Stellantis N.V. (STLAM) Earnings Call Transcript & Summary

Ladies and gentlemen, dear shareholders, good morning. I'd like to declare the special assembly of shareholders with double voting rights open. And it will be followed at 11:00 a.m. by the extraordinary General Assembly open to all shareholders. In the present context of the health crisis, so as to be able to protect our employees, our shareholders, our service providers, the assembly is taking place at the headquarters in camera without the physical presence of shareholders and other people having the right to attend. And this is an application of the provisions of the Ordinance of 2020 -- no, 1497 December 2, 2020. We're going to create the bureau for the assembly. I've asked Alexandre Ossola for Bpifrance via Lion Participation and Robert Peugeot on behalf of the EPF FFP via Lion to be the scrutineers to this assembly. They've accepted. We appoint Grégoire Olivier to complete the bureau as as Secretary of the assembly. Grégoire Olivier is the Secretary General of PSA. We also have the members of the management board to sit at the table here, Carlos Tavares, the President of the Board; Maxime Pica and Olivier Bourges; Michael Lohscheller is at his office in Rüsselsheim in Germany; Philippe de Rovira, the Financial Director of the PSA Group is also present at this table. Because of the impossibility of the shareholders being present today, the shareholders have been invited to vote on a remote basis before the assembly by correspondence with the ballot or on Internet. The shareholders have given proxies -- who have given proxies have also been taken into account in the vote process. All the documents have been made available on our site with questions and practical answers before the assembly on the project to merge PSA and FCA. I have the pleasure to inform you that on the 10th December 2020, I had a meeting with the advisory committee of shareholders. I thank all of the shareholders who voted before the assembly on a remote basis. According to the attendance list, we can see that we have present here in fact the 340,015,158 shares which is 99.622% of shares with double voting rights. Thus this quorum is duly constituted, and the assembly can indeed be fairly constituted. All of the documents and information required by regulations in place have been made available to the shareholders within the legal conditions and necessary following the publication of the notice of meeting in the French -- Official French Bulletin. I would like to point out that as President of Supervisory Board, I will preside this assembly. I would like to give you the outline of this meeting. First of all, we will have an introduction with the messages of the Supervisory Board on this historical moment. We'll have a movie with the highlights of 2020. Then Carlos Tavares will, in fact, present the merger agreement with FCA and its progress. Then you will have Grégoire Olivier who will present the 3 resolutions submitted to vote. They are, first of all, the examination approval of the merger products, the elimination of the double voting rights and the powers in view of carrying out the necessary formalities. I'd now like to say a word with regards to the Supervisory Board's message. I'd like to point out so as to ensure that continuity before the closing of this merger operation between the 2 companies. It was agreed upon that I would continue my term as President of the Supervisory Board of PSA until the merger between the 2 companies is completed. I'm very happy to be here at this historical moment. I must say that never in my very long professional career, have I had this feeling of experiencing a key moment in history. A few dates here. In 1810, we had the transformation of the family, the Peugeot family mill, which became, in fact, a steel foundry. In 1882, we saw the start of the production of cycles. In 1910, the -- you saw the merger of the 2 family companies, automobiles and cycles. 1919, the launch of the Type A, the first Citroën car. 1948, Citroën launched the 2CV. In 1965, 1966, the Holding Peugeot SA was created, we saw the -- 1970, Chrysler was acquired, and the beginning of this whole process, then we saw the production of the 403, the Dushu and the 205. This fascinating history has indeed been the history of Peugeot. Thanks to Carlos Tavares, all his team, all of the employees of the group, PSA in 2019 became the most profitable carmaker in the world and has clearly remained profitable in the first semester of 2020, which was a clear cataclysm. And in fact, it has achieved its reductions better than others with regards to the objectives for reducing CO2 emissions as set by the European Commission. It is this history and the present good health of the company, which allows PSA to undertake the most depth change since the 19th century. This is the merger with a company, which has a long history, and which is also in good healthy, Fiat Chrysler. I would like to say a word about 2020, which has been the setting of the health crisis and a market crisis never before seen. Despite that, the group has kept its course despite the difficulties generated by the COVID-19, an exceptional crisis in terms of scope and magnitude. The group has worked to protect the health of its workers and of the company, thanks to the application of a reinforced health protocol, which was implemented very early in all of the activities, whether the sites were industrial, research and development sites, tertiary and commercial, all of this to protect our salaries. All these measures have been carried out to continue giving an adapted response to this very competitive and restraining environment for the automobile sector. The group has worked to maintain its commitments. I must say that Carlos Tavares and his team have worked towards this time-consuming project. The Supervisory Board has, in fact, accompanied the Management Board in this merger process over the last 2 years, 2019 and 2020. During the negotiations, the approval and the signing of this combination agreement started in December 2019 and throughout 2020, and this throughout the signing, closing phase. A signing and closing meeting was organized monthly with the President of the Management Board. Carlos Tavares informed on a regular basis the Board of the advance at each step in the process in terms of the antitrust concerns and the approvals of the banks, approvals of the market authorities in the different countries. And this with regards to the activities of the future entity. The extraordinary Supervisory Board meetings and its committees were indeed created to allow the members of the Board to examine the details of the dossier and to ensure the implementation of the merger terms in accordance with the combination agreement as well as all of the decisions of Supervisory Board regarding the operation since 2019. I thank the President of the committees for this work. All of the answers to the questions regarding the merger terms, the reports by the merger appraiser, the fairness of exchange of the contribution by PSA, were all brought by the management, the appraiser, the appraiser of the management, Mr. Olivier Bourges as well the cabinet of [indiscernible] and their Supervisory Board, which were entrusted with carrying out this expertise and this was to ensure the carrying out of the terms of the combination agreement as broadly as possible. The Board also called upon Perella Weinberg Partners since [ 9 June ] 2019 to carry out a fairness opinion. The fairness was evaluated in light of 3 principal elements: the exchange ratio, the value creation through synergies and the opportunity created by the merger, managing the risks to ensure better adjustment to the energy transition and the automobile industry. The Supervisory Board met on an exceptional basis on the 27th October to approve the -- unanimously the signature of the merger terms, 50-50 between PSA and FCA. In terms of governance, the committee on Nominations, Remunerations and Governance presided by Gilles Schnepp has implemented with the help of an external cabinet, a process for identifying and selecting the Board members of Stellantis, which will be chosen by PSA. The independent directors will be chosen from diverse professional backgrounds and will contribute their perspective and experience to -- which are relevant and in line with the dynamic spirit of this innovative combination. Future members of the Board of Administration of Stellantis chosen by PSA and its 2 major shareholders will have benefited from an induction course in October 2020, 2 days, in fact, which will enable them to familiarize themselves with the strategic themes of the automobile sector. I would like to thank all the shareholders, the members of the Supervisory Board of PSA and the management of the company for the work done in 2020 within this scope. And I want to now allow -- I want to thank Carlos Tavares and now we will see a few of the highlights of the 2020. [Presentation]

I would like to invite Carlos Tavares to present the merger project with FCA.

Thank you, President. Ladies and gentlemen, good morning. I'd like to start off by expressing my best wishes, and thank you for taking part in this assembly. I must say that it is with a great deal of seriousness, emotions and a lot of excitement that I address you today. Indeed, this general assembly represents a historical moment for the PSA Group, which in recent years, was the leader in its industry from a number of points of view. First of all, together, all of us have succeeded in bringing the PSA group to the highest levels of profitability of the world automobile industry. Profitability, thanks to the strategy to lower the breakeven point that we've implemented. We've become a variable, efficient group in terms of value creation. We showed this in the 2019 results within operating -- recurring operating margin in the automobile sector of 8.5%. In the first semester of 2020, we were #1 in the world in terms of the recurring operating margin of the auto sector. And this is the result of the work done by all of the employees of this group management. All of the employees that I'd like to greet and thank you. So today, we have a PSA group, which is efficient, it is profitable. And the COVID crisis has, in fact, demonstrated that the piloting of the company by lowering the breakeven point, increasing the operating margin has provided a shield in this crisis period. The group has positioned itself as well as the leader of automobile manufacturers in terms of CO2 emission reductions. In our main market, the European market, we are the leader of all automobile manufacturers. We've respected all of the objectives set forth by the European Union, but we have gone even further. We have anticipated on the societal and environmental expectations from this point of view. And this point needs to be attributed to our teams, our engineering, our industrial and commercial teams. And here again, I greet them and salute them. We have shown that we can do this, thanks to the agileness of the company. We have steered that energy transition going from an internal combustion technology that we master to an electric technology that we also master. And this -- the proof of this is the results obtained. This is true for Peugeot Citroën DS, but also for Opel Vauxhall because the results in terms of CO2 reductions for Opel Vauxhall, are very well positioned. We see their economic results are also well positioned because in 2019, the operating margin of Opel Vauxhall was 6.5%. In the first semester of 2020, that operating margin was positive at 2.5 -- at -- excuse me, at 2%, which shows that we have brought the PSA Group at the top levels of efficiency and resilience. At the same time, we have continued to produce iconic mythical models. We have continued to launch in the market marvelous cars with marvelous brands. This was recognized by the industrial experts with no less than 4 Car of the Year titles, 308 in 2014, 3018 in 2017. And not to forget the Opel Astra in 2017 and 208 in 2020. And this shows that we continue to manufacture and sell beautiful cars that protect and defend the freedom of movement of our companies. We received 3 auto best titles for Citroën Aircross, for the K9 and the Opel Corsa. This shows that our company has been able to build an extraordinary economic efficiency at the world level and that it will continue in the future to be animated by the passion of its employees in the design, manufacture and sale of objects, which -- whose value is recognized by our customers. So this is a historical moment today. Despite the headwinds in 2020, we have been able to carry out those projects, which were ours, first of all, protect our employees, protect the long lastingness of the company while building the future of the company through the merger project, which is proposed today. I would like to stress here that one of the decisive factors in the attainment of this result, which leads us to be present here today in front of you is that I see that the majority of the stakeholders and the majority of shareholders of PSA and FCA have, in fact, the will and a clear vision for the future and we see that they have a clear vision of the adaptations that have been brought to our initial agreement in 2019, which was updated in September 2020 to take into account the consequences of the COVID crisis. This has been done in a collaborative, constructive, highly mature context, which enables us to protect you today under the best of conditions. Let me say that in the LCV market, we have continued to work in -- on excellent terms because we have won the IVOTY trophy for our entire range of electric LCVs for 2021. And I would like to say that as the President said that I'd like to focus, on the last 7 years, we have steered the company through a lowering of the breakeven point, we've maintained the margins of the Automobile division at the world level. There is continued passion for the automobile in our company, a CO2 performance, which is fully aligned with our societal expectations. And there is the leadership, the leadership that we maintained as regards to our competitors. Remember, today, we have 16 electrified models which are on sale, and we have respected our road map, whereby by 2025, all vehicles launched on the market will offer an electrified version. And we are in line with this plan. We are implementing rigorously what we presented to the shareholders. We have in front of us, a world, which is challenging, of course, but it's also a source of opportunity. The challenge we have for the future in the coming years is that we want to protect the freedom of movement to our co-citizens in all markets of the world, offering them mobility, which is safe, which is clean and which is affordable. This is the convergence of these 3 factors, which will indeed allow the performance for the coming years. We want to bring together the affordability, the safeness and the cleanliness of the mobility we offer our co-citizens. And this mobility is a fundamental need of the human beings. It is the freedom to move. So we must continue to develop this. And we have to offer all kinds of mobility. These are the 3 criteria, we will respect in facing this challenge. And as always, we will respect 1 or 2 which are easy, of course. But when we try to bring the 3 together, it calls for great effort. So once again, we want to be able to offer those 3 dimensions of mobility, safety, affordability, and clean mobility. And it is in the face of these challenges that today, we are presenting the merger of the 2 entities, PSA and FCA, to create Stellantis, which thanks to the scale effect, thanks to its research and development capabilities, its size and its ability to be present in all of the markets of the world that we will be able to meet the challenge I've just described. With Stellantis, we will create the third carmaker in the world in terms of sales, fourth in the world in terms of volume, while always stressing that essential element, the quality, the qualitative dimension is important, even if quantitative is also important. The quantitative is important if we want to dilute the significant research and development efforts that we will have to invest in to prepare the company for a brilliant future. It is those details that we will be looking at to enable the company to continue to massively invest in the technology of the future, so as to offer that freedom of movement, that mobility answer. It is in this way, we will try to protect ourselves from regional crisis, from a sequential world crisis by being profitable, by being powerful in 2 of the principal world markets, which are the Americas and Europe. By approving this merger, we are going to give ourselves a business base in these 2 important regions of the world, which will protect the company from regional crisis or sequential world crisis as the 1 we are presently living. It is the complementarity between the 2 entities, PSA and FCA, that we are seeking a geographic complementarity, a technical complementarity, which is obvious in various fields like the reduction of CO2 emissions, autonomous cars and other sectors as well. This complementarity will be offered by Stellantis. It is also the assurance that we will have a management team, both on the PSA and FCA side that has a great culture and a capacity to deploy plants. Because what makes the success of a company is not just its strategy, but it is at times and especially its ability to execute these plans. The 2 entities presented today as candidates for the merger are entities which have shown their capacity to deploy to execute their plans. So this execution capacity will be an important element of Stellantis. So I repeat, geographic complementarity, technological complementarity and the capacity to execute the company's plans. This is extremely important to mention. I'd like to give you a few figures here. If we were to look at a few points, this entity represents more than 8 million vehicles sold in the world, a turnover of some EUR 167 billion, EUR 11 billion to EUR 12 billion in operating income and this operating margin, free cash flow of EUR 5 billion. These figures are based on the 2019 results. Just to give you an idea of the scope that I mentioned of this company that will have to be steered with agileness. Size will have to be used to dilute the efforts that will have to be made, as I mentioned. The 2 principal pillars in this business are Europe and the -- and it represents EUR 76 billion internal, Europe and the EMEA, EUR 74 billion for America and Latin America with EUR 10 billion in turnover, representing 6%. All of this with an extraordinary portfolio of brands, 14 automobile brands, some of the most prestigious in the world with a fantastic history, which represent the foundations on which we are going to build the future. So the -- how will the story with Stellantis occur? First of all, it will be based on an important value creation, which will be based on some EUR 5 billion of synergies per year. That is the value created linked to this merger, EUR 5 billion per year. This will be the #1 priority of the Stellantis management to deploy that synergy and create that value. Stellantis represents research and development and investment, resources, which will be more powerful. The -- it will be a percentage of the total turnover, which will be reinvested in engineering and investments. So innovation capacity, a capacity to develop new products, new services and technologies, which will be significantly increased. It is a financial position at its creation, which will be very robust, given the public results known by the markets in the second half of 2020. So as of the creation of Stellantis, we will have a robust financial situation because both entities, both boards have been wise and approved the updates presented in September of 2020. What's also important is that we will be stronger together than we are today as PSA. And by consolidating the industry, by merging with FCA, PSA is positioning itself in a more robust way so as to be able to face challenges that will appear. Neither company is in a crisis. Both companies are healthy. So they have the possibility of showing they are intelligent, capable of using their strengths to confront these challenges. In the implementation, the execution of the plans I mentioned will be extremely important. We will come back to you to present the strategic plan of Stellantis and we will assume the duty of executing that plan with the rigor you know we have. And from the managerial point of view, on both the PSA and FCA sides, we have that rigor. And this is 1 of the strengths we will preserve in the new entity. Let me say that we have been extremely methodical and I think, and I hope, professional in preparing today as the President stressed in the creation of the future Stellantis Management Board, but also in all of the preparation carried out up to now. Here, I would like to pay tribute and warmly thank all of the teams which have worked ceaselessly since December 2019 to prepare. Today, the President has said, we've obtained all of the necessary validations, all of the necessary approvals. So it's with a great deal of pride that we stand here in front of you today. It's also with a great deal of warmth and sincerity that I thank all of the teams today. I'd like to give you an idea of the work that has been done since December 2019. As far as the antitrust dossiers are concerned, our PSA teams with those of FCA have submitted some 12,500 pages of document -- of documents to obtain the antitrust validations in the world, no less than 12,500 pages. We have answered more than 1,200 questions. So you can imagine the amplitude, the magnitude of the effort carried out, a silent effort, which worked without counting their time, without counting their hours and days dedicated to this. And I must say, I really admire the work of these teams. I thank them warmly here. All of this to say something quite simply that we are ready. We are ready for this merger. We are ready for this value creation. We are ready to move on to the next step in this fantastic story that was presented by the President earlier. And here, again, beyond the thanks, I wanted to address to all of the PSA teams. I would also like to thank the FCA teams. I would like to thank the Supervisory Board, its President, our industrial and social partners who have, at all times, supported this merger. All of the bodies have, in fact, supported this. No one has hesitated. I'd like to thank them for their vision, the co-constructive attitude of our social partners at PSA, which is something that's important for us. The quality of the dialogue with the social partners is indeed the locomotive of the advancement of this company. And this is -- it's truly -- this is truly the maturity of the -- all the stakeholders that are enabling us to be here today, I'd like to thank all of the actors, the President of the Supervisory Board, Louis Gallois, who has taught me a great deal, who I've listed to a great deal, and I -- has enabled me to make this modest contribution today. I'd like to say that if you were to decide to go ahead, then we are ready to announce very rapidly the effective date of the merger, what's called the closing of this merger. We are ready, and we are aware of the fact that each and everyone of you will be able to understand the magnitude of today's decision, the importance for the future of our company. This is what I wanted to say, Mr. President with our -- to our shareholders. Thank you, President.

Carlos? I suggest we move to questions and answers. Did we receive any questions?

No, we have not received any written questions.

Okay. Then let me thank you Grégoire Olivier for this answer. And now I give you the floor because we are now going to present the different resolutions. Yes.

Yes. Thank you, Chairman. And before we present the resolutions, let me recall to the bureau and to the shareholders that special shareholder meeting is held behind closed doors. In fact, following the government recommendations and the shareholders have voted in advance. So when I present the resolutions, I will also present the results of the vote of the shareholders. With the first resolution, shareholders of shares with double voting rights are asked to approve the cross-border attached merger according to the terms and conditions detailed in the notice of the meeting and explained in the notice brochure. In particular, the shareholders are called upon to approve the fact that all assets and liabilities of Peugeot S.A. be transferred to FCA and that the remuneration of the assets reflect an exchange ratio of 1 PSA share for 1.742 FCA share. The merger will be effective once all conditions precede and are satisfied or lifted. In fact -- and in fact the day after the date on which the Dutch civil law notary executes the notarial deed of cross-border merger. This resolution was adopted by 99.99% of votes. The second resolution, shareholders holding double voting rights are asked to approve the removal of the double voting rights. The removal of the double voting rights is a consequence of the completion the cross-border merger, which is itself, in fact, subject to specific approval. After the merger, no double voting rights will be carried over. The new Stellantis company will adopt a loyalty voting structure according to which shareholders can ask to register their common shares in the loyalty register of Stellantis. Each share registered in the loyal register for 3 years will be entitled to receive an additional vote. This resolution was adopted by 99.99% of votes. The third resolution is the powers for formalities. And this resolution was also adopted at 99.99% of votes.

Well, thank you, Grégoire. Thank you, Secretary. Now I do not see any further business. Grégoire, is that right?

No further business.

Okay. Then I would like to thank you all for this participation to this historical general meeting. All the elements we have presented bode well for the future. Stellantis is born on a good basis and has everything it needs to be a major player in the automobile sector in terms of competitiveness. The Supervisory Board of PSA wish Stellantis full success. We will meet again at 11 for the extraordinary general meeting. As indicated in the documents you have received, we ask you to open another link. In fact, the 1 connected to the extraordinary general meeting. And let me say that this meeting is adjourned at 10:37. [Statements in English on this transcript were spoken by an interpreter present on the live call.]