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Operator: Ladies and gentlemen, welcome to the Stellantis Third Quarter 2025 Shipments and Revenues Call. I will now hand you over to your host, Mr. Ed Ditmire, Head of Investor Relations at Stellantis. Mr. Ditmire, please go ahead.
Edward Ditmire: Thank you. Hello, everyone, and thank you for joining us today as we review Stellantis' third quarter 2025 shipments and revenues. Earlier today, the presentation material for this call along with the related press release were posted under the Investors section of the Stellantis Group website. Today, our call is hosted by Antonio Filosa, Chief Executive Officer; and Joao Laranjo, Chief Financial Officer. After their prepared remarks, Antonio and Joao will be available to answer questions from the analysts. 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 2 of today's presentation. As customary, the call will be governed by that language. Now I'll hand over the call to Antonio Filosa, Chief Executive Officer, Stellantis.
Antonio Filosa: Well, thank you, Ed, and hello, everyone, and thank you all for joining us today. First of all, please let me to recognize our teammates that are struggling with the effects of the terrible hurricane in Jamaica and surrounding areas. We are very close to them. So let's get started. There are 3 important topics we want to cover today. First, our commercial plan is progressing with a third quarter return to top line growth. Second, I want to cover our recently announced a $13 million investment in our U.S. manufacturing and product to explain the new opportunities it opens. And third, Joao will take you through the numbers we are reporting and give you our assessment of the second half 2025 outlook. So let's begin with a summary overview of the third quarter. First, let's look at the performance, which improved as we progressed our commercial trends. Consolidated shipments and net revenue both increased 13% compared to prior year, and we delivered a global sales performance that was 4% higher year-over-year. Net sales performance included a sequential increase in market share in North America and even stronger trends in the United States. At the same time, we also saw some share contraction in Europe for reasons I will explain shortly. Second, we announced our $13 billion U.S. investment program, which directs significant capital into our U.S. products, plants and production. For customers, this means we are reentering segments where we have been missing for too long and extending powertrain choices in ways we know our customers love. Lastly, we are confirming our second half 2025 financial guidance which implies continued sequential improvement and at the same time, we'll continue what we started in the first half to structure our business for profitable growth. Now let's go into more details on our commercial progress. First, products. This year, we set out a plan to launch 10 major new products. In the third quarter, we launched the fifth and the sixth of those, the Citroen C5 Aircross and the DS N°8, both on the rapidly scaling STLA Medium platform. We have 4 important remaining products scheduled to launch very soon, 2 in North America and 2 in Europe. And I will detail why each can be very impactful. So let's look at the 2 launches in North America. The Jeep Cherokee marks our return to the mid-sized SUV market in the U.S., the largest vehicle segment, around 1/5 of total volume of the industry. Jeep Cherokee will bring us back into that huge mid-SUV segment with a very competitive design and capabilities. For example, the new Cherokee has significantly more room and the brand's first ever full hybrid powertrain, dramatically boosting fuel efficiency and range. Moving to Dodge, we will soon begin production of the exciting ICE Charger SIXPACK in both 2 and 4 door configurations after more than 2-year absence. The initial Scat Pack high output 2 door frames sold out the entire 2026 model year when we opened for orders. Now let's go to Europe. The Jeep Compass has had considerable success in the past. This new generation Compass built on the STLA Medium platform features 3 powertrain options, BEV, PHEV and hybrids for the first time ever. And then the Fiat 500 hybrid, one especially close to my heart as an Italian, which will enable this very successful nameplate to appeal to a much wider audience than it could be as a BEV only product. Now let's look closer at North America. This was a very exciting quarter with market share in U.S. starting to improve, a strengthened order book and strong execution of the new product pipeline. U.S. sales rose 6% versus the prior year, with several Jeep products, Wrangler, Gladiator and Wagoneer showing solid gains. Our new Ram expressed a 1500 HEMI V-8 variants began shipping. These products are likely to show a bigger sales impact in the fourth quarter as availability on dealer lots increases. Since announcement, we have received more than 43,000 dealers orders. And in fourth quarter, we are launching our updated Jeep Grand Wagoneer large SUV and that all new Jeep Cherokee mid-size SUV. So our momentum in the U.S. is starting to pick up even before the very important new U.S. investment program that I will discuss shortly. Now to Europe. Here, we are making solid progress executing the product plan. But the context is tough with softer volumes in the French, Italian and light commercial vehicle markets, where we are the biggest player. Due primarily to these market mix headwinds. Our third quarter EU30 market share was down 70 basis points versus prior year. We are taking the necessary step to earn that back. In the A segment, we will be introducing the Fiat 500 hybrids, where we see significant pent-up demand, especially in Italy. In the B segment, we are continuing to ramp up the new smart car platform products. Next, we will launch an ICE version of the Fiat Grande Panda. And in the C segment, we will launch soon the Jeep Compass. At the same time, together with other members of the ACEA, we are heavily engaged with European policymakers to define and implement urgently needed reforms to revitalize the European auto industry. I believe there is a strong cross industry consensus that the rules need to change and change quickly. Last quarter highlighted 6 near-term opportunities we had to improve profitability, spending new products, changes for the new model year vehicles and improved manufacturing and operational efficiencies. And I'm happy to report we are making good progress. The return of the HEMI V-8 to the RAM 1500 light-duty trucks in the third quarter has delighted many of our customers. Next, SRT. We will bring an initial SRT model, the Dodge Durango SRT Hellcat to market in the fourth quarter. This will be the first of several SRT products that we will launch in the coming years. And we pointed to the ramping up of the 4 smart car platform products in Europe. In the third quarter, we increased production by 57,000 units year-over-year, which is exciting because we have approximately 120,000 orders for these vehicles in our order book. Next, I want to recognize our global Pro One commercial vehicle organization. This is a critical differentiation for us. Our grid commercial vehicle products represent roughly 30% of our revenues in aggregate across the regions. Europe, where we are #1 in commercial vehicles with a solid 28% share. We are expanding our in-house customization options. In South America, we are also #1 in commercial vehicle with a 31% share. We are expanding how we cover the mid-size pickup segment with the new launched Ram Dakota. And in Middle East and Africa, where we have a 20% share, we are launching a local production of compact Fiat [ Benz ] in Algeria, market where we have especially strong share leadership. In North America, we have a 12% share. We have returned the Ram 1500 HEMI to the lineup with more product actions to come. Now let me touch briefly on a topic where we have some exciting announcements recently. We are excited to, by the way, technology and other dynamics are evolving to bring robotaxis closer to commercial viability, and we have announced a new collaboration with incredible partners. First, in October, we announced plans for Pony.ai to adopt our fully electric LCV and jointly develop a program to launch a large robotaxi people-mover. First prototype vehicles have already begun testing in Luxembourg. And then just this week, we announced a collaboration with NVIDIA, Uber and Foxconn to build fleets or robotaxi based on our AEV-ready platforms, LCV and STLA Small targeting U.S., U.S. cities as first. We are extremely proud of the fact that these outstanding partners recognize the advanced capabilities built into our platforms, and I'm convinced we can deliver substantial value in the emerging robotaxi market and space. Now let's turn to our exciting investment news. Since I took the CEO role, I made clear inside and outside the company that the U.S. is a key priority for our success. Because when we are strong in the U.S. we are stronger and better as a company everywhere. The $13 billion we will invest in U.S. in the next 4 years is an investment in growth. This is the largest single investment in our history and a proud commitment to our U.S. people, plants, products and communities. This investment will support the introduction of 5 all new vehicles to U.S. plants and critically increase the level of U.S. production by 50%. I want here to recognize the administrations for their important focus on making pragmatic changes to regulations and tariffs. This is truly making the difference. So let's look more closely at how this investment enlarge a lot opportunities for us. First, Jeep. Jeep is showing gradual improvement in U.S. in 2025, with quarterly sales growth of 11%, nearly double the U.S. market growth of 6%. We also have an exciting quarter 4 planned with all new Cherokee and refreshed Grand Cherokee and Grand Wagoneer. To build on that momentum, the new U.S. investment includes plans to manufacture, Jeep Compass and Jeep Cherokee in our Belvidere plant. This is critical to our strong offensive in the sub-40k U.S. dollar market. We are also investing to bring new technologies and other strong product actions to the iconic Jeep Wrangler and Jeep Gladiator. Our ability to serve the mid-sized SUV segment, the largest in the U.S. car market at 20% of total industry volumes is extended in a powerful way with Jeep Cherokee and a very unique trade rated Recon, which arrives in 2026. Overall, we are substantially stepping up our market coverage. The lineup is incredibly fresh and exciting, and our manufacturing sites will be ready to support higher demand. Now Ram. I've spoken already about the strong product actions at Ram in 2025, which have helped us drive year-to-date retail sales 26% higher than last year. Now with the U.S. investment, we are opening up additional growth. First, we are putting in place a much more comprehensive product range. We have now set the plan to return Ram by 2028 to both the mid-sized truck and large SUV segment. Second, we are leading on innovation. With this new large SUV, the Ram lineup will include 2 models alongside the Ram 1500 REV, both set to future our unique and very innovative range standard powertrain. Lastly, Ram will be showing even more of its trademark passion with 2 new SRT performance products to be rebuilt in the coming months each with utterly distinct value propositions. We are building the most comprehensive, the most innovative, the most passionate ramp ever. Now over to Joao, who will take you through the numbers for the quarter. Thank you for now.
Joao Laranjo: Thank you, Antonio. Good afternoon, and good morning, everyone. It's my pleasure to be speaking to you for the first time as a Stellantis new CFO. So let's start with the top line figures. In the third quarter of 2025, Stellantis saw a return to year-over-year top line growth. This ended a tough period of 7 quarters of year-over-year declines. Consolidated shipments of 1.3 million units were up 13% or 152,000 units. Most of the increase came from a 35% improvement in North America. That increase mainly reflects the benefits of normalized inventory dynamics. To elaborate the prior year shipments were heavily impacted by the second half of 2024 U.S. dealer inventory reduction actions, which entail substantial factory downtime. Net revenues of EUR 37.2 billion were also up 13% compared to the third quarter of 2024. That was driven by increases in North America, Europe and Middle East and Africa. Let's turn to the revenue bridge to understand the 13% revenue increase in more detail. The improvement was driven mainly by the volume increase in North America and Europe. The 13% revenue increase year-over-year was driven mainly by the 13% volume increase. Other factors, including positive mix and pricing were offset by FX headwinds. On volumes, in addition to the improvement of 104,000 units reported by North America, we also saw a net total 48,000 units increased from the other regions with positive contributions in Europe and Middle East and Africa, partially offset by a moderate decline in South America. Next, pricing was up 2% compared to the third quarter last year. This was driven by gains in North America, where a roughly 4% increase reflect a low prior year comparison point when higher incentives to clear aged inventory were in place. We are also benefiting in 2025 from a strong inventory discipline. We continue to see ongoing pricing headwinds in Europe, but positive pricing dynamics in South America and Middle East and Africa. FX remained a material headwind in the third quarter, with EUR 1.7 billion negative impact at the group level. This reflects the devaluation of the U.S. dollar, Turkish lira and Brazilian Riyal versus the Euro. The U.S. dollar impact was by far the largest part of this. Now let's move to our regional segments. The third quarter saw year-over-year volume and net revenue improvements in North America, Europe and the Middle East and Africa. Jeep Wrangler and Ram light-duty nameplates in particular, drove volume improvement for North America. Europe saw the ongoing ramp-up of European smart car products, the second quarter of 2025, which helped sales. At the same time, we are seeing generally subdued registration volumes in Europe year-to-date. Middle East and Africa had a strong shipment increase of 21% driven mostly by higher volumes in Algeria, where the company has significantly raised its local production. South America revenue was down 5%. This is in part due to tough comps compared to the third quarter of 2024 when Stellantis benefit from a recovery in Brazilian shippings that had been delayed by the second quarter of 2024 flood in Rio Grande do Sul. Turning now to inventories. The stock levels remain well managed at the end of the third quarter of 2025. Total inventories rose 4% sequentially compared to the end of the second quarter. That is primarily due to higher stock in North America, mainly to the ramp-up of any V-8 Ram 1500. U.S. dealer inventory days of sale remained in the mid-60s, consistent with where we ended 2024. Moving forward, we expect to continue to see some absolute increase sequentially at the group level as we continue expanding the product lineup in the market. While the relationship to sales will remain relatively stable. Let me end this section with our 2025 guidance, which we are confirming in all respects. We expect the second half 2025 to continue the third quarter's return to year-over-year growth and to be above first half 2025 levels, stronger volumes and their contribution to improved industrial efficiency will put us in position to deliver low single-digit adjusted operating income margin in the second half and we are working to deliver sequentially improved industrial free cash flow. Please note also, we have refined our projection for net tariff expenses for 2025, now approximately EUR 1 billion compared to the prior EUR 1.5 billion. There are a few other things I'd like to touch on which, while they are currently expect to have limited impact on the aforementioned second half guidance metrics will likely affect other aspects of our second half financial results. First, as we indicated in July, we are engaged in the ongoing process of reviewing all aspects of the business as part of updating our strategic plan. This will likely lead to further charges in the second half. We expect that a large portion of the charges will be excluded from AOI to the extent that they are not indicative of our ongoing operations. Second, we are in the process of updating how we estimate warranty costs. Our historical model was in line with industry practice and worked well. However, in recent periods, we've experienced cost inflation. While this change in estimate does not change the actual cash cost or their time, it is likely to result in a onetime charge, which would increase the level of balance sheet reserves. It is not expected to materially impact future period profitability compared to the 2025 run rate. Now I'll hand the call back to Antonio for some closing remarks.
Antonio Filosa: Thank you, Joao. Before opening to your questions, let me recap the key points from today's presentation. The third quarter revenue and shipment performances give an early signal that our actions are beginning to have a positive impact. You can see that in quarter 3, we continued the accelerated the actions we started in January to correct past strategic and operational decisions. We quickly changed our organizational structure to restore proximity to our customers, dealers and suppliers. We reconnected with our governments and regulators, and we took important decisions such as the product actions and major investments we discussed today that have restored the freedom to choose to the very heart of our strategy. And lastly, confirming our second half guidance signals our belief in further steady sequential progress quarter-by-quarter. That concludes our opening remarks. And so I would like to ask our operator to open the line for your questions. Thank you.
Operator: [Operator Instructions] The next question comes from José Asumendi from JPMorgan.
Jose Asumendi: A couple of questions, please. Antonio, certainly a very exciting product launches coming through in North America and product refreshes. I was wondering if you could talk a little bit around how everything comes together when it comes to improvement of production capacity, utilization of the plants and ultimately also improving pricing power I know that it's a question that goes into 2026. But as we think about the short-term and maybe longer-term, what are you thinking in terms of those 2 metrics? And then second question, Joao, again, most welcome. And I was wondering if you could just give us a little bit your thoughts with regards to the key levers to improve free cash generation maybe second half of the year where you are hinting towards an improvement. Is there an opportunity to even generate cash in the second half? Or if not, how do we think about the levers of the improvement in second half versus the first half?
Antonio Filosa: Thank you, José, for your questions. So I will take the first part of your questions, and then I will leave to Joao the second part of your question. So let me start, please, by saying that today in quarter 3, we celebrate a return to top line growth, both in shipments and in revenue after 7 quarters of shipments and revenue decline. And also since your first part of the question was around pricing power, we celebrate a favorable pricing for the first quarter after 4 quarters in a row of unfavorable pricing. And still, we are very competitive into the market. So we believe we are very well positioned for future growth. And the way we want to address our future growth even in pricing power is through a strategy that we are setting since the beginning of the year, and we are implementing since then, that is aimed to correct the past strategic decision. So we know that our major issues was product gaps, both in North America and Europe, and we are implementing strong corrections in the short-term and in mid-term around those. This is the case, for instance, of the re-introduction of the V-8 engine of Ram 1500, which is a big volume opportunities but also very accretive on profit per unit. This is the case of the relaunch of the ICE engine for the muscle cars of Dodge, again, both opportunity and profit opportunity and this is the case of the launch of Jeep Cherokee in the largest individual segment in the world, which is the U.S. mid-SUV segment that accounts for 20% of the entire industry in the U.S. This is the way we want to correct the past strategic decision, fulfill our product lineup with products that we know our customer wants and grows both in volume and profit. This is the first part of my answer, and I will leave Joao to answer the second.
Joao Laranjo: Thank you, Antonio and hi José. So on your second question on the biggest driver for the free cash flow improvement in the second half, it's primarily volume growth in North America. That is the primary driver for the improvement and underscores the importance of continuing to improve sales and volumes across our machine.
Operator: The next question comes from Philippe Houchois from Jefferies.
Philippe Houchois: I have 2 questions. One is on the free cash flow dynamics. Because I understand the improvement from H1 to H2, you had negative EUR 3 billion in the first half. It seems the market seems to be anticipating being EUR 1 billion and EUR 2 billion negative in the second half. But I just want to clarify, in the second half compared to first half, the past utilization both in the U.S. and in North America and in Europe is probably up. And then trying to understand sequentially as well as long as you have sequential improvement in your production, which I think is the case. And then normally, working capital should be a significant contributor to free cash or to cash generation notably under the payables at the year-end. If you can help me make sure that I'm not the wrong in our assumptions or I know you're not going to tell us what the cash flow is going to be second half. I'm not asking, just to understand the dynamics, that would be helpful. The second question is on tariffs. Again, thank you for clarifying that the $1.5 billion is lower. Some of that, I guess, is the timing of the tariff on the full-size pickup. 2026 normally should be a higher tariff because you are going to have 12 months of Ram in Mexico, and you're going to have the relaunch of the Cherokee. Then in 2027, you start having the benefit of reshoring to more production to North America, to the U.S. specifically, both vehicles and engines. Is it right to assume that 2027, I know it's far away, but understand the dynamics, the 2027 tariff is going to be lower than '26 and potentially going back to the level of 2025. If you could help me understand that, that would be great.
Joao Laranjo: Yes, for sure. Thanks, Philippe. On your first question on the free cash flow, the way that you're thinking, it's correct. The only piece of information is the second half versus the first half. The region where we're going to see primarily the volume improvement is North America. But other than that, your rationale is correct. On tariffs, I'll leave Antonio to answer the question.
Antonio Filosa: So on tariff, my answer is the following. So our new strategy that we have been starting to implementing since January, has been meant to grow in our most important and largest market, which is U.S. but also has a positive side effect to reduce exposure against tariffs as you said, in the next years. Then obviously, many things around this topic will happen, including the final settlement of USMCA and we'll be ready to manage this new variable of our business equation as we are doing already. Thank you.
Operator: The next question comes from Henning Cosman from Barclays Auto.
Henning Cosman: Can I just ask you a little bit higher level, your predecessor management had given us a bit of a steer saying that you've abandoned all-weather above 10% margin company narrative. I think the indication then became more like 6% to 8%, perhaps in favor of growing volume, growing market share. I just wanted to ask again, if you're still endorsing this kind of narrative now as a new now complete management team and what the underlying prerequisites for this are? Does that still imply something like 10% U.S. market share, 20% European market share? Does it require incrementally positive pricing from current levels? How does the reshoring in the U.S. fit into that? I would imagine it would come with higher depreciation, it will probably come with higher labor costs. If you could just give us like a sort of updated framework where you see the company going over the next few years in a sort of steady state. And then secondly, perhaps more again with respect to near-term free cash flow dynamics. I just wanted to clarify, I wasn't sure in response to Philippe's earlier question, if you endorsed that minus EUR 1 billion to minus EUR 2 billion if you didn't mean to make any statement in that respect.
Joao Laranjo: So I'll take this second piece. No, I was not referring to the number, but the dynamics. We are -- the guidance that we have here, it's improvement versus H1, and that's what we are confirming. Thanks for asking for that clarification.
Antonio Filosa: So thank you, Henning. And I will take the first part of your important question, and thank you for that one. So I believe that we will deploy -- we are deploying already since January, a strategy of growth that will deliver to the company, a steady sequential improvement in all business KPIs quarter-by-quarter. This is our major target, and this is what we will do. Now what we understand is also that a 6% to 8% AOI business is a reasonable target for the mid-, long-term for this company, and we will have Capital Market Day to discuss further on those objectives. The most important to us is now to deliver what we want to do, which is a steady sequential improvement quarter-by-quarter or all business KPIs.
Operator: The next question comes from Thomas Besson from Kepler Cheuvreux.
Thomas Besson: I have 2, please. Firstly, for Antonio, I'd like you to talk more about the order intake, please. Could you give us a bit more granularity on the higher U.S. order intake? What has been already the impact of relaunching HEMI on Q3 volumes, what the initial reaction -- reception of the Cherokee so far since the order intake has been opened? How much benefit should we see in Q4 from this already? And when should we expect the full impact on your registration figures of these new products? Could you also give us an assessment of where you see the overall U.S. market in Q4? I think GM and Ford have talked about the 16 million market that would be useful. And then the second question, probably more for Joao. On warranty cost and provision, you talked about a change in methodology that will drive some one-off charges. Can you remind us broadly the recall costs for '25 you expect versus '24 and '23 and confirm that setting up this provision for using this new way of assessing future recall costs has no cash impact on H2? And can you eventually make as well some comments by region, whether you're using different methodologies or whether costs vary a lot between North America and Europe in particular?
Antonio Filosa: Well, thank you, Thomas, and I will take the first part of your important questions, and I will leave Joao answer in the second part. Thank you for the 2 questions. So your first question, the dynamics of order collection in the U.S. is going very well. Actually, it has been already 12 months in a row that we had almost improved month-over-month every month our order portfolio and the new products have been received very, very well and very strongly. So for instance, we have been accumulating more than 43,000 orders since we announced the Ram V-8 legendary HEMI return. After announcing the Dodge muscle car charger with an ICE variant, we received the orders that we need to close the full production up to next model year. And Jeep Cherokee announcement has been received very, very well, very strongly. Both by customers, dealers and also journalists. Not to mention the last presentation of the renewed Jeep Grand Wagoneer that also has received a lot of interest from dealers, from customers and also from journalists. So we are very pleased to see our order book strengthening month-over-month and this is very important to build upon for next year. For your question about what industry we see next year, well, we see an industry that can be fought in around 16.4 million, 16.5 million units for U.S. This is my answer, and I will leave Joao answering to the second question you did. Thank you.
Joao Laranjo: Okay. So -- on the warranty, the first thing is that the methodology that we are reviewing would primarily impact U.S. and Europe. And the potential adjustments would be a noncash provision in 2025. The warranty cost, the total warranty cost for the group in 2023 was EUR 8.9 billion. In 2024, sorry -- corrections here. It was actually mentioned the balance sheet for warranty in 2024 was EUR 9.3 billion. And then on the details specifically to the recalls, we can follow up on off-line if it's okay, Thomas, because I don't have the numbers on hand here.
Operator: The next question comes from Patrick Hummel from UBS.
Patrick Hummel: Also 2 questions from my end. The first one, Joao, your predecessor said that the second half AOI in North America should be positive. Now this is nowhere in the deck, you had a good volume balance over the first half in North America. So I was just wondering if that statement is still valid that we should expect a positive AOI for North America in the second half? And my second question relates to free cash generation of the business. I appreciate today is not guidance day. But if we qualitatively think about the puts and takes for the cash flow as we're heading into next year, is it fair to say they are going to be higher investments year-over-year because you've got that $13 billion plan for the U.S., I guess some of that CapEx is going to be incremental and I'm still wondering if there is a little trailing effect on free cash flow of any bigger further one-off announcements you might have in the second half of this year. So would you say with confidence that next year's free cash flow should be in positive free territory? Or is that too early to say?
Joao Laranjo: Yes. No, thank you for the question, Pat. So first on North America, we are not providing guidance by region. But we are very focused on sequentially improving quarter-by-quarter, as Antonio mentioned. And then on free cash flow, despite the investments that we have announced in the U.S., we continue to focus on [ monthly ] investments around 8% of our revenue going forward. And the -- in relation to the adjustments that we are working on our strategic plan, we are still going through them and assessing the amount. So I don't have right now final figures to understand the impacts for next year. And we'll provide an update, obviously, on that when we have the financials for the full year financials.
Operator: The next question comes from Michael Foundoukidis from ODDO BHF.
Michael Foundoukidis: Two questions on my side. First one on the U.S. investments you recently announced with plans to significantly increase vehicle production in the country. This could have some implications on your cost structure, I guess, and probably for your peers as well, if they decide to go on the same path. Would you be eager to have your view on this? And do you believe that the pricing environment in the U.S. could be negative regarding new vehicle demand going forward? Or do you think that you can get some substantial, let's say, efficiency or competitiveness gains to offset these higher costs? And then second question on volumes. Any comments you could share on October or maybe Q4 trends, especially in the U.S. You highlighted several times during your presentation that North American volumes where are the key driver of the expected earnings improvement. So would you expect most of this improved momentum to come, let's say, in the next 6 to 12 months to be driven by retail or fleets or both equally?
Joao Laranjo: Thank you very much, Michael, for your 2 questions, and I will answer both of them. So on the volume, which is the latest question that you did on October and quarter 4, yes. We see improvement on volume in North America, mainly U.S. because we will see the first positive impact of the launches. The V-8 Ram 1500 is hitting now the dealer lots and is turning very, very fast, driven by a very strong pent-up demand. We will launch in production on Jeep Cherokee by the end of quarter 4. So the first units will get to the dealer lots in that period. Obviously, the major positive impact will start being visible in quarter 1 next year when the largest portion of first unit builds will hit the U.S. dealer lot. The same story on the door charger ICE engine equipped that will be launching production in the next months. Few units will get to dealer lots by the end of the year. Most of them will be hitting the dealer lots by quarter 1 next year. But yes, volumes will increase in U.S. with increase in North America. The first part of your question is about the investment that we are deploying in U.S. products and plants. And if it will have an impact on profitability. So number one, we see a pricing scenario for U.S., which is stable, and this is good news for us. Number two, we are working on cost efficiencies in all the globe and obviously, North American plants and U.S. plants. Number three, our investment is meant to grow in the largest and most important market that we manage, so we see just positive impacts out of it. Thank you very much for your question.
Operator: The next question comes from Horst Schneider from Bank of America.
Horst Schneider: The first 1 relates to Europe. A colleague asked already about your expectation for the North American margins. In that context, I'm asking about Europe because you said in the H1 call that you aim to improve margins in Europe. You just said in the U.S. also you want to improve margins semester-over-semester. Can you confirm that also for Europe maybe? Because my impression is that Europe is getting slightly worse because you talk about increasing incentives and the back share is increasing. So therefore, my question is what implication has that got on European profitability. Then the second question that I have is regarding working capital. Maybe you can explain how you expect working capital basically to develop into year-end? So I would expect inventories to increase slightly. Maybe you can quantify that and trade payables also to increase. But in that context, with this Nexperia chip shortage maybe you can say how your plans could be affected by that. So if there's any supply disruption coming up, if that plan would be at risk? And the last question that I have is on the USD 13 billion CapEx in the U.S. I wonder what that means in terms of restructuring need for Mexico and Canada, not sure if you ever made a statement on that if you plan any plant closures but also can you maybe split the $13 billion CapEx into capitalized or -- not capitalized R&D -- into R&D, but also into CapEx for property plant equipment.
Antonio Filosa: Okay. Thank you, Horst, for your clear 3 questions. So let me start answering with the European parts. So in Europe as well, we intend to do 2 things: earn back the market share that we have been declining a little bit. And this is majorly driven by 3 product actions. Again, product is at the core of our new strategy that we are implementing. So the first is in A segment. So in A segment, we launched in production in end of November, Fiat 500 hybrids. This is first a big volume opportunity mainly in Italy. Second, profit per unit accretive since for sure, the hybrid version of Fiat 500 will generate to us a better profit per unit than the only BEV version. The second product offensive that we have in Europe is around B segment, where we see a big volume opportunity in ramping up quicker the 4 products out of a smart car platform. Again, we improved our production by 57,000 units year-over-year. This is because we have a very strong order book that so far, it's 120,000 units orders collected in those 4 important nameplates. This is, for sure, a big volume opportunity that we have in front of us. The third product action is about the launch of Jeep Compass out of Melfi plant in Italy. Jeep Compass will be our strong player into the C SUV segment in Europe which is a big volume opportunity for us, but also a profit opportunity for us. So for sure in Europe, we see a very nice future of volume growth but we also see some important profit improvement, driven by mix of models and mix of trims per each model. On Europe, I also want to comment a little bit, the regulatory framework that we see today. So what we see in Europe is a regulatory framework, [ we change it ] and changed it quickly. And we have been working very intensely with the ACEA organization [indiscernible] to promote our ideas of flexibilities that we want to introduce in this regulatory framework. And I've been very vocal in the press with stakeholders about the 4 major points of our agenda, 4 major flexibilities that we would like to introduce. So on the $13 billion investment in U.S., which I believe is the second part of your questions. Well, for sure, we will use that to leverage the industrial capacity that we have in North America everywhere, for sure in U.S., but also elsewhere where we are not announcing any planned shutdown. Finally, on the cash management, Joao, if you want to add to your point, please.
Joao Laranjo: Horst, on the working capital, we do expect the dynamics that you mentioned due to the increase of volumes in North America, as I mentioned previously. And obviously, any production disruption for now to the end of the year, would have a large working capital impact because of the negative working capital position that we have, right, as we usually collect the cash as we invoice the vehicles and have payment terms with suppliers.
Horst Schneider: And your supply is safe until then? Volkswagen said the supply is safe until end of next week. Is it the same for you that visibility is just poor for you as well?
Antonio Filosa: So we are monitoring day-by-day on daily basis the chip situation from Nexperia. We have a cross-functional war room in the building where I'm sitting that has this as primary job. And every day, we are pushing actions and projects to extend our period. So this is a management -- day-by-day management of what is the industry-wide global issue.
Operator: The next question comes from Emmanuel Rosner from Wolfe Research.
Emmanuel Rosner: The first one is just a point of clarification. These charges that you're taking in the second half, both for, I guess, turnaround actions but also for warranty. Can you just confirm again if there's any sort of cash impact that you should be thinking about associated with it and whether that would be included in the free cash flow reiterated guidance? And then just maybe a little bit longer term, with these changes in U.S. regulations and in particular, a significant easing in the emissions regulations, what kind of opportunity does that provide for you? What kind of upside does that unlock 1 of your the 3 competitors on the record saying that this is a multibillion dollar opportunity. How would you plan to take advantage of it?
Antonio Filosa: Okay. Very good. And thank you, Emmanuel, for your 2 questions. I will start answering, and then I will leave the stage to Joao. So obviously, the new regulation that in our point of view are very pragmatic and are giving back the U.S. customers, their freedom of choice. We welcome them very well. We believe those represent to us a very good news for the short, mid and long-term, and we intend to explore all the value that we can extract out of those through mix. So in our product offer that we are implementing since January, freedom of choice is the mantra of our strategy. We are still a lot developing beautiful BEV vehicles for the customer that will prefer a BEV. That's why we are launching the Jeep Recon very soon in half 1, 2026. But also, we are enlarging our lineup with ICE introduction, hybrids introduction. This is the portion of the industry that is growing fast. The fastest one in the U.S. and our first car will be the Jeep Cherokee full hybrid and range standard introduction. This is very pioneeristic. We will be the first in the industry to launch in U.S., a range extended powertrain or a pickup truck, but also for a large SUV. While we keep our leadership as Stellantis in the PHEV. So really freedom of choice is at the basis of the new strategy that we are implementing since January this year. Again, in answer to the past decision, strategic decision that we believe was important to correct, right? And this change of strategy is triggering the charges that Joao will detail a little bit.
Joao Laranjo: Thank you, Antonio, and hi Emmanuel. So the reviews -- the strategic review and the product plan reviews that we are undertaking would lead possibly to project cancellations as we have already communicated the light-duty BEV here in the U.S. And the type of adjustments that we should expect on the project cancellations would be a write-off of CapEx and R&D capitalized spend and also other program cancellations costs. And those other program cancellation costs, they could have a cash impact, which we would expect to have limited cash impact in '25 and more into the future.
Operator: Ladies and gentlemen, this was the last question. With this, I am handing over back to Antonio Filosa, Stellantis CEO, for his closing remarks.
Antonio Filosa: Well, thank you, and thank you, everyone, for your time and focus on the Stellantis story. It was a privilege to update you on the company's commercial progress and its return to top line growth. Talk about why the investment in the U.S. and the strategic updates we are making are so important and reiterate our guidance, bringing continued sequential improvement quarter-by-quarter. I look forward to updating you on our progress in the coming months and quarters. Thank you everyone.