Volkswagen AG (VOW3) Earnings Call Transcript & Summary

Ladies and gentlemen, I hereby open the 60th Annual General Meeting of Volkswagen Aktiengesellschaft from the DRIVE Volkswagen Group Forum in Berlin. According to the articles of association, I will chair the meeting. Let me welcome you, our shareholders, representatives from the media and everybody who is watching this. And let me do so on behalf of all my colleagues on the Supervisory Board and the Board of Management as well. We'd have loved to be able to welcome you face-to-face in the CityCube in Berlin. However, the unusual situation does not allow us to do so, unfortunately. Due to the health risks still present based on the coronavirus, the Board of Management took a decision supported by the Supervisory Board to hold this year's Annual General Meeting as a virtual AGM that is without the shareholders and their proxies being present physically. We thus use the option granted by the legislator based on the so-called COVID-19 Act. The virtual Annual General Meeting allows us to protect the health of our shareholders, our staff and everybody working at this meeting, not to forget the general public. Because of the existing corona restrictions, we have limited the number of physical participants here in the DRIVE Volkswagen Group Forum to only a few people. In addition to myself, the Deputy Chairman of the Supervisory Board, Mr. Hofmann, is present in the room, more specifically behind the scenes, and the entire Board of Management is present. The other members of the Supervisory Board are attending by video and audio. Notary public, [ Mr. Raki ], is physically present as well. He will establish the notarial record required under the law. And the voting proxies of the company are present as well. Ladies and gentlemen, let's take a look back and look at fiscal 2019. Despite headwind from the markets, the Volkswagen Group moved on to more record levels when it comes to deliveries, revenue and earnings. In the current fiscal year, the global COVID-19 pandemic has significantly impaired our business, however. We've taken a number of measures in order to protect the health of everybody working for Volkswagen in order to align production with demand and to reduce costs and protect our liquidity. It's even in this unprecedented corona crisis that the Volkswagen Group has made great strides when it comes to its transformation process. That's the result of [ a magnificent ] team effort. And I'd like to express our gratitude and profound recognition to the members of the Board of Management, the works council of the management in general and everybody working at Volkswagen Aktiengesellschaft and everybody working for related companies as well. Later on, I will come back in more detail to the strategic challenges we are faced with and how the bodies work together to master these challenges. But what I'd like to do, first of all, with your permission, is establish the required formalities for today's Annual General Meeting. The Annual General Meeting has been convened in line with the stipulations of the articles of association. The invitation to the AGM was published on the 21st of August 2020 in the German Federal Gazette. It was our deliberate decision to not use the reduced notice period under the COVID-19 Act to make sure that you, shareholders, have enough time to register for today's something. Ladies and gentlemen, we will maintain an attendance register as well this year. The attendance register will include all company proxies present here at the venue. You will find some more information on this year's virtual Annual General Meeting on the website of our company, under investor relations, and there under shareholder meetings and 2020. Our shareholders are able to follow the entire AGM through our online shareholder service. The speech by Dr. Diess and the report by the Supervisory Board will be publicly available. To allow you to duly exercise your shareholder rights under the virtual AGM as well, we have made it possible to you, in line with the COVID-19 Act, to send in your votes by postal ballot as well or authorized company proxies or third parties to exercise your vote. Only holders of common shares and their proxies have voting rights in this shareholder meeting. But since it's not possible to enter into a dialogue with us under a general debate as usual, we've made it possible for duly registered shareholders to send in questions on agenda items through the online shareholder service. We will answer these questions after our reports. If you wish to object to a resolution adopted at today's Annual General Meeting [ and have it limited ], you can also do so through the online shareholder service. This feature of the service has been open since the beginning of the shareholder meeting and will continue to be available until a few minutes after the voting results will have been announced. As usual, this Annual General Meeting may not be recorded. No verbatim [ recorded ] is established either. So much for the formalities required. Ladies and gentlemen, for those of you who have taken part in a face-to-face Annual General Meeting of Volkswagen Aktiengesellschaft, you will know that we traditionally remember those who have passed away before starting with the business of the general meeting. This year, we'd like to extend this remembrance beyond those who have worked for Volkswagen. The Volkswagen Group has customers or clients and business partners in almost all countries of the world. We were dismayed in seeing how many people fell ill with COVID-19 and how many lives could not be saved. We'd like to express our sympathy to the families of all those who have died from COVID-19 globally and are with them in spirit. In August last year, the long-term Chairman of the Board of Management and Supervisory Board of Volkswagen AG, Professor Dr. Ferdinand Piëch, died the age of 82. During his career, Professor Dr. Piëch was instrumental in the development of the automobile and the automotive industry and especially in the growth of Volkswagen to become a global mobility group. The company and everyone who works for it hold enormous gratitude and respect for his services. We will always remember him and his life's work. In January 2020, Dr. Werner P. Schmidt, former member of the Volkswagen AG Board of Management, died. Dr. Schmidt belonged to the Board of Management from 1975 to 1994 and demonstrated tireless commitment throughout this period, in which he made an important contribution to shaping our company. We will fondly remember his accomplishments. Let us observe a moment of silence to commemorate those who are no longer with us. Thank you. Ladies and gentlemen. I will now give you a condensed report of the Supervisory Board and inform you about the changes on the Supervisory Board since the last AGM and also talk about how we implement the recommendations of the German Corporate Governance Code. Following my remarks, the CEO will give his report. And after that, we'll proceed with answering the questions sent in through the online shareholder service, and this will be followed by the vote. Ladies and gentlemen, let me, first of all, turn to the report by the Supervisory Board. Since the end of last year's regular Annual General Meeting, the Supervisory Board of Volkswagen AG has seen 2 changes in terms of composition. When it comes to the labor representatives, it was Ms. Birgit Dietze who stepped down as a member of the Supervisory Board, with effect dated 31st of May 2019. In accordance with Section 104 of the Stock Corporation Act in Germany, the Braunschweig registry court appointed Ms. Conny Schönhardt to succeed her as a member of the Supervisory Board of Volkswagen AG, with effect from the 21 of June 2019. Ms. Schönhardt is Union Secretary to the Board of IG Metall metalworkers' union. And again for labor representatives, Mr. Johan Järvklo stepped down as Supervisory Board member, with effect from the 29th of May 2020. The Braunschweig registry court followed -- or took a decision accordingly to appoint Kai Bliesener, with effect from 20th of June 2020, to become a Supervisory Board member on behalf of the labor representatives. Mr. Bliesener is head of vehicle construction and automotive and supplier industry coordinator at IG Metall. We are looking forward to continuing our good collaboration. As for Ms. Dietze and Mr. Järvklo, who left the Supervisory Board, I'd like to thank -- on behalf of all Supervisory Board members thank them for their good collaboration. At the end of the 59th AGM, the regular term of office of Dr. Hessa Sultan Al-Jaber, Dr. Hans Michel Piëch and Dr. Ferdinand Oliver Porsche ended. The Annual General Meeting reelected all three as on the 14th of May 2019 for another full term of office. According to section 11, paragraph 2, of the articles of association of Volkswagen Aktiengesellschaft, the term of office of Dr. Hussain Ali Al-Abdulla as a regular Supervisory Board member will end with -- or after today's Annual General Meeting. And as you read in the agenda of today's meeting, the Supervisory Board suggests that, with effect after the end of today's AGM, Dr. Al-Abdulla should be reappointed for a full term of office. In other words, until the end of the Annual General Meeting formally resolving on the formal approval of his activities as Supervisory Board member for the fiscal year 2024. Dr. Al-Abdulla has been a member of the Supervisory Board since 2010. The Supervisory Board has sought assurance from Dr. Al-Abdulla that he will continue to be able to invest the time to be expected for the work as Supervisory Board member. As an annex to the agenda, you will find the CV of Dr. Al-Abdulla and some more information on this election proposal. And Dr. Al-Abdulla has declared that, if elected today, he would accept the appointment. So much for the composition of the Supervisory Board. Ladies and gentlemen, the main focus of the work of the Supervisory Board in fiscal 2019 was on the strategic alignment of the Volkswagen Group. This included the long-term investment or CapEx planning but also the IPO of TRATON SE, cooperations with Ford and Northvolt and building up our own software organization. During the year under review, the Supervisory Board of the Volkswagen Aktiengesellschaft regularly discussed, looked, reviewed and discussed, the company's position and development in line with the responsibilities. Under the law, the articles of association and the rules of procedure, we supervised and supported the Board of Management and advised it on matters of management of the company and advised it on the management of the company and the group. We always took into account the recommendations and suggestions of the corporate governance code in doing so. The Supervisory Board was directly involved in all decisions of fundamental importance for the group. Ladies and gentlemen, the Board of Management complied with its duty of -- to inform us, informing us both in writing and in person, in a timely and comprehensive way, in particular, when it comes to all matters relevant for the strategy of the company, its business development, planning and company situation. This also included the risk situation and risk management. It was in this context that the Board of Management informed the Supervisory Board on further improvements of the risk and compliance management systems. In addition, the Supervisory Board received ongoing information from the Board of Management on compliance and other current matters. The Supervisory Board received documents relevant to its decisions in due time before the meetings. At fixed intervals, we also received the detailed report of the Board of Management on the current business and the forecast for the current year. Whenever there were any deviations from the business plans and goals, the Board of Management gave us extensive explanations, either in writing or orally. It was together with the Board of Management that we analyzed reasons of deviations and derived countermeasures based on this. At the meetings of the Special Committee on Diesel Engines and its meetings, the Board of Management also reported on current developments under the diesel issue. I have regular meetings with the CEO for discussions in order to discuss important current issues and matters. In addition to addressing the diesel issue, this included, among other things, the group strategy, planning, business development, the risk situation and risk management but also questions of integrity and compliance in the Volkswagen Group. The board of -- the Supervisory Board, rather, did not only have close consultations and exchanges with the Board of Management but also entered into a dialogue with our stakeholders. For example, as suggested by the German Corporate Governance Code, I had a number of meetings with investors on matters specific to the Supervisory Board. In 2019, the Supervisory Board held a total of 8 meetings, the average attendance rate was 94.3%. On Page 15 of the annual report, you will find specific attendance by the members of the Supervisory Board. Whenever there were particularly urgent matters, they were decided by a written vote or using electronic means of communication. In the last fiscal year, 4 of the 5 committees of the Supervisory Board held meetings: 14 meetings with the Executive Committee, 1 meeting for the Nomination Committee, 6 meetings for the Audit Committee. And the Special Committee on Diesel Engines held 2 meetings. When you look at the sheer number of meetings of both the Supervisory Board and its committees, you can see that the Supervisory Board has very actively supervised and advised the Board of Management in fiscal 2019. The Mediation Committee did not have to meet in 2019. You'll find a detailed list of the subjects, the agenda items treated in the meetings of the Supervisory Board and its committees on Pages 12 through 17 of the annual report. Ladies and gentlemen, Board of Management and Supervisory Board have issued the declaration on corporate governance on the 15th of November 2019. That is the annual statement under Section 161 of Stock Corporation Act on the recommendations of the German Corporate Governance Code. The declaration of conformity lists all deviations from the recommendations and the declaration of conformity itself is available from the website of Volkswagen AG. You'll find more information on the implementation of the recommendations and suggestions of the German Corporate Governance Code from Page 60 of the annual report and also in the notes to the company's or group's financial statements on Page 334 of the annual report. The report by the Board of Management on [ related companies and related companies report ] was reviewed by the auditor, PricewaterhouseCoopers. The Supervisory Board also reviewed this report and found that, after its review, there were no objections against the declaration of the Board of Management at the end of the report. The Supervisory Board also asked PwC to review the combined separate nonfinancial report for fiscal 2019. This report is based on the corporate social responsibility directive of the EU. The purpose of the CSR directive and therefore the report is transparency on environmental and social aspects of companies operating in the EU, [ strengthening this ] transparency more specifically. After its review, the Supervisory Board had no objections to the results of PwC's review of the combined separate nonfinancial report for 2019. In addition, I'd like to refer you to the written report by the Supervisory Board, which is available from Page 12 of the annual report of the company. Shareholders, the members of the Board of Management have received remuneration in line with the German commercial code for 2019 totaling EUR 45.4 million. In 2017, the system of Board remuneration was decided. And 2017, at the AGM, the system of remuneration of the Board was explained in detail, and it hasn't changed since. Based on the German Shareholder Rights Act 2, the Supervisory Board will submit a remuneration system for Board of Management members next year, which will be in line with the new legal requirements and which will be for the AGM '21 to resolve on. Ladies and gentlemen, let me now move on to the diesel-related investigations that also concerned us in the course of last year. We've once again made good progress with our investigations and have reached key milestones. We have resolutely pressed ahead with the clarification of the background to the diesel issue and the review of possible claims for damages against current and former members of the Board of Management. We've come a long way in this regard even if we're not yet quite there. In Autumn last year, the Braunschweig public prosecutor's office filed an indictment against the former Chairman of the Board of Management of Volkswagen AG, Professor Dr. Martin Winterkorn; the current Chairman of the Board of Management, Dr. Herbert Diess; and me on account of alleged market manipulation. At its meeting on the 25th of September 2019, the Supervisory Board unanimously decided in light of this that Dr. Diess and I should continue in our respective offices. I was obviously not involved in the discussions or the adoption of this resolution. In the meantime, Braunschweig regional court has terminated the proceedings against Dr. Diess and myself. In its order of 24th of September 2020, Braunschweig regional court admitted the indictment against Professor Dr. Winterkorn to the main hearing and opened the main proceedings. Based on the thorough review by the advisers engaged by it, the Supervisory Board has concluded that the termination of the proceedings against Dr. Diess and myself was, given the current challenge facing the company, in the [ latter's ] interest and neither Dr. Diess nor I had breached any duties vis-à-vis Volkswagen in connection with the fact and circumstances covered by the terminated criminal proceedings. With the termination of these proceedings, the administrative offense proceedings against the company could also be brought to an end in this respect. It must be emphasized that the Supervisory Board's review is in principle being conducted independently of any measures by the public prosecutor's office or the courts. The Supervisory Board is to review possible claims without reservation and regardless of who is implicated even after the termination of the proceedings. As you are already aware, the Stuttgart public prosecutor's office had already instituted fine proceedings against Dr. Ing. h.c. Porsche AG. These fines proceedings were concluded last year by way of a fine notice issued by the Stuttgart public prosecutor's office, bringing another chapter of the diesel issue to a close. In April 2019, the Braunschweig public persecutor's office filed an indictment against 5, in some cases former, employees of Volkswagen AG, including the former Chairman of the Board of Management, Professor Dr. Winterkorn, on account of alleged fraud and other criminal offenses in what are named as the [ annual acts ] proceedings. These proceedings do not concern Volkswagen AG since all allegations against Volkswagen AG [ in these connections ] were finally settled by means of a fine notice from 2018. Braunschweig regional court accepted the indictment in its order of 8th September 2020 and opened the main proceedings. We will monitor the proceedings as they continue. The Supervisory Board will also closely monitor the civil proceedings, especially the test case pending before Braunschweig high regional court under the capital investors model proceedings act. Likewise, the actions brought by customers, a significant portion of which have been settled in the class action for a declaratory judgment and therefore concluded in a manner satisfactory for both Volkswagen and our customers. Ladies and gentlemen, as you know, Celle higher regional court appointed a special auditor at the end of 2017. The appointment was based on a motion filed by Deutsche Schutzvereinigung für Wertpapierbesitz, DSW. The original is -- appointed special auditor refused the appointment for [ 8 related reasons ] and did not take any action at all. In April this year, Celle higher regional court appointed a new special auditor by way of a legally binding order. The new special auditor has meanwhile accepted the appointment. It is our view that the order of the special audit and the replacement of the special auditor violate Volkswagen's constitutionally protected rights. Volkswagen has therefore filed constitutional complaints with the Federal constitutional court against both the order of the special audit and the replacement. I would like to express that the company is not trying to prevent further investigations. However, we are obliged in the interest of all shareholders and the company to safeguard the interests of Volkswagen AG that are protected by the constitutional court. In this context, it might be taken into account, in particular, that the matters that the special auditor is to clarify have already been widely investigated and will continue to be investigated also independently. Volkswagen was also monitored by the compliance monitor appointed by the U.S. Department of Justice. We are, moreover, cooperating with the authorities in numerous countries to the fullest possible extent. Moving on to the monitorship. Monitor Larry Thompson closely followed the company for just over 3 years. He [ and his team ] played a very active role in not only consistently reviewing and checking but also supporting the company's process of change. Larry Thompson provided Volkswagen with valuable recommendations. In November last year, he issued his second follow-up report in which he summarized and assessed the improvements on compliance at Volkswagen over the previous year. The monitor issued his final report in September this year, in which he had to assess whether our compliance and ethics program is reasonably designed and implemented. We spent the last 3 years working throughout the group on and giving top priority our compliance and ethics program. Reviewing and assessing the compliance and organizational structures in the group was, therefore, an ongoing task of the Supervisory Board. During the past financial year, in particular, this made up a substantial part of the work of the Audit Committee. As an example, in the past year, the Supervisory Board has developed and implemented a process for regular risk-based independent audit of the company's ethics and compliance program and risks monitoring system. Ladies and gentlemen, today, I can tell you that Volkswagen has received a monitor's certification. In its final report, the monitor states that Volkswagen is now most certainly a better company than it was in 2015. We see that the certification means that Volkswagen has passed another key milestone in its handling of the diesel issue. On behalf of the Supervisory Board, I would like to thank all our employees as well as all other persons involved for their commitment, their cooperation with the monitor's team and their ready acceptance of the extensive organizational changes. Ladies and gentlemen, the Board of Management and the Supervisory Board, after completion of our independent investigations, propose to formally approve of the actions of the Board of Management and the Supervisory Board for fiscal 2019. On to the changes in the composition of the Board of Management since the end of our last Annual General Meeting. Mr. Abraham Schot, by mutual consent with effect from 31st of March 2020, left the Board of Management of the Volkswagen Aktiengesellschaft and the Audi Aktiengesellschaft. Mr. Schot's successor was appointed by the Supervisory Board on November 15, 2019, namely Markus Duesmann, who will become his successor with effect from the 1st of April 2020. In the Board of Management of Volkswagen, Mr. Duesmann is particularly responsible for the brand group premium as well as the business unit group research and development. On the 1st of April 2020, Dr. Herbert Diess took on the position of the Management Board business unit sales at the group level. By mutual consent, Dr. Stefan Sommer left the Board of Management on the 30th of 2020 (sic) [ 30th June of 2020 ]. Now Frank Witter will take on the position as the manager for the business unit components and procurement for a temporary basis. Responsibilities have been restructured in the management for the brand and the group. The group brand Volkswagen Passenger Cars will be -- have been managed from the 1st of July 2020 onwards by the former Chief Operating Officer of the brand, Ralf Brandstätter. The Chairman of the Board of Volkswagen Group, Dr. Herbert Diess, who held both positions in the past in the group Board of Management, will continue to manage the brand group volume, which also includes the Volkswagen Passenger Car brand. In addition to that, Andreas Renschler left the Board of Management of Volkswagen AG on the 15th of July 2020 and the Board of Management of TRATON SE. The step was taken by mutual consent. The business unit that Mr. Renschler was formerly responsible for, the business unit truck and buses, will now be managed by our HR manager, Gunnar Kilian. His successor as the Chairman of the Board of TRATON SE will be Matthias Gründler, who up until May 2018 was the Chief Financial Operating Officer of that company. On behalf of the Supervisory Board, I would like to thank all the members of the Board of Management that have left and the entire Board of Management for their extraordinary personal commitment and the extraordinary results that were achieved. Ladies and gentlemen, I would like to thank you most cordially for your attention, and let me now take the opportunity to pass the floor to Dr. Diess in order to give us his report of the Board of Management.

Dear shareholders, ladies and gentlemen, welcome to the Annual General Meeting of Volkswagen AG. I will be bringing you up to speed on your company's past year and its current situation and outlook. On the surface, the fiscal years 2019 and 2020 could hardly be more different. 2019 was a year in which the Volkswagen Group achieved records, while 2020 was the year of the coronavirus pandemic, and this had significant impact on the automotive market worldwide. In both years, we took significant steps towards becoming a leading provider of electric digital mobility, and we achieved important milestones. The transformation of the group is not being held back by the coronavirus, but it is actually accelerated by it. Volkswagen's 670,000 employees particularly demonstrated their ability and high performance during the coronavirus pandemic. Within the space of a few weeks, Volkswagen South Africa converted a former factory into a temporary hospital, SEAT manufactured respiratory equipment in Spain, ŠKODA in the Czech Republic and Lamborghini in Italy produced medical masks. The group provided relief supplies worth EUR 40 million, looked for suitable producers in China and organized shipments of the goods to Europe. We set up a task force under the direction of Board member for human resources Gunnar Kilian. We managed to keep delivery chains stable, and we continued to supply our dealers and customers with auto parts. During what was a period of extraordinary market weakness, we provided massive support to our commercial partners' purchasing operations. In Germany, we absorbed the VAT, among other things. At the beginning of the pandemic, we halted production at our factories to protect our workforce and kept our plants shuttered during the general lockdown. Short-time working has now been discontinued, however. In some areas, particularly in electric vehicles, plug-in hybrids and the manufacture of components, we're now running additional shifts to reduce delivery times. While we continue to normalize production, the health of our employees remains our top priority. Having our own testing facilities at our German sites allows us to perform up to 2,400 tests per day at the Wolfsburg test centers and [ to first ] break the chain of infection. This also takes pressure off the public health system. In Germany, the rate of infection among our workforce is 0.11%, which is 1/3 of the rate for the entire population, which is at 0.34%. So in terms of corona, Volkswagen is demonstrating stability. I would like to take this opportunity to warmly thank each and every individual from our group for their commitment and sense of responsibility. My thanks also go to you, our shareholders, who have remained loyal to Volkswagen and supported us. Business this year took a hard hit due to the pandemic. The following picture emerges for the first 8 months for the current fiscal year. Light commercial vehicles and the volume brands in the passenger car business were affected to a greater extent than the premium segments. Deliveries to our customers by our volume brands were down nearly 23% overall. Our premium group, led by Audi, contracted by around 16%. Porsche and the luxury brands saw a decline of 5.6%. Truck & Bus deliveries fell by 32%. China saw the smallest decrease in deliveries at 11.5%. And Western Europe, the sharpest fall at over 30%. The group is winning market share. 13% share of the global market, that means a growth of 0.4 percentage points. In China, our largest market, 1 in 5 new cars comes from the Volkswagen Group. During the lockdown, our primary objective was to safeguard the group's liquidity. At the end of the second quarter, the Automotive Division's net liquidity came to a respectable EUR 18.7 billion. The reduction of inventory helped a lot to achieve this. Even during the crisis, we are continuing to invest in the future. By 2024, we will invest EUR 33 billion in e-mobility and EUR 14 billion in building our IT capacity and in autonomous driving. Ladies and gentlemen, we expect the upward trend to continue for the remainder of this year. We expect incoming orders and deliveries in September to be up on the previous year. Forecasting institutions are expecting a 4.9% decline for the global economy in 2020. And of 2021, economic experts assume a broad-based upswing. The global economy is slated to grow by over 4%. However, the pre-crisis levels are not likely to be reached until at least 2022. All medium- and long-term forecasts continue to involve considerable uncertainty and depend on the future course of the pandemic. Our goal for the current fiscal year has remained unchanged, to remain profitable in the sum of all parts of the group. Ladies and gentlemen, due to postponement of the Annual General Meeting, the fiscal year 2019 is now quite some time ago. Now here's an overview of the key figures again. Although the global car market contracted by 4% in 2019, we were able to increase deliveries and sales revenue. We generated more revenue from our operations than ever before. Sales revenue rose by 7.1%, outstripping deliveries, which were up 1.3%. We sold better-equipped, higher-margin vehicles at higher prices. We were able to significantly increase the quality of our business. Operating profit before special items came to EUR 19.3 billion. At 7.6%, the operating return on sales was slightly above our target corridor. Net cash flow in the Automotive Division came to EUR 10.8 billion. Now given that it is still difficult to assess economic developments reliably, the Board of Management and Supervisory Board decided at the end of July to propose to the AGM the distribution of a dividend of EUR 4.8 per ordinary share, EUR 4.80; and EUR 4.86 per preferred share. We've thus amended the proposed dividend previously announced for the 2019 fiscal year, which had originally been EUR 6.50 per ordinary share and EUR 6.56 per preferred share. The remaining net profits of EUR 855 million will be carried forward to the new account. This decision is not based on the lack of financial robustness on the group, the original dividend proposal was based on the good results of successful 2019 fiscal year. New proposal now takes into account the massive impact that the pandemic has had and continues to have. Ladies and gentlemen, let's talk about what makes our group special: our strong brands, products, technologies, our global positioning and the people behind all of this. Ladies and gentlemen, in the commercial vehicle business, TRATON has set itself the goal of systematically implementing the global champion strategies and leveraging synergies between Scania and MAN even better. TRATON wants to tap into efficiency potential, particularly with MAN. Our Commercial Vehicles Division will also drive technological change towards carbon-free electric and digital mobility in the transport sector. By taking the holding company public in 2019, we secured separate access to capital market for it to accelerate the global championing strategy and give the Commercial Vehicles division more entrepreneurial freedom. The goal of acquiring U.S. truck producer Navistar is an important step. The United States is the most profitable market for heavy trucks. The acquisition of Navistar can make TRATON a globally positioned truck manufacturer that has operations on all continents and achieves the necessary economies of scale to continue its profitable growth. In January 2020, TRATON submitted its first bid for the remaining ordinary shares of Navistar. It raised its bid again on September 10. TRATON assumes that the increased bid will now be examined in detail by the independent members of Navistar's Board of Directors. In the group Board of Management, Gunnar Kilian is now in charge of the Truck & Bus division and is systematically tackling the restructuring of our truck business. Together with the new TRATON CEO, Matthias Gründler; and the new MAN CEO, Andreas Tostmann, the focus will now be on improving the efficiency of the long-established Munich-based manufacturer MAN. In fiscal 2019, MAN Truck & Bus generated an operating return on -- of sales of just 3%. This means that even before the coronavirus crisis, the economic basis was not sufficient to be able to finance strategically important investments over the truck cycle. In the first half of 2020, its operating results amounted to minus EUR 387 million, and the operating return on sales was minus 9.5%. MAN Truck & Bus needs to restructure with plant closures and approximately 9,500 jobs cut -- job cuts necessary to become competitive. This is the only way that MAN can catch up with the competition in electrification and the efforts to achieve autonomous driving. It will also put MAN Energy Solutions, which was previously part of MAN plant engineering, back on a stable footing. The sales talks have been unsuccessful. We will now extensively restructure energy solutions with site closures in order to achieve sustainable profitability. MAN's Executive Board has submitted specific plans for the company's restructuring to the group works council. We are eager to quickly reach an agreement acceptable for both sides. Scania's unit sales fell 21% (sic) [ 41% ] in the first half of the year due to the coronavirus. The Scania team adjusted the capacity accordingly by cutting back on temporary work. Scania stands on a firm foundation under the leadership of Henrik Henriksson. Its operating return on sales in 2019 was 10.8%, and its operating profit stood at EUR 1.5 billion. In the first half of 2020, Scania's operating return on sales was still 4.2%, and its operating profit came in at EUR 221 million. During the coronavirus pandemic, safeguarding liquidity is also a priority at TRATON. Despite maintaining a strict cost discipline, the holding company also continues to focus on major future trends. It will invest EUR 1 billion in developing alternative drives by 2025. 2 weeks ago, Scania unveiled the next generation of successful hybrid trucks and the first all-electric truck generation with a range of up to 250 kilometers. Short- and medium-haul freight transport will also become electric. MAN and Scania are both bringing out electric urban buses in 2020. Our Brazilian truck affiliate has received an order for 1,600 vehicles, the world's largest order for electric trucks to date. Ladies and gentlemen, Porsche. During the corona pandemic, Porsche has also remained remarkably profitable. Notwithstanding the coronavirus, its operating return on sales in the first half of the year was around 10%, and its long-term target is unchanged at 15%. The new 911 in the legendary version of the Targa and the new 718 Boxster and Cayman GTS 4.0 models will help to achieve this goal. And last but not least, the first all-electric Porsche Taycan. This car is a significant milestone for Porsche, as the brand has adopted, by far, the most ambitious electrification strategy of all the brands. Porsche estimates that, by 2025 at the latest, over half of all new Porsches will be electrified. In other words, powered solely by batteries or as plug-in hybrids. To be the technical and technological spearhead for the group is -- that's the aim of Audi and its new Board of Management chaired by Markus Duesmann. The new team began work in the spring with the ambitions to lead Audi back to the top of the premium competition. Markus Duesmann has taken on responsibility for technical development in both the Audi Board of Management and the Group Board of Management. Audi is doing pioneering work with the e-tron, a genuine premium model among the electric vehicles. e-tron has been the global market leader among electric luxury SUVs since July 2020. In Europe, it has been the best-selling electric SUV since the beginning of the year. In Norway, the leading market for electric mobility, it's actually the best-selling car of all. In Germany, Audi was the most successful premium brand in the first half of 2020 in terms of the number of electric and plug-in hybrid models sold. Production of the all-electric e-tron GT, another technology and design icon of the brand, starts at the end of the year. The Q4 e-tron and the Q4 Sportback e-tron will follow next year. This is the first time the group's new electric platform MEB will be used in the premium compact segment. This vehicle will use Audi's characteristic quattro all-wheel drive technology and set standards in its class with a range of over 450 kilometers. Audi plays a really leading role in the group in the development of innovative technologies -- in terms of hardware, with a PPE architecture in terms of software, with the E3 1.2 and 2.0 architecture. In launching the Artemis project under the leadership of Alexander Hitzinger, Audi has started the race to catch up with Tesla. A compact team of passionate specialists with greater freedom of action will significantly increase our development and decision-making speed in vehicle projects on a pilot basis. Artemis will develop a next-generation electric car and is teaming up with the Car.Software organization to develop the E3 2.0 software for it. We will then roll this software out across the group. The Artemis team has access to the resources and technologies of the entire group [ for this process ]. Audi will present an initial view of the new [ Polestar ] this year. It will be the first group vehicle to use the new operating system by Volkswagen, vw.os. For this, Artemis has close tied to our -- close ties to our Car.Software organization under the direction of Dirk Hilgenberg. The CSO started up at the beginning of July with 1,800 employees from the Audi, Volkswagen and Porsche brands. It combines the group's existing software expertise and the acquisitions that we use to extend the CSO expertise and capacities. These include diconium; and wireless; and recently, the software specialist HELLA Aglaia Mobile Vision, a company with leading image processing expertise in Germany. We plan to increase the share of internally developed software in our vehicles from below 10% today to 60% in 2025. Audi has been regaining its former strength in China in 2020. In the first 8 months, its sales figures already topped those for the prior year period. For the year as a whole, Audi forecasts that its Chinese business will see a slight improvement on 2019. Our emotional luxury cars from Bentley, Lamborghini and Bugatti are weathering the crisis exceedingly well. Booked business in Ducati's motorbike business is up significantly year-on-year. Ladies and gentlemen, our core brand Volkswagen closed 2019 with a record result. SUV models from the T-Cross to the Touareg and Atlas Coupé enabled us to improve our margins and market share worldwide. This is particularly true for South America and North America where we were already close to breaking even for 2020 before the outbreak of the corona pandemic. A special event for the Volkswagen brand in 2019 was the world premiere of the new Volkswagen Golf. It is the brand's core product and defines the character of the brand like the Octavia does for ŠKODA and the Leon does for SEAT. 14 out of 15 comparative tests conducted in Germany again attest to the outstanding product quality. The Golf thus continues the proud tradition of its predecessors. Once the sporty GTE and GTI models and the new generation of the Estate with significantly more usable space are launched, the Golf will strengthen its position as Europe's best-selling car. Golf's quality is winning through. Never before has the Golf been so digital, so environmentally friendly and so electric, as with the current portfolio of mild hybrids, plug-in hybrids and highly efficient combustion engines. The launch of the ID.3 is fundamental for the future of Volkswagen and for achieving climate targets. Over 30,000 units of this all-electric vehicle have been ordered. The ID.3 is based on the completely new MEB platform. Already in 2016, we decided to develop this independent platform for electric vehicles. It's designed for electric driving from the ground up and offers competitive advantages in terms of cost, range and space. The ID.3 is already making electric vehicles a more economical, significantly more ecofriendly and better option for many of our customers. Following on the heels of the ID.3, Ralf Brandstätter, as Volkswagen's brands new CEO, presented the second model from the ID family, the ID.4, only last week. The ID.4 is a global car that will be launched almost simultaneously in Europe, China and the U.S. We hope to sell 0.5 million units by 2025. Ladies and gentlemen, in China, we successfully launched the Jetta brand in 2019, our new Volkswagen brand in the entry-level segment. With 3 models, 2 SUVs and 1 sedan, Jetta combines a fresh design with tried-and-tested Volkswagen technology and quality for young buyers. China remains a trailblazer and a driving force in electrification. Growth in the Chinese automotive market during this decade will be predominantly electric. Our forecasts assume that the annual volume will increase by more than a factor of 10 between 2020 and 2030. The policy of opening up China's economy creates new opportunities for us as a carmaker. We are, therefore, planning to increase our share in our JAC joint venture to 75%. In it, we will develop and produce a new entry-level version of our new electric drive platform MEB. We are taking a stake in Chinese battery manufacturer Guoxuan High-tech Co., Ltd., to ensure battery capacity, expertise and supply of raw materials. The investment will give us access to the entire value chain in China's battery production. It will also allow us to tap additional expertise in relation to iron phosphate batteries, which are cheaper and offer better cycle stability than NMC batteries. Ladies and gentlemen, the era of electric mobility is also beginning at our longest-established brand, ŠKODA, which celebrates its 125th birthday this year. ŠKODA has just rolled out this first electric SUV based on the MEB, the ENYAQ. Test drivers from AUTO BILD came to the following conclusions: "Pleasantly designed, technically compelling, spacious and affordable, the values we like in ŠKODA." I would like to wish the new CEO, Thomas Schäfer, every success in further sharpening customers' awareness of precisely these values. In 2019, ŠKODA achieved a record operating profit of more than EUR 1.6 billion. ŠKODA's order intake is also back at the level of the prior year, partly due to new models. Like Porsche, Audi and Volkswagen, ŠKODA is performing important functions for the entire group, above all as a leading brand in Russia, Eastern Europe and India. Ladies and gentlemen, of all the group brands, ŠKODA is the one best positioned to continue growing profitably, including in very price-sensitive segments and markets. This is where the areas of growth are that ŠKODA is expected to open up for the group. SEAT stands for exciting products and is increasingly venturing into higher-priced segment with CUPRA. The new Formentor is the first model to be launched solely under the CUPRA brand. Establishing a new brand is one of the most challenging tasks in the automotive industry. Wayne Griffiths has already achieved remarkable results here with CUPRA. As CEO, he will now assume overall responsibility for SEAT and CUPRA. CUPRA will become an electric and electrifying automotive brand that will be captivating with exciting designs, the latest technology and a modern urban appearance. The electrification of CUPRA is starting with the CUPRA Leon as plug-in hybrid and the all-electric el-Born, which will be launched next year. What is probably the most radical change in the group is taking place in light commercial vehicles in Hanover. The decisions on the partnership with Ford, the electrification of the Volkswagen Bullis and the preparation for self-driving technology to move people and goods with Argo AI set the direction. Carsten Intra is taking light commercial vehicles through this change as new CEO. The electric ID. BUZZ, which is due to have its world premiere in 2022, has an appeal beyond that of commercial vehicles for Volkswagen's global brand presence. One of the brand's core products is the new Caddy based on the first time on MQB and with a plug-in hybrid version. The partnership with Ford is particularly important for Volkswagen Commercial Vehicles. The collaboration significantly reduces development costs for both partners and allows them to take advantage of economies of scale. Ford will be our first customer in the third-party MEB business. We are thus establishing our platform as the standard for electric mobility. Supplies are delivered from the component plants in Braunschweig, Kassel and Salzgitter, where we're setting up a battery cell production facility with the Swedish startup company Northvolt. The third-party business is helping us switch these plants from combustion engines to electric mobility. An investment in Argo AI allows Volkswagen and Ford to jointly bear the high development costs for autonomous driving and will enable us to provide the first autonomous mobility services faster than other companies. Ladies and gentlemen, all our brands are in the middle of the electrical transformation. However, there is no other area of the group where this transformation has a greater impact than in manufacturing components. Under the leadership of Thomas Schmall, Volkswagen's Group Components is systematically reviewing the portfolio and gearing it to future technologies. The merger of our seat manufacturer SITECH with the company Brose creates a globally competitive seat system supplier. Brose will manage the joint venture. Volkswagen Group Components will be in the future -- will, in the future, also focus on the entire value chain of the battery electric drive system. It is responsible for the battery life cycle from the procurement of raw materials through cell production, battery system production and second-life use, to recycling. Cell and battery production are the core competencies of Volkswagen. The transformation is also perceptible at Volkswagen Financial Services. New areas of business for financing and services are arising around e-mobility, such as billing charging and supplying green electricity. There are many reasons to believe that in the long term, the residual values or salvage values of electric vehicles will be higher than those of vehicles with combustion engines after a comparable useful life. The possibility of several lease periods offers new growth opportunities in this context. Ladies and gentlemen, with our rapidly growing range of electric vehicles and the powerful transformation of the value chain, the Volkswagen Group is better prepared for the foreseeable introduction of stricter CO2 fleet targets than our competitors. However, efforts to transform the value chain must be stepped up to support the European Commission's green deal. Holding global warming to 2 degrees Celsius or below is a necessity. At Volkswagen, we consider rapidly phasing out fossil fuels to be feasible. To end the carbon-based economy, however, we need social consensus, political will and as a consequence, a cross-sector climate policy. This includes an earlier coal phaseout, investments in green electricity production and charging infrastructure and a perceptible carbon tax. Ladies and gentlemen, Volkswagen has worked on its corporate culture in the last 5 years in the lights of the diesel crisis. With their critical analysis, requirements and advice, independent monitor Larry Thompson and his team significantly supported us and substantially accelerated the process. Our objective is more transparency, a more open culture of discussion, more accountability and greater tolerance of errors. Larry Thompson said, "Volkswagen is a better company today than it was 3 years ago." This sentence is part of the monitor's final certification. With his help, we have developed a new compliance system, introduced a whistleblower system and established numerous new processes, golden rules and integrity principles. Larry Thompson also rightly observed that constant mindfulness will be necessary to live the new structures and processes in a sustainable manner. Integrity is not a project with a beginning and an ending but rather an ongoing task. I'm grateful to Larry Thompson and his entire team for their hands-on support along this path. Ladies and gentlemen, the transformation of individual mobility is central in the political agenda today and, in many countries, on the economic agenda as well. The transformation of propulsion is the simpler change that traditional automotive manufacturers must accomplish here. The fact that the car will develop into a fully networked mobility device in the next 10 years will be the much more far reaching: a mobility device that brings people much more safety (sic) [ safely ], comfortably and sustainably to where they want to go; and continuously collects data and learns to better understand its users and their needs. Volkswagen must be able not only to offer transportation shells but also the brain that safely steers the vehicles with artificial intelligence. Volkswagen wants to combine the car, the brain and services and offer a unique mobility experience of the new era. This change will be much more challenging than the switch to electric drives. We need skills that do not currently exist in our industry, nor even in our economic ecosystem in Europe, skills that we have to acquire. Volkswagen needs to change from a collection of valuable brands and fascinating combustion engine products that thrill customers with their superb engineering to a digital company that reliably operates millions of mobility devices worldwide, one that always remains in contact with customers and improves services, the vehicles' comfort and safety on a weekly and even daily basis. We will take further important steps to set the course for this in the rest of 2020. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]