Earnings Call: Q4 2013

Feb 13, 2014

Good morning, everyone. Sorry for the short delay, but welcome to Renault's fiscal year 2013 results presentation and conference call. This call is broadcast live and in replay versions on our website. The presentation file, press release, and activity pack for this call are all available on our website in the finance section. I would like to point out the disclaimer on page 2 of this pack regarding the information contained within this document, in particular about forward-looking statements, and invite all participants to read this. Today's meeting is scheduled to last about 90 minutes. We have two key speakers this morning. First up will be Dominique Thormann, our CFO, who will take you through the highlights of our financial results, and then Carlos Ghosn, Renault CEO, will present the second part of our strategic plan. The presentations will last around 40 minutes and will be followed by a Q&A session. Dominique, the floor is yours. Thank you, Thierry. Good morning, everyone. I have the pleasure to announce this morning that we have achieved our 2013 targets despite a tough environment in Europe. We grew in volumes. The Automotive division achieved positive automotive free cash flow and generated a positive operating profit. Before going through the financial results in detail, I would like to start with a quick summary of our commercial results on slide 5, which we released on January 21st. Our group sales increased 79,000 units or 3.1% to 2.63 million units. Overall this year, four out of five regions contributed positively to this performance. Only Asia-Pacific declined due to Iran. Excluding the special situation, all regions would have shown positive growth. In Europe, our sales were up 2.4% or 31,000 units, while sales on international markets increased 3.8% or 48,000 units. Once again, it is worth noting that without Iran, our international business would have increased 9.7%. Let's turn now to slide 6 with the group revenues. In total, group revenues reached EUR 40,932 million, an increase of 0.5% from last year. Please note that we had some minor adjustments for 2012 accounts as a result of accounting method changes. You will find a table with related numbers at the end of the pack. Revenues for the automotive business increased by 0.4% in the period to EUR 38,775 million versus EUR 38,612 million in 2012. Revenues from our captive sales financing company, RCI Banque, increased by 2.3% to EUR 2,156 million in the period. Let's look in detail at the automotive revenue variance analysis on slide 7. Starting on the left-hand side of the page, the first item is foreign exchange, which was a strong headwind, amounting to EUR 1,585 million, driven by the weakness of the Argentine peso, Brazilian real, the Iranian rial, and to a lesser extent, the Russian ruble. In total, adverse foreign exchange rates caused a negative impact of 4.1 points. The second item, volume, new vehicles sold, came in at a positive 1.6 points. Geographic mix accounts for 0.7 points, reflecting primarily the positive development of our business in France and more globally, a better balanced contribution from Europe and international operations than in previous years. This was particularly true in the second half, as this item was flat in the first half of 2013. The fourth item to note is the mix effect, which is almost neutral. It was the result of the success of our C-segment cars, but also the slowdown of our C-segment range, particularly before the introduction of the facelift version of the Mégane family. The fifth item is the price effect, which is positive by 1.3 points. This is lower than the 2-point improvement we showed you in the first half, and is due to the deconsolidation of our business in Iran, which explains a big part of the price increase in the first half. Sales to partners impacted positively by 1.1 points, reflecting the increase in shipments of powertrains and the ramp-up of C-Class deliveries to Mercedes. The last item, named Others, represents the activities outside of the new car business, mainly spare parts, our wholly owned dealers, and battery statements being impacted marginally negative at 0.1 points. I will now turn from automotive revenues to the group operating profit by activity. In 2013, the automotive operating profit came to EUR 495 million, meaning that we were profitable by EUR 284 million in the second half after earning EUR 211 million in the first half. RCI Banque posted a EUR 747 million contribution, in line with last year's EUR 748 million. In total for 2013, the group operating profit stood at EUR 1,242 million, an improvement of EUR 460 million compared to 2012. Slide nine shows the main variances which explain this increase. I will start the walk-down reading from left to right. As already seen for revenues, currencies had a negative impact of EUR 619 million. Once again, the main culprits were the same currencies as on the revenue line. The next line shows a EUR 112 million positive impact coming from the increase in units invoiced. Mix, price, and enrichment contributed EUR 276 million. This achievement results from our efforts to defend our pricing in Europe, as well as price increases to offset currency. To defend 100% of the pay in Europe. But also compensate for the effects of changes in emerging countries. The effects, the first quarter had a positive effect of EUR 86 million. For the next part of the walk-down, we have grouped four items, which together form the major part of our cost reduction efforts. Purchasing savings totaled EUR 600 million, split evenly in the first and second halves. Warranty costs increased by EUR 63 million, while manufacturing and logistics costs improved by EUR 41 million. The improvement over the first half comes to EUR 68 million and shows the first positive venue of our competitiveness programs, which we deployed last year. The R&D charge in the profit and loss account decreased EUR 50 million, also reflecting discipline in this field. The capitalization rate stayed stable at 40.8% versus 41% in 2012. It is worth noting that the depreciation charge remains higher than the amount of capitalized R&D. Total savings for the year amounted to EUR 628 million. G&A costs also decreased by EUR 18 million as a result of strict expense controls. Other items yielded a negative EUR 80 million, while RCI Banque increased its contribution by EUR 30 million. I will detail RCI Banque later in my presentation. Continuing on to the P&L with the other operating income and expense items on slide 10. This year shows a negative result of EUR 1,276 million. The first item in this table is the impact of our decision regarding Iran, taken in the first half that I already commented on in my presentation in July. In total, we booked a provision of EUR 514 million. The second item relates to the impairment of assets, both tangible and intangible, amounting to a charge of EUR 488 million. As you know, we run impairment tests on a regular basis, and some of our programs required some adjustments in book values. The next item is a charge of EUR 423 million to cover part of the cost of our competitiveness plans implemented in France and, to a lesser extent, in Spain. The cost in 2013 is higher in France than we had suggested previously, as more people signed up for the agreement. The total cost of the plan in France through 2016 will probably exceed our initial estimates, but they will be offset by additional savings as well. Next, the disposal of assets contributed positively by EUR 153 million. Lastly, other miscellaneous items impacted negatively for EUR 4 million. After taking into account these expenses, our EBIT is negative at minus EUR 34 million versus EUR 183 million in 2012, as you can see on slide 11. Continuing down the P&L, the next item is net financial income and expenses. The net charge was lower than last year by EUR 39 million, at EUR 282 million, despite the higher carry cost of liquidity. Non-cash items had a positive impact of EUR 50 million, mainly coming from lower provisioning for distressed suppliers. The next slide, number 12, shows the impact of associated companies in Renault's P&L. Nissan contributed EUR 1,498 million to our 2013 results. This was EUR 285 million more than last year. Renault's share of AvtoVAZ results, which is consolidated with a three-month time lag, came to a negative EUR 34 million, a deterioration of EUR 220 million compared to last year, when AvtoVAZ benefited from a one-off gain coming from positive changes in its long-term debt conditions. In total, the contribution from associated companies fell EUR 31 million compared to 2012. As a reminder, part of this variance is also due to the absence of a contribution from Volvo, which was no longer consolidated starting in September 2012. I will turn back to the P&L on slide 13, where the net tax charge for 2013 came to EUR 433 million, compared to EUR 549 million last year. Bottom line, net profit after tax came in at a positive EUR 695 million versus EUR 1,712 million in 2012. That included the capital gain on the disposal of the Volvo shares. After taking into account minorities, the net result per share came to EUR 2.15. Now that I have completed the analysis of the P&L, I will turn to slide 14 on the change in net automotive debt. Cash flow from operations totaled EUR 2,914,000,000. Changes in the working capital requirement impacted positively for EUR 790 million. Net tangible and intangible investments came to EUR 2,877,000,000, flat versus last year. As a result, automotive operational free cash flow came to a positive EUR 827 million. Regarding dividend flows, dividends received from quoted companies in the period totaled EUR 432 million. Excuse me. While dividends paid during the period amounted to EUR 537 million. Other financial items came to a negative EUR 493 million, including the cash payments made for our increased stake in Alliance Rostec Auto, which is the joint venture we established to carry the investment in AvtoVAZ, and the impact of the deconsolidation of our business in Iran, where we had positive cash balances. In summary, net automotive cash increased by EUR 229 million and came to EUR 1,761,000,000 versus EUR 1,532,000,000 at the end of last year. Slide 15 shows you the status of our inventories at the end of the year. The number of cars has decreased 15,000 units since the end of Q3. In number of days, we came in at 63, a decrease of 12 days versus Q3, and two days lower than last year. I would now like to move on to the automotive liquidity reserve on slide 16. Cash and cash equivalents totaled EUR 10.7 billion at the end of December, up EUR 0.6 billion compared to the end of last year. Together with the fully available undrawn credit lines, the automotive gross liquidity reserve stands at EUR 14.1 billion at the end of 2013. I would now like to take a few moments to give you a bit more detail on RCI Banque's performance on slide 17. RCI Banque's new financings increased by 5.5%, thanks to the continued international development of RCI, notably with the consolidation of the Turkish and Russian subsidiaries. The rise in penetration rate on new vehicles financed, and finally, an increase in pre-owned vehicle financing contracts of 6% in 2013. However, average outstanding loans were flat in the period as the conversion in euros was negatively impacted by the weakening of the Argentine peso and Brazilian real. The cost of risk stayed fully under control at 42 basis points of outstandings, in line with last year. Operating expenses were down slightly at 1.56% of average outstanding loans. In total, the pre-tax return on assets reached 3.07% versus 3.22% last year, giving a benchmark return on equity of 20%. RCI's liquidity position has also remained strong, as we can see on slide 18, with EUR 7.5 billion of liquidity reserves at the end of 2013, up EUR 600 million over the prior year. RCI Banque's dependence on the capital markets was significantly reduced with the successful retail online banking activity that you can see on slide 19. Total deposits taken in 2013 represented 52% of RCI's funding requirements. Following the successful launch in France of the Zesto savings plan in 2012, RCI Banque launched a similar savings program in Germany. At the end of December, total deposits amounted to EUR 4.3 billion, of which EUR 3 billion from Germany. RCI Banque's retail deposit taking should represent 20%-25% of total outstandings by 2015. That completes my financial review for 2013. I will now pass the floor to Mr. Carlos Ghosn. Thank you very much for your attention. Good morning, ladies and gentlemen. The 2013 financial results that Dominique Thormann has presented to you mark the midpoint of our six-year plan, which is Renault 2016 – Drive the Change. During my presentation, I will take time to comment on the past few years before unveiling the main goals and action plan we have set for the next few years. In 2011, Renault's priority were to restore growth in unit sales while generating free cash flow. As you know, our two metrics were to reach 3 million unit sales while obtaining a cumulative EUR 2 billion in free cash. In business term, this meant transforming Renault from a regional to a more global player. 50% of our sales are now generated outside Europe. In Europe, our sales are supported by a product offensive with cars that so far have well attracted customers. These three cars particularly symbolize this renewal. The first one to embody our new design strategy and open the way for a full transformation of the lineup is Clio. It is connected vehicle via R-Link, recognized today as being among the best multimedia systems in the world. Clio is also best in class in CO2. Next is Captur, the second pillar of our B-segment renewal. We launched it in April 2013, and it quickly became the number one selling crossover in France and segment leader in Europe. Last but not least, ZOE, which is our flagship. Even though sales are still below plan, it is a leading selling EV in Europe and achieves the highest customer satisfaction rate of any car in the Renault range. The impact these vehicles have had on our performance in the B-segment is significant. Renault has recaptured first place in segment share in Europe and turning a profit. We have also seen notable improvement in third-party assessments of the brand's image in France, Spain, Italy, Germany, and Turkey. At the same time, we expanded the M0 range of products to a total of six vehicles. This highly integrated and competitive platform allowed us to sell over 1 million units in 2013 in 111 countries around the world. M0 products are now assembled in eight manufacturing sites. Duster has become a global success. It is the number one selling Renault model worldwide, number one SUV in Russia, number two in India, in Brazil, in Argentina. Duster is the driving force behind the M0 vehicles, which have become the highest contributors to our profitability. In light commercial vehicles, we have also been busy renewing our lineup with the success of Master. Renault is also number one in the European LCV market, and Kangoo Z.E. is a leading selling all-electric LCV. Through our partnership with Daimler, we also started producing and delivering the Citan LCV for the Mercedes brand. All of this product activity has made Renault a more global player. The M0 platform has been a key driver in meeting customer requirements in emerging markets. As a result, sales outside Europe increased substantially from 37% of our total in 2010 to 50% today. Five emerging markets now rank in the top 10 markets of Renault, with Brazil coming in second place, Russia in third. In addition, with the exception of Algeria, where already one in every four cars sold is a Renault, we gained market share in every emerging market since 2011. In India, where we relaunched our operations in 2012, leveraging Nissan's presence, we achieved a 2.2% market share. However, notwithstanding these advances, little did we know when these cars were planned that Europe was on the verge of an even sharper downturn than in 2008, with the debt crisis leading to post-war lows in automotive sales in many countries. Retail sales dried up, affecting the entire automotive value chain as policymakers struggled to contain the crisis. We had forecast an increase of 6% in European total industry volume during the plan period. After an 8% drop between 2008 and 2010, the market actually dropped another 10%, reaching a 20-year low. This caused a 16 points gap, which, added to the collapse of the Iranian market for us, could not be offset by our strong momentum in emerging market. As a consequence, our objective of selling 3 million vehicles in 2013 was not met. However, thanks to the effort of the entire company, we maintained a strong cost and financial discipline and surpassed our cumulative automotive operational cash flow commitment of EUR 2 billion. The path to our objective turned out to be quite different from what we planned, but because we maintained focus on our priority and reacted on them, we were able to withstand a particularly trying environment. It is with these lessons learned and strengthened by this achievement that Renault is looking to the future with renewed confidence. In the next three years, in the field of vehicle and product development, we will implement the Alliance CMF modular platform design strategy, which has already been launched by Nissan. This approach will allow us to address the main product challenges of the next several years by giving us the benefits of scale that we could not have given our own size. Thanks to the Alliance, we'll be able to sustain this high level of product and technology development while maintaining the CapEx and R&D ratio below the 9% cap on revenues that we introduced in 2011. As the cost of regulatory features and technology increase, platform consolidation and scale become inescapable. Through the Alliance with Nissan, our modular CMF design strategy will give us two platforms with 3 million units. The CMF-CD and the CMF-B platforms will count among the industry top five global platforms by units produced. 80% of our future launches in the same time frame will be produced on these platforms. Through this strategy, we are expecting saving of at least 30% in development cost and 20%-30% in procurement costs. Two-thirds of the value of a vehicle will come from standardized modules, which is double the level achieved today. With the increase of our sales outside Europe to 50% today, our parts and components sourcing is being adapted to better match our production footprint. By 2016, we are aiming for 80% local sourcing. Maximizing locally sourced vehicle content is also the only effective way to permanently balance cost and revenue by currency, thereby avoiding unnecessary foreign exchange risks. In the case of Europe, cost efficiencies will come from a better utilization of our capacity through a combination of higher Renault volumes coming from our product plan and the allocation of production for the Alliance as well as for partners. The utilization rate of Renault plants will reach over 100% based on a standard two-shift pattern. This reinforces our commitment to honor the terms of the Accord de Compétitivité signed in France, which calls for 710,000 units of local production in 2017. A strong product plan and a disciplined pricing policy are tied together. Current scope of consolidation was calculated using a foreign exchange rate consensus forecast available early January 2014. Clearly, any significant changes in currency rates up or down could affect our turnover, which is consolidated in euros. Of course, we will not lose focus on our core automotive business and the importance of obtaining competitive market share. Growth will be primarily driven by vehicle sales, which should reach 3.3 million units globally by 2017. Strengthening our brand remains a priority, and we will continue to build on the achievements of the first part of the plan. The product plan, innovation, and quality are all intended to reinforce our brand. Beyond the extension of our range, we also aim to improve the appeal and competitiveness of our car by introducing innovations that are useful, desirable, and affordable. Autonomous and connected vehicles represent a huge business opportunity that will come to the market step by step before full completion by 2020. R-Link is a good first step of what connected multimedia systems represent. We intend to maintain our leadership in environmental responsibility. On the one hand, we will continue the development of a competitive offer of electric vehicles. On the other hand, for internal combustion engine, Renault will stay among the leaders in CO2 performance. At the end of the day, what matters in terms of product competitiveness, what customers say about our vehicles, customer satisfaction, and overall opinion are the drivers of share and profitability. Our renewed sales and marketing team is fully engaged in supporting three simple goals: sustain Renault as the leading French automotive brand in the world, move and sustain Renault up to the number two brand in Europe, sustain the Dacia brand as the undisputed leader in its category. As you know, growth without profit is unsustainable. In the auto industry, during the next three years, we will maintain the fiscal discipline that we have demonstrated in the last three years. Our cumulative automotive free cash flow commitment proved to be the right metric to manage the company, particularly as we were going through the European crisis. Now that our balance sheet has been restored, which we had committed to doing in 2011, we are targeting a sustainable, consolidated operating profit margin of at least 5% at the plan completion. However, we will not lose the focus on free cash flow, and we will hold ourselves to generating a positive automotive free cash flow each year of the plan. As you can see from this chart, growth alone will not take us to our objective. Reaching more than 5% will require a significant contribution from the cost side of the equation. Our cost reduction activities will continue to drive our competitiveness with a contribution of at least EUR 600 million per year. We must also be pragmatic and recognize that there are events that are unpredictable, such as adverse movement in the prices of raw material or currency rates, which could have a negative impact on our profit, while other events are more predictable, such as regulatory costs, vehicle enrichment costs. We know today that our ability to pass them on is limited. We know that if we want to reach a sustainable 5%, we have obviously to plan for much more. We also keep in mind that one of the key byproducts of sustaining a competitive automotive profit margin is returning to an investment-grade rating. Every plan sets out its own objectives, such as the ones I have just described. Every plan period is also time spent preparing for the future. Just as we spend time preparing to launch the products and technology that will come to market in the next 3 years, so too will we be preparing the products and technology to be launched beyond 2060. Most significantly, we will be preparing our entry in China. China is Renault's new frontier and perhaps its biggest ever. After obtaining all the necessary approval, we signed an agreement to create a joint venture with Dongfeng last December. Leveraging off of Nissan's experience, we immediately began construction of an industrial facility in Wuhan, which will have a capacity of 150,000 units by 2016 as a first step. The product plan has already been determined and will focus on crossovers, mainly in the C and D segment in the first stage. We are encouraged by the initial reactions of our customer clinics on these products. Given the scale of our project and its importance to Renault global competitiveness, China will receive our undivided attention. At the end of last month, we announced a project to further integrate selective key functions in the Alliance. Once this project is approved following Works Council consultation, purchasing, HR, and large parts of engineering, manufacturing, and supply chain will be placed under single Alliance leadership. The objective of this change is about increasing synergies and efficiencies for both companies. As you know, from the very first days of its foundation, the Alliance has always been about synergies and improving the performance of each company. By taking this additional step, we have visibility to reach a minimum of EUR 4.3 billion in synergies in 2016. More than ever, the Alliance is making Renault's plan more robust. This project will allow us to avoid significant costs and investments that we would otherwise have to spend to extend our range and fuel our growth. It will also allow us to reduce costs through more commonality and give us the benefits of greater scale. We are a 2.6 million car company starting to benefit from an 8.3 million scale. Our objective for the second half of our plans are ambitious yet realistic. They are ambitious because they require a high level of discipline and focus on execution with a strong commitment from every corner of the company to deliver a level of sustainable performance that was never done in our past. But they are realistic because we have already made most of the necessary decisions and investments. The action plan needed to accomplish our goal for the next three years are identified and already started. Renault has a clear and focused strategy. Today's automotive world is concentrating around a few high-volume and competitive players. Through the Alliance with Nissan and after us, Renault is one of those. I know some of you have questioned the speed of our progress, and I understand the difficulty in comparing us to others. The Alliance is unique in its longevity in the industry. There is no comparable model. It is the only comprehensive global Alliance to have lasted. This doesn't mean that we have reached the full extent of our potential, far from it. But it is by pragmatically and carefully planning the next steps that we will extract more from the Alliance. Our guidance for 2014, which is the first year of the plan, is consistent with the objectives I've just laid out. We're forecasting the European market to stabilize, but still at a low level. At the same time, growth in emerging markets will still be driven by China but is more uncertain elsewhere. We aim to increase registrations and group revenues, improve our operating margin, including that of the automotive division, and achieve a positive operational free cash flow. Furthermore, I propose to the board of directors that we maintain our dividend at EUR 1.72 this year. This means that we are going beyond passing through the dividend received from associates, as we had committed for the first part of the plan, since the fall of the yen would have meant reducing this year our dividend, which is paid in euros. In the future, and subject to the generation of sufficient cash, from now on, our dividend policy will aim to offer returns to our shareholders in line with those of our peers. Thank you for your attention. We're now available for your questions. Thank you, Mr. Ghosn. Now we'll open the Q&A session. We'll start with Thomas. Thank you. Hi. Thomas Besson, Kepler Cheuvreux. I have three questions, please. First, you have made several comments about changes in the industry and Renault-Nissan being one of the three, four, five companies that will have several platforms above 2 million to 3 million units. Can you give us your view about how the smaller players are going to evolve and be eventually captured into one of these bigger organizations? Shall I give you all questions? Frankly, I do not spend too much time worrying about what these guys are going to do. I think that we have already enough on our plate. I would suspect that a lot of them are going to have to hook to a big player. That is what is going to happen. Which means, maybe the hooking is going to be on a lot of things. For example, you can imagine a smaller company joining the Alliance or getting the technology from the Alliance where they cannot afford to develop it, which, by the way, is something that you start to see in Japan, where some of the small Japanese players are starting to go to Toyota or go to Nissan in order to get electric trains, platforms, cars, coming from the product plan of one company. So you are going to see more and more of this. I would personally think that you are going to see more alliances one way or the others, contracts, hooking from the small players to the larger one. Because I am going to tell you, that means the big change in the auto industry is the fact that now the biggest ones are the most competitive, which was not the case 10 years ago. The largest car manufacturer were not the most competitive. Now, between the larger, you have the most competitive, which is a big threat for the smaller players. When we see in our negotiation of the contract for the cars coming on C/D for Renault, when you have a platform of 3 million cars, well, the negotiation with your suppliers and the cost of the investment is completely different. We can see it, we can measure it. So we can imagine how difficult it is going to be for the smaller player, particularly those who do not enjoy a high price premium, to allow them to compensate for the lack of competitiveness. My opinion is they are going to have to hook up one way or the other, and you are going to see a lot of innovative cooperation between car makers coming. Okay? This is driven also by technology. This is not an industry of commodity. Electrification of powertrain, autonomous driving, connectivities, the multiplication of the safety features into the car, all of this is going to be driving for more investments, more technology, and you are going to have to have also more localization if you want to compete. I can give you the example of Russia. That is an interesting example. In Russia, Renault is the leading brand after Lada. We are very profitable. We have grown in a market which was down. What is the simple reason for this? Yes, we can say our product is pleasing, but this is the same product that we are selling somewhere else, Duster, Sandero, Logan. The big difference is we are much more localized. We are much, much more localized. So when the ruble goes down, we suffer, but we suffer much less than our competitor, which gives us a big advantage. But if you want to localize, you need to have the volume. If you cannot have the volume by yourself, you are going to have to hook with somebody else. So it is a kind of circle, where you have to somehow get a minimum level of scale if you want to be successful. If you cannot get it by yourself, you are going to have to hook with somebody else. There you go. Second question, please. Can you elaborate a bit more on cash redeployment for Renault and Nissan? You are targeting a substantial increase of your operating profits, that should more or less double or a bit more between 2013 and 2017. You have paid a bit of your free cash flow now in dividend. What do you mean by paying something in line with peers, between a 3% dividend yield, 4% dividend yield? Yeah. Well, as you know, our plan, EUR 50 billion in 2017, 5% operating margin makes operating profit at EUR 2.5 billion. This is obviously without AvtoVAZ, but you know that AvtoVAZ should be consolidated at this time. And the objective of AvtoVAZ are very clear, 20% market share in Russia and 6% operating margin. So AvtoVAZ, when Bo Andersson will complete the turnaround of AvtoVAZ, should be a positive addition to Renault. So there will be at least EUR 2.5 billion of operating profit. What we can say today is, first, we are stopping the pass-through policy. We think we today have a reasonably good balance sheet in order to go beyond passing through. And, the second element is the first reference is what our European peers are doing. Obviously, in the European peers, the situation is very different from one to the others. But what we are committing today is to say it will be at least comparable to the European peers. That is what we can say today. We are eliminating the passing through. There will be a payment of dividend from core business, and will be at least at the level of the average European peer. Now, European peer, you have a very different situation. That is why for the moment, we just say comparable to the European peers. Okay. Last question for me, please. On the specific segment where you used to make a lot of money, LCVs, what is your expectations of the recovery of that segment in Europe and globally? Is it fair to say that this is one segment where you should materially improve your operating profit in the next 2 to 3 years? There are two hopes for LCVs, even though we have been a little bit conservative in our plan for LCVs. The first one is the recovery of the European market. As you know, this plan has been built with the European market stable. So I admit the fact that it's a little bit conservative. Okay? But you never know, with Europe, we prefer to be conservative because there are still a lot of problems ahead that have not been solved. But we are very sensitive to the European operation because it's still about 45% or 50% of our sales. So we can see immediately when Europe start to go up, how easy it's for us, not only in term of volume, but even in term of profit. But we said, okay, you consider that Europe is stable. LCV in Europe, we are the number one brand. We're not counting on a big growth of LCV. We are renewing our product line up, but I don't think this is not where the opportunity will come. The opportunity will come from the fact that we are mainly a European LCV company, while we have a lot of opportunity with LCV outside Europe. This is where I am expecting much more growth, both into the emerging market and also with Nissan. As you know, we're going to come with two pickup trucks. One of them will use the platform of Nissan, of the one-ton pickup truck. The other one will be based on an M0 platform. We think pickup truck will be one area of expansion, in a certain way, at our reach. This is not the kind of premium market. This is a market which is totally compatible with our existing customer base. Okay. Max, number one. Thank you. It is Max Warburton at Bernstein. Two questions, please. One for Dominique. Dominique, just on FX this year. In your budget, what is the year-on-year impact of FX in the operating profit walk? Then the question for Mr. Ghosn. Mr. Ghosn, you are probably the most highly regarded CEO when it comes to relations with the Chinese government. The relationship with Dongfeng has been incredibly fruitful, and they seem to feel that you have done more than most to build the industry there. When we look at this deal with PSA that is supposedly imminent, is this deal, each of them investing in PSA, is it good for Renault? What advice would you have to them as they make the step? Okay, Max, I will take the foreign exchange. We wrote in a negative assumption. So we wrote it in as a headwind. As a matter of fact, we showed you a chart. We wrote it in as a headwind for the full plan period. We did this not knowing the current turbulence in the market is something that was on top of our assumption. But if you look at the impact because of our sourcing, which is now moving more towards where we are localizing production, we are reducing the impact. So for roughly, if we take 1,000 hit at the top line, a third of that only falls through to the profit line as a rough guide. So we wrote in a negative number for 2014 in our assumptions. How much? How much? That I cannot tell you. But the order of magnitude is bigger in 2013. It is the biggest that we have suffered recently. But do not forget that we have currencies and raw materials often act in opposite directions. So two years ago, we had a 500 and some odd million hit to raw materials, whereas foreign exchange was posited by a few million. This year it is the reverse. So order of magnitude is not going to be very much different. But hoping, you plan for the worst and hope it does not happen. But, this year is 600, hopefully it will be a bit less than that. Yeah. In fact, if I can add something, I don't think the impact on us is EUR 600. It's EUR 600 minus the pricing that was driven by the collapse of the currencies. Just to be fair. So part of the pricing and the mix, which is positive, is not due to our own efforts. It's due to the fact that when the ruble collapsed, while obviously it gives an opportunity to add 1 or 2 or 3% to the price of your cars, even though our pricing has been more conservative than our competitors because of our localization. So, the impact on our bottom line is apparently EUR 600, but in that it's not, because some of the pricing, we have to admit, is driven by the collapse of the currencies. Now, on your questions about Dongfeng, yes, we have been working with Dongfeng for more than 11 years. I think I'm not worried about whatever will happen because I know that Dongfeng has a long tradition of compartmenting their relationship with different car makers. When we started the relationship through the contract that Nissan signed with Dongfeng in 2013, a lot of people were worried about the strong relationship existing between Dongfeng and Honda. As you know, the relationship between Honda and Nissan, I would say, is a little bit comparable to the relationship between Renault and PSA. Frankly, I don't think this has been a handicap for Nissan. Nissan developed very well, has grown very well. I don't think ever we have seen any passing through of information or strategy, whatever, between Honda and Nissan. So we're pretty confident that the Dongfeng team has a long tradition of putting compartments between their relationship. I don't consider it good news. I don't consider it bad news. I just think, for us, it's not relevant. I don't expect any good news. I don't expect any bad news coming out from it at the beginning. But obviously, this will depend on what will be coming in the next years. Okay, thank you. We're going to take a question from the call now. We have a question from Charles Winston from Redburn Partners. Sir, please go ahead. Yeah. Hi, good morning. Thanks for taking my questions. Two quick ones from me. Could I just go back to the comments that Mr. Ghosn made just about pricing in emerging markets? Could you perhaps flesh out some of the actions you've taken so far, given the recent EM currency crisis and perhaps what we might expect in terms of pricing overall, perhaps also touching on the pricing environment in Europe at the same time? Then just secondly, a quick point of clarification. I think in the presentation you talked about Monozukuri gains being at least EUR 600 million per year throughout the period of the plan. Any idea on cadence of that? In other words, should that be accelerating as we come towards the end of the period as new models start going onto the CMF platforms, or should that be EUR 600 million fairly flat? Does that figure include any cost savings that you've arranged with the talks with the unions in France and Spain? In other words, is that local labor restructuring included in the Monozukuri targets, or is it separate? Thank you very much. The first question was? Pricing- On pricing. emerging market, different measures we have taken. Well, obviously, it is market by market. The situation is very different whether you are in Russia, whether you are in Argentina, or whether you are in India. Because our own situation is not the same, our level of localization is not the same. The pricing opportunity are not decided centrally. They are left at the level of the region. Every region decide. The regions commit to a profit, and when they see that the currency is collapsing and it is hitting their bottom line, they need to find the right balance between increasing the price and the volume of their sales. They have done it pretty well. Obviously, some regions have been more successful than the others. I think the champion have been our Russian team, which has had a record year in term of profit. Russia today is, in term of margin, the highest margin country for us, and in term of total profit, the second largest, most profitable market after France. Obviously, Argentina is another case. India is a third case. But I can tell you that, everybody knows that when the currency collapse, you have to increase price. The only question is when, how much, on what product, and this, we leave it to the region. We do not interfere with the region because we are afraid that we will make mistakes. These are very sensitive decisions to be made product by product, segment by segment. I would say from time to time, even mix, channel mix by channel mix. The second question? The second question was about our expectations in terms of acceleration of Monozukuri coming from the common platforms. Yeah. We're putting EUR 600 million. Obviously, it's a conservative number. It should accelerate with the renewal of the product line up because it's easier, because we have new platform. That's for sure. On top of this, the Accord de Compétitivité in France and in Spain should also help us. We've been a little bit prudent because, as you know, into the total delivery cost, what we call the efforts done by our competitiveness, we are including a lot of elements, including enrichment, including regulation, including competitive action. That's why when we're talking about EUR 600 million, we're talking about some kind of net, where the total amount is much higher than this. But from this amount, you have to extract some of the regulation costs that you cannot price or the competitive enrichment that you cannot price. I agree with you that it should go up, particularly with everything we have been preparing for, which mean new platforms, Accord de Compétitivité, higher level of utilization of capacity. Let me just open a parenthesis about high utilization of capacity. Yes, we'll be at 100% capacity utilization by the end of the plan because of everything what I explained. This doesn't mean that it's okay. Because we still need many plants to produce 710,000 cars in France, while some of our competitors can do this volume with one plant. I would say that from a situation where we have a lot of plants underutilized, we're moving to a second best, which is a lot of plants fully utilized. But we're still below the level, which consists to say, if you had to reorganize all of this, would you need all of this? Certainly not. Okay? Again, we are realistic people. We're very pragmatic. We look at what can be done and what cannot be done. We're moving up from one step to the other, taking in consideration what can be done in the present environment. Okay, thank you. We are going to take another question from the call. We have another question from José Asumendi from JP Morgan. Sir, please go ahead. Morning. Three items, please. The first one, could you please explain what could be the expenses for the implementation of the competitive plan in 2014 and the cost savings derived from it? The second one, on the 2016 targets, the 3.3 million units you mentioned, is this including China or excluding it? How should we think about the development of Brazil over the next three years? Then finally, I am just interested to understand, in your planning, what is the minimum operating margin that you are targeting for the autos division in the midterm? Should we just think about it as 2013 is the lowest level you have achieved, and we should see a recovery over the next years? Thank you. Okay. Why do I start with a few of your financial ones. On the competitiveness plan, as you know, according to accounting rules, we reserve our accounts as people sign up for the plan. There is an initial assumption, because the plan is open until 2016. There was an initial assumption made of the number of people and the profile of the people, because it is driven by individual age and individual situation. So we have a reserve at the end of the plan, at the end of the year 2013, which is in line with the number of people who signed up. We had more in 2013 than we initially assumed, so there is more in 2013 accounts. That said, the plan was designed to be front-loaded, so that is relatively good news. The guidance that we gave is that the plan should contribute, compared to a do nothing scenario, should improve our competitiveness by EUR 500 million. As we go forward, we will give you more guidance as 2014 becomes clearer. That is the best number we can use right now. As for the two other questions, you had one question on the 3.3 million units that the CEO referenced in his speech, asking whether that includes or excludes China. China, as you know, the industrial operations, we are going to be spending 2014 and 2015 building a plant. Today, we have very small sales in China. In 2016, there will be some sales coming out of the factory in China that will be producing cars. It is not the major driver of the increase in sales in the plan period. Then I think you had a question on the operating profit margin. We are guiding to a 5% consolidated operating profit margin. That is being driven by the automotive side of the business. I think you saw that in our accounts at 3% this year. The automotive side is 1.3%, and RCI is really pretty much stable compared to last year. I am not saying that RCI will not improve. It will. I have been tasked by the CEO to make that number go up, but the main driver is clearly going to be the automotive margin. Okay, thank you. Francois in the room. Francois Morillo, Securities. Today is the most dynamic and profitable market worldwide are China and the U.S. You are not present in these two markets. You have announced something in China. Should we expect something to come in the U.S.? Should something happen with Mitsubishi? Could you be more specific on this agreement? Yeah. Well, I don't think frankly it's very reasonable for Renault to envision anything in the U.S. in the foreseeable future. Because one of the sickness of the past is we had too much planning and not enough occupying the market. We've been to Russia very quickly, but for many years, we didn't do anything with Russia. We've been to Brazil very quickly. We didn't do anything with Brazil. It took us 8, 9 years to start to make profit in Brazil. We've been to India. We took a bath. We had to come back with Nissan. Why? Because this story of going to a market, putting a flag, but then there is no troop to occupy the land, doesn't work. So you have to be cautious. United States for me is out of the picture because obviously we can plan it. Yes, we can have great plan. We'll have a lot of agreement. But as long as we don't have a strategy to get the market share and make a profit and really get a return on our investment, we're not going to do it. We have plenty of opportunity in the United States. We're just refusing them because now we need to concentrate on China. We're not going to go to China to sell 150,000 cars. We know China, the first step is get our global market share in China. We have today 3% market share in China. Hopefully, we're going 3% market share globally. Hopefully, we're going to go to 3.5%. Obviously, our presence is not on the total market. That's why it's so small. In fact, on the market where we are present, we have a much higher market share, which means that China is more a 600,000, 700,000 cars a year potential than 150,000. But this means in order to deliver that, you need to build plants, bring cars, make sure we are concentrated on it. And if we open another front, I'm afraid that we're going to fall into some of the weakness of the past, that we rush to establish our presence, but then there is not enough forces. There is not enough focus in order to get the best out of the market. The story of Brazil is interesting. Renault went to Brazil in 1997. From 1997 to 2008, practically, we didn't make any money for 10 years, and we practically didn't progress in term of market share. The market share progression started immediately after, when we came with a decent product line up, we start to do a decent work in term of localization. We started to build the brand, and today is one of the most dynamic market. Russia. We were one of the first one to go to Russia. I think our first agreement with the Moscow mayor was in 1997 or 1998, but for many years, nothing happened. We had to dynamite, put a little bit of dynamic, create a relationship with AvtoVAZ, build Avtoframos, bring the car, localize, and this requires a lot of energy. This require a lot of focus. My only point is, yes, there are a lot of opportunity in the United States, but now we're going to concentrate on China. There will be plenty of time when we will get our market share in China and get the kind of profit that the other car makers are getting, which is probably 10% plus operating margin. When we get there, then we can think to other market. I just want you to know that it's not because we don't have ideas, we don't have plans, we don't have opportunities, but because before going into a new opportunity, we just want to make sure that we can get the return, and we can do a good job into increasing the presence of the brand, and get the profit out of it. Going to take a question from the room, Philippe. Yes, thank you, Philippe. So three questions, if I may. First question regarding the second part of your midterm plan. To sum up the situation as Europe will be the bulk of gaining profit in second half of the plan. I mean that in Europe, actually, you can get a margin which is normalized in line with margin you can get in international markets, meaning that Europe will go from very low margins to something in line with the group targets at the end of the plan. The main improvement will come from this area. Second question regarding the entry price vehicle. Do you see some risk on the margins in the entry vehicles, given the competition and the difficulties we can get on emerging markets, the competition and demand going down? Third question, regarding AvtoVAZ, actually, you're going to go over 50% of the JV. How you agree to consider the company, despite very low earnings at time being or loss, will list by AvtoVAZ in 2014? Okay. Can I just try to clarify your first question? We do not give regional breakdowns in terms of profitability. I just want to understand what is behind your And a question that the progress should come from Europe over the next three years, in that we know that actually international operation are quite profitable. I assume that Europe is at low point. I would say given the restructuring and reorganization you are going to make in Europe, Yeah is this the bulk of progress should come from Europe? Yes, there will be progress in Europe, but let's not forget that in our plan, Europe is stable. We told you from the beginning. The hypothesis in our plan is in 2017, the market in Europe is equal to the market in 2013. That is our hypothesis. It is a conservative one, but we consider we have been a little bit more bullish on the emerging market. Because frankly, we do not think that this volatility and uncertainty on the emerging market will stay for a long term. Somehow, if you take the present situation, we are bullish on the emerging market, conservative on Europe. In six months, maybe this will change. We will become more reasonable on emerging market, maybe something else on Europe. This is the assumption of the plan. Yes, there will be a recovery of margins in Europe, hopefully, because as you know, with the decrease of the European market, we all suffered in term of margin. I would not qualify the improvement in profit as mainly coming from Europe. It is not true. The growth in Russia is very important for us. Growth in Brazil is important for us. The Chinese operation will have no impact, practically, on this part of the plan. It will have an impact for probably the next plan of Renault. We have plenty of other also opportunity, North Africa, Eastern Europe. We have plenty of opportunities that we want to put at profit. What was the second? There was a question about, don't we think that the M0 profitability could be attacked by our competition? Look, it will be. For the moment, it has not been. Logan has been out for now many years. After Logan, we brought the Sandero, we brought the Duster. Now we have the A platform coming. So far, there is some competition to the M0, but none of them has been really matching our own performance. Because M0 is not a car, it is a system. You have to reproduce the whole system. I agree, there is a possibility, for the moment, it did not materialize. It may. We don't see it. It may happen, but we don't see it. So we are not thinking that M0 profit is going to go down, but we are also not thinking that we're going to continue to increase the margin on the car of M0, even though I can tell you, Duster has been a great surprise for us. That mean Duster has beaten all the forecasts that we thought from the beginning. The new A platform coming out from India, the clinics are very strong. We really think this is going to be another very successful car into the M0 platform, we'll see. Last question was about AvtoVAZ consolidation. Yeah, the consolidation of AvtoVAZ. First of all, there are a number of condition precedents. We have a number of milestones to go through in 2014 because we've not acquired all the necessary shares yet. This is a process that was planned. We're going through the milestones. There then needs to be a bit of work on the AvtoVAZ side. They need to produce IFRS compliant accounts, compliant to the Renault standards. All of this is work in progress currently. When we get there, and when we can demonstrate control, then obviously, the accounting world will allow us to look at consolidation. In any event, this is an accounting consolidation, but this is without recourse to. The cash will not flow from one company to the other, so this is without recourse to Renault. Yeah. The situation of AvtoVAZ today is not very good because as you know, the market in Russia collapsed in 2013. It has been a surprise for many people, and it doesn't look good at the beginning of this year. At the moment where AvtoVAZ is investing a lot, not only to renew its own lineup, but also to build capacity for Renault and Nissan. The only thing I would like you to keep in mind is we hired Bo Andersson. Bo is, in my opinion, one of the best person to manage AvtoVAZ. First, because as you know, he has somebody who knows the industry very well. He has taken plenty of jobs in the past where he has delivered a lot of results, and second, he knows Russia very well. He turned around GAZ, and when you look at the numbers of GAZ, it's impressive what has been done. I think we have here an opportunity to transform, really, AvtoVAZ, not only into a very profitable operation that will be consolidated by Renault, but also into a base for production and sourcing for the line. We're counting a lot on Bo and his team. I just want you to take this into consideration. For me, Russia, yes, today is a risk, but I see a big opportunity with the new management team that we put in place. Okay. Thank you. Next question from the call. We have a question from Rabih Freiha from Exane. Please go ahead. Yes, good morning, Rabih from Exane. I have two questions, please. The first one, if you could give us a bit more details on the working CapEx gain that we saw, the EUR 790 million. If I am not mistaken, the guidance was for flat working capital. What has changed between the last time you set that guidance, end of October in the last two months of the year? Also, how should we think of the dealer inventories in 2014, given the number of phase outs you have on the Renault core side and the market weakness in emerging markets? My second question is regarding the more than 5% operating margin target for 2017. You are qualifying this target as ambitious and realistic. When we look at market expectations today, the market is expecting a margin very close to 2017 target in 2015 already. Do you see these expectations as unrealistic, and why, if not? Thank you. While Dominique Thormann is preparing to answer your first question, I can answer the 5%. We said at least 2017. Why we took 2017? Because, there are a lot of things coming in 2014, 2015, 2016. It would be fair that the measures of 2016 have an impact on our objectives. If you take the year 2016 as a reference, part of what we will be doing in this plan will not be captured in our objective. We wanted really to have a full year impacted by all the measures that we are taking. That's why we took 2017. I said a minimum of 5%, which mean obviously we're planning for much more. If you say, is the 5% conservative or is it going to depend a lot on the environment? It's going to depend on a lot of factors, it doesn't depend on us. Is European market going to be flat or is it going to go up or is it going to go down? That's a big factor for us. Are emerging market going to go out of this volatility and problem, at the end of 2014 or in the middle of 2014 or is this going to last? Are the exchange rate going to continue to be volatile or not? There are a lot of questions independently of us. Obviously, we're planning for much more than 5%, it's clear. Both in term of growth, price, and cost. There are so much uncertainty around us that we had the choice of giving no numbers or giving a numbers that takes in consideration all the volatility around us. If you think that Europe is going to grow, that the volatility on the emerging market is going to stop, that the emerging market is going to resume their growth, then yes, I can tell you, assuming that in 2016, we can reach to the 5%, is reasonable. Okay? But assuming that all of this happens, which obviously we are not sure, and let's not forget that for us, we're considering Europe as flat for the next years. Yeah, Rabih, on your question on working capital. First of all, what we were aiming to deliver was free cash flow, and we did that, even without the contribution of working capital. We just did better. It's that simple. We learned a lot these last three years. We've taken a lot of cash out of the system. We were totally inefficient on the receivable side. We weren't getting paid very quickly. We were not very good in our supply chain. We had intermediate stocks. We just did a lot better in managing our business. I think it was something that, a great lesson learned in the 2011-2013 period, which we're going to carry over into the next period. The dealer inventory, you have seasonal patterns depending on when vehicles get launched. January was very strong, and the dealer inventory just sold out. The dealer sold out of that inventory that was in transit or that had already been delivered. I am comfortable with the 63 days. I had given you guides that we would bring that number down towards the end of the year. We are going to come into a seasonal pattern. Q1 is always a little bit higher as you go into the spring selling season. I think this is business as usual, and we just manage this very tightly on a month-by-month basis. Okay, thank you, Dominique. Gaëtan. Good morning. Gaëtan from Deutsche Bank. I have two questions. The first one, I want to go back, Dominique, on this pre-retirement scheme in France, because you booked EUR 400 million, which is a big number. Can you give us an idea how many people are signed up out of the 7,500 people, which is what was prepared in the plan? What are the magnitude of the savings we can expect in 2014 coming from that? Can you summarize that a little bit? The plan, the 7,500 people is a net number, so it is more going out, and then there is, in future years, we are going to be hiring against that number. It is, I think 8,250 was the number that we initially gave you. It is just more people signed up in 2013 than were expected. How many people sign up in 2014 and 2015 is still an open question mark, and as we cannot make an overall assessment and reserve our accounts based on an assumption, you have to actually physically have people signed up before you can reserve your accounts. Because more people ended in 2013 does not mean that you will have even more in 2014 and 2015. That is something that we do not know. The order of magnitude, what we guided to, is that the plan is designed to deliver compared to a do-nothing scenario, which is an unrealistic assumption, but you have to have a user baseline. It is designed to deliver EUR 500 million in improved operating contribution by the end of the plan on a four-year basis. What is your advice you give me in terms of saving for 2014, 2015, out of what has been projected? EUR 400 million is a big number. Yeah, it is a big number, but it is a number that is commensurate with the number of people. If the plan gets done earlier, so be it. But roughly, the cost against the EUR 500 million, it was somewhere around EUR 450 in terms of overall reserves. So order of magnitude. Now, if more people sign up, you get a bigger benefit at the end. And that number we do not know today. Okay. Not sure I fully understood. Anyway, Mr. Ghosn, I have a second question. I will take you offline. Okay, perfect. Thank you. So Mr. Ghosn, I have a question for you on these synergies with Nissan. We moved to a pretty big number, EUR 4.3 billion. First question, is it 50/50 between Renault and Nissan? Because since Nissan is two times bigger than Renault, in theory, it should be bigger for Nissan. Can you help us to get an idea what could be the P&L impact? Yeah. Because there is a lot of cost avoidance. Is this number include more cost avoidance? Yeah. Can you summarize that a little bit? Yeah. Look, let me give you based on the past. Well, the past doesn't mean the future, but it's a good indication of what may happen. Today, the cost reduction is 40% of the synergies. Cost reduction. Which means the 60% are cost avoidance, investment reduction, investment avoidance. Because let's not forget, this is a cash flow impact. The synergy, we calculate them on cash flow because we're interested also into reducing investments. But based on the last years, and this is controller number, 40% of the synergies are cost reduction. And frankly, there is no reason to think it's going to be different in the future, even though there is no guarantee. But let's take 40%. When you project EUR 4.3 billion of synergies, which by the way, are all planned. This is not a black box where we are starting to work about how we're going to make the 4.3. The EUR 4.3 billion are identified, and the planning is for more than EUR 4.3 billion because you'll probably hear internally different numbers. Yes, we are planning for much more, but we want to put in the bank for the moment, 4.3. So if you take 40% of 4.3, you're going to get something like EUR 1.6 billion, EUR 1.7 billion. The repartition so far between Renault and Nissan has been 45 for Renault, 55 for Nissan. And why Renault benefit relatively more? Because obviously, Renault being a smaller scale than Nissan, the impact on Renault is much bigger. For example, when you come to a CMF platform, and you are changing from a 700,000 platform to a 3 million platform, I would say the jump in performance is much bigger for Renault than for Nissan. Because Nissan had platforms that were not at 3 million, but I would say the jump for Nissan is smaller. So 45/55 is the historic number. Should not change, even though the size of the two companies are different. So bottom line, I would say 40% in cost reduction and repartition 45/55. Okay, thank you. I guess that we have time for one more question, so we'll take it from the call. We have a question from Christina Serge from Barclays. Madam, please go ahead. Oh, yes. Thank you. My first question is just returning to a question asked earlier on pricing. Could you just give a little bit more detail on European pricing at the moment and where you see that standing currently and going forward into 2014? My other question was regarding FX in terms of your hedging policy. Is there any change that you can do there to mitigate some of the impacts of FX, or anything else that we should expect? 2014. Thank you. Okay. Well, for the European pricing, in fact, the best would be to talk to the head of the region in Europe, Stefan Müller, who is going to be telling you exactly what is the situation and what's our situation on pricing. Stefan? Yes, thank you very much, Mr. Ghosn. As Mr. Ghosn has already explained in his speech, we dramatically improved our position in terms of pricing in the last years. That means that today in pricing, on average in Europe, we are only about 5% below the leader, and we are 3% more expensive than the basket. Now, in terms of pricing position for the future and strategy, it's as Mr. Ghosn has already explained, for us very, very clear we are going to maintain and improve this position. Why? Well, it's relatively easy. Because we are going to be able to price with every new product that is coming in on a much higher level. That is true for all the products that you will be seeing coming in the next two to three years. We are reasonably optimistic that this is possible because we have seen it now with Clio and Captur. We have been very successful in exactly doing that. If I may add something, because we talked about all the new products and the renewal, which are going well. There are also points of vulnerability in Europe, which is the end of life of Mégane. That means we are in the last two years of Mégane. At the moment, our main competitors have launched their new products. As you know, there is a new Golf, there is a new Peugeot, et cetera. So one of the reasons for which we are a little bit prudent is because the M0 is going to be a challenge for us in 2014 and 2015. Hopefully when we will come with the new products, with the new design, attractiveness, competitiveness, because it is going to be based on a 3 million platform, things are going to change. This is one of the reasons for which we are a little bit prudent, and we need to build much more profit and cost reduction in order to sustain the movement that we mentioned. Can you answer this? Yeah. Christina, hi. On foreign exchange, it is an endless debate in the auto industry, but I think we have not changed our policy. I think in the CEO speech, you heard that the only effective way of really protecting against currency fluctuations is balancing revenues and expenses in the same currency, which means having an optimized localization rate, where we manufacture, where we sell actually. So, the cost of hedging some of these very, very volatile currencies, in Argentina, for example, is just astronomic. You are just transferring a risk. You also end up having to take a counterparty risk because somebody has got to be the other side of your hedge contract. So, hedging Argentina is just totally impossible right now, and it is just uneconomical. So no, we have not changed our policy. Yeah. Well, if I can just add something about foreign exchange risk and localization. They are obviously linked. At the same time, as you know, localization is a question of scale. It's not a question of know-how, but if you are a small car manufacturer and you want to localize, no supplier is going to take really into consideration a few thousand cars locally. They don't care. The investment is too big. The part of the tooling is too high. The pricing will not be competitive, so they don't do it. So in order to localize, you're going to have to have the volume. So the scale is important even for localization. As we know, localization is at the base of competitiveness in emerging market, and the emerging markets are going to be the engine of the growth of the industry. Come back to the first question you asked, scale is going to be of essence, particularly when it is benefiting some of the most competitive players in the industry. Because it's playing at the level of the investments, it's playing at the level of the cost, it's playing at the level of the localization. And when you add all of this, if somebody has 8 to 9 million cars and the other one has a third of this volume, it's a completely unbalanced competition. Okay. Thank you, Mr. Ghosn. I'm afraid that due to time constraint, we have to stop now this Q&A session. So thank you for joining us today. Of course, Alain and myself will be available full day for all questions which have not been addressed this morning. Thank you very much. Have a good day.