With Stellantis as part of Wolfe Research Virtual Auto Summit. My name is Emmanuel Rosner, and I'm the lead auto analyst here at Wolfe Research. We're very pleased to welcome Stellantis, one of the largest and most diversified automakers in the world. In the four years since PSA and FCA merged to form Stellantis, the company has experienced extraordinary highs and, more recently, some significant lows. While it's not a secret that we've been cautious on the company fundamentals, it's also true that Stellantis is home to iconic brands, including Jeep, Ram, Alfa Romeo, Maserati, and others, with the potential for impressive global scale if management can execute a turnaround in North America and in Europe. At such a critical juncture, we're very pleased to have CFO Doug Ostermann with us today to discuss Stellantis' strategy, as well as Ed Ditmire from Investor Relations. Gentlemen, thank you so much for being with us. Thank you, Emmanuel. Thanks for having us today. Maybe just to kick things off, strategically, what is changing at Stellantis now versus the previous leadership? I'd maybe highlight a couple of things, Emmanuel. One, as you know, we've kind of changed to this interim executive committee, which is a team of roughly nine executives that support the decision-making. As you may know, prior to that, we had more like 29 or 30 senior executives supporting all the decision-making. We moved to a structure that, one, I think, is a bit more nimble, makes for faster decision-making, and also, I think, a structure that is more common to what you would see at major corporates around the world, frankly. I think that's something that will stay in place long-term. Another big shift for us really has been kind of focusing on those core stakeholders and trying to kind of build back some of the relationships that had deteriorated a bit over the past years. We have been, as you may have seen, working a lot with our union partners, with the administrations and regulators in the regions in which we do business, working a lot more cooperatively with suppliers, and, of course, importantly, our dealer body, particularly in the U.S. That has been a big focus for us. I would say, not that it is necessarily a change, but we are very laser-focused on this huge product offensive that we have going right now. Lots and lots of product rolling out, particularly in Europe, but also some very significant launches in North America. I would say that has been a big, big focus for us. I would say just kind of evolving our approach to kind of the regulatory and compliance side of things. You may have seen that we've been involved in some pooling efforts in Europe, but also the landscape on the regulatory side is changing pretty significantly. We have been really looking at kind of our product plans, re-sequencing some of the launches, looking at kind of the powertrain offering that we have to make sure that, really, we have the products in the market with the right powertrains to kind of meet the evolving customer demand that we see in each of the regions. I would say those are kind of the most significant shifts over the last couple of months. Yeah, that's a helpful overview. Doug, you were part of the team that organized the PSA-FCA merger under the, I guess, premise that the combined scale and resources would drive efficiency. Now, four years in, do you still believe the current structure is optimal, or could a different organization be more efficient? I mean, I think that Stellantis has benefited tremendously from the merger, and we've realized a tremendous amount of synergies. I think there's quite a bit of synergy still to be realized, frankly. As you know, the product cycles in the automotive world are pretty long. I think there's still lots to come. Importantly, when you look at Stellantis today, we have both regional scale in kind of three of the most important markets of the world. Europe, very significant scale. North America, significant scale. South America, significant scale. Also global scale, right, with 5.4 million units last year, depending on how you group things. That puts us around the third largest in terms of absolute number of units sold. I think when we look at the dramatic changes that are going on in the industry between electrification, the rising importance of software, and, of course, the more traditional elements of just sourcing, I think these all benefit from a global scale. These types of investments, when you can spread them across a significant volume, really help with that transition, which is going to be key to all the competitors in our industry, no matter where you operate. I think it's still a big competitive advantage for us. Of course, we still have to live up to the potential, right? We can't sit back and say, "Well, we experienced and achieved a lot of synergies over the first couple of years. We have to keep driving. I would say also that we certainly recognize that there is more kind of regionalization going on right now as opposed to globalization. One of the things that we've been working on is really pushing down a lot of the decision-making within the organization into the regions, right, where we can kind of do a better job of, one, addressing issues as they occur, but also tailoring the product, tailoring the mix, tailoring the approach to the local markets. That is another thing that we've been progressively working on as we see the landscape evolve. Shifting to the tariffs discussion, with this ongoing uncertainty here in the U.S., what mitigating actions could you take in case of tariffs on Mexico and Canada? More broadly, do you expect a broader shift towards reshoring capacity for Mexico and Canada to the U.S. in the coming years? Yeah, I mean, tariffs is definitely kind of the hot topic of the day. Appreciate that you waited until the third question to ask it. That's good. You did not hit me with it first question. Look, tariffs are an issue that we've been giving a lot of thought to. There were a couple of different parts to your questions, so I'll try and answer each of them. Please circle back if there's anything I missed. In the short term, we, of course, have been working upstream with kind of our supply chain to look at our Tier ones that might be impacted by the tariffs, some stock levels, safety stock, et cetera, that we normally would keep at a supplier. We've been moving across the border into our plants. It's not the way we normally operate, but in order to kind of mitigate any short-term impact, we've been taking some steps. We've been also working kind of downstream with our dealers to collect orders of units that could be impacted to try and produce them over the last kind of month hiatus that we've had. Really, when you look at the vehicles that we produce in Canada and in Mexico, we have pretty good supply on the ground right now with our dealers, probably 70-80 days on most of those units. We've been doing some near-term actions. Importantly, we also have been dialoguing with the administration at various levels. Of course, we really appreciate the opportunity to provide that input, to kind of help them understand the issues within our industry specifically and ways in which maybe they could help us help them achieve their policy objectives, right? I think as we think about seeing the administration's support for U.S. manufacturing, that's, of course, very exciting for us to have the administration so focused on trying to support U.S. manufacturing. We obviously want to see that through, want to help them understand our needs, and obviously try to help the administration achieve those goals, which they're going to be putting out there. I think it's an ongoing situation. Of course, just like we adapted after USMCA was put in place in the first Trump administration, I'm sure we'll adapt to whatever changes come about on April 2, 2024 or thereafter. Of course, as you probably know from our fourth quarter earnings call, Emmanuel, we've been also trying to focus the administration on the roughly 4 million units that come into the U.S. market that are not USMCA compliant. Because even the products that are assembled in Mexico and Canada, as you know, have very high, many of them have very high U.S. content, right, to meet the USMCA regulations, as opposed to these kind of 4 million vehicles that we've been talking about that come in from places like Korea, from Japan, from Germany, that oftentimes have little to no U.S. content. We feel that if the administration wants to focus on supporting U.S. manufacturing, that's a place for them to also take a look at. Yeah. On the other side of the regulatory discussion, the landscape for EVs is also shifting here. Detroit OEMs have committed significant capital to EVs in recent years, but a more relaxed regulatory environment could potentially free up some of this capital previously earmarked for EV investment. How are you thinking about this shift for Stellantis here in the U.S.? Yeah, I mean, I think a couple of things. One, we've always been a big believer in kind of the freedom of choice, right? So we offer a wide range of powertrains, everything from full ICE to mild hybrids to hybrids to plug-in hybrids all the way to full battery electrics. Really, when we invested in our new set of platforms, so I'm talking about the STLA Smart Car and STLA Medium, STLA Large, and our frame platform, we did it in a way that was multi-energy because we recognize that, one, there are different adoption rates around the world where these platforms are industrialized, but also that the rate of adoption can shift with government policy and the like. I think we're set up fairly well in terms of being able to adapt the powertrains within the new platforms to the mix that's desired within the market. Of course, as we've been pretty transparent, we make money on our BEV platforms. For instance, in Europe, we're just launching our first BEVs in North America, but we don't make as much as we do on the ICE vehicles. We're still working on the convergence of the pricing or the cost of those vehicles. That'll take some time as battery chemistry changes. Certainly, the ability to potentially mix to meet customer demand for more ICE vehicles should be positive for our mix. Shifting maybe to your North American operations, the market understood your 2025 earnings guidance as suggesting North American EBIT margins would improve from low single digit in the first half to maybe mid to high single digits in the second half. It would seemingly require higher market share and volumes while keeping pricing broadly stable or maybe even improving year over year, which is often a challenging thing to accomplish at the same time. What will drive this for Stellantis? Yeah, I mean, the short answer to your question, Emmanuel, is product, right? We have a pretty significant amount of product coming into the market. When we think about our pricing, really, we took about a 4% adjustment in pricing during the second half of 2024. That brought our pricing for the most part in line with our major competitors. We are much more competitively priced right now. I do not think there is a lot more work to be done there. What we need to do is we need to continue to launch our product cadence. There are a couple of important elements there. One, as we started introducing the new DT full-size Ram pickup, our light-duty pickup, kind of mid last year, we did not have full availability of a lot of the higher trims. When we look at the Tungsten, the RHO, the trim lines that have the high-output engines, we've just gotten back into producing those trims early this year. We opened up dealer ordering for those in January. That is an important add to our mix. We have the new 2500 and 3500, the heavy-duty versions being refreshed, which is really the last kind of piece of the full-size truck refresh that we've been working on for the past year. We need to get those into the market. We need to really look at probably a lower-end truck to replace the DS that we stopped production of, the old full-size pickup that we referred to as the Ram Classic, which was at a very attractive price point. Now the dealers are starting to sell out of those. We need to introduce kind of a lower-end trim of the new pickup to fill that gap. We are going to be looking at some expanded ICE powertrains that I think are going to be very exciting for customers kind of later in this year. Also, very late in this year, we're going to have the new Ram REEV, so the range extender, which is called the Ramc harger. That product, I think, could be a blockbuster for us. I think it's a very, very attractive consumer package with kind of world-class towing capability, very good range, and just a dynamite offer. I think we will be the first to come out with that powertrain on a full-size pickup in North America. I think there's a lot coming on the Ram side of things. We also, of course, need to introduce the Cherokee replacement for Jeep, which comes kind of late in the third quarter. That will also be our first full hybrid, so HEV in the marketplace. We've seen our competitors do very well with those powertrains. I'm excited to get our first one into the market and then work on expanding the offer of that powertrain into more vehicles on that same platform. This is all kind of building on this launch of these new platforms into the marketplace. It's a great time for us. Really, that's the key to the market share this year, really is broadening the coverage that, frankly, has shrunk for us. Last year, as you know, we didn't have Charger and Challenger. We stopped production of those cars. We just kind of started up the first version of the replacement vehicle, which is the Dodge Daytona BEV, but we'll be coming out with the ICE versions of that vehicle, the two- and four-door kind of mid-year this year. Again, another kind of blank space, at least temporarily for us right now, being filled in. Certainly, market coverage has been an issue for our market share over the last year or two. Yeah, absolutely. Let me try and dig into a little bit more details on some of the product coming up. You mentioned you have key launches in the crossover space, in the sedans, in the EVs. What are your volume expectations for these launches? I guess, how should we think generally about sort of like the volume benefit from some of these launches as we move into the back half of this year? Yeah, I mean, when we look at Stellantis as a whole, of course, the product launches and the product story, I would say, is even stronger on the European side, right? In Europe, we're launching all of our new B and C segment vehicles. As you know, the B segment is like 20% of the market. It's been a stronghold for us. Being able to launch all of the Smart Car-based vehicles, starting with the C3 and e- C3 late last year, kind of September, October, then moving into C3 Aircross, Frontera, Fiat Grande Panda, a whole onslaught of vehicles, frankly, in the B segment. In the C segment also, with our new STLA Medium platform, 3008, 5008, Opel Grandland, we have a C5 Aircross. A lot of new products coming in. Big product story in Europe as well. To answer your question on volumes, as I kind of looked at the volume decline that we had last year in terms of the 750,000 units that we talked about on the earnings call, I kind of broke it roughly into three parts. Roughly 250,000 units that was related to inventory correction, right? Another 250,000 that was related to these blank spaces that we've been talking about filling with this new product. And then another 250,000 that was, frankly, from market share decline of existing products. That's where some of this price repositioning that we've talked about in the second half, as well as really an increased focus on marketing. Anybody that kind of saw the Super Bowl and saw our two ads getting definitely more aggressive on defending our share of voice, particularly for those products that really make a big difference for our profitability. Ram and Jeep in North America, significant increase in our marketing efforts on that front. Of course, new leadership for Ram with Tim Kuniskis coming back into the company to run the Ram brand after a long and storied career here as a great marketer. I'm sure all the dealers are very happy to see Tim back, as are we. Lots of change. These three buckets are very helpful. Out of these 750, would you think you can, you're targeting this year to recapture one or two of these buckets? I mean, certainly the blank space, I guess. Yeah. We want to try and capture kind of two of those buckets, let's say. I mean, obviously, a lot of it will depend on kind of how the market itself develops over the course of the year, right? Yeah. Certainly, we're trying to address we won't have a repeat of the inventory correction. We certainly will be able to fill in some of the white space products, not on January 1. That'll only be a partial replacement as we move throughout the year. As I mentioned, some of the launches are later in the year. Of course, the market share will very much depend on the effectiveness of our efforts there. Yeah. On pricing, incentives have been rising since middle of 2023, but the retail market share has sort of remained on the low side. What do you make of the lack of price elasticity? We did take a lot of our price adjustment, like I said, kind of in the second half of last year on the North American side. On Europe, we really addressed it kind of in the first half of the year. A little bit different dynamic there. If we look at our level of incentives as a percentage of kind of what we think of as the customer-facing price, that really peaked in October and has been receding generally since then with kind of the difference between our incentive spend and the average of the market coming down by about a third. If we look now in terms of market response, which was really the heart of your question, we're seeing the early signs that we're moving in the right direction. Dealer orders have been much stronger during the early part of 2025, which was a big improvement. When we look at retail volumes, they were about 10% higher year over year in February. We are kind of cautiously optimistic that we will be able to build some momentum, build back some of the market share. The dealer orders are also extremely important to us, right, to be able to run our plants efficiently throughout the year. Both those signs, I think, are encouraging, but still kind of early days here. Maybe one more on the U.S. pricing. Where should the Ram 1500 pricing ultimately land? I think you mentioned, obviously, some of your current product, but also the need to introduce something to replace the Classic. Do you have a target market share to go back to on the Ram 1500? Yeah, I mean, really, when I think about the Ram lineup today, I think for the trim levels that we have in the market, we are very competitive. Obviously, being able to come out and produce more of the higher-level trims, like the Tungsten and RHO, I think that's going to help our overall pricing because there's a lot of kind of pent-up demand for those models right now. I think the 2500 and 3500 are brand new products. We really do not see a lot of discounting typically when we have new products like that. The lower-end model that we need to address, that'll take a little bit of time. I do not see that coming into the market immediately. We still are working on that one. Of course, second half, being able to come out with that range extender powertrain, I think, could really help us as well. I do not necessarily think that we need a lot of pricing effort on the Ram side. We need to bring the products back into the market and, of course, work on the share of voice and the marketing effort side, which, frankly, we were not spending against in the past year or two. I think we need to return to defend our share of voice and make sure that customers are aware of our products, aware of all the benefits of our products, and have that emotional connection that we traditionally have had with our customers via the Ram brand. We have a lot of very storied, fantastic, strong brands. I appreciate, Manuel, you mentioned them at the top of our discussion. Yeah, obviously, we need to keep the marketing up to keep that connection. Yeah. Shifting to Europe. The Europe market share was maybe around 15% in the second half of last year, down from 18% in the first half. Some of the delayed B segment launches played a role. We have also heard feedback that Stellantis products are perhaps misaligned on price and mix. Does the portfolio or pricing strategy in Europe need adjustment, or is it really just about introducing the product? I mean, we're, of course, always looking to improve price and mix. I won't say that we aren't working on price and mix. For sure, we always are. Really, what happened was our products, particularly the B segment, we did not invest in the former products and their powertrains as the regulation changed mid-last year because we were expecting the new products on the new platform, the STLA Smart Car platform, which we had industrialized previously in India, but had the first industrialization of the Smart Car in Europe launching. We thought that it would dovetail, come right in as the old vehicles ran out. It turned out that it took us longer to get that new platform, all the new powertrains, and all the new top hats kind of set up. There was a delay there, right? In the second half, we were missing a lot of those products that we expected to have in the market. The product cadence now that we got the first top hat launched on that new platform in the September-October period is very rapid. If we look at February start of production, we had quite a few cars off that platform or the sister cars, if you will, all launching. Opel Frontera, Fiat Grande Panda, the C3 Aircross. Just a big rollout. I think when we look at really improving the market share, those products are the key to the market share. In fact, if you look at our market share in Europe in January and February, it is significantly up. I think we're seeing good signs, but really, most of those products hit in March, right, because they started production in February. So really, March, April is when we really want to watch to see that market share start to really us kind of reclaim our traditional market share in some of those segments. How should we think about the impact of the EV mix on margin, considering that you have sort of like this recent development around easing regulations, but you also have new BEV launches? Any insights you can give us into unit profitability or operating leverage on these BEVs? Yeah, I mean, it's a good question, Manuel. We have to separate it kind of in the two markets. In North America, EVs are such a small percentage of the overall market, kind of 8%, that we are launching some exciting BEVs, but they aren't really a big factor in our profitability. When we look at Europe, it's quite a different story, right? In Europe, the regulations are changing such that really most manufacturers will need to get into the high teens in terms of mix, maybe around 20%, to be compliant by the end of the year. I can tell you a lot of manufacturers are not anywhere near that percentage rate. It is a big shift. Even for us, we're looking at a shift from kind of low teens to very high teens at the end of the year. We feel well-positioned to do that because of all these products we just talked about. They all are multi-energy. They offer ICE versions and mild hybrids, but they also offer full BEVs. Frankly, the early orders for a lot of those car lines that we just talked about in the B and C segment have been heavy BEV mix. That is good. They have been well received. We do make money on those products in Europe. As I mentioned earlier, we do not make as much as we do on ICE. To answer your question directly, when I think about that mix going from kind of low teens to high teens, I would say we are looking at a margin headwind of up to a full percentage point, so 100 basis points, one full percentage point of margin headwind from that shift. Now, the second part of your question, when you were talking about, like, how do we think about this regulation change? The regulation change, assuming it passes in Europe, is really a shift to something much more similar to what we have in the United States, which allows you to comply over this kind of three-year period. Now, for us, like I said, we already had planned on being self-compliant with our own portfolio. We also have a little bit of cushion because we have pooled for a little bit of credits with Tesla. We also have pooled with Leapmotor. As you know, we've launched Leapmotor in Europe. I wouldn't be surprised if we sell 50,000 units of Leapmotor in Europe this year. That'll help because we get to take advantage of those credits as well. There is a little bit of cushion as well. Where it really is a relief, frankly, from my viewpoint, is I was very concerned that we would get to kind of third quarter, a lot of our competitors who maybe are not as well equipped for this shift to BEV might start to look at their mix, look at the fines that they may be subject to, and start to panic. That price discipline in the market on BEVs, in particular in the fourth quarter, could get really ugly, right? The fact that now the EU is looking to pass legislation that is going to allow for that panic to be avoided and for people to comply over a three-year period is a huge plus in my book. That makes sense. I had a few questions on the search engine, but in the interest of time, I'm probably going to jump to focus on free cash flow and on capital allocation. Then we can come back to the search engine if we have time. You guided to positive free cash flow this year. Can you provide us more context? What are the key assumptions around working capital volumes, etc., to achieve that? What's the upside potential for normalized free cash flow later down the line? Yeah. One is an ex-treasurer. I'm glad you're focused on cash. It's a key area, right? Look, if we look at the first half, just to give you some more granularity, if we look at the first half, I had mentioned on the call that I expect us to run at an AOI operating income% of low single digit, right? With low single digit margins, the ability of the company to generate cash when last year, keep in mind, we ran it at 10% AOI, right, in the first half. We were just basically break even on cash. We had negative $400 million, right? If we run it at single digit, I wouldn't be surprised if we see some negative cash evolution in the first half on industrial free cash flow. Now, much of that will depend on kind of the production levels that we run at in the last six to eight weeks of the half and how our inventory dynamics evolve in those last few weeks as well. We will have to see. There is a possibility that we could be closer to break even cash. It would not surprise me at all if we end up at negative cash in the first half. All the cash generation will come really in the second half. As we talked about, we expect to return to positive free cash flow this year. Longer term, though, we really need to look at our cash conversion cycle, right, and improve our performance on that metric. I would like to see us go from a traditional performance where we're kind of in the 40-50% range to be 10 percentage points higher than that in the next couple of years. It will take a lot of work and a lot of discipline. Yeah, cash flow is a big important focus for me. The return to positive cash flow this year is key for the company. How are you thinking about capital returns to shareholders this year and beyond? What is the right formula or framework for Stellantis? Yeah, I mean, as the former treasurer of the company, I mean, I worked very hard to put together with my team and the colleagues here what I considered a fortress balance sheet. And we have always talked about the fact that we'd like to run at a liquidity that is 25-30% of trailing 12-month revenues. As you know, in the last few years, we ran substantially higher than that. But we kept a strong balance sheet so that we can endure a year like we had last year, right, where we had negative free cash flow. We did it because we know that we operate in a volatile industry, a cyclical industry, and you're going to have years like that. And so what that allowed us to do, though, was to absorb that down year and not change our return of capital strategy, right? We've always talked about the fact that we want to return 25-30% of net income to our shareholders. Now, traditionally, because we've been running such strong earnings, we had been at the 25% level. With the dip in earnings this year, we went to 30%. It allowed us some flexibility to return more capital. In fact, we also returned some capital that was associated with a transaction we had on the separation of Comau, which we had signaled at the time of the merger and finally were able to accomplish this year. I feel good about the consistency of our capital return to shareholders. I would expect that our policy will continue as we continue to see the company return to positive free cash flow. Looks like we may have the time to ask actually one or two questions on the search engine. Let's do it. Stellantis has dominant positions in markets like Brazil and Turkey. Chinese OEMs, most notably BYD, are ramping volumes there. Given their willingness to operate sometimes at little to no margin, what are you seeing and how are you thinking about competitive pressures? Okay. Yeah, I mean, our third engine, our profitability in the third engine is driven by South America and MEA primarily. When we think about those markets, they're quite different. Keep in mind, when we think about the Chinese threat, we, of course, are launching the Leapmotor brand in both those regions. In MEA, we've started the launch already. In South America, we will be launching later this year. Those customers who are attracted to that kind of Chinese offer of kind of value technology for the money, I think we have a good offer for them. It's somewhat differentiated from our traditional strong emotional brand connection, brands that have been around for 100 plus years in many of these markets, right? I think it's a great offer, and it's been very well received. I think Leapmotor is going to help us combat the Chinese. As you know, we have all the exclusive rights via RJV to all the sales of Leapmotor products outside of China. We have exclusive rights to all the manufacturing of Leapmotor products outside of China. We have our own kind of Chinese initiative. That being said, when we look at a market like South America, you're looking at a market where I would say that the strongest differentiator, where the Chinese tend to have a real strength, is in the BEV side of the market, right? That's where I'd say the cost advantage is the biggest. South America, frankly, is not a very big BEV market, right? It's tiny down there. South America is a market that is focused on flex fuel, right? We have a great team down there that develops fantastic products, local for local, produces them in local plants. The brands are well-loved in those markets. We are the number one in South America for the fourth year running now with Jeep and Fiat as our lead brands. We have a real depth of understanding of these multi-fuel technologies and engines. Also, as you know, Brazil is a somewhat protected market. You see the competitors like BYD purchasing plants. I think they just purchased a Ford, ex-Ford facility to localize. It'll take some time. Like I said, I think their real strength, which is on the BEV side, is maybe not as potent, at least in the near term, in the South American market. When I look at MEA, again, we're extremely well positioned. There's a lot of opportunity in MEA. We're kind of focused on five of the 55 countries in that region, but there's a lot of expansion possibilities there. We have a growing, strong, very young middle class in the Middle East Africa region. We have strong market share, very strong margins. We keep introducing more of our European products into those regions with local production. It has been a very successful strategy for us. I think that's a real area of strength and opportunity for us. Not to say we're ignoring the Chinese threat. We're certainly not. I think we're well positioned in both those markets. To summarize, if we fast forward another nine months, what KPIs are you focused on that will indicate Stellantis is exiting the year in a stronger position than when it entered? Certainly, we want to grow market share in both North America and Europe. I think that's a key metric for us all to focus on and watch to measure our own progression. Certainly, improved profitability sequentially going from kind of last year's second half, we ran kind of flat to single digit in the first half, low single digit in the first half to kind of mid to upper single digit in the second half. I think that's going to be an important metric so that we exit with a rate that is indicative of where we can go next year. Certainly, the return of cash generation, very, very key for our company. Industrial free cash flow positive. Great. Doug, thank you so much for the time and insights. Very much enjoy the conversation. Thanks, everyone on the line for joining. Yeah, thanks for having us. Have a great day. You too.