Mercedes-Benz Group AG (MBG) Earnings Call Transcript & Summary

Welcome to the global conference call of Daimler. At our customer's request, this conference will be recorded. A replay of the conference call will also be available as an on-demand audio webcast in the Investor Relations section of the Daimler website. The short introduction will be directly followed by a Q&A session. [Operator Instructions] I would like to remind you that this teleconference is governed by the safe harbor wording that you'll find in our published results documents. Please note that our presentations contain forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made. May I now hand over to Steffen Hoffmann, Head of Daimler Investor Relations. Thank you very much.

Good afternoon, ladies and gentlemen. This is Steffen Hoffmann speaking. On behalf of Daimler, I'd like to welcome you on both the telephone and the Internet to our conference call regarding reporting changes caused by our new company structure as well as our adjusted guidance methodology. I'm sure all of you know that I took over on April 1 as Daimler's new Head of IR following Björn. And therefore, I'm very happy to be on my first investors and analyst conference call with you today. We are very happy to have with us Harald Wilhelm, member of the Board of Management responsible for finance and controlling and Daimler Mobility. Harald will begin with an introduction, directly followed by a Q&A session. The respective presentation can be found on the Daimler IR website. Now I'd like to hand over to Harald.

Thanks, Steffen. And welcome, hello to everybody. First of all, I hope you and your families are well. The current situation definitely reminds us all that health is priority #1. COVID-19 has changed the world as we last spoke. The original intention of today's call was to provide you with some insights on the upcoming reporting changes of Daimler, which we will start with the publication of Q1 2020 results, which is the reason why we're having that call here today. These changes will reflect the new group structure after the implementation of PROJECT FUTURE and our move to report adjusted figures in addition to pure GAAP figures. However, in a situation like this, I think we cannot have such a call without some words on the current pandemic situation and the way we handle that at Daimler. Whereas the overall economic impact on Daimler cannot yet be assessed with sufficient certainty due to the high volatility of the situation, I'm happy to take you through the actions we initiated. So what are they? We at Daimler reacted pretty fast. We currently operate on a day-to-day mode, adjusting to reality in real time. We take speedy decisions. We gather information, I mean, on very short notice, and that drives a lot of efficiency in the way we operate right now to navigate through this situation. At the same time, we envisage the opportunities ahead. Actually, we think the situation will help us to accelerate our transformation plans and improve speed and efficiency beyond corona. So what are our actions? We shifted gears to full cash preservation mode with a consequent end-to-end management of all cash in and cash outflows to address the issue. We quickly adjusted global production at Mercedes-Benz Cars & Vans as well at Daimler Trucks & Buses. We introduced short-term labor in our German plants and agreed on temporary salary reduction for managers. We cut back CapEx, OpEx and general procurement spend. However, we continue to work on future topics. Strategic projects will continue, and we maintain necessary basic functions for ongoing operations. We want to remain on schedule so that we are ready when things pick up again. We secured an additional EUR 12 billion loan facility and could demonstrate access to the capital markets last week with the successful issuance of a EUR 1.5 billion 5-year benchmark bond. That comes on top of our EUR 11 billion net industrial liquidity and EUR 24 billion industrial gross cash at the end of 2019. So which means, all in all, we have a lot of flexibility for various adverse scenarios ahead. We decided to postpone the annual shareholders meeting, the target now is to do it early July as a digital AGM. Let's have a look at the markets data, which I think is coming out as we speak for Q1. So of course, corona heavily impacts to the sales on a global scale. So what is it, what we can see in our core markets for Q1 2020? At Mercedes-Benz Cars, excluding smart, we recorded in the first quarter, sales of 465,000 units, that's around 12% below previous year. After a strong start into the year, we then saw the impact from the corona crisis with a significant decline in February in China, followed by Europe in March. The group sales in the U.S. in March showed no corona impact. Especially our high margins SUVs, the GLE and the GLS, show a very solid sales performance, underlying the continuing attractiveness of our SUV portfolio. We see early signs of a recovery in China. Group sales in March returned close to 60,000 units, almost on the same level as last year's sales. All of the dealers are in operation in China, and we are recognizing growing customer traffic. As of the end of March, our operations in China is already fully normalized, including the complete supply chain. We work in 2 shifts. By the way, this is almost equal to 3 shifts in Europe. From today's perspective, for Mercedes-Benz Cars & Vans, we expect a positive absolute margin in Q1 2020. At Daimler Trucks, the sales figures show a clear downward trend in Q1 2020 versus previous year for all major regions. In total, we recorded 20% decline in group sales, mainly driven by market downturn. Trucks North America with about 26% and Trucks EMEA with about minus 30% are hit hardest. At the same time, we record a reduction of 15% in incoming orders, largely driven by Trucks Asia and some -- to some extent also from Trucks EMEA with 8% year-on-year down. Trucks in North America actually withhold the trend with a positive incoming order trend of slightly more than 20% year-on-year positive. We are monitoring the situation very closely. So far, we registered first postponements and cancellations, a further negative trend due to the corona crisis is to be expected. So from today's perspective, for Daimler Trucks & Buses, we expect a positive absolute margin in Q1 2020. Coming to Daimler Mobility. In the current situation, that means that we take less new business on board, which means less cash out through the financing. The majority of our markets is in shutdown situation, which is the main driver for high demand of payment deferrals. Based on the potential macroeconomic cool down, we expected delinquencies and in the mid-term credit losses will increase in the future. Net credit losses are yet to be assessed. Before net credit losses, Daimler Mobility expects to be margin positive in Q1 2020 as well. The industrial free cash flow for the group is expected to be negative in the first quarter 2020, but I feel comfortable with my net industrial liquidity level as we speak. On the production side, the capacities have been reduced to match the lower sales volumes and to control inventory. Due to the worsening COVID-19 pandemic, Daimler decided on Tuesday, March 17, to suspend most of its production and work in selective administrative areas initially for 2 weeks and to introduce short-term labor for another 2 weeks. For the time being, this affects the majority of production and work in selected administrative areas in Europe and meanwhile also in the U.S., Latin America, Africa and India. We intend to prolong the measure of short-term labor for most of the plants until the end of April. We ramp up China, the supply chain to China and gradually step up some of our production sites. The majority of all other functions is down or in short-term labor except for key future projects, as I outlined before. However, as soon as seen -- as we seen an improvement on the demand side, we are ready to ramp up our production gradually. Production of batteries and important product launches continue as we speak. So if I wrap it up and conclude on the current COVID-19 situation. First, our responsibility is to do everything possible to help to slow down the spread of the virus and to protect our people. At the same time, it is essential that we keep the company running and control everything that is in our hands. The second, at this stage, we cannot make reliable projections on the future. We look at various scenarios. Third, cash protection is put into place very fast. Fourth, liquidity measures are implemented. We have lots of flexibility to weather various scenarios. And fifth, we are working on how to get out of this situation even stronger. Now, and coming back to the original subject of the call, the change in the reporting structures. I think we provided a couple of slides earlier to this call today. So let's have a look at that. Last year's annual shareholder meeting approved our new group structure, which you see on the Page 2 of the deck. This new corporate structure took effect when the hive-downs were entered in the commercial register. Mercedes-Benz AG now is responsible for the divisions Mercedes-Benz Cars and Mercedes-Benz Vans, while Daimler Truck AG took over responsibility for Daimler Trucks and Daimler Buses. Starting with January 1, 2020, we also changed the internal management and reporting structure. Therefore, we'll start to report according to this new corporate structure with our reporting on the first quarter 2020. At the same time, we have taken this as an opportunity to enhance transparency on a number of KPIs. Moreover, we started to report adjusted figures in addition to the GAAP figures already with a disclosure on our full year 2019 financials. We prepared a couple of slides on this, which have been distributed to you and also made available on the Internet. So let's have a closer look on the changes. We now have 3 operating divisions or reportable segments, Mercedes-Benz Cars & Vans, Daimler Trucks & Buses and Daimler Mobility. We will report financial KPIs exclusively on these segments. Because on the product side, there is a significant difference on passenger vehicles and vans and even more in trucks and buses, we'll continue to report unit sales and market shares separately like we did in the past. Effects from legal cases as well as from investments, which previously were not allocated to the segments, will now be allocated to the automotive segments. On Page 3, you can see which KPIs are new in our reporting. Reflecting our increased focus on cash flow, we are going to provide you with cash flow before interest and tax, as called CFBIT. In our Capital Markets Day back in November, we put an even stronger focus on our targets for cash conversion rate for the automotive divisions. Consequently, we now integrate this KPI in our reporting on actuals and guidance. Reflecting our intention to focus reporting and capital market communication more on the development of the underlying business, we complement GAAP figures with adjusted KPIs. This relates to EBIT, free cash flow of the industrial business, CFBIT, and based on that also return on sales, return on equity for Daimler Mobility and to the cash conversion rates. Let's go to Page 4. As early as within the last full year disclosure, we introduced a set of adjustments for material single items affecting EBIT and CFBIT. What are they? These single items comprise legal proceedings, M&A transactions and restructuring programs. Let's turn to Page 5. More than that, we will enhance transparency on how we derive EBIT, net assets, free cash flow, industrial and reconciling the EBIT to the CFBIT. You can see this new reporting structure on the deck. Hence, the level of the detail for the automotive divisions will be increased significantly. I think this is something you have requested for a while. Over to Page #6. Here, I mean, you can find the actual figures from 2019 full year. The figures in the blue boxes are those you're already familiar, based on our traditional reporting structure, the red boxes comprise of the add-ons, as explained on the previous slides, with more details on the EBIT of the industrial business and with reconciliation of EBIT to EBIT adjusted. As you can see, this results in a return on sales adjusted in 2019 for Mercedes-Benz Cars & Vans of 5.8% and for Daimler Trucks & Buses of 6%. Return on equity adjusted for Daimler Mobility was 13.1%. Let's turn to Page 7. We also take occasion of today's call to provide you with the actuals for Q1 '19 according to the new reporting structure. You may use this for the preparation of the upcoming Q1 disclosure. Chart #8 shows a significant level of additional information related to the cash flow we will provide to the market in the future. The cash conversion rate adjusted for Mercedes-Benz Cars & Vans were 0.3 and for Daimler Trucks & Buses 1.0, respectively, full year 2019. Again, on Page 9, you see the actuals for Q1 2019. And last but not least, we intend to enhance the transparency also on the net assets, as you can see on the Page 10. It goes without saying that all of this clearly related to our strong cash flow and capital allocation focus. So before we come to the Q&A, last but not least, I'd like to thank Björn for his outstanding commitment to the company and to the investors community. I appreciate a lot his engagement and dedication to the investors community over so many years. And in particular, I'd like to thank you, Björn, for your strong support during my onboarding over the last 12 months. I know you're on the call here today, really big thanks to you, and we all wish you the very best, Björn. And to you, Steffen, I mean, happy to have you on board. Very warm welcome in this difficult period, but I'm sure we'll navigate through it, as we said before, and come out even stronger. With this, we are happy to take your questions.

Thank you very much, Harald. Ladies and gentlemen, you may ask your questions now. The operator will identify the questions -- the questioner by name, but please also introduce yourself with your name and the name of the organization that you are representing before asking your question. [Operator Instructions] Last but not least, please note this is not our Q1 results conference call. Instead, this is the conference call regarding the reporting changes caused by our new company structure as well as our adjusted guidance methodology. So any questions concerning these issues are highly appreciated. We understand that we are already in early April and you are interested to learn more about the first quarter financials, but please understand that we will address these questions in connection with our Q1 disclosure. Now before we start, the operator will explain the procedure.

[Operator Instructions] And the first question we received is from Tim Rokossa, Deutsche Bank.

It's Tim from Deutsche Bank. Before I come to my questions, I would also like to take some time to thank you, Björn, especially from me personally, but also I know on behalf of many others on this call. It is really hard to imagine a time without you opening this call in the future and reminding us to be nice and behave well with only 1 or 2 questions. I'm sure Steffen will do a great job with that as well. For most of us, Björn, you are the synonym for Investor Relations at Daimler. When I started covering this space in 2009, you had just started to run this department. And in your role as a capital markets spokesperson, you were -- there were quite a few things until today that you had to communicate that were lots of fun, like trying to catch up to be the #1, again, actually achieving that. Others like a few profit warnings here and there were certainly rather difficult, and I also remember the one or the other fairly intense discussion between us. But regardless of all of these circumstances, you are a very trusted and reliable business partner. And most importantly, you are simply also a great guy. And that also, despite all this hard work that you did all those years, always found some time to care about personal relationships, discuss about family and sometimes even share a beer over a [ Board or ] farewell party or after some very intense sessions at your Capital Markets Day. So I think I can absolutely really only echo what Harald said, and that is to wish you all the best for the next couple of weeks, stay safe. And so enjoy some time with your lovely family after so many years of hard work, and a big thank you from all of us in the capital markets community. And with that, Harald, I'd like to come to the questions around the reporting structure then. I will definitely not ask something on Q1. But if we really stick to this reporting structure, I hear the word adjustment quite a few times. The idea of this was also to increase transparency, as you said. You have given us an idea of what you will adjust for going forward. Is there anything that you can already foresee that we should include in our numbers in terms of adjustments? And then also, just to be clear, one key thing that you and I also discussed about the last couple of months is this massive gap between the reported and the adjusted figures. When I look at the CFBIT of Mercedes-Benz Cars & Vans, I see a line that's called Other, that is EUR 6.5 billion. How do you make sure going forward that your management team tries to limit this massive gap that's out there? And how will your management team be judged by this? Is this the adjusted figure or is it stated figures?

Thanks, Tim. So first, in terms of why are we doing that on the adjusted. It's to enhance the transparency with regards to the underlying performance. I can witness to you that, I mean, the whole team is definitely committed to keep the adjustments very limited in terms of the categories, I mean, eligible for. I think I mentioned them before, it's litigations, it's M&A and restructuring. And we don't want the list of adjustments to be longer than the list of P&L items. That's definitely the agreement among the management team over here. In terms of the incentives basically you addressed, I can confirm to you that the incentives of the management team refer to the reported numbers, not the adjusted numbers. On the EUR 6.5 billion, you make reference to in the cash flow statement. I think I can help you maybe by saying that in there, chiefly, you'll find the provisions which have been created in 2019 for legal proceedings, Takata, the stop of the X-Class, and it also includes the dividend from China. That basically explains, I think, the EUR 6.5 billion.

Great. And by the way, Harald, thank you for taking the time to do these calls. I know that it's quite difficult with what you can say and what you cannot say right now.

The next question is from José Asumendi, JPMorgan.

José at JPMorgan. Harald, thank you very much for the additional disclosure, and Björn, my very best wishes, and thank you very much for the excellent collaboration over the past years. Two items, please. The first one, as I look at the additional disclosure, there are some obvious gaps to some peers on SG&A and R&D. I'm just thinking, as you think about cascading down the improvement of KPIs across the management team, how does that effectively work, setting those targets across the whole group, if you could just provide any -- some clarity because I think as we gain additional visibility into the numbers, I think also it will be interesting to hear from you how are you implementing the changes across the group? And then the second question will be around purchasing. I would love to get more insight into the cost of materials across cars and trucks, if that will be possible, going forward. But maybe could you talk a little bit about how far does the purchasing department collaborate now between cars and trucks? And is there anything being shared across both divisions?

Thanks, José, for the questions. So first, on the incentives. The incentives for all of the management teams are attached to benchmark profitability, benchmark profitability on the passenger car side, benchmark profitability on the trucks and buses side and as well as on benchmark profitability with regards to return on equity for the DMO side. And obviously, that means that the management teams of the 3 businesses have to manage, I mean, all of the contributors meant to it, be it, I mean, the SG&A or also the cost of material line. But very clearly, it's benchmark profitability which matters. I think you can see that, therefore, that 2019 was a pretty difficult year, yes, for some of the one-off adjustments, but also on the underlying and even pre-COVID-19, 2020 will be another difficult year from an incentives standpoint. But that's what we're committed to bring the company back to benchmark profitability level; and hence, the incentives are set accordingly. In terms of, I mean, cooperation in the company, we -- I think we're trying to leverage, I mean, the benefits of the group wherever that is possible. Is it on technology side, like on the fuel cell or on autonomous driving, but as well on purchasing at large? I mean the general procurement organization, I mean, is a common one for the whole group. But if we have synergies and potentials also on direct material, obviously, we'll make use of that.

And the next question is from Stephen Reitman, Societe Generale.

I will just -- first of all, with the new disclosure and putting cars and vans together, you've mentioned that you will be giving at least individual data about the vans in terms of sales and market share, the like. But I think one of the clear concerns of the market has been the significant deterioration in the performance of the vans business from 2017 double-digit margins to the very low margins we saw today on adjusted basis. So I'm just wondering, are you prepared to give at least some qualitative information about how the vans business is proceeding in the future? My second question is you mentioned about the crisis, providing perhaps the opportunity to accelerate the transformation process and your desire to get to benchmark earnings. You gave us, in your Capital Markets presentation in mid-November, your view to 2022, which is still far from benchmark, looking your '22 objectives. So maybe some indication of where you think or how long it will take to get to benchmark levels.

Thanks, Stephen. Yes. Definitely, we said, I think, loud and clear that we haven't been satisfied at all with the underlying performance of the vans, even taking the exceptionals off. So moving forward, I'm very happy to talk you through the improvements we're doing on the business on the qualitative side. Rest assured, that is in the focus, and we don't want to hide the vans within the Mercedes-Benz and Cars, I mean, division. So come back to that commitment when we talk again about real numbers in terms of the progress we're doing. With regard toward the acceleration, I mean, the point I'm making here is that, obviously, the current situation, and I think we're not the only one, forces us to take, I mean, some radical decisions in terms of production adjustment, in terms of working in different configuration. That is pretty unprecedented, I think, for everybody. But at the same time, it's also an interesting learning as we can take decisions much faster. And that's what I mean, that in terms of decision-making and implementation of decisions, this is an interesting learning. And so we didn't change the plan which we outlined in November, which you know by heart, but the measures, I think, they can be accelerated. And that's what we're thinking about.

And the next question is from Tom Narayan, RBC.

Tom Narayan, RBC. Thank you for holding this call and providing the detail. It's much appreciated. Some of us have already been taking out adjustments, so this will make it a lot easier. On the new disclosures, I do have a question on automotive EBIT. Will you continue to include equity income in that metric? I know some of us take it out to match the sales disclosure, which, as you know, does not include equity income. And I know other carmakers separate equity income from EBIT. So just curious if that's something we could see happen? Or any explanation of why you guys include it in automotive EBIT?

Yes. Thanks for the question. Very clearly, you mean, the -- equity income is part of the industrial business. It's integral part of our operations. And hence, I think it sits correctly within EBIT. So no change to that envisaged, and I think that's where it belongs to. And no, I mean, that's a part of the global business relationship. So I mean -- and all of the other revenue and margin streams are also part of -- integral part of the revenue line as well as of the EBIT line. So again, I think that's why it sits correctly over there. As part of the disclosure, you have the information about, I mean, what it is. But again, I think it's correctly positioned there.

And the next question is from Daniel Hummel (sic) [ Patrick Hummel ], UBS.

I guess that's me, Patrick Hummel, UBS. First of all, thank you, Björn. All the best, and we stay in touch, and looking forward to collaborating with you, Steffen. My first question, Harald, is on what you said about the net liquidity, and I appreciate this is not the Q1 call. I'm just curious, based on your scenario that you could start re-ramping production in the western world countries, let's say, in about a month from now, give or take, when would you expect the liquidity to trough? And would you still expect to be in positive net liquidity territory by then? And can you just share some thoughts and the communications you have with the credit rating agencies, whether in such a scenario you would expect to stay within the investment-grade territory? And my second question, Ola said in a media interview a couple of weeks back about the dividend, that the dividend is still on as planned. I was just curious, in the latest thoughts, we have seen more and more companies in the meantime just canceling their FY '19 dividend. So I'm just curious in -- what's the latest in your thought process.

Thanks for a few questions, Patrick. All right. So first, on liquidity, on net and gross, I'm happy to talk about that, is we emphasized a lot the NIL in 2019. We locked in the EUR 11 billion at the year-end, which is the EUR 24 billion. So I think we entered this crisis with a very strong liquidity situation in terms of net and gross liquidity. I mean if we're in a scenario, I mean, as you outlined, where we resume, I mean, production in the weeks ahead, I think we are very comfortably positioned with the gross and the net cash we have on hand. I would expect some cash burn in the second quarter as the adjustments we took, the ones I talked about, they come in with some delay. But in particular, I mean, the delay due to the payment terms before they take full effect in terms of cash out reduction. So yes, probably in such a scenario, Q2 would be burdened by it. But then definitely, I mean, Q2 would be a trough in terms of the NIL and the gross cash. And again, but with one we have on hand, could be well managed in the scenario we described. What did we do, however, on top of that, and no -- it's not that -- I assume that scenario to happen. But given the huge uncertainties over the last couple of weeks on COVID-19, we secured, I mean, additional flexibility with a EUR 12 billion facility. And at the same time, we could also retain market access. So I think really we protect the company to go through that crisis. Hopefully, it's a scenario, I mean, you paint in terms of production and demand resuming in the more shorter term. If for whatever reason, I mean, it would be worse, we can weather this. I mean this is, I think, what risk management is about. Second question in terms of credit rating, well, we saw some adjustments. Frankly, I don't want to comment too much on them. That's the call of the rating agencies. In terms of the fundamentals of what we're doing in terms of the objectives, in terms of margin improvement, in terms of cash conversion focus, nothing changed in that respect. Obviously, 2020, I mean with COVID-19, has different implications. But as I just said before, from a liquidity standpoint, I think we are very well positioned to, I mean, to whether that in various scenarios. Again, I leave the rating action, I mean, to the respective agencies, their call. I mean that has been done. Therefore, I do not expect -- I do not see, I mean, a reason for any further rating action at this juncture. But it is their call, and I'm happy to have any discussion in this respect. Third point on the dividend, I mean, we made the proposal -- or the Supervisory Board made a proposal to the AGM, which has then been postponed, of EUR 0.90 a share. I mean since obviously the spread of the virus, I mean, we're looking at everything, and we're monitoring in all of the issues very closely on a daily, on an ongoing basis. But at that current point of time, we remain with our proposal, as Ola mentioned some 1 or 2 weeks ago.

And the next question is from Angus Tweedie, Citigroup.

Just 2 questions on the disclosure. Can I confirm on the Mercedes-Benz Cars & Vans segments, when we look at the legal adjustment, that's coming through in the selling expenses? Or is it more complicated than that? And then secondly, just thinking about inventory structurally within the car business. You had a good performance in the fourth quarter of last year on that size. But when we look at the levels you're disclosing there, they're still above peers. How are you thinking about that perhaps into the midterm?

So on your second question, I mean, on the working capital and the inventory, if we get it right, last year, fourth quarter, yes, it was good, lots of sales, I mean, which could be done. I think we stressed it several times that moving forward. I mean we want to look at working capital overall even harder. It's part of our plan to increase the cash conversion ratio to the objective which we outlined. Well, I mean, maybe 2020, I mean, given the volatility, it's not an easy moment, I mean, to do so. But maybe I pick that as an example in terms of, I mean, how we took decisions very rapidly and put them into place. I look at my colleagues, I mean, next to me, but probably the speed at which we took the decision to adjust production is pretty unprecedented. And that means that -- I mean, the matching between sales and production from today's point of view is working pretty well. So we should not have too much of cash trapped in working capital and inventory, even in such of a crisis mode. What does it mean? You can see the emphasis on cash in a crisis mode right now, like COVID-19, but also on an ongoing basis to ensure the target cash conversion ratios we outlined. Your first question in terms of where are the legal costs coming through. I mean a part goes into cost of sales, which is more, I mean, what is related to warranties and the remainder rather goes into other expenses.

And the next question is from Henning Cosman, HSBC.

It's 2 follow-ups really. The first one is, I think, Harald, you addressed the timing of the cash out for the provisions that you made. I appreciate it's difficult to say because the contingencies, sort of liabilities off balance sheet, it's not even clear if they will materialize, of course. But can you just sort of comment a little bit if you would expect them to be flexible in terms of timing, so that they don't fall into the most unfortunate timing when you may be a little bit light on liquidity anyway? Just if you can maybe help us understand how flexible that timing might be if they do materialize. And the second question, just on Angus' previous point about the inventory. Just we understand that directionally a little bit better because I would have thought you were maybe still selling a little bit while you had already stopped producing. So I would have thought there's maybe a step change down in inventory, and therefore, cash inflow. But with sales also sort of materially dropping now in Europe for a month or 2 and the U.S. maybe to a lesser extent, is it not almost true that they then kind of frozen at this slightly lower step and don't keep dropping in line or as a percentage of revenue? If you could just clarify that, that would be great.

So to your first point, in terms of the cash out related to the provisions. Well, as we said for the full year, it's practically impossible to predict with the phasing of it. And the same applies from today's standpoint. And even more so, is -- I mean, on some of that, I mean, there's deals with settlements and litigations for which you need to have other people to deal with who are probably in shutdown mode as well. So what I can say, however, is a part of that is related to litigations and settlements. In case these would occur, probably the cash out related to these would be rather associated, I mean, to that timing of a settlement. Whereas, I mean, a good part of the provisions which we took in 2019, this is also related, I mean, to recall, take the Takata, to update of the fleet, which will take a couple of years. So therefore, you shouldn't take everything into 1 year. You should take a part maybe in a given year. Is that 2020, I cannot tell you, could also be another year. But a very significant part of the provisions recorded in 2019, I think you can stretch out over several years. With regard to, I mean, the detailed phasing of the cash in and the cash out from sales and production level, it's -- apologies, but it's a bit difficult to give, I mean, precise predictions at this juncture. But let me try the following. And what you could see in March, basically, we gave the numbers before in terms of the sales numbers. So second half of March, you would see Europe really going down. Germany was, I mean, still pretty okay given the situation, I would say. U.S., we didn't see yet. So what could we expect, therefore, I mean, April, certainly, will be impacted on the U.S. side, further on the European market. At the same time, as we discussed before, China will come back up again. South Korea, I think, is also doing pretty well in this respect, so -- which is not so easy from a production standpoint as some of the sites really -- I mean, you ramp down completely, but powertrain supply and other products going into these markets have to be supported. So it's a fine balancing between the 2. All in all, however, yes, I do expect that, I mean, sales will impact -- will be impacted in April. We will see, as I said before, the impact of the production stop decided and implemented in April with a cash out reduction coming through a bit later, chiefly to the payment terms. So that will be, therefore, volatile cash situation in April and then that should rather stabilize in May. But frankly, I think I'm going already beyond what I should say on this call, but you see really we're steering these flows on a daily basis in and out. And the full team has been moved on cash-focus mode, which is something which is, I think, helpful in the crisis, but also beyond.

And the last question is from Horst Schneider, Bank of America.

Just a brief one. On the one-offs you have guided for regarding these employment reductions, the EUR 1.4 billion, we read in the press that, at the moment, the exception to these offers is very low. Do you still expect all these provisions to be booked this year? And then coming back again to the CMD presentation that you held in November. When we get an update, which part of that is still valid and we can work with, especially, for example, regarding these assumptions regarding material cost savings.

The restructuring plan which we outlined in 2019 remains, I mean, on track. There's no reason to go backwards or to go back on it. In the beginning of the year, we could agree the terms and conditions for the plan, including severance packages. Well, what you might have seen here and there is some speculation that it's pushed back. No, I mean, we keep going with it. I mean, however, if you want to sit down and discuss about severance packages and severance conditions with employees, with colleagues, I think you don't do that over the phone. And as most of the people are in home office, that's what is currently not happening, but that doesn't mean that the plan is pushed back. As I said, we keep going with it. Maybe the cash out phasing, therefore, gets a bit pushed back to the right, but we're not changing the plan as such.

But that means, your provisions will not yet be booked now, right? They will be booked later.

Absolutely. So I mean the way it works, upon agreement of a severance package, you record the provision and upon exit, then you have the cash out. Yes. So that might be, I mean, pushed back to the right a bit. But again, we're not pushing back the plan as such. In terms of giving an update on the other sections of the plan, be it immaterial, the overhead cost reaction, yes, for sure, we'll come back and give you a regular update where we are. I guess during the Q1 call, probably we'll be a bit more busy with what's the current situation of COVID-19 and the way forward. So probably, it's more around the Q2 call that we come back -- hopefully, we come back to the normal course of business.

Ladies and gentlemen, thank you for your questions and for being with us today. Also, thank you very much to Harald for answering these questions. Investor Relations remains at your disposal to answer any further questions you may have. Please note the next event, Harald has referred to it, our Q1 results conference call will take place on April 29. So please pencil us in your schedule, and we are looking forward to talking to you soon. To all of you listening in from Internet and the phone, have a great morning, a great afternoon or a great evening. Thanks, and goodbye.