Joseph Veltri - Fiat Chrysler Automobiles NV Sergio Marchionne - Fiat Chrysler Automobiles NV Richard Keith Palmer - Fiat Chrysler Automobiles NV.

George Galliers - Evercore ISI Brian A. Johnson - Barclays Capital, Inc. Adam Michael Jonas - Morgan Stanley & Co. LLC Martino De Ambroggi - Equita SIM SpA John Murphy - Bank of America Merrill Lynch Patrick Hummel - UBS AG Thomas Besson - Kepler Cheuvreux SA Lello della Ragione - Intermonte Sim SpA José M. Asumendi - JPMorgan Securities Plc.

Good afternoon or good morning, ladies and gentlemen, and welcome to today's Fiat Chrysler Automobiles 2018 First Quarter Results Webcast and Conference Call. For your information, today's conference is being recorded. At this time, I would like to turn the conference over to Joe Veltri, Head of FCA Global Investor Relations. Mr.

Veltri, please go ahead, sir..

Thank you, Rowan, and welcome to everyone who's joining us today. You will find today's presentation material along with the earnings release under the Investors section of FCA's group website. Our call today will be hosted by our Chief Executive Officer, Sergio Marchionne and Richard Palmer, the group's Chief Financial Officer.

After their brief presentation, we'll be holding our customary question-and-answer session. Before we begin, I'd like to just point out that any forward-looking statement that might be made during today's call are subject to the risks and uncertainties that are noted in the Safe Harbor statement, which is included on page 2 of today's presentation.

And that the call will be governed by that language. With that, I'd like to turn the call over to Mr. Marchionne..

Thanks. Thanks very much, Joe. I'm going to keep my remarks relatively brief. I think the quarter, at least in the context of what we expect for 2018 was certainly in line with our own expectations.

We mentioned on a variety of occasions and more in particular, when we reported full year earnings that the real issue for us for 2018 was the execution of this industrial realignment that we've had, that we'd sort of decisioned and implemented in the United States.

And the launches that we have underway, especially the launch of the pickup trucks in the new plant up at Sterling Heights has been particularly challenging.

We have now devoted a number of resources from across our industrial, sort of resource team internationally to try and make sure that we deal with a relatively complex set of industrial challenges that we've got in launching this truck. We're probably running today at 60% of cycle, which is not where we need to be, and certainly it was not.

We expected to do better than that number when we got into production. We certainly allowed enough time in 2017 to get that installation up and ready to take on the challenge. It has proven to be more difficult than we expected.

I've asked Richard and I think he's done so in the press release and in the analyst deck to sort of give you an indication as to what we think that this functional cost associated with a less than perfect ramp up curve out of the U.S. has cost us. The number, give or take €2, maybe above €300 million.

I think, when you look at the actual number of resources that we've had to devote to this number is probably in excess of that. So if I make those adjustments, I think, the quarter has been in line. The good thing about all this is that these are not permanent, and the lack of efficiencies I think that we understand the issues.

I think we've put a number of remedial plans in place now to try and catch up with our expectations for the rest of the year and that gives us the confidence to be able to confirm 2018 targets in all their aspects including the extinguishment of debt as we'd originally forecast for the end of the year. I'm encouraged by what I see in Latin America.

We just concluded a set of meetings down both in Brazil and in Argentina. I think we've been able to preserve the economic value of our plant in Pernambuco in terms of the original expectation.

I think this is a very positive thing vis-à-vis the 2022 plan because it gives us certainly a runway that extends beyond the closure of that plan well into 2025. Overall, I think the indications are that the business is in good shape and we have not seen areas of concern.

We continue to work, I think, diligently at the conclusion of our work on the next five-year plan, which will be presented on June 1. I think I have nothing else really that I think should be mentioned of. I mean, obviously, we're pleased by the debt reduction. I think Richard was pleasantly surprised by the size of the reduction.

I instinctively believed that it was going to happen, simply because I think that we're in a phase now where the large portion of the investment profile that we had originally forecast in the last round of the plan is coming to an end and we're now embracing the next investment cycle, which I think will take some time to materialize.

So I'm encouraged by the size of the debt reduction. I think there are bets growing out there now as to whether I will or will not wear a tie on June 1. We're only, well, less than two months away from that famous day, so I think we'll hold it and see what happens on June 1. But on that basis, Richard, it's over to you..

Thank you very much. So, welcome everyone to the call. I'll now take you through the presentation deck starting on page 3. We started 2018 with a record quarter one set of results. Our adjusted EBIT was posted at €1.6 billion and our margin was up 50 basis points to 6.0%.

And adjusted net profit was up 55% to €1 billion and was actually up nearly 80% at constant exchange. We saw continued strong performance in NAFTA despite the launch costs I mentioned earlier, and a significant improvement in our LATAM margins and volumes, which augurs well for the rest of the year in Latin America.

Cash flows from operating activities were up and we reduced our net industrial debt down to €1.3 billion from €2.4 billion starting point. During the quarter, we repaid €1.3 billion of maturing debt out of cash. And on the balance sheet, still we had two ratings upgrades in the quarter with S&P raising us to BB+ and Moody's raising us to Ba2.

The initial phase of NAFTA capacity realignment plan as we have been talking about now for the last few quarters is coming to completion with the launch of the all-new Ram 1500 in Sterling Heights.

And during the quarter, as you know, the board authorized the implementation of a plan to eventually spin off Magneti Marelli in due time following approval from shareholders.

As mentioned, our 2018 guidance is confirmed with net revenues at €125 billion, adjusted EBIT at or above €8.7 billion, adjusted net profit at €5 billion, and net industrial cash of around €4 billion. Moving to page 4, we have some product news. As mentioned, we've launched the all-new Ram 1500 in the U.S.

and production is ramping up at Sterling Heights. This is the most technologically advanced pickup now in the market. It's been getting a lot of positive feedback, and now in Q2, we'll start to see how it's received by consumers.

We also announced in the quarter the fourth localized Jeep for China, the Grand Commander, which is a three-U (sic) three-row SUV exclusive for the Chinese market and production of that vehicle will commence in the second quarter at our Chinese joint venture plant in Changsha.

We also revealed some limited editions for Maserati and for Alfa as we continue to work on the brand equity and the awareness of these two brands. We've revealed a limited edition Levante Trofeo V8 at the New York Auto Show. It's exclusive for the U.S. and Canada.

And we revealed for the Stelvio and the Giulia NRING versions at the Geneva International Motor Show, which play on the excellent performance of those vehicles on that famous track. As we move to page 5, we have the financial summary. So combined shipments were up 5% driven by the Jeep brand, up 37% due to new Compass and new Wrangler.

This increase was partly offset by Ram, which was down 17% due to the light-duty transition in the U.S. and also due to some downtime in our heavy-duty plant as we get ready for the mid-cycle action that is planned for the end of the year.

Dodge was also down principally due to the limitation of capacity to produce Dodge Journeys, as our Toluca plant focused on volumes for the new Jeep Compass, which is produced in the same plant. So, overall, as I said, our combined shipments were up 5%, our consolidated shipments were up 7%.

That drove net revenues up 9% at constant exchange, but down 2% after FX translation impacts, principally the euro/U.S. dollar. Adjusted EBIT, as I mentioned, was above €1.6 billion, up 5%, but up 19% at constant exchange. Our adjusted net profit was €1.04 billion, a record first quarter.

Our financial charges were down again, about €120 million, due to the continued reduction in our gross average debt. And our adjusted tax rate for the quarter was down to 20% as we see the benefit of U.S. tax reform on our overall tax rate.

Net industrial debt, as I mentioned, was reduced to €1.3 billion and available liquidity at the end of the quarter was €19.4 billion. So still very strong notwithstanding that we repaid the €1.3 billion of capital markets debt at maturity. We also extended the maturity of our €6.25 billion revolving credit facility by one year to March 2023.

And finally, on the balance sheet, we still have a €600 million bond maturing in July and a term loan B in the U.S. maturing in Q4, and both of these we intend to pay down using cash, which will further reduce our leverage and financial charges going into the second half and into 2019. Moving to page 6.

We show the adjusted EBIT change year-over-year firstly by segment. So, overall, adjusted EBIT was up 5% as mentioned, notwithstanding the negative impact of translation of about €240 million due to the weakening of the U.S. dollar.

NAFTA was impacted by some launch costs as we mentioned around some delay, particularly on the Ram 1500, but still managed to show a slight margin improvement year-over-year. LATAM improved significantly offsetting some volume reduction in Maserati and Alfa Romeo launch costs in Asia Pacific.

If we look at the lower part of the chart by operational driver, volume mix and price positive, mainly regarded NAFTA and Latin America due to new product launches that we've been talking about for NAFTA and the ones we mentioned at the end of last year for Cronos and Argo in particular in Latin America.

The industrial costs increased due to the launch costs for the Wrangler and the Ram 1500, as well as the new Cherokee in NAFTA. Moving to page 7. If we look at the improvement in net industrial debt in the quarter, we had lower CapEx than prior year due to program timing.

In the first half of last year, we were spending on three significant programs that are now being launched in NAFTA. We expect CapEx to increase in the second half of the year compared to current run rate as we work on the next wave of product launches, particularly for Jeep.

But it's probably true to say that our total CapEx for the year will be below last year, last year's number was about €8.7 billion and our current estimate is to be around €8 billion for the year.

Cash taxes were up in the quarter, but they were offset by lower cash financial charges and we had some improvement in changes in provisions due to increased volumes in NAFTA, some dividends received and some supply recoveries. Moving to page 8, we review the NAFTA region performance.

The industry remained strong and FCA sales were flat year-over-year with U.S. retail share up 30 basis points, offset by lower U.S. fleet sales. Jeep sales were up 22% due to new Wrangler and new Compass. Ram was down 13% due to lower fleet sales as production was directed to retail as we transition some key products.

Chrysler and Dodge were down due to the discontinued Chrysler 200 and Dart in the prior period and less availability of Journey, as I mentioned earlier, Toluca focuses on Compass production. U.S. dealer inventories were slightly down in terms of days to 81 days from 83 days last year and down from year-end – end of 2017 where we were at 86 days.

Our shipments for the quarter were up 6% driven by the new products. And revenues were up 10% at constant exchange, but down fall due to negative FX translation. Adjusted EBIT margin was up to 7.4% from 7.3% despite the impact of the €300 million of launch costs mentioned earlier and some delays in the ramp up of the new products.

If you look at the walk across below, you can see those impacts with volume up nearly 40,000 units and also mix very strong due to large part of the volume increase being driven by Wrangler and Compass and lower Journey volumes offsetting that.

Industrial costs were offsetting some of that improvement in volume mix price due to the launch costs mentioned, the increased cost of the products that are being launched and some fixed cost items relating to those new products. We move on to page 9, the LATAM region.

So the positive market trend continued in Q1 with the market up 15% in Brazil and 19% in Argentina. Our group sales were up 12% to 127,000 units. Our market share was slightly down, in particular in Brazil due to the product transition to the new B hatch product, the Argo and the B sedan and the Cronos which are still being launched.

Importantly as regards profitability, the Jeep brand maintained leadership in the SUV segments and pickup volumes also improved. Our inventories were stable at 35 days, the same level as the prior period. Shipments were up 31% and revenues were up 35% at constant exchange of 13% reported due to translation impacts.

Our stronger margin performance is shown here with 3.9% margins compared to a 1.2% loss last year and that was driven by the 30,000 unit volume increase and positive mix price mainly from the Pernambuco, Jeep and pickup built vehicles. Moving to Asia Pacific, on page 10, the markets where I say sales were up.

Our combined sales in the region were flat at 62,000 units with Jeep up to 56,000 versus 51,000 last year. Our inventories were up to 91 days as we support the launch of the Alfa Romeo Giulia and Stelvio in China and also the Jeep Compass being built in India.

Consolidated shipments were up slightly by 3,000 units, driven by the India produced Compass in particular. Net revenues were up 3% at constant exchange, but down reported due to exchange.

And our adjusted margins were down to 1.6% due to higher investments in the Alfa Romeo brand launch, in particular the Stelvio, which has basically started to get delivered in Q4 of last year and we're now in the launch phase. Moving to EMEA on page 11. Sales were slightly down from 399,000 units to 390,000 this time.

Our passenger car share was down due to the Fiat brand in the A and B segments, but positive performance from Jeep, which was up 42% due to Compass and Alfa, which was up 15% due to Stelvio. The LCV share was also up to 11.3% with nearly all nameplates showing improvement. Inventories are flat at 62 days and down from 71 days at the end of the year.

Our shipments were up slightly due to the launching products I mentioned earlier. Revenues basically flat at €5.6 billion, and margins also flat at €3.2 billion with cost actions and FX benefit on imported vehicles offsetting some negative pricing and GBP, British pound unfavorability. Moving to page 12, where we talk about the Maserati brand.

Sales were down and shipments were also down about 20%. Revenues were down 15% at constant exchange due to some positive mix effects, but down 20% after exchange.

Our adjusted margins was slightly up at 11.4% with the impact of the volume decrease on EBIT being mitigated by positive price actions as we cover exchange impacts and cost improvements on the product as well as some SG&A actions. Components on page 13.

Reported results were basically flat, although EBIT was up 8% at constant exchange driven by improvements in Marelli and margins were up to 4.8% for the quarter. On page 14, we show our industry outlook, which is basically unchanged for the year.

LATAM in Q1 showed a positive trend with Brazil up 15% above the full year 10% we have built into our outlook. China was also strong in Q1. The U.S. was up 1%, also slightly better than our full year outlook, while EMEA was basically in line. The whole markets remain broadly positive to support our 2018 guidance.

And moving to the guidance on page 15, we are confirming guidance. Importantly in the first quarter, we have now started shipping all three of the key launches in the NAFTA region and we'll see the volumes ramp up now in Q2. We confirm that we are working towards the net cash position for the June 1 event.

And lastly, as you're all aware, we will be holding our Capital Markets Day in Balocco on June 1st. So thanks for your time and now I'll hand back to Joe and we'll take questions..

Thanks, Richard. Rowan, I think we are ready to start the Q&A, so please open the lines..

Ladies and gentlemen, today's question-and-answer session will be conducted electronically. We will now take our first question from George Galliers of Evercore ISI. Please go ahead..

Good afternoon. First question just relates to the North American earnings bridge and the €1.1 billion step up in industrial costs.

Could you just give us some insight into how much of that related to the launches of the new products and therefore likely dissipate in the second quarter and the rest of the year?.

Hello, George. The €1.1 billion is basically, about €300 million as we mentioned earlier relates to pure launch costs. So we expect those to come down significantly in Q2 and then to become basically versus zero in the second half of the year. And then the rest of the cost, some of it is related to the product cost obviously.

We shipped about 120,000 of the new vehicles between the Wrangler, the Cherokee and Ram 1500, and so that accounts for about a third of this number.

And then we also had higher D&A, higher fixed costs and R&D as well as some negative FX impacts in the quarter which we will see repeated in the second quarter, but then they'll dissipate in the second half of the year as the comparative in terms of exchange gets easier.

So, about a third of the cost really is launch costs that we obviously need to work to reduce significantly in Q2 and then to zero in the second half..

Okay, great. Thank you. And then just on commodities, I think, Q4 you spoke about around €850 million headwind for this year.

Can you just clarify how much of that you saw during Q1 and whether there's any update to that number?.

Yes. The number remains substantially the same in terms of the full-year forecast. And we had about €200 million in Q1, which is about a 1.2% impact..

Okay, thanks. And then just one final one quickly. Clearly, a decent step down in CapEx to Q1. I think, again, looking back to Q4 you suggested a run rate of about €8 billion to €8.5 billion for the full year.

Do you still stick to that guidance given the Q1 number, or could CapEx actually come in a bit lower than €8 billion?.

We're going to stick to the guidance we gave you. You understand that there's no capital that is being committed now, which is going to have any impact on 2018 numbers. These are all forward capital commitments. They're effectively pre-spending on the 2022 plan.

So it's not as if we're slowing the machine down, it's just that as part of this articulation of a view about what we're going to be doing between now and 2022.

We have re-dimensioned and there've been some changes even in our own thinking about where capital is going to get deployed, and we'll see hopefully sort of the complexity of the choices that we've had to deal with on June 1 when we take you through the process. But there's nothing nefarious about the slowdown in Q1.

I think it reflects a relevant pause in anticipation of a full deployment on the capital expenditure profile going out to 2022. The number is not going to materially change from what Richard gave you at Q4 last year..

Perfect. Thanks for the detail. Thank you..

We will now take our next question from Brian Johnson of Barclays. Please go ahead..

Thank you. I just have a couple of questions; first just continuing the NAFTA drilldown and second on China. Following up on the last question, I think the underlying premise was, with the additional product costs you had higher volume and mix.

Can we get comfortable that the new product launches actually expand margin because we have seen other players in Detroit launch great new products only later to learn....

The answer is, yes, Brian..

Okay. And the launch costs, I won't ask Mr. Marchionne if he's sleeping on the floor.

But do these dissipate, how quickly can these dissipate, is it things like premium freight, is it showing up in weekly production volumes and just how do we kind of track during 2Q where you're going to be on those?.

Yes. I think you're going to – it won't take – let me give you – to begin with, I'm not sleeping on the floor. You need to be Elon's age to do that, I'm too old for that crap. I've done it by the way historically. But I think I'm beyond it now. Hopefully my successor will learn how to sleep in a sleeping bag on the floor.

I think the best way to gauge progress here is to watch sort of the monthly sales data as the new truck goes out and those Wrangler numbers start populating the monthly reporting stuff. I can't give you a better gauge then that until we report again at the end of June. But I think it will be visible.

The thing you got to be careful with the Wrangler is that we're phasing out the old Wrangler in Q2 to make room for the pickup truck, which is going to get industrialized in 2019, at least there will be a market in 2019. We're making changes to the plant now to accommodate the vehicle. It should go into production.

The startup of production should be sometime at the end of 2018. We will not see full industrial production until 2019. The old Wrangler plant was siphoning at about 240,000 vehicles a year. That's going to tone down as the new plant comes back up. And we should be gaining net-net about 100,000 vehicles a year when you compare the old with the new.

That will not happen at cycle until the end of Q2..

Okay..

So you need to watch monthly sales reporting numbers..

So the launch costs, I didn't catch that, are they in the Wrangler plant or are they in the Ram plant?.

The main costs are sitting in the Ram plant, there is (00:30:47)..

Okay. That's what I thought. And the next question on China and it's probably prelude to June which is, it's no secret you're not going to be at 500,000 Jeeps in China. We saw Cherokee, Renegade sales slip.

What directionally are you going to be telling us about changing the China strategy?.

I think you need to wait till June 1. It's a complex structure especially in view of what's happening. Now with the changes on regulations, I know some of these are forward data of the 2022 changes on JV position. I think fundamentally we're not changing our strategy in terms of brand presence, it is still going to be Jeep.

But I think you need to wait till June 1 to see how that Jeep story gets deployed in Asia-Pacific and in particularly in China..

Okay. Thanks..

We will now take our next question from Adam Jonas of Morgan Stanley. Please go ahead..

Thanks. I got just two questions. The first is kind of economic and policy related about our crumbling U.S. infrastructure. Sergio, would you support an increase in the U.S.

federal gasoline tax, which we haven't seen increase in about a quarter century if the proceeds went to rebuilding our roads and bridges and tunnels and basically our transport infrastructure?.

Yes..

Thank you. Next question. Sergio, when you joined Fiat, I remember saying this was like the worst auto job in the world, right. Fourteen years later, it might be the best auto job in the world.

Isn't this just a terrible – I mean I know you're not going to – we've got to move on at some point and I don't think anyone expects you're going to be there in 2022.

But isn't this a terrible time for you to leave the company? And no disrespect to the talented team around you, but when the chief architect of the company and its strategy launching a big plan June 1 and kind of doing a big transaction in Marelli leaves right out of the gate, it just doesn't make any sense Sergio.

I mean you can't leave this company so early, you just can't. And don't make me beg, but is there at least some possibility that the architect of the house can stick around just a bit longer into 2019 to see this thing through or at least get it off to a good start. That's it. Thanks, Sergio..

I think the likelihood of my staying on beyond what we've announced is between zero and nothing. Hopefully I'll convince you on June 1 that what we're going to present to the market is not only a very solid plan, I think we're leaving – and then Rich and I have thought about this at some length.

I think we both feel very comfortable that the 2018 numbers will be delivered. I think the starting point from my successor is going to be good. And I think there will be absolute clarity on the strategic direction of the group going forward. I don't think you'll need me to get that done. I think the house is knee deep in talent.

I think we should give them space. And as you well know, there's a time for everything. I think the time has come for this too, so we'll just move it on. But, trust me Adam we'll do the right thing..

Thanks..

Our next question comes from Martino De Ambroggi of Equita SIM. Please go ahead..

Yes. Thank you. Good afternoon, everybody. In any case following the last answer, I believe you will stay as a supervisor in extra role outside the company looking at this story very closely. That's my personal idea.

The question is on net working capital, the first one, because if I remember correctly in the bridge you presented last year, you had the contribution of €3 billion in net working capital in the three-year period 2017 and 2018.

This year, okay, you started as it typically happens for seasonal reasons with a negative change, but in order to match your guidance, what is the expectation you have for net working capital this year?.

So we expect net working capital to be positive for the full year at around €2 billion and obviously, that will start to come through as you see these launches stabilize and volumes increase through the year. There's also a piece of it which needs to be worked on regarding inventory in general.

We have, I think some opportunities as the launches come through also to reduce the level of inventory we have because of process as we launch these new cars. So, the answer is €2 billion..

Okay. Thank you.

And the second question is on Alfa Romeo, you mentioned the starting point for your successor will be good for the group, but what will be the starting point for Alfa Romeo standalone?.

I'm not sure I understand the question about standalone Alfa. I don't think I ever made a comment about the brand standing alone. I think the starting point for my successor in running the group is a much better starting point that I've seen since I've been here in the last 14, 15 years.

I just think that – and hopefully, we will be able to delineate the development that we expect out of Alfa and Maserati going forward as we get together on June 1, but I think the future for both of those premium brands is pretty clear.

I go back to what I say, the minute you start repeating yourself you should be careful, but I think those brands today represent a pretty visible assertion of the technical skill level that FCA has been able to develop in the last few years.

And I think we have spent – if I told you how many hours we have spent internally analyzing the architectural choices that we've had to make in connection with the launch of the new Grand Cherokee which is coming on in 2020.

And if we were to explain to you the interconnectedness of that architecture with the work that's gone on with Alfa in the last four years, you will be incredibly surprised as to how the depth of knowledge that we acquired since 2012 in developing Alfa has actually weaved itself into the development of the Grand Cherokee.

And I think we can't ignore those facts.

I think they keep on reinforcing the fact that all these things are ultimately connected and then it's up to us in managing these processes to make sure that we extract the highest level of, I hate using the term synergy, but we extract the highest level of utilization from these investments which have been pretty massive and large over time and they effectively benefit the whole portfolio of FCA.

That's something hopefully will become visible on June 1 as we point out the far reaching changes that are going on not just in terms of architectures, but also in terms of engines, power trains, and the intrusion of electrification into the portfolio. So we're less than two months away from that day, June 1 is pretty close.

So, just hang on to your seat..

Okay. I hang on. And the last question on capitalization of R&D costs for Richard. In Q1 were dramatically down because of lower CapEx.

What's the amount of net balance effect you see for the full year?.

I don't think our capitalization rate for the full year will change significantly compared to prior year, Martino..

So at the end you will have a much lower positive effect compared to the €1.1 billion of last year..

No, I said it would be similar to last year..

Okay. Similar, so there is a recovery. Thank you..

We will now take our next question from John Murphy of Bank of America Merrill Lynch. Please go ahead..

Good morning, good afternoon, guys.

Just a question on the Commander in China, and Sergio just to push you a little bit on this, I mean, is sort of the problem with Jeep in China that you didn't have a significant three-row vehicle and that's kind of where the market is and do you see that as potential solution of maybe just extending wheel bases and that will help the sales dramatically?.

You're partially right. I also think it's a question on brand positioning and I think it's something that needs work and I think we've embraced the objective now. I think we underestimated or we overestimated the value of the American DNA of Jeep onto the Chinese market.

And I think that we need to retune that DNA to make sure that it becomes absolutely relevant to the Chinese market. We started that process about six months ago. It needs to be completed.

And I think the K8, this new vehicle, the three-row, the Commander that's being launched which by the way the internal name is K8, but – which has nothing to do with the movie. But the K8 is the first embodiment of the realignment of the portfolio to the Chinese market. There'll be others. And I think that we started well.

I think the car was launched, I think today in Beijing, and I think it will be in market in Q2. I think that will be really the litmus test as to whether we've made a transition well into China or not will be visible as soon as we start seeing sales numbers for the Commander..

Okay. And then just a second question on the Magneti capitalization, when it spun.

Should we sort of just simplistically be assuming sort of 1 to 2 turns net leverage on the billion dollars of EBITDA?.

Yes, broadly speaking, yes..

Okay. And then just lastly....

Broadly speaking, yes..

Okay. And then just lastly, I mean, you guys had sort of first mover in this strategy of largely dumping your car portfolio and really pushing aggressively into crossovers and trucks. Everybody else is kind of piling into the car here and no pun intended, but piling into this strategy.

What you think this means for the crossover segment's profitability three years to five years down the line? Do you think this is going to emerge or sort of trend into what the pass car or midsized pass car segment was, as competition really ramps up and that you're going to be looking for another form factor in five years to kind of get ahead of the curve again?.

I think the pure economic theory would suggest that you would – if what you suggested is in fact going to happen, and I agree that it will, that you're going to see a downward pressure on margins. The difference at least to us is in the uniqueness of the Jeep brand because this brands do matter.

And we've seen this on the premium side where people have been able to extract above mass market margins from vehicles that may not even have exhibited the full premium nature that the brand stands for.

In the case of Jeep, it's such a unique set of attributes that I think five years from now we will continue to be able to preserve a special position for the brand, and I think a set of margin generations which are reflective of the uniqueness of the brand. The Ram side is an interesting story. That is a very limited.

That is not going to be open to everybody. It is very much of a North American play. We've seen foreign car makers try and come in and play in that area unsuccessfully because I don't think they have other heritage or the grounding that the American brands have.

I am a lot more hopeful that as we continue to develop the quality of these vehicles in terms of content and capabilities that the margin generation of Ram as I would expect the other American competitors have done so far that we will be able to maintain sort of the margin capability of the business.

And we have been incredibly disciplined in terms of expanding capacity. We have really sort of measured our pace to reflect market developments. We haven't plotted anything.

We have not over exercised ourselves in terms of creating a large buffer, which by the way has been historically the case on the car side where people have ended up overpopulating the segment, and effectively driving prices where they did not have the economics – the basic economics, including ourselves, in the case of the Chrysler 200 and the Dodge Dart.

So, five years from now, I think we will see a little change in margin generation subject to volume fluctuations, which I think are market dependent, but margins I think will be protected..

So one just quick follow-up on the Wrangler.

Can you guys give us a rough cut at the average ATP on the old truck versus the new truck because it sounds like there were some pretty good increases and that would be a pretty good example of the strength of the Jeep brand?.

I think we'll give you that information when we get together on June 1. I think that's going to be visible enough by then that we will have enough vehicles where we can give you some reliable data. But I think what you said is correct, and I think it's – because the new vehicles does have additional costs.

I mean, the vehicle is a lot better than the old one simply because of the fact that it is structurally a very different vehicle. And we've been able to maintain and preserve margins notwithstanding this transition to a higher price level..

Great. Thank you very much..

We will now take our next question from Patrick Hummel of UBS. Please go ahead..

Yes, thank you. Good afternoon. Two questions, please. My first one is regarding the Ram 1500 truck.

In light of the ramp up of the new truck that's a bit behind schedule, what does that mean for the production of the old truck? Can you just give us an update for how long you expect to run the old truck in parallel?.

Well, given the ramp up curve we'll certainly run for the rest of 2018. And I think we're watching this market very carefully. In this transition, we have preserved the ability to continue to sell the truck well into 2019 even though there may be some regulatory changes that are required to make the truck compliant.

One of the benefits of having the old truck in market is that it will allow us to play in a portion of the market which is price sensitive which we have historically not been able to do. So, I think we're going to play this by year as we go through. I think 2018 is relatively guaranteed.

I think the fact that we have the old truck running has made up for some of the inefficiencies in the launch of the new. But, eventually, the new truck needs to come on full stream. And when it does, we'll be able to buffer the other one to make sure that we don't effectively create unnecessary supply in the marketplace.

But we have never done this, but I think we're learning in the process. I think we need to really get a much better gauge for the depth of the demand of the old to find out whether we can stay in market well into 2019..

Okay. Thank you. My second question is on Maserati. You've managed to protect obviously the margin and pricing, but volume wise it looks like the Levante is already softening quite a bit.

Is there any reason why there was a particularly weak Q1 and we should see this recovering in the next few quarters or is that more structural question for the brand for June 1?.

Very poor execution. To be perfectly honest, I think we sucked at the launch of the Levante. I think it's potentially a phenomenally successful product, but I think it was poorly handled on launch. I think the launch of the Trofeo, which we did in New York about four or five weeks ago, was a reset for the U.S. market.

I think I expect a lot more out of the U.S. market for 2018 and 2019. It will be part of the plan that we pitch on June 1, so you'll be able to see it..

Okay. But irrespective of the more strategic plan then you would expect a recovery of Maserati sales in the coming quarters....

Yes..

...is that what are you saying? Okay. Thank you..

We will now take our next question from Thomas Besson of Kepler Cheuvreux. Please go ahead..

Thank you very much. I have two please. First, on LATAM, you lifted your profitability quite substantially and that's where you surprised positively versus expectations.

Can you say a few words about the potential for profitability in the region in 2018 and beyond given the additional capacity that have been added to the region, maybe you want to keep that for June 1, but I still give it a try..

I can give you an indication of numbers. I think it's going to get back to double-digits by 2022..

Okay. So you think we could return to a €1 billion plus of EBIT contribution from LATAM..

Yes..

Great. Second question, can you say a few words about the evolution of FCA's NAFTA margin versus GM and Ford? We are seeing a relative convergence already even if it's not the exact same accounting methodology.

Do you believe we could have in 2018, 2019 or maybe 2019, 2020 higher FCA margins than GM and Ford or do you think that the industry overall is focusing on more profitable products and you're all going to go towards 10%?.

I made the comment that it was my sincere hope that it would happen on my watch. If it doesn't happen on my watch in 2018, I don't have a single doubt that my successor will be able to whack the crap out of both of them. The machine is ready to do it, just let them engage, right, and we'll see..

Okay. Thank you very much..

We will now take our next question from Lello della Ragione of Intemonte. Please go ahead..

Hi. Thank you for taking my question. I have two left, actually just on topics of clarification. The guidance you gave and you restated points to a range of 8% to 8.5% and in the first quarter they were substantially below what we were expecting I think compared to last year.

I was wondering is that correct so to infer that in the remainder of the year the capital expenses are going to be at least in line with what you had spent last year in the last three quarters? And then if you can just clarify a bit what is the main driver of the change in provision in your net debt bridge, please? Thank you..

So in terms of the CapEx profile, we'll be at similar level in Q2 and Q3 as last year and then eventually higher in Q4 as we start spending on some of the programs we'll be discussing on June the 1st when we meet. In terms of the provisions (00:52:21) mentioned we had positive because the improvement in our volumes in the U.S.

that we had increases in warranty provisions and in incentive provisions, we receive some dividends from JV partners, from JV companies. We had a supplier recovery in the quarter and so those are the main items hitting the €300 million positive you see in the bridge..

Okay. Just if I may add, on the working capital, you said still on the EBIT bridge, should we expect the seasonality effects meaning that the third quarter are more on the negative side despite the launches or that trend should be somehow offset by your current top (00:53:09) launches..

I didn't really understand the question. I mean, like I said, we're going to have positive working capital for the year..

Yes. Yes. On total, yes, I mean, just so in looking at the seasonality quarter-by-quarter as the usual one should be affected significantly going forward or....

Yes. Normal seasonality, it'll be positive in Q2, negative [Technical Difficulty] (00:53:33) that's the seasonality. I don't see it being significantly different from that..

Okay. Thank you..

Thanks..

Our final question comes from José Asumendi of JPMorgan. Please go ahead..

Thanks very much. José, JPMorgan. I just want to come back to Europe where there is clearly some progress in terms of EBIT margins, but I think you're lagging peers. It looks to me like (00:54:00) dedicated to the region and you're selling in excess of 1.3 million units.

So what is the plan going forward with the next quarter? Is there anything you can do short-term to improve the product mix in the region or outsource production to other car manufacturers? Yes, any comments on that please. Thanks so much..

Yes. By the way, outsourcing production to other manufacturers is not a short-term measure. If you're running a pizza joint, you can do it quickly. I can't do it on the car side. But, look, I think we need to wait until June 1. By the way, you were very nice and generous when you said that we are underperforming our peers and the answer is, yes.

At least, not all of them, there's at least one guy who's doing a tremendous job and we're envious of what he's done at Peugeot Citroën.

I think we've carried out some pretty extensive analysis internally about where our shortcomings are and I think the objective in the plan that we're going to launch for 2022 is to effectively make up that difference and move this business into a different place. We've done, I think a decent job of moving in thus far.

I don't think we did enough to get it in the right place, hopefully it will become evident on June 1 and then the final step in the repositioning of EMEA is crucial. There were a couple of comments that were made by a couple of you guys in connection with the 2022 plan, I think in particular vis-à-vis EMEA.

And this I will tackle head-on when we get together on June 1. Of all the issues that we need to deal with strategically, as geographic areas, EMEA is the one that presents the highest level of complexity and certainly the biggest challenge because of the regulatory framework within which we're operating.

And I think anything that we do, vis-à-vis 2022, has to take that issue into account and that needs to be the single largest driver of the repositioning of the business.

Because ignoring that issue apart from the financial consequences of fines, penalties, noncompliance, et cetera, which are very onerous and which are, I mean it needs to be avoided like the Black Plague. There are some fundamental consequences associated with product and positioning of the brands that we need to address.

And a large portion of the time that we spend crafting the 2022 plan has been devoted to that issue.

And by the way, when I look at the economics, and I look at return on invested time, forget about invested capital, return on invested time and the effort that's required to make EMEA reasonably profitable, not excessively profitable, but reasonably profitable, one would have to wonder why one is doing it, because it is fraught with difficulty, it is an incredibly complex jigsaw puzzle.

And I think we've got a pretty good idea of what we want to get done. It will become much clearer when we get together on June 1 as to why the choices that we made are what they are, because I think the consequences of taking anything else would really be a huge disturbance in terms of the 2022 objective.

So, bear with us, we'll talk about this on June 1..

Looking forward. Thank you very much..

This will conclude the question-and-answer session. I would now like to turn the call back to Joe Veltri for any additional or closing remarks..

Thank you, Rowan. I think with that we will close today's call. I'd like to once again thank everyone for joining us and have a pleasant day..

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect..