Oliver Larkin - Head, IR Frank Witter - Responsible, Finance and Controlling Fred Kappler - Head, Group Sales

Charles Winston - Redburn Partners José Asumendi - JPMorgan Arndt Ellinghorst - Evercore Stuart Pearson - Exane Michael Tyndall - Citigroup Stephen Reitman - Société Générale Patrick Hummel - UBS Tim Rokossa - Deutsche Bank Fraser Hill - Bank of America Harald Hendrikse - Morgan Stanley Philippe Houchois - Jefferies Michael Punzet - DZ Bank Christian Ludwig - Bankhaus Lampe

Ladies and gentlemen, welcome to Volkswagen’s Conference Call on the Results for the period January to June 2017, based on the half yearly financial report we published this morning. For today’s conference call, I am joined as usual by Frank Witter, Member of the Board of Management, Volkswagen AG, responsible for Finance and Controlling; and Fred Kappler, Head of Group Sales of Volkswagen AG.

You can follow today’s webcast via our website, where you will also find the charts available for you to download. Following their presentations, we will take questions first from analysts, and we will keep time later for questions from journalists.

So let me now hand you over to Frank.

Thank you very much, Oliver, and a warm welcome to all participants of this call. Before we start with the financial highlights, I would like to use this opportunity to address the recent press issues concerning the cartel law.

I know that many of us would like to have more clarity right now, but we are all well advised not to participate in speculation. Fact is that the European Commission is analyzing information it has received.

As a group CFO, my job is to mitigate risks for the company and its shareholders. For this very reason, we can’t take any questions on this issue today and refer you to yesterday’s press release.

Now let’s back to the real focus of today’s call. The Volkswagen Group had a successful first half of 2017, with an operating result of just below €9 billion, significantly higher than the prior year.

The result was mainly driven by positive effects from higher volume and mix improvement, and whereas last year, we had the burden of around €2 billion of special items in the first half, this year, no material special items have been required. Our sales in the first half of 2017 have been characterized, on the one hand, by a solid overall performance in Western Europe, Central and Eastern Europe; and on the other hand, by further recovery from low levels in South and North America.

Our sales revenue at just under €160 billion, which excludes the Chinese joint ventures as we include their results at equity the financial result, increased by over 7% compared to the same period last year. This positive development is particularly supported by volume and mix effects adjustment.

Yet equity result, mainly driven by the Chinese joint ventures, came in at around €1.6 billion, slightly below last year. However, excluding the sale of LeasePlan in Q1 of last year, the underlying trend for 2017 was however positive.

Profit before tax increased substantially to €9 billion, reflecting the improved operating result, but also as this year was not burdened by special items. The significant cash outflows for diesel-related charges in H1 drove the underlying automotive net cash flow, as we expected, into the negative zone at around €4.8 billion minus.

Cash outflows for this year totaled to €12 billion in the first six months, of which around €7 billion related to Q2. Including the cash out of €3 billion in the fourth quarter of 2016, total payments up to now amount to €15 billion.

However, I would like to strongly emphasize that we continue to work hard on cash flow generation. If you exclude the effect of the diesel issue related outflows, good progress can be seen as our cash flow from operating activities ex diesel was nearly €14 billion over the first 6 months.

Automotive net liquidity ended the quarter robustly at almost €24 billion, holding the level from the end of Q1. Net liquidity was boosted by the receipt of €2 billion dividend from our Chinese joint ventures, which equates to about 2/3 of total dividends due.

Our successful hybrid capital market transaction of a combined €3.5 billion in June also contributed positively. Although we have had a successful half year, we are conscious of significant remaining risks such as the fragility in South America and Russia, open issues such as a possible hard Brexit impact and developments in the North American region.

For these reason -- region -- reasons, we are sticking with our prudent full year margin guidance as we head into Q3. However, I certainly do not rule out us coming in at the upper end.

We will discuss the financial results in details in a few moments after Fred has taken you through the market context and our sales performance.

Ladies and gentlemen, I would also like to extend a warm welcome to this conference call and will present the first half year sales results for 2017. The following overview shows the development of the worldwide passenger car market and Volkswagen Group deliveries to customers of our passenger car brands in comparison to the previous year.

The global car market remains, in the first half, on its growth path, although at a slightly slower pace than in the first quarter of this year. While Western Europe and total Asia-Pacific, but also markets, such as Brazil and Russia, contributed positively to total growth, the negative market development in the United States and the United Kingdom dampened this growth in the second quarter.

Despite this challenging market environment, the Volkswagen Group improved its sales performance and gained momentum, especially in second quarter of 2017, among other things due to our renewed and extended product portfolio. Overall, the high level of the Volkswagen Group car deliveries to customers remained stable in the first 6 months of this year compared to last year’s result.

Let us now move on to the deliveries of the Volkswagen Group for passenger vehicles in comparison to the car market on a regional basis the first half of 2017. In North America, the market remained slightly below the high level of the previous year, while Mexican and Canadian markets are still growing, the demand in the U.S.

continued to slow down. Nevertheless, our group brands: Audi, Porsche and Volkswagen Passenger Cars, continued their path for growth in this region and reported a sales increase in the first 6 months.

Despite the generally positive trend in Western Europe, the region presented also a mixed picture. While passenger car demand grew in such markets as Italy, Spain and Germany, the market in the U.K.

felt the effects of vehicle tax rises from 1st of April and decreased in total. The Volkswagen Group recorded a sales gain during January to June 2017.

In Central and Eastern Europe, the overall passenger car market grew versus the same period of the previous year. In addition to the increasing market demand in Poland and the Czech Republic, the first half year was also marked by positive stimuli from the recovering Russian market.

With regard to the Volkswagen Group, car deliveries to customer increased during the first half of the year. The total market in South America was above the previous year’s level.

Alongside the market growth in Argentina, demand in Brazil improved in the second quarter and led to a positive trend in the first six months of 2017. The Volkswagen Group benefited from the positive development in South America and posted increasing sales.

The Asia Pacific region recorded a rise in demand. After slow growth in the first quarter in China due to the increase in purchase tax on cars with engines below 1.6 liters, the market gained new momentum in the second quarter.

Deliveries to customers for the Volkswagen Group could not be maintained at the same high level as in the previous year. However, after the challenging first few months of the year caused by extraordinary effects associated with the strategic alignment of Audi’s China business, group sales showed a positive trend in the last three months.

Moving now to the year to date performance of our Volkswagen Group brands. The Volkswagen Group handed over a total of approximately 5.2 million vehicles to customers since the start of the year, representing an increase of 0.8% versus the previous year.

The Volkswagen brand delivered over 2.9 million vehicles to customers worldwide in the first half of the year, a slight increase of 0.3% compared with the previous year. Sales volume developments in Argentina, United States and also Russia were particularly encouraging.

The main driver on the product side was the strong demand for the new Tiguan. Meanwhile, the decline in Germany affected the performance of Western Europe, primarily due to the model changeover in the Golf family and uncertainty among customers resulting from discussion about possible driving bans for diesel vehicles in certain cities.

Year to date, Audi handed over around 909,000 vehicles to customers worldwide. The decrease in deliveries resulted mainly from temporary extraordinary effects in China.

However, deliveries in China continued to recover, consolidating the trend which had begun at the end of May with the agreement on the future collaboration between Audi and its local partners. In light of the current order situation, we expect a stronger second half of the year for Audi.

ŠKODA reported for the six months just over 585,000 deliveries to customers, a 2.8% improvement over the same period of the previous year. The positive development in markets such as Poland, the Czech Republic, Western Europe was supported above all by the new KODIAQ.

SEAT deliveries year to date increased by 13.7% to 246,000 cars. The new Ateca has already made a remarkable performance in the sales figures.

With over 126,000 vehicles delivered worldwide, Porsche exceeded the high figure from the previous year by 7.2% and is thus enjoying the most successful first half year of its history. The top seller, Macan, remains the main driver of this growth.

The positive development was also supported by high sales in China and the United States. Deliveries to customers of Volkswagen commercial vehicles grew 5% year-on-year to almost 250,000 units.

This resulted from a strong performance in especially Western European markets. The total market demand for trucks above 6 tons increased year-on-year, but with different regional trends.

Whereas the European market rose against the prior year, the overall market for trucks in South America again declined. Through the first half year, MAN sold around 53,000 vehicles worldwide, an increase of 6.9% versus the previous year.

The markets of Western Europe, South America and Russia contributed positively to this performance. Also, Scania recorded higher sales compared with previous year and delivered around 44,000 units, driven in particular by high demand in South America, China and Russia.

Our bookings at MAN and Scania are above the previous year level. Last but not least, let me now introduce to you a few model highlights which have been extremely well received after their premiere and for which we have high expectations.

The Volkswagen Passenger Car brand expanded its SUV range with all new Tiguan Allspace. This long-wheelbase model version offers more space for luggage and up to seven passenger seats, as well as impressive flexibility.

In addition, the Tiguan Allspace comes first in its class with an attractive range of equipment features such as gesture control. After market launch this month in the U.S., the new SUV will launch in European countries beginning from September.

The new Polo by Volkswagen impresses with a clear, powerful design; much greater room; more efficient engines and pioneering driver-assistance systems. Volkswagen presented the completely redesigned sixth generation of its best-selling car at a world premiere in Berlin last month.

In many parts of Europe, the new Polo is due to launch at the end of this year. Audi is fundamentally reengineering the A8 in its fourth generation.

With its new design language, top-rate suspension solutions, touch screen operating concept and superlative comfort, the brand flagship model again provides a benchmark for [indiscernible]. From 2018, Audi will gradually be taking piloted driving functions such as parking pilot, garage pilot and traffic jam pilot into production.

The new Audi A8 made its world debut this month and would appear on the market in late 2017. After four generation and more than 5.4 million cars sold, the new SEAT Ibiza comes loaded with the latest technology features, outstanding dynamics and an impressive improvement in interior space and comfort.

Following its international debut at the Geneva Motor Show, the first deliveries took place already in early June. Apart from these model highlights, other new model launching in the next month such as the new Volkswagen T-Roc, the ŠKODA KAROQ the SEAT Arona, which give us further ground for optimism for the second half of this year.

Thank you very much, Fred. Let’s now turn back to Frank for a look at our financial performance in a little bit more detail.

Thank you. Now let’s start with our group performance before moving on to discuss our brands in more detail.

As mentioned already, over the first 6 months of 2017, sales revenue for the Volkswagen Group was around €116 billion, an increase of 7.3%, resulting in particular from volume and mix improvements, including the continued success of a greater proportion of SUVs. Operating profit for the group increased by nearly 70% to slightly below €9 billion compared to the prior year figure.

Again, please note that there is a base effect coming from a circa €2 billion special items booked in 2016 versus no material special items in the first half of this year. The strong operating result was strongly supported by the continued improvement in the performance of Volkswagen brand.

The group margin improved significantly from 4.5% to 7.7%. Net equity result came in at €1.6 billion.

Our Chinese joint ventures, which make up the majority of the equity accounted investments, reported a proportionate operating profit of €2.1 billion, around 10% below the first six months of 2016. The Chinese result was dampened by the challenging market environment.

It also reflects the difficulties at Audi at the start of the year. And that at the end of June, deliveries for Audi were still around 12% below the 2016 reference figure.

However, at the end of May, Audi came to an agreement on the future collaboration with its local Chinese partners. Audi sales are now recovering.

And for the full year, we target a sales result around the level of last year in China. The other financial result came in less negative than the prior year comparable period at minus €1.6 billion, mainly due to lower finance costs for the discounting of provisions.

Group profit before tax of €9 billion equaled 7.8% return on sales. Moving on to look at the group operating result performance for the first half year in more detail.

Over the course of the first six months, the position, volume mix prices in the passenger car segment reported a plus of €1.7 billion. Stronger volume; better vehicle and country mix; positive pricing, including lower incentives; and improved results in our spare parts business were the main drivers.

Positive exchange rate effect of around €0.2 billion also contributed to our higher operating result. Product cost savings came in at €0.2 billion.

We fought extremely hard in recent years to consistently lower our product cost base. However, this year, we have to contend with rising raw material prices.

And as always, we have taken a cautious approach in booking material costs and, of course, the carryover of the lower product costs achieved in previous years. Additionally, the methodology used here to calculate savings look at the current costs versus the comparable period last year.

With some of the new models launched, the SEAT Ateca and the ŠKODA KODIAQ just being two examples, or the Volkswagen Atlas as another, there are no models to compare with. Instead, the strong contribution of these cars is shown in their first year as part of the position, volume, mix and prices.

Fixed costs, which rose by €1.1 billion over the first six months, looking a little deeper, we can see that launch costs, plus higher depreciation relating to new products amounted to close to half of the increase. The launch costs were not only for the recently introduced midsized SUVs but also the preparation for the next expansion to our SUV portfolio and pure-play bets like the Audi e-tron.

The very successful sales performance and order base of the new midsized SUVs demonstrate that while launch costs are a headwind at the moment, the longer-term payback justifies the short-term pain. Other elements of the increase in fixed costs include the additional running costs of the Audi factory in Mexico for the Q5 and the enlarged facility in Kvasiny supplying the ŠKODA and SEAT SUVs.

And as the year progresses, we expect fixed costs to continue to grow. Of course, we will continue to work hard to improve our operational efficiency as the progress, for example, with the future pact around Volkswagen demonstrates.

Nevertheless, we make no excuses for investing in our future while at the same time driving overall profitability up. And surely, at the end of the day, it is the bottom line that we should be looking at to judge our overall performance and not just one position or the other on our profit bridge in isolation.

From where we are today, it seems highly unlikely that for this year product cost savings would be sufficient to compensate for fixed cost increases. However, this doesn’t mean we are moving away from our minimum target of product cost savings at least compensating for fixed cost increases.

As in the case every year, we will review our overall forward-looking position during our next planning round in Q4. Earnings in our Commercial Vehicles division increased on the back of the good sales performance in Europe, while our Power Engineering division came in flat compared to last year.

Earnings in the Financial Services Division came in just above the solid level of the prior year. Turning to the brands in more detail.

Volkswagen Passenger Cars continued its momentum, with an operating profit of €1.8 billion compared with only €0.9 billion in the comparable period in 2016. The improvement is mainly driven by volume and mix.

As you are aware, the Volkswagen brand is holding their first phone half year conference call tomorrow. The brand CFO, Arno Antlitz; and Jurgen Stackmann, the brand board member for sales and marketing, will provide you with further details during their call.

Of course, your participation in that event and those of the other brands is much appreciated. Moving on to Audi.

The operating profit came in at €2.7 billion, in line with the comparable period. Process and cost optimization improvements from the strategic program speed up and currency effects compensated for slightly lower vehicle sales.

ŠKODA reported an excellent €0.9 billion operating profit, a strong 26% improvement year-on-year. This performance was driven in particular by a strong product mix especially from the high demand for the KODIAQ.

SEAT’s result also improved strongly by over 41% to €130 million with the success of the Ateca being a key driver. Bentley reentered the profit zone, reporting an operating profit of €13 million.

Porsche delivered very strong operating profit of €2.1 billion, supported by volume, mix and positive currency movements. The operating result for Volkswagen Commercial Vehicles at €0.5 billion showed a further substantial improvement of nearly 50%.

Volume improvements in Europe, including double digit growth in Central and Eastern Europe, were key to the performance. Increased volumes, positive exchange rate effects and stronger service business contributed to the improved operating profit of close to €0.7 billion at Scania.

MAN commercial vehicle earnings grew to around €0.2 billion, mainly driven by higher volumes. MAN Latin America managed to reduce losses due to increased sales and the absence of further restructuring cost.

MAN Power Engineering earnings came in lower at €73 million as revenue reduced by nearly 30%, mainly due to lower demand for Marine business. Once again, Volkswagen Financial Services had a strong quarter with earnings for the first half of €1.2 billion, while the full Financial Services Division reported earnings of €1.3 billion.

Turning now to cash flow in the Automotive Division. Operating cash flow for the division over the first six months before diesel related outflows came in at the strong €13.6 billion.

This is 40% up on the prior year. After €12 billion cash out for diesel, operating cash flow was still positive at €2 billion.

CapEx reduced in absolute terms by around 8% over the first six months versus the prior year to around €4.2 billion. As a result, together with the higher automotive revenue, the CapEx ratio improved to 4.2% versus 4.9% in H1 2016.

The €2.9 billion capitalized development costs increased by €300 million and presented 43.2% of total R&D costs. The increase was mainly product driven by vehicles, such as the T-Roc, Arteon and Touareg in the Volkswagen brand as well as the Audi A6 and the Porsche Carrera.

At €6.8 billion year to date, total R&D costs are slightly up, reflecting the development of more environmentally friendly vehicles and the shift towards electrified powertrains. As a strong focus area for us is satisfying the continuously increasing customer demand for SUVs, at the very same time, we are balancing the costs required to fulfill the ever growing stringent rules, the earlier adoption of tough emissions compliance and the investments required in future technologies.

In summary, net cash flow for this quarter came in negative at minus €2.5 billion, leading to a cumulative half year impact of minus €4.8 billion. Net liquidity in the Automotive Division stood at robust €23.7 billion at the end of June.

As I have mentioned, there have always been around -- there have already been around €15 billion in diesel-related cash outflows, of which €12 billion in 2017. As the year progresses, further diesel-related cash outflows are expected, but at a significantly lower level.

Furthermore, €1 billion was paid out in dividends to Volkswagen AG shareholders. As a final comment on liquidity.

The dividends received from China in Q1, which are reflected in the position net cash flow, and the hybrid funds were additionally key positive drivers. So turning to my last slide with our outlook for 2017.

Despite the solid result of the first half of 2017, we remain cautious and still continue to expect, on the whole, deliveries to customers of the Volkswagen Group in 2017 will be moderately above the level of the previous year amid persistently challenging market conditions. Let’s be clear.

It is too early to hail victory. The risks I already spoke about in the Q1 call have not gone away.

The subject diesel in all its dimensions is far from over. Certain markets are fragile.

The Brexit impacts are not yet quantifiable. Markets are highly competitive.

And the exchange rate volatility and fluctuations in raw material prices all still pose relevant challenges. On the other hand, we anticipate positive effects from efficiencies in all brands, including further achievements from the future pact at brand Volkswagen and from the continued rollout of models based on the modular toolkit, especially in the still underrepresented SUV segment.

This includes the Volkswagen T-Roc, SEAT Arona and the ŠKODA KAROQ in the second half of this year. Depending on the prevailing economic conditions, we now expect the full year 2017 sales revenue for the Volkswagen Group to be up by more than 4% on the prior year figure.

In terms of the group’s operating result, we are sticking to our guidance and continue to expect an operating return on sales for the group of between 6% and 7% in 2017. Based on what you’ve heard so far today and the way we’ve described the current situation, we are quite comfortable in saying that we expect that the full year margin will more than likely come in at the upper end of the guidance range.

Thank you, Frank. And we will now take questions from investors and analysts, keeping time towards the end for questions from journalists.

And just a note before too many of you ring up and ask the question. Just to confirm that the dividend from China was received in Q2.

I think it may have come across as Q1 in the speech, but it was Q2. But so anyway, operator, let’s go over to you for questions from the people on the call, please.

Just a couple of housekeeping questions, if you don’t mind. And then just one slightly bigger picture one.

FX in the year, obviously is a very moving feast. If you’ve got any thoughts as to what the net impact in the year might be at current rates; that would be useful.

Secondly, can I just confirm bonuses paid? Normally, second quarter is when we see the cash out for bonuses, which obviously, is very part and parcel in the provision number.

Can you perhaps give us what that number was? And then thirdly, it’s just -- is the concepts of the whole product costs versus fixed costs.

Clearly, a lot of the VW investment story, investment case, is about building investor trust that the new team is delivering. We are now in a position where you feel confident to invest for future technology, as you talked about, such that we are not going to see product cost savings offset cost inflation.

This -- we have this theme of perhaps disappointing cost control at VW for some time. Arguably, it started at MQB and it’s been going on since.

What can you offer investors to give people confidence that there really is a change in attitude on cost control in this group? Because if we just look at the numbers you are reporting, we’re still struggling.

There’s still very little evidence of sustained focus on costs. Anything you can offer us there will be just really appreciated.

Charles, thank you very much. I think, Frank, those three are for you.

Yes. Let me start -- Charles, let me start with the -- I think the first one was related to FX.

I think for the year, I think your question was more towards to the future. We see a slightly positive impact, if you certainly would look for a number, I think, in the range of maybe €0.5 billion for the full year.

But as you rightly said, Charles, the volatility is there. And this is a ballpark number which we certainly can’t guarantee, but this is what we are currently assuming.

I think you also asked a question regarding bonus payout. I think if I remember correctly, it was in the range of €2 billion.

The third question is certainly a big one regarding cost control, but it’s also certainty product costs versus fixed costs improvements. I think what I said in my speech, it’s important that we deliver on our promises.

And we gave you guys very clear guidance at the Capital Markets Day for the medium and long term but also for this year. And we addressed key issues like CapEx and R&D cost ratios and progress which we are committed to deliver, which is more than overdue.

You know the discussion, and our colleagues will report tomorrow about the brand which probably has the longest way to go, which is Volkswagen Passenger Car with the future pact. And we see the first results of the hard and fine work coming in.

But I also said in my speech that it is important to keep things into perspective. It is important that we are not looking in one part of a bridge where we compare one year to the other.

We need keep things in perspective at the greater scheme. When we talk about the fixed cost increases result, for instance, anything from our colleagues in Volkswagen Passenger Cars, they didn’t contribute to the increase in fixed cost.

And you will get more details from Arno Antlitz tomorrow. We have seen decreases at brands like Porsche and ŠKODA.

Both of them account for a bit more than half of the €0.9 billion we had on that level. Brands which have EBIT margins which are at historic levels, 19% at Porsche for the first half and 9.9% for SKODA, we increased versus last year the EBIT margin.

The EBIT increase for ŠKODA, for example, by 26% and turnover by 23%. So what I’m saying is that as much as we need to push and continue to work towards fixed cost increases, these increases have been fueled by the substantial growth also in turnover and earnings of those 4 particular companies, 2 of them I mentioned, SEAT and Porsche I spoke were other ones.

This is the way I wanted to describe and put it into perspective. And there is clearly a commitment, not only for Volkswagen Passenger Cars, it is a commitment and a strong push by the group board to all brands and companies that we need to improve in that respect, too.

Thank you, Frank. A very detailed answer there.

José at JPMorgan. A couple of items, please.

On the volume price mix bucket, which is, I think, obviously funding your incremental fixed cost while allowing you to fund the future of the company, can you give us a bit of a split between volume price mix on that category maybe for the second quarter or for the first half? And second element is in terms of your margin targets.

When I look at your margins for the first half across ŠKODA and Volkswagen, and they look to me, like, completely outdated. I mean, you’re clearly hitting well above expectations and well above the barriers you have set for the year.

So I hear you on the concern for the second half, but they look to me like too cautious. So if the third quarter run rate would be sort of similar to the first half, would you be in a position to upgrade your targets?

Or would you still be keeping that cautious outlook? And then the third item, please, would be just on any asset disposals or a potential truck IPO.

How is the company thinking about these strategic steps?

Okay. Thanks, José.

Yes, José, a bunch of subjects. First, your question related to volume mix price, which came in at a strong 1.7 billion year-over-year improvement.

To shed some more light, certainly, we are quite happy that unit sales volume increased. That contribute around about €0.3 billion.

Vehicle and country mix, also important factor, €0.6 billion; pricing, €0.5 billion, important. As we always said, we also need to improve on the incentives since we obviously had to step up after the diesel issue came to light in 2015.

That was positive. And also spare parts business was €0.2 billion.

That is, in a nutshell -- these are the -- in a nutshell, the main drivers behind that strong part of the bridge. And we continue to count that this will carry us.

The margin targets. We discussed the 6% to 7% at numerous occasions, and we certainly appreciate tremendously that we had a very strong first half, even being in excess of the upper end of the range.

We are serious about those risks, and our job is to manage them. But it’s also important that we are going to hit our targets and keep our promises.

And from today’s perspective, and we are a group which is still dealing with diesel in a lot of respects. And the recent press coverage is for sure not helping that operation in the business.

We have volatility. And the precise answer to your question, we certainly would raise the bar down the road once we have more evidence and once we have, hopefully, an even better handle on reduced -- on the reduction of those risks I have been talking about.

But for us, it’s also important that we deliver on the promises and the results. And this is certainly an environment which is not the easiest.

In terms of asset disposal, there has been speculation and rumors. We continue not to comment on rumors in the marketplace concerning some of our fine assets.

But I also refer you back to a group initiative number 13, which is part of our strategy, Together 2025. And as you particularly addressed a truck IPO, we said we are pushing very hard in terms of intensifying the collaboration amongst our brands.

We obviously have, with Navistar, some additional opportunity. And we said down the road, we are not ruling out an IPO or partial IPO.

But for the very moment, our focus is getting to the synergies, which we strongly believe in.

It’s Arndt Ellinghorst from Evercore. I have one comment and one question, actually.

Frank, I would just really recommend you step away from providing this EBIT bridge. I think it’s more confusing than anything else.

And I really truly believe you can’t put a company like Volkswagen in 5 or 6 lines. But that’s just a comment.

Instead, you should really talk more about cash flow. And here’s my question.

Could you give us some color on really the underlying free cash flow? If you take out the China dividend, if you take out the bonus payments to workers, the diesel cash outflows, what was really the underlying free cash generation of the business?

That’s the first question. And the second question is on the other EBIT line.

As, we’ve seen a major swing from around 300 million negative to 833 million negative. And this is despite the inclusion of some profits from the reallocation of the distribution businesses.

So what was driving this huge increase, negative increase in that line? And can you give us some color for the rest of the year, please?

Thank you/.

So Arndt, just as I understand the question, it’s about -- thank you for the statement on the EBIT bridge. But on cash flow, but when you’re referring to the others line, I think you were actually commenting on the Q2 figure in particular of minus €800 million.

Yes. Thanks, Oliver.

Exactly.

But Frank, I’ll hand over to you for the cash flows to start with.

Yes. Obviously, Arndt, the relevance and importance of cash flow has been discussed amongst ourselves at various occasions.

I think if you ask me to review, I would certainly side on the positive, the good development of the profit quality and that we had less CapEx, for example, compared to last year. On the negative side, you rightly referred to let’s take out the diesel issue.

We have a higher capitalized R&D cost, which is the result of relevant, hopefully, and we are quite convinced, successful product being quite advanced in the development process. We had the acquisition of Navistar shares.

And if we compare to last year, we certainly had not the same effect as we had last year from the disposal of LeasePlan. I think what’s going to drive future progress, it’s certainly that we deliver on the targets which we laid out, targets to you guys related to CapEx, the CapEx ratio and R&D ratio, to bring that down to the range of 6%.

That is certainly quite important and the key issue and the key area where we need to work on. In the various -- at the occasions, we confirmed to you that it will be a particular difficult transition in ‘17 and ‘18 due to the required work of the electrification of the fleet and also CO2 compliance.

But we definitely push hard and to consider it as much as you do to be important and to show progress in the cash generation of the group. The other line, you know that from previous calls, is a mixed bag.

It contains mainly internal postings, especially the elimination of internal profits, investment supplies and reserves. And internal profits are the result of transactions between the group companies.

These items, as you know from the past and as it also is going to be the case in the future, can vary strongly over the quarters. And this is something which is just the result of the group and the intergroup relationships.

And obviously, we shouldn’t forget about PPA being a relevant part of it in total for this year in the range of €1 billion.

And should that number be for the rest of the year more in the area of €300 million or €800 million on a quarterly basis?

I’m sorry, Arndt, we didn’t get your question there.

The area of €300 million negative or €800 million negative on a quarterly basis for the rest of the year? Or can’t you just -- can’t you forecast that at all?

As in the past, Arndt, I refrain from giving guidance on the other line.

So a couple of questions. I mean there seems to be a bit of a conflict here, I guess, between what we are seeing on a very strong cash story and a bit of frustration on costs.

So I wonder, Frank, if you just -- when you think about the fixed cost inflation that you’re talking about going forward, and that could frustrate some people, I mean, how much of that is really cash effective when you think about that? How much is D&A that is a result of past investment that you can’t do much about?

So how would that affect the underlying cash generation of the group going forward? Is there a significant headwind to the cash side from the fixed cost inflation?

Then the second question, it’s just about the cars you’ve been buying back in the U.S. and the inventory moves.

I mean I remember in, I think if I’m right, in Q1, around €3 billion outflow on the inventory side was relating to the cars you bought into inventory in the U.S. So I wonder, if you just give us an update on are they still set there on inventory, how many more have gone in billion euro terms maybe in Q2.

And in terms of how many you might be able to fix and sell on. There are some stories today that perhaps you might get as many as 300,000 approved, so you can sell those on.

Just how is that trending versus your expectation when you set the €22.6 billion provision? Is it looking like you might be able to sell and fix and sell more than you had expected at that stage?

Let’s come back to you again, Frank.

Yes, Stuart. I mean the fixed cost is a subject of great attention.

We are very aware of that. Just to remind on a couple of developments, which are certainly quite relevant, which is the new Audi factory in Mexico.

We increased capacity in Kvasiny for very successful SUVs carrying ŠKODA and SEAT. And this is something we also know.

The level of spending in the past for CapEx and also R&D capitalization, and this is certainly something we are carrying into the future, and we have to certainly compensate for that going forward. I think in terms of depreciation, I think versus ‘16, I think we are talking around about €0.3 billion.

Just a couple of questions, if I may. I’m going to jump back on to what Stuart was saying with regards to the cars in the U.S.

There is a headline saying that you may well be able to fix 300,000 of them. Can we talk about what that would mean from a -- we’d had the €22.6 billion provision.

Are those cars at zero book value for you at this point, and therefore, if you can sell them, there is a profit that’s going to come back? And then a second question, just in relation to your guidance as it were.

Is there a secondary effect here if you change your guidance in terms of internal budgets are set against that guidance, people’s bonuses are working against that by -- that guidance, and therefore, if you change it, you effectively change the goalposts for the entire business, which might explain why your reticence aside from the risks to move things at this point in the year?

Yes. With respect to the used cars and inventory in the U.S., I think we are talking a number in the range of €1.8 billion all based on the end of June.

I think at this very moment, it would be just completely irresponsible if I would speculate any P&L impact from the disposal. Our priority is and as it should be is to provide for appropriate customer solutions, and that certainly includes repair solutions.

With respect to bonuses, I am not exactly sure that I got your questions. But bonuses are paid for results, and this is the way the company has been incentivizing in the past, and I think it’s the only legitimate way to do in the future.

Certainly, we should push for ambitious targets, but as we always discussed at various occasions, they should be reasonable and fair as well. But at the end of the day, it matters that we deliver our promises and what -- when we talk about group promises, this is the sum of individual parts from all the brands and companies, and this is what we as a group are pushing for.

I hope I got the sense of your questions correctly.

I was -- yes, I guess what I was trying to refer to is, for example, you’ve got a 2.5% to 3.5% margin target at VWPC. If you change that to 4%, clearly, that has a knock-on effect to Mr.

Diess. Is there an issue there in terms of your changing the goalposts for all of your managers midway through the year?

Yes, I’m trying -- I mean, what I understand -- I mean, we -- the margin target for brand Volkswagen Passenger, I think, end of year target should be consistent throughout the course of the year. Nevertheless, and this is -- if there are circumstances which allowed to exceed, then there is certainly a great level of incentive for everybody to push for the maximum possible, but certainly -- and this is to me the key issue.

We are not in a short-term restructuring when we -- if we stay for a moment with Volkswagen brand passenger cars. This is the planned year targets to 2020.

It’s important that we get momentum into the organization. And I think it’s fair to say, without preempting tomorrow’s more detailed presentation, we are seeing first strong signs that we are moving in the right direction, but we are far, far from a position where we could call victory.

We have to deliver on very ambitious productivity improvements, 7.5% for the first 2 years and 5% for the 2 following years. We have relevant losses in key markets like U.S.

and Brazil, which we as quickly as possible need to substantially reduce. So this is what we are up against, but it is important for the team and for the investment community that we start seeing progress on key elements that you know from other presentations of the group, but also from the brand.

But particularly, the fixed cost area has been a major concern. And particularly on the fixed cost side, brand Volkswagen Passenger Cars probably from the worst base compared to some of our other group’s companies, they made progress, and that is important that we continuously have been able to deliver and then people should be incentivized.

But I’m not a friend of moving targets, but if there is more in the kitty than what we assumed, then let’s go for it.

Two questions. First of all, on China.

Looking at your proportionate share of your equity accounted companies there, the decline in Q1 was about 5% and the decline in the second quarter was about 15%, giving you a 10% decline for the first half. The sales declined a little bit in the first quarter by 1%, was up in the second quarter.

So I just want to get a bit more information about what is going on. Are the losses relating to FAW and on the ongoing issues with the Audi dispute, which is, as you said, has now been settled?

My second question is about liquidity. I think earlier in the year, you were indicating that although you have a target obviously of €20 billion, it was possible that with the payouts relating to the diesel settlement, this could fall below this figure during the course of the year.

Obviously, you’re now halfway through the year, you’ve paid out €12 billion, and you’ve said that the payments for the rest of the year is going to be substantially lower than that. And we are still well above that €20 billion benchmark.

Are you confident that you will stay above the €20 billion for the course of 2017?

Yes. Thanks for your questions.

Yes, I am comfortable, obviously, certainly assuming a normal market development, and nothing I’m not familiar with or know. But we are quite comfortable with the liquidity development and the continued focus, hard work, and certainly, the acceptance in the marketplace contributed to the strengthening of our net liquidity position.

Yes, China is a mixed bag. We have a strong operating profit, but it is 10% below.

In terms of being a challenging market environment, I think you know that, particularly the first quarter, we had the pre sell effects from the expected sales tax increase, which particularly impacted volume brands. Partially, we have been able to offset by a positive mix.

But we also had the Audi issue, which the very negative year over year variance numbers we have been posting for the first months, and we started to recover starting by the end of May. And actually, June was, if I’m not mistaken, the best June ever in Audi’s China history.

We also, therefore, had different development between the North and the South. The Takata airbag issues, those joint ventures due to provision and order prepare.

And I think, in general terms, we can be quite satisfied given the circumstances. And I would definitely cite the Audi situation having been the biggest headache, and we are very pleased with the current recovery.

Fred could talk about the Teramont, which is a product, which is right in the sweet spot. I think dealers are selling above sticker.

So we are quite encouraged, but China is competitive and will remain competitive, but this was meant to shed some more light on the development in the first six months and also some differentiation between North and South.

My first question, just coming back more precisely to free cash flow. If I take the underlying free cash flow of the first half of the year, excluding the diesel outflows that was €7.2 billion, do you expect to defend that figure going towards year-end, i.e.

will the year-end figure be €7.2 billion or higher? Or should we expect some outflows because of the usual spike in CapEx?

And the related question to this is, you guided for a specific CapEx and R&D ratios this year, 6.9% on the CapEx side -- sorry, 6.6% on the CapEx side, 6.7% on the R&D side. But now you’ve guided up the revenue.

So I would assume that those target ratios should come down because you obviously have a bigger top line. Is that a fair assumption?

That’s my first question. And my second question relates to the medium-term financial targets.

Basically, on a brand level, you’ve hit those targets for 2020 already now in the first half. And as you rightly pointed out, you still have important markets like the U.S.

and Brazil in the losses. How should we think about your planning process here in the sense that the market is obviously helping you right now.

Your competitors in the mass segment deliver also very strong results. Let’s see what Renault does tomorrow.

But shouldn’t you be already now in the position if you are really ambitious for the VW brands, and you said you are with the upcoming productivity measures, the product offenses, et cetera, shouldn’t we already at the point now to revisit those 2020 targets?

Maybe start with the 2020 targets. And I think the main debate has been about brand Volkswagen Passenger Cars.

But what we also tried to laid out very clearly is, what are we up against till 2020? This is the very stringent targets which we have to meet worldwide basis on CO2 compliance.

That will cost significant amounts of money, not only for us, for the entire industry. And we have a growing assumed part of the business being with full electric vehicles, and that is certainly not an easy transition given the lack of profitability from today’s profit perspective, which we certainly working on.

That is the environment targets for 2020, and that’s what we presented in a great level of detail. And that was driving the targets we have been putting out there.

For us, a second piece of the puzzle is certainly to get to weigh more competitive CapEx and R&D ratios, bringing them down to 6% level. That is an extremely tough way to go since everybody else is increasing.

But for us, it is without an alternative to push as hard as we can in this direction, and discipline is core. The brand Volkswagen Passenger Car, again, without preempting, we always said, we always said, nobody on neither the brands nor the group’s level is satisfied with the target of 4% for 2020.

And our objective is to exceed that as quickly as possible. But based on deliverables, results and the momentum which I was referring to earlier, that we get the organization could change the way it works and operates, that we reduce the losses in those regions cited with solid business plans, and again, deliverables and launch of the relevant product needed.

This is a combination, and we always said that we revisit targets once we have evidence and proven that we are going down that road. But we don’t want to put out numbers the community would have not believed in at too early stage.

That has been our approach and will continue to be our approach. And once we are able to raise the bar, you have our promise that we will do so, but not without evidence and substance.

And regarding the cash flow?

Regarding cash flow, if we -- we certainly, I mean, we have the -- these are related outflows which you rightly cited to be special. We clearly -- if we adjust for diesel and dividends from China, we expect a clearly positive net cash flow in the Automotive Division, and it continues to be an area we are pushing.

This is what we are committed to and what we have the entire organization committed to, and reduction of CapEx and R&D and increasing efficiency is one of the pillars even though the environment, in particular in ‘17 and ‘18, is for those reasons explained certainly not an easy one for all the brands worldwide.

Wouldn’t the ratios come down as a consequence of your higher top line growth guidance, because I assume the dollar or euro amounts are...

The absolute amount in that environment are certainly not coming down as we expressively described. But the efficiency is improving, and we obviously have targets for CapEx for this year of 6.6%, 6.7% and for R&D, which is certainly currently the area everybody is struggling the most with, 6.7% range around about, quite an improvement from the past.

And it is a stretch. We always said it is a dogfight.

It’s not a done deal. Everybody else is going up, and we’re obviously trying to accomplish quite a bit, electrification, autonomous driving, CO2 compliance, C6 China, some of the targets are being put ahead on us, the entire industry certainly.

So that is a tough environment, but the entire management knows exactly what the board expects, and it is a daily subject. And obviously, key is that we change behavior, that we challenge our own standards, that we collaborate amongst the brands more and better.

And this is the potential, we are believing it. That’s the reason why we’re putting up those ratios, which are certainly not a walk in the park.

Frank, I have one question on disposal and then one on the latest news headline that would just be that you might be forced to recall 22,000 Porsches, I think, related to an illegal cheating device apparently also that’s just really hitting the tape, if you could comment on that. And the first question would be, we have just heard Mr.

Marchionne saying on his call that he wants to purify his portfolio further and that there might be further spinoffs. You have an obvious loophole in your portfolio.

It’s U.S. SUVs.

Would you be interested in the Jeep and Ram brands if they were put to market? Or would you rule out any larger acquisitions given all the risks that you just discussed about and that you have on the plate to deal with?

I basically have to come back to what I said earlier. We have a group initiative number 13, that we are reviewing our asset portfolio in light of our strategy.

We are not in the position to comment on rumors and speculation, but optimization of our portfolio is what we have in our strategy. And other companies obviously might have their plans, and this is not our cup of tea.

And we are certainly not speculating or commenting on other people’s approach, targets for their future. The other question related to Porsche, if I’m not mistaken or?

Yes, correct. It’s just news on the tickers that Mr.

Dobrindt is asking you to recall a couple of thousand -- I think it’s 30,000 Cayennes or something, I guess, 22,000 Cayennes with an illegal cheating device.

So I think there is a discussion about a potentially -- a potential recall or a software update, but I’m currently not in the position to go into more specifics that might -- you might refer to some very recent developments, but at this very moment, I’m not in the position to shed some -- to shed more light on it.

Okay. Just to clarify on the first question, so your comment refers to acquisitions and disposals when you talk about optimizing your portfolio?

Yes, that’s correct.

I just wanted to ask two questions, if I could. Frank, just back to the CapEx and R&D, I think you’ve often been pretty clear about the ratio to sales coming down.

At the CMD early this year in March, I think you were a bit more explicit about the absolute levels declining in 2017. So for R&D, I think your slide showed a reduction to about €13 billion from €13.7 billion.

And I think CapEx was, give or take, flat year-on-year. So are you still expecting to have that fairly material decline in R&D this year?

Obviously, the first half, it’s roughly flat year-on-year. Or do you think some of the pressures are going to make that a tough target to achieve?

The same for CapEx, please. And then the second question relates to headcount.

Could we just get an update on the future pact and really where you’ve got to with the progress so far? Obviously, there was 30,000 heads to leave by attrition.

You were going to hire, I think, 9,000 [indiscernible] in the e-mobility space. Where are we with that?

Obviously, the group numbers ticked up a little bit since that stage. That would be useful.

Yes. And I mean, obviously, we are not walking away from our targets, but I think I referred to it earlier.

The year ‘17, ‘18, in particular, are extremely tough. If you ask me about where do we have the biggest risk, it’s on the R&D side due to the developments and circumstances.

There is the very ambitious CO2 compliance in all relevant major jurisdictions. And some of the targets are also pulled ahead, but we still in striking range, but it is -- it will be ambitious and tough on the entire organization until the very end of this year, and ‘18 not easier.

So but this is what we’re up against, and this is our job to manage. But the transition, as we have been quite transparent at the Capital Market Day and in all venues related to investor relations is, it is our commitment.

We have challenging projects and pushing by cascadation of those targets to the brands. This is to the headcount reductions, now overall, as part of the future pact and Germany being the area of focus, we have a plan till 2020.

It is committed. It is cascaded down to the factory level of reducing 23,000 positions.

This is a gross number, partially offset by 9,000 new positions in future oriented parts of our business, which are important to have the type of talent and expertise on board. We are pretty much on target.

We have signed and agreed upon early retirement contracts, and we are plugging along. And I think our colleagues tomorrow will probably give more details, but I have, at this point of time, from the group’s perspective, no reason to assume that we are not going to achieve our targets in that respect as well.

Two questions, please. One, there has been some commentary that you were looking at developing the idea of Volkswagen electric vehicle, and you’ll be looking to sell that very competitively against the Tesla Model 3.

I’d like your thoughts on that pricing on how you can get the cost down quickly enough, and how the profitability of such a car would compare with the equivalent car that you’re currently selling. And then secondly, back to the rather boring issue of diesel.

But I keep trying to think about how you would protect the company against the worst case situation here. Some brands, Porsche, Volvo, already highlighting that they will phase out diesel, so petrol only engines after 2019, ‘20.

Does it make sense -- or wouldn’t it make sense to protect the balance sheet by starting to take up the monthly payments on these cars and forcing consumers to pay a little bit more down on the residuals just so that you can protect yourselves a little bit more? It feels like everybody is being very mechanical when, in fact, I’m just wondering whether you guys could actually just be a little bit more proactive on this.

I’d like you to hear your thoughts on that, please.

I think let me start and Fred might at a later point add also from a market and customer perspective shed some light on diesel because I know for sure that there are lot of people who love their cars and who bought diesel cars, not because they had to, but because they felt that this is a compelling and attractive offering, and there are still a lot of people out there. And we are of the opinion that the diesel has a future.

We always assumed for the last couple of years that the share of diesel vehicles in the total fleet is going to decline. That has been our plans for a long period of time.

What we currently see, particularly in Germany, is a question whether that trend accelerates or not. And certainly, there is, particularly in Germany, but also in some other markets, some more pressure on the diesel sales.

Electric vehicles are a key pillar of our strategy. And we certainly also have a dedicated share of our development cost for electric vehicles, and that portion is well above 10% in the years to come.

We always said, and I indicated earlier, when we talked about the transition in 2020, we all know that from today’s perspective, yes, probably nobody who makes money on electric vehicles beside the Tesla, but this will not be the case forever. We see significant progress in terms of costs, particularly as it relates to the battery.

With the MEV, we are strongly believing that we have a tremendous platform. And with our representation worldwide and our fine brands, that we have a reasonable assumption to get into scale maybe probably faster than others.

But the first generation of electric vehicles are certainly not at the today’s levels, but they are not supposed to be a loss-making proposition either. As it comes to introducing them into the marketplace, you probably should think at the pricing level in the range of today’s diesel cars, and that is besides the fact that those cars are attractive as you’ve seen quite a bit of our product, including Audi at recent venues and motor shows.

So in that respect, we are strongly believing that this transition can be managed successful, but it certainly will be a tough job to be done. And maybe, Fred, do you want to add a couple of points from a market perspective?

Yes. Especially about the diesel discussion, we have a very intensive discussion, especially in Germany.

One should not forget, diesel is very important for all the manufacturers to hit the CO2 targets we are looking for at 2020. The diesel business is slightly going down.

Our take rates for diesel are deteriorating, but it’s not a landslide. And also, in the other European countries, what we can see is, and especially the fleet segment, diesel is still a stable business, and the residual values are at a relatively stable level.

This is also reported by the DRT, I think a very neutral institution, that residuals are at a relatively stable level. Nevertheless, there is of course, some nervousness about the future development, especially here in Germany.

And next week, we have the diesel forum organized by the government. And then we’ll see in what direction the regulation for diesel will continue.

Just briefly. I just wanted to have your view as, is it unreasonable to expect that given how much you’ve spent already on the diesel scandal that we might have a clean balance sheet by the end of this year, where all your litigation costs, et cetera, will have been sorted out?

And I was wondering also, it’s a price of your hybrid bond, did you feel under pressure to actually maintain the net liquidity above €20 billion? Or was that kind of an opportunistic move for you to raise capital?

I mean the €20 billion is a number where -- which we deemed to be right and important. We communicated that to you guys.

We all knew that we would go below the €20 billion line due to the substantial payouts, predominantly geared towards to diesel. So for us, we felt it is important also for the rating agency, but also to have the necessary safety net and financial strength to focus on resolving all customer-related issues and pushing for normalization of our business, which it is not yet at this very moment.

But for us, it was -- it is not a new instrument. And there is a lot of appetite, and we have been extremely pleased with the receipt of the hybrid, but also, certainly, of the senior unsecured, which also by a great margin exceeded our own expectation and was well oversubscribed.

I think the other part, in terms of clean balance sheet on diesel. I mean we -- obviously, we’ll also have some payouts in ‘18 and ‘19, but a number which is less than €3 billion from today’s perspective.

The other inherent question is whether -- if I assume your question right, is €22.6 billion, the end of it. We assess every aspect of the diesel issue consistently and true the assumptions up.

There are certainly not only FX fluctuations but certainly the risk assessment can change in the one or the other way. But for the time being, we had some consistency in our numbers, and we just assess those numbers.

And to the best of our knowledge, this is what we consider to be necessary and adequate.

I have one question with regard to the diesel forum. There was a headline today that VW will offer a software update for 4 million diesel cars.

Maybe you can figure out, is that figure related to the group or is it only to the VW brand? And so far, I know the dieselgate cars are not [indiscernible], the remaining part of the 1.5 million, is that also only focused on Europe?

And do you expect a similar software update to other markets like the U.S.?

Okay, thank you. So you’re referring to the visit today of the German environment minister here to Wolfsburg, for those who are not aware, and Mr.

Mueller made a few comments. Frank, I’ll pass that to you.

I certainly don’t want to comment on what has been said earlier today. But I think to -- important is the diesel forum is the right step.

The right parties are at the table. And I think we should leave it to the diesel forum to conclude on the outcome.

And I think any comment on numbers floating around before that, I think, from my perspective, would be a bit premature. I think we are looking forward to the venue, and we have the highest representation possible, and we are fully committed to the agenda.

And let’s leave it to the diesel forum to come up with a comprehensive approach hopefully for the entire industry.

Thank you. And we’ll move now to some journalist questions before we close the call.

I just want to try to get a feeling if the -- what we’ve seen today, the last month, the decline in the diesel share of your sales in Europe. Is that -- does it mean there’s a change for your strategy to reach the 2021 targets?

Or you still feel confident that with all your activities around e-mobility that you will able to meet the 2020 targets in Europe?

In the midterm, of course, we are very much developing and pushing the full electric vehicles. We have, of course, some -- the diesel is important as a backbone, because in terms of CO2, diesel is favorable compared to the petrol engine.

The diesel rates are declining, yes, but it’s not a landslide. In total, in Europe, we have a decline this year compared to the previous year of 3 to 5 points.

It depends a little bit on the individual markets. Let’s see how this will continue.

Also, on our order book, we have still a considerable amount of diesel. On 2020 onwards, of course, we will very much invest into the full electrical vehicles.

We have different kind of hybrids available. And so we assume that we will meet the 95 gram CO2 -- gram target in 2020, and we are fully committed to that -- to reach that target.

Thank you. And we’ll take the last question now, please.

Yes, I just wanted to follow-up on the R&D, Frank. You talked about the upward pressures, and the fact that it might be difficult to cut that this year, I fully understood that.

I just wondered if you could elaborate which areas of expenditure you’re needing to push higher relative to the beginning of the year? You said that the diesel mix maybe has a surprise for you.

So is it just the requirement to clean up the internal combustion engine? Or you’re accelerating investments into the e-mobility area or is it e-mobility services, AI investments?

I’m just kind of interested what’s changed this year to make you now sort of see R&D probably flat to up versus the environment from a few months ago.

I think we have a tendency to stick to our plan, but the key issue is CO2 compliance. It is the overarching issue.

It is an issue in all jurisdictions. And there are tremendous investments for every OEM around the globe necessary, be it gasoline or diesel, to improve performance of those currently dominating combustion engines.

And it’s the issue which is putting a lot of pressure on our brands. This is no different from anybody else.

The other items, investing and developing new technologies, be autonomous driving, connectivity, electrification, certainly important, but the most critical one is CO2 compliance, and it’s probably an answer you get from every other major OEM.

Okay. Thank you, Frank, and thank you, Fred.

Thank you for our callers and those listening on the call here today. And we’ll close the call now, and thank you and goodbye from Wolfsburg.