Stellantis - Q4 2025 TU

Transcript

Operator (participant)

Hello and welcome to the Stellantis Preliminary Results H2 2025 call. You will have the opportunity to ask questions at the end of the call by typing pound key five on your telephone keypad. Please do not exceed one question per person, and if necessary, an additional one. I now give the floor to Mr. Ed Ditmire, Head of Investor Relations, to begin today's conference. Sir, the floor is yours.

Ed Ditmire (Head of Investor Relations)

Thank you. Hello everyone, and thank you for joining us today as we review Stellantis's H2 2025 preliminary financial results. 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 João Laranjo, Chief Financial Officer. After their prepared remarks, Antonio and João will be available to answer questions from analysts. Before we begin, I want to point out that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included on page two of the presentation. As customary, the call will be governed by that language. Now I'll hand over the call to Antonio Filosa, CEO Stellantis.

Antonio Filosa (CEO)

Thank you, Ed. Thank you very much, and thank you all for joining us today. What we are presenting today is a decisive reset for our future profitable growth. We are today resetting our organization by empowering our regional teams so that they can accelerate decision-making process and maximize rigor of execution. We are dramatically resetting our stakeholder relationship, improving all of them, including relationship with our employees, with our partners, the dealers, the suppliers, the governments, and the unions. We are resetting our product plan and our EV supply chain to reflect much more real customer demand and shifting regulation, following an initial overestimation of pace of adoption of electrification in the regions. We are resetting execution and improving quality management processes to address previous operational issues triggered by past decisions. Those are changes very needed, necessary, that we are aggressively implementing.

Implementation is all in progress, and they are delivering to us initial signs of recovery already in H2 2025. So let me talk a little bit about those initial signs of recovery that will deliver positive foundation for 2026 and forward. The first bucket of early improvements is execution improvements. We have a new leadership team in place. We have a much leaner organizational structure. We have given power to the regions, enhancing local decision-making processes. We have recruited more than 2,000 engineers in 2025, mainly in North America, notably, and together with them, a lot of field professionals and skilled trades for our plants. We have already enhanced quality, with one-month in-service KPI, which is improving more than 50% in North America, more than 30% in Europe. This is in 2025. The second bucket of improvement is about our product momentum.

We have launched in 2025 10 all-new products in all regions. We have returned the HEMI V8 to our Ram 1500 pickup truck, and we will increase HEMI production a lot in 2026. We are progressing the rollout of the Smart Car lineup in Europe with substantial incremental product offerings, such as the Fiat Grande Panda, for instance, notably. We have been launching in quarter four 2025, recovering past delays, many new products, including Jeep Cherokee Hybrid, which is our Jeep fundamental player in the largest individual segment in the world, the midsize SUV segment in the United States, more than 3 million units sold every year. We have launched the Dodge Charger i6 SIXPACK that, together with the Dodge Charger Daytona BEV, is Car of the Year for North America, recently awarded. We have launched the Fiat 500 Hybrid in Italy.

At those launches, we all expand our market coverage in 2026. The third bucket of improvement is about our return to growth. We increased our global shipment, half 2025 versus half 2024, by 11%, and our North American shipments in the same period by 39%. In Europe, we are retaining our segment leadership in the all-hybrids market, in the B segment, and in the very profitable light commercial vehicle market. In South America and in Middle East and Africa, we are keeping our growth. The fourth bucket of improvement is our order book, which is very robust. Our order intake in Europe increased by 13% in half 2025 when compared to half 2024, and 23% only in quarter four 2025 when compared to the same period of 2024.

Our order book in North America is up more than 150%, and this is driven by accelerated demand of the new Ram, Jeep, and Dodge products. We have received year-to-date more than 60,000 orders for our 2026 model year Ram 1500 HEMI V8 engine-powered, and we have sold out our planned production for model year 2026 of the recently launched two-door Dodge Charger SIXPACK Scat Pack. Through the renewed product strategy, we are addressing many white spaces in the markets where we compete, and this is a very big opportunity for us in 2026. So in half one 2026, we will launch our Ram 1500 TRX. We will launch our all-electric Jeep Recon. We are already launching the new Jeep Grand Wagoneer. We are already launching the new Fiat Grande Panda IZ. All those products will enhance our market coverage for 2026.

And also the many launches of half 2025 will give us a full benefit in 2026 of additional market coverage. This is the case of the eight launches that we see in the bottom of the slide, including Ram 1500 HEMI V8, Ram 1500 Express. In South America, the Ram Dakota, our midsize pickup truck over there. As we mentioned before, our Dodge Charger i6 SIXPACK together with the BEV, Car of the Year in North America. Our Fiat 500 MHEV. Our Jeep Cherokee Hybrid. The return of an historic and iconic nameplate in the largest individual segment in the world. In Europe, the Jeep Compass BEV. And in Europe again, the Citroën C5 Aircross BEV. And now I leave the word to João.

João Laranjo (CFO)

Thank you, Antonio. As part of our 2025 second-half results, we are announcing EUR 22 billion worth of charges that are excluded from AOI. We have broken this out for you into three categories: EUR 14.7 billion related to product plans. It includes write-offs of canceled products of EUR 2.9 billion, and also impairment of certain platforms of EUR 6 billion. This is primarily due to substantially reduced volume and profitability expectations for BEV products. It also includes approximately EUR 5.8 billion in projected cash payments expected to be paid over the next four years. EUR 2.1 billion related to steps taken to resize the EV supply chain. This includes a total of EUR 700 million in cash payments expected to be paid over the next four years. EUR 5.4 billion relates to other items. This includes EUR 4.1 billion due to a change in estimate for contractual warranty provisions, and EUR 1.3 billion of restructuring and other charges.

The vast majority of charges related to necessary corrective actions have been taken in 2025. Now let me review the preliminary results for the second half. Revenues rose 10% year-over-year at the preliminary estimate midpoint, on 11% higher consolidated shipments. AOI was negative in the range of EUR 1.2 billion-EUR 1.5 billion. Industrial free cash flow was negative in the range of EUR 1.4 billion-EUR 1.6 billion. This represents approximately half of the EUR -3 billion in the first half of 2025. Now let's dive deeper on the AOI topic. We finished below our AOI expectation for the second half of 2025 due to a combination of specific items which more than offset improvements in other areas. First, let's go through the items impacting industrial costs. Warranty expense for the second half was EUR 700 million higher year-over-year.

EUR 500 million of this was triggered by the change in estimate related specifically to vehicles shipped in the first half of 2025. Another EUR 200 million of warranty expense related to the recall of certain now discontinued PHEV models. The company also booked EUR 500 million in compliance fine provisions related to European LCV volumes. This represented the entire 2025 full-year accrual booked in the second half. Moving forward, we project this should be about EUR 300 million lower in the first half of 2026. Lastly, there were also EUR 500 million related to two items: a supplier bankruptcy and for costs incurred due to disruption of the aluminum supply chain. Next, two items in the financial service business had a negative impact of EUR 400 million in the FX and other bucket. The first was due to the residual value impact incurred in the U.S.

for the now discontinued PHEV models, and the second was a provision related to an industry-wide motor finance redress program in the U.K. So in total, there was EUR 2.1 billion of negative impact from the specific items I mentioned. At the same time, core foundational business drivers like volumes, price, industrial efficiency, and purchasing costs were all moving in the right direction. Now let us go over what we expect for the full-year 2026 financial guidance. Net revenues are expected to rise by a mid-single-digit percentage, with the largest contribution from North America. The margin guidance is low single-digit, with improvement expected comparing the second-half to the first-half of 2026. And industrial free cash flow is expected to improve year-over-year. Included in this, it's approximately EUR 2 billion in projected cash payments in 2026, of which approximately EUR 1 billion is expected in the first quarter.

We expect a return to positive Industrial free cash flow in 2027. Now let us turn to capital. The message here is that the balance sheet is strong and will remain so. The decision to not pay a dividend this year reflects our net loss. Next, the Board has authorized the company to issue up to EUR 5 billion of hybrid bonds. These actions will contribute to preserving a strong balance sheet and liquidity position, while the company works to return the business to positive industrial free cash flow generation. The company finished 2025 with industrial available liquidity of approximately EUR 46 billion, representing a ratio of 30% to net revenues at the top end of our 25%-30% target range. I want to briefly flag that we are sharing a supplemental slide for you to better understand information on the change in estimate on warranty.

I will now hand you back to Antonio.

Antonio Filosa (CEO)

Thank you, João. To conclude, I present to you this final slide where, again, I am presenting a decisive reset to make customer preferences our only guide star for the future of our business plan and for the business of Stellantis. We have a new CEO. We have a new team in place. We have a new approach to the many markets where we are relevant, and a new vision that we will be delighted to share with all of you on May 21st, 2026, in our Investor Day. Just some highlights about what we said today. Customer is back at the center of our business strategy. We drive our product plan driven by demand rather than command. We are very delighted by the very positive reception of our dealers and our customers over the new products that we recently presented to the markets.

We have a new organization in place. We have empowered regions, and our decision-making process will be faster and leaner because closer to customers. We have a new expanded range of products, some attacking white spaces where we were not present, some others that represent important return of beloved nameplates in our lineup. We are improving a lot manufacturing execution. We are improving a lot quality governance and quality processes. Our one-month in service in North America has improved in 2025 by 50%. Our one-month in service in Europe, as KPI, has improved in 2025 by more than 30%. We are recruiting. We are recruiting engineers, more than 2,000, to support our quality and time-to-market needed improvement. A profound reset that puts our customers at the center of what we do.

It comes with a cost, as João has already explained, but a very needed and important one to set us back on the road of business growth. That is all from my side. Now we will take your questions. Thank you very much.

Operator (participant)

Thank you. As a reminder, to ask a question, please type pound key five on your telephone keypad. Please do not exceed one question per person and, if necessary, an additional and related one. So the first question is coming from the line of Patrick Hummel from UBS. Your line is open.

Patrick Hummel (Head of European Autos Research)

Thank you very much. Hi, Antonio. Hi, João. Hi, Ed. Thanks for taking my questions. I would like to start with AOI. Looking at your 2026 guide, low single-digit, I guess, translates into 1%-3% AOI margin. Now, the second-half of 2025, if I strip out those non-recurring items that are within the AOI, the clean margin of the second-half of last year seems to be around 1%. So basically, you're guiding for a very moderate margin expansion, if I take the midpoint, of just around 100 basis points, and that despite quite strong progress made on the commercial front, and you're guiding the top lineup mid-single-digit. So I'm just wondering if you can share a bit more color about the puts and takes, why there is so little operating leverage despite a better topline, and if you can, also by regions.

Is it just that Europe or the Third Engine is worse, or is it that the recovery path in the U.S. is flatter than what we had in mind? And my second question is a very, very simple one. Can you just say loud and clear that with the measures announced today for the balance sheet, a rights issue is off the table? Thank you.

João Laranjo (CFO)

Okay, Patrick. Thanks very much for your question. So I'll address the second one first. We are not contemplating any equity raise, so that is not something that we are contemplating. On the AOI, we expect to see continuous improvement in 2026, and the key drivers for the improvement in AOI throughout 2026 will be volumes as we ramp up the production of the new volumes, as we are indicating in our guidance. We expect mix to be positive in the U.S. with a reduction of PHEVs and BEVs and increase of HEMIs. We expect price to be basically flat with positive improvements in the U.S., likely some negative price in Europe given the strong competition. And then we have headwinds on tariffs and raw materials of around EUR 1 billion that we expect to offset with industrial cost efficiencies due to the higher volume and much better operational execution.

Then there is the non-recurring specific items. Our guidance incorporates those levers, and we expect to make as much progress as we can throughout 2026.

Antonio Filosa (CEO)

Well. And complementing what João just said, so the pace of our reset, because this is a profound strategic reset, will be driven by new successful product launches that we will execute with very high quality. So the speed of this reset is driven by those launches that require time, obviously, that we will deliver to the market with high-quality standards. When it comes to the regions, the major engines of our business growth will be North America, U.S. specifically, where we have a big concentration of new product launches coming to the market and a very high expectation around that. It is important to remind that our order book in North America is up 150% year-over-year, and our market share is growing, especially the U.S. retail market share, which is obviously the most profitable, and this is a very good sign.

Those are the major answers to your question, and thank you for that.

Patrick Hummel (Head of European Autos Research)

Thank you.

Operator (participant)

The next question comes from José Asumendi from JPMorgan. Your line is open.

Jose Asumendi (Head of Global Autos and European Autos Equity Research)

Thank you very much. Thank you, Antonio and João, for the presentation. It's hosted from JPMorgan. Just one question, please. I can clearly see how the white space products or the products coming into white space are going to give you that additional momentum in volumes and earnings. My question is, is there not a need to take more drastic action in Europe, taking down capacity, or simply another word? Can you talk about how the announced measures are going to help improve your industrial footprint both in Europe and in North America? Thank you.

Antonio Filosa (CEO)

Well, thank you very much for this question, and I will answer to that. This profound reset that has been done to put back our customers in all the regions at the center of everything we do as a company, obviously, it comes with a strategy of business growth. That is why we are investing $13 billion in the next four years in the U.S. with the launches of five all-new products and 19 relevant products. That is why only in 2025, we launched globally more than 10 all-new products: North America, Europe, but also South America and Middle East and Africa. So once we put our real-world customer demand at the center of what we do, and once we set up for ourselves a foundation through product launches of growth, our main strategy is to grow.

It's to grow in North America, it's to grow in Europe, it's to consolidate South America, it's to grow in Middle East and Africa and elsewhere. Then, obviously, our business is also a business of efficiency. So we will take a lot of care at industrial efficiency as well. For what we think on our brand portfolio and our industrial footprint, well, we will share with a lot of pleasure all those considerations in our Investor Day, May 21st, 2026. Thank you very much.

Jose Asumendi (Head of Global Autos and European Autos Equity Research)

Thank you. Looking forward to it.

Operator (participant)

The next questions come from Philippe Houchois from Jefferies. Your line is open.

Philippe Houchois (European and US Autos Analyst)

Yes, good afternoon, and thank you. My question is on the perpetual hybrid bond. I'm just trying to understand, considering how much liquidity you have on the industrial balance sheet, am I right to assume that the driver of that hybrid bond is more to protect the rating rather than add liquidity? And if I can follow up with that, is, to what extent protecting the rating or how does, I guess, you're trying to protect the rating to continue to invest in the CapEx organization in the U.S.? And if you can comment on this, if it is the right logic, am I thinking about it the right way? And does your balance sheet in any way constrain your ability to continue building that Finco? And I'm just wondering, you've set up to EUR 5 billion, which suggests you could do less.

How could we think about the cost of that instrument? Currently, Volkswagen pays about 4.5% interest growth on a similar facility. Is that the kind of cost of funding we should be looking at? Thank you.

João Laranjo (CFO)

Yeah, thank you. Well, the first thing is, obviously, the hybrid, it's one more instrument in our toolbox to make sure that our balance sheet continues to be strong, and it's something that we are very focused on, including to make sure that we protect our investment grade, which is very important to us, and we are working very hard as well to improve the operating performance, including to protect the growth of the Finco here in the U.S. So all the points that you mentioned relate to the hybrids, the rationales that we are also looking at. And the cost of the hybrid, right now, it's at historical lows, so we think that it's a very competitive instrument. And as you said, competition and other large companies, especially in Europe, use those instruments at largest scale.

We think it's a very good instrument to add to our debt portfolio.

Philippe Houchois (European and US Autos Analyst)

Thank you.

Operator (participant)

The next questions come from Thomas Besson from Kepler Cheuvreux. Your line is open.

Thomas Besson (Head of Automotive Research)

Hi, good afternoon. It's Thomas Besson with Kepler Cheuvreux. I'd like to ask you a couple of questions, please, as well. First, when I look at your deck on page 7, could you please explain to us the difference between your operating cash burn at about EUR 2.4 billion and the industrial free cash flow at EUR 1.5 billion? Can you isolate the elements that are related to the bank and other items that can explain why there isn't a greater industrial cash burn? And the second question is, on the EUR 6.5 billion cash portion of the charges that you plan to pay over the next four years, could you confirm that it has been agreed with your suppliers that this payment can be done over four years, or is it something that you still need to negotiate? Thank you.

João Laranjo (CFO)

Yes. No, thank you for the question. So first, on the reconciliation between the operating cash flow and the industrial free cash flow, so the operating cash flow, as shown here, it's an IFRS measure, and it does not include CapEx, but it includes the operating performance of the Finco primarily in the U.S. So that operating cash flows, it's a view for the group, and it's basically including operating drivers, not investments or financing, while the industrial free cash flow does not include the Finco activities but includes the investments on the industrial companies. So the walk between the EUR 1.5 billion-EUR 2.5 billion, there is a CapEx of EUR 4.5 billion and then an operating from the Finco of EUR 5.3 billion, and that is the delta that reconciles.

If you'd like, we can provide the details after the call, but that's the difference between the operating cash flow at group level and the industrial free cash flow as we are reporting here. On the cash payments, the EUR 6.5 billion, yeah, and on the cash payments, we are in negotiation with the suppliers. We have not closed all the negotiations. The negotiations that we have closed so far are aligned with this payment terms condition, including the U.S. deal that we have announced today. The EUR 700 million that we state to be in four years, that is exactly the terms of the transaction that we just closed.

Thomas Besson (Head of Automotive Research)

Thank you very much.

Operator (participant)

The next question comes from the line of Christian Frenes from Goldman Sachs. Your line is open.

Christian Frenes (European Automotive Research Analyst)

Yeah, hello, everyone, and thanks for taking my question. Just three questions from me. Regarding the provisions that you've announced today, can you just confirm that any risk to your European operations from increased pricing pressure or what have you is sort of captured in these provisions? That's question one. And question two would be just a detail on the EUR 6.5 billion cash out from your restructuring activities. It's clear that EUR 5.8 billion comes from the product realignment, and then you have EUR 0.7 billion from the EV supply chain. What about the EUR 1.3 billion from workforce reductions? How much of that is a cash issue?

Then lastly, for your Finco, for your financial subsidiary, it was already a question on that, but could you just outline the cash investment that the Finco will consume in, I guess, both for 2025 and maybe your thoughts on 2026, what we should assume? Thank you.

João Laranjo (CFO)

Yeah. So on the provisions, we have provisioned what we have listed here. Obviously, based on our regular closing process, we take into consideration risks on the residuals and related items, including in the European market. So that is contemplated on our regular closing, but on the provisions, there is nothing exceptional for price in Europe. On the EUR 6.5 billion or the EUR 1.3 billion of restructuring, as you can see on our financials in 2024, 2025, we continue to have restructuring actions that it's about around EUR 1 billion. So the cash out in 2025 was about EUR 1.3 billion, and we expect a similar amount or slightly less, around EUR 1 billion in 2026. And then the Finco, especially for 2026, I'll follow up with you on the full-year earnings call.

Christian Frenes (European Automotive Research Analyst)

Okay. Thank you. And just to be clear, so that's an additional EUR 1 billion then out from restructuring that we should assume in line with.

João Laranjo (CFO)

Yes, but it is not a headwind versus 2025. It is actually going to be the restructuring cash out in 2026, we expect to be slightly lower than 2025. In 2025, it was EUR 1.3 billion, and we are expecting about EUR 1 billion in 2026.

Christian Frenes (European Automotive Research Analyst)

Okay. That's clear. Thank you.

João Laranjo (CFO)

Thank you.

Operator (participant)

The next question comes from the line of Stephen Reitman from Bernstein. Your line is open.

Stephen Reitman (Automotive Equity Analyst)

Yes. Good afternoon. Stephen Reitman from Bernstein in London. My question is about market share in North America or rather in the United States, excuse me. Obviously, after the 8.1% you achieved in the fourth quarter, which was obviously heralded as a sign that things improving from the lower levels you'd seen before, we went down to 7.5% in January in the United States. Now, obviously, the weather played a large part in disrupting a large number of the U.S. automakers. What would you feel comfortable with, or what would be your expectation for the market share that you should be able to achieve in the United States in 2026?

Could you comment on some of the newspaper reports that were coming out last year suggesting that you were looking at more of a volume strategy, going to put more emphasis on fleet sales as well in order to grow volume? Thank you very much.

Antonio Filosa (CEO)

Oh, thank you. Thank you for your question. I will take it. So our market share in the U.S. and in North America is overall growing January 2025 against January 2024, growing in all the segments and the channels. That includes U.S. retail, U.S. fleet, Canada, and Mexico. It's also growing in January 2025 versus December 2024 if we consider U.S. retail only. So U.S. retail is growing. What is not growing is fleet when we compare December with January, and this is because basically seasonality of our production. So we usually plan our plans to ramp up in January and the beginning of February and then go full production starting from second half of February and going forward. And obviously, on that, we limit our supply of fleet volumes. In quarter four, we grew, as you saw, and U.S. retail is still growing in January.

Our market share in 2026 will grow. In those numbers, neither in quarter four numbers nor in January, there is a significant impact of the new products. That will become significant starting from March. I just want to remember that the new products are the Jeep Cherokee produced in Mexico, so there is a lead time to get to the U.S. retail stores, so our dealer network. That will start showing up in March. Also a new product, which is the Dodge Charger that is produced in Canada. This will start to show up in our dealer lots starting from second half of February. Again, our firm trust is that the new products and the additional performance in U.S. retail and fleet will lead us growing in market share in the U.S. and in North America. Thank you very much.

Stephen Reitman (Automotive Equity Analyst)

Thank you.

Operator (participant)

The next question comes from the line of Tom Narayan from RBC. Your line is open.

Tom Narayan (Global Autos Lead Equity Analyst)

Hi, Antonio, João, Ed. Thanks for taking the questions. Tom Narayan, RBC. First question on brands. I didn't see any commentary on brand rationalization. It seems like the idea is to keep all the brands intact as you have. Just to follow up on that, the Jeep Cherokee, you mentioned the market for that in the U.S., 3 million cars. We haven't really seen much volumes yet on that. Just curious if maybe there's some supply issues related there or strategy there. Then if I could just squeeze in an accounting item, given the charges today, can we expect an improvement on D&A for 2026? Thank you.

Antonio Filosa (CEO)

Okay. Thank you for your question. I will take the first answers, and then I will leave João to the Charger's answer. So Jeep Cherokee has been launched in production in December last year. That's recovering a past delay from the past years, and it's coming now to the dealer lots by March. Again, the production site of Jeep Cherokee is Toluca in Mexico, so there is a logistic lead time to get to our U.S. dealer network. You will see Jeep Cherokee starting being visible in the dealer lot in March, starting to accelerate deliveries of this fantastic car to our consumers starting from March. This is the major lever of our market share growth and recovery. On the Charger's, João?

João Laranjo (CFO)

Yeah. On the depreciation, we expect to see a benefit of about EUR 250 million of lower depreciation amortization versus 2025 driven by the adjustments that we are announcing today.

Tom Narayan (Global Autos Lead Equity Analyst)

Okay. And then on the brands, you're okay with all the brands?

Antonio Filosa (CEO)

Oh, yeah. So brand portfolio is something that we are working a lot on top of it. We are very proud of our brands. They represent iconic brands for our consumers. If you imagine, there is no more iconic brand in the U.S. than Jeep, Ram, Dodge, and Chrysler, and we have many, many iconic brands in Europe such as Fiat, Peugeot, Citroën, Opel, Alfa Romeo, and the others. Obviously, we have an Investor Day already scheduled for May 21st this year, and we will be more than delighted to share with you all the important considerations that we have for our business plan around our brand portfolio for our future. Thank you very much.

Tom Narayan (Global Autos Lead Equity Analyst)

Thank you.

Operator (participant)

The next question comes from the line of Martino De Ambroggi from Equita. Your line is open.

Martino De Ambroggi (Senior Financial Analyst)

Yeah. Thank you. Thank you very much for taking my question. On free cash flow, my focus on, in 2026, it will be probably negative including the EUR 2 billion cash out related to extraordinary charges. If we exclude the extraordinary charges, could it be positive? And follow up on the free cash flow, what are the main components in terms of CapEx, working capital, and your assumptions? Thank you.

João Laranjo (CFO)

Okay. No, thank you. Well, on investments, first, I'll address the second part of your question. So thinking about the 2026 free cash flow, we expect investment to be very similar to 2025, and we also expect working capital to have a similar performance despite the EUR 2 billion payments because of higher volumes and also more efficiency on inventories and then some tariff credits that we are going to collect in 2026. So to your question about the results of free cash flow in 2026, it will be primarily correlated or very close correlated to the improvement in AOI. And on the AOI, at the beginning of the call, I provide the key drivers for the improvement in 2026. So we expect all the improvements that we see in AOI in 2026 versus 2025 to flow through the cash flow.

Martino De Ambroggi (Senior Financial Analyst)

Okay. But excluding the EUR 2 billion extraordinary cash out, could it be positive?

João Laranjo (CFO)

It will depend on the improvement of the AOI in 2026.

Martino De Ambroggi (Senior Financial Analyst)

Okay. Thank you, João.

Operator (participant)

The next question comes from the line of Michael Foundoukidis from Oddo BHF. Your line is open.

Michael Foundoukidis (Automotive Senior Equity Research Analyst)

Yes. Hi. Two questions on my side remaining. So João, earlier, you mentioned the very intense competitive environment in Europe, yet at the same time, you highlighted that order intake improved meaningfully in H2, which should be reassuring. However, as recently as last week, we also heard from European teams at Stellantis that they intend to adopt a much more aggressive pricing strategy to regain lost market share. So could you help us reconcile these two points and indicate whether you believe that Europe can realistically return to profitability at some point in 2026 or whether 2027 is a more plausible timeline? And maybe second one, very quick, could you tell us if you expect to be back in positive territory at the AOI level already from Q1 as you will report quarterly earnings from now on? Thank you.

João Laranjo (CFO)

Okay. So first on the second question, we expect to be profitable at group level through fall 2026. As I mentioned before, we are seeing a lot of competitive pressure in Europe. So in our forecast for 2026, we expect some headwind on pricing in Europe. We're not going to comment today on a specific forecast by region. But as you mentioned, we see a lot of positive momentum as we start the year with the market share in Europe. Do you want to comment on?

Antonio Filosa (CEO)

No, just reassuring that we will be profitable as a group throughout all 2026. This is exactly what we will do this year.

Michael Foundoukidis (Automotive Senior Equity Research Analyst)

Thank you.

Operator (participant)

The next question comes from the line of Horst Schneider from Bank of America. Your line is open.

Horst Schneider (Head of European Automotive Research)

Thank you. My question on Europe has just been asked, so therefore, I just have got one large question left. I'm not sure if you want to debate that also at the Capital Markets Day in May. But Antonio, from your perspective, are there still any synergies left between Europe and North America? So put it in a different way, is there maybe a debate at some point if Stellantis should break up so that there should be Stellantis North America where the profit pool is the highest where you have got now you can do as many ICE engines as you want, and in the rest of the world, you still have got more EV regulation, maybe that entity should stay together? What do you think about this way of thought?

Antonio Filosa (CEO)

No, thank you for that question. So there is no doubt that Stellantis makes a lot of sense being a very strong global company, proud to have very strong regional roots. So globally, all the region will enjoy a global development of global platform, of global architecture, electric electronic architecture, global modules, a global powertrain. And we will do that globally by interacting globally with global suppliers. What stays regional and local is the go-to-market, right? So what we have done in our organization by regionalizing it is to have those global assets develop globally with global partners and making sure that at a regional level, leaner regional teams are able to address specific consumer demand and specific geographical regulation in the proper way. This is how we want to leverage our global synergies that are mainly technical and of supplier base with our regional go-to-market tactics.

Thank you very much.

Horst Schneider (Head of European Automotive Research)

As a follow-up then maybe, since you just restructure largely Europe, I'm not sure, are there planned closures in Europe on the agenda and why you don't restructure also North America? Because if I get it right, there is also a larger amount of overcapacity.

Antonio Filosa (CEO)

Well, this strategic reset comes with a strategy of business growth. That is why we are investing. We are investing $13 billion in our U.S. brands in the next four years for Jeep, Ram, Dodge, and Chrysler, and for all our U.S. plants. We are investing in Europe by launching many of the 10 all-new products that we launched, for instance, in H2. Then, of course, our business is a business of efficiency as well, and we will take a very close care to industrial efficiency as well. For all of that, for all the consideration that we might have, I suggest you join us in our Investor Day, May 21st, 2026. Thank you very much.

Horst Schneider (Head of European Automotive Research)

Of course, I will do that. Thank you.

Operator (participant)

The next question.

Antonio Filosa (CEO)

Thank you.

Operator (participant)

The next question comes from the line of Henning Cosman from Barclays. Your line is open.

Henning Cosman (European Head of Automotive Research)

Yeah. Hi. Good afternoon. Thank you for taking the question. I wonder if we could talk a bit about the H2 performance by region. Is it possible to indicate a bit if you did achieve profitability in North America? I think that's something that was contemplated by the previous management. I believe your team, your current team, hasn't entertained that anymore. But I think it's quite important to understand as a starting point to extrapolate from. To your point, Antonio, the shipments were already up almost 40%. Mix was improved, albeit not with the run rate perhaps of the HEMIs that we are going to see, but it was pretty strong. So I'd be really interested to hear even if just directionally if that made it into the positive territory.

Going forward, the widespaced product, the two important ones, the Cherokee and the Charger, of course, coming from Mexico and Canada, which currently still have the very large tariffs. So if you could perhaps speak about the unit margins of these products or the unit economics considering these tariffs, and if that's perhaps the reason that the profitability increase or the margin accretion despite the revenue increase is perhaps a bit more modest, that'd be great. Thank you so much.

Antonio Filosa (CEO)

Okay. I will take some part of these questions, and thank you for that. Then I will leave João answering on the regional view and the other aspect of the same question. So what is happening in 2026 is that we are delivering to our execution a very strong foundation to grow. And I'll tell you some numbers just reminding all of that. Our shipments are already growing, 11% H2 2025 versus H2 2024. Our order book in North America, as you mentioned, grew 150% year-over-year. And our market share is growing, including in January against January last year in all channel, including January against December last year in U.S. retail, which is the most profitable one. The new products that will make us really growing are many. Some of them are produced out of the U.S., so they pay tariffs.

This is Jeep Cherokee case and also Dodge Charger case. But we have strong mix adjustments, and also we have strong cost efficiencies that we are implementing to have profitability out of those. Others, mainly in the numbers, are the ones that are produced in the U.S. So we are launching Jeep Grand Wagoneer, which is very profitable to us out of our Michigan plant in Warren. We are increasing a lot Ram 1500 HEMI production. In 2026, we estimate close to 100,000 units produced and sold more. And this is big profit to us. So we have a very important mix lever to activate to accelerate our profitability growth. Then on the regional view, please, João.

João Laranjo (CFO)

Yeah. Henning, I appreciate very much your question, and obviously, it's an important point. We are planning to talk about the regional results on our call on February 26th. If we can wait by then to provide you all the necessary information in key drives by region, we would appreciate it. Thank you.

Antonio Filosa (CEO)

Thank you.

Henning Cosman (European Head of Automotive Research)

Thank you both.

Operator (participant)

The next question comes from the line of Stuart Pearson from Oxcap Analytics. Your line is open.

Stuart Pearson (Head of Automotive and Mobility Research)

Yeah. Thank you for taking my questions. A couple of quick ones to finish up on. The warranty side, obviously, one of the big buckets of provisions that you've booked. But the spending hasn't really gone up that much year-over-year, I think 6.2 up to 6.4. And I think the provisions you put through for 2025 itself are around EUR 7.6 billion, so around EUR 1.2 billion ahead. So I mean, what are you seeing on that rate of warranty cash going out of the door in the last quarter or so? Is that starting to stabilize? Are you expecting that to carry on increasing in 2026 and into 2027?

I just wonder whether that gap between what you're provisioning and what's going out the door has some space to narrow because you seem to have provisioned quite a lot for that, and your balance sheet provision looks similar to your business now. And then have a quick question just on the capacity side. A few people have already touched on that. I just wonder, other than closing, there's other options. We're seeing the Chinese OEMs reportedly looking to partner with incumbents and obviously, Geely and Ford, one speculated route there. I mean, what are your thoughts on those kind of partnerships, the pros and cons of that? Obviously, you have the international JV with Leapmotor. Could you expand that structure a little bit?

Is it impossible in any region, not just Europe, that we see you do something more in terms of where plants sit within your different, I guess, legal entities when we get to the CMD? Thank you.

Antonio Filosa (CEO)

Okay. Thank you for your question. I will answer a couple of aspects of your question, and then I will leave João talking about the warranty spend. So before talking of warranty spend, which is very important, I want to talk on product quality. We have refocused our industrial team in improving our product quality dramatically, and we are achieving that. We have recruited more than 2,000 engineers, mainly in North America, to support both quality improvements and time-to-market improvements, and this is working. The early indicators of quality in our business is the one-month in service. In 2025, since we started this new level of execution, we improved one-month in service on our product by more than 50% in North America, by more than 30% in Europe. So quality is improving and will improve further. And then the spend, I will leave in a moment to João.

On the capacity question that you just asked, well, we read the declaration for the CEO on proposal of capacity sharing with Geely. Actually, we were pioneering that because with our partner Leapmotor, through Leapmotor International and through our network of distribution in Europe, in South America, and in the Middle East and Africa, we're already selling their cars. And we are already planning capacity sharing with Leapmotor in Europe and in South America, as we announced it already. So we are already on that path. I believe that this path will benefit them and us, them to localize production, us to share supplier bases, to share capacity, and to accelerate in some technological step-up. And on the warranty spend, I will leave João the answer.

João Laranjo (CFO)

Yeah. Thank you, Antonio. So on warranty, as you note, 2024 and 2025 were basically flat, albeit at high levels. We don't expect warranty spend in 2026 to increase versus 2025 levels. As Antonio mentioned during his prepared remarks, we are starting to see improvements in warranty both in North America and Europe. So eventually, we expect to see benefits also on the warranty spend. But for sure, in 2026, we don't expect warranty spend to be ahead of in 2025. Thank you.

Stuart Pearson (Head of Automotive and Mobility Research)

Thank you.

Operator (participant)

The next question comes from the line of Emmanuel Rosner from Wolfe Research. Your line is open.

Emmanuel Rosner (Managing Director)

Thank you very much. I have a couple of questions on the cadence, if I may. So you're signaling an improvement in first-half margin, but then in the second half better than first half, and then 2027 better again, and then same thing for free cash flow. Besides for maybe the volume or market share trends from ramping up some of the new products, are there any other puts and takes that we should consider that will make the second half better than the first half and then further improvement in 2027?

Antonio Filosa (CEO)

Well, no. Thank you very much for this question. I will take it. Yes, as you mentioned, we see a very big improvement in volumes driven by new products, but also in mix. So one of the largest volume improvements will happen in the space of Ram pickup truck, V8 HEMI engine power, where we are planning to produce and sell 100,000 units more in 2026 versus 2025. And this is obviously a big profit maker for us. The other and third lever of profit enhancement that we see for 2026 and forward is to improve industrial execution. That will mean to us to improve quality output, as we said. They are already improving, and we are keeping improving them in many war rooms that we started in all the regions in all our organization. And by improving cost, that we are working a lot with our engineering.

We recruited more than 2,000 only in 2025 with our suppliers that we are engaging in many and several supplier tables to technically work on components, systems, and subsystems. Volume, mix, cost, and industrial execution will be the major levers to enhance our profit for 2026 and forward. Thank you very much.

Emmanuel Rosner (Managing Director)

Then a quick follow-up on cadence as well, and apologies if I missed it. In terms of the cash out for some of these realignments, you said I think it will be over four years. Are you able to give us some sense of cadence of how much of it is in which year or specifically how much of it in 2026? Again, apologies if I missed that.

João Laranjo (CFO)

Yeah. So of the total EUR 6.5 billion, we expect about EUR 2 billion to be paid in 2026. And of that EUR 2 billion, EUR 1 billion to actually be paid in Q1 2026 as we close negotiations. So that is the cadence. So in 2027, 2028, 2029, it will be evenly spread. But in 2026, we expect to pay EUR 2 billion out of the EUR 6.5 billion.

Emmanuel Rosner (Managing Director)

Thank you. Very helpful.

Operator (participant)

Ladies and gentlemen, this was the last question for today. Let me now hand the call back to Mr. Antonio Filosa for the conclusion.

Antonio Filosa (CEO)

No worries. Thank you very much. Again, thank you for joining us in this important moment. What we announced today is a profound strategic reset for our company, one that will put back our customer real needs at the center of everything we do. We are very optimistic for 2026 and for the future. Please, I will have all you back, hopefully, in our Investor Day, May 21st, 2026. Thanks again. See you later. Bye-bye.