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. The replay of the conference call will also be available as an on-demand audio webcast in the Investor Relations section of the Daimler website. [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 morning, 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 Q2 results conference call. We are very happy to have with us Ola Källenius, Chairman of the Board of Management of Daimler and Mercedes-Benz AG; Martin Daum, Member of the Board of Management of Daimler AG responsible for Trucks & Buses; and Harald Wilhelm, Member of the Board of Management of Daimler responsible for finance and controlling and Daimler Mobility. In order to give you maximum time for your questions, the 3 gentlemen will begin with a short 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 Ola.

Thank you, Steffen. Welcome, and good morning, everybody, and thanks for joining us this morning. We certainly have had to endure a complex quarter, 3 months that have been dominated by the COVID-19 pandemic. And as we informed you last week, we recorded a net loss in this quarter, but our results in the second quarter were partially above market expectations, in particular, on the free cash flow. And in general, I think it's fair to say that our management of the challenges from COVID-19 is working. And at the same time, we continue to make progress on our long-term strategic course and our efforts to lower the breakeven of the company. For starters, let me briefly take you through the second quarter's key topics. And I would like to make 4 main points this morning. Number one, we initiated a large number of measures to protect our cash position in this quarter, and our robust net industrial liquidity is a testament to the effective cost control and cash management. Harald will follow up on this in his part of the presentation this morning. Number two, we're seeing the first signs of a sales recovery. While the market slumped like never before in a quarter, our unit sales were better than expected, especially at Mercedes-Benz passenger cars, with a strong demand for our top end models and electrified vehicles. In China, our passenger car sales set a new Q2 record level. And also our vans had their best ever sales quarter in China. And in recent weeks, order intakes at trucks turned positive again in nearly all of our core regions. Number three, we continued improving the cost base of our company. While our previous efficiency goals targeted the upcoming transformation, they did not anticipate a sudden and steep global recession. And that's why we have reinforced these efficiency measures. One example, we initiated adjustments of our global production network capacity to match the expected market environment. And number four, we are working with full focus on our key strategic objectives, leading in electrification and digitization. All the core product projects, in spite of COVID, have progressed according to plan. And we have also, in the past months, announced some major partnerships in this regard: our truck joint venture with Volvo on fuel cell technology, Martin will allude to this; our partnership with a battery sales supplier, Farasis; and finally, our partnership with NVIDIA to develop a smart computer architecture for automated driving functions. The first 2 points, they give us confidence in dealing with the COVID-19 recession in the short term, and the last 2 points give us confidence in building our mid- and long-term future. That said, let's talk numbers and that's Harald's home turf. Harald, would you mind taking over?

Thank you very much, Ola, and hello, everybody. I hope everybody of you is safe and healthy, and I'm very happy to take you through the Q2 numbers now. Yes, without doubt, the Q2 was challenging from all perspectives. However, following a better-than-expected market recovery and the strong June finish in terms of performance, Daimler Group adjusted EBIT, Mercedes-Benz Cars & Vans adjusted EBIT and Daimler's industrial free cash flow for the second quarter of 2020 came in better than expected, which triggered the ad hoc we did last week. So -- yet the unit sales decreased significantly by 34%. We sold 542,000 cars and commercial vehicles worldwide. The total reported EBIT amounted to minus EUR 1.7 billion. Last year's Q2 EBIT reported was heavily impacted by various onetime issues. So therefore, let's focus on the adjusted EBIT figures if we compare the year-over-year performance. The adjusted EBIT, which reflects the underlying business in Q2 declined to minus EUR 708 million. Key reasons, obviously, for this situation were the lower unit sales and revenues across all divisions in the quarter that was significantly hit by the COVID-19. At the same time, cost of sales have been adjusted more or less accordingly and reductions in functional costs and SG&A helped to reduce the losses. And yes, we also worked a bit on the free cash flow, as you can see with the Q2 results. So let's have a look at that a bit more in detail on the net industrial liquidity, Page 4. As Ola said already, we focused early on cash preservation and cost management and that started to materialize throughout the quarter. We maintained a healthy level of net cash, and in particular, gross cash throughout this complex quarter. On top, the favorable sales demand in June helped to improve further to deliver positive industrial free cash flow of EUR 685 million. Therefore, we could end the second quarter with a solid EUR 9.5 billion net industrial liquidity. Impact from working capital was in total favorable with EUR 1.9 billion, close to EUR 1.6 billion from Cars & Vans and about EUR 300 million from Trucks & Buses. As you know, in terms of production, we applied the brakes early and then restarted production outside of China by the beginning of May to keep pace with improving demand. With this approach, we were able to outgrow Q2 wholesale figures versus Q2 production figures by close to 60,000 cars and vans and more than 6,000 trucks and buses. This obviously lowered quarter-end stock accordingly. In a nutshell, while the market slumped like never before in a quarter, our sales were better than expected. But above all, it is tough cost measures and our effective cash flow management that are having an impact. However, there's still a long way to go to normal mode and we have to speed up by further cutting cost and adjusting capacities. The next point that stabilized quarter 2 free cash flow was that investments were diligently managed and did not outgrow depreciation, as you can see on the chart. From a liquidity perspective, we find ourselves in a rather comfortable position despite the current circumstances. As you know, in April, we secured our financial flexibility with a further loan facility agreement in the amount of initially EUR 12 billion in addition to our existing EUR 11 billion revolving credit facility. Both have not been utilized. Due to our good access to the capital market, we were able to issue 2 benchmark bonds in the quarter. And with this, we protect our high financial flexibility. And I say it loud and clear, and I see no equity needs. Moving on to Mercedes-Benz Cars & Vans. In the quarter, we saw a rebound in retail sales on the car and vans business side. Nearly all worldwide dealerships have reopened in June. We have experienced, I mean, a strong finish so that the global retail deliveries increased slightly above prior year level again in the month of June. We see favorable development in model mix. In particular, demand for our top end models was high. Just to highlight a few of them, the GLS, the S-Class Maybach, the SL. We were above prior year level in the second quarter. Looking at our powertrain mix in Europe, demand for our plug-in hybrids increased in the first half of the year compared to the prior year, and we were progressing on the xEV share towards our 2020 target. By the end of the year, our car portfolio will comprise 5 all-electric models and more than 20 plug-in hybrids, and we're enjoying a high level demand in particular from our fleet customers. That's why you will see a strong ramp-up in xEV unit sales in the second half of the year. Besides that, an important lever is the initiation of streamlining of our global production network and capacity adjustments connected to our operations in Hambach, Tuscaloosa and Aguascalientes. Concerning the Hambach plant, we are in talks with Ineos; and in Tuscaloosa, we take out the C-Class; in Aguascalientes, the A-Class. Ola mentioned already that we are joining forces with NVIDIA on -- in the field of driving assistance for our next-generation fleet. I also would like to highlight at Mercedes-Benz Vans, we're pushing forward with electric mobility. The EQV and the eSprinter became available for orders since May and will strengthen our leading position in this segment. Now let's have a look a bit closer at the sales development throughout the year. As mentioned before, we already -- have made up, I mean, some ground in the quarter. If we look at the 3 core regions on the chart, we see a very promising recovery pattern in group sales, in particular, with the early recovery in China, which started already in March. Ola highlighted already, 4 months later, we achieved our best second quarter ever in terms of unit sales there. In the U.S. and Europe, we saw a much slower ramp-up than in China. While at the end of June, our China group sales year-to-date were 0.4% up versus last year. In Europe, we are at minus 31% and in the U.S. at minus 16%. Let's look at the Mercedes-Benz Cars & Vans key figures, Page 7. Unit sales were down 30% year-over-year. In revenues, that means 25% down to EUR 19 billion. That indicates a better model mix. The EBIT adjusted amounted to minus EUR 284 million. In this, the Vans were about breakeven. We saw a positive development in the cash flow before interest and tax, which was EUR 430 million positive, and therefore significantly better than in the same period last year. Obviously, working capital helped a lot in that respect. In more detail, in terms of the earnings bridge, the lower unit sales would clearly mean the key driver for the drop in EBIT over the quarter. However, we saw a very favorable mix development with a higher total share of SUVs. Also pricing proved to be positive in the quarter with global discounts at a stable level. However, within the pricing bucket, we took some residual value provisions in a low level triple-million-digit figure. FX came in slightly positive. Industrial performance was even slightly positive, supported by production efficiency, including short-term labor effects and positive material cost effects despite the severe ramp-down of our plans. Due to extensive cost cutting, we were able to significantly reduce SG&A expenses, especially in the area of marketing spend. R&D expenses in P&L were at the level of the second quarter 2019 due to ongoing investments in electrification of vehicles and further development of our product portfolio. In the other lines, you will find the changes of provisions. Inside, a negative effect from the discounting of noncurrent provisions and a gain of EUR 105 million from transactional selling shares in the HERE Group. In the second quarter, the EBIT was burdened by charges for restructuring for EUR 687 million, mainly for the streamlining of the production network and capacity adjustments. This includes approximately EUR 400 million from Hambach and the remainder for Tuscaloosa and Aguas. Further, minus EUR 101 million adjustments were booked for the restructuring for the cost optimization programs, which means people signing up for voluntary redundancy. And all of these initiatives in terms of capacity adjustment, as well as in terms of head count adjustment, will help to improve the structural cost base in the mid- and the long term of the company. Looking at the cash flow chart, Page 9. The cash flow before interest and tax adjusted was EUR 522 million in the quarter, was thanks to extensive cash measures. The major lever here is the working capital with a pronounced reduction of inventories by more than 60,000 vehicles in the division. The net of payables and receivables in the quarter is a wash. The change in working capital was therefore positive by EUR 1.5 billion. As you can see, we also managed to reduce the gap between depreciation and net investments. However, I'd like you to bear you in mind that the onetime major adjustment of depreciation linked to Hambach, Aguas and Tuscaloosa is also included in here. And now, Martin will take you through the development of Trucks & Buses.

Thank you, Harald, and a good morning from my side to all of you. The truck and bus market experienced a weak second quarter of 2020, heavily impacted by the COVID-19. The market environment was already in a cyclical downturn before in the first quarter when the pandemic hit the global economy. Volume-wise, especially in North America, the market lost around half of its volume compared to prior year level. In Europe, market contracted even more by nearly 60%. That drop affected all segments, but especially the heavy-duty long-haul business. However, after hit in April, we see a significant improvement in incoming orders, especially in the North American market. Additionally, we put a strong focus on cash preservation measures and progressive execution of restructuring activities to improve our long-term competitiveness and profitability. We also put the brakes hard on our fixed cost spending. Nonetheless, we have kept a clear focus on our strategic initiatives, just to name, our expanding and intensifying activities around fuel cell technology. For Daimler Truck AG, fuel cell systems will play a decisive role in achieving CO2-neutral transport as a supplement to our battery electric drive. The hydrogen-based fuel cell is a key technology of strategic importance in this context. We finished the transfer of all of Daimler's fuel-cell activities to Truck AG and are well underway to start small serious production soon and prepare large-scale production in heavy-duty fuel cells, commercial vehicles in the second half of the decade. Furthermore, end of May, Daimler Truck AG and Rolls-Royce Power Systems announced a planned cooperation on stationary fuel-cell generators as CO2-neutral emergency power generators for safety-critical facilities to further increase our volume base on this technology. The next chart shows you the weekly truck sales in our key markets that show clear the significance of the COVID-driven decline in the second quarter. However, after a steep drop of sales across all markets in April and May, we saw a significant recovery in June that will continue in the third quarter. We saw an increase in market share in almost all markets for Daimler Trucks & Buses. Let's come to the key figures. How is this reflected? Certainly, not good. In the second quarter, we sold approximately 57,000 -- or 58,000 trucks, 54% less than in the prior year period. Global bus unit sales declined by 63% to 3,000 units. The revenue at Daimler Trucks & Buses decreased by minus 46% to EUR 6.2 billion. Besides truck sales drops in Europe and the NAFTA region, we have seen significant decline in Latin America experiencing an additional negative impact from economic crisis in Brazil. The bus market has also been very weak, in particular, in Europe, Brazil, Mexico and India, all important markets for us. Especially in North America, we still have a strong order board. So the decline in sales wasn't triggered by the lack of market demand, but by the necessary and precautionary closures of all of our factories in the U.S. and Mexico. With the reopening in June and steep ramp-up in production, we will see an entirely different third quarter. As a consequence of the drop in unit sales, adjusted EBIT at Daimler Truck AG declined to minus EUR 747 million. Especially in Europe and North America, volume was down significantly driving the majority of the negative volume and regional mix effects. On the used vehicle side, we took a write-down on inventories in the mid-double-digit million euro range and tried to minimize future risks. Pricing proved to be stable through all the major regions. Industrial performance was largely burdened by a customer service measure at Mercedes-Benz Trucks in the amount of a low triple-million-digit figure. Adjusted for this, industrial performance was balanced in the quarter despite high additional cost for plant closures and the efforts, which we have for all the precautionary necessaries to protect our people. The strict cost management in Q2 also resulted at Daimler Trucks & Buses in a positive development of all fixed cost areas. The cash flow in Q2 was more than EUR 600 million above EBIT. Inventory reduction of around 7,000 units contributed significantly to this development, and to a lesser part, a reduction of trade receivables. As you can see, we also could limit our net investments to be below our depreciation. The provisions we took in Q2 to prepare for future risks added to the positive cash development. For the Daimler Mobility review, I will hand back to Harald.

Okay. Thank you, Martin. So looking at Daimler Mobility, obviously, was also impacted by COVID-19 where we see that chiefly in a significant decrease in the new business. The quarter 2 EBIT at Daimler Mobility was burdened by moderate adjustment of expected credit risk provisions and further adjustments in the YOUR NOW group. In the first quarter, we have already started to implement measures to withstand the headwinds. We have supported our high-quality customer base with good payment record and temporary payment holidays. And furthermore, we have supported our dealer network, for example, with flexible floor plan solutions to facilitate recovery after reopening. If we look at the key numbers, the new business decreased by 24% to EUR 14 billion. The contract volume in the second quarter decreased by 6% to EUR 154 billion, which is roughly stable with the first quarter. The portfolio decrease basically happened in all regions and also is impacted by a bit of negative FX impact. However, in all regions, we saw catch-up effects in acquisitions in June in line with what we said on the sales side on the brand partners. Looking at the EBIT evolution, Page 17. The EBIT adjusted declined by 35% to EUR 313 million. Higher cost of risk due to the worsening of the macroeconomic outlook could not be offset fully by the benefits from cost-saving measures. However, the increase, and I'd like to emphasize again, of expected credit risk provision by EUR 150 million in the second quarter was significantly lower than what we did in the first quarter. We could also reduce significantly the functional costs and the SG&A as you can see on the chart. At the same time, we suffered also a bit of higher funding cost in the second quarter given the financial market volatilities. And furthermore, we adjusted our investment in the YOUR NOW Group with an impairment of EUR 105 million in the quarter. So what does all that mean in terms of the group earnings? Page 18, I took you through the division numbers already. So the group adjusted EBIT for the second quarter is at minus EUR 708 million, including minor reconciliation items. The adjustments at the group level are EUR 974 million of charges, most of them, I think, I explained already before, in particular, the EUR 687 million for the adjustment and realignment of capacities, the restructuring expenses of EUR 101 million, both at Mercedes-Benz Cars & Vans. And all in all, if we look at the number, be it the minus EUR 700 million or be it the minus EUR 1.7 billion, I would somehow say, given the economic context and the unprecedented Q2 impact of COVID-19, the result looks acceptable. However, we are far from where we want to be. The bottom line in the second quarter was a material loss. And also, we can survive corona through the short-term work and radical short-term cost-cutting measures. We cannot accept our current cost structure in the long term. The threshold above which we are profitable is clearly too high. This structural challenge will not be solved in the next quarter. The recession will extend well beyond this year, and transformation is a task for the next decade. So we have to fundamentally improve our cost base and financial position. However, the experience in the second quarter makes us confident that we can do that. Looking at the cash flow at the group level. Again, same thing. We explained all of the division, I mean, elements in support of the EUR 685 million free cash flow for the group. One point to add inside that, at the group level, it includes a tax payment from Daimler Mobility to the industrial business of EUR 271 million. The adjustment from CFBIT to free cash flow includes the -- from the free cash flow reported to the free cash flow. Adjusted includes EUR 93 million from governmental and court proceedings and measures relating to Mercedes-Benz vehicles. Now let's have a look at the guidance, Page 20. The corona pandemic will continue to have a strong impact on the developments during the rest of the year. Talking about the outlook, I think it's very important to outline the assumptions underpinning that. What are they? For the full year, we assume a significant decrease of all major automotive markets. For the second half of the year, we assume a significant recovery of the economy and of unit sales exceeding the first half. Compared to H2 2019, we expect H2 2020 Cars & Vans units to be slightly lower and Trucks & Buses unit sales to be significantly lower. And we assume that we can continue the cost and cash measures, which we started in the second quarter. We -- with all of that, we expect the group revenue to be lower than in 2019. What does it mean for EBIT and cash flow? Assuming that the economic recovery continues in the second half of the year and that there is no new significant new wave of COVID-19 infections in our key sales markets, we expect both group EBIT reported and the free cash flow reported of the industrial business to be positive in 2020, but lower than in the previous year. Moreover, we have taken numerous measures to sustainably improve our cost structure and become significantly more efficient. Yet, we will continue to invest to ensure into the future and to ensure viability of our company. With this, I hand back to you, Ola.

Thanks, Harald, for walking us through the numbers. So what's ahead in the second half of this year and beyond? As we've already stressed last week, our systematic efforts to lower the breakeven of the company, that will continue and will be intensified. We will work with full focus on reducing costs, increasing flexibility and also adjusting capacity to market demand. In the autumn, we will present our all-new S-Class, with it, our next-generation MBUX system. The S-Class is our flagship model and it will set new standards in the field of digitization. I think this vehicle, like no other, symbolizes Mercedes and also will strengthen the implementation of our strategic course. We want to sharpen the focus on our core as a manufacturer of modern luxury vehicles. We still have great potential, especially on the upper end of the segments that we sell in. This is our home field advantage and this is our leading edge, and we will come back to you later in the year and give you a deeper insight into the strategy. The market launch of the S-Class will be followed by the EQS, the electric sibling in 2021, our first fully electric sedan based on an all-electric architecture with a range of more than 700 kilometers according to WLTP. And of course, first, all-electric compact Mercedeses, for instance, we will present the EQA also later in this year. We are strongly committed to our electrification strategy and our path towards CO2-neutral mobility. And of course, we also have a full focus on the CO2 target for Europe this year, still 5 months to go. And it is our goal to meet the target. Our strong plug-in hybrid sales and upcoming EV models will help us on this path. There are some challenging months and years ahead of us. Nobody knows for certain how the COVID-19 pandemic will change our business environment in the long term, but we are very determined to build an exciting, successful and profitable future for Daimler. I would like to thank you for your attention. And now we are looking forward to your questions.

Thank you very much, Ola, Martin and Harald. Ladies and gentlemen, you may ask your questions now. [Operator Instructions]

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

It's Tim from Deutsche Bank. One for you, Harald, and one for you, Ola. Harald, maybe if we start with you because the big positive surprise, as you and Ola said, in this pre-release was the free cash flow and that's very good to see. Now during the Q1 call, you said you expect it to be negative in Q2. Was this surprise only driven by working capital? Or can you go into details about some of the other measures that helped you to achieve this? And when we think about your full year outlook, a positive free cash flow below last year can mean quite a bit between 0 and about EUR 2 billion. Is this going to be a sizable positive number that you can actually do something with? Or will you just really barely make that? And then, Ola, for you, a lot of press coverage lately was on your strategy and you already just touched on this. We're hearing different numbers that you want to restructure every single day as it feels, and I suspect you're not yet ready and in a position to talk about the actual number. But I would like to emphasize a little bit more on what you just mentioned on the luxury focus of you. And I think everyone on the call would agree that for a premium carmaker, it is a lot more important to focus on margin rather than size per se. Now how do you want to fill that strategy with lights? You don't need to give us the details if you want to do that later this year, but shall we think about a different incentivation of your sales organization? Shall we think about a percentage of your portfolio for high-end models just like BMW has it, for example? How exactly will you execute on that idea?

Thanks, Tim. Short and sweet probably we could answer the remainder of the call -- your questions, but we try to somehow keep it short. I mean, second quarter, cash positive, surprise. Not a surprise as we initiated the measures early. We had expectation for sales. That clearly led, I mean, to a negative free cash flow for the quarter. We reduced, I mean, the production and the stock level and that has been accelerated by the strong level of sales in June. And therefore, at the very end of June, I mean, the cash flow turned into positive territory where we certainly are very happy, but as you can see, it was EUR 0.7 billion. Given the volatility also of cash flow, is not a surprise. But obviously, we're satisfied and pleased with this. On the full year, let me give you a bit more color. Yes, it's a bit of a wide range. Important to read, however, what we were saying and what I'm going to say on that in the context of the assumptions I outlined before. I'm not going to repeat them, but they are important, i.e., the sales recovery assumed in the second half of the year and that we continue the cost and the cash measures. What does it mean? The free cash flow reported, which we referred to, however, excluding possible expenses related to legal and governmental proceedings. We expect it, I mean, to be positive, as said before, but prior year -- below prior year level. And from today's perspective, with all of the uncertainty left for the second half of the year, maybe that could be a high triple-digit million number. As a reminder, on the free cash flow reported, we adjusted the H1 cash flow by a bit more than EUR 500 million, in particular, for restructuring charges in governmental and court proceeding measures. For the adjustments to come in the second half of the year, i.e., I mean, H2 2020, we see that at a similar magnitude, which means it could total adjustments of, all in all, EUR 1 billion. That should give you maybe a view of where FCF reported could be, but as well FCF underlying. On the -- maybe on the EBIT reported side, if we knock off that right away, if we put all together what we explained before, I could imagine that the EBIT reported could be a low positive 4-digit million number with all of the uncertainties, however, I mean, in the second half year, I mean, to come. And as you know, in the H1, we booked about EUR 1 billion of adjustments. We will carry on our efforts in terms of restructuring. Therefore, these charges could double for the full year. And again, I hope that gives you a view where we see from today's point of view with all of the limitations and the uncertainties, the EBIT adjusted for the full year.

As a true luxury carmaker, of course, it comes natural to us to focus on the upper end of the segments that we are operating in. So that will be the course going forward. In that context, the magic word is profitable growth, underlining profitable. So yes, we will focus on pricing power, on sales contribution, managing and maximizing that. I don't want to go through the complete picture today because we will invite you later in the year to have a more -- deeper look at this Mercedes strategy. Perhaps one comment, you also mentioned restructuring and cost. I think it's pretty natural that when you have changing circumstances in the overall economy, in this case, as a result of COVID or more precisely the potential aftermath of COVID. The transformation plan that we put together and presented in the late fall, we were well on track to deliver that transformation plan. Now we have a new set of circumstances, so we take a look again. And I think that we have demonstrated in Q2 that in terms of short-term reaction to such a circumstance, we have done a reasonable job. We will then adjust our efforts on the efficiency side to drive the breakeven down. Long term, though, we will lead in luxury. We will focus technologically in terms of transformation on electrification and digitization. And yes, building on that pricing power is part of the picture. Thank you.

And the next question is from José Asumendi, JPMorgan.

José, JPMorgan. Just 2 topics. On CO2 emissions in Europe, can you speak a little bit about which vehicles or technologies do you think will take a large share, especially in Europe, for Daimler to be able to meet emission targets in Europe? Is it more 48-volt, plug-in? Which vehicles do you think will be key? The second, a little bit -- please, a bit more details on restructuring. Are you done revising the production footprint, especially with regards to the provisioning in Hambach, Aguascalientes and Tuscaloosa? And on the union negotiations in Germany, when do you expect to close the negotiations? And can you confirm a ballpark number of how many workers would you like to reduce?

Yes, of course. If we start with CO2, as you know, we have a 3-pronged approach. Electrify our combustion engines with 48-volt systems, I think we are probably the leading premium manufacturer in this field and that is in full force. That's the first piece of the puzzle. The second is plug-in hybrids. We have extended and will further extend our plug-in hybrid portfolio and we have very attractive ones looking at -- from the bottom of the portfolio with A-Class with up to 70 kilometers on WLTP. And if we take the GLE, with up to 100 kilometers on WLTP, very competitive in the plug-in space, and experienced extremely strong demand on that particularly in Europe but not only in Europe. And the fully electric vehicles, it's like every month is going up and up. So it's all of those 3 contributing. We're adding one more now here in the late summer, it's the EQV on the van side that will come into that portfolio. So it's literally every month is a bigger month on xEVs than the month before. Having said that, we knew we came from a very challenging start where we were at the end of '19. So as I've communicated several times, it is a challenge for us in 2020 and 2021, but we're very focused on these targets and determined to do everything we can to reach them. If we talk about, let's say, what did we have here, our production footprint and what we're doing on cost. The transformation plan that we put together last year, we said EUR 1.4 billion personnel cost by 2022. We will extend the time frame in which we are going to continue restructuring and also lower not only personnel costs, but look at all cost categories to 2025. So naturally, that number will grow. In the short term, we're now executing the transformation plan. We did, due to COVID, delayed 1 piece of that during the COVID months, the talks for voluntary severance packages, but that has now started to ramp up here in the summer. It doesn't make sense at this stage to put an additional number out there, but our future financial plans will then include further efficiencies on the cost side. What we also -- what we also are doing in terms of capacities, transformation is not something that is done in a year. We will evolve our operational footprint over many years. As Harald mentioned in the financial presentation, in Q2, we took 3 measures. We adjusted capacities on 2 plants in the Americas, and we decided to put Hambach up for sale. We will have constructive discussions with the labor side to look at our overall worldwide footprint and adjust as necessary. I think it goes without saying that with Daimler, we do this in a socially responsible way.

The next question is from Patrick Hummel, UBS.