6-K FCA NV Q3 2018 Earnings Shell


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K
 

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of October 2018
Commission File No. 001-36675
 
Fiat Chrysler Automobiles N.V.
(Translation of Registrant’s Name Into English)
 
25 St. James's Street
London SW1A 1HA
United Kingdom
Tel. No.: +44 (0) 20 7766 0311
(Address of Principal Executive Offices)
 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule101(b) (1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule101(b) (7): ¨

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ¨ No x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

 







The following exhibit shall be deemed to be incorporated by reference into the Registrant’s Registration Statement on Form F-3 (File No. 333-217806) and to be a part thereof from the date on which this report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished:
Exhibit 99.1
Fiat Chrysler Automobiles N.V. Interim Report as of and for the three and nine months ended September 30, 2018

The following exhibits are furnished herewith:
Exhibit 99.2
Fiat Chrysler Automobiles N.V. Supplemental information as of and for the three and nine months ended September 30, 2018
Exhibit 99.3
Fiat Chrysler Automobiles N.V. Supplemental information as of and for the three and nine months ended September 30, 2018









SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: October 30, 2018
FIAT CHRYSLER AUTOMOBILES N.V.
 
 
 
 
 
 
 
 
 
By:
/s/ Richard K. Palmer
 
 
Name: Richard K. Palmer
 
 
Title: Chief Financial Officer









Index of Exhibits

Exhibit Number
Description of Exhibit
99.1
Fiat Chrysler Automobiles N.V. Interim Report as of and for the three and nine months ended September 30, 2018
99.2
Fiat Chrysler Automobiles N.V. Supplemental information as of and for the three and nine months ended September 30, 2018
99.3
Fiat Chrysler Automobiles N.V. Supplemental information as of and for the three and nine months ended September 30, 2018



Exhibit 99.1 FCA NV 2018.09.30 Interim Report
Exhibit 99.1
https://cdn.kscope.io/047c898cbfccabf118e03858fe46a630-fcagrouplogo.jpg
Interim Report
As of and for the three and nine months ended September 30, 2018




TABLE OF CONTENTS
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



CERTAIN DEFINED TERMS
In this Interim Report, unless otherwise specified, the terms “we”, “our”, “us”, the “Company”, the “Group”, and “FCA” refer to Fiat Chrysler Automobiles N.V., together with its subsidiaries and its predecessor prior to the completion of the merger of Fiat S.p.A. with and into Fiat Investments N.V. on October 12, 2014 (at which time Fiat Investments N.V. was renamed Fiat Chrysler Automobiles N.V., or “FCA NV”), or any one or more of them, as the context may require.
All references in this Interim Report to “Euro” and “€” refer to the currency issued by the European Central Bank. The Group’s financial information is presented in Euro. All references to “U.S. Dollars”, “U.S. Dollar”, “U.S.$” and “$” refer to the currency of the United States of America (or “U.S.”).
Forward-Looking Statements
Statements contained in this Interim Report, particularly those regarding possible or assumed future performance, competitive strengths, costs, dividends, reserves and growth of FCA, industry growth and other trends and projections and estimated company earnings are “forward-looking statements” that contain risks and uncertainties. In some cases, words such as “may”, “will”, “expect”, “could”, “should”, “intend”, “estimate”, “anticipate”, “believe”, “outlook”, “continue”, “remain”, “on track”, “target”, “objective”, “goal”, “plan”, “design”, “forecast”, “projection”, “prospects”, or similar terms are used to identify forward-looking statements. These forward-looking statements reflect the respective current views of the Group with respect to future events and involve significant risks and uncertainties that could cause actual results to differ materially.
These factors include, without limitation:
our ability to launch new products successfully and to maintain vehicle shipment volumes;
changes in the global financial markets, general economic environment and changes in demand for automotive products, which is subject to cyclicality;
changes in local economic and political conditions, changes in trade policy and the imposition of global and regional tariffs or tariffs targeted to the automotive industry, the enactment of tax reforms or other changes in tax laws and regulations;
our ability to expand certain of our brands globally;
our ability to offer innovative, attractive products;
our ability to develop, manufacture and sell vehicles with advanced features, including enhanced electrification and autonomous-driving characteristics;
various types of claims, lawsuits, governmental investigations and other contingent obligations affecting us, including product liability and warranty claims and environmental claims, investigations and lawsuits;
material operating expenditures in relation to compliance with environmental, health and safety regulations;
the intense level of competition in the automotive industry, which may increase due to consolidation;
exposure to shortfalls in the funding of our defined benefit pension plans;
our ability to provide or arrange for access to adequate financing for our dealers and retail customers and associated risks related to the establishment and operations of financial services companies, including capital required to be deployed to financial services;
our ability to access funding to execute our business plan and improve our business, financial condition and results of operations;
a significant malfunction, disruption or security breach compromising our information technology systems or the electronic control systems contained in our vehicles;

3



our ability to realize anticipated benefits from joint venture arrangements;
our ability to successfully implement and execute strategic initiatives and transactions, including our plans to separate certain businesses;
disruptions arising from political, social and economic instability;
risks associated with our relationships with employees, dealers and suppliers;
increases in costs, disruptions of supply or shortages of raw materials;
developments in labor and industrial relations and developments in applicable labor laws;
exchange rate fluctuations, interest rate changes, credit risk and other market risks;
political and civil unrest;
earthquakes or other disasters; and
other factors discussed elsewhere in this Interim Report.
Furthermore, in light of the inherent difficulty in forecasting future results, any estimates or forecasts of particular periods that are provided in this Interim Report are uncertain. We expressly disclaim and do not assume any liability in connection with any inaccuracies in any of the forward-looking statements in this Interim Report or in connection with any use by any third party of such forward-looking statements. Actual results could differ materially from those anticipated in such forward-looking statements. We do not undertake an obligation to update or revise publicly any forward-looking statements.
Additional factors which could cause actual results and developments to differ from those expressed or implied by the forward-looking statements are included in the section — Risks and Uncertainties of this Interim Report.
Further information concerning the Group and its businesses, including factors that could materially affect the Company's financial results, is included in the Company's reports and filings with the U.S. Securities and Exchange Commission (“SEC”), the Netherlands Authority for the Financial Markets (stichting Autoriteit Financiële Markten, (the “AFM”)), Borsa Italiana S.p.A. and Consob (collectively, the “CONSOB”).



    

4



MANAGEMENT DISCUSSION AND ANALYSIS
Highlights - from continuing operations
Our Magneti Marelli business has been classified as a discontinued operation for the three and nine months ended September 30, 2018 and 2017. Refer to Note 2, Scope of consolidation in our Interim Condensed Consolidated Financial Statements elsewhere in this Interim Report for additional information. Unless otherwise stated, all figures below exclude results from discontinued operations:
Nine months ended September 30
 
 
 
Three months ended September 30
2018
 
2017
 
(€ million, except shipments, which are in thousands of units, and per share amounts)
 
2018
 
2017
3,665

 
3,493

 
Combined shipments(1)
 
1,160

 
1,123

3,526

 
3,267

 
Consolidated shipments(2)
 
1,125

 
1,051

80,938

 
78,148

 
Net revenues
 
27,594

 
25,192

4,907

 
4,830

 
Adjusted EBIT(3)
 
1,872

 
1,648

2,159

 
2,550

 
Net profit from continuing operations
 
514

 
822

3,215

 
2,504

 
Adjusted net profit(4)
 
1,343

 
854

180

 
156

 
Profit from discontinued operations, net of tax
 
50

 
88

2,339

 
2,706

 
Net profit (including discontinued operations)
 
564

 
910

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share for Net profit(5)
 
 
 
 
1.50

 
1.75

 
Basic earnings per share (€)
 
0.36

 
0.59

1.48

 
1.73

 
Diluted earnings per share (€)
 
0.36

 
0.58

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share for Net profit from continuing operations(5)
 
 
 
 
1.39

 
1.66

 
Basic earnings per share (€)
 
0.33

 
0.54

1.38

 
1.64

 
Diluted earnings per share (€)
 
0.33

 
0.53

The amounts below include Magneti Marelli for comparability with prior periods and previously provided guidance:
(Amounts in € million)
 
At September 30, 2018
 
At December 31, 2017
Net cash/(debt)(6)
 
(2,507
)
 
(4,666
)
Of which: Net industrial cash/(debt)(6)
 
(189
)
 
(2,390
)
Available liquidity(7) (total Group)
 
19,975

 
20,377

 
 
Nine months ended September 30
(Amounts in € million)
 
2018
 
2017
Cash flows from operating activities
 
5,963

 
6,569

Of which: Cash flows from continuing operations
 
5,623

 
6,090

Of which: Cash flows from discontinued operations
 
340

 
479

Industrial free cash flows(8)
 
2,318

 
(18
)
________________________________________________________________________________________________________________________________________________
(1) Combined shipments include shipments by the Group's consolidated subsidiaries and unconsolidated joint ventures.
(2) Consolidated shipments only include shipments by the Group's consolidated subsidiaries.
(3) Refer to sections — Non-GAAP Financial Measures, Group Results and Results by Segment in this Interim Report for further discussion.
(4) Refer to sections — Non-GAAP Financial Measures and Group Results in this Interim Report for further discussion.
(5) Refer to Note 18, Earnings per share, in the Interim Condensed Consolidated Financial Statements included in this Interim Report.
(6) Refer to sections — Non-GAAP Financial Measures and Liquidity and Capital Resources in this Interim Report for further discussion. These figures include the assets and liabilities from the Magneti Marelli Business unit for comparability with prior periods and previously provided guidance.
(7) Refer to section — Liquidity and Capital Resources in this Interim Report for further discussion.
(8) Refer to section — Non-GAAP Financial Measures and Liquidity and Capital Resources in this Interim Report for further discussion. Amounts include Magneti Marelli for comparability with prior periods and previously provided guidance.

5



Non-GAAP Financial Measures
We monitor our operations through the use of several non-generally accepted accounting principles (“non-GAAP”) financial measures: Net cash/(debt), Net industrial cash/(debt), Industrial free cash flows, Adjusted Earnings Before Interest and Taxes (“Adjusted EBIT”), Adjusted net profit and certain information provided on a constant exchange rate (“CER”) basis. We believe that these non-GAAP financial measures provide useful and relevant information regarding our operating results and enhance the overall ability to assess our financial performance and financial position. They provide us with comparable measures which facilitate management’s ability to identify operational trends, as well as make decisions regarding future spending, resource allocations and other operational decisions. These and similar measures are widely used in the industry in which we operate, however, these financial measures may not be comparable to other similarly titled measures of other companies and are not intended to be substitutes for measures of financial performance and financial position as prepared in accordance with both International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) as well as IFRS as adopted by the European Union.
Net cash/(debt) and Net industrial cash/(debt). We believe Net cash/(debt) is useful in providing a measure of the Group’s financial position, which includes total indebtedness, cash and cash equivalents and current securities.
Due to different sources of cash flows used for the repayment of the financial debt between industrial activities and financial services (by cash from operations for industrial activities and by collection of financial receivables for financial services) and the different business structure and leverage implications, we provide a separate analysis of Net cash/(debt) between industrial activities and financial services.
The division between industrial activities and financial services represents a sub-consolidation based on the core business activities (industrial or financial services) of each Group company. The sub-consolidation for industrial activities also includes companies that perform centralized treasury activities, such as raising funding in the market and financing Group companies, but do not, however, provide financing to third parties. Financial services includes companies that provide retail and dealer financing as well as leasing and rental services in support of the mass-market vehicle brands in certain geographical segments and for the Maserati luxury brand. In addition, activities of financial services include providing factoring services to industrial activities as an alternative to factoring from third parties. Operating results of such financial services activities are included within the respective segment in which they operate.
Net industrial cash/(debt) (i.e., Net cash/(debt) of industrial activities) is management’s primary measure for analyzing our financial leverage and capital structure and is one of the key targets used to measure our performance. Net industrial cash/(debt) is computed as: debt plus derivative financial liabilities related to industrial activities less (i) cash and cash equivalents, (ii) certain current debt securities, (iii) current financial receivables from Group or jointly controlled financial services entities and (iv) derivative financial assets and collateral deposits; therefore, debt, cash and cash equivalents and other financial assets/liabilities pertaining to financial services entities are excluded from the computation of Net industrial cash/(debt). Net industrial cash/(debt) should not be considered as a substitute for cash flows or other financial measures under IFRS; in addition, Net industrial cash/(debt) depends on the amount of cash and cash equivalents at each balance sheet date, which may be affected by the timing of monetization of receivables and the payment of accounts payable, as well as changes in other components of working capital, which can vary from period to period due to, among other things, cash management initiatives and other factors, some of which may be outside of the Group’s control. Net industrial cash/(debt) should therefore be evaluated alongside these other measures as reported under IFRS for a complete view of the Company’s capital structure and liquidity. In addition, Net industrial cash/(debt) is one of the metrics used in the determination of the annual performance bonus for the Chief Executive Officer (“CEO”) of the Group and other eligible employees, including members of the Group Executive Council.
Refer to the section — Liquidity and Capital Resources for further information and the reconciliation of these non-GAAP measures to Debt, which is the most directly comparable measure included in our Consolidated Statement of Financial Position.
Industrial free cash flows: historically, due to our leveraged position, we used Net industrial cash/(debt) as a key metric to focus our team on the fundamental task of de-leveraging the balance sheet. As we expect to complete this task this year, we will substitute this key metric with a cash flow metric, specifically Industrial free cash flows, which we define as Cash flows from operating activities less: cash flows from operating activity related to financial services, net of eliminations; Investment in property, plant and equipment and intangible assets for industrial activities; adjusted for discretionary pension contributions in excess of those required by the pension plans, net of tax.

6



Refer to the section — Liquidity and Capital Resources for further information and the reconciliation of this non-GAAP measure to Cash flows from operating activities, which is the most directly comparable measure included in our Consolidated Statement of Cash Flows. Industrial free cash flows should not be considered as a substitute for Net profit, cash flow or other methods of analyzing our results as reported under IFRS.
Adjusted EBIT: excludes certain adjustments from Net profit/(loss) from continuing operations including gains/(losses) on the disposal of investments, restructuring, impairments, asset write-offs and unusual income/(expenses) that are considered rare or discrete events that are infrequent in nature, and also excludes Net financial expenses and Tax expense/(benefit).
Adjusted EBIT is used for internal reporting to assess performance and as part of the Group's forecasting, budgeting and decision making processes as it provides additional transparency to the Group's core operations. We believe this non- GAAP measure is useful because it excludes items that we do not believe are indicative of the Group’s ongoing operating performance and allows management to view operating trends, perform analytical comparisons and benchmark performance between periods and among our segments. We also believe that Adjusted EBIT is useful for analysts and investors to understand how management assesses the Group’s ongoing operating performance on a consistent basis. In addition, Adjusted EBIT is one of the metrics used in the determination of the annual performance bonus for the Chief Executive Officer of the Group and other eligible employees, including members of the Group Executive Council.
Refer to the section — Group Results and Results by Segment below for further discussion and for a reconciliation of this non-GAAP measure to Net profit from continuing operations, which is the most directly comparable measure included in our Consolidated Income Statement. Adjusted EBIT should not be considered as a substitute for Net profit, cash flow or other methods of analyzing our results as reported under IFRS.
Adjusted net profit: is calculated as Net profit/(loss) from continuing operations excluding post-tax impacts of the same items excluded from Adjusted EBIT, as well as financial income/(expenses) and tax income/(expenses) considered rare or discrete events that are infrequent in nature.
We believe this non-GAAP measure is useful because it also excludes items that we do not believe are indicative of the Group’s ongoing operating performance and provides investors with a more meaningful comparison of the Group's ongoing operating performance. In addition, Adjusted net profit is one of the metrics used in the determination of the annual performance bonus and the achievement of certain performance objectives established under the terms of the equity incentive plan for the Chief Executive Officer of the Group and other eligible employees, including members of the Group Executive Council.
Refer to the section — Group Results below for further discussion and for a reconciliation of this non-GAAP measure to Net profit from continuing operations, which is the most directly comparable measure included in our Consolidated Income Statement. Adjusted net profit should not be considered as a substitute for Net profit, cash flow or other methods of analyzing our results as reported under IFRS.
Constant Currency Information: The discussions within the sections — Group Results and — Results by Segment below include information about our results at constant exchange rates (“CER”), which is calculated by applying the prior-year average exchange rates to translate current financial data expressed in local currency in which the relevant financial statements are denominated (refer to Note 1, Basis of Preparation in the Interim Condensed Consolidated Financial Statements included elsewhere in this Interim Report for the exchange rates applied). Although we do not believe that this non-GAAP measure is a substitute for GAAP measures, we believe that results excluding the effect of currency fluctuations provide additional useful information to investors regarding the operating performance and trends in our business on a local currency basis.

7



Group Results
The following is a discussion of the Group's results of operations for the three and nine months ended September 30, 2018 compared to the three and nine months ended September 30, 2017.
Nine months ended September 30
 
 
 
Three months ended September 30
2018
 
2017
 
(€ million)
 
2018

2017
80,938

 
78,148

 
Net revenues
 
27,594

 
25,192

69,428

 
66,187

 
Cost of revenues
 
23,584

 
21,294

5,608

 
5,285

 
Selling, general and other costs
 
2,291

 
1,667

2,249

 
2,210

 
Research and development costs
 
705

 
696

201

 
296

 
Result from investments
 
50

 
101


 
895

 
Reversal of a Brazilian indirect tax liability
 

 


 
49

 
Gains on disposal of investments
 

 

26

 
81

 
Restructuring costs
 
24

 
5

801

 
1,010

 
Net financial expenses
 
249

 
292

3,027

 
4,615

 
Profit before taxes
 
791

 
1,339

868

 
2,065

 
Tax expense
 
277

 
517

2,159

 
2,550

 
Net profit from continuing operations
 
514

 
822

180

 
156

 
Profit from discontinued operations, net of tax
 
50

 
88

2,339

 
2,706

 
Net profit
 
564

 
910

 
 
 
 
 
 
 
 
 
 
 
 
 
Net profit attributable to:
 
 
 
 
2,321

 
2,693

 
Owners of the parent
 
557

 
911

18

 
13

 
Non-controlling interests
 
7

 
(1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net profit from continuing operations attributable to:
 
 
 
 
2,156

 
2,544

 
Owners of the parent
 
513

 
825

3

 
6

 
Non-controlling interests
 
1

 
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net profit from discontinued operations attributable to:
 
 
 
 
165

 
149

 
Owners of the parent
 
44

 
86

15

 
7

 
Non-controlling interests
 
6

 
2

Net revenues
 
 
 
 
Increase/(Decrease)
 
 
 
 
 
 
 
Increase/(Decrease)
Nine months ended September 30
 
2018 vs. 2017
 
 
 
Three months ended September 30
 
2018 vs. 2017
2018
 
2017
 
% Actual
 
% CER
 
(€ million)
 
2018

2017
 
% Actual
 
% CER
80,938

 
78,148

 
3.6
%
 
10.3
%
 
Net revenues
 
27,594


25,192

 
9.5
%
 
11.0
%
See — Results by Segment below for a discussion of Net revenues for each of our five reportable segments (NAFTA, LATAM, APAC, EMEA and Maserati).
As a result of the presentation of Magneti Marelli as a discontinued operation, the remaining Components activities are no longer considered a separate reportable segment and are included within “Other activities” (refer to Note 2, Scope of Consolidation within our Interim Condensed Consolidated Financial Statements included elsewhere in this Interim Report).


8



Cost of revenues
 
 
 
 
Increase/(Decrease)
 
 
 
 
 
 
 
Increase/(Decrease)
Nine months ended September 30
 
2018 vs. 2017
 
 
 
Three months ended September 30
 
2018 vs. 2017
2018
 
2017
 
% Actual
 
% CER
 
(€ million)
 
2018
 
2017
 
% Actual
 
% CER
69,428

 
66,187

 
4.9
%
 
11.6
%
 
Cost of revenues
 
23,584

 
21,294

 
10.8
%
 
12.1
%
85.8
%
 
84.7
%
 
 
 
Cost of revenues as % of Net revenues
 
85.5
%
 
84.5
%
 
 
The increase in Cost of revenues during three and nine months ended September 30, 2018 compared to the corresponding period in 2017 was primarily related to (i) an increase in NAFTA, with higher volumes and higher product costs for content enhancements and logistics costs; and (ii) vehicle mix in EMEA, which were partially offset by (iii) decreases resulting from foreign currency translation effects.
Selling, general and other costs
 
 
 
 
Increase/(Decrease)
 
 
 
 
 
 
 
Increase/(Decrease)
Nine months ended September 30
 
2018 vs. 2017
 
 
 
Three months ended September 30
 
2018 vs. 2017
2018
 
2017
 
% Actual
 
% CER
 
(€ million)
 
2018

2017
 
% Actual
 
% CER
5,608

 
5,285

 
6.1
%
 
11.8
%
 
Selling, general and other costs
 
2,291

 
1,667

 
37.4
%
 
38.4
%
6.9
%
 
6.8
%
 
 
 
Selling, general and other costs as % of Net revenues
 
8.3
%
 
6.6
%
 
 
Selling, general and other costs include advertising, personnel and other costs. Advertising costs accounted for 32.5 percent and 47.9 percent of total Selling, general and other costs for the three months ended September 30, 2018 and 2017, respectively, and 40.9 percent and 47.6 percent for the nine months ended September 30, 2018 and 2017, respectively.
The increase in Selling, general and other costs during the three and nine months ended September 30, 2018 compared to the corresponding periods in 2017 was primarily due to the charge of €713 million recognized during the three months ended September 30, 2018, for estimated costs related to U.S. diesel emissions matters (refer to Note 16, Guarantees granted, commitments and contingent liabilities within our Interim Condensed Consolidated Financial Statements included elsewhere in this Interim Report), partially offset by lower advertising costs in NAFTA and foreign currency translation effects.

9



Research and development costs
 
 
 
 
Increase/(Decrease)
 
 
 
 
 
 
 
Increase/(Decrease)
Nine months ended September 30
 
2018 vs. 2017
 
 
 
Three months ended September 30
 
2018 vs. 2017
2018
 
2017
 
% Actual
 
% CER
 
(€ million)
 
2018

2017
 
% Actual
 
% CER
1,088

 
1,114

 
(2.3
)%
 
3.8
%
 
Research and development expenditures expensed
 
348

 
359

 
(3.1
)%
 
13.9
 %
1,095

 
1,051

 
4.2
 %
 
9.5
%
 
Amortization of capitalized development expenditures
 
357

 
304

 
17.4
 %
 
(2.0
)%
66

 
45

 
46.7
 %
 
46.7
%
 
Impairment and write-off of capitalized development expenditures
 

 
33

 
n.m.

 
n.m.

2,249

 
2,210

 
1.8
 %
 
7.4
%
 
Total Research and development costs
 
705

 
696

 
1.3
 %
 
1.6
 %
________________________________________________________________________________________________________________________________________________
n.m. = not meaningful
Nine months ended September 30
 
 
 
Three months ended September 30
2018
 
2017
 
 
 
2018

2017
1.3
%
 
1.4
%
 
Research and development expenditures expensed as % of Net revenues
 
1.3
%
 
1.4
%
1.4
%
 
1.3
%
 
Amortization of capitalized development expenditures as % of Net revenues
 
1.3
%
 
1.2
%
0.1
%
 
0.1
%
 
Impairment and write-off of capitalized development expenditures as % of Net revenues
 
%
 
0.1
%
2.8
%
 
2.8
%
 
Total Research and development cost as % of Net revenues
 
2.6
%
 
2.8
%
The increase in amortization of capitalized development expenditures during the three and nine months ended September 30, 2018 compared to the corresponding periods in 2017 was primarily due to higher amortization in NAFTA due to new vehicles.
The impairment and write-off of capitalized development expenditures during the nine months ended September 30, 2018, primarily in EMEA, was due to changes in product plans in connection with the updated business plan.
Total research and development expenditures during the three and nine months ended September 30, 2018 and 2017 were as follows:
Nine months ended September 30
 
Increase/(Decrease)
 
 
 
Three months ended September 30
 
Increase/(Decrease)
2018
 
2017
 
2018 vs. 2017
 
(€ million)
 
2018

2017
 
2018 vs. 2017
1,463

 
1,815

 
(19.4
)%
 
Capitalized development expenditures
 
557

 
547

 
1.8
 %
1,088

 
1,114

 
(2.3
)%
 
Research and development expenditures expensed
 
348

 
359

 
(3.1
)%
2,551

 
2,929

 
(12.9
)%
 
Total Research and development expenditures
 
905

 
906

 
(0.1
)%
57.4
%
 
62.0
%
 
 
 
Capitalized development expenditures as % of Total Research and development expenditures
 
61.5
%
 
60.4
%
 


3.2
%
 
3.7
%
 
 
 
Total Research and development expenditures as % of Net revenues
 
3.3
%
 
3.6
%
 


The decrease in capitalized development expenditures during the nine months ended September 30, 2018 compared to the corresponding periods in 2017 mainly related to operations in NAFTA and EMEA due to program timing.

10



Net financial expenses
Nine months ended September 30
 
Increase/(Decrease)
 
 
 
Three months ended September 30
 
Increase/(Decrease)
2018
 
2017
 
2018 vs. 2017
 
(€ million)
 
2018

2017
 
2018 vs. 2017
801

 
1,010

 
(20.7
)%
 
Net financial expenses
 
249

 
292

 
(14.7
)%
The decrease in Net financial expenses during the three and nine months ended September 30, 2018 compared to the corresponding periods in 2017 was primarily due to year-over-year planned reduction in gross debt.
Tax expense
Nine months ended September 30
 
Increase/(Decrease)
 
 
 
Three months ended September 30
 
Increase/(Decrease)
2018

2017
 
2018 vs. 2017
 
(€ million)
 
2018
 
2017
 
2018 vs. 2017
868

 
2,065

 
(58.0
)%
 
Tax expense
 
277

 
517

 
(46.4
)%
29
%
 
45
%
 
 
 
Effective tax rate
 
35
%
 
39
%
 


The decrease in the effective tax rate during the three months ended September 30, 2018, compared to the corresponding period in 2017, was primarily related to impact of the December 2017 U.S. tax reform and tax benefits recorded on tax positions finalized in the quarter, including the benefit of €94 million from an accelerated discretionary pension contribution (refer to Note 10, Employee benefits liabilities within our Interim Condensed Consolidated Financial Statements included elsewhere in this Interim Report), partially offset by the tax impacts from the recognition of a provision for estimated costs related to U.S. diesel emissions matters.
The decrease in the effective tax rate during the nine months ended September 30, 2018, compared to the corresponding period in 2017, was primarily related to the €734 million decrease in deferred tax assets in Brazil recognized in the nine months ended September, 2017, in addition to the impact of the December 2017 U.S. tax reform and tax benefits recorded on tax positions finalized in the period, partially offset by the tax impacts from the recognition of a provision for estimated costs related to U.S. diesel emissions matters.
The decrease in the deferred tax assets in Brazil was composed of:
€281 million related to the reversal of the Brazilian indirect tax liability mentioned above; and
€453 million that was written off as the Group revised its outlook on Brazil to reflect the slower pace of recovery and outlook for the subsequent years, largely resulting from increased political uncertainty, and concluded that a portion of the deferred tax assets in Brazil was no longer recoverable.
The above items are excluded from Adjusted net profit.
Profit from discontinued operations, net of tax
Nine months ended September 30
 
Increase/(Decrease)
 
 
 
Three months ended September 30
 
Increase/(Decrease)
2018

2017
 
2018 vs. 2017
 
(€ million)
 
2018

2017
 
2018 vs. 2017
180

 
156

 
15.4
%
 
Profit from discontinued operations, net of tax
 
50

 
88

 
(43.2
)%
Magneti Marelli is presented as a discontinued operations in the Interim Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2018 and 2017. For more information, refer to Note 2, Scope of consolidation, within our Interim Condensed Consolidated Financial Statements included elsewhere in this Interim Report.

11



Net profit
Nine months ended September 30
 
Increase/(Decrease)
 
 
 
Three months ended September 30
 
Increase/(Decrease)
2018

2017
 
2018 vs. 2017
 
(€ million)
 
2018

2017
 
2018 vs. 2017
2,339

 
2,706

 
(13.6
)%
 
Net profit
 
564

 
910

 
(38.0
)%
The decrease in Net profit during the three months ended September 30, 2018 compared to the corresponding period in 2017 was primarily due to (i) the charge recognized for estimated costs related to U.S. diesel emissions matters, partially offset by (ii) improved NAFTA operating performance; (iii) lower Net financial expenses; and (iv) lower Tax expense.
The decrease in Net profit during the nine months ended September 30, 2018 compared to the corresponding period in 2017 was primarily due to (i) the charge recognized for estimated costs related to U.S. diesel emissions matters; and (ii) the €895 million reversal in Q2 2017 of a liability related to Brazilian indirect taxes previously accrued by the Group’s Brazilian subsidiaries. These were partially offset by (iii) lower Tax expense; and (iv) lower Net financial expenses.
Adjusted EBIT
 
 
 
 
Increase/(Decrease)
 
 
 
 
 
 
 
Increase/(Decrease)
Nine months ended September 30
 
2018 vs. 2017
 
 
 
Three months ended September 30
 
2018 vs. 2017
2018
 
2017
 
% Actual
 
% CER
 
(€ million)
 
2018

2017
 
% Actual
 
% CER
4,907


4,830

 
1.6
%
 
10.0
%
 
Adjusted EBIT
 
1,872


1,648

 
13.6
%
 
15.9
%
6.1
%
 
6.2
%
 
-10 bps

 
 
 
Adjusted EBIT margin (%)
 
6.8
%
 
6.5
%
 
+30 bps

 
 
The following chart presents the change in Adjusted EBIT by segment for the three months ended September 30, 2018 compared to the corresponding period in 2017.
https://cdn.kscope.io/047c898cbfccabf118e03858fe46a630-fcagroupq32018adjebit.jpg
For the three months ended September 30, 2018 and 2017, the Adjusted EBIT related to Magneti Marelli that was excluded from the Group's Adjusted EBIT result was €123 million and €110 million, respectively, net of intercompany eliminations. Refer to Note 2, Scope of consolidation in our Interim Condensed Consolidated Financial Statements elsewhere in this Interim Report for additional information regarding the classification of Magneti Marelli as a discontinued operation.

12



The following chart presents the change in Adjusted EBIT by segment for the nine months ended September 30, 2018 compared to the corresponding period in 2017.
https://cdn.kscope.io/047c898cbfccabf118e03858fe46a630-fcagroupq32018ytdadjebit.jpg
For the nine months ended September 30, 2018 and 2017, the Adjusted EBIT related to Magneti Marelli that was excluded from the Group's Adjusted EBIT result was €354 million and €330 million, respectively, net of intercompany eliminations. Refer to Note 2, Scope of consolidation in our Interim Condensed Consolidated Financial Statements elsewhere in this Interim Report for additional information regarding the classification of Magneti Marelli as a discontinued operation.

Refer to — Results by Segment below for a discussion of Adjusted EBIT for each of our five reportable segments (NAFTA, LATAM, APAC, EMEA and Maserati).
The following table is the reconciliation of Net profit from continuing operations, which is the most directly comparable measure included in the Interim Condensed Consolidated Income Statement, to Adjusted EBIT:
Nine months ended September 30
 
 
 
Three months ended September 30
2018

2017
 
(€ million)
 
2018

2017
2,159

 
2,550

 
Net profit from continuing operations
 
514

 
822

868

 
2,065

 
Tax expense
 
277

 
517

801

 
1,010

 
Net financial expenses
 
249

 
292

 
 
 
 
Adjustments:
 
 
 
 
713

 

 
Charge for U.S. diesel emissions matters
 
713

 

164

 
133

 
Impairment expense and supplier obligations
 

 
80

129

 

 
China inventory impairment
 
129

 

111

 

 
U.S. special bonus payment
 

 

78

 

 
Employee benefits settlement losses
 

 

26

 
80

 
Restructuring costs, net of reversals
 
24

 
3


 
(68
)
 
Tianjin (China) port explosions insurance recoveries
 

 
(68
)

 
(49
)
 
Gains on disposal of investments
 

 

(46
)
 

 
Recovery of costs for recall - airbag inflators
 
(3
)
 

(47
)
 
(895
)
 
Brazilian indirect tax - reversal of liability/recognition of credits
 
(47
)
 

(50
)
 

 
Recovery of costs for recall - contested with supplier
 
13

 

1

 
4

 
Other
 
3

 
2

1,079

 
(795
)
 
Total Adjustments
 
832

 
17

4,907


4,830

 
Adjusted EBIT
 
1,872


1,648


13



During the three months ended September 30, 2018, Adjusted EBIT excluded adjustments primarily related to:
€713 million charge for estimated costs related to U.S. diesel emissions matters (refer to Note 16, Guarantees granted, commitments and contingent liabilities in the Interim Condensed Consolidated Financial Statements included elsewhere in this Interim Report);
€129 million relating to impairment of inventory in connection with the accelerated adoption of new emission standards in China and slower than expected sales;
€24 million relating to restructuring costs, which included €60 million of costs in EMEA offset by a €36 million reversal of previously recorded restructuring costs in LATAM;
€47 million of gains in relation to the recognition of credits for amounts paid in prior years in relation to indirect taxes in Brazil; and
€13 million accrued in relation to costs for a recall which were contested with a supplier.
During the nine months ended September 30, 2018, in addition to the items above, Adjusted EBIT excluded adjustments primarily related to:
€164 million relating to impairment expense of €109 million, primarily in EMEA and APAC, and supplier obligations of €55 million resulting from changes in product plans in connection with the updated business plan;
111 million charge in relation to a special bonus payment, announced on January 11, 2018, to approximately 60,000 hourly and salaried employees in the United States, excluding senior management, as a result of the Tax Cuts and Jobs Act;
€78 million charge arising on settlement of a portion of a supplemental retirement plan in NAFTA;
€46 million gain from the recovery of amounts accrued in 2016 in relation to costs for recall campaigns related to Takata airbag inflators; and
50 million gain from the partial recovery of amounts accrued in 2016 and 2018 in relation to costs for a recall which were contested with a supplier.
During the three months ended September 30, 2017 Adjusted EBIT excluded adjustments primarily related to:
80 million relating to impairment expense of which €56 million related to changes in the product portfolio in EMEA; and
68 million income reflecting final insurance recoveries related to the explosions at the Port of Tianjin, China.
During the nine months ended September 30, 2017, in addition to the items above, Adjusted EBIT excluded adjustments primarily related to:
895 million gain on the reversal of a liability for Brazilian indirect taxes;
49 million gain on the disposal of the Group's publishing business; and
80 million restructuring costs, primarily €77 million of workforce restructuring costs related to LATAM.

14



Adjusted net profit
Nine months ended September 30
 
Increase/(Decrease)
 
 
 
Three months ended September 30
 
Increase/(Decrease)
2018
 
2017
 
2018 vs. 2017
 
(€ million) 
 
2018
 
2017
 
2018 vs. 2017
3,215


2,504

 
28.4
%
 
Adjusted net profit
 
1,343


854

 
57.3
%
The increase in Adjusted net profit during the three and nine months ended September 30, 2018 compared to the corresponding periods in 2017 was primarily due to (i) strong NAFTA operating performance; (ii) lower Net financial expenses; and (iii) lower Tax expense.
The following table summarizes the reconciliation of Net profit from continuing operations, which is the most directly comparable measure included in the Consolidated Income Statement, to Adjusted net profit:
Nine months ended September 30
 
 
 
Three months ended September 30
2018
 
2017
 
(€ million)
 
2018
 
2017
2,159

 
2,550

 
Net profit from continuing operations
 
514

 
822

1,079

 
(795
)
 
Adjustments (as above)
 
832

 
17

(23
)
 
15

 
Tax impact on adjustments
 
(3
)
 
15


 
281

 
Reduction of deferred tax assets related to reversal of a Brazilian indirect tax liability
 

 


 
453

 
Brazil deferred tax assets write-off
 

 

1,056

 
(46
)
 
Total adjustments, net of taxes
 
829

 
32

3,215

 
2,504

 
Adjusted net profit
 
1,343


854

During the three months ended September 30, 2018, Adjusted net profit excluded adjustments related to:
€3 million charge reflecting the tax impact on the items excluded from Adjusted EBIT above.
During the nine months ended September 30, 2018, Adjusted net profit excluded adjustments primarily related to:
€23 million benefit reflecting the tax impact on the items excluded from Adjusted EBIT above, which includes a €26 million reduction in the impact from the December 2017 U.S. tax reform.
During the three months ended September 30, 2017, Adjusted net profit excluded adjustments related to:
€15 million charge reflecting the tax impact on the items excluded from Adjusted EBIT above.
During the nine months ended September 30, 2017, Adjusted net profit excluded adjustments primarily related to:
€453 million expense relating to the write-off of deferred tax assets in Brazil as reported above; and
€281 million expense arising on decrease in deferred tax assets related to the release of the Brazilian indirect tax liability noted above.

15



Results by Segment
 
 
Net revenues
 
Adjusted EBIT
 
Consolidated Shipments
 
 
Three months ended September 30
(€ million, except shipments which are in thousands of units)
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
NAFTA
 
19,073


16,126

 
1,937


1,286

 
673

 
592

LATAM
 
1,983


2,115

 
83


59

 
151

 
140

APAC
 
582


782

 
(96
)
 
109

 
19

 
23

EMEA
 
4,955


4,975

 
(25
)

127

 
273

 
285

Maserati
 
631


821

 
15


113

 
9

 
11

Other activities
 
576

 
646

 
(39
)
 
(16
)
 

 

Unallocated items & eliminations(1)
 
(206
)
 
(273
)
 
(3
)
 
(30
)
 

 

Total
 
27,594

 
25,192

 
1,872

 
1,648

 
1,125

 
1,051

 
 
Net revenues
 
Adjusted EBIT
 
Consolidated Shipments
 
 
Nine months ended September 30
(€ million, except shipments which are in thousands of units)
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
NAFTA
 
53,025

 
49,307

 
4,550

 
3,878

 
1,995

 
1,777

LATAM
 
5,979

 
5,798

 
258

 
99

 
433


373

APAC
 
1,853

 
2,424

 
(184
)
 
174

 
58

 
61

EMEA
 
16,925

 
16,615

 
345

 
505

 
1,014

 
1,020

Maserati
 
1,953

 
2,844

 
103

 
372

 
26

 
36

Other activities
 
1,868

 
2,048

 
(124
)
 
(89
)
 

 

Unallocated items & eliminations(1)
 
(665
)
 
(888
)
 
(41
)
 
(109
)
 

 

Total
 
80,938

 
78,148

 
4,907

 
4,830

 
3,526

 
3,267

________________________________________________________________________________________________________________________________________________
(1) Primarily includes intercompany transactions which are eliminated on consolidation
The following is a discussion of Net revenues, Adjusted EBIT and shipments for each of our five reportable segments for the three and nine months ended September 30, 2018 as compared to the three and nine months ended September 30, 2017. We review changes in our results of operations with the following operational drivers:
Volume: reflects changes in products sold to our customers, primarily dealers and fleet customers. Change in volume is driven by industry volume, market share and changes in dealer stock levels. Vehicles manufactured and distributed by our unconsolidated joint ventures are not included within volume;
Mix: generally reflects the changes in product mix, including mix among vehicle brands and models, as well as changes in regional market and distribution channel mix, including mix between retail and fleet customers;
Net price: primarily reflects changes in prices to our customers including higher pricing related to content enhancement, net of discounts, price rebates and other sales incentive programs, as well as related foreign currency transaction effects;
Industrial costs: primarily include cost changes to manufacturing and purchasing of materials that are associated with content and enhancement of vehicle features, as well as industrial efficiencies and inefficiencies, recall campaign and warranty costs, depreciation and amortization, research and development costs and related foreign currency transaction effects;
Selling, general and administrative costs (“SG&A”): primarily include costs for advertising and promotional activities, purchased services, information technology costs and other costs not directly related to the development and manufacturing of our products; and
Other: includes other items not mentioned above, such as foreign currency exchange translation and results from joint ventures and associates.

16



NAFTA
 
 
Increase/(Decrease)
 
 
 
 
 
 
 
Increase/(Decrease)
Nine months ended September 30
 
2018 vs. 2017
 
 
 
Three months ended September 30
 
2018 vs. 2017
2018
 
2017
 
% Actual
 
% CER
 
 
 
2018
 
2017
 
% Actual
 
% CER
1,995

 
1,777

 
12.3
%
 

 
Shipments (thousands of units)
 
673

 
592

 
13.7
%
 

53,025

 
49,307

 
7.5
%
 
15.1
%
 
Net revenues (€ million)
 
19,073

 
16,126

 
18.3
%
 
17.7
%
4,550

 
3,878

 
17.3
%
 
26.2
%
 
Adjusted EBIT (€ million)
 
1,937

 
1,286

 
50.6
%
 
52.1
%
8.6
%
 
7.9
%
 
+70 bps

 

 
Adjusted EBIT margin (%)
 
10.2
%
 
8.0
%
 
+220 bps

 

Three months ended September 30, 2018
The Group's market share(1) in NAFTA of 12.0 percent for the three months ended September 30, 2018 reflected an increase of 100 bps from 11.0 percent for the same period in 2017. The U.S. market share(1) of 12.9 percent reflected an increase of 160 bps from 11.3 percent in the same period in 2017, with retail share increasing to 12.7 percent of total sales, up 150 bps, with U.S. fleet mix increasing to 17.0 percent of total sales, up 200 bps.
Shipments
The increase in NAFTA shipments in the three months ended September 30, 2018 compared to the same period in 2017 was mainly due to increased shipments of the all-new Ram 1500, as well as the all-new Jeep Wrangler and the new Jeep Cherokee.
Net revenues
The increase in NAFTA Net revenues in the three months ended September 30, 2018 compared to the same period in 2017 was primarily due to €2.0 billion from increased volumes and favorable mix, and €0.8 billion from favorable net price.
Adjusted EBIT
The following chart reflects the change in NAFTA Adjusted EBIT by operational driver for the three months ended September 30, 2018 compared to the same period in 2017.
https://cdn.kscope.io/047c898cbfccabf118e03858fe46a630-naftaq32018adjebit.jpg



_______________________________________________________________________________________________________________________________________________
(1) Our estimated market share data presented are based on management’s estimates of industry sales data, which use certain data provided by third-party sources, including IHS Markit and Ward’s Automotive.

17



The increase in NAFTA Adjusted EBIT in the three months ended September 30, 2018 compared to the same period in 2017 was primarily due to:
higher volumes and favorable vehicle mix;
positive net pricing; and
lower advertising spend.
These were partially offset by:
increased product content costs, included within industrial costs.
Nine months ended September 30, 2018
Shipments
The increase in NAFTA shipments in the nine months ended September 30, 2018 compared to the same period in 2017 was mainly due to increased shipments of the all-new Jeep Wrangler, new Jeep Cherokee and Jeep Compass, as well as increased shipments of the all-new Ram 1500.
Net revenues
The increase in NAFTA Net revenues in the nine months ended September 30, 2018 compared to the same period in 2017 was primarily due to €5.5 billion from an increase in volumes and positive mix and €2.0 billion from positive net pricing, partially offset by €3.7 billion due to negative foreign exchange translation effects.
Adjusted EBIT
The following chart reflects the change in NAFTA Adjusted EBIT by operational driver for the nine months ended September 30, 2018 compared to the same period in 2017.
https://cdn.kscope.io/047c898cbfccabf118e03858fe46a630-naftaq32018ytdadjebit.jpg
The increase in NAFTA Adjusted EBIT in the nine months ended September 30, 2018 compared to the same period in 2017 was mainly attributable to:
higher shipments and favorable vehicle and market mix;
positive net pricing, primarily for new vehicles; and

18



lower selling, general and administrative expenses primarily due to lower advertising.
These were partially offset by:
higher industrial costs, which mainly related to launch costs and increased product content, as well as depreciation and amortization related to new vehicles; and
negative foreign currency translation effects.
LATAM
 
 
 
 
Increase/(Decrease)
 
 
 
 
 
 
 
Increase/(Decrease)
Nine months ended September 30
 
2018 vs. 2017
 
 
 
Three months ended September 30
 
2018 vs. 2017
2018
 
2017
 
% Actual
 
% CER
 
 
 
2018
 
2017
 
% Actual
 
% CER
433

 
373

 
16.1
%
 

 
Shipments (thousands of units)
 
151

 
140

 
7.9
 %
 

5,979

 
5,798

 
3.1
%
 
24.1
%
 
Net revenues (€ million)
 
1,983

 
2,115

 
(6.2
)%
 
14.3
%
258

 
99

 
160.6
%
 
232.5
%
 
Adjusted EBIT (€ million)
 
83

 
59

 
40.7
 %
 
82.6
%
4.3
%
 
1.7
%
 
+260 bps

 

 
Adjusted EBIT margin (%)
 
4.2
%
 
2.8
%
 
+140 bps

 

Three months ended September 30, 2018
The Group's market share(1) in LATAM increased 80 bps to 13.4 percent for the three months ended September 30, 2018 from 12.6 percent in the same period in 2017. The Group's market share in Brazil and Argentina for the three months ended September 30, 2018 increased 60 bps to 18.2 percent from 17.6 percent and increased 70 bps to 12.7 percent from 12.0 percent respectively compared to the corresponding period in 2017.
Shipments
The increase in LATAM shipments in the three months ended September 30, 2018 compared to the same period in 2017 was mainly due to increased volumes in Brazil of the all-new Fiat Argo and Cronos, as well as the Jeep Compass, partially offset by discontinued vehicles and the impact of the economic deterioration in Argentina.
Net revenues
The decrease in LATAM Net revenues in the three months ended September 30, 2018 compared to the same period in 2017 was due to €0.4 billion from negative foreign exchange translation effects, partially offset by €0.3 billion from higher shipments, favorable vehicle mix and positive net pricing.








________________________________________________________________________________________________________________________________________________
(1) Our estimated market share data presented are based on management’s estimates of industry sales data, which use certain data provided by third-party sources, including IHS Markit, National Organization of Automotive Vehicles Distribution and Association of Automotive Producers.

19



Adjusted EBIT
The following chart reflects the change in LATAM Adjusted EBIT by operational driver for the three months ended September 30, 2018 compared to the same period in 2017.
https://cdn.kscope.io/047c898cbfccabf118e03858fe46a630-latamq32018adjebit.jpg
The increase in LATAM Adjusted EBIT in the three months ended September 30, 2018 compared to the same period in 2017 was primarily due to:
higher volumes, positive mix and net pricing, as described above.
This was partially offset by:
higher industrial costs, primarily in relation to negative foreign currency transaction effects;
higher advertising costs relating to new vehicles; and
negative foreign exchange translation effects.
Nine months ended September 30, 2018
Shipments
The increase in LATAM shipments in the nine months ended September 30, 2018 compared to the same period in 2017 was mainly due to the all-new Fiat Argo and Cronos and Fiat Strada, as well as Pernambuco-built vehicles, partially offset by discontinued vehicles.
Net revenues
The increase in LATAM Net revenues in the nine months ended September 30, 2018 compared to the same period in 2017 was due to €1.3 billion mainly from higher volumes, favorable vehicle mix and positive net pricing, which were partially offset by €1.2 billion from negative foreign exchange translation effects.

20



Adjusted EBIT
The following chart reflects the change in LATAM Adjusted EBIT by operational driver for the nine months ended September 30, 2018 compared to the same period in 2017.
https://cdn.kscope.io/047c898cbfccabf118e03858fe46a630-latamq32018ytdadjebit.jpg
The increase in LATAM Adjusted EBIT in the nine months ended September 30, 2018 compared to the same period in 2017 was primarily due to:
higher volumes and favorable mix; and
positive net pricing.
These were partially offset by:
higher industrial costs, including inefficiencies from the truckers' strike during the second quarter;
higher advertising costs related to new vehicles; and
negative foreign currency effects.
APAC
 
 
 
 
Increase/(Decrease)
 
 
 
 
 
 
 
Increase/(Decrease)
Nine months ended September 30
 
2018 vs. 2017
 
 
 
Three months ended September 30
 
2018 vs. 2017
2018
 
2017
 
% Actual
 
% CER
 
 
 
2018
 
2017
 
% Actual
 
% CER
155

 
212

 
(26.9
)%
 

 
Combined shipments (thousands of units)
 
46

 
66

 
(30.3
)%
 

58

 
61

 
(4.9
)%
 

 
Consolidated shipments (thousands of units)
 
19

 
23

 
(17.4
)%
 

1,853

 
2,424

 
(23.6
)%
 
(18.4
)%
 
Net revenues (€ million)
 
582

 
782

 
(25.6
)%
 
(24.1
)%
(184
)
 
174

 
n.m.

 
n.m.

 
Adjusted EBIT (€ million)
 
(96
)
 
109

 
n.m.

 
n.m.

(9.9
)%
 
7.2
%
 
n.m.

 

 
Adjusted EBIT margin (%)
 
(16.5
)%
 
13.9
%
 
n.m.

 

________________________________________________________________________________________________________________________________________________
n.m. = number not meaningful

21



We locally produce and distribute the Jeep Cherokee, Jeep Renegade, all-new Jeep Compass and all-new Jeep Grand Commander through the 50% owned GAC Fiat Chrysler Automobiles Co (“GAC FCA JV”). The results of the GAC FCA JV are accounted for using the equity method, with recognition of our share of the net income of the joint venture in the line item “Result from investment” within the Consolidated Income Statement. We also produce the all-new Jeep Compass through our joint operation with Fiat India Automobiles Private Limited (“FIAPL”) and we recognize our related interest in the joint operation on a line by line basis. 
Shipments of our consolidated subsidiaries, which includes vehicles produced by FIAPL, are reported in both consolidated and combined shipments. Shipments of the GAC FCA JV joint venture are not included in consolidated shipments and are only in combined shipments.
Three months ended September 30, 2018
Shipments
The decrease in combined shipments in the three months ended September 30, 2018 compared to the same period in 2017 was mainly due to lower shipments from the GAC FCA JV and import volumes, primarily due to China market weakness and increased competition.
The decrease in consolidated shipments in the three months ended September 30, 2018 compared to the same period in 2017 was mainly due to lower import volumes, primarily due to China market weakness and increased competition.
Net revenues
The decrease in APAC Net revenues in the three months ended September 30, 2018 compared to the same period in 2017 was primarily due to lower consolidated volumes, unfavorable market and product mix and unfavorable net pricing.
Adjusted EBIT
The following chart reflects the change in APAC Adjusted EBIT by operational driver for the three months ended September 30, 2018 compared to the same period in 2017.
https://cdn.kscope.io/047c898cbfccabf118e03858fe46a630-apacq32018adjebit.jpg
The decrease in APAC Adjusted EBIT in the three months ended September 30, 2018 compared to the same period in 2017 was primarily due to:
lower Net revenues, as described above;
lower results from the GAC FCA JV (included in Other above); and

22



the benefit of the Tianjin port explosions final insurance recovery of €87 million included in prior year results (included in Other above).
Nine months ended September 30, 2018
Shipments
The decrease in combined shipments in the nine months ended September 30, 2018 compared to the same period in 2017 was mainly due to lower shipments from the GAC FCA JV and import volumes, partially offset by increased shipments of the all-new Jeep Compass in India.
The decrease in consolidated shipments in the nine months ended September 30, 2018, compared to the same period in 2017 was mainly due to lower import volumes being offset by increased shipments of the all-new Jeep Compass in India.
Net revenues
The decrease in APAC Net revenues in the nine months ended September 30, 2018 compared to the same period in 2017 was primarily due to lower volumes, unfavorable mix and pricing actions resulting from announced changes to China import duties, in addition to negative foreign exchange translation effects.
Adjusted EBIT
The following chart reflects the change in APAC Adjusted EBIT by operational driver for the nine months ended September 30, 2018 compared to the same period in 2017.
https://cdn.kscope.io/047c898cbfccabf118e03858fe46a630-apacq32018ytdadjebit.jpg
The decrease in APAC Adjusted EBIT in the nine months ended September 30, 2018 compared to the same period in 2017 was primarily due to:
lower Net revenues, as described above;
lower results from the GAC FCA JV (included in Other above); and
the benefit of the Tianjin port explosions final insurance recovery of €93 million included in the prior year results (included in Other above).
These were partially offset by:
lower selling, general and administrative expenses.

23



EMEA
 
 
 
 
Increase/(Decrease)
 
 
 
 
 
 
 
Increase/(Decrease)
Nine months ended September 30
 
2018 vs. 2017
 
 
 
Three months ended September 30
 
2018 vs. 2017
2018
 
2017
 
% Actual
 
% CER
 
 
 
2018
 
2017
 
% Actual
 
% CER
1,014

 
1,020

 
(0.6
)%
 

 
Shipments (thousands of units)
 
273

 
285

 
(4.2
)%
 

16,925

 
16,615

 
1.9
 %
 
2.5
 %
 
Net revenues (€ million)
 
4,955

 
4,975

 
(0.4
)%
 
(0.1
)%
345

 
505

 
(31.7
)%
 
(33.6
)%
 
Adjusted EBIT (€ million)
 
(25
)
 
127

 
n.m.

 
n.m.

2.0
%
 
3.0
%
 
-100 bps

 

 
Adjusted EBIT margin (%)
 
(0.5
)%
 
2.6
%
 
-310 bps

 

Three months ended September 30, 2018    
The Group's market share(1) in the European Union for passenger cars for the three months ended September 30, 2018, increased 10 bps to 6.3 percent from 6.2 percent in the same period in 2017, while the Group's market share for light commercial vehicles decreased by 30 bps to 10.6 percent from 10.9 percent.
Shipments
The decrease in EMEA shipments in the three months ended September 30, 2018 compared to the same period in 2017, was primarily due to lower Fiat volumes partially offset by higher Jeep shipments.
Net revenues
EMEA Net revenues in the three months ended September 30, 2018 were substantially in line with those in the same period in 2017, primarily due to favorable vehicle mix, offset by lower volumes and negative net pricing, largely due to the transition to WLTP (“Worldwide Harmonized Light vehicles Test Procedure”).
Adjusted EBIT
The following chart reflects the change in EMEA Adjusted EBIT by operational driver for the three months ended September 30, 2018 compared to the same period in 2017.
https://cdn.kscope.io/047c898cbfccabf118e03858fe46a630-emeaq32018adjebit.jpg






________________________________________________________________________________________________________________________________________________
(1) Our estimated market share data is presented based on the European Automobile Manufacturers Association (ACEA) Registration Databases and national Registration Offices databases.

24



The decrease in EMEA Adjusted EBIT in the three months ended September 30, 2018 compared to the same period in 2017 was primarily due to:
lower volumes and unfavorable trim and channel mix, as described above;
continued negative net pricing;
impacts from the transition to WLTP; and
higher advertising expenses.
This was partially offset by:
purchasing and manufacturing efficiencies as well as favorable foreign currency transaction effects, included within Industrial costs.
Nine months ended September 30, 2018
Shipments
The decrease in EMEA shipments in the nine months ended September 30, 2018 compared to the same period in 2017 was mainly due to lower Fiat, Fiat Professional and Lancia shipments, partially offset by increased shipments of the all-new Jeep Compass and the Alfa Romeo Stelvio.
Net revenues
The increase in EMEA Net revenues in the nine months ended September 30, 2018 compared to the same period in 2017 was primarily due to favorable vehicle mix being partially offset by negative net pricing and foreign exchange effects.
Adjusted EBIT
The following chart reflects the change in EMEA Adjusted EBIT by operational driver for the nine months ended September 30, 2018 compared to the same period in 2017.
https://cdn.kscope.io/047c898cbfccabf118e03858fe46a630-emeaq32018ytdadjebit.jpg
The decrease in EMEA Adjusted EBIT in the nine months ended September 30, 2018 compared to the same period in 2017 was primarily due to:
continued negative net pricing, including foreign exchange transaction impacts, primarily from British Pound Sterling and Swiss Franc, as well as the transition to WLTP.

25



This was partially offset by:
lower industrial costs, primarily due to purchasing and manufacturing efficiencies.
Maserati
 
 
 
 
Increase/(Decrease)
 
 
 
 
 
 
 
Increase/(Decrease)
Nine months ended September 30
 
2018 vs. 2017
 
 
 
Three months ended September 30
 
2018 vs. 2017
2018
 
2017
 
% Actual
 
% CER
 
 
 
2018
 
2017
 
% Actual
 
% CER
26.0

 
36.0

 
(27.8
)%
 

 
Shipments (thousands of units)
 
8.8

 
10.9

 
(19.3
)%
 

1,953

 
2,844

 
(31.3
)%
 
(29.2
)%
 
Net revenues (€ million)
 
631

 
821

 
(23.1
)%
 
(23.2
)%
103

 
372

 
(72.3
)%
 
(72.0
)%
 
Adjusted EBIT (€ million)
 
15

 
113

 
(86.7
)%
 
(86.1
)%
5.3
%
 
13.1
%
 
n.m.

 

 
Adjusted EBIT margin (%)
 
2.4
%
 
13.8
%
 
n.m.

 

________________________________________________________________________________________________________________________________________________
n.m. = number not meaningful
Three months ended September 30, 2018
Shipments
The decrease in Maserati shipments in the three months ended September 30, 2018 compared to the same period in 2017 was mainly due to lower volumes in China and Europe, more than offsetting slightly increased volumes in North America.
Net revenues
The decrease in Maserati Net revenues in the three months ended September 30, 2018 compared to the same period in 2017 was primarily due to lower shipments and unfavorable market mix.
Adjusted EBIT
The decrease in Maserati Adjusted EBIT in the three months ended September 30, 2018 compared to the same period in 2017 was primarily due to lower volumes, unfavorable market mix and increased research and development costs.
Nine months ended September 30, 2018
Shipments
The decrease in Maserati shipments in the nine months ended September 30, 2018 compared to the same period in 2017 was mainly due to the impact from import duty reductions in China applicable from July 1 delaying customer buying decisions, as well as lower volumes overall, partially offset by higher GranTurismo and GranCabrio shipments in the first quarter.
Net revenues
The decrease in Maserati Net revenues in the nine months ended September 30, 2018 compared to the same period in 2017, was primarily due to lower volumes, unfavorable mix and pricing, as well as negative foreign currency translation effects.
Adjusted EBIT
The decrease in Maserati Adjusted EBIT for the nine months ended September 30, 2018 compared to the same period in 2017 was primarily due to lower shipments and unfavorable mix and pricing in connection with China duty reductions, partially offset by lower advertising costs.

26



Liquidity and Capital Resources
Available Liquidity
The following table summarizes our total available liquidity, and includes Magneti Marelli for comparability with prior periods and previously provided guidance:
(€ million)
At September 30, 2018
 
At December 31, 2017
Cash, cash equivalents and current debt securities(1)
12,297

 
12,814

Undrawn committed credit lines(2)
7,678

 
7,563

Available liquidity(3)
19,975

 
20,377

________________________________________________________________________________________________________________________________________________
(1) Current debt securities are comprised of short term or marketable securities which represent temporary investments that do not satisfy all the requirements to be classified as cash equivalents as they may not be readily convertible to cash or they are subject to significant risk of change in value (even if they are short-term in nature or marketable).
(2) Excludes the undrawn €0.1 billion long-term dedicated credit lines available to fund scheduled investments at September 30, 2018 (€0.1 billion was undrawn at December 31, 2017).
(3) The majority of our liquidity is available to our treasury operations in Europe and U.S.; however, liquidity is also available to certain subsidiaries which operate in other areas. Cash held in such countries may be subject to restrictions on transfer depending on the foreign jurisdictions in which these subsidiaries operate. Based on our review of such transfer restrictions in the countries in which we operate and maintain material cash balances, we do not believe such transfer restrictions had an adverse effect on the Group’s ability to meet its liquidity requirements at the dates above.
Available liquidity at September 30, 2018 decreased €0.4 billion from December 31, 2017 primarily as a result of the repayment of two notes at maturity with a total principal amount of €1.85 billion, partially offset by €1.2 billion positive cash flows from operating activities net of cash used in investing activities and positive foreign exchange translation effects of €0.1 billion. Our available liquidity is subject to intra-month and seasonal fluctuations resulting from business and collection-payment cycles as well as to changes in foreign exchange conversion rates. Refer to the section — Cash Flows below for additional information regarding the change in cash and cash equivalents.
Our liquidity is principally denominated in U.S. Dollar and in Euro, with the remainder being distributed in various countries and denominated in the relevant local currencies. Out of the total cash, cash equivalents and current debt securities available at September 30, 2018, €8.4 billion, or 68.3 percent, were denominated in U.S. Dollar (€7.0 billion, or 54.7 percent, at December 31, 2017) and €1.1 billion, or 8.9 percent, were denominated in Euro (€2.3 billion, or 18.0 percent, at December 31, 2017).
At September 30, 2018, undrawn committed credit lines totaling €7.7 billion included the €6.25 billion syndicated revolving credit facility, as described below, and €1.4 billion of other revolving credit facilities. At December 31, 2017, undrawn committed credit lines totaling €7.6 billion included the €6.25 billion syndicated revolving credit facility, as described below, and approximately €1.3 billion of other revolving credit facilities.
Capital Market and Other Financing Transactions
Medium Term Note Programme
In March and July 2018, the Group repaid notes at maturity with principal amounts of €1,250 million and €600 million, respectively, that were issued through the Medium Term Note (“MTN”) Programme.
Revolving Credit Facilities
In March 2018, the Group amended its syndicated revolving credit facility originally signed in June 2015 and previously amended in March 2017 (as amended, the “RCF”). The amendment extended the RCF’s final maturity to March 2023. The RCF, which is available for general corporate purposes and for the working capital needs of the Group, is structured in two tranches: €3.125 billion, with a 37-month tenor and two extension options of 1-year and of 11-months exercisable on the first and second anniversary of the amendment signing date, respectively, and €3.125 billion, with a 60-month tenor. The amendment was accounted for as a debt modification and, as a result, the new costs associated with the March 2018 amendment as well as the remaining unamortized debt issuance costs related to the original €5.0 billion RCF and the previous March 2017 amendment will be amortized over the life of the amended RCF.

27



European Investment Bank Borrowings
In June 2018, the Group entered into an agreement for a €420 million four-year loan with the European Investment Bank (“EIB”) to support research and development (“R&D”) projects to be implemented by FCA during the period 2018-2020. The drawdown of the loan took place in July 2018.
In July 2018, the Group repaid a loan at maturity of €600 million with the EIB.
Cash Flows
The following table summarizes the cash flows from operating, investing and financing activities for the nine months ended September 30, 2018 and 2017. Refer to our Interim Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 included elsewhere in this Interim Report for additional detail.
 
 
Nine months ended September 30
(€ million)
 
2018(1)
 
2017(1)
Cash flows from operating activities - continuing operations
 
5,623

 
6,090

Cash flows from operating activities - discontinued operations
 
340

 
479

Cash flows used in investing activities - continuing operations
 
(4,306
)
 
(6,108
)
Cash flows used in investing activities - discontinued operations
 
(415
)
 
(404
)
Cash flows used in financing activities - continuing operations
 
(1,947
)
 
(4,358
)
Cash flows used in financing activities - discontinued operations
 
(61
)
 
(199
)
Translation exchange differences
 
54

 
(1,065
)
Total change in cash and cash equivalents
 
(712
)
 
(5,565
)
 
 
 
 
 
Cash and cash equivalents at beginning of the period
 
12,638

 
17,318

Total change in cash and cash equivalents
 
(712
)
 
(5,565
)
Less: Cash and cash equivalents at end of the period - included within Assets held for sale
 
508

 

Cash and cash equivalents at end of the period
 
11,418

 
11,753

________________________________________________________________________________________________________________________________________________
(1) The cash flows of the Group for the nine months ended September 30, 2018 and 2017 have been re-presented following the classification of the Magneti Marelli business unit as a discontinued operation for the nine months ended September 30, 2018; Magneti Marelli operating results were excluded from the Group's continuing operations and are presented as a single line item within the Interim Condensed Consolidated Income Statement for the each of the periods presented. The assets and liabilities of Magneti Marelli have been classified as Assets held for sale and Liabilities held for sale within the Interim Condensed Consolidated Statement of Financial Position at September 30, 2018, while the assets and liabilities of Magneti Marelli have not been classified as such within the comparative Interim Condensed Consolidated Statement of Financial Position for any of the periods presented.
Operating Activities
For the nine months ended September 30, 2018, cash flows from operating activities were the result of Net profit from continuing operations of €2,159 million primarily adjusted: (1) to add back €4,175 million for depreciation and amortization expense, (2) a €221 million change in deferred taxes, (3) a €618 million net increase in provisions, primarily due to a €713 million charge recognized for estimated costs related to U.S. diesel emissions matters and a €670 million accelerated discretionary pension contribution largely offset by changes in other provisions (4) €340 million of cash flows from operating activities of discontinued operations and (5) for the negative effect of the change in working capital of €1,976 million, which was primarily driven by (i) an increase of €1,066 million in inventories mainly due to the ramp-up of new models in NAFTA and EMEA as well as volumes increase in LATAM, (ii) an increase of €204 million in trade receivables, (iii) an increase of €781 million in other receivables net of other payables, mainly due to an increase in indirect tax receivables, which were partially offset by (iv) an increase of €75 million in trade payables,

28



For the nine months ended September 30, 2017, cash flows from operating activities were the result of Net profit from continuing operations of €2,550 million primarily adjusted: (1) to add back €4,191 million for depreciation and amortization expense, (2) €713 million of net decrease in deferred tax assets mainly related to LATAM (refer to Note 5, Tax Expense, in the Interim Condensed Consolidated Financial Statements included elsewhere in this Interim Report), (3) €479 million of cash flows from operating activities of discontinued operations, and (4) for the negative effect of the change in working capital of €1,225 million, which was primarily driven by (i) an increase of €2,183 million in inventories mainly due to the launch of new models in EMEA, volume increases in LATAM and Maserati and inventory build-up for the launch of Alfa Romeo in APAC, (ii) an increase of €164 million in trade receivables which were partially offset by (iii) an increase of €1,080 million in trade payables mainly due to increased production volumes in NAFTA as compared to year-end December 2016, and (iv) an increase of €42 million in other payables and receivables.
Investing Activities
For the nine months ended September 30, 2018, cash used in investing activities was primarily the result of €3,785 million of capital expenditures, including €1,463 million of capitalized development expenditures, an increase in receivables from financing activities of €388 million, which was mainly attributable to increased financing in LATAM and EMEA, and €415 million of cash flows used by discontinued operations.
For the nine months ended September 30, 2017, cash used in investing activities was primarily the result of €6,094 million of capital expenditures, including €1,815 million of capitalized development expenditures, an increase in the portfolio of financial services companies of €230 million, mainly attributed to increased dealer and retail financing in APAC, and €404 million of cash flows used by discontinued operations, which was partially offset by the proceeds received of €144 million from the sale of the investment in CNH Industrial N.V. (“CNHI”), which was recognized in the Change in securities line item within the Statement of Cash Flows (refer to Note 14, Fair Value Measurement, in the Interim Condensed Consolidated Financial Statements included elsewhere in this Interim Report).
Financing Activities
For the nine months ended September 30, 2018, cash used in financing activities was primarily the result of the repayments of two notes at maturity with a total principal amount of €1,850 million that were issued through the MTN Programme.
For the nine months ended September 30, 2017, cash used in financing activities was primarily the result of (i) the voluntary prepayment of the outstanding principal and accrued interest of U.S.$1,826 million (€1,721 million) of the FCA US Tranche B Term Loan due 2017 and (ii) the repayment at maturity of two notes under the MTN Programme, one with a principal amount of €850 million and one with a principal amount of €1,000 million, (iii) the prepayment of the remaining scheduled payments of the Canada Health Care Trust Tranche B Note for a total of €226 million and the net repayment of other debt, primarily in Brazil.

29



Net cash/(debt) and Net industrial cash/(debt)
The following table summarizes our Net cash/(debt) and Net industrial cash/(debt) at September 30, 2018 and December 31, 2017 and provides a reconciliation of Debt, the most directly comparable measure included in our Interim Condensed Consolidated Statement of Financial Position, to Net cash/(debt):
 
 
At September 30, 2018
 
At December 31, 2017
(€ million)
 
Industrial
Activities
 
Financial
Services
 
Consolidated
 
Industrial
Activities
 
Financial
Services
 
Consolidated
Third party debt (principal)
 
(13,234
)
 
(1,966
)