particularly in South America.

SG&A was flat also due to synergies from indirect purchasing and media buying.

R&D increased mainly due to the launch of new products in North America, increasing the depreciation amortization and decreased spend for new products compared to prior year, the resulting NOI margin at 11, 8% was up 70% year over year.

Now we move to the regional performance starting on page 23, with North America, which had a record performance for the year with margins of 16, 3% on H two a 16, 4% industry volumes reached 18 million vehicles up 4% and our sales were down 3% or 2 million units, mainly due to U S fleet down 30.

8% and Canada Canadian fleet down, 40% impacted by supply constraints and the discontinuation of adult journey and Grand caravan.

Our North America share was down from 11, 8% to 11, 1% and shipments reached one 8 million units down 2% year over year with dogs down, 30% Jeep down, 5% and ramp up 16% revenues increased 15% to nearly 70 billion euros with a strong increase in ATP.

As mentioned earlier, driven by net price and strong product mix from Graeme volume and increased Grand Cherokee in Uganda Wagonette volumes.

<unk> costs were negative due to raw material inflation and logistics and other industrial efficiencies due to the stop go of chip shortages increased DNA for new product launches and increased labor coal costs for variable pay pay due to the strong results R&D increase relates to amortization of program costs for the new model launches.

On page 24, we show US what South America for performance, we're in an industrial 14%. Our sales reached 812000 vehicles with share up three eight percentage points to 22, 9%.

In Brazil, our share reached 32% and in Argentina, and 29% with our overall sales up 37% for the Fiat brand was up 34% Jeep, 35% plus show up 56% in Sichuan up 40%. So all brands performing very positively shipments increased 48% to 800 and.

30000 units with our South America business less impacted in North America, and Europe , the shipyard chip shortages.

Revenues increased 71% to over 10 billion with very strong net price performance offsetting negative inflation and industrial costs and G&A.

This strong performance resulted in a <unk>, increasing by fivefold to 892 million with margins of eight 3% for the year.

Enlarged Europe results are shown on page 25, and a flat 2021 industry still anticipate 29 share remained at 22, 1% number two in the industry H two share was down compared to H. One due to continued focus on improving price mix and reduction in total stock levels through the year of around <unk>.

40% in fact, AOE was up 76% to $5 4 billion euros, our margins were nine 7% from two 4% the prior year.

Shipments for the year were down 3% with semiconductor availability impacting the four highest volume brands are similar levels, a newly launched open market marker Citron <unk>, four and <unk> 500, <unk> performing well.

Despite shipments being down revenues were up 5% with positive price and mix driven in particular by increased lead volumes, which more than doubled in the year and by the perjury brand portfolio of new model launches as mentioned for Citron Opel and fit.

Costs were well managed with raw material inflation offset by purchasing savings and inefficiencies due to stop go with chip supply offset by manufacturing actions and by reduced compliance costs.

FX was marginally positive due to sterling strengthening and other impacts included improvements to parts and service and used car profitability.

Turning to page 26.

We review in the Middle East and Africa, where the region achieved double digit margins and our <unk>.

Increased over 80% to 545 million euros for the year the.

The industry was up 19% with all major markets up strongly with the exception of Turkey down 5%.

Our regional market share was down to 11, 9% from $13 six in the prior year as vehicle shortages and strong pricing actions in Turkey impacted sales performance, which was still up 4% to 412000 units consolidated shipments were up 6% and positive pricing offset significant negative FX impacts.

Due to the Turkish lira, resulting in revenues up 9%.

On page 27.

We moved to China, and India, and Asia Pacific were consolidated shipments increased by 26% with China up, 17% and India and Asia Pacific up 28% Jeep brand increased 30% and represents around 50% of the 120000 shipments Pasha was up also 30% to 30000 unit.

Yes.

Revenues increased in line with shipments to nearly 4 billion for the year and actions on mix improvement and pricing offset negative FX to improve margins to 11, 1% or nearly doubled to $442 million.

Moving to Maserati on the ride Maserati sales increased 41% as mentioned to 24000 units with sales up 20% in Europe and over 40% in China, and the U S improved pricing and residual values due to the refresh versions in market.

As well as the improvement in volumes allowed Maserati to close with at $103 million and five 1% margins.

On page 28, we show the industrial free cash flow, which reached $6 1 billion for the year. Despite the slow start in H, one due to net working capital and provisions, which closed the year a negative $2 9 billion an improvement of $2 8 billion compared to H. One this resulted in Asia II.

In industrial free cash flow of $7 2 billion euros looking at the elements of the cash flow.

Before DNA reached 15, 7% margins a further improvement from our strong H, one and 15, 3%.

Capex and R&D capitalized totaled $10 2 billion of the $10 9 billion in investments, which also includes the acquisition of the U S. Winco and other equity injections into joint ventures, total Capex and R&D spend was 13 billion euros or eight 6% of revenues.

The negative working capital was driven by lower year over year payables with November December production of one 1.04 million cars down over 100000 units year over year, partly offset by improved inventory levels.

Changes in provisions was driven down by the reduction in daily.

And dealer inventories through the year of 390000 units.

And on page 29, you can see that reduction in inventory, we continue to operate at historic low levels of inventory with total inventory down 37% in the year and dealer inventory in line with that reduction.

This has allowed us to sustain sales performance by increasing turn rates and offsetting some of the chip shortage impacts the reduction is it similar percentages in North America and extended Europe and does show some increase since the low point in September which was due both to summer shutdown seasonality, particularly bad chip shortages in the June through September .

<unk>.

The last page of the financial section shows our outlook for the industry, where we see moderate growth in our key regions also heavily dependent on supply volatility.

As regards AOE margins, we expect to continue to operate with double digit margins and to offset headwinds in <unk>. In 2022, which include continued semiconductor scarcity supply chain constraints due to labor cost and absenteeism, particularly in North America, and raw material inflation of around 4 billion Euro.

Year over year up from the two in a quarter billion in 2021.

Industrial free cash flow will be positive and allow us to continue to invest 8% to 9% of revenues in capex and R&D to execute on the numerous LTV and Bev launches that we mentioned earlier.

Thank you and thank you for listening and I will turn the call back to Carlos.

Well. Thank you. Thank you reach out for this.

We're very focused.

Explanations.

To wrap up on this for a spot before we go to your questions I just would like to highlight a couple of things first.

In 2021.

We were blessed by the fact that our company is enjoying.

Very.

Trailing diversity our company is very diverse.

As you know historically.

Our company is built out of many other car companies with different brands different countries and therefore diversity forest guarantees is a differentiator.

But more than that diversity at Sterne entities.

As a way to enjoy.

A very exciting journey for all of us.

We see it through the immense.

Number of resumes that we receive.

You receive.

Enormous amount of resumes of people want to join this journey.

Very surprisingly many of those resume as our people currently working in tech companies.

And they see a breathing space.

They see opportunity to change they see opportunity to build and they see the opportunity to enjoy an exciting journey as a team.

This diversity has been a really a very important factor of our good results in 2021.

We also see that.

Of course.

The challenges that we have ahead, which are most of them external challenges.

Can be overcome in a more efficient way.

We understand the world in which we operate in a more focused way and a more sharp way and of course diversity is also very helpful to understand the world in which we are operating.

That's part of one point number two we are blessed by the fact that we have a strong bottom up support from our people are.

Our people understand why we did this merger they understand that <unk> makes total sense from a scale perspective from a diversity perspective.

And you can see that the.

Very high level of synergies that we could deliver in 2021, no less than 3.2 billion euros is the result of a significant bottom up trend.

Our people understand why we do this and our people are.

Rewarding us with many many synergies even though those that we.

We couldn't think of during the discussion.

It was done prior to the deal of the merger. So this accelerated pace of synergies is demonstrating that we have a significant bottom up support.

Which of course is also a very important driver for the profitability the record profitability that could deliver in 2021.

Last but not least.

As we are steering the company fast and strong towards and automotive Tech company, we needs to recognize that some of the key strategic partnerships with the tech companies are going to be boosting.

The transformation of this company not only on electrification, but also on software.

And I will be pleased to explain to you all the details of this shift the during our long term strategic plan presentation next week. So it will come very soon on March. The first thank you for your attention greatly appreciate it and let's now go for the Q&A. Please.

Thank you if you'd like to ask a question on todays call. Please press star one on your telephone keypad to withdraw your question. Please press star two.

The first question comes from the line of Jose assume Andy from J P. Morgan. Please go ahead.

Thank you very much.

Carlos and Richard for the presentation wholesale from JP Morgan.

Couple of questions, please and trying to build.

We understand the opportunity to maintain the margins in North America.

At the current elevated levels. So so Carlos can you comment a little bit.

Around the airport the Lady said another 60000.

Vance North America, and continue to take market share there.

Richard can you speak please.

The industrial costs North America between raw material depreciation a stop and go roughly how much was that across the three buckets.

And then the second question Carlos.

Yes, I mean at least.

You think about the business in Europe .

Clearly, there's two big of working with this one.

Reveals the R&D expenditure.

Yep.

Yes, Brian .

We expect them to capitalize on the launch of the Google.

On in Europe , as you launch it.

Social platform.

Can you comment please on those two opportunities and how can that basically helped your earnings development into it you can get you.

Well, thank you Jose and thank you for your thoughtful questions as always let me answer first on the U S.

Situation.

What we have seen in 2021 is that.

We are operating in the U S under what we would call a pool model.

Instead of a push model.

As a consequence of the semiconductor supply shortage as you.

Surely understand so we could leverage this situation in a very efficient way in terms of pricing power.

While.

We were fighting against the costs and the inflation on the cost, namely the raw materials. This is this is what we have been doing which means somewhere the operating point of the U S is moving upwards.

Better transaction pricing and I gave you.

Some numbers compared to the other two Detroit competitors.

And we they are of course, a big fight on the cost side.

To try to work.

Compensate for the raw material cost increase so we are operating at the point, which is quite profitable because.

We prioritize the most profitable sales in the most profitable channels.

And while we are doing this we are operating at the highest transaction price.

With some kind of.

Cost reduction that could compensate some of the inflation that we are victims of when we combine the two the two factors at the end of the day, we could deliver a record profitability because we were.

Quite fast at enjoying a better pricing.

Wow.

Pushing back on some of the.

Costs and compensating with additional cost reductions so it's a very specific situation.

<unk>, which we are in right now as you can understand from your deep experience of this market, we are enjoying a pool market rather than the <unk>.

Bush market.

The core reason of this are two.

First one is that there is a balance between the offer and then demand and the second one is very simply the expertise and the skills and the agility of our North American team, which has been doing a fantastic job in terms of taking the best out of the market.

That's what I can right now.

Are you on your final question on the Ltvs before I give the floor to to reach out I would say that.

Not only we intend.

To keep our leadership in Ltvs in Europe .

And grow our performance in the U S.

And the deal with Amazon is very representative of.

How focused we are to make some of our major customers happy with the features that we can imagine an engineer but of course, we have also a global ambition because we are growing at a good pace and we believe that we can do much more on connectivity much more on some of the.

Features that make the logistic companies improve their own efficiency.

We can bring the zero emission mobility to those fleets.

A good example, next year is the pro Master EV, which by the way is leveraging the electrification that already exists on the same van.

In Europe , and therefore, we can go reasonably fast so we will continue to work hard.

For our LCD business to grow not only on the van sector in Europe , but adding the vans and the pickups all over the world.

We intend to give to our.

Breathing space, so that they can go faster and I don't want to forget the very important point, which is the fact that we are now cutting edge.

A cutting edge efficiency on the hydrogen version of our events. We are I believe the only one that on the same van.

Can offer to the market diesel versions.

E versions and fuel cell versions, which says a lot about the way we are implementing the technology on those events. All of this is going to be available for all the brands.

Of sell antiques, regardless of the family, where they are coming from and of course the efficiency that you can find in one specific brand you can expect that that efficiency will be expanded.

And made available for all the brands.

Of our iconic house of brands, including <unk>. The model that you commented Richard.

Thanks, Scott Us so on the.

Industrial.

Cost bucket.

Jose.

I would say that the three biggest effects, obviously, there are others that sort of offset but the blue me against the.

The inflation effect, which was about $1 1 billion of the $1 seven.

The inefficiencies on stopped go was about zero 4 billion.

And then extra DNA was about zero to for the $1 7 billion.

Of impact so.

I think clearly there's some opportunity to continue to work on industrial cost base in North America. So you see we.

Effectively offset similar issues in Europe to zero and.

I think that the team is very focused on trying to improve that net performance in North America as we go forward and the other point on the profitability as you know we launched the Grand Cherokee the new one.

In H two basically so in 2022, we have a full year.

And we launched the Grand Wagoneer and the Wagoneer basically in Q4, so we have a full year in 'twenty. Two so there is I think still some important product news related to those launches and also the second version of the Grand Cherokee.

Coming in in 2022 as well with the two roseau, we have I think some good product I'm used.

Used to continue to manage our mix.

In our.

Margin.

In 2022, as we capitalize on those those new new cars.

Thank you Richard Thank you Jose let's go to the next question. Please.

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

Yes, Hello, Michael Quinley tedious.

Two questions on my side. The first one is could you give us maybe more color on what you achieved in 2021.

Sure Michael.

Any club accident.

In this context.

What we should expect this year.

Ooh before Newport Koepcke clean.

The first one and second question, maybe regarding your profitability it was strong across much stronger than what we expected.

Perfect. Thanks to mix on price, but also efficiency gains.

Could you maybe help us understand how we should look at these efficiency gains maybe between Oakland.

Which is probably still bringing some new synergies.

Portfolio cleanup.

And maybe the customer journey.

And maybe also.

You bet. Thank you.

Two great questions. Thank you.

First of all on the synergies.

I would like as always that we keep it very transparent.

We do ourselves and with our investors.

It is fair to say that $3 2 billion is a very nice number for the first year.

At the same time I think it's important that we highlight the fact that the.

Those were the low hanging fruits.

And therefore by definition the low hanging fruits.

Can be captured fast and strong.

I expect the pace of progress to slow down.

For a very simple reason is that the.

The execution of the synergies is the cement.

Of Celanese.

We want the synergies could be a bottom up dynamic.

That translates the fact that our teams.

Understand the sense.

Of what we are doing with this merger and for me. The most important thing is to make sure that the foundation.

Our first Atlantis is sound.

And is built bottom up and that's the reason why not only I can congratulate our teams for their excellent number for 2021, but I want them to continue to run the show and I want them to continue to demonstrate that there is a bottom up.

NAMIC that demonstrates their complete support of this merger so I can expect that.

It's going to be good.

I think it is fair for all of us to consider that the pace may slow down so that we keep it bottom up and we make sure that we have a very strong foundation.

For our company I think it is in your best interest in my best interest. It is in our best interest that the foundation of talent is a sound.

As possible and for this foundation to be sound. It has to be driven bottom up as much as possible not only of course, but needs to be significantly bottom up driven so do we have more potential yes, I will tell you more next week on this matter I just want to be very clear on the.

The fact that in this year, we were blessed by the low hanging fruits that we can capture and they're very strong.

Dynamic way. It is also somewhere the consequence of the excellent collaboration that's happened prior to the merger and prior to the closing.

Within the teams.

The human relationships could be built.

Again as I said during the presentation enjoying the diversity as a way to have an even more exciting.

And rewarding and enriching activity in the company by working with very different people. That's what we are seeing and I think that's that's great for the company and that's great for you. So I expect it to continue even though the pace may slow down a little bit. So that we continue to build on the strong foundation for the company on the SEC.

<unk> topic it is clear that.

In Europe , there is more potential.

There is more potential in Europe in terms of overall efficiency and effectiveness.

Most probably in the area of the G&A.

We see that on the pricing power.

Most of the brands have done their homework.

You can see that most of the brands are at if not above the benchmark.

And in pricing power, which means that they are the new benchmark of the market, but inside of the organization.

We have been historically piling up many different layers offer offer different companies different brands. It is quite clear when you look at the numbers and when you discuss with the top executives that there is more potential.

<unk> simplification.

Diversity complexity reduction for increasing the speed.

At which we go to market focus more energy on quality and marketing and a little bit less.

In bureaucratic bureaucratic work. So there is potential in terms of G&A for Europe , there is potential to reduce diversity complexity and there is potential to increase speed. So all of this has been identified.

We are going to execute our plans over the next couple of years hopefully we'll see the results for me. It's premature to tell you what are the magnitude we are shooting for but certainly this is the direction in which we are currently working on this matter hopefully this gives you some light on this two on these two matters.

Let's move to the next question.

The next question comes from the line of charge <unk> from Goldman Sachs. Please go ahead.

Yes. Thank you for taking my question.

First question was really just on 2021, obviously was an extraordinary performance.

I think people would have struggled to imagine five years ago.

Oreo, where you reached 16.

In North America, and 9% in Europe .

When we consider some of the assets in that base in addition to PSA.

Some investors do you feel that 2021 from an industry perspective was as good as they get the pricing evolution from the shortage of vehicles.

Spike very low industry volume.

Out of interest would you classify 2021 at the year, which was as good as it get from an end market development.

And then the second question I had was just on your end market prognosis.

Obviously, you're seeing nice of your main markets growing at a rate of around 3%.

It seems a little conservative.

Perhaps you could give some insights into why only 3% of what you think percent stronger growth and does the company do you expect to do a little better than 3% of all your wholesale from an internal planning perspective. Thank you.

Well those are great questions.

Let me try to answer on the first one on North America.

I just would like to tell you that we are not shy.

Of things, we would like to improve.

Being a cost being marketing.

Being quality.

We have identified with the North American <unk>.

Our management team a lot of things, we can improve and it's a it's a rewarding experience refreshing experience to see that there are things that we could do better and why because we have such a very large open book for internal benchmarking instead auntie's that's there.

Yes.

Always somebody in the company that is doing a better result than you are in any given part of your P&L. So that is giving us a huge internal benchmark and lever that our top executives are aggressively embracing.

Embracing to improve things in their own region or in their own brand. This has been working very well because fortunately we have been able to keep an open minded.

Archie chewed inside of the top leadership team, which is only focused at improving the company and not a.

Being a defensive on there any kind of topic, where we could find in the company of better performance. So we are not shy.

On the list of things, we can do better.

In North America at the same time.

I think it is fair and I think you hinted that to consider that the current conditions in North America are very positive for the margins.

Because we have this significant and balance between the offer and the demand.

Which then creates what we call a pool market instead of a push market and we both know that those are very good conditions to improve.

Profitability margins.

In a given market. This is a situation in which we are now.

But we are not the only ones.

Our competitors are in the same enjoying the same position and then you can compare you the investor who is doing the better drop just looking at the margins.

From the metrics.

That they have access to.

The winner is obviously sell antiques in North America by far.

That's good for them and it's a warm congratulations to our north American team and of course.

Our strengths.

Is to be able at the same time, where we congratulate them to.

To be putting our energy our time and our focus on the things that we can do better.

Thanks to the internal benchmarking so that's what I would tell you on on the North American.

The current situation.

What was the other question forgot growth of 3%, 3% forecast well.

I think we have to be very humble.

On the.

On the outlooks, we are not very good.

At making outlooks historically, we see that we are often wrong.

Anyway, as you know well.

Now the size of the markets will be mostly.

Managed by the supply of semiconductors.

So the size of the market is going to be somewhere the consequence of that supply.

So.

Express is the fact that we believe the situation is going to move in the right direction.

But we also believe that it's going to be very that's why those numbers are.

And for US is yes, hopefully things will get a little bit better, but we believe it's going to be.

Very slow it will take time and the 2022 is not going to be from that perspective, the year, where we can say we are back to normal.

We don't think that that will happen on top of the pure semiconductor problem.

Of course, the the raw material cost inflation, which is going to create additional hurdles to be overcome and of course, it's normal that we mentioned geopolitical of the world.

Which I have not been very helpful. In the in the last years and they don't seem to be coming better. This year. So we are not at all.

Pessimistic.

Because we have enough.

On our play to improve the efficiency of the company.

The way we have been working intensively on the long term strategic plan.

It's very helpful to see where are the areas in the pockets of things that we could and should be doing better. So we have tons of things that we can improve at the same time, we are facing the headwinds that you know in the if you seem to consider that we are quite cautious on the outlook.

From our side, we would answer that most probably it's because we see.

An improvement on the semiconductor supply front, but still a very small and very low pace improvement I think that's the best answer that we can give you on this matter.

Next question please.

The next question comes from Thomas Besson from Kepler Please.

Please go ahead.

Yeah.

Thank you very much ship's godmother.

I have two questions. Please.

The first one.

Is a good cash returns you've generated a much stronger amount of sketch them initially anticipated.

One you are proposing to return <unk> billion dividend.

25% of your of your earnings.

Is it reasonable to think that the.

Buybacks virtually complements dividend.

In the coming months, if your shaft hoist remains depressed in terms of regulation.

She knew for sure to discuss next week.

Second.

You achieve extraordinary results for 2021 but still.

<unk> decided to Oh.

Shinji or distribution agreements in Europe , and tried to get those well new agreements with suppliers at least in North America.

Can you update us on these.

And explain us why youre still pushing so much.

For a while.

Margin improvement, while you are well above our competition I know the sense of how long she is always there for you.

But.

Maybe you could explain us already what the load center.

The notice to improve in all regions and it's true while most of your direct competitors you know Hawaii go always Chinese exploratory, but you could have had the deterioration of the operating cost once thank you, what where do you see maybe coming.

Others may not see as well as you do.

Thanks.

Well, thank you John great questions. Indeed.

A couple of comments I will I will give the free cash flow question to web to reach or they will give you more details as it relates.

It relates to dividend policy.

We will talk to you about this next week in a in more details.

It is a sensitive matter that needs some ex explanations.

Just want to tell you that we considered that the cash of the company is.

<unk> owned by the shareholders. So either we have a very strong.

Project to propose and we have.

As you will see next week.

And if there is availability in a strong liquidity position, which is our case. There is no reason why we would not give the cash back to our shareholders, which I think is fair. They are the owners of the company. So that's how we think about things.

Certainly next week, we are going to be talking about that but for the free cash flow question I will hand over to Richard on your second question.

Which is about why do we keep pushing as much as we are.

I think the fair answer is that.

I have learn.

From my 40 years of automotive of life that as soon as you stop pushing you.

You go backwards.

Cause as you know well Thomas this is a competitive game. It is all about being better than the other guys at the end of the day and if you stop pushing then you go backwards because the other guys are pushing.

They may not be pushing as much as you are you would never know, but they are pushing anyway. So if you stop pushing then you go backwards.

For us the big.

The bigger.

The gorilla in the room.

Is the cost of electrification.

That's the big Gorilla in the room.

We can expect electrification to represent an additional total production cost of around 40% to 50%.

<unk> a conventional vehicle.

There is no way, we can transfer of 40% to 50% of the additional transfer.

Total production cost to the customer because if we do so we will lose the middle classes in our customer bases will shrink.

So we cannot do that.

At the same time, we cannot.

The same pricing with that cost because it of course, we will go in the Red and we all have to restructure the company. So the only way to move forward is to absorb.

Those 50% of additional cost.

If we say that we do it.

From now up to 2026, because we told you at the capital day that from 2020 States we would be.

Be ready to commit on the double digits a wide margin.

If we if we have to do it over the next few years.

Then that means around 10% productivity per year for the next five years in an industry that is.

Used to deliver as you know tomorrow between 2% to 3%.

So how do you go from 2% to 3% per year.

10% per year.

There are not many many different ways to go there one of the ways to reduce our distribution cost improve.

We improved the quality to the final customer improve.

Fact that you can connect with the final customer.

And at the same time, while you are improving the quality of the customer journey you reduce the cost of distribution. It's a strong contributor for the absorption of the electrification costs.

Not the only lever we have others that we can't comment.

Next the next a week, but this is to say that one of the reasons why.

We didn't stop discussing with our partners about how can we improve the quality of the customer journey, while reducing the cost of distribution. We didn't stop and we are now progressing very well in Europe and I believe that we will reach.

An agreement that will be supportive of.

Achieving a double digit margin in a fully electrified world.

While making sure that we do not lose the middle classes.

Which represent a significant part of our customer base. So that's what we are trying to do and that's why we don't stop pushing but you know our DNA. We are competitors and we are here for the race. Thank you Tamara Richard on the free cash flow. Please.

Thank you Carlos I think you basically answered the question I think on capital allocation, where we're talking about it on March one.

I think on the payout of the dividend and I think we're very satisfied with being able to propose to the board and the board agreed. So therefore, obviously subject to the shareholder approval. We're pleased with the $3 3 billion payout will look at the rounding so see if it's a precise 25.0 tomorrow, but I think it's.

Basically not far off so I think we're at 25%.

The first payout first Atlantis, which I think is very respectable.

And you know hopefully will.

Be seen so by shareholders and investors and then we will move forward, but we'll give you more visibility on overall thoughts on capital allocation on March one.

Thank you Richard.

Next question please.

The next question comes from the line of Phillip Schwartz from Jefferies. Please go ahead.

Thank you very much and good afternoon I've got two questions. Please one maybe for Richard is I'm looking at the size of the adjustments was $1 7 billion last year or $2022 7 billion in 2021.

What's the direction there because similar to the adjustment it's hard to know how much data, we nonrecurring how much there things like that I used in warranties. So I think it'd be interesting to get your views on where are we going in terms of the size of adjustments and future visibility on this.

And.

And the second one.

Thank you very much Carlos for you I know you've been vocal about affordability and but I'm still looking at the cost of electrification is definitely one of them this year and next possibly.

Raw materials going up so logically nominal prices have caused it to go up if you want to maintain your margin interest rates going up.

Real that is ongoing to improve much. So they may be stable, but they may also come down so that makes affordability.

With lots of multiple headwinds so I'm just wondering what you're you're on you're talking about distribution, but that's going to be it was going to take several years and I'm curious about what you're doing with some of your suppliers, where you seem to be very very strict about requiring to get back to you any productivity gains are there any levers or are you taking the risk that you're going to be.

With your suppliers. Thank you.

I think your understanding is absolutely.

Is that absolutely perfect on the second topic I will answer the second question and then leave the first one to to reach out on the second one.

We have to come back to some <unk>.

Basics that of course, you know is as good as I do which is the fact that on the total production cost of an automobile today.

Just before you put the car on the trailer to ship it to the dealer.

85%.

Of the total production of car of an automobile is made out of both our thoughts.

This is the situation that has been created over the last 30 years in the automotive industry and of course.

Our suppliers could enjoy.

This activity for the last 30 years.

It happens that in such a cost structure, if you have 85%.

Of the total production cost, which is made out of both of our parts.

There is no surprise.

That's when you have to absorb 50% of additional costs coming out of electrification your suppliers need to be a significant contributor.

For this additional productivity because they have been enjoying a significant business over the last 30 years.

With this kind of cost structures, so yes, they have to contribute.

And some of them are doing.

Some of them are contributing in a very efficient and partnership oriented way.

What does it mean it means that.

In this transformation of the industry.

It's not only about the Oems.

It's also about the supplier base and as you know there is significant competition in the supplier base and that is going to be also.

A very nice darwinian transition periods for our suppliers as much as it is for the Oems. It means that we are in the same boat.

We are in the same transformation the speed is imposed on us by the regulations.

And of course, it means that.

We are going to keep what I believe is a strong differentiator of the Atlantis and it has been formally for the two families that created stat anti switches.

Keeping a very low breakeven point.

Because if at any point in time.

We cannot.

Generate enough productivity to absorb.

The additional cost of electrification and we cannot pass.

Everything to the consumer, but we can pass something to the consumer.

Perhaps that.

The total markets.

We'll go slightly down.

And the guys who are going to be able to manage these are the guys who have the lowest breakeven point.

And we are those guys.

We will keep a very low breakeven point, because we have 30% more efficiency than our peers, when we spend R&D and capex. So we are more efficient.

Our sharper on costs sharper on fixed cost, we try to enjoy a strong pricing power at benchmark level. So we keep the breakeven point is very low because in this process of absorbing 50% of additional cost.

We can contribute and we will contribute significantly as the OEM.

We need our suppliers to contribute and at the end of the day what is left is <unk>.

Some part of it will be transferred to their customer. It may have an impact on the size of the market and the guys were going to be able to digest that are the guys who have the lowest breakeven point and from that perspective 2021 is very good concrete example, because we did a 6 million cars or potential as you know well is above.

Eight.

And we delivered 11, 8%.

Margin.

North of 6 billion euros of positive free cash flow with 6 million cars in a car company that could do more than eight.

Which demonstrates to which extent are.

Low breakeven point is protecting the company in protecting our investors and that's why some of your.

Teammates, we're talking about all weather company, yes to a certain extent still antisense they'll all where the company and one of the things that is I think a differentiator is that the.

Of course, we need to push its not always spontaneous but to a certain extent this company likes change.

This company likes to put itself in a dynamic of change because we don't get bored.

When things are changing and it gives us more opportunities.

To grasp different business and be even more competitive vis vis our peer so.

Your point your point is valid.

This is going to be mostly a cost reduction race.

Over the next five years.

To protect affordability in terms of protecting the size of the market. So that we can keep the middle classes onboard on new car sales I think it's very important not only for the car companies, but also for the social stability.

The western societies in which we operate I think that's very important that we protect freedom of mobility for the middle classes.

This is what I can comment to your fair question and I will give the floor to reach out for the other one.

Thanks, Carlos Hi, Felipe.

So well so I think.

We're looking at too.

Relatively unusual years.

Hope.

So 2020, obviously the charges that we had on unusuals were largely related to.

Impairments due to.

Covid.

And issues related to.

Some of the product.

That we looked at going forward in a largely an FCA.

In 2020 in 2021, obviously, if I look at the 2.7 about one and a half billion noncash items related to.

PPA for half a billion of inventory.

Warren T policy alignment for 0.7 billion.

Which again is a noncash item we have two companies are different practices.

From an accounting estimate point of view, we need to move forward.

In a consistent manner, and then 0.3 billion of of some impairments.

On some old vehicle lines.

Frankly, mainly from the <unk>.

Oh boy side of the house is that product lineup.

When it comes to towards an end so one half billions noncash charges largely related to the merger and then.

We have.

The remainder of about eight 900 million, which is.

Turing and are in a more traditional sense of the word and also related to these transactions that have occurred in the past for both X PSA and FCA. So I would imagine going forward. We are likely to can you continue to have some level of restructuring going through.

The restructuring line of half a billion two 1 billion depending on the year in the short term.

Coming down over time.

But I would not expect to have the.

The same level of noncash charges that we had in 2020 for some of the events there in 2021 related to the merger.

Thank you Richard.

Let's take one more question does the time is flying please.

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

Yeah, good afternoon, and thanks for sneaking Enel. So my question here.

The most important ones that I have that relates to your market I checked. It again. This morning. So in 2021, you probably generated an adjusted EBIT.

That was the one of the Volkswagen group.

And your market cap is just 40% of the Volkswagen group. So we see at the moment that Volkswagen group has embarked on what's likely to embark on financial engineering and going to dispose of assets.

Just wanted to understand.

How are you think about the duration of the Atlantis.

And what you also consider financial engineering measures, maybe to increase the valuation of the company and the last question that I have a second question that I have that relates more again to the one from George Kelly on volumes, what would you do it.

Actual prices.

Adverse in the U S. If incentives going to increase in the U S would you rather than cut back on volumes of what you say no. Its did a great margin volumes are more important we need to keep market share what is good for your preference. Thank you.

Well. Thank you those are really great questions.

I would be pleased.

To answer them much more next week and this week.

Of course, but I would just comment that you are possibly rights that.

Right now certainties is cheap opportunity for the investors.

I am absolutely convinced that what we had said office is very exciting and you will see it through our plan next week so yes.

<unk> is quite cheap why is that possibly because we have not been good enough and I have not been good enough at communicating to you the exciting plans that we have for the company.

We have tried to.

Correct that with the.

Electrification capital day with the software capital day, we will present to you the plan in an extensive manner next week, hopefully you will be convinced but.

Surely a stellar anti deserves a much better market cap that's four clear it's a it's a very obvious.

The opportunity for investors.

We have demonstrated that we are.

In our DNA and all weather company.

We have demonstrated that we like change and therefore, we are not afraid of steering the company towards a tech mobility company in any way. We are demonstrating that we are not afraid of new technologies. We have demonstrated that we are able to make partnerships with tech companies.

At a high pace. So all of this has been done for you for you the investors to enjoy opportunities now the decision is in your hands not in mind. My job is to ensure that we are creating value and that we are ensuring the sustainability of our company through the different challenges that we have ahead and I'm the absolute.

We convinced that we have everything we need.

I am absolutely convinced that we have a fantastic team and are absolutely convinced that with a very clear and rigorous governance that we have in our in our company. We can ensure the proper stability.

For the management.

To execute.

Execute the plans.

You were asking if we had some specific financial operations that we could do.

I don't expect that to happen in the first years of the plan, but its still a possibility that we cannot disregard and that we should not disregard.

Based on the great things that we are now building and those great things in a few years may represent big opportunities to unleash additional value for our shareholders and that we should not and I do not exclude that but so far it's not the core of our plan. The core of our plan is to explain to you how we are still.

During the company towards a tech.

The motive company, how we are positioning ourselves to grasp the more profitable opportunities.

And I think we have as you will see next week tons of things that we can do and hopefully you will be convinced not only by the numbers, but also by the clarity of what we want to do so with this I would like to thank you all for the very thoughtful questions that you are raising always.

I'd like to tell you that as the CEO of this company I'm very confident.

I don't to generally speak without there being <unk>.

Grounded on realities that they can see instead of the company. So I think that <unk> was a great move.

It's a winning move.

Guarantees as a great potential and I think it is fair to our people to say that we cannot do everything in one single year.

And it is fair to tell them that what we have already achieved on the first year through the accumulation of the fee layers that I have described is already quite immense.

So I would like to thank you the investors for your trust.

For your.

Thoughtful questions and I would like to convey to my people my warm thanks.

And sincere congratulations for what they have achieved on the first year of tenancies. Thank you very much and see you hopefully next week bye bye.

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

Yeah.