Stellantis N.V. Q2 FY2025 Earnings Call

Hello, and welcome to Stellantis Half Year 2025 Results. And I hand over to your host today, Mr. Ed Ditmire, Head of Investor Relations, to begin today's conference. Thank you.

Thank you, George. Hello, everyone, and thank you for joining us today as we review Stellantis' First Half 2025 Results. 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 Doug Ostermann, Chief Financial Officer. After their prepared remarks, Antonio and Doug 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 the call are subject to the risks and uncertainties mentioned in the safe harbor statement included in 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.

Thank you. Good afternoon and good morning to everyone, and thank you all for joining us today. Before we dive into the presentation, I just want to say that it's a great privilege for me to talk to you today for the first time as Stellantis CEO. I want to thank you for your interest in our company and the time and effort you put into understanding our performance, our perspectives and our plans. Just a few words about me before I start. I have spent over 25 years working at this company. I have learned a lot about what drives performance and what gets in the way of performance as well as the enduring value of our brands and the need to constantly ensure that they remain relevant. Most importantly, I have learned about the importance of our people and our culture. I believe in empowering our teams, encouraging them to be thoughtful, open and decisive. I don't like blame. I like responsibility and accountability. And I'd like to be clear with our teams about the challenges we face and the opportunities we can unlock by acting with courage, with energy and yes, with joy. These are simple observations, I know, but they are not simplistic. They will be at the heart of the way we will work together. If we have lost some of these in recent times, we are here to put that right, rolling up our sleeves, running towards the difficult decisions and moving ahead. So let's begin with a summary overview of H1 and the outlook for H2. 2025 has been and will be a tough year, and these H1 results make that very clear. At the same time, we are making progress on our product wave and beginning to see early but encouraging improvement. Our new leadership team is in place and is committed to taking decisive actions. Our key commercial KPIs are much stronger now than they were 6 or 12 months ago. And the second half has a range of new products that will catalyze growth. We are establishing our financial guidance. What we want to achieve for the rest of the year is a gradual sequential acceleration. We do that by launching new products, improving our execution and by taking all the tough decisions needed as we started doing in H1. Now I will ask Doug to walk us through the H1 financial review.

Thanks, Antonio. So let's walk through the numbers. Starting with the focused financial figures on Page 7, which fully reflect what a tough period it was. Consolidated shipments of 2.7 million units fell 7% with declines in North America and in large Europe, slightly mitigated by growth in South America and Middle East and Africa. Net revenue of EUR 74 billion saw a larger 13% decline as adverse regional mix and lower pricing added to the change in volumes. AOI margins were compressed as the early stage of our recovery actions was negatively impacted by external factors, like tariffs and foreign exchange headwinds. Our adjusted diluted earnings per share generally track our AOI development, and our industrial free cash flow was an outflow of EUR 3 billion in the first half. While nowhere near our potential, each of these 5 figures did, in fact, improve in H1 2025 compared to the second half of 2024 as we benefited from new products, improved inventory discipline and more stable production schedules compared to the prior 6 months. Now let's look at the factors that drove the net revenue decline. The 13% decline year-over-year was the combination of volume, mix, pricing and Forex, all presenting headwinds for the period, but some of these factors are evolving in positive ways. First, on volumes. Consolidated shipments were down 7%, as just mentioned. While materially negative, the first half year-over-year decline did represent a substantial improvement from the H2 2024 figure of minus 14%, and there's encouraging progression within this first half as the second quarter of 2025 year-over-year decline reduced further to 6%. Next, on pricing, which was down 2% in the first half of 2025. That negative 2% figure reflects first, a minus 3% in the first quarter of 2025 and then a smaller headwind of negative 1% in the second quarter. Most of this improvement comes from North America. Let's look at the AOI bridge now from the prior year. This is a particularly challenging walk considering the H1 2024 comparison period wherein the company ran at a 10% margin. AOI came in this year in the first half at EUR 540 million with a 70 basis point margin, reflecting the aforementioned volume, mix, pricing and FX headwinds. These combined with a EUR 1.6 billion increase in industrial costs. Industrial costs were impacted by higher warranty expense and lower volumes that reduced the spread of our fixed overhead as well as a net EUR 330 million of tariff expense. I think it's important to emphasize here that the prior year period that we're comparing to from H1 of 2024 was the last with pricing of the supply-constrained era and the last before a very significant reset in the second half of 2024 to address what at the time were outsized inventories and declining market share. With that in mind, we're now going to take a look at the sequential improvement in AOI comparing the first half of 2025 to the second half of 2024. In particular, volumes improved sequentially as new product launches helped the European business and North America move past successful inventory reduction initiatives. Pricing improved 1% sequentially with North America being the big driver. And it's encouraging to see industrial costs moving in the right direction as our production schedules became more steady in both North America and in large Europe in the first half of this year. Now let's turn to industrial free cash flow. Obviously, a very difficult result for the first half of 2025 with EUR 3 billion in cash outflows. The main reason for this was AOI generation that was simply too low. Even adding back the D&A, this figure was too low to cover our CapEx and R&D spending in the period, but we did manage to lower investment expenditures versus the prior year. There was also a headwind of EUR 1.3 billion of working capital increase due in part to production disruptions related to our initial tariff response. Looking at inventories now, we can see that our corrective actions in 2024 have gotten us back to healthy levels. And as you can see, we're now maintaining that discipline through 2025. Globally, the trend for the following months should be flattish to perhaps a slight increase, including impacts of ramping the recently introduced B and C7 segment vehicles in Europe, but also the planned North American launches such as the new Cherokee. Now let's review a few of the specifics on each of our regional segments. North America and Europe remain in their turnaround phases, but the other regions are delivering very consistent results in the meantime. In North America, performance was impacted by tariffs as well as from lower fleet performance and improved inventory discipline. In Europe, results reflect 13% lower industry volumes in LCVs, which is a stronghold for us in Europe, shrinking but still meaningful product transition gaps and a roughly EUR 500 million provision for a campaign on a 1.5-liter diesel engine. Our results in South America reflect our continued market share leadership, coupled with industry growth in 2 of the key markets, Brazil and Argentina. And in Middle East and Africa, a couple of notable items. First, we experienced FX headwinds to AOI due to a decline in the Turkish lira that constituted around EUR 600 million. But second and importantly, we continue to have a lot of momentum on the business side, including continued share leadership in Turkey and ramping local production in Algeria. Moving to our summary financial figures table. Let's focus on the balance sheet for a minute. Industrial liquidity finished the first half at EUR 47 billion, consisting of a positive EUR 31 billion of cash and liquid securities. That EUR 31 billion was bolstered by first half bond issuances of EUR 3.6 billion. In addition, the liquidity figure includes EUR 16 billion in undrawn committed credit facilities. This puts our industrial liquidity to trailing 12-month revenues at 32%. That's a little above our targeted range of 25% to 30% and certainly in a very strong position. Now let's just talk a little bit about tariffs. Previously, we have provided a range of EUR 1 billion to EUR 1.5 billion as the expected net tariff expense for this year. With the increased production levels expected in the second half of the year, we believe that we will be at the upper end of that range or approximately EUR 1.5 billion. The tariff dynamic, as you know, continues to evolve. We're, of course, engaged in discussions with various policymakers, and we'll continue to provide updates as things evolve over time. As Antonio mentioned in his opening remarks, we are reestablishing financial guidance. With H1 in the books, we want to provide a clear view of how we see the rest of the year developing. And our second half 2025 guidance tells a story of continued improvement. Net revenues are expected to increase half-over-half and AOI margin is expected to be in the low single digits. Lastly, we expect improvements in industrial free cash flow as compared to the first half of 2025. We're not, of course, anywhere near or close to the full potential of this company, but we're making the tough decisions and executing on fundamental issues to build on our first half progress in the second half and beyond. So I'll now hand it back to you, Antonio.

Thank you, Doug. Let's start with the renewed leadership team at Stellantis and now we are operating. The Stellantis leadership team I have appointed on my very first day as CEO is made of proven performers, several joining the top team for the first time and others taking on expanded responsibilities. These are leaders that know us, know our brands, know our people and teams, understand our customer and will bring the energy that this moment demands. As a team, we will also take together the tough decisions to accelerate the business. Let me go through some of the actions we have taken already in H1 in detail to give a clear picture of how we are operating moving forward. We made the decision to end our fuel cell initiatives in Europe. Why? Because it was clear that in the absence of any reasonable prospect to develop a market for these products, there is no path to profitability. We have also stopped product initiatives that we understood were poorly suited to customer needs. At the same time, we are already taking actions to develop and launch products that we know represent a clear opportunity for us. A small but good example of this is the Ram 1500 Express trim level, very affordable and very appealing to the customer. It will substitute the Ram DS Classic that we have discontinued last year. It will help for sure regain share in the entry-level light-duty truck segment. I said H1 was tough, but I also said we made meaningful progress. Let me give some details on that. We were able to decrease total inventory by 16% in Europe and North America combined, that is over the last year. Maintaining discipline on inventories as we have shown from December '24 to June '25 is key to prepare the ground for the great new product launches that are coming very soon. On the combined order books for both regions, North America and Europe, we increased 14% in the last year and 34% in only the last 6 months, a very good dynamic with our dealers and with our customers. And then in our other regions, in particular, South America, Middle East and Africa, we are delivering very well, showing a combined 6% improvement in AOI from H2 '24 to H1 '25. At the beginning of the year, we set 3 priorities: growth, execution and profitability. Let's see how we are doing. First, growth, where we have an exciting lineup of new vehicles and new powertrains recently launched or on their way. Let's start with our new products. We have 10 new products for this year, along with several important refreshes or relevant nameplates. In H1, we launched already 4 of the new products, including 3 very competitive B segment products in Europe, the Citroën C3 Aircross, the Opel Frontera and the Fiat Grande Panda. These have been very well received in terms of reviews and in terms of customer orders. And we have much more for the rest of the year. First, 3 all-new STLA Medium products in Europe. Later in the year, we will welcome back some very iconic nameplates with a variety of ICE, HEV and MHEV powertrains, correcting decisions that removed those nameplates from our lineup for significant periods. Let me talk more about the 3 STLA Medium products for Europe. These vehicles are exciting midsized cars, each targeting a distinctive customer segment. Their launches also strengthen our platform consolidation strategy since they are all on the STLA Medium platform, which they share already with Peugeot 3008, Peugeot 5008 and Opel Grandland. As you know, historically, we have been strong in Europe on A, B and light commercial vehicle segments, but not as strong in midsize. So here is a good example of Stellantis moving to introduce cutting-edge products that will boost our market coverage and will accelerate sales. Moving to North America. We will return with some truly iconic vehicles that have been absent for far too long. This is extremely exciting to us. Let me talk first about the all-new Jeep Cherokee. We will begin production in H2 after more than 2 years of absence. The all-new Jeep Cherokee will mark our return into the midsized SUV segment, the largest segment in the U.S. industry. And this will happen with a substantially upgraded product with our first-ever HEV powertrain and, of course, a full dose of distinctive Jeep design and all-terrain capability. Moving to Dodge. We will begin production in late 2025. That will be of the exciting ICE Dodge Charger SIXPACK in both 2- and 4-door configurations after nearly 2 years of absence. This will be critical to reinvigorating our strong connection with the incredible community of Dodge enthusiasts in the United States. And much more is coming. To better illustrate what I mean by reconnecting with our customer base and our community, let me share with you this beautiful campaign. Enjoy. Beautiful, isn't it? Welcome back, Hemi. This marketing campaign also tells us a different story, a story about our organization's ability to take quick, smart, impactful corrective actions. As you may know, up to 40% of full-size truck buyers will not look at a truck brand unless this brand has a V8 offer. So this one was not a difficult decision. Actually, it was a very obvious one. By acting decisively and quickly, we are reactivating many buyers who have been eager to have Hemi back. What is remarkable here is the speed with which the team has been able to move. In less than 10 months from getting the green light, they will have the Hemi back in H2 2025. And the response to our announcement was very, very large and immediate, with more than 10,000 orders placed in the very first 24 hours. Now let's move to industrial execution. First, let's talk about where things are in North America. Here, we are at a relatively early stage of commercial recovery as most of the new models will come later in the year, but we have set the stage for our next actions. In particular, as I said earlier, the inventory and ordering dynamics have completely changed in a positive way from the prior year. We now have leaner inventories and a healthier order book with a 90% year-over-year improvement. Ram is showing particularly encouraging early signs, with retail sales up 25% in H1, including the benefits of a successful quarter 1 refresh of the light-duty and heavy-duty models. But let's be clear, we still have tons of work to do. In particular, we are focused on bringing products back to segments, where we have been absent on improving industrial execution, starting with product quality and reinvigorating fleet channels performance. Now let's move to Enlarged Europe, the other key region for our commercial recovery. Here, we are beginning to benefit in terms of market share from a wave of recently launched products. H1 '25 market share at 17% is up 1.3 percentage points from H2 2024. And I am also very pleased with our progress ramping BEVs and hybrid vehicle sales. We took the second spot in European BEV volumes. And for the very first time, we are now #1 in European hybrids. As we move forward, several things are priorities for Europe. First, we have to improve the customer experience through elevated product quality as in North America. Second, we have to improve our industrial execution. For example, we need to be quicker in ramping the very well-received new products such as the new Fiat Grande Panda. And then exactly as in North America, we need to increase profitability. So let's talk about profitability. Here, you may appreciate 6 sections, among many others, that we have taken or are taking, and I would like to highlight maybe a few of them. We recently announced the return of the SRT division for the North American brands to create the most distinctive high-performance products our fans are most passionate about, and this will be accretive to the AOI. We are also in the process of launching model year '26 products in North America with evolved much-improved trim lineups, in each case, expected to be margin accretive. Finally, in Europe, we will benefit from the full ramp-up of our Smart Car products. That means higher volumes and higher profits. So before opening to your questions, I will just recap the key points I would like you to take away from this presentation. First, H1 was incredibly tough and nowhere near where we want and we need to be. But the sequential improvement on H2 2024 is indeed encouraging. It includes the impact of tough decisions, decisions that will continue in the second half of this year. Second, we are maintaining discipline on inventories. We have healthier order books and the product launch cadence is in progress. In Europe, ramping production of new Smart Car platform models will be a big lever. And in the U.S., we will begin welcoming back iconic products and powertrains such as the Jeep Cherokee, the Dodge Charger ICE and the legendary Hemi V8 engine. Third, we expect gradual and sequential improvement in the second half. We have established H2 guidance that frames this clearly, and we are intent on delivering against it. One final note. We are also in the process of updating our long-term strategic plan, which we will have the pleasure to present to you at the Capital Markets Day in early 2026. With that, thank you for your attention, and let's go to the Q&A.

Our very first question today is coming from Jose Asumendi from JPMorgan.

Jose Asumendi, from JPMorgan. Thank you, Antonio, for the comments and Doug as well. Just one question, please. I would like to focus a bit more on the U.S. market. And I think you've provided, I think, compelling arguments with regards to how to get the company back to growth in the second half of the year. Can you talk a little bit more about the levers to improve the profitability, excluding growth levers, what are the actions you plan to take when it comes to maybe taking down capacity, any restructuring elements, actions you may take also in the U.S. Any actions excluding growth?

Very well, and thank you for your question, Jose. So you said, priority #1 for Stellantis growth of business will be growth in North America, which is a key market for us. And what are the key actions? Number one, obviously, it's volumes as well, but we are launching new products that will be all accretive in AOI margins. For instance, the V8 engine on versions such as the Ram 1500 TRX will deliver to us additional volumes, as you said, but you want to exclude those, but also accretive margin per unit. Second, the recently signed by President Trump Big Beautiful Bill of 4th of July gives us more flexibility in choosing better margin optimized mix in between ICE version and electrified version of the models that we sell. And this will mean to us a lot of additional profit and also volumes that are much closer to the end customer demand. Third, we are launching now in U.S. model year '26 products, and we are starting from a much healthier inventory situation. That means that we might and we will enjoy net price opportunities by doing that. Finally, we are engaging our technical teams in several programs and projects of total production cost reduction. Those are technical changes in our current life products, but also in the ones that are about to launch to maintain the value proposition and decrease technical costs. So those are the 4 actions that we are, among others, very strong in pursuing, and this is my answer. Thank you very much.

We will now be moving to Patrick Hummel from UBS.

Antonio, my first question is about the absence of discussion on cash flow, balance sheet strength, and your strategic priorities. I understand that improved AOI also boosts cash generation, but it appears there is a significant possibility of continued cash burn in the second half. It's reasonable to observe that among the Detroit 3, Stellantis' balance sheet is currently solid. You experienced a substantial cash burn of over EUR 9 billion at the group level in the first half. I’d like to know what your plans are regarding balance sheet priorities. Is it feasible to continue growing the Finco, which seems to require substantial cash? How should we consider cash returns to shareholders in the short and medium term given the somewhat pressured balance sheet situation?

Thank you very much. And I will take the first part of the answer, and then I will leave to Doug the rest. So as we said, the first business priority is to grow, right? And that means volume through the expansion of our lineup with the addition of new products that are much closer to customer demands and that also healthier in terms of margin per unit. By growing volumes and by growing profit, we will automatically grow the top line of cash generation, which is AOI. Then on the rest, please, Doug, if you want to add something.

Yes. Just to address a couple of different items that you had in there. One, of course, we're encouraged by the fact that the cash burn rate is reducing, right? So we reduced it in about half from what we saw in the second half last year to the first half this year. We expect a significant decrease again in the second half of this year as we chart our path towards cash flow positive operations. I think that's a big focus for us in the near future. That being said, we will continue to invest in the business and invest in the product plan. The way to achieve the positive cash flow turnaround is really through a couple of different things. One, of course, increasing the AOI generation in the company and also stabilizing working capital. So if you look at the working capital trend as well, you see more stability in the working capital piece of our cash flows over time. And so I think we're making good progress on this front. In terms of your question about the Finco, of course, we're very excited about the Finco, particularly the growing piece that we have that's growing so rapidly in the United States and its ability to help us and our customers get into our vehicles, the potential to use it as a loyalty tool over time and, of course, help us connect more closely with our customers and also, of course, finance our dealers. When we talk about capital, though, we also have to recognize that we have inflows from that business, particularly in Europe, where we receive dividends. We do, of course, have outflows as we build the balance sheet on the U.S. Finco. I think the net of those will be less than EUR 0.5 billion of outflow. So this year, while it will be an outflow, it's not a huge drag on the industrial free cash flow at this point. But I think that's a great business that we continue to see a lot of potential in. So hopefully, that answers the different pieces of your question.

It does. And Antonio, if you allow me a follow-up. In terms of your brand portfolio, would the CMD be the event when we get your latest thoughts and your strategy regarding your brand portfolio, which probably many people would expect to see some streamlining?

Very well. Thank you again for your second question. So we all realize and recognize within Stellantis that our large portfolio of very iconic brands is one strength that we have against our competitors. For instance, the new Chinese entrants. And we want to work it better. We want to be more effective and efficient in our brand portfolio management. That's why, for instance, you may have observed us recruiting a lot of talents to take care of our brands from the market. So you see, for instance, on Citroën, the new Head of Citroën is Xavier; on Peugeot, the new Head of Peugeot, Alain Favey; then you see Tim Kuniskis as Head of all the North American brands. You see Gilles Vidal recently recruited to take care of design for the European brands at the European Design Center, plus Davide Mele, who is in my top executive team that will help us in better managing our product portfolio, but also our brand portfolio. Yes, we are working intensively on that. And all the answers will be provided in the Capital Market Day of quarter 1, '26. Thank you.

We'll now move to Michael Foundoukidis of ODDO.

Michael, from ODDO BHF. So one question on Europe. You mentioned in your presentation some price cuts on your side as well as a strong pricing pressure overall. Is it something that you think continues or deteriorates? And how would you position Stellantis in this environment, meaning that do you see yourself as a follower or maybe more an active player given your previous price position, which was too high?

Well, no, thank you for your question. So we all know that Europe is a large but complex market for all the automakers, right? But we understand with Stellantis that we have turned the corner. For instance, talking of market share now before pricing. You see that the introduction of the new products that have been launched recently and are still in ramp-up, they already are growing the market share significantly from H2 2024 to H1 2025. We are now at 17% market share. That is 1.6 percentage points better than H2 2025. So market share is coming, volume is coming. Second, as profit action, but also volume action, we are now in the phase in the ramp-up of the all new Smart Car products. They have a very large bank of orders, and we are ramping up the 2 plants that are producing one is Slovakia, the Citroën C3 and the Opel Frontera, the other one in Serbia, the Fiat Grande Panda. So what we expect for Europe is an H2 better than H1 in terms of volumes, market share, but also profit generation. On the industry itself, we are observing some deterioration, especially in spaces that are very important to us, such as light commercial vehicles. And on that, we understand that one key point is also regulation on CO2 emissions. For that, we are in constant and productive dialogue with the institution. And we believe that important decisions will be taken also to unlock the full potential of the light commercial vehicle industry for Europe. Thank you.

Next question will be coming from Mr. Stuart Pearson calling from BNP Paribas.

So I guess for Antonio, to start with, I mean, Stellantis has obviously gone from being the benchmark for profitability in both Europe and North America not so long ago to now pretty much loss-making in both, and peers are earning reasonable returns. So I mean, you've had a front row seat on all of this. I mean what's your diagnosis of what's gone wrong? And what kind of response should we expect from you? I know we've got to wait for the CMD. But I mean, when we look at what you're saying today, it looks like more of the same. That might be unfair, but more incremental actions. But I wonder, are you considering anything more radical that you think might be required to get the company back to benchmark levels? And maybe just linked to that, possibly for Doug, just on the restructuring charges and exceptional items. We've had EUR 3 billion on average now over the last 5 years, another EUR 3 billion in H1 this year. I mean, what can you say about H2 as things stand today? Do we expect anything more there? And then when will those continued charges perhaps finally moderate? And then maybe to finish the question, Doug, perhaps now that financial services is becoming such a bigger part of the business, we could get some separate disclosure between industrial and the Finco. And I'm sure there'll be lots to look at and analyze there.

Well, thank you for your question. I will take the first part, and then I will hand to Doug for the second part. So the first part, the diagnosis, both in Europe and North America. Well, diagnosis itself is large and complex. But for sure, one important root cause of our market share deterioration, both in North America, especially, but also in Europe, is the fact that in the past, we decided to phase out many important, relevant, and successful nameplates. For instance, in North America, U.S. specifically, we phased out 7 successful nameplates: Jeep Cherokee, Jeep Renegade, Chrysler 300, Ram DS Classic, Ram ProMaster CD, Dodge Charger, the muscle car of the past, Dodge Challenger, same family. Those 7 nameplates were granting to us 300,000 units per year sold and several billions of gross commercial results per year. So now we are restoring that lineup. Jeep Cherokee is coming much improved than the previous one with 2 years of absence but coming strong. The powertrain that we have discontinued in the past, they are coming back, starting with the legendary Hemi V8 engine shared before. And this means volumes and this means margin per unit. And also in Europe, we are correcting some initial all-in BEV powertrain decisions into multi-energy offers to our customers because we believe that both in North America and Europe, to be multi-energy means to be closer to the real customer demand. Then on the rest of the question, I will leave Doug answering.

Thank you, Antonio. To address the other parts of your question regarding one-time charges, the EUR 3.3 billion in one-time charges we experienced in the first half largely stems from difficult decisions and strategic changes by the new management team. About EUR 2 billion of that total reflects these changes, including the significant decision to halt ongoing investments in fuel cell programs in Europe, as Antonio pointed out. There are additional strategic shifts contributing to this figure, such as some restructuring efforts mentioned in your question. Furthermore, there are factors related to changes in our environment, including the implications of the recent legislation in the United States that affected CAFE fines. Overall, while the majority of these charges relate to strategic adjustments, some are tied to environmental changes. We typically do not forecast one-time items for the future, but looking ahead, the new management team still has considerable work to do in refining our strategies and preparing for the announcements expected at the Capital Markets Day. This may lead to further strategic changes and one-time charges in the second half. Regarding Finco, there’s substantial information shared about the financial services aspect of the business compared to the industrial segment in the 6-K. You raised an important point about when this segment might grow large enough to warrant separation. We assess this every quarter, and there is plenty of information in the 6-K. I would be happy to have a discussion offline to go through some of those details with you.

Our next question will coming from Mr. Stephen Reitman of Bernstein.

Could you talk about your relationship with the U.S. dealers? Obviously, that was a significant issue leading up to the whole blow '24. Can you comment on kind of any metrics you have in terms of how the confidence and trust of the brand has been changing since management changes?

Very well. Thank you for your question. Well, since January, myself and my team committed to a much better dialogue with our dealer network, especially in the U.S., but not only. And good things are starting to come. For instance, the new versions of Ram that I mentioned in my presentation, the Ram 1500 Express is basically an idea that came out of our team that deals with the brand, talking to the dealers. We have decided to discontinue more than 1 year ago, Ram DS Classic that was attacking the entry level of Ram of light-duty segment in the U.S. And now this version that again came out from a constructive dialogue of the network with the brand team is now restoring our presence there, and we see good orders coming in. And when you ask what is a quantitative indicator of this restored confidence, I must say that the order inflow is one of those. So our order book, mainly driven by retail orders, thus our dealer network grew more than 90% year-over-year. And this is a clear demonstration that confidence, which is an enduring process to build day by day through relationship and also through good business, good mutual business, while it's coming back.

Next question will be from Mr. Philippe Houchois from Jefferies.

My question is regarding the guidance you provided on free cash flow for the second half of the year. While improvement is noted, it doesn't clarify whether the second half will offset what occurred in the first half. I also sensed a reluctance to provide guidance on working capital. Typically, an uptick in volume in the second half positively impacts working capital and cash inflow. Is this hesitation due to reluctance on your part, a lack of visibility, or is there a specific reason for not anticipating a significant inflow? I understand that cash inflow from working capital may differ in quality from earnings, but I would still expect to see a substantial inflow. Additionally, we are aware of the Express and the return of the Hemi for the Ram. When can we expect to see those numbers significantly? Will I be able to find a Ram V8 in U.S. dealerships soon, or will that take more time? What is the current status of restocking and the supply chain? Are we in production, and are we delivering to customers or just to dealers? Any insights on this would be appreciated.

Well, thank you for your question. I will take the first part, and then I will give the technical answer to Doug. So let's start. First of all, on industrial cash flow, but generally speaking, on the progression of results that we are committing to in our guidance. We need to understand and to remind ourselves that we closed H1 nearly breakeven, right, in AOI, for instance, and with the free cash flow, the outflow that you saw. And in H2, we will have the highest portion of impact of tariffs in the United States, which I believe in H2 only will be around EUR 1.2 billion. That means that through the additional volumes driven by the launches through the accretive profit per unit that those launches, but also the cost action will deliver to us, we need to offset those impacts, and we are committed to accelerate. So it's not reluctance, actually is considering that half 1 was in the numbers that you saw. And half 2, the way it has been expressed in the guidance represents a very relevant acceleration, which we intend and commit to do, but also to go forward in the next years. On the Ram launches that you mentioned, so on V8, for instance, after a green light, the team was unbelievably quick and fast in delivering the full development and the manufacturing adjustments in less than 10 months. So we will have very soon a start of production. Thus, you will see both the V8 versions, but also the Express version by quarter 4 mainly in the dealers of this year. Doug, the rest?

Yes. Regarding your question on cash flow and working capital, I agree with some of your points. It’s a challenging time to forecast the business, a sentiment I’m sure all of you as auto analysts can understand. There are significant external challenges. In the first half, we experienced an impact of about EUR 1 billion to our AOI just from fluctuations in foreign exchange, especially with the euro’s value changing against currencies like the Turkish lira, Brazilian real, and Argentinian peso. These factors are difficult to predict, along with tariffs. The impact of tariffs has changed considerably, and we are still receiving updates on tariff negotiations that could influence those figures significantly. Currently, we estimate the full tariff impact for the year to be EUR 1.5 billion, making it hard to be definitive about many of these numbers. As for working capital, with increased volumes in the second half, we would expect that to positively affect working capital. However, it's important to note that the payment terms in this business significantly impact production and working capital, particularly concerning production in the last 6 to 8 weeks of the period. When comparing the dynamics from midyear to year-end, we often encounter some downtime during the holidays, making it challenging to see considerable improvement between the end of the first half and the end of the second half. However, in general, with increased volumes, we should expect working capital to at least stabilize, if not improve slightly.

Our next question will be coming from Thomas Besson calling from Kepler Cheuvreux.

I'd like to come back to your guidance, please. Is it fair to say that you're trying to be conservative for the second half as you should be able to produce normally for the first time in a long time without downtime for tariffs or without having to substantially cut your inventories? Or is that a lot related to the USMCA uncertainty or the willingness not to have to one again? And to follow up on Philippe's question on free cash flow, is it fair to assume that H2 CapEx has a little reason to rise sequentially?

Okay. thank you for your question. And as I mentioned a little bit before in my previous answer, yes, we need to consider that H1 was basically breakeven for our business. And we are committed to drive the business into a gradual sequential improvement that needs to be evident quarter-by-quarter in all our business KPI, that means AOI, industrial free cash flow generation, volumes, shipments, etc. So this is our commitment. And considering that, as Doug said, around EUR 1.2 billion, EUR 1.3 billion of the overall EUR 1.5 billion of initially estimated tariffs, if things don't change, will be paid in the second half. This is a commitment that I would not call conservative, but we are very committed to do that as we are committed to transition in acceleration into the next year, keep going. Doug, if you want to take the technical part?

Yes. No, I think that's exactly right, Antonio. When we think through the dynamics first half versus second half, we think about where we can guide the business and where we see the business performing, I think we can step up production. I think we can make progress on volumes. I think we can make progress on pricing, particularly in the United States. I think a lot of the pre-tariff vehicles that were on dealer lots are running out. I think we'll see an industry dynamic that should be supportive of pricing. When we look at industrial, of course, our fixed costs will spread a bit better with the higher volumes. But there are significant headwinds as well, right? Because we only paid, as Antonio outlined, EUR 330 million of the expected EUR 1.5 billion impact in the first half. Part of that is just because of the timing of when the tariffs came in, right? But yes, we're looking at a step-up in that expense from EUR 330 million to more like EUR 1 billion plus in the second half. So that's a significant headwind for us. Now offsetting that, we also should be able to run a richer mix that probably more aligns much better with customer demand that we see in the United States with CAFE fines going to 0. That's going to be a positive. But there is certainly a lot of headwinds still to be handled in the second half. I think our guidance is reasonable and achievable, but certainly, there are challenges in meeting it.

Our next question will be coming from Itay Michaeli of TD Cowen.

Great. I was hoping we could dig in back to North America on fleet sales and maybe if you can quantify the impact in H1 and give us a bit more detail about some of the action plans you have to improve fleet sales, how we should think about timing and potential impact to both top line as well as bottom line?

Thank you for your question. I believe we can estimate that the overall impact of reduced fleet sales, which was a decision made for profit optimization, is around 0.5 points of market share in North America. We have recruited a strong leader, Michael Ferreira, to manage the team, and he has already taken steps to change our strategy in fleet sales. Fleet sales are divided into three subchannels: rent-a-car, commercial for small and midsized businesses, and governmental. We had been overly focused on rent-a-car due to high volumes and decent margins during the semiconductor shortage. With the new leadership and team, we are diversifying our approach across all three channels, with significant efforts in the governmental and commercial sectors, both of which offer higher margins than rent-a-car. We have already seen initial growth and some recovery of what we lost, and we anticipate further acceleration as we move into next year. Thank you again for your question.

We'll now be moving to Mike Tyndall of HSBC.

I would like to discuss tariffs and the situation in Mexico. What insights do you have? We've observed trade agreements globally, but there's been little communication regarding this matter. Additionally, how does this affect the economics of the new Cherokee, which I believe is set to be manufactured in Mexico? Does this vehicle comply with the new tariff regulations? If it doesn't, what measures can be taken to address that?

Thank you for your question. Regarding tariffs, it might be a lengthy explanation, but I will keep it concise. First, from the beginning, we have understood and supported the overall strategy of President Trump's administration to enhance job creation and U.S. production, both in automotive manufacturing and among suppliers, using tariffs as a tool. We aim to support this initiative. Additionally, we are engaged in constructive discussions with American institutions, as well as with policymakers in Mexico and Canada. We are currently in a phase where tariffs are being negotiated between the U.S. and various countries. We believe it is essential to request proper recognition of the significant American content in certain vehicles. To provide some context, the U.S. automotive industry sells about 16 million cars annually, with 8 million manufactured in U.S. plants, which naturally have a high U.S. content. Four million are produced in Mexican and Canadian plants, using numerous components from U.S. suppliers, thus also carrying substantial U.S. content. The remaining four million vehicles come from Europe and Asia, with almost no U.S. content. It is vital to recognize that vehicles made in the U.S. as well as in Mexico and Canada include considerable U.S. content in the tariff discussions. Furthermore, we appreciate the U.S. government's recent flexibility concerning tariffs with Mexico and Canada, including the expanded recognition of U.S. content and other tax offset credits. Regarding the Cherokee, you are correct that it is being developed and will initially be built in Mexico. We are focusing on reducing transformation and production costs through various technical studies and projects to improve the profitability of the platform, components, and overall vehicle. This initiative is crucial as it opens us up to the substantial midsized SUV market, which sells around 3.6 million units, equivalent to the entire German automotive industry. We are committed to managing costs effectively to offset the impact of tariffs. That concludes my response. Thank you.

Ladies and gentlemen, due to time constraints, that was our last question for today's conference. I'd like to hand the call over to Mr. Antonio Filosa to conclude this call.

Thank you. Thank you very much, George, for your help today. Thank you very much. And thank you, everybody, for your time and focus on the Stellantis story. I look forward to updating you on our progress in the coming months and in the Capital Market Day that we will held in quarter 1, 2026. Thank you. See you later. Bye-bye.

Thank you. Thank you very much. Ladies and gentlemen, that will conclude today's conference. Thank you for your attendance. You may now disconnect. Have a good day, and goodbye.